Most of the emerging economies are blaming Mr. Bernanke for food inflation. His Ph.D. thesis was on great depression of 1932.
People are faling to understand some lessons in psychology.
If you are given excess money, which is more than you spend on your daily needs, what you do with that excess money? Answers will be different depending upon risk profile of person. If you had asked this question in 1990s to someone from emerging economies, most would have banked excess money. If you had same question to someone from developed economies, most would have thought of investing some where. The reason is, people from developed economies had seen their neighbours prosper by investing excess money. Same time, people from emerging economies had seen their neighbours fail by investing excess money.
However, we are now in 2011. Situation has changed dramtically. China and India constitute about 50% of world population. Both these economies are integrated. Integration of such huge economies will definitely increase demand for raw material and commodities. Dr. Bernanke should not be blamed for this.
However, this is almost maximum that we can have as far as global integration is concerned. Tomorrow, if Nepal economy gets integrated with world economy, it will not even cause a ripple as Nepal is miniscule economy.
Coming back to lessons in psychology, if one has excess money, he tends to invest in 2011 unlike "banking excess money" as in 1990. Almost, 90% of the high risk investment fail, but investment which succeds gives gigantic returns not only for investor but also for the rest of the world.
Inventions in semiconduction technology is prime example. Hopefully, we will continue on same path. But, this can happen only if Bernanke suceeds. If he fails, people will look at their neighbours. Neighbours who invested and lost (in 2014).
-Shrihas Pandharkar
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DYOR.
Thursday, 24 February 2011
Friday, 11 February 2011
Complexity
There are millions of finance professionals all over the world. If you take survey of finance professionals, you will notice that very few are working in world financial markets. So, if you speak to finance professionals, not many know how currency market behaves or how stock market behaves or how bond market behaves (as some among them could be working in audit, taxation etc.).
Now let me zero down on people working in world financial markets. Among those working in world financial markets, someone working in bond markets does not know stock markets or currency markets. It is also true for professionals working in stock markets or currency markets. Now among these professionals, there are further specialisations like someone working only on EUR/USD pairs, someone covering only Oil and gas sectors etc.
This is where opportunity lies. As most of the professionals, named above will have their spare cash/funds parked with some fund managers. Their private pension will be managed by some pension funds.
Few years down the line, let us say Mr. Bernanke’s gamble fails. Can anyone guess what will happen? Retail people will have no money to pay credit card/utility bills. Pension funds will have filed for bankruptcy and people who worked hard to secure their retired life will see their savings/pension disappearing. Lawsuits will be filed.
Losers will be all including finance professionals named above. However, finance professionals who have learnt something other than their 9-to-5 jobs will survive.
Note that in 2008, many finance professionals working in world finance markets lost their jobs. Some had worked on trading desks. These people tried trading in their own account and most of them failed miserably. The reason, "they did not learn anything other their 9-to-5 job"
That is why I love these markets. Only fittest survives. “Fittest” does not mean physically or mentally fit. “Fittest” in world financial markets is defined VERY differently.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Now let me zero down on people working in world financial markets. Among those working in world financial markets, someone working in bond markets does not know stock markets or currency markets. It is also true for professionals working in stock markets or currency markets. Now among these professionals, there are further specialisations like someone working only on EUR/USD pairs, someone covering only Oil and gas sectors etc.
This is where opportunity lies. As most of the professionals, named above will have their spare cash/funds parked with some fund managers. Their private pension will be managed by some pension funds.
Few years down the line, let us say Mr. Bernanke’s gamble fails. Can anyone guess what will happen? Retail people will have no money to pay credit card/utility bills. Pension funds will have filed for bankruptcy and people who worked hard to secure their retired life will see their savings/pension disappearing. Lawsuits will be filed.
Losers will be all including finance professionals named above. However, finance professionals who have learnt something other than their 9-to-5 jobs will survive.
