ABOUT MAKING AND MANUFACTURING

ABOUT MAKING AND MANUFACTURING

Ever since the first machine was designed or invented somewhere around 1760, the drudgery of manual labour was reduced greatly. Not only in the industrial sector, part of the developments spilled over into the agricultural or Farm sector as well.
India was largely touched by the Industrial revolution quite late and through the colonial domination.
Though it's been over 250 years , we still considered manual labour superior to that of machine and agriculture superior to factories.Gandhi, Shastri and host of other socialist leaders gave slogans in that direction.
There had been few dissenters like the Great Engineer Vishveshvariah who had clearly trashed Gandhi's policy of Khadi and Gramodyog .
Slow to follow up , we did however shed the agricultural based priorities to catch onto the fruits of industrialization - but not without heading into large scale urban migration .
Now again when we should be moving ahead, we are once again caught in that manufacturing quagmire.We simply don't manufacture enough. It is a general notion that we still mostly export spices and gems and Jewellery, which was effectively the Indian export a millennia ago.
Time and again there are calls of boycotting the Chinese products for various reasons , but not a reason that we manufacture  those items more efficiently or cheaper.
No one bothers to check the fact that most of a exports ad valorem are Petroleum by-products.
No-one bothers to check that most of the products arising out of a Chinese factory are those with minimal tech and profit margins. As for India , so it is for rest of the world, the technology and hence the demands and hence the priority keeps changing.
Let me put it better by way of an example. In 1969 when Apollo was sent to moon the computing that was used in the process was using 128MB. Now 48 years down the line , the cheapest of mobile phone uses 100 times of that.
It may be a popular step to compete with the "assembly line countries" and start manufacturing Laptops,mobile phones and even cameras. But if you can do better than that should you take a regressive step.
Better Than That: What is better than manufacturing the latest expensive gadgets which are popular all over the world?
I will like to answer that question in a different way.
Which is the most expensive Indian company in terms of value or Market Capitalisation ?
Right!  It's TCS or Tata Consultancy Service. And what does it make?
What does Apple make for that matter. Or Microsoft ?
Contrary to popular notion, even for Apple- a constant stream comes from it's software platforms like i-tunes.
Value Chain addition: In the complex economy of today, it is very difficult to say that an entire product is made in any one country. (In fact that was also a premise on  which GST in India was based - when the talks started, but that is a different matter). The metals for a products may be procured from another country annd the unfinished metal for it from yet another one. The plastics may be manufactured in a 2nd country but the resins may come from a 3rd one. The design of the chip maybe done in Hyderbad but the chip is made in Guangzou. The software for it maybe made in California by Green Card holder engineers working for Infosys. So now whose product is it?
This is where the Value Chain addition kicks in. This is also why today we cannot clamour about Swadeshi or Pardesi. The companies have joint holdings and cross holdings across companies and countries. The workers come from one country and work in the third but remit their earnings to the first, which maybe their own motherland, fatherland or simply a tax haven.
Read the following article which is actually written 5 years ago when Apple was still strong on the back of it's products
https://www.forbes.com/sites/timworstall/2011/12/24/china-makes-almost-nothing-out-of-apples-ipads-and-i/#5579f0a960b4

So now we can safely address another question,which is a question in sync with the times! What is it to make and what is it to manufacture. While answering this we may have to junk the classical GUNS V/S BUTTER MODEL which was (and maybe is) taught in schools and colleges.
It is good to come to some form of conclusion in the Socretarean way!

Let's start from the first mechanised product- Textile.
Is the cloth made at the power loom or at the designing table or the design software?
Is the cloth considered made when the garment is made out of it or when the yarn was manufactured out of petrochemicals?
In classical economics a product was considered produced once it reached the market or was even part of the inventory. However it maybe , in today's environment- every part of the process may be claimed by a different company or country.Hence it also obvious that the amount of value added to the product is the real clincher. It is this value added that may- I repeat -May decide a country's export.

For stand alone exports anything from an idea (not Idea) to concept to a drawing can be good enough to earn something.
With this new concept of Value chain addition the classical patriotism theory will also take a beating which has been around since last 250 years.
Just to sum up, even Chanakya had propounded in his ":Arthashastra" to manufacture what was efficient for the state and the society and import what was not economically efficient to grow or manufacture.
So don't jump if I tell you that most of the Chana and Moong which you eat , come from Canada, Australia and Mozambique.

