The Alchemist by Paulo Coelho

The Alchemist, an international best seller doesn’t not need any review. If you love philosophy, don’t read further. Just go and read the book. This book is an amazing mixture of Philosophy and inspiration with an amazing story. And believe me this book has changed lot of lives including me.

This is the first book written by Paulo Coelho and it became famous internationally. I heard a lot about this book previously but never thought of reading it, because I had a totally wrong impression about it. Some people say the book says a lot about inspirational stuffs but in reality it contains more of philosophy and inspiration with an amazing story of a boy.

You will simply fall in love with this book and the best part of this book is... Its 160-70 pages. If you are travelling somewhere and looking for something different to read, I would suggest this book to start with and you won’t have an idea when your journey ended.  All the best..!!

The Secret of the Nagas by Amish

“The secret of Nagas”, the sequel of “The Immortals of Meluha” has proved that you can’t simply ignore me if you have read my first part and I believe if you are reading the first book then you have to read the second one, otherwise there is no point of reading first one. Please don’t take it otherwise; you’ll simply love this book as you loved the first one.

The book starts with the same energy as last one ended. Once you start this, you would just want to go on and on till it completes. It’s very well written to keep you focused and of course the same level of curiosity you’ll have as you had in the last one. This is the first book I read so fast that I could not even realized that I have completed second part of Shiva Triology. Please don’t go by the size of this book, just buy and read it, you’ll also feel the same as I felt… Amazing.

But again this is not the end, there is more on its way…yes I am talking about the third part and eagerly waiting for it. God bless the author. Om Namah Shivay..!!

The Immortals Of Meluha By Amish

"The immortals of Meluha”, a national bestseller and obviously this one deserves to be read by everyone.  If you want to get out of your limited way of thinking/reading and try something different which you might have thought about in your past life like where did this god come from, what’s the story behind it whether it’s true or just an illusion or its highly modified, i would suggest you to start with this and only this book.

 I don’t know if the content of this book is based on some research or just man made stuff and i really don’t want to know but i assure you, that you are not going to find anything which is not convincing. The reasons and logics in this book are very well presented and it will make you think even harder about “God” thing. I would suggest that if you start this book try to read it with minimum gap possible or no gap at all.  

This book is first part of shiva trilogy written by Author. I can’t really wait to start the 2nd one so i hope you’ll enjoy reading this book. “HAR HAR MAHADEV”!! 

How can you say...Its a good investment.

Before writing about good investment, lets have a quick view about investment. Investment is nothing but money invested in any field, whether it’s financial stuffs (bonds, shares, treasury bills etc) (note-- please don’t bother much about these words... sooner or later you’ll come to know once you start investing), real estate or anything which add some rows into your asset column.  But the aim should be, “In the long run the asset column should start filling your pocket in addition to its net worth”. Let me explain it with an example.  

Suppose you have bought a piece of land worth 15lakhs. Now this will add an asset worth 15L as per current real estate condition. Now you can do so many things with your land.  Some of them are

1.  You can wait and watch, finally if you get a better deal you can sell it in 20L (say).  This option is good if you want to make quick money, but market sentiments should support you.

2.  You can use it for rental purpose by putting some more money for construction and then you can earn some decent amount per month. It’s a good option which takes care of your monthly expenses and in addition to that you’ll own that asset too.

Let’s get deeper into the first option (which is the best way to explain a good investment). Suppose you have waited for two years after purchasing the land. The key factor for good investment is  “Inflation”. Let’s say within two years of span inflation rises to 10 %. Now you need to do some calculations here. Net worth of 15L invested, will become 18.15L within two years by taking the rate of interest 10% compounded annually( which is nothing but inflation). If you didn’t understand, simply calculate compound interest with principle amount 15L, rate of interest 10% and no of years 2. You’ll get the same value as 18.15L.  But as per our assumption you have sold it for 20L which is more than the value calculated by taking inflation into consideration. This explains, you are in safe side and made a not good but the best investment.

What if you have sold it for 17L.. Though you have earned 2L in two years and as per your business budhhi you have made a good investment but you haven’t considered the market sentiments and as per investment logic you are in loss of 1.15L which you have not given through your pocket but your asset could have put more than this if you would have considered inflation.

I prefer second option because somehow it fulfills the definition of good investment and it has two benefits, first it will put some money on your pocket on monthly basis which you will get through rent and secondly you can sell this after five years or so in a decent amount by considering inflation as well as your total expenses including construction and maintenance etc.

so moral of the story, first of all start investing if you haven't and initially don't bother much about profit and loss but keep inflation factor in mind. Always go for long term investment and study the market, sooner you'll find your pocket in a positive side. 

