ELECTRONIC COMMUNICATION AND ELECTRONIC TRANSACTIONS

ELECTRONIC COMMUNICATION AND ELECTRONIC TRANSACTIONS

A few days back, I did a small coverage on our friendly Postman, who had served us for over 23 years. The piece was in a nostalgic tone and questioning the future of postal delivery.

This however should not set the tone of this article which happens to be in favor of electronic transfers and communications.

Most of the people to whom my articles are normally directed are seafarers, NRIs and HNIs or high networth individuals. However this may have to do with everyone who would care to read.

Normally it is very awkward for a middle aged male like me to stand up for the modern methods which everyone vouchsafes are not safe and full of risk. There is a very high level IT professional in UK whom I know( having a doctorate in Computer Science). He operates with conventional methods and does not access his bank account except by a ATM card. He may be aware of a few things that we are not aware of, however we will continue with our discussion.

ELECTRONIC COMMUNICATION:

There are stories galore how in past years people lost admission to prestigious colleges, or employment or a large investment opportunity because they did not get the required letter in time , due to whatever reason.

Nowadays it is rare to find anyone without an email address. It is in order too, as written communication has reached mind boggling speed and hence expedited the inter-personal and official transactions. Even the government offices have adopted email for official medium of transfer of information to individual stakeholders e.g. interview letters, appointment letters. Admit cards and results are freely being communicated through emails and SMS.

All this not only brings speed to our communication but also saves natural resources like trees for paper and fossil fuel for means of transportation which would otherwise be required to support the snail mail system of communication.

However the reason why I would like to support E-Communication is for another reason in addition to ensuring that you receive your correspondence.

PRIVACY: Letters and other Official documents are open to breach of privacy especially in today’s colony based culture of row- houses or apartments. I have witnessed people complaining how their letters are being regularly opened and again sealed back.

At times few missing letters from the bank may be sufficient to reveal your financial position and liability to unscrupulous elements. I have witnessed a case where the perpetrators / kidnappers came to know about the amount in the bank account from a Bank Statement passed on by the Postman.

Statement of Account: of a Bank account does not only reveals your bank balance, but a few other personal details about you like PAN No., email address, nomination etc.

While the Statement of bank account gives out your immediate financial position, SOA of your DEMAT account and Mutual Funds are even worse. They can give out your total financial standing of your lifelong savings to people. The scenario is indeed scary as it gives a sense of violation.

Primary and secondary system of email : It is also a relatively common complain that a person’s email has been hacked .To this I had come up with an idea of Primary and a Secondary system of email.

With this system there is a central email address e.g. yourname@gmail.com. This ID should never be publicized or given to anyone except family members. Now you can create few other SECONDARY email addresses for various purposes. 1 email ID for your bank, 1 for your MFs and demat account, 1 for public domains like promotions and 1 for your employer etc. Next step is to install a email client like Outlook, Eudora etc on your PC. Laptop or Tab and have all the above accounts on the same client for receiving emails. For sending emails you can individually select the email id from which the email is to go out.

Second method, is to go individually to the particular POP mail site and the individual email account and create the FORWARDING to your Primary email address , which was yourname@gmail.com .

In this way your individual email addresses will not be known by entities who should not know  that address and you will also be able to know if a particular email address has been breached.

This will also deal with the data theft of email address that has become prevalent nowadays with employees of banks, insurance companies resigning and carrying away the data with them to be misused later.

Conclusion:

Always opt for online Statement of account of banks, Demat services, Mutual funds, Insurance companies etc.

Have individual email IDs for individual uses and have them redirected to your unique central account.

Relying completely on emails will not only enable you to  receive and organize them systematically but also keep a record for an extended period of time.

ELECTRONIC TRANSACTIONS:

 Most of the Seafarers and expatriates have their salaries remitted to a savings bank account. This is even today done by depositing cheques in the accounts and the money lies there for a few days to few weeks till you can access the account or issue a cheque on it. It is seen that there is always a week or two delay between the money coming to the account and be invested further. Sometimes this delay can be of months too.

Considering even a 10-15 days delay with 7-8 months for seafarers and 12 months for other individuals there is a huge opportunity cost involved and wasted. Even if you were to use the money for opening a Fixed deposit this gets delayed by 80-120 days for that amount. If the purpose is for investing in MFs or stocks the loss in opportunity cost is huge.

  I have always gained because of the electronic transactions. One such instance I distinctly remember. I saw that it was the last day of the higher interest rate of the bank which they had hiked only for 15 days in 2012 to attract NRE deposits. They obviously do not inform you .So while I was on ship, I could open FDs on line and gain by locking into a higher interest rate for a very long time. Similarly, I have gained umpteen times by investing online in case of large crashes of the market while being on board the ship.

Hence it is definitely in order that you opt for Internet transactions. Opt for i-transactions for your bank accounts, mutual fund investments, access to demat account even if you are not interested in the online sale-purchase of stocks.