GST- MAGNA CARTA 2.0 OR DEMON 2.0

                                GST- MAGNA CARTA 2.0 OR DEMON 2.0 OR NEW INDIA 2.0

Magna Carta was a document signed in 1215 by King john of England , by way of which he signed away most of his powers and agreed to abide by law. 

So how can we compare the GST regime , which is coming into force from tomorrow, with such an archaic document?
This is rather funny and in good humour that I am trying to compare the two. Because the GST bill has been prepared by the Central excise and Customs department , who are writing away their far reaching powers and agreeing to abide by the new Code.
For more than 11 long years , the officers of the Excise, Vat, Service Tax and other miscellaneous departments have toiled through the archaic laws of the country to simplify and align them for the ease of doing business.
 GST has an immensely far reaching consequences for both the Manufacturer and The Service provider (M&SP) and the Consumer.
For the (M&SP) , it claims to not only reduce the number of taxes that they have to pay , but also the duplicity of taxes that they had to encounter. The business owners are rightly concerned about the number of online forms (called RETURNS) that they will have to fill.

For the consumer or the customer it promises to give him the right product for the intended price; which means that the GST which he will pay will go to the Government. This is unlike the situation now where the Service tax or the Vat is charged to the customer but not deposited with the government.
GST also promises the states of the fair share of their taxes depending on the economic activity that takes place in the respective state. This means that, a state which produces a car will get the proportionate amount of tax , unlike the loss of excise at present , where the tax actually went to the state of sale.

But this everyone knows or have read plenty of times.
What I am looking is entirely a different scenario.
What I see is a unique opportunity in a direction which can be called THE GREAT LEVELLER.
From the midnight of  1st july 2017, all the professionals and experts dealing with Central or State Excise, VAT, Service Tax and other knowledge base- will be challenged to learn and practice something absolutely new.
I agree , the ready-made softwares will make their jobs much easier; but same will apply to any other person who has basic intelligence but did not have any knowledge about all those taxes so far.
In my opinion we are knocking at the doors of an opportunity for all those young Indians who are out of college with miscellaneous degrees and no jobs for various reasons.
Here will be an opportunity for them to start afresh and quickly get their hands on the new tax code or GST code and find a way forward for them.
From 1st July there will be a plethora of Institutes which will teach GST through various softwares. But for once, there will be an opportunity at the end of those short courses.
For once a 20 year old intelligent youngster will have the same knowledge as a 50 year old Tax specialist; at least in theory.
The online procedures aim to seal corruption , which will be good for the new professionals- as no longer the older generation of tax professionals have any physical office to settle the tax matters of their clients. It will be all cut and dry.
There is also a small ... very small window that I see for the unskilled sales force at different small businesses or shops. So far they were paid pittance for their efforts of 8-10 hours. However now that there will be about 3 online return forms to be filled every month - there will be an opportunity for them to train themselves in rudiments of Computers. With this extra qualification, they will be able to double up as the " GST Return Preparers" and be more useful to their employer. In fact 8-10 small businessmen can pool in to share such a GSTRP .
With this hopeful and optimistic view , I call upon all those youngsters who are unemployed or underemployed to put their mind and effort in correct places and benefit out of this opportunity.

Magna Carta, meaning ‘The Great Charter’, is one of the most famous documents in the world. Originally issued by King John of England (r.1199-1216) as a practical solution to the political crisis he faced in 1215, Magna Carta established for the first time the principle that everybody, including the king, was subject to the law.

Magna Carta, meaning ‘The Great Charter’, is one of the most famous documents in the world. Originally issued by King John of England (r.1199-1216) as a practical solution to the political crisis he faced in 1215, Magna Carta established for the first time the principle that everybody, including the king, was subject to the law.

Magna Carta, meaning ‘The Great Charter’, is one of the most famous documents in the world. Originally issued by King John of England (r.1199-1216) as a practical solution to the political crisis he faced in 1215, Magna Carta established for the first time the principle that everybody, including the king, was subject to the law.

