Short Gold

Last week, I got an interesting call from the UK. A learned, finance lady called me up, and was trying to sell me the idea of investing in her gold-backed financial instruments. I didn't buy her idea, and, consequently, she failed to sell her products to me. We had some interesting discussion on the phone -- she was betting on the gold price going north, and I was making her understand that the gold price will go south, hereon! We both failed to convince each other. 

Her position on gold: it will go up as it has come down a lot. In other words, gold has seen a large correction, and looking at the historical trend in the gold price, it will go only north, hereon! Indeed, pretty optimistic lady! :-)

My position: The past is not a good indicator for predicting the future. Markets, by and large, don't work like that. Moreover, the world has, of late, changed a lot, as it doesn't work the way it used to. All key players -- traders, speculators, investors and governments -- manipulate markets like anything. The recent hike in the gold price (between 2009 and 2012) was not only because of the speculators/investors who were hoarding on to gold, but also because of the governments worldwide which were busy hoarding on to gold. However, their purposes were, by and large, the same: to hedge against the foreseeable inflation and to hedge against the greenback going south -- both of which have not yet happened even after three years of their prediction -- or, to but it in a better way, they never understood how the world worked and how economies were integrated! That's the precise reason, why some less-dumb players have started offloading their gold hoardings, leading to some neat correction in the price of gold. My back-of-the-envelope analysis says that gold will be trading between $950 and $1050 by the end of this year! 

Of course, she didn't buy my analysis, but, instead, assured me of her calling me again, if I get right in my prediction -- by the end of this year. Lady, I will be waiting for your call! :-)

The Never-ending Drama of the Euro Zone

I have, for long, been reading about the never-ending drama of the Euro-Zone and have quite been bemused with it too. Trust me; it really is amusing, for many non-obvious reasons. The drama has been unfolding itself since the onset of the Great Recession of 2008. Technically, the Euro Zone is out of the recession now, but the hangover of the recession is still there! It seems the Euro-Zone has fallen in love with the hangover itself :-)

The core factors at play for the ongoing drama are:

1) The Euro itself. The workings and the interests of the Euro are at loggerheads with the interests and purposes of the Euro-Zone economies! In a plain vanilla term, the widely differing Euro-Zone economies never needed a common currency in the very first place. It was the fear of the hegemony of the Greenback that rushed the creation of the Euro. The 17 Euro-Zone economies are very different from each other, as some (peripheral Euro-Zone economies) are import-driven economies -- that need a strong Euro to pay less for its bills -- and some are export driven economies (such as Germany) -- that need a weak Euro, for pumping its export up and for making its export much more competitive on the global markets. Hence, the straight-jacket-solution, the Euro, has, since its inception, been at conflict with the interests of the economies that use it as their local currency. The obvious consequence of this conflict is the prosperity of the German export during the Great Recession, riding the tide of the undervalued Euro. Whereas, the peripheral Euro-Zone economies have been struggling to pay their debts off, and have literally been "begging" around for bailouts -- these economies primarily are import-driven and a weak Euro is detrimental to their economic health. Undoubtedly, there are other strong factors at play for the sufferings of these peripheral economies as well. I will discuss those equally important factors later.

2) Germany is not playing its supposed leadership role. It's the strongest economy amongst the 17 members of the Euro-Zone. The reasons for Germany taking a back seat are many. For example, it's benefitting from a weak Euro as its export is growing by leaps and bounds; it is skeptical of its leadership role, thinking that the economically weaker Euro-Zone members will ask it for money, if it gets desperate to save the Euro by extending a helping hand to the struggling member economies; it still is feeling guilty of having dragged Europe into two world wars, and, now, it doesn't want itself to be the reason for the third disaster to Europe.

3) There is going to be a tightly contested election in Germany this year. So, all political parties and leaders in Germany are playing safe by not committing any national resources to the bailout of the struggling European economies. There is a widespread ill-feeling in Germany of the luxurious social benefits in the struggling Euro-Zone economies, and most Germans believe that their tax monies should not be used for paying for the lavish social benefits to the peoples of those struggling economies.

