Why gold investment never runs out of fashion

One investment class which has found buyers across all generations and category of people is Gold. Often people ask me whether it’s a good time to buy gold now. There is no definition of “now” as whenever you want to buy gold, it’s a good time. You are buying into an appreciating asset and disregarding the short term price fluctuations in gold, you would never lose money in the metal.

There have been fables and dynasties built on this yellow metal. Gold has attracted the attention of man since the days of the Gold Rush when people risked their lives in the hope of making it big with the discovery of some gold mine. Over the generations, the yellow metal has found a place of eminence among the asset classes on account of its never ending demand. There are some facts which one should know about the metal before they commit there hard earned money on the shiny metal.

Gold is an inert chemical element and is one of the most malleable and ductile metal known. The metal retains its shine and colour even when exposed to air and water and that adds to its value as storehouse of wealth. The supply of gold is limited on earth and unlike fossil fuels, it does not get formed through the chemical reaction of the basic materials (carbon, oxygen, nitrogen and hydrogen). Moreover gold once mined remains above earth in some form or the other…. Jewellery, Gold bars, Coins, industrial machines, etc. Till date around 165,000 tonnes of gold has been mined.

Gold has been widely used throughout the world as a vehicle for monetary exchange, either by issuance and recognition of gold coins or other bare metal quantities, or through gold-convertible paper instruments by establishing gold standards in which the total value of issued money is represented in a store of gold reserves. Gold has been fascinating mankind since ages. Egyptian hieroglyphs from as early as 2600 BC describe gold, which king Tushratta of the Mitanni claimed was "more plentiful than dirt" in Egypt. Gold is mentioned frequently in the Old Testament, starting with Genesis 2:11 (at Havilah) and is included with the gifts of the magi in the first chapters of Matthew New Testament. The Book of Revelation 21:21 describes the city of New Jerusalem as having streets "made of pure gold, clear as crystal".

A recent report ranked the central governments of different countries according to their gold reserves. No wonder, US Govt. topped the list with close to 8900 tonnes of gold reserves. India was ranked 12^th on the list, but when it comes to gold consumption, no country can match up to India as far as the demand for gold is concerned. India consumes nearly 25% of the gold produced each year mainly in the form of jewellery. So if we consider both the government reserves and gold in the form of jewellery with the citizens, I am sure India would top the charts comfortably. It goes without saying how Indians have always realized the true value of gold which many countries are now realizing considering the weakness in the dollar which has been the measure of a government’s reserves.

Gold investment worldwide has grown dramatically in the last five years, but compared with the total stock of financial assets, gold bullion investment is still just a tiny proportion. Several factors are now stimulating gold investment by new pension fund money - as well as by private investors. Sales of gold jewelry across Asia are surging as the local economies boom and private investment grows. China's gold investment demand grew by 20% in 2009, while Indian consumers bought a record 900 tonnes – well over one-fifth of the total world market. Gold buyers in Asia tend to think of their jewelry as a form of gold investment. Prevented from owning gold bullion until very recently, they buy gold to protect their savings from inflation and currency shocks. That's why the most popular form of gold jewelry in Asia – heavy chains and bracelets – is known as "investment jewelry" in the gold industry.

Gold mining companies worldwide have failed to meet the growing demand from gold jewelry and gold investment buyers, pushing the gold price steadily higher. The world's No.1 gold mining nation, South Africa, has seen its annual gold output halve since 1998, and new operations in China and Russia - though growing - have failed to pick up the slack. According to consultants "Virtual Metals" total world mining output has fallen by 4% since 2003. Their gold investment analysts don't forecast an early return to growing output.

The surge in crude oil prices has closely matched the gains in gold prices since 2003, but many people now thinking about gold investment will also want to consider the surge in world food prices, the boom in base metals such as copper, and the current all-time highs in the cost of shipping. Rising demand for better housing and durable goods from Asian consumers is certainly a factor. But many gold investment analysts also point to the huge growth in credit and debt in the West. The money supply in the United States has doubled in the last seven years. In Europe, growth in the money supply hit a near-30 year record in late 2007, increasing the appeal of gold investment as the value of each Euro in circulation threatens to shrink under the weight of new notes and electronic account balances.

Why Manmohan Singh should quit as India's PM

Like a large number of Indians, I too had immense respect for Dr Manmohan Singh and felt India would really emerge under the stewardship of his vision. However this hope soon faded away as we Indians came to realize that he would just be a puppet whose reins would be elsewhere. I would not want to delve too much into this as much of bandwidth has already been spent on this.