Case of a Mutual Fund Advisor/Distributor

                                       Case of  a Mutual Fund Advisor/Distributor (A/D)

Like all financial products, Mutual Funds too have an intermediary who connects an investor to the Asset Management Company by way of different schemes.
Right from the advent of Private Mutual Funds in the early 90's they helped in selection of  funds (which was not a big task those days, as the number of funds were a lot less), filling up the form(s) and doing the leg work. Even though the distributors were not too familiar or educated in Financial Planning , they did a reasonably good job for the money that they were being provided by the AMC as incentive.
The hey days were those of 2.25% entry load and almost 2% exit load, so the distributors were a happy lot with trailing commission of the investments flowing in as long as the investment was there.
This model of commission was in line with that of the LIC agents - whose commissions were intact "zindagi ke saath bhi zindagi ke baad bhi."
Then in the August of 2007, a benevolent SEBI chairman scrapped the Entry load and the MF schemes suddenly became cheaper. Further on the exit load became less and the further squeeze on the commissions.
However the trailing format of the commissions still stays on even though it has come down drastically to about 0.6% for equity and to about 0.12% for debt funds.
But what does TRAILING mean?
It means that if you made a modest investment of Rs.1.0 lac in the year 2000 and it has grown to Rs. 10 lac today- then your distributor will get the appropriate commission for each and every year till date  on not only the original investment but any successive purchases that you had made. This was a price for keeping you invested and I fully support it because most of the investors need that guidance and motivation from the distributor.
1.But what is their relevance today?
2.Do we need them with the Direct Schemes that the  MF companies have launched parallel to each "normal" retail scheme?
3. How safe are these distributors with regards to trusting our money with them?
4.What service are they really providing us with in these times of net transactions?
5. Finally! Can I have a mid way between the Normal Retail Plan and Direct Plan, so that I can pay what is the relevant remuneration for the service?

I feel that I am somewhat qualified to answer this question for two reasons:
1. I had always invested through a MF advisor/distributor for the entire period of my earning and investing life.
2. Though I spread awareness about investment and personal planning , I am not beneficially or gainfully connected with any person or entity who has a business interest in Mutual Funds or any element of Personal Financial Planning.

The Mutual Fund  Distributor: is still very relevant today , especially for a new investor and especially for the Seafarers, but only if he is a certified ADVISOR or a DISTRIBUTOR by the SEBI. He should also have a AMFI certification and his "own" ARN NO. Some distributors act as "sub brokers" to the main distributor on some commission sharing basis. These should be avoided as they are not qualified or experienced enough to guide an investor.
I feel that when one starts investing by way of Mutual Fund , one needs to learn a lot of nitty gritty which otherwise he may learn at his own cost...and what is more... an enormous opportunity cost.
It simply isn't easy to select a good fund with LOOOONG term view. A good advisor/distributor can help you with that.
There are over 1800 mutual Fund schemes to select from 48 AMCs. For a direct and that too a first time investor this can be a mammoth and a daunting task.
Hence starting off with a  A/D is a good and certainly recommended idea. Yes there comes a time after 3-4 years , in which if you have taken active interest and your portfolio has satisfactorily progressed- then you may consider going Direct.
However, my experience with fellow investors is that once they start getting good returns from their MF investments and good advice from the A/D , they prefer to stick with him , as the feel that a small timely advice has saved them lacs and even a crore at times.
A question you may ask here- How do you know if my distributor of Advisor is genuine or not; or if he is acting in my interest.
Answer: Check your portfolio. If your A/D has ever enticed you to invest in a Closed ended Fund, NFO at the peak of a bull run (because such funds never come in the down turn times). Further on if your share in such funds is actually quite high... then you have all the reason of knowing that the scheme was sold to you for his 4% upfront commission and even attractive trails.
{However you can also kick yourself for not reading my e-book available for free from marineinsight.com :)}.
Answering the Third question is much easier. A Mutual Fund scheme is a contract between you and the MF AMC. The A/D is just a conduit to have connected you to the right scheme or not. He will fill your forms, get your KYC done and kick-start your investment. If you have issued a cheque from your designated account in favor of the MF scheme- even a fly cannot hurt your investments- you are 100% safe.
Mutual Funds are so heavily regulated and hence safe that  even you will not be able to invest from an account which is not connected with that particular Portfolio.