I believe that the Euro-Zone drama will not end until the upcoming election is concluded in Germany, and that Germany has to come to the forefront to bail its fellow members out, consequently saving the Euro, and ending the long drama. I guess that's the cost Germany has to bear with, after having enjoyed the weak Euro for long. After all, the struggling member economies will indirectly have paid Germany for bailing them out by giving the global financial markets enough reasons for shorting the Euro! Haven't they? :-)

Being Positive

Many times, we all hear people talking about being positive. Do we all really get what it means being positive? I have a doubt!

Let me share with you all the mantra for being positive, and equally important is the skill to identify positiveness -- a quality that is even harder to gauge and vouch for. 

In layman terms, being positive requires no prejudice and no pre-judgment. It demands for being neutral, at least at the beginning, if not overtly positive right off the bat. Then, as events/times progress by, start taking things/events/people at their face value, without jumping to conclusions on your own -- now, this is the hardest part. Why is it the hardest part? It is simply because you need to understand things and try to gauge the progress as well. The trap here is being judgmental before the right time and without having enough information. Try to gauge the prevalent intents, means and goals, and generate as many perspectives as possible, before making any sort of conclusion. Keep reminding yourself of the fact that clear communications are the way to go. When you have, at least, three parties' perspectives -- third parties', second parties' and first parties' -- you are good to go for your conclusions. A caveat here is not to conclude things completely in isolation. You must get your perspectives cross-checked and reiterated with the parties involved either covertly or overtly, as far as possible. Then is right the time to conclude by all means. After all, we ought be decisive in life, right? Concluding, per se, is not an evil thing. In fact, it is a mandatory thing to achieve and seal substantial progress. Good luck!

And, when you are evaluating others of their positiveness, make sure you have enough perspectives, backed by good enough qualitative and quantitative information, before arriving at your conclusions. Help yourself run through the above exercise. It really is a no-brainer, but, usually, is not highly practiced.

To be candid enough, I too am in the process of learning what I have just preached. :-) So, please feel free to remind me of my own exercise, whenever you observe that I am forgetting my own lesson. Thanks. See ya back, soon. :-)

Kausar Fahim's Undertaking 2.0

It has really been a very, very long time since I posted my last blog. Well, since then, I have been so busy, with so many chores of life that it was not possible for me to come up with some quality blogs. So, instead of producing junk, I took a long break! Well, having said so, I don't want to claim that all my previous blogs were of high quality! :-) The caveat is that my blogs' readers had neither reprimanded me of, nor appreciated me much for, my past blogs! So, I decided to take the benefit of doubt. (-_*)

Going forward, I have decided to put extra efforts to make my blogs interesting and light. I don't intend to give my readers high blood-pressure and/or hyper-tension. I would love to see a smile on my blogs' readers' face, while reading my blogs. Anything more than that would be considered great bounty! :-)

However, as usual, criticism, to my blogs, is always highly solicited. So, please feel free to type in your valuable comments whole-heartedly. 

Thanks, fellas. 

The Inflation Problem in India

The Indian Government has long been struggling to tame the inflationary pressures that run in the excess of 6%. Since early 2010, the Reserve Bank of India has increased the interest rates six times, but, has still failed to meet the longing objectives. Why?

The simple answer is that they are trying to fix the wrong side of the problem. It's true that demand is high in the Indian market, but, more than just demand, it is the supply-side that is highly constrained! By increasing the base rates, the RBI has just been trying to bring down the demand, so as to tame the inflation. The actual, and thus the long-term, solution to the problem requires on the government part to invest billions of dollars in fixing the pathetic supply-side problems. But, fixing the supply-side of the problem requires guts, courage, discipline, honesty, accountability, high-standards of governance, and tons of money.

Instead of tackling the real-and-higly-challenging problem, the government is busy giving the world, especially to the global investors, an eyewash by frequently increasing the interest rates. Sad? Indeed.

The Global Currency War

The global fight to reducing the value of currencies is peaking up. It might reach to its zenith, with the Fed further printing crispy US dollars, and pumping those dollars in the global economy, either directly or indirectly. The Fed is thinking of buying the US Treasuries, with its new crispy greenbacks, and is going to keep the interest rates near to zero, for a long time. If this happens, the US dollar will get diluted, and US exports will become more competitive on the global markets. Thus, it is a direct, currency-war response to China. But, the challenge for China is to move its currency further down, in tandem with the greenback, against a basket of currencies. Thus, China needs to keep buying US-dollar denominated assets, especially US debt, extending its love-hate relationships with the greenback. For global investors, it is a no-bariner to guess the US treasury yield, and, for the global market, it's a no-brainer to guess the direction of the new money!! :-)