One Minute Manager By Kenneth Blanchard

It is a nice book to start with if you want to know the ABC of a manager’s responsibility towards his organization and its people. The book is very well written, easy to comprehend and explains the inspirational and practical stuff about managing people thereby improving the productivity. This book has a well balanced mixture of philosophy and practical examples that complements the philosophy.

The concept is easy to understand, it may look childish or philosophical drama to some but overall a good and recommendable book for a beginner. The best part of the book is the size, a handy book with 50-60 pages that can be completed within 2-3 hrs.  It’s worth giving your time to this book if you have any. The best thing to learn in such a short time...... don’t miss it if you want to be an effective manager and looked up to.... ;)

Rich Dad Poor Dad By Robert Kiyosaki

“Rich Dad Poor Dad” is an amazing book with lots of philosophical as well practical talks related to financial rat race. It’s a complete package of thoughts and their implementations toward the investment arena. Sometimes you may find it boring because there are some points which are repeated so many times throughout the book, but I suggest you to stick to the modulus of the whole thing.

 I found this book very interesting and inspirational. If you need some guidance related to the way you handle your income then this is “THE Book” you should start with and I am sure it will not disappoint you. Theories or so called philosophies and the relationship of these with real life is presented very well which may  fit to your life style or inspire you to change the way you live;  To make it better of course!!. I have read this book twice and found it “A Must Read Book” at least once.

Nuts and Bolts of GDP (Gross Domestic product)

For this term I have to admit, it is not easy as it looks like. 

Let’s try to find out the basics behind the complexity of this term. For that, we start with the very basic term “Domestic”. When we say Gross domestic product of a country, we directly refer to the domestic behavior/health/output of that country excluding all monetary relation with foreign countries except money earned through export.
Till now it is clear that whatever we are going to deal with, are taking place within the boundaries of the country.

In common terms, GDP basically signifies the health of a country or specifically financial health of a country. There are various methods through which GDP is calculated— Product approach, expenditure approach, and investment approach.  Whatever approach you take, result comes the same. India uses expenditure approach.
Remember, we are trying to find out economic health of a country which depends on various factors such as—  consumption/spending power of people, government expenditure, investment made by private or public sector organizations( non Government), exports made by the country etc.

Whatever way you take, money spend by someone will always go into someone else pocket. It’s either this way or that way the final output remains the same. We can consider all the factors as either expenditure made by each one of them or investment made by each one of them or we can take directly the product value for which expenditure/investment are made. Factors explained above are self explanatory but we’ll have a quick look on each one of them.

---: Consumption refers to personal expenditures pertaining to food, households, medical expenses, rent, etc made by common men. 

---: Government spending stands for the total government expenditures on final goods and services which include investment expenditure by the government purchase of weapons for the military, and salaries of public servants etc. 

---: Investment by public/private organization stands for business investment as capital which includes construction of a new mine, purchase of machinery and equipment for a factory, purchase of software, expenditure on new houses, buying goods and services but investments on financial products is not included. 

Finally exports refers the difference between total export made and total import made. It may be positive or negative and directly affects the GDP of the country.

To calculate the GDP, we add up all the expenditure and compare the final value with the last year GDP and we come to know whether health is in good condition or bad. If the total expenditure is increased that means the power to spend/purchase of people/government is increased and overall it’s a good sign.

(-->>In one line: GDP shows the power of people/government of a country to purchase something, to produce something, to invest on something, to expend more or in other terms it’s a measure of a country’s overall economic output.

How do Card Companies make money..

Now a days, credit card has become a fashion or you can say, for some people it has become a “Mazboori”. God bless me, I have applied for this little piece approx six times and I didn’t get it. So finally I thank to god for not giving me an opportunity to use this master card. 
When I came across this term “Credit card”, suddenly one question came into my mind—how these credit card companies make money. After doing a bit google and consulting with my friends I got some points which I would like to share. I hope these points may give you a little bit answer if you already have this question in your mind. 


1.Let’s start with a real time experience which I had when I went to shop with my    friend. Here is the conversation which I had with cashier of the shop.
Me— do you accept credit card?
Cashier—yes we accept.
Me—any discount for TATA employees.
Cashier--- yes we have, if you pay by credit card then 7.5% discount and if you pay by cash then we’ll give you 10% discount. 
So here you can see the difference in discount percentage (2.5%) which is basically due to the mode of payment. If you pay by credit card then the shopkeeper has to pay some amount to the bank who issues the card. This happens with all the purchase done by credit card and the percentage varies from 1% to 4%.  Now you may ask why the shopkeepers accept card at all. Well now a days nobody carries cash with him. So ultimately there is no option left with the shopkeeper but to accept the card to improve his sell.


