why is gold soaring

gold prices have crossed the $500 mark per once, for the fourth time in last hundred years, as this article says. gold is traditional hedge against uncertainity, but why should its price soar if mankind is on an uninterrupted path to prosperity as indian and global markets suggest. perhaps, investors of gold know something that others dont or its is purely a techical rally driven by flow of funds

why economists underplay ITs contribution

i have often wondered why economists in india dont stress on the importance IT has played in economic growth and employement. so, i was pretty annoyed see an artcile stating that "IT contribution to employment not so good", which quotes Prof C. P. Chandrasekhar of the Centre for Economic Studies and Planning, Jawaharlal Nehru University.

the article states that: he said National Association of Software and Service Companies (Nasscom) estimates that employment rose from around 2,85,000 in 1999-2000 to just above one million in 2004-05, at a compound rate of about 28.5 per cent per annum.

However, these numbers are deceptive because of the low base from which employment in the IT sector has grown, and it constitutes only 0.21 per cent of the non-agricultural workforce in the country (NSS survey on employment and unemployment)

i hate to use such strong words, but i believe that anyone with a modicum of common sense will think otherwise.

the first thing is we have to agree that a million people are employed in the IT industry. it may not seem much in a country of 1000 million but then only 12 million people are employed by the handloom sector, one of the largest employers in the country after agriculture.

now, lets dig a bit further. each IT job, according to conservative estimates, creates one addition job through direct means. this includes the driver who ferries the staff to and forth and the cleaner at the office. so, IT is directly responsible for employing 2 million people.

now, let say IT has a direct effect on the lives on the 2 million families , considering each IT worker will influence his family. and let us take the average number in the family to be 5 - in india , there is usually an extended family - one own - wife and children and then parents, atleast.that makes it 10 million - or 1% of the population - thats pretty significant i would say.

ITs contribution doesnt end here. in my view one of the greatest benefits of IT to the "common man" is the construction activity it generates. each IT worker occupies 120 square feet of office space. that makes it 120 million square feet and at an extremely conservative rs 1500 per sqare feet that makes it 180,000 million rupees and if a fouth of it goes in labour costs, it amounts to rs 45,000 million in labour , enough to provide lifetime employment to - i dont know how many workers. (i often think the market should begin to view IT cos as real estate plays!)

and then, almost all IT workers in know buy a house, atleast a small apartment through a friendly bank loan. i wonder how much employment that creates.

a lot of IT workers have been exposed to the US culture - so, they splurge on everything from cars to candy. i think that sweetens up the economy quite a bit.

and takes places where IT activity is concentrated like Karnataka. i estimate about 75 % of the incremental GDP growth comes from the sector and allied ones.

this is plain logic which could only escape a blinkered economist. perhaps, they should look beyond the NSS survey and take a trip around blore - or sit in the desk and calculate the direct and indirect employment generated by the sector and its multiplier effect!

indian taking on more debt than americans

i am pretty scared about the level of debt some of my friends are taking. i cannot understand it.
it has become so easy now to take on debt as illustrated in my earlier posts a b.

it was interesting to see a morgan stanley report echo similar views.

India has been living on debt more than any other non-Japan Asian country or even the US, says the report, which is culled from the newsreport available here.

finally, some numbers on Sahara

The sahara group is making money and has a rs 1000 crore dispute with the tax dept that would put ITC to shame. anyways, this is the first time that i have come across the group numbers available here. i wont bother looking at them lest they compete with my well cooked dinner!

how the press is managed

i am no expert on this subject and i certainly should not be putting out this post.
but i was appaled to see this story about the Sahara boss in the times of india.
to me, it shows how low some in the media can stoop. the entire story has the line - all is fine with daddy and he is a great guy.

how about using the opportunity to ask some tought questions. why dad doesnt appear in public. how much public deposits has dad taken. how is the RBI scrutiny of his business going. can they provide the annual reports of dad's companies. what is the source of dad money. why doesnt dad ever hold a press conference. do they get a great inflow of principal every month than interest paid out. - a true test of a ponzi scheme. perhaps "dad" should answer these questions.

when pesticide is found is soft drinks, there is a sunitha narian taking up the issue. when food is adulerated there are thousands of food inspectors to check. same applies to the hundreds of things we consume on a daily basis.

but when the most potent commodity in today's world - information - borders on trash- there is hardly any check. just an anonymous ,unread ,blogger writes a stupid post.

importance of information flow.

i had written about the importance of information flow here espically in the context of bird flu.
i thought the excerpts from this news report may be of interest.

"The last thing that any nation can afford to do, not only in its own interests but in the interests of the fellow members of the world community, is to hide or cover up in any way." In London, the leading medical journal The Lancet called on governments to communicate honestly and openly with the public. Governments "must admit to uncertainty, act transparently, issue guidance on disease protection and make sure information is disseminated to the public as quickly as possible" to avoid panic even before a pandemic emerges, it said in an editorial.

===

U.N. official Robert Hepworth said in a Reuters interview in Nairobi that the world body wanted to pull together data from a range of sources on the routes and flight times of migratory birds, which carry the flu virus and infect domestic flocks.

===

the pen drive is mightier than the sword!

available here

Peter drucker emerges from the morning sun - leads to a "changed society"

i have a feeling that peter drucker always wanted to walk quietly into the evening sun. he lived in small town US and was associated with a lesser ranked university.
Though a prolific writer , he gave few interviews and was featured in the press far less than he deserved or could have easily got. (being a former journalist he knew how the system worked and could have had reporters eating off his hands).

i guess the press in the last few days had put out almost all that one needs to know about him -
from his birth to an intellectual family in vienna, living thro WWII , synthesizing the field of management from social sciences and engineering disciplines, to pathbreaking concepts like management by objectives.

i have a few thoughts about him which has been missed by the mainstream orbit writers.

1. influence of danish philosopher Soren Kierkegaard
drucker learnt danish in a very short time - some say 2 weeks - to read kierkegaard's writing in original. he was very much influenced by the K's concept of the influence of religion on society and varies principles he espoused. this, i believe laid the foundation for drucker's beliefs in life.

2. learning from catholic church.
the catholic church had then an overpowering influence on businesses and the state. i believe that views on drucker's on social responsibility of business are derived from the church.

3. Forget predicting the future - take a look at what happening today.
this is the key lesson i learnt from his works. he was so focussed on trying to understand the present rather than make grandiose statements about the future. if he say things about the future it was based on events happening today.

4. A great philosopher- leads to a "changed society"
drucker has changed how companies work to put it mildly. and many of us lucky enough to use
the net probably work for a company or are associated with one in some way. he has changed the way we work and it effects will be felt longer than we can think of.

5. his death will spark an interest in his work.
drucker was in many was not a part of the mainstream management bandwagon. he was truly a bystander. his work based on logic rather than on models or empirical evidence was not used by mainstream academia , as much it should have been. his death , i believe, will lead to a greater use of his work.

6. three year system
drucker studied a topic for three years . Japanese art to india history. his gave him a breadth of knowledge few possess. incidentally, he rated Indian Civil service, under the british the best middle management in the world. the top management was involved in the world wars and the lower management was not very good, yet the ICS, he says, did a gr8 job.

7. never predict the stock market!
drucker, as it now well known, predict a gr8 bull run just before the 1929 crash. my sensex target of 5000 looks just a ridiculous now. lets see a year later.

china and information flow - need for a global regulator

i have always known that information flow from china is suspect and had always believed that it needs free up the flow for the sake of the international community.
take a look at this, a outbreak of bird flu takes place on Oct 26 and it gets reported on nov 4.
pretty unbeliveable.

just think about the consequences of withholding of information, which is needed for the whole of humanity. we need to have a global body, an arm of the UN, to regulate the flow of information. to see all need info. is available for making better decisions for the sake of humanity. countries guilty of withholding sensitive info - in the sense of human wellbeing - should be punished severely.

A typical bull market - throwing caution to the winds

i have been doing some reading about the bird flu and the probability of the H5N1 virus mutating. pretty scary stuff. the threat does seem real from what little i know about the subject.
i wonder what hedges one can put in place against a doomsday scenario which hopefully will never play out. i wonder if gold is a good hedge now. if there is a collapse of the modern financial system who will have the money or the commoditity needed to buy gold and why would they want to buy it.
agriculture is a great hedge but i wonder how many can practice it. in germany, after world war II the farmers where the richest people around and used to try and bribe other people with milk!

anyways, coming back to the bird flu and the market and in my view the meaningless bull market.

look the stock prices of venkateshwara hatcheries (venkys) and SKM Egg feeds, the leaders in the poultry business in india. venky's lost 0.6% during wednesdays trading to close at Rs 140 double its 52-week low. SKM egg feeds closed up a 1% at rs 20.50, well above its 52-week lows of rs 13.

i wonder if it is irrational to expect these stocks to hit new lows everyday given the current environment.

on bird flu:
http://www.cdc.gov/flu/avian/gen-info/facts.htm