My view as to why Dr Manmohan Singh should resign from his current position as the PM of the nation is based on the fact that having been the face of the ruling government which is opposing the Jan Lokpal Bill proposed by Anna Hazare and team, it has become a face-off between Anna and Manmohan. People have come to see it as if Manmohan Singh is not against corruption and he is supporting a corrupt government. The real corrupt politicians have taken shelter behind the PM and are using him as a shield. No where in discussion its being said that Laloo Prasad Yadav, Jayalalita, Mayawati or Sharad Pawar are opposing the Jan Lokpal Bill. When in reality they would ensure at any cost that the bill does not pass as then it would mean nailing their own coffin. On the contrary the fight has become one between two honest and respected citizens of the nation.

I think Dr Manmohan Singh should call it a day at his current role and take up role's which involve less of politics and more of intellect which he is gifted with. We need minds like his to steer the nation towards a developed economy which he cannot do under the shadow of higher power and for always being insulted as the silent PM of the nation. It feels bad to hear when people make fun of the gentleman criticizing his silence. He needs to speak up for himself and protect his dignity which he is losing protecting those people who really don't care for him.

2008 being revisited in 2011

2008 was a year that very few people would forget in their lifetimes. You need not be linked to the capital markets to remember the events of 2008 as almost all across the Globe and across all sectors, the tremors were felt with varying intensity.

Now as we have come to the middle of 2011, the fault-lines are starting to show up again. Indian markets started the year with a strew of negative events - big ticket corruption being unearthed, high inflation, rising interest rates and high crude oil prices. Developing markets continued to outperform the emerging economies as economists went gung-ho about the growth prospects of the shattered developed economies. US was seen as the clear market leader in the global rally. Unfortunately the party on the street has become very short lived.

Unlike 2008 when it was the "Too Big to Fail" banks from the US which were at fault and collapsed, this time around in 2011 its the Sovereign Governments whose neck has been put on the line. Countries which till yesterday figured as the top tourist destinations of the developed world, became the poster boys of Sovereign defaults. These countries made it clear to the world, either the European Union (EU) bails it out or there would not be any EU tomorrow. What initially looked like a European problem, soon raised its head in none other than the mighty USA. With the Debt Limits becoming a national political issue in the US, the world could do little but watch the debt limits being raised to another astronomical figure of a few more trillion dollars!!

Now with fresh concerns of European banks falling, the markets are on tenterhooks!! People are talking of a Lehman type crisis in Europe. Growth rates are being downgraded for the developed and emerging economies and also for the World at large. Where would all this lead to? Has Lehman become the synonym for financial crisis? Before we could lick our wounds from the last crisis, we have been pushed into another one and this time around the wound seems to be quite deep. Governments are in trouble unlike the previous case when governments bailed out the banks. Fed cannot come to the rescue of the US government by running its minting machines overtime. That would be the silliest thing to do.

The problem with the current global economy and more specifically the financial sector is that greed has become the corner stone of its demise time and again. We do not seem to be learning from our past mistakes. We pumped in $700 bn in 2008 and created the current mess. Now debt limits are raised further and stakes are higher. Its no man's guess what the size of the next crisis would be.

The Indian Congress digging its own grave

There is an old saying in Hindi mythology "Vinash kale vipareet buddhi" which means when one's destruction nears he is guided by wrong intelligence. This seems to be the very scenario for the ruling Indian Congress Party (UPA) and its handling of the Anti-Corruption movement led by Anna Hazare and team.

After the first wave of Lokpal Bill movement in April 2011, the ruling UPA government felt the pressure was too intense and it was needed to show to the common man its intentions of fighting corruption and hence accepted to draft the Lokpal Bill which has been lying in the corridors of the Indian Parliament for the last four decades!! Like always, the government felt that this too was a passing phase and soon the steam related to the Lokpal bill would die down and government would come out with a weaker version of the Bill to appease the citizens and pat its back for having made an anti-corruption law. However little did they realise that times have changed and we Indians are not in an era of Roti-Kapda and Makan, but a much more enlightened society. Moreover the people leading from the front in the fight for Jan Lokpal Bill are no politicians whose motives end with the gain of publicity and votes. They are respected citizens of the country who have the least aspirations to be on the political list of any party.