2. This is an example which happened with one of my friend. He has HDFC credit card and the limit is up-to 25k. Previous month somehow he crossed the 25K limit and the best part is the card was not denied at the time of transaction even though it crossed the limit.  When he got the bill, additional Rs 500 was charged to him due to over limit. Immediately he called to bank and asked “how the credit card was accepted if it crossed the limit”, finally he got to know that he was a very old card holder that’s why bank has allowed him to cross the limit. 
So I hope you understand the moral of the story. Over limit and late payment is one of the innocent ways to make money even if it is the mistake done by bank.


3. You might have seen the advertisement on the credit card bill if you have one. You’ll find lot of offers which give you some discounts if you use this card for some service. For example—if you book a flight ticket through this card you will get 15% discount etc. this may be one of the way to make money. It’s all depends upon the deal made between the bank and other service providers.


4. Service charge, higher interest rates, cancellation fee, charging more for use overseas, charging fee for card protection etc. are the ways to make money.


So ultimately there are several ways you can be charged either by mistake or intentionally, or as a normal process. 

Difference Between Microeconomics and Macroeconomics

A lot of confusion went into my mind when I came across these words and ultimately I found that these are just big shot child of the big shot daddy.   
Lot of concepts overlap these terms and there are concepts which make the difference. Ultimately these are son of economy (The Godfather) and define the properties and condition of their daddy. Let’s try to keep it simple.


Microeconomics is study of decision that people make running their business. Like for example—what should be cost of the product, how much profit they should make by selling the product, what should be the resource of raw material, where to invest, how to maximize the profit, or why to maximize/minimize the profit. When you ask all these questions to yourself by keeping the government tax regulation in your mind then you deal with the younger bro “Micro” and of course this includes the supply demand crap. So we can say this is nothing but a small introduction to the economics family. 


Now when we come to higher level than the elder one comes into play i.e Mr. “Macro”. 
Macroeconomics is the field of economics which tells/study the behavior of economy as a whole. It not only includes all the business but also includes employment, GDP, Inflation, Price level (in general), national Income, Import/export analysis, capital flow etc. These all are done at national level.


Well you can easily see Mr. Macro has the power the attorney.  The bottom line is “Micro” is the ground work analysis or we can say a bottom-top analysis and “Macro” is the top-bottom analysis.  But you have to understand both of them to be a part of this family.  

Difference between Asset and Liability

I was pretty much confused about these terms until I read “Rich Dad and Poor Dad”, though it has some inspirational stuff but apart from that it also has some interesting things. If you have already read this book then you must have come across these words and I hope you have the difference. No need to worry if you are still confused, just relax and breathe.


Assets and liability both have some value.. the only difference is, an asset gives you some income and increases its value as time is passed. A Liability gives you all comforts except the income and the value decreases as the time is passed.


Simply put, an asset is something that puts money in my pocket, A liability is something that takes money out of my pocket..


For instance, this is the cash flow pattern of a poor person, or a young person still at Home:
Job (provides income)-> Expenses(Taxes Food Rent Clothes Fun Transportation)
Asset (none)
Liability (none)


This is the cash flow pattern of a person in the middle class:
Job (provides income)-> Expenses(Taxes Food Mortgage Clothes Fun Transportation)
Asset (none)
Liability (Mortgage Consumer loans Credit Cards)


This is the cash flow pattern of a wealthy person:
Assets(stocks bonds notes real estate intellectual property)->income (dividends
interest rental income royalties)
Liabilities (none)


Difference is pretty much clear in the flow, if you compare the cash flow of wealthy person with others you can find the only thing is asset, which makes him wealthy. Let the asset take care of your income so start buying assets and avoid purchasing liabilities. 

Difference between Debt and Deficit

After doing a lot of Google, I was confused between these two simple terms “Deficit” and “Debt”. So I finally searched in the oxford dictionary and found the basic difference between these two terms. It helped me to realize the meaning of these words.


A debt is a sum of money that you owe someone, and a deficit is the amount by which something is less than what is required or expected, especially the amount by which the total money received is less than the total money spent. 
Well the above definition may help you out, but it would be better if we take an example to explain these.


