My Understanding of 'Shining Dawn', called Gold.

With the ever watchful eyes , I have been following the yellow currency and its history from a long time...Right from the days of checking gold prices through SMS alerts during my classes to the days of waiting impatiently for Gold Reserves Value Data of every country... and then rushing back to my blackboard to analyze how would it behave...

Gold as in likewise with all trade-able assets, are more dependent on what your neighbour does rather then what it should do...

Consumer Prices and Gold have a been showing an amazing correlation off late... The international currency standard status has bestowed some properties other than the chemical ones on the yellow money. Or has it, really ?

In 2000, there was a crash in dot.coms. The whole magic of the tech bubble suddenly disappeared. And guess what? Gold went up.
In 2001, the War on Terror(or some say it was a pseudo war created to boost an dwindling economy, flourishing on debt[lets keep this for another time]) began. And guess what? Gold went up again.
And again in 2002. And 2003. And 2004.
By 2005, the world economy was in the throes of a massive financial bubble. Everything was going up. Gold went up too.
In 2006, the US had a major housing bubble on its hands. Gold went up.
In 2007, the housing bubble started to lose air. Gold went up.
In 2008, Wall Street stared into the abyss. Lehman Bros. went broke. The feds took over housing finance, auto-making, insurance, commercial lending...and gold went up.
In 2009, the feds went all out to try to engineer a recovery. The Fed ballooned its balance sheet by $1.2 trillion. The federal budget went into deficit by nearly one and a half trillion. Still, gold went up.

And what's this? The recession officially ended more than a year ago. Housing and unemployment are still limping. De-leveraging is still underway (David Rosenberg calls it a "depression")...and go figure. Gold is still going up.

Gold goes up with consumer prices. That's the most common notion... however if we stretch the periodicity chart on 5 year horizon. We find for nearly two decades - from 1980 to 1999 - gold went down while consumer and asset prices rose.

Now, consumer prices are stable. Yet gold hits new records.

All views on gold are with an exception.They say Gold has its own wacky behaviour. There's no line of thought on the subject that doesn't have a curve in it. Today, some bulls are loading up on gold because they see a recovery coming. Others are buying it because they don't. Recovery, they believe, will boost consumer appetites, resulting in higher inflation levels and a higher price for gold. The absence of recovery, say others, will cause the Fed to undertake more money printing.

Those who are supposed to sit on the fences are among the most aggressive buyers. Gold for them is a " safe haven bet " proposition. If the economy improves, gold rises naturally. If it doesn't improve, the Fed actions will force it up.

And if you come to believe that US days in financial supremacy are numbered, then the Chinese will take over. Gold makes up only 1.7% of China's foreign exchange reserves. China is supposed to be targeting a 10% figure. If so, then it would have to buy every ounce the world produces for two and a half years or more. Now given the kind of skewed relations it is building up, relying on its own production , (China is the world's largest producer) it would take nearly 20 years of steady accumulation to reach the 10% level.

The metal sitting pretty on the 79th place in the periodic table has many uses for the common humans. People make spoons, forks and bathroom faucets out of it. It's occasionally used as roofing, or even as a murder weapon;(history) a king had molten gold poured down his throat after being captured by his enemies. And Lenin said he would line the public latrines with it. But the best use ever found for it was as money - as a reliable measure of wealth.

My grandparents are on another set of people who do not let me forget the sway Gold has in our lives. They can't stop talking about how cheap they had brought gold at the time of their marriage and how undervalued it was even in the time of my parents marriage. But unaware of one amazing fact, The inflation meter sppeaks otherwise. The price of gold will have to almost double from today's level to reach its inflation-adjusted high of 1980.

But this is what makes gold very different from other money. Mr. Robert Mugabe should know, that, the trick is not in holding a trillion dollar note from Zimbabwe, he can hold onto that paper until hell freezes; its value will never return. Gold, on the other hand, will never go away.

