Sunday, August 11, 2013

Investment Opportunities

Borderless Investments
Borderless Investments (Photo credit: mars_discovery_district)
(published in Vishwa Sandesh)

Investment Opportunities
By Paramendra Bhagat (www.paramendra.com)

Your checking account gives you zero interest. The money is safe, but it is not growing. Your savings account famously gives you 1-2%. It is practically zero. Government issued bonds are safe but they also give returns in the 4% range only. That has been Madonna’s favorite thing to invest in. She did not need the money to grow, she knew she was going to make plenty of her own money; she just needed it to be safe.

If you invest in the American stock market in a sample basket of companies, say in a fund that is tied to the S&P 500 or the NASDAQ, in the short run you might lose or gain money. A few of your stocks might do spectacularly well, or might see a spectacular nosedive all the way to the company going down the tube and your losing all your money. But if you are not going to speculate daily, if you are not going to walk in and out every few years, if you are going to leave your investments for the long run of something like 10 or 20 years then you can expect an annual return of something like 10%. At that rate your money doubles every seven years. So 10,000 dollars will have become roughly 40,000 dollars in about two decades.

The mega recession of 2008 busted two major myths. The big one was that governments don’t go belly up, because people will always pay taxes. But country after country in Europe did go belly up. Another myth though a casualty of ups and downs in the housing market pretty regularly saw a major jolt was that real estate is a good investment because no matter what you will still have your house. Well, what if that house now has a value of half of what you paid for. Was that still a good investment?

The real estate sector in Nepal is a major hindrance to productive avenues of investment. People go abroad, do hard labor, they save, and they send money back to Nepal. Quite a lot of that money goes into real estate. People really like the idea of owning a house. It gives them a sense of belonging. There is this one small corner of the earth that they own. That brings solace. And since buying a house in Nepal is not like buying a house in America where you keep making rent like payments for 30 years, buying a house pretty much leaves you high and dry. Perhaps people feel once they have enough to eat, buying a house is next, and some day they might buy shares in companies. As the Nepali economy matures there will be more productive ways to invest than buying a piece of land and putting a house on top of it.

Things get wilder. A hydro project in Nepal might give an annual return of 30%. At that rate money doubles every two and a half years. So your 10,000 dollars will have become two and a half million in those same two decades. As in, a 30% growth rate is substantially more than the 10% growth rate.

I think it is a very good idea for Nepalis in New York City to invest in hydro projects in Nepal. You keep getting returns for 30 years at a handsome rate of 25-35%. I think that could mean a retirement scheme to many people.

My Nepal Hydro 20K Seed Fund
Virtual Mall

But not even 30% is wild enough. The first person who invested in Google put in 100,000 dollars. The two Google founders (they were PhD students at Stanford) were on to see a professor of theirs. A friend of the professor happened to be sitting there. He overheard the conversation. That sounds interesting, let me just write you a check, but I have to leave now, he said. That money became a billion and a half dollars in about eight years. At 10% money doubles in seven years. If the money went from being 100,000 dollars to 1,500,000,000 dollars in eight years, what kind of growth rate is that? You do the math. Looks to me like the money grew 15,000 times.

But then Google founders are rare people. It is hard for them to show up, and it is very hard to get to meet them at that early stage. And most people will not, do not recognize them at that early stage. I mean, Yahoo did not. Yahoo at the time was what Google is today. The Google guys wanted to sell their search engine to Yahoo and be done with it. Yahoo refused to buy. We already have a search engine of our own, they said.

If you have 100,000 dollars to invest, put 10% of that into a checking account, which is practically cash, and put 10% into something high risk and high reward like an early stage Google. Investing is a spectrum. You play partly safe, but partly you go wild with the money. But then some people go largely wild. When Larry Ellison, the founder of Oracle and my personal favorite character in tech, was worth 100 million dollars, he still borrowed money from the bank for his personal expenses, since he knew his ownership of Oracle would grow much, much faster than whatever the bank charged in interest, and he was so very right.

I think pretty much every Nepali in New York City has the option to invest at least a thousand dollars. You bring together 100 people and that is 100,000 dollars. That is not big money, but that is no chump change either. All should attempt financial literacy. Good investment ways come with some practice.


