Thursday, November 18, 2010

Impact of Paper Currency on Equity Market, Income Inequality, Marriage rate, Divorce rate, Health....

By now I believe regular readers of our blog know that we have a Big time problem with "Paper currency system" that started on 15th Aug 1971.(Recently, writing in the Financial Times, World Bank President Robert Zoellick called for a new monetary system to replace the floating rates adopted in 1971 known as Bretton Woods II.). So there is a thought process coming in mainstream that agree on flaws of paper currency.  

In this article I have tried to see "Before 70s" vs " After 70s" pattern for many aspects. Although I don't like to use maths and stats in sensitive issues such as Marriage rate, Divorce Rate or even on Health, few graphs below were too shocking for me. So I just thought of sharing with our friends.

Historic Dow Jones Before and after Paper currency

As we all know Dow Jones Industrial Index is one of the TOP Indicator of equity health of US and in turn whole world, We can clearly see "Before 70s" vs " After 70s" pattern here.

widening income Inequality 

This is pretty interesting one. (Income inequality has Increased in Paper currencies ). There is "Before 70s" vs " After 70s" pattern here. What might be reason ? Is that the previous Graph ? are people investing in Stocks (By understanding / not understanding magic of paper currencies) becoming richer? Leaving rest all poor in comparison?  Is equity Investment only best way to make money in paper currencies?

Median Annual Earnings over decades.

Here there is co-relation for Men's income. It remains in same bracket while women's income growing steadily. This should make us proud as a human race that women's are bridging the gap of income. Although  for Woman's graph increasing trend is from mid 50s and has gone up steadily so there seems no pre 70 and post 70s correlation.
Divorce Rate over decades.

This was a simply shock to me. Here I see correlation to Before 70s and After 70s . What has changed? There was a discussion within friends on this. One said "Now a days males are having more bad habits like Smoking, over Drinking, etc... That is causing all this" Another friend who suggested that "May be women's have better income now (Previous Graph) which "helps" them to take a call if they are not happy in their married life. In old days even if women was not happy she had no option but to stick with husband as she had no economic freedom so in fact it's good development due to economy". Another more conservative friend had strong argument on that comment. He said, "Look no one divorce for pleasure. But if what you are saying is correct, then after 1st divorce, their life should be better off. In reality study shows that in US, Divorce rate for 1st Marriage is 50%, for 2nd Marriage it's 68% while for 3rd marriage it's 78%. Which means that something is wrong in thinking that capacity to take divorce is "helping" factor for happy life!!!."

I had no counter argument on that ... But what worries me is are we going in right direction as a society.

Decreasing Marriage Rate.

I see a correlation here Well. There is impact on Marriage rare as well. What may be the reason ? Need to think more ... ?

Health Data from official Web Site

What to say here .. Is easy money and credit bubble making us fat also ? at least graph shows it.

Now to counter all these arguments someone may say that these social issues have nothing to do with paper currency etc..Don't blame all our problems in paper currency...  it's a new era and this is bound to happen..... To me it makes a lot of sense in believing that all this has some co-relation with each other and is connected. But I think this is a topic of debate and I welcome comments and arguments here.

P.S:  To add the data I have taken is of 50 Years + ( Thanks to Prof Reeve Vanneman at University of Maryland for her great work on .. ).

Sunday, November 14, 2010

Good Investment in Nov 2010 “Real Food Investment Habbit”!!

Well, environment seems changing again.  Out of PIIGS (Portuguese, Irland, Italy, Greece, Spain) This time Irland is on verge of default and need money (bail-out). This can create some amount of disturbance in markets. Although “Next Euro bailouts” are designed to be least vocal and painless, they will still have same consequences as money has to come from somewhere. If no one pays then of course currency devaluation pays. Which means you and me have to pay more for gas, food, and everything.

Anyway while many people will be busy in figuring out on direction of stock, what happens to Ireland, credit default swap, ECB reaction, derivatives, and so on, I believe it will be good “investment” to stockpile rice, wheat, salt, beans, lentils, pigeon pea, coffee, tea, and other food items that you need on day to day basis for personal consumption. If possible for next 2 Years! Here are the reasons why I believe this.

# Baring few exceptions like India and China, Food prices are still relatively low in many countries. (Even in India and China, though they are high, 2-3 years down the line they will be possibly much higher)
# With amount of stimulus injections, everyone knows that there will be inflation for years to come so what you buy this year will always be cheaper than next year.
# Inventories of food are lowest in decade across the world and there are multiple reasons for the same.
            # Due to constant urbanization across world, labor is not available for farming.
            # There is no reverse flow of labor from cities to villages for farming.
            # Weather has turned unpredictable resulting possibility of very bad weather in any year.
# If the fear of hyperinflation turns into reality, 3-4 years down the line, people who maintain habit to stock “basic grains” will survive better out of situation.

Like every investment there are risks for this. E.g. grain that is accumulated can catch various pest, infections etc.. so we should learn some good techniques for the same. Also we need to consider expiry date / best before date for things we buy. On cost side if the cost goes down suddenly, we can buy from market for temporary consumption and keep our stock intact. Some grains like rice are in fact better when they turn older. One of the very interesting case I saw in one video over YouTube where American person explaining rice and bean as good combination. Reason it is interesting is rice is not typically consumed in US.

To add there is no need to assume we are doing this for preparing for war etc..:) but there is nothing wrong in being  planned for everything in life.