Over the centuries, mankind has often experimented with alternatives to gold. Driven by larceny or desperation, base metal and paper were tried on many occasions. Paper was particularly promising. You could put as many zeros on a piece of paper as you wanted, creating an infinite supply of "money". People realized that money gotten at no expense was only gotten rid of at great cost. Given the ability to create "money" at will, a central banker will sooner or later create too much.

But one generation learns. The next forgets.

But Gold Stays on .... I trick which i have learnt is never trust Gold ... but at times of desperation... this metal can be of great value...

Market Labour Reforms and implications on Labour Development

Brooding over with a discussion with my friend Tuhin, on labour markets reforms and its deregulation status in PSU sectors in India, an thought stuck me as how to identify the labour and product market institutions affecting the labour market performance of a country.

In this context, factors such as the employment protection legislation, unemployment benefits and entry barriers for firms have been considered. Theory has generally predicted a clear impact of institutions on labour market performance. Empirical evidence from studies around are yet to conform the predictions of the theory(if any of my readers know any papers which prove it otherwise,please post the link). The findings fail both to distinguish the crucial from the less important institutions but also to determine whether deregulation lowers or raises unemployment ,while the inconclusive results can be partially explained by differences in the time period or the country selection, model mis-specification and the policy making body bias on such issues also seems to be an important source of error.

Institutional variables which I am taking the liberty to divide into five groups (what we as Indians understand):
Tax system (progressive.. but can and should be more simflified),
Employment Protection legislation (Not any research done to study the implementation and penetration of such legislation's in MSME sector),
Workers' bargaining power (we have come a long way... At least now we can lure our farmers to cities for boosting Infrastructure),
Product market regulation (Still a fiefdom of big names and business groups..) and
Unemployment compensation (oops... this is not applicable in India..oh !! NREGS..oh yeah, another way to fill pockets from coffers).

"Enough of you being cynical, Avinash"... if you are a staunch believer in the Indian Reform System.

Taxes on labour seem to affect the unemployment rate mainly by increasing the cost of labour and, thus, lowering labour demand.

Furthermore, the effect of a labour tax increase depends crucially on the degree of the workers' bargaining power. The stronger the workers, the more of the tax increase the firms have to bear. Hence, higher labour taxes only affect labour demand, if the workers' bargaining power is high(eg. Labour conditions in Bengal and Kerela). An important point is the utilization of the tax income by the government. If part of the taxes serve as funding for, say, qualification measures for unemployed workers to reduce the spell of unemployment, taxes can indirectly help to reduce unemployment, but this point is highly debatable in terms of Indian context.

Let me talk about something whose implementation is supposed to be improbable possibility "Employment Wages" or something which we will call as 'Employment Protection fund'. The replacement rate can be split up into the benefit payments for different states of unemployment, say, first year of unemployment or fifth year of unemployment. The bargaining system can be displayed by, for instance, both the union coverage and the bargaining co-ordination.

Providing employment protection in globally advanced countries is usually conducted by imposing severance payments on the firm or to exacerbate layoffs by legal regulations. Concerning unemployment, the effect of higher employment protection is assumed to be twofold. On the one hand, it lowers the flows from employment to unemployment since firms take the additional costs for layoffs in consideration when evaluating the productivity of a worker. Labour is allocated less efficiently what comes along with a fall in productivity and, finally, decreased labour demand. While the employment protection can be seen as an insurance against getting unemployed, the unemployment benefit system affects predominantly those who are already out of work. An increase of unemployment benefits on the one hand causes unemployed persons who are eligible to benefit payments to raise their reservation wage. On the other hand, unemployed who are not eligible to benefits will have a higher incentive to accept a job in order to get qualified for the benefit payments in case of future unemployment.

Furthermore, the fear of losing job-specific human capital can convince the workers to attach no importance to high unemployment benefits. In this case, unemployment benefits will not lower the unemployed workers' incentive to search a job.

The degree of product market regulation affects labor demand through adjusting the competitive environment in a market. Increasing competition in a market means more competition for labor if entry barriers are sufficiently low. Hence, the lower the governmental regulative intervention (e.g. barriers to entry or public ownership) the lower the unemployment rate.

