@Leisure - Vol-30 | srei

@Leisure - Vol-30

Newsletter
 

Five things you can learn from the Great Depression

The Great Depression started with the Wall Street crash of 1929 and it lasted till 1939. It is the singular negative economic event of the 20th century that has dominated the imagination of people from all over the world. The Great Depression had global repercussions though it hit the United States particularly hard. International trade during this era fell by half and incomes, prices and tax revenues all took a hit across the globe. Urban areas were especially hard hit as people lost their livelihoods. So what can we learn from this era? Here are five lessons from the Great Depression:

Economic cycles can be brutal

The average annual family income in the US fell from US$ 2,300 before the depression era to US$ 1,500 during the depression. It became very difficult for people without savings to beat long periods of fall in incomes. It is thus best to have a good cash cushion for hard times, as they can arrive anytime.

Employment is fluid

During the Great Depression, 200,000 people left California by 1940 and 2.5 million left the Great Plains area of the United States in search of employment. People went where the jobs were. In order to survive, you may have to be mentally prepared to move at any time.

Improvisation is the key

Scarcity was the hallmark of the Great Depression. As an example, zips were invented because buttons were exceedingly expensive during this time. People who can develop new skills and innovate are likely to survive tougher times.

Don't depend on markets alone

Markets only recovered from the Great Depression in 1954, and then too they only managed to reach the pre-depression levels. You should have your savings and investments in a wide range of assets to survive financial cycles.

Life goes on even in tough times

Some great American landmarks such as the Empire State Building, the Golden Gate Bridge, the Rockefeller Centre and the Chrysler Building were built during the depression. Even when the times are tough, people will find a way to be resilient. Have confidence that you can survive and get the skills to do things with your hands.

Conclusion:

The Great Depression is unlikely to return anytime soon but economic cycles are a part of our lives. In fact we have been living in a downturn since 2008. We should learn from this part of our history and prepare for the worst, while hoping for the best.

 

iQuippo - taking the world by storm

iQuippo, India's first and only digital marketplace for new and used construction equipment, machinery and services, is going global. iQuippo is a Srei e-commerce venture and has opened representative offices at the Jebel Ali Free Zone in the United Arab Emirates (UAE) and Leninsky Prospekt station in Moscow, Russia. Betting on an expansion of the online renting of construction equipment, iQuippo is all set to make a foray in emerging markets like Africa, Middle East and South East Asia with a special focus on Myanmar where construction business is in a phase of expansion.

About iQuippo

At the moment, most transactions in the US$ 2 billion used construction equipment market happen through brokers in an opaque fashion. iQuippo is a unique online platform which allows users to interact, negotiate and close transactions easily, transparently and in a cost-effective manner through a digital marketplace.

iQuippo's strong roots

iQuippo is expanding its footprint and bringing the concept of online renting of equipment to the world. The digital marketplace will allow users to not only rent equipment but also generate digital contracts and get paid online. iQuippo venturing into UAE and Russia is only natural as Srei Leasing, which started operating in 2004, has been doing business in Russia. European Bank for Reconstruction and Development as well as the German government-funding agency DEG are investors in Srei Leasing through debt and equity infusion. As for the UAE, Quippo Middle East FZCo, which was formed as a free zone company, is registered with the Jebel Ali Free Zone Authority and is in the business of distributing equipment machinery for the mining, oil and gas industry. Quippo as a brand has been operational since 2002 and is specifically in the equipment rental business.

The iQuippo Model

iQuippo uses a similar model that marketplaces like Amazon and Uber use. There are tie-ups with equipment providers and validation and certification of used and new equipment using industry experience. Sellers can list their equipment on iQuippo and get real-time offers. The proprietary asset certification program - iQuippo Certified - run by the digital marketplace, allows buyers to get a detailed analysis of the listed equipment, thereby ensuring greater confidence.

Positive outlook for online renting

iQuippo has the potential to generate the next wave of growth in the construction industry by helping people access equipment easily and in a transparent manner. The digital marketplace takes out the opacity in the equipment lending business and removes information asymmetry. In emerging markets where the construction industry is booming, a myriad of businesses can use the iQuippo market place for a quicker pay-back period, lower costs and transparent deals with equipment suppliers.

 
 

Bonds, not equities, have performed well last year

Global equity markets have been giving good returns last year; however, the picture in India is a bit different. If we compare returns between August 2016 and August 2015, we would get a surprising picture, in which the equity markets represented by the BSE Sensex have returned -0.4 per cent, while at the same time, bond markets have given returns to the tune of 8.5 per cent1.

Bonds outshine equities

Not only have bonds performed well, even if adjusted for inflation, bonds have not disappointed. If we adjust for inflation, bonds have given a return of 2.7 per cent while equities have given a negative return of 6.2 per cent. This means that for every 100 rupees invested in the bond markets, the returns would have been 120.70, but in the equity markets, the same would have turned into Rs. 93.80.

Why bonds are doing well

The central bank in India has shifted its focus on providing real returns to investors with a strong motivation to tame inflation. India has a stable government, which is taking policy measures towards reform, which is also attracting FIIs. Real returns in India are higher than in developed economies like US, Japan and the UK. In July 2016, FIIs brought in Rs 6,845 crore into the debt market, which is the highest so far this year. Also, in the coming times with yields falling for investors that purchased during the high period, capital gains are expected. This means there may be more activity in bonds by FIIs before yields actually head southwards.

Retail investors have opportunities

Retail investor participation in the bond markets has been negligible; however, of late, RBI has been taking measures to make it easier for investors to access the bond market. Negotiated Dealing System - Order Matching (NDS-OM) mechanism has been made available to retail investors by the central bank. Now investors who have a demat account with the Clearing Corporation of India Ltd can trade in bonds using the NDS-OM channel. Treasury bills can be purchased by retail investors for a minimum amount of Rs. 10,000 or multiples.

Conclusion

While FIIs have been pouring money into Indian bonds, it is time that the domestic investors too woke up to the possibilities that the Indian bond markets have to offer. Bonds offer a safety net of debt investing and a potential for capital gains through secondary market trading as investors can take advantage of lowering yields.

1 - http://economictimes.indiatimes.com/markets/stocks/news/bonds-not-equity-have-made-real-money-for-you-over-last-12-months/articleshow/53568175.cms

 
 

Buddy Jokes

JOKES

1. A man goes to the ATM and smartly punches in Rs 400 for withdrawal. ATM gives him a Rs 1000 note. Message on screen 'Keep the change'.

2. 'In this world nothing can be said to be certain, except death and taxes.'
- Benjamin Franklin

3. 'Lack of money is no obstacle. Lack of an idea is an obstacle.'
- Ken Hakuta

4. New business plan: I'm planning to open a gym next year and I will name it 'RESOLUTIONS'. It will have exercise equipment in it for the first month and then it turns into a RESTAURANT for the rest of the year.

 

Buddy Quiz

1. The Great Depression Started in:
a) 1918
b) 1929
c) 1935
d) 1988

2. What percentage of returns have Indian bond markets offered in the last one year?
a) 8.5
b) 9.5
c) 2.5
d) -0.4

3. Real interest rates are highest in
a) Russia
b) Nigeria
c) India
d) Myanmar

4. iQuippo is being rolled out in
a) Russia and China
b) India and Russia
c) Russia and UAE
d) Russian and UK

5. In the next great depression with respect to saving and borrowing, what is a better strategy?
a) Keep everything in cash and lend
b) Borrow in good times and pay in difficult times
c) No one should ever borrow
d) Borrow in difficult times and pay in good times

Answer: 1-b; 2-a; 3-c; 4-c; 5-d