Fourth Question is about their service which they (A/D) provide outside of what we can get on the net.
As you have seen quite often on the net, the amount of information is mind boggling. If Financial Management is not your profession , chances are that you will never get the info which is relevant to you.
An A/D helps you with the precise info and services that you may need.
There is also an element of hidden knowledge. The A/D keep meeting with the Fund Managers of most of the AMCs at various seminars arranged for them for their education enhancement. At these seminars the Fund Managers and even the CIOs/MDs of the AMC discuss long term views of their funds. In addition the A/D gets personal messages and alerts in case government changes or is about to change a policy. This information can be made available to you in good time to benefit.
The final question being if you can find a mid way between going for Retail Plan and paying commission or losing out by going for direct plans.
Yes there can be a mid way- Ask your distributor to go for a Direct plan and set up a commission model with him. Since he gets only 0.60% as trailing commission (that is if your investments continue for the entire year), you can set up a different model which can be beneficial to you and him. I am sure with the great ingenuity that the Indians are blessed with, you will be able to find a good middle road.

I do not think any more queries would remain after this article.
In case you have then post a query here or send me an email on kaushik.the.idiot@gmail.com .

 

Circle is About To Complete

Because of my penchant for Economics and Finance , very often amongst my friends and known circle I am mistaken to be a materialistic and money minded person.
Whereas nothing can be farther from truth. And this I can say with absolute certainty because I have been in touch with my self for most part of my life. I have never wandered very far away from my inner self and have always striven to complete that circle of life which involves everyone and everything.
The name of this blog "holistic" , is an indication of my journey to try to complete the circle of my life by connecting various dots representing divergent aspects of human life...The Noble Eight Fold Path.
For me  money simply represents a fulfillment of today's needs and a modest security of future. Beyond this I always believed in putting this money to some use towards those people who were not only needy but also deserving. Otherwise who doesn't need money today.
However this charity part , I was able to realize quite late in life since I never had time or maybe  the direction.
Vipassna meditation helped me take this into different walks of life.
In my objective of guiding my colleagues was a necessary urge to help them plan a definitive life and retirement. Also a hidden desire was that once most of them had been put on that path I would introduce them to the virtue of charity and paying it forward.
Then I came across this association for Seafarers in Dehradun called DSWA. It was formed by a set of very young officers and they had succeeded where efforts by our seniors and ourselves had failed.
The acronym DSWA stands predictably for Dehradun Seafarers Welfare Association.
However what the association has been working for past 2.5 years is for the welfare of the society; giving back part of their very hard earned money to those whom they don't even know.
This was a compassion that I wished to impart to my younger colleagues, but it was already there.
Bright young people spending their quality time in orphanages, even celebrating their birthdays with those who don't even know their own birthdays.
Recently a Trust working with affected children and ladies ran out of money and gave a SOS call.
The members of DSWA immediately responded and in a span of 48 hours collected a sum which is a dream of most of NGOs.
The entire feeling of seeing humanity in the hearts of those who are so away from humans for most part of their lives, is so very touching.Probably the physical distance away from family makes them so sensitive.
There is huge personal satisfaction for me too, in knowing that my objective is almost over and THE CIRCLE IS ABOUT TO COMPLETE.