Nevertheless, a certain degree of barriers to entry can also help to increase the firms' productivity in a market. This, in turn, can lead to an increasing demand for labor. Furthermore, a change from public to private ownership boosts the performance of workers and managers since monitoring is much easier to implement.

I think i am getting too carried away .. for more insight refer to my Labour Market Reform report .... C ya till the next update.

A Branding Joke ... played on the Disparate Indian Consumer.

Brands in Disparate India.

The marketer always tries to push the envelope always by adding a dimension to its scope of work. Invariably, doing it either by increasing the scope by volume or by upping its qualitative deliverables.

One of the biggest failures for him has always been in the area of brand building, specifically loyal customers. This happens in the Indian market, not because of the non-accessibility of the product but the range of disparate consumer,which it has to cater to.

The need for the Indian Marketer to be a visionary is not the need for the time, but the need of the evolution and sustainibility.The Indian Marketer has always failed to look beyond the Short term Vision, because of the pressure of deliverables in the Indian Market.His escape lines are something like this,” At the end of the day, I have to report numbers”.

Lets accept this fact.
We are a number driven country, intent only on performance and immediate ones. We don’t leave scope for Experimenters and the ‘also-rans’. We are an impatient lot because of the sheer competition and peer pressure of people waiting for one chance to perform. In India, do not leave scope for mistakes and thus are nipping creativity and growth in its bud, in the fear of conformity and certainty.

Oh !! Come on.If you are shaking that head in disagreement, Let me prove it.

Lets start with the best example you can imagine of.
The best consumer build up, reach, brand retention and brand building ad exercises have been made by the Telecom Industry. You name it and you would be in unison with me.

AIRTEL..Express yourself.. Building Relationships.. the list for these guys is endless..

VODAFONE.. the pug and then the zoo zoo .. they took the world by storm.

IDEA .. what an idea, sirjee!! ranging from a range of common social issues and giving smart ideas to solve them..

Amazing isn’t it . Success . The Telecom Sector wouldn't trade it for anything else to Redefine it better. Best distribution networks... Keeping all variable of marketing challenges in peak.

Ok , hold it right here. Now lets go back to basics.

BRAND
Brand is seen as a implied promise,the level of quality which people(consumers) have come to expect from a brand which will continue with repeated future purchases of the same product. Xerox.. Nirma in the 90's.. Parle G Glucose Biscuits.. Lifebuoy.. Given the options and competition, the consumer always goes for the product. This is the criteria for a LOYAL CUSTOMER BASE . It sums up the crux of our whole branding exercises in the Management corridors.

Is the Telecom Industry conforming with this pattern of product positioning with its portfolio.

I would say ,"This is not the case with telecom."

Though they have been excellent in selling and catering to customer base as wide as selling Blackberries to Rs. 5 Recharge Vouchers, but the they have failed miserably in creating a repeated purchaser.

The amount of churning happening in the telecom industry, doesn’t subscribe to the basics being right here. This flaw is making the telecom companies not allow the clause of number portability enter in India. Brand Confidence for this industry is so less and that these companies are still following a poach and acquisition customer strategy.

Indians with their inherent nature will never pay for what they haven’t still used , but still a statistics which goes to do so much contrary to the basic mindset of the folk. Just imagine, we still are in the phrase of such an evolution and growth, but we still see subscriptions in Postpaid area to be mere 20% and the Prepaid sector still a staggering 80%.
WHAT KIND OF BRAND ACCEPTANCE IS THIS ?

A sector which has been adding 20 million customers on a monthly basis, give or take plus or minus 1%, Imagine them adding this base with suppose 2% churning and yet we can only boast of a tele-density of 58% and the base of 650 million subscribers. Improbability can’t be more believed.

Now would you still say Telecom is the best branded sector.. .. The story has more dimensions to be revealed … for more insights look for my Telecom Sectoral Report.

One credit which I don’t want to take away from the Telecom Sector is the way it has branded itself.. Lets save the next story for the next update.