Note that in 2008, many finance professionals working in world finance markets lost their jobs. Some had worked on trading desks. These people tried trading in their own account and most of them failed miserably. The reason, "they did not learn anything other their 9-to-5 job"
That is why I love these markets. Only fittest survives. “Fittest” does not mean physically or mentally fit. “Fittest” in world financial markets is defined VERY differently.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Thursday, 10 February 2011
Facebook valuation
It is true that if my age is known then it will be easy for companies to sell me specific product. It is true that if my location is known then it will be easy for companies to sell me specific product. It is also true that if my interests are known then it will be easy for companies to sell me specific product.
Facebook collects all such information. Naturally, looking ahead Facebook should command some valuation.
Note that google made similar attempt with Orkut but it is close to failure. Some years before same thing happened with free emails where people said you could market products if email ids are known.
My question is why facebook valuation of 50 billion dollars why not 200 billion dollars or why not 1 billion dollars?
In fact, I see great potential in search engines. I search for something, and my search words are stored in Google computers. I could be anywhere in the world but my searches are known to everyone (as Google can sell this information). When I search something, information including IP address and MAC address goes to Google. In fact, if one correctly analyses search data/words, Google will be worth lot more.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Facebook collects all such information. Naturally, looking ahead Facebook should command some valuation.
Note that google made similar attempt with Orkut but it is close to failure. Some years before same thing happened with free emails where people said you could market products if email ids are known.
My question is why facebook valuation of 50 billion dollars why not 200 billion dollars or why not 1 billion dollars?
In fact, I see great potential in search engines. I search for something, and my search words are stored in Google computers. I could be anywhere in the world but my searches are known to everyone (as Google can sell this information). When I search something, information including IP address and MAC address goes to Google. In fact, if one correctly analyses search data/words, Google will be worth lot more.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Wednesday, 9 February 2011
Getting interesting
Currency market is getting interesting. The question is, what happens if all these happen together;
• Almost all major currencies (including some emerging economies) appreciate against dollar by let us X %
• Oil rises by same percentage (oil remains priced in dollars).
• All other commodities rise by same percentage (commodities remain priced in dollars)
Can anyone guess what will happen to Inflation in USA?
Can anyone guess if inflation in other countries will go up by same percentage as in USA? (please account for cost push inflation only)
Intelligent people will get the picture.
What I wrote above is definitely going to happen. As a result, Mr. Ben Bernanke will be forced to abandon his grand experiment and start tightening.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
• Almost all major currencies (including some emerging economies) appreciate against dollar by let us X %
• Oil rises by same percentage (oil remains priced in dollars).
• All other commodities rise by same percentage (commodities remain priced in dollars)
Can anyone guess what will happen to Inflation in USA?
Can anyone guess if inflation in other countries will go up by same percentage as in USA? (please account for cost push inflation only)
Intelligent people will get the picture.
What I wrote above is definitely going to happen. As a result, Mr. Ben Bernanke will be forced to abandon his grand experiment and start tightening.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Tuesday, 8 February 2011
Inflation, deflation
Inflation is roaring its head in emerging economies and some developed economies. Everyone is fully convinced at the moment that we will have inflation...and this will be end game.
Worried about inflation, policy makers will start tightening. However, there is always lag between easing (QE) and its effect. Inflation may become more visible by second quarter of 2011 and that is when policy makers will make mistake of tightening.
As a result of these actions of policy makers in response to perceived threat of inflation, We will definitely have deflation by around 2013 end. Policy makers will try to reverse but will fail. Nature will take its own course.
DOW will touch 32000 by year 2032.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Worried about inflation, policy makers will start tightening. However, there is always lag between easing (QE) and its effect. Inflation may become more visible by second quarter of 2011 and that is when policy makers will make mistake of tightening.
As a result of these actions of policy makers in response to perceived threat of inflation, We will definitely have deflation by around 2013 end. Policy makers will try to reverse but will fail. Nature will take its own course.