With Gratitude and Compassion to all my Colleagues

With Gratitude and Compassion to all my Colleagues at Sea

Exactly 30 years and a few weeks ago I had entered the hallowed portals of Shipping.
I was overawed by the traditions and beliefs that were passed down to us and were repeated at the cost of insanity and lack of logic...but we accepted.
As through a lot of mindless beliefs and traditions I also saw through the apparent lack of social security for the average sailor, despite being what looked like uniformed services and the discipline attached.
The Indian companies did have a defined system of Retiral benefits, but such was not the case with the Foreign entities. It was a "Soldier of Fortune" or hire and fire concept there- more of firing of course.
At the outset I understood that I had to find my own way out or "Retirement Nirvana" for myself, could not depend upon the shore management of the big and rich companies , however many slogans of loyalty they shouted.
Through a constant reading of books (mainly) by A.N.Shanbhag and International Retirement funds, I tried to find some easy and consistent way.
Even before my promotion to Chief Engineer , I had got almost 75 Officers and crew to open their PPF accounts which guaranteed 12% interest p.a. tax free.
Coinciding with my promotion in 1995 , the Indian Mutual Fund industry which was shackled by UTI till then- was opened up to private players.
Next 3,4 years were spent simply finding out how, where, which to invest in.
Till then. the desire  and drive was also not so great as the NRNR deposits gave almost 18% which compounded to 20% for a 3 year period.
By 2002 I was finished with the discovery and my basic tenets of investing were in place. Most of these tenets were of psychological nature.
I had understood that What was good for me is quite different from WHAT I WANT.
As I was investing myself , I was also introducing my colleagues to the Mutual Funds- who were not very keen on my theme.
However by 2005 I decided that I will help at least 500 of my colleagues to not just invest but plan their future in a systematic way .
The journey was very slow and painful. But I was patient for a change.
In 2014 I myself said goodbye to my beloved Sea and hence to a steady income stream. By then I had barely helped 175 people, to form their portfolio.
In 2015 I published my first e- book with the help of marineinsight.com titled- "Financial Planning for Seafarers".
The book was priced very cheap ( at about Rs.150 or $2.25) , still not people were able to buy because of payment platform issues. So the publisher consented to my request to make it free.
Today I'm happily told by a lot of colleagues returning from sea- that the book was there on all the Desktops and Laptops of the ship. Nothing could make me happier- in a world where everyone talks of piracy .

Then Dehradun Seafarer Welfare association (DSWA) roped me in and we had 2 seminars within a span of 5 months.These were attended by over 175 officers and their wives.
From here the movement of Seafarer's Financial Planning took a whole new turn.
Everyone was enthusiastic and livid. Even the young cadets were talking in terms of Equity exposure and STPs. My target figure of helping 500 Seafarers has long been crossed.
Now something even more phenomenal is happening.
Each one of these young officers have turned advisors to their ship-mates.
Captains have their new role cut out- as a financial guardian.
A young Captain who teaches part time in a college- says that he regularly teaches youngsters about finance during his regular classes.
I get about 5-6 calls a day and equal no. of emails asking me to help them fine tune their portfolios.
Last 2 years have been very important in the life of Mutual Funds when the retail small investor has helped the industry surge ahead of other Financial entities like LIC and other Insurance companies.
Somewhere in all this the seafarers also have their contribution. They do not even know that they are directly helping the country and helping themselves in return.
I am very happy for whatever is happening around me now.
No Sailor will be cheated by LIC and other insurance companies into buying expensive ULIPS.
Everyone will be adequately covered by Term Plans and Health Insurances.
All these gentlemen will slowly build wealth with aim and option to retire early.
And wherever I am then, I will always be thankful to them for having their faith in me and helping me to help them.
I hope and wish them success in their lives...
... their lives which are tough because of the nature of duty
... their lives which are tough because of being away from their loved ones
...their lives which are tough because of missing the birth, the marriages and the deaths of their loved ones
... their lives which are threatened by all the entropy and disorder in the world
... their lives where time is not counted in hours and minutes but in the number of stamped pages on their CDC.
May God bless my Sailors and their families.

Equitable Wealth Revolution of a kind

There are revolutions of various types... some very noticeable , some hidden...Political, agricultural , cultural...

But nothing can close to this.

The Fiscal revolution.

In 1993-4 , the Mutual Fund space was opened to private players.This was the euphoric period of IPOs and Harshad Mehta was behind everyone's memory. With great reluctance, few informed investors started investing.Internet was not around , so information was not common.

In the ensuing 20 years these few investors were richly rewarded... while a majority failed to comprehend the concept and avail the opportunity.

With some public connect over print and AV media people took nimble... very nimble steps... and something happened.

The Mutual Fund space was flush with funds.

In 2017 the Mutual Funds of MFs as we call them became the biggest Domestic investor in the Indian market .

To give you an idea the Total size of Indian Budget stands at Rs. 21.47 Lakh Crore for yeaar 2017-18.

Compare this with the size of  Indian Mutual Fund Industry Rs.17.54 lakh crore at the end of March 2017.

The slow to catch on - Indian investor has ultimately realised the virtue of slow and steady investing on one hand and the Power of compounding on the other.

SIP and STP are buzz words now .