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Wednesday, July 31, 2013

Maintaining Perspectives On Ethnicity, Race And The Good Old Dollar

English: Nitish Kumar
English: Nitish Kumar (Photo credit: Wikipedia)
(published in Vishwa Sandesh)

Maintaining Perspectives On Ethnicity, Race And The Good Old Dollar
By Paramendra Bhagat (www.paramendra.com)

All you have to do is meet a few bad mannered Madhesis in New York City, and that really gives you perspectives on ethnicity and race. Madhesis are not Bahuns, not Pahadis, Madhesis are not white. All you have to do is meet a few bad mannered Bahuns in NYC and you come out ahead on the social dynamics of the situation. Bahuns are not Indian.

There is the immediate, and then there is that which happens or needs to happen 10,000 miles away. There is the New York City thing, the city that is the Kathmandu of the world, the capital city where every town on earth is represented. And then there is Nepal.

I have fond memories of putting my efforts into Nepal’s democracy movement a few years ago. And I have vivid memories of seeing deep hostility from some of the comrades of that same movement when the Madhesi movement took off. It is sad that the constituent assembly was not able to give Nepal a new constitution in two years, or even four. I have a feeling neither of the two sides might cross the two-thirds majority mark, and all the major parties will end up facing a similar situation to what they faced in the last assembly, which is that compromise is essential to how democracy works. You can’t get everything you want, and so you also have to listen to the other side and try and seek common ground.

When I personally drew a map for a federal Nepal in 2005 it had three economic states: Koshi, Gandaki and Karnali. The Terai got a proportionate representation in the parliament based on population. And I drew that map because I have recognized as far back as I can remember that poverty is the number one political issue in Nepal. It is number one, number two, number three. There are Arab states where you draw a handsome annual salary for simply being a citizen. I am a believer in Nepal’s hydro potential. There’s the petro dollar, and then there’s the hydro dollar.

But over the years I have come to appreciate the need for ethnic federalism. I have personal experiences going back to my high school years in Kathmandu that more than convince me the systemic disadvantages faced by the DaMaJaMa – Dalit, Madhesi, Janajati, Mahila – in Nepal are very real. A compromise would mean Nepal might end up neither with a pure geographic federalism, nor with a pure ethnic federalism. And I would rather the map came out sooner rather than later. The longer Nepal takes to finalize its constitution and the federalism question, longer the delay to focusing on economic issues. Right now Nepal is missing out. China is forging ahead. India is forging ahead. Nepal sadly lags behind. What Nepal needs more than anything else is a Nitish Kumar, someone who would make a singular focus on economic development and give double digit growth rates, year in year out. The longer we dwell on issues of ethnicity and federalism, greater the delay to such years of rapid growth.

I had never imagined Bihar would see the day it is seeing today. This is like Alabama became the top American state economically. That same Bihar depends on Nepal to become flood free and energy rich in the future. But Nepal and India have never so far managed to reach such heights of cooperation. Nepal and India are friendly as in the two countries are not likely to go to war, but cooperation has been poor over the decades. In Nepal the false nationalism is suspicious of everything that looks Indian, and that sentiment has permanent hold on a segment of the population. In India the bureaucrats running the foreign policy machinery spend too much energy on being a regional hegemon and not enough on aspiring to be a global power by taking the immediate neighbors into confidence.

But the economic engine is a beautiful thing. I f diversity is the reason for civil wars, New York City would shame Bosnia, but it does not. It is because people in NYC are too busy chasing the dollar. A laser like focus on the economy is the best way for Nepal to get past its ethnically complicated past. All you need is a simple, progressive constitution, basic law and order, and an honest government leadership that calls the shots on investing in education, health and infrastructure, and providing planks for massive inflows of foreign investment.

There is the hydro sector, there is the tourism sector. Nepal could do well in becoming a regional education hub for having a wonderful climate at least in the hills. Planned urbanization could be another boost to the economy. Wireless broadband over metro areas could spew a host of knowledge industries like software and long distance learning. Get federalism, get the constitution, and get going, I say.
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