Suppose our govt. has set a target to spent Rs. 2000cr per month. Now at the end of first month they spent Rs. 2100cr which is unexpected but important. So here the difference of Rs 100Cr is nothing but monthly “deficit” (compare it with the basic meaning of deficit). Now suppose this 100cr deficit continues the whole year and ultimately the sum rounds up to Rs 1200cr. This 1200Cr is “Debt” of that financial year.


In short Debt is the sum of all deficits. Debts always occur, but deficits may not be as uncontrollable since the economical situations changes every month or year. Theoretically, it is possible to have no deficits in a month, but if there are deficits in the other months or years, then they will eventually accumulate and become a debt.


so deficit is a kind of  “chota Udhari” which accumulates to “Bada Udhari” i.e Debt.   

Repo Rate and Reverse Repo Rate

These are commonly used terms in banking sector. Let’s take an example to explain these things.


Suppose you want to start a business and to raise capital for your new business you went to a “Muneem”. Of course, He can’t give to money by simply looking at your face instead he has taken some security deposit like properties papers/jewelry then gave you some money with a particular interest rate. After some period of time, Mr Muneem came to know that your business is doing well so he decides to sell your security deposits (which you have given while raising capital) to you at a particular interest rate. Finally he sells you some of the securities and gets some of his money back. 


Before I explain further let me tell you something about Mr Muneem. He is a kind of person who is the head of all the people running their business in a particular area. He manages all the capital flow i.e lending money to the people who want to start business or want to improve their business. The extra ordinary thing he does is, when he finds that the flow of money in that area is adequate and further injection of money can cause instability in market, then he decides to tighten the money flow by selling the securities deposited by some of the business men. So he’ll lend money at a particular interest rate as per his choice and will take the money at a particular interest rate as per his choice.


Now all you need to do is, to correlate the entire scenario with RBI and all the commercial banks of our country. Imagine Mr Muneem as RBI and all the business men/ Newbie as commercial banks. The rate at which Mr Muneem lends and gets his money back is nothing but Repo Rate and Reverse repo Rate respectively. At least by now, you might have got some idea about the mechanism. 


So we can say, Repo and Reverse Repo are rates available in the hands of RBI to manage the liquidity or money flow into the system. It either injects liquidity into the market if the conditions are tight or sucks out liquidity if the liquidity is excess in the system through the Repo and Reverse Repo mechanism. Now in REPO rate RBI injects liquidity into the system i.e. it purchases the securities from the banks and lends money to them to ease their liquidity crunch. The rate charged by it for lending money is the REPO rate. Reverse REPO rate is the opposite of REPO: When liquidity is excess in the system. RBI sucks it out by Reverse REPO by lending securities and taking out money from banks. The rate charged for it is the Reverse Repo rate.


Note—Above rates are decided by central bank i.e RBI. 


You can easily get this (Rate) information at RBI home page right hand side under heading Current Rates
http://www.rbi.org.in/home.aspx 

Inflation

In simple terms, when there is a rise in general price level of goods and services it is known as inflation. The best example I can give you is, some years back gold flake cigarette (small one) was available at 1.5rs and now the same thing you’ll get in 3.5rs so this shows the inflation which is occurring each and every day and this thing will continue.


Suppose you got a salary hike, now your company will definitely increase the prices of goods and services so that they can satisfy your hunger for money which leads to a kind of inflation or increase in price for the product sold by your company. Ultimately the cycle continues and the prices are increased unless and until there is something wrong with the company or the employee.


If you remember something about the demand/supply thing in economics then we can say, if there is an increase in demand and supply is less or we can say supply is not in sync with the demand then prices of the all “Rashan Pani” is increased, which leads to inflation. Sometimes inflation occurs due to rise in the quantity of money in the market which occurs due to govt spending. and in technical term we say it “Fiscal Inflation”.


Some says inflation is neither very good nor very bad for an economy. Till now, you  might be aware of the bad impact of inflation. I’ll tell you who gets the benefit when inflation occurs.


Suppose Ram is a grocery shop owner (wholesale and retail). Somehow he has got a feel that inflation is going to occur in coming days so he has started purchasing and put all the basic Ration (Rice, Dal, Wheat etc) in his godown with let say20rs/kg on an average. At the time of inflation he sold the same stocked goods at 30rs/kg on an average. We can see, he has got 10rs/kg profit straight forward. Ultimately he is the one who got the real benefit of inflation.


Always remember inflation doesn’t occur due a single reason, there are several things/factors which as a whole cause inflation.