Another challenge for China is to weigh-in the costs and benefits of continuing its currency war, as it holds almost 10% of US debt -- the dollar asset the value of which goes down, every time the dollar is getting devalued. So, the ultimate question for China is to consider whether it is worth keeping its currency devalued so as to export more and more, and then keep buying US-debt with the money earned so to keep exporting even more and more, and, then, somewhere in the cycle, the US brings down the value of the debt down by printing new greenbacks!! Undoubtedly, it is a vicious circle!!! A vicious circle in which China has a huge chance of losing, rather than of winning!! Isn't it illogical to bet on someone else, especially when your entire fortune is at stake? But, it appears, for China it is not!! China has been keeping most of its economic strategies US-centric!! China really needs to come to grips with itself -- that it is a behemoth and it should now be inward looking rather than outward looking!

Although, it all started with the US and China, but, of late, some more countries have hopped on to the bandwagon in the currency markets to manipulate their currency in order to export more and more, such as Japan, South Korea, Indonesia, Brazil, etc., making the currency war global. It's a dangerous-and-quite-pointless fight the world is getting into, as it is purely a beggar-thy-neighbor policy, which is not only mean, but also cheap!! Why? In one way, this unequivocally proves that the world has run out of real innovations, or, at best, it proves that the world has really given up on real innovations, which are the real-and-awesome sources of renewed exports that bring livelihood to all, including the producers and the consumers alike. But, instead of focusing on this aspect, the whole world is getting into a dog fight!! May God save us all. Aamin!

My Blogs: Easier to Read, Simpler to Understand, and Friendlier to Share

I have earnestly tried my level best to make the template of my blog as simple as possible, in order to enhance the ease of readability. Moreover, now, you can share my blogs with others through your very own Gmail, Blogspot, Twitter, Facebook, and Google Buzz accounts.

As usual, please keep enjoying my blogs secretly! :-)

If, in case, you want to share your "secret-enjoyment" with me, there is a comment button down here. Kindly give your invaluable feedback and let me enjoy my blogs too. I will surely try to enhance the level of enjoyment we all derive from the blogs here. I promise. Enjoy. :-)

Is Apple Really In Trouble?

Having successfully failed to woo Apple, Adobe filed complaints against Apple to the US Antitrust Enforcers, saying Apple is stifling competition by shunning all Flash-based content from the iPhone and the iPad.

First things first, is Adobe justified in its allegation? Let me give you some perspective, before you jump to any conclusion.

Flash is Adobe’s proprietary software that currently is being used to run more than 90 percent of online graphics, animations, and videos, especially content for displaying online advertisements. And, Apple doesn’t support Flash on its products, disallowing Adobe a highly-desired, much-awaited entry into the Apple Value Chain.

But, why does Adobe want to enter into Apple’s “territory.” There are two obvious reasons for desiring so:

1) Apple’s customers, in general, are higher-spending smartphones-users. Getting their eyeballs for advertisements are highly desirable, as the chances increase manifold that those customers will buy things, when they are exposed to “relevantly-pitched” advertisements.

2) Apple may break Adobe’s hegemony on online content that generates online advertisement revenues, and may push HTML5 – an open-source standard for web-based graphics, animation and videos – as the industry standard for online advertisements. If that happens, Adobe’s value will tumble, because Adobe makes money from charging advertisers, designers, and developers for using its proprietary tools, such as Photoshop and Illustrator, for creating Flash-based graphics, animation, and videos.

Let me give you some more perspective. Why should Apple bow to Adobe? If the ground has to be leveled for all kinds of stakeholders, then why shouldn’t it be leveled by making an open-source standard, such as HTML5, as the industry standard for online graphics, animations, and videos? Doesn’t it sound more logical? Why should “the power” shift from one company to another? The power to control online revenues should be dissipated to everyone on this earth! And, that is achievable only by making HTML5, or something still better, the industry standard for creating content that generates online revenues.

Apple has vehemently been supporting HTML5!

Now, let’s get back to the original question of whether Adobe is justified in claiming that Apple is killing competition by not allowing Flash-based content on the iPhone and the iPad. What do you think? I think, “Not a tad!”

