Friday, September 21, 2012

Book Review: Growth in a Difficult Decade

FROM EMPLOYEE TO EMPLOYER- A MOTIVATIONAL COLLECTION Book: Growth in a Difficult Decade. 2012 Authors: Compilation by and concept by Regus plc Published by : Regus. Price : GBP 19.99 Regus plc is a global business enablement partner. They make your transition from slave to entrepreneur easier by giving you fully equipped office space across nearly a hundred countries. Then there is a company called Mindmetre Research that is in to business and consumer analyses. Both these organisations are headquartered in UK. Regus is now present in India also. Both the firms have a keen interest in entrepreneurship. Looking at India, it is evident that the more the state tries to do something the less we achieve. World over, governments are thinking that they will print their way out trouble. However, sustainable growth can only be brought about by private enterprise. India has grown over the last two decades in spite of the government and not because of the government. Now, when the economy looks like staring at a potentially ‘lost’ decade, entrepreneurship is perhaps the way for nations to emerge out of the hole of ‘no growth’ that we seem to be staring at. Today, individuals are willing to take risks to become an employer rather than remain an employee forever. It is not essential that the drive being at age thirty or age sixty. Everyone can. Both the above organisations have put together a compendium of 64 entrepreneurs from across the globe. Six continents, sixty four snap shots. Unlike conventional biographies, this book is more a compendium from secondary and primary sources. The narrative style is unlike a normal book one reads. This book fleshes out the entrepreneurs with snapshots of their business growth as well as some quotable quotes that have been the driving forces for these entrepreneurs. The book is also like watching a trailer. Entrepreneurs like Marc Benioff who founded or Leandro Rizzuto ( a must read section about a business that is in to aids for hair dressing ) can provide inspiration for those who want to cross the bridge from receiving a salary to setting up your own shop. The good part about the write ups is that there is a very brief write up about an entrepreneur and a commentary about the business growth. Each story is four to six pages on an average. You can read it at leisure, though if you are thinking of quitting being a slave or have just quit, you will read the book in one go. Some entrepreneurs and business stories that you find of more relevance will leave you with a sense of wanting to know more. So if you are expecting a life story of any business or businessman, don’t read this. However, if you want a pen portrait of entrepreneurial hunger, you can benefit by reading about this group of sixty four disparate personalities. The unifying thread is the fact that each one identified a gap in some business service or ventured in to something totally new. Reading about these varied people, one gets a sense of different thoughts bonded together by creativity, the ability to delegate, the need to choose the right team, the need to respect knowledge etc. In a sense, this book will help you look at all the factors that you may want to look at. There is reference to the website of each entrepreneur so that you can go for more depth of information if you desire. Entrepreneurship is about creating your own space. To create and nourish that space, you need to have your own guiding principles, some traits and skills. Here, you have a rich selection of people who share their thoughts with the reader and can help you to speed, up the learning curve. Importantly, this book showcases people who have created new spaces where none existed and in the process filled in some needs for the customer. Creativity, innovation, persistence and talent management seem to a common thread running through the sixty four chosen ones in this book. Most of us dream about having our own set up. We spend time dreaming and talking about it. However, not many actually venture out, due to a deep sense of insecurity and a fear of failure. And many will say that the economic conditions are not best to start a new venture or take risks. Andre Monteiro, co-founder of Compra3 (an innovative online shopping site) has this to say of risk taking, “Risk is part of an entrepreneur’s routine. The economic crisis is just another condition that highlights the risk, and entrepreneurs are used to these conditions. Most people are worried, but for the entrepreneur it’s just the natural habitat.” Among the cast of characters, there is also the flamboyant Donald Trump sharing some of his success mantras. Behind every brilliant idea and light hearted banter, there is also the extraordinary amount of hard work that people have put in to get to their goal. Sure, not everyone will make it, but if no one steps out the world stagnates. Do not look for too many details, since the focus of the book is to bring you the big picture and not the fine print. One important thing is that the revenues (presumably after costs) will be donated to the Red Cross. All the more reason for wannabe entrepreneurs to get a copy and dip in to the book at any place you can put your finger. Every page has some inspiration for you.