I get daily 8-10 phone calls with the flawed question- "which is a good SIP plan?"

The question shows poor understanding of Mutual Funds- but nonetheless...

Why is it working- the concept of Mutual Fund that is?

Why there hasn't been any scam in this space so far (barring that of the grandfather scheme of UTI- called US64)? Not that there cannot be any in future- but let's talk about what happened so far.

The credit can be fairly given  first to the concept of MUTUAL itself and then to the governments of the day. 

Overlaying itself over the era where the share price was a very opaque issue. Which means whatever or whenever you bought a share - you could be sure that you got the highest price and vice versa while selling.

But when you bought a MF unit- the price that you would pay would be the one that was declared as the NAV at the end of the day (rather evening). It did not matter who bought the MF units - my purchase of 100 units got the same treatment as someone else's 10,000 units. There was no preferential treatment and price was universal. This is an important feature of MFs even today.

Then there were continuous improvements in the structure:

- Cash purchases were banned.

- Third party cheques and DDs were not allowed.

- In 2007 - entry load , which used to be a hefty 2.25% was removed by SEBI.

- Insistence by the SEBI of the Fund employees investing in their own funds.

All these ensured that clean money of genuine investors was flowing into the market.

The rise of Mutual Funds gave employment to a new genre' of trusted (largely) financial advisors, MF industry employees and the cult of STAR FUND MANAGER.

The fortunes of various fund houses changed by the entry and exit of a handful of Fund Managers who enjoyed cult status.

Toady people like Prashant Jain who despite heading the fund house that they once worked in at a lower level- still individually manage the funds. The AUM of his funds may far exceed the GDP of small countries.

One of the features of MFs is that in case of a downturn you do not have to rush in to take your money out like people do in direct stocks. Since it is the responsibility of the Fund manager to buy and sell- you just have to sit back and enjoy the show. If you are continuing to have some funds for investing- it makes more sense in investing it in a market crash rather than running away- as I have fortunately learnt.

Mutual Fund concept is a very Indian kind of concept where you are not bothered about the vagaries of life (market in this case). It gives equal opportunity to various classes of people to increase their wealth according to their input without bothering to learn too much.

So there you are enjoy the show while the market is rising and make sure that you also buy the ticket to the show when they are falling.

 

WARNING!!! Earthquake- Build The Right Home

Whenever we start earning, our first instinct is to buy a land or house for ourselves. Of course some like to simply splurge on- but that is not what we are discussing here. For the last few years I am seeing the rush to buy apartments in the Doon Valley. The only criterion that is followed is to have a good view of Mussourie, all other parameters are simply ignored or dwarfed. No one is interested in finding out how the sewage will be taken care of or from where will the water come in next 3 years.
The builders are simply finding  small areas anywhere in the nooks and corners, behind and below each and every small hillock. They have even encroached the River bed and built seven floors on stilts.
As you may be well aware that Dehradun lies along the most seismically sensitive area- and as I have learnt from few Geologists, that thee Rispana lies along a fault line, especially near the northern part of the Doon valley .
The kind of earthquake that we witnessed last night on 6th Feb2017 night is exactly what is waiting to happen. There are no calculations for the past earthquakes proffered yet, so obviously all these so called multi-storied apartments are also built without taking any calculations into account.
I am not discouraging the reader from buying a home for himself , it is a must and you must buy it if it is a must.However do not ignore even one aspect of safety- since more than your money- your and your family's life depends on it.
In 1993 , I had myself bought a home (not an apartment) and I could not actually check the architectural strength of it because the owner had disguised it very nicely. Soon after purchase one of the walls started sinking and developed cracks. In those days I employed all the engineering skills I had learnt on board and inserted 7 RCC pillars without breaking the terrace slab.
In the process I learnt much about the topography of Dehradun.
More than my engineering skills , the reader must take my financial advice and build a structurally resilient home for himself- the old fashioned way. Buy the land- then build. None of the apartments are cheaper than a house that you would build for yourself.
Think in terms of using alternative materials, including imported wood, prefab elements.Line up the roof with Solar PV cells, Follow the engineer from Chennai  - whom I had featured on my FB page- and build a completely self sustaining home for yourself.
http://asc-india.org/seismi/seis-uttaranchal.htm