If you disagree with me, please feel free to rip me apart – there is a button for comments right down here! I look forward to hearing your rationale too!

Adobe’s One-sided Love Affair with Apple

Apple is very clear of how it wants developers to develop applications for its products, such as the iPod, iPhone, and iPad. It wants developers to use its well-documented APIs in the manner it prescribes. Thus, it wants applications to be developed ONLY in C or C++ that could well be executed by the iPhone OS WebKit Engine.

In other words, Apple still wants to shun Adobe’s Creative Suite that includes Flash, which is currently being used for displaying more than 90 percent of online videos.

Apple, since the launch of the iPhone in 2007, has been shutting Adobe out of its value chain, even though Adobe has consistently been trying to woo Apple by sending very clear signals! For example, the new Adobe Creative Suite 5, which is expected to be unleashed soon at Adobe’s annual developers conference, has features that will give developers the ability to produce applications in a format that can work on the iPhone and iPad. But, Apple’s new developer agreement makes it succinctly clear that Apple is not going to accept Adobe’s courtship!

But, the obvious questions are: Why does Apple want to hurt Adobe? Why does Apple want to keep Adobe out of its value chain? Won’t doing so hurt Apple too? Won’t blank-holes be there when Apple customers browse the Internet, using Apple devices? What is going to fill in there, if not Flash-based videos, which already are prevalent all over the Internet?

The answers to these so-called obvious questions could perhaps be like these: No, perhaps, Apple purposely doesn’t want to hurt Adobe, but, definitely, wants to hold on to its highly enthusiastic developers firmly, raising the costs of switching for them. And, yes, doing so is hurting Apple too, but not much, as content-providers are slowly moving from Flash to HTML5, which is an open-source standard, and works fine for Apple. So, hopefully soon, there won’t be many blank-holes for Apple’s customers.

Oh yea, Apple has its own way of saying a big NO! But, it is just playing safe, as it knows what might pop up, if it lets Adobe come close to it – and to its products, services, “hegemony” over its entire spectrum of value chain, revenues, and bottom line, of course! :-)

Emirates, Off Course?

As per the International Air Transport Association, Airlines worldwide, in 2009, which witnessed the worst demand-decline in the airline history, are estimated to have lost USD 9.4 billion. For the same year, Emirates will announce even more profits, including another record for passenger traffic, perhaps above the 23 million mark! How?

Between April 2009 and December 2009, when all other Airlines were getting into a price war to lock-in passengers, in order to fend off the global recession, Emirates increased its fares by 35 percent across its network. The surprising, but strategically-planned outcome of doing so was that the demand for Emirates grew up! Seat factors went up, so did the loads!

The decision for hiking the fares did require a little retrospect for Emirates. It was quite tempting for Emirates to get into the global price-war, but, then, it realized that having spent millions of dollars in building a premium brand, getting into the price war wouldn’t make sense at all.

For example, Emirates had put first-class showers on its A380 super-jumbos; had sponsored horse racing, yachting and football events across the world. All these strategic, brand-building investments would be in a stark-contrast to its decision for getting involved in the global price-war! Thus, to show the world what it was, and, perhaps, what it is, it hiked its fares across the board. Moreover, it also identified a much-untapped goldmine in first-class and in business-class passengers coming out of Europe, Asia, and South America. Awesome! Isn’t it?

But, its competitors are crying foul, as they claim that Emirates has an undue advantage over its competitors, as it has full support of the airport and civil aviation authorities, especially of those of Dubai. But, then, that is Emirates’ strategic, niche business-model for cutting travel-time short for its passengers by creating new “city-pairs” via a single stop at Dubai, and also for realizing Dubai International Airport’s strategic growth-model that seeks to be the world’s busiest aviation hub. Now, this is called aligning your growth strategies with those of your business-partners – a strategy for devising a win-win solution for all the parties involved, even for your customers as you shorten their travel-time while still putting them on a luxurious flight!

Emirates is chalking out a big-potential-for-growth strategy by linking 500 profitable destinations worldwide under its “city-pair” business-model, up from its current network of 101 cities. It says, “It’s just the tip of the iceberg!”

The only constraints that it may face will be the physical constraints of Dubai International Airport, in terms of airspace, runways, and other physical infrastructure that might limit the use of its “city-pairs” concept. Emirates, off course? Of course, not!