Also opt for DCB (Direct credit to bank) of your Mutual fund redemptions, share-dividends, insurance paybacks and proceeds and any other source from where you receive or liable to receive funds.

In India at least the central bank called RBI is making compulsory to opt for electronic transfers.

You may be surprised that the amount of unclaimed dividends and bonuses in the capital market is so large that the government body called SEBI has formed a Investor’s Education and Protection fund.

Similarly, unclaimed amount from PPF and Employees Provident Fund is well into over Rs. 100 billion.

All this is due to poor record keeping by individuals on their personal record keeping. Most of the time reason is also that when the depositor dies the surviving members of the family has no idea about the financial products that the deceased had invested or saved in.

Similar case is with insurance policies. Due to poor education of the family members, the only time the money is required is when the Insured Person is dead. After him mostly there is no one to form the family as to what they should do.

Few cases have come to my personal attention where after the person had passed away. Family could not file a claim as they could not get their hands on the Policy documents. The agent did not inform them since he is supposed to be paid by the company. The company was not pleased when I sent them to file their claim after 3 years.

Now there are custodians nominated by government who can do the safekeeping of your Insurance documents in a demat way, just like your shares. But for that you must inform your family.

Conclusion and takeaways:

• 1.       Opt for electronic fund transfers and internet transactions in your financial dealings.
• 2.       Keep a record of all your investments in one place.
• 3.       Opt for Direct Credit to bank of ALL your redemptions, sales, dividends, bonuses.
• 4.       Opt for SMS information also which is available freely nowadays.
• 5.       Keep an electronic record of your insurances.
• 6.       Invest in a good antivirus.
• 7.       Keep changing your passwords regularly.
•  

 

PETROL AND OUR NATIONAL DUTY

So many times we just take up part data and draw conclusions that suit  our argument. This is also the reason why the standard of Indian researchers in our colleges/universities is less than satisfactory.
The below table is itself explanatory of this fact.
The compiler has taken lot of trouble in accumulating the data and making the slide.However he has overlooked a certain  fact that that a nation's economic calculations are not based on simple additions and subtraction.
In the year2005-2006 the average Re/ $ average rate was  Rs.44.2735 which as per the table pegs gasoline(petrol) as $0.9224 per litre.
For the year 2015-2016 the official average rate is still not out but let us take it as 64.50. The rate per litre comes to $0.9488 .
Here too I can take whatever $/Re and petrol rates to suit my argument=- that is the beauty of statistics- but that is not our lookout here.
1. What the compiler has overlooked is that during the decade in question Diesel was heavily subsidised and the subsidy component was either being financed by Fixed and elevated Petrol price.
2.Apart from the petrol , government was covering the shortfall by giving cash transfer to OMCs. This shortfall was obviously being funded by the tax payers.
3. The prices that you are seeing between 2007 and 2008 and again between 2008 and 2014 Jan have highly fluctuating. What do you think was the price that the Oil importers were paying to the O(il) P(roducing) C(ountries). This price is the spot price or sometimes the long term contract price.
4.During this time there have been great political turbulence in the middle east .Iran has been a subject of great interest. It could not sell it's oil and US placed embargo on it's oil export. All these had effect on the oil availability as such the country had to do a lot of spot purchases, all this while burdening the tax payer and the Petrol user.
5.Even the Onion buyers know that prices vary with demand. During the above decade the automobile industry has churned out a double digit growth . The farmer in Punjab has used free water  generated by diesel pumpsets running on subsidised diesel.
But during this growth in demand the price of petrol has mostly remained static.
6.All the well-to-do citizens bought 2000cc+ powered SUVs running on subsidised diesel.That included politicians, businessmen,media person, property dealers and crooks who paid no taxes.
At this time no one ever questioned the price of petrol, because they were not using it. It was being used by the poor Scooter, motorcycle and  Maruti 800 and Santro users.
Just for your information, very few luxury cars exist that run on petrol.Most run on diesel.
7.Now when the oil price has inched down only in line with the previous pattern. Should the government not try to eliminate the oil subsidy that has already burnt a hole in it's pocket and cover the shortfall on account of old subsidy..
8. As per government statistics ( which may not be accurate) 8 crores of LPG cylinders have been distributed to people who did not deserve it. This has been extrapolated from the no. of people who have given up their LPG subsidy.