DOW will touch 32000 by year 2032.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Creditor's problem
If bank lends small money and debtor defaults then it is a problem for debtor. If bank lends huge money and debtor defaults then it is banks problem and bank can go under.
Let me first start with Euro zone. Germany is most financially sound economy in euro zone. Naturally, when it comes to supporting other euro zone members, countries will look at Germany. In this case, Germany becomes creditor and other nations become debtors. All of us know magnitude of problem in Euro zone. Therefore, if Germany offers credit using its own money and if debtors default then Germany will also be taken down. Naturally, Germany would like member states to not default (in short, Germany would like its member states to become better economies by controlling expenditures, increasing exports etc.). But is that possible if member states do not want to control expensditures? The answer is “NO”.
Same thing can be said about China, which is the biggest creditor nation. USA is debtor nation in this case. Let me take example of this moment. At this moment, almost all Americans are enjoying better lifestyle compared to Chinese. Americans are using borrowed money to fund their lifestyle, which is better than Chinese. However, note that China is in transition period where present-day generation takes pain for future generations. After some decades, reverse will be true when Americans will work hard and Chinese will have better lifestyle than Americans even when Americans work hard and that will be called transition period.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Let me first start with Euro zone. Germany is most financially sound economy in euro zone. Naturally, when it comes to supporting other euro zone members, countries will look at Germany. In this case, Germany becomes creditor and other nations become debtors. All of us know magnitude of problem in Euro zone. Therefore, if Germany offers credit using its own money and if debtors default then Germany will also be taken down. Naturally, Germany would like member states to not default (in short, Germany would like its member states to become better economies by controlling expenditures, increasing exports etc.). But is that possible if member states do not want to control expensditures? The answer is “NO”.
Same thing can be said about China, which is the biggest creditor nation. USA is debtor nation in this case. Let me take example of this moment. At this moment, almost all Americans are enjoying better lifestyle compared to Chinese. Americans are using borrowed money to fund their lifestyle, which is better than Chinese. However, note that China is in transition period where present-day generation takes pain for future generations. After some decades, reverse will be true when Americans will work hard and Chinese will have better lifestyle than Americans even when Americans work hard and that will be called transition period.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Saturday, 5 February 2011
Can single country stand up?
Everyone in this world is blaming USA for food inflation. Basic of inflation is demand-supply gap.
Now let me break down arguments in small parts.
Some decades before, most of the people from emerging economies had lower living standard than today. Governments of these countries opened up economies and foreign investors came rushing in. These investors poured billions of dollars. These incoming dollars raised living standard of people.
People from all such economies should note that their own currency has no standing. It is because dollars are coming in; that they are seeing this wealth effect. If all these dollars are withdrawn, then these economies will be back to square one. Therefore, they should not blame incoming dollars for food inflation.
Neither of these economies are self sustainable. All these people should ask themselves a a question, what will happen if all dollars are withdrawn? Some of the big economies from emerging area import oil worth 50 billion dollars annually. These countries will not be able to pay for oil if they do not export goods or services.
These countries will do well to ignore inflation for short period and instead plan to become self-sufficient.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Now let me break down arguments in small parts.
Some decades before, most of the people from emerging economies had lower living standard than today. Governments of these countries opened up economies and foreign investors came rushing in. These investors poured billions of dollars. These incoming dollars raised living standard of people.
People from all such economies should note that their own currency has no standing. It is because dollars are coming in; that they are seeing this wealth effect. If all these dollars are withdrawn, then these economies will be back to square one. Therefore, they should not blame incoming dollars for food inflation.
Neither of these economies are self sustainable. All these people should ask themselves a a question, what will happen if all dollars are withdrawn? Some of the big economies from emerging area import oil worth 50 billion dollars annually. These countries will not be able to pay for oil if they do not export goods or services.
These countries will do well to ignore inflation for short period and instead plan to become self-sufficient.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
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