With the failure of the government to pass a strong Jan Lokpal Bill, and Anna Hazare's decision to take on the government a second time, I think the stage is set for the final ouster of the ruling party in the next elections if not before that. The ruling party has lost its support of the citizens which is visible from Bangalore to Delhi and Mumbai to Kolkata. They hit the final nail on their coffin by making the silly mistake of arresting Anna Hazare and his team even before they could begin their fast and peaceful rally in the capital city of Delhi. This act highlighted the fear the government has with the success of the rally. My question is why is the government hesitating and so adamant on not allowing corrupt bureaucrats being investigated by an independent body like the Lokpal? What skeletons is it hiding in its cupboards that it is so scared of any investigation?

Surprisingly ruling party ministers come on television and talk about how the Jan Lokpal Bill is not the solution to corruption problems in the country. They don't realise that we too know its not the panacea for the corruption problem, but then as of now we do not have a better alternative and neither do these so called elected ministers have an alternative other than just degrading the Jan Lokpal Bill. Below I have summarised the difference between the Jan Lokpal Bill and the Draft Bill as recommended by the government of India.

Draft Lokpal Bill (2010)	Jan Lokpal Bill
Lokpal does not have powers to investigate the prime minister.	Lokpal will have the powers to investigate the prime minister.
Lokpal can only probe complaints approved by the Speaker of the Lok Sabha or the Chairman of the Rajya Sabha.	Lokpal will have powers to initiate suo moto action or receive complaints of corruption from any citizen if it deems it worthy.
Lokpal will only be an Advisory Body with a role limited to forwarding reports to a "Competent Authority".	Lokpal will have the power to initiate prosecution of anyone found guilty.
Lokpal will have no police powers and no ability to register a First Information Report (FIR) or proceed with criminal investigations.	Lokpal will have police powers as well as the ability to register FIRs.
The CBI and Lokpal will be unconnected.	Lokpal and the anti corruption wing of the CBI will be one independent body.
Punishment for corruption will be a minimum of 6 months and a maximum of up to 7 years.	Punishments will be a minimum of 10 years and a maximum of up to life imprisonment.

I guess its just a matter of time before the ruling government realises that no one is bigger than the citizens who have elected them and whom they are ruling in a democracy. We are no dictator-run country like Eqypt, Libya or Iraq where there would be civil uprising and riots on the streets. We have a much powerful tool of non-violence patronised by The Father of our nation and we shall surely achieve our goals this time too though a little later because of the quantum of money involved and the level of people who would be under investigation once the bill comes into play.

Destination Mobile Apps

There seems to be a new industry that is seeing more entrepreneurs than anywhere else. Low start up cost, low fixed expenses, shoe-string marketing budget with marketing based on social networking sites and need for only few tech savvy minds to get the business up and running, is what is driving this new industry. This is the new generation Mobile applications industry that is seeing growth unheard since the IT boom days of the late 90’s. I would contribute the emergence of this new industry to one single company which has emerged like a phoenix from the ashes and taken its place as the largest US company surpassing the giants like Exxon. Yes I am talking of Apple Computers. The launch of iphone brought about a revolution in the world. The very meaning of smartphone changed forever and it brought about a new breed of Application developers to cater to different need based and entertainment based applications that would enhance the experience of the iphone.

We have come a long way since the days of iphone with the launch of newer versions of iphone, ipad and a host of Android based smartphone and tablets. Applications based on Blackberry and Symbian platforms are also seeing quite a lot of activity. Industry reports peg the growth of these applications in exponential terms with the industry revenues pegged at several billions of dollars till 2015.

However I have my own reservations on this aspect. It’s not unknown that when the going gets good, research companies go overboard in their estimates. This in-turn pulls in too many new players in the industry which ultimately sets the stage for the untimely demise of the same and negative publicity of the whole concept. My observation on the mobile Applications industry comes from the fact that we have lakhs of Applications on App Store and for Android phones, but only a handful of them which are actually downloaded regularly and are of any significant utility. So I am concerned about the other app developers who got lured by the huge potential in this industry but then got lost in the crowd. I agree it’s a survival of the fittest like in any other industry. If you have a killing application it would definitely make its own mark.

My other observation comes with regard to the saturation being seen in the App space. Normally any smart phone user would not install more than 10-15 applications on his device unless he has ample amount of time to dabble with the apps the whole day. Now with applications available for almost every segment, the opportunities for newer developers are getting narrower. So my advice to aspiring mobile application developers is that check the App stores to see the applications which are the most downloaded, what categories see the most hits and which ones are also at the bottom of the heap. Market is definitely large and has space for many more developers to make their mark but caution needs to be taken to not get lured by any mirage in the world of Apps!