There are several ways through which you can calculate inflation rate. Some calculate it through CPI (Consumer Price Index), some calculate it through WPI( Wholesale price Index). I think this is not the right time to discuss these things, we’ll cover this in coming Posts.

Gross budgetary support

It looks like a very heavy term but basically it refers to the money which is raised by the government to supports their budget estimate for a particular financial year.


Example— For session 2010-2011 government is going for a moderate hike in GBS by 15%, and it put them in a big dilemma, because government has made so many promises to fund schemes for common man etc. Already inflation is somewhat not in favor of our government and the same figure seems to linger upon us in future, if there is more spending by the government. So here comes the real need to play the game carefully so that there should not be any economic instability.


GBS stats are generally presented by finance minister in union budget.

Wholesale Price Index

Wholesale price index(WPI)  is the price of a representative basket of wholesale goods.  Representative basket is basically a combination of more than 2400 commodities. By doing some calculation we measure the WPI. Some countries use the change in WPI to calculate the inflation rate.  Like-- India.  

The Indian WPI figure is released weekly on every Thursday. The Wholesale Price Index focuses on the price of goods related to industries rather than goods bought by consumers. By analyzing this at industry level, we can know what is going up there so that further steps can be taken without affecting the aam aadmi.

Let’s discuss one example to calculate the WPI and inflation by using WPI.

 I have taken a set of 2400 commodities and their price changes are used for the calculation. The selected commodities are supposed to represent various strata of the economy and are supposed to give a comprehensive WPI value for the economy. WPI is calculated on a base year and WPI for the base year is assumed to be 100. To show the calculation, let’s assume the base year to be 1970. The data of wholesale prices of all the commodities in the base year and the time for which WPI is to be calculated is gathered.

Let's calculate WPI for the year 1980 for a particular commodity, say wheat. Assume that the price of a kilogram of wheat in 1970 = Rs 5.75 and in 1980 = Rs 6.10

The WPI of wheat for the year 1980 is,

(Price of Wheat in 1980 – Price of Wheat in 1970)/ Price of Wheat in 1970 x 100

i.e. (6.10 – 5.75)/5.75 x 100 = 6.09

Since WPI for the base year is assumed as 100, WPI for 1980 will become 100 + 6.09 = 106.09.

In this way individual WPI values for the remaining commodities are calculated and then the weighted average of individual WPI figures are found out to arrive at the overall Wholesale Price Index. Commodities are given weight-age depending upon its influence in the economy.

If we have the WPI values of two time zones, say, beginning and end of year, the inflation rate for the year will be,

(WPI of end of year – WPI of beginning of year)/WPI of beginning of year x 100

For example, WPI on Jan 1st 1980 is 106.09 and WPI of Jan 1st 1981 is 109.72 then inflation rate for the year 1981 is,

(109.72 – 106.09)/106.09 x 100 = 3.42% and we say the inflation rate for the year 1981 is 3.42%.

Since WPI figures are available every week, inflation for a particular week (which usually means inflation for a period of one year ended on the given week) is calculated based on the above method using WPI of the given week and WPI of the week one year before. This is how we get weekly inflation rates in India.

Registrar of companies (ROC)

Registrar of companies is appointed by central government under some section 609 companies’ act which we shouldn’t be bothered about. Their primary duty is to register the companies of the respective states, union territories and to ensure that the companies comply with statutory requirements of the Companies Act.

 Before few days, I was also not aware that such kind of organization exists.  There are some steps and conditions which you have to follow, while you register any company. You can visit the official website for more information.

http://www.mca.gov.in/ ---- Ministry of corporate affairs.

Fiscal Deficit

You might have heard about ‘Aamdani athanni aur kharcha rupiya’. This phrase explains the whole story. It is the difference between, the money spend by the government and the money it has earned.

Ever year budget is being presented by our finance minister; suppose they planned to spend some money on common men of our country, by doing so they realized that their estimate is not enough for one 1 billion common men including our politicians, so they spend some more which is a kind of unplanned expenditure. This extra money or (udari) is nothing but Fiscal deficit of our country. Normally it is described as a percentage of GDP. 

Fiscal Consolidation

‘Fiscal’ word is basically the money related to government or public. In our country, money related things like (how the money is raised, how it is invested, where it is invested etc.) are presented in so called “budget”, which is presented by central government on yearly basis.  

  

Fiscal consolidation is like “WASULI” (Policy) by the government to reduce their deficit and to accumulate some money for their spending.

"WASULI" basically refers to the way; you give your money to government, like—Income tax, PPF and all kind of tax which pays money to government.