At the end of my poorly managed argument, all I can say is that whatever be the form, it will always be the citizens who will pay the bills of the government. The government has no money, NO GOVERNMENT OF THE WORLD HAS EVEN A SINGLE CENT. It is all citizens money in form of taxes or loan given to the government in form of Bank FDs, Post Office schemes , PPF etc.
What your objection should be not micro issues that the government tries to put forward to you to distract you. should ask and ask for good governance.
File regular RTIs and Public Grievances for the useage of your tax money.
File petitions on downsizing of government machinery.
When most of the work is handled by Infosys and TCS, why is the IT department using almost 45% of it's tax revenues generated.
Why is there a full department of service tax in just 15 years?
Why should the direct taxes not be done away completely and we survive on the GST and expenditure tax?
Why must the government revenue departments not publish a Annual Report like Private and Public companies.
These are the questions that citizens must ask but no-one ever will.
It is much easier to throw vague barbs at no-one in particular and pretend that we have done our national duty... but we haven't.
JAI HIND

DOING WHAT YOU KNOW BEST

DOING WHAT YOU KNOW BEST

At least two to three times a year , the financial world provides an opportunity to the 2 billion literate experts of this world. This opportunity manifests itself in making quite a few armchair economists every time  and also throws up a lot of investment experts and advisors. This is required also, because there are serious shortage of jobs in this world; and what better job can be there than to comment upon the economies of the world , tell the televisions that the doom is near and how this crash is worst ever that the world has seen- ever in most cases meaning since last week .

I have always approached most of the things rather simplistically i.e. from First Principles. Here is how they went:

 What is a Stock/Share? It is part of a business that anyone can own legally, even if someone has limited funds.

What Stocks/Shares should I buy? Of a good reputable business which has near monopoly . Preferably a product that is used regularly and cyclically.

But I don’t understand balance sheets, all the financials which are to be considered while buying a share what should I do? Invest in Mutual Funds. Diversified and preferably large cap.

How long should one hold the shares of a good company? Forever! If the business is good and growing , why would you want to sell it and start looking for another good business. It is like closing your own running shop and starting another one instead.

This was as close my mind worked towards investment and all was going well… till something called derivatives came along.

These were very complicated financial concepts which made the people who were regularly buying and selling everyday (and hence called traders)- even more busy. Now they were not buying shares but promising to buy a whole batch of shares of a company by paying a fraction of what you and me were paying by “actually buying shares”. To cut a long story short at various times when the markets fell due to a lot of reasons that they do, a lot of people lost money, homes and even lives.

An even more complicated product wiped out the economy of United States and Europe in 2008 .

During all this time I was quite bewildered (not enough to not continue with my MF investing).I was wondering that what economically productive function was being performed by the FnOs or derivatives and individuals and companies who were dealing in it.

If something is not produced, it is not part of an economic activity. This production can be of something tangible like metal, petroleum, machinery, banking, Pharma OR non tangible like IT, healthcare OR services. Something must be produced to have a value attached to it. We all are part of that economic activity. If we do not work, not only will we not be able to earn for a living but also not add any value to the society and the economy. There is a classic theory of economics called Guns and butter, which you can google .

In short… we must do what we know..exert and assert our skills.

It is very important to read the above and understand before reading what I am about to mention below.

We earn by working and save it in the banks and further invest it in Mutual Funds, stocks, gold, real estate, bonds etc. The companies, the stocks of whom you own are carrying on their business and making a profit because of which your share price goes up. But what happens if that company whose shares you own, instead of using it’s profit to expand it’s business uses the money to invest in the Stock Market or buys MFs for itself? There is nothing wrong with it legally. They are confident that they will make more profit by investing than by carrying on their own business.

Let us further take this example. The government of a country has wealth in form of foreign exchange or surplus taxes in its budget (which rarely a government has). Now instead of using that wealth on development programs the government decides to take that money and invest in the stock market. Is that right, or is that correct? Is the government doing anything wrong? It maybe argued that by doing so the government is trying to bridge the deficit that it is always saddled with because the receipts from taxes are always less than what it has to spend for development. It maybe true ,however to me it looks like a python trying to eat itself tail onwards.

This was what China was trying to do. It was using it’s reserves to make profit from the market that was supposed to be coming up by it’s own developmental and growth policies…and who was supposed to be having a higher growth rate than China.

There is more to this in form of improper or incorrect data that used to be flowing out from China, which I always believed was “doctored” by the government. China is in fact in a unique position to show to the world what it intends to show and how much it has to show. I am personally witness to 2,3 incidents where the government or party workers kicked in to what was supposed to be a private drydock in order to create subterfuge and diversion from accidents that happened due to safety having taken a backseat.

Coming back to our talk… it is important for everyone to do what they are trained to do or supposed to do.

Government is supposed to create policies and a safe atmosphere for it’s citizens and businesses.

Businesses and industries are supposed to carry out their enterprise in earnest.

Citizens are supposed to abide by law like everyone else, work and earn their living and ensure that their dependents are looked after.

This is the ideal world…or utopia as we call it.

What actually happens is …

Government does business or creates confusion by interfering in businesses.

Businesses try to interfere with governance and twist laws to extract unfair amount from the citizens.

Banks mislead the clients and channelize the wealth they are supposed to protect into avenues that are profitable only to themselves.

The professionals who are supposed to heal, build bridges, protect the country and carry on their professions start dabbling with their money and lack of knowledge…

As a result all goes haywire… and we have the entropy and disorder that we have.