Wednesday, September 5, 2012

Keep Faith in Equities

EQUITIES DELIVER- DON’T LOSE THE FAITH The economy seems to be firmly in the grip of a slowdown. Growth is decelerating across sectors. On the other hand, we are seeing food prices climbing higher each day. Even the weather gods have decided to be hostile this year, with near drought like conditions. Corporate earnings are certainly slowing down, though the stock markets seem to have done very well this calendar year, so far. A weakening rupee, stubborn inflation and a central bank (RBI) that is reluctant to drop interest rates. All these do not portend well for investors. The stress on the populace is showing. The first sign of a troubled economy is the signs that the savings rates have started to fall. This is a sign that rising prices are forcing people to save less. An optimistic way of looking at this falling savings rate is to say that people are not slowing down the spending. I would carefully watch the sales trend in big ticket items like durables, automobiles and two wheelers. So far, people seem to be unconcerned about slowdown and are buying. Interest rates hopefully should start to fall. High interest rates are hurting corporate India badly. Profits growth has come down to single digit and threatens to go negative in terms of growth in this fiscal year. All the asset classes seem to have done well, indicating the easy money availability with investors who are happy to take risks. Of course, the FIIs and the LIC of India have also pumped in decent amounts in to the markets this year, so far. Equities have given good returns and so have fixed income. Gold took a breather, scaring off many late entrants and seems to have resumed its climb. Of course, a depreciating rupee has added its own kicker to the momentum. Many foreign investors have lost in dollar terms due to the strength in the dollar as well as the weakness in the rupee. All indications are that the dollar is likely to gather further strength as troubles dog the Euro zone with no solution in sight. Politically, this seems to be the worst of times since independence. Everything seems to be in a stagnation zone as the ruling party and the opposition trade charges and totally neglect the populace. Policy making has ground to a halt. The slim hope is that there is certainly a better man at the Finance Ministry in terms of capabilities. Infrastructure spending seems to be a thing of the past. In this context, I would certainly advise people to take some money off equities and put it in to either income funds or bank deposits. Of course, for those in direct equities, there will always be opportunities and it is likely that over the next twelve months or so, attractive bargains may be available. I am bullish on gold, so long as it is a small part of your overall asset allocation. Not on any intrinsic valuation, but purely taking a view on global fear and a weakening rupee. SIP returns (assuming termination in first week of august 2012) were as under: 5 year returns 4.66% 10 year returns 13.53% The above is for the NIFTY ETF. However, if you were in HDFC Top 200, the returns would have been 22 percent plus for ten years and over ten percent for five years. Clearly shows that a well managed equity fund delivers great returns. Yes, you have to be lucky and choose right. Over half the funds did worse than the index. I am not endorsing Top 200 or any other fund, but using it merely to show that your choice of a fund can make a significant difference to your final corpus. Clearly, a pointer that equities will give you modest returns over long term so long as you make investment a steady habit and eschew looking at prices daily. Of course, the returns will look higher when the termination is in a good phase like the present. Termination in a bad market will naturally mean worse returns. So, it is all a question of timing. Maybe it makes sense for an investor who is near his last leg of investing through the SIP route, to keep tabs on the returns and when he sees returns in excess of 13 or 14 percent on a compounded basis, close it out and put it in to a liquid fund. This will offer some protection against getting whipsawed by a poor market. For example, if I have been saving in equities for the last couple of decades and am in my seventies, with no further commitments, I should keep an eye on pulling out money from equities and moving it in to fixed income products. If I have direct equities, the objectives would be different. Of course, it all depends on how rich I am at that point in time. Ideally, I should not need that money in equities during my lifetime to sustain my daily needs. This year, there is a lot of hope left in the market. The biggest hope is that the interest rates will start to fall off. This will help us in two ways. One is that whatever we have invested in income funds or in bonds, will give us a capital appreciation as rates fall. The second is that it will signal an improvement in corporate earnings apart from an improvement in relative attractiveness of equities as opposed to fixed income. Keep your faith in equities alive. That is the only hope that we will either beat inflation or minimise our loss of capital.