Understanding Economics

I don’t think she met it literately. But there is huge problem with all kinds of number if there is a huge diversity or rather range in lowest annd highest income annd wealth. Averages and comparisons become difficult.

In a number of countries, including the USA a handful of people own incredible wealth. Whereas a large part of the population might be near or even below the poverty line. Even median compared to average calculation might not show the real issue. You need to look at a far more granular level to understand what is going on.

Same is true for GDP per capita. Some interesting statistics for all countries on all of this can be found here

https://worldpopulationreview.com/co...ome-by-country

Jeroen

That's a very gentle way of saying she is clueless. GDP is the best measure related to velocity of money. Is it perfect, no. There is no perfect way, GDP is the most objective way. Saying GDP is being calculated by adding Adani’s wealth to the earnings of a poor autorickshaw driver, doesn't mean anything. It reveals her ignorance, and nothing else. The media should have just downplayed it and not given so much exposure to her ignorance.

Which is why I shared the video of Richard Wolff, who as a Marxist economist could precisely explain the problem, unlike a liberal arts writer.

I have read some of her stories and publications. I think she is spot on. It’s is not about the technicalities of the GDP, but she is correct to some extent, that the GDP is heavily determined by a handful of extremely wealthy individuals and the vast number of those who have very little hardly move the needle when it comes to GDP. Even though the GDP itself is not a direct reflection of individual income of course neither does it include stocks.

Adani claims he is adding a trillion to India GDP. Not sure how much the services of the autorickshadriver add to GDP? Even when we add all the services from all the rickshaw driver in all of India together it is going to amount to a fraction of Adani’s contribution to GDP.

https://www.livemint.com/market/stoc...302998232.html

Maybe we should mail her, asking her to be more clear so more people get her point.

I’m with her on this. The wealth and with it the influence of a handful of individuals is obscene and extremely worrisome. Across the world as far as I am concerned.

Jeroen

I think we just have to agree to disagree here.

Sure, go ahead. I am curious how such an absurd statement can be made.

I don't disagree with this. In fact, I have argued against inequality and high CEO pay ratio many times in the past. But that argument has be made with sound economic ideas and not by sensational statements. I am persuaded by logical explanations.

Yes, I would prefer to be the same. But logic has no place on the internet by and large and certainly not in politics.

So sometimes it helps to be flexible in one’s approach. Not always of course. I can’t stand all those idiotic claims made by people on synthetic oils in another thread. Not a thread, pardon the pun, of factual knowledge, but hearsay, wishful thinking and “personal experience”

So GDP is your red flag then, mine is synthetic oil. Only for today of course. Tomorrow there will be other idiotic illogical stuff showing up somewhere on our forum.

Like how car suspension is influenced by engine RPM. All down to torque, or so I am told.

Anyway, the Dutch elections are up and it is unbelievable exiting. The looney centre right is trying to outmanoeuvre the demented centre left. And any coalition is likely to need the utterly despicable extreme right wing.

I want to vote for Volt, a very pro Europe party. Lots of young people, an incredible program of massive change and the only party that has an actual balanced financial plan to back it up. Unfortunately, latest polls show they will at best have 2-3 seats in parliament. So now I am forced to make a very illogical choice and vote for the loony right or the despicable left.

For context, in this tiny country of 17,5 million people, our parliament has 150 seat and we have 26 (yes you read that correctly) national political parties battling it out for these 150 seats!

In all its wisdom my local council appointed me chairman of our local voting station. And I just discovered the council broke, intentional, the voting laws. So I called a few people I know here and there. Made the headlines last Friday on our Dutch national news channel the NOS. (The Dutch BBC).

And the council had to redo all its preparation and change back to a proper vote counting process. And now the council folks hate me of course. Whereas they were breaking the law, not me.
No logic at all!

For the next couple of days I will be manning the voting station and helping to count votes! Democracy at work, public duty and all of that! Whish me luck and strength. It’s going to be an all-nighter for the next two days.
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Jeroen

India is now a $4T economy - though its not the number, but the engines behind it that counts.

As a very small time investor, I feel confident about India's economic chances in the near and longer term horizon. (Politicians & Geopolitical tensions being big threats.)

Feel like we are going to be the next Japan. The difference being that our exports would be much more sustainable and long term - good, skilled and sensible people.

The US is marred with debt, wokism, drugs & fentanyl problems which seems to be hollowing out their labour force. STEM applications are predominantly from immigrants. EU has a failed immigration policy, aging workforce etc. The Chinese are losing out on trust, e.g., there were reports of US Navy sacking Chinese cooks, and looking for trustworthy nationalities. All this translates into the new oil (smokeless) - overseas remittances. I think this will yield some very interesting and positive trends for India.

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Way back I used to be the managing director of a small private investment company. These day I only look after my own investments. I get invited for all sort of investments seminars by various parties. I attend about 6-7 of these events every year. What I always found/find remarkable is the current lack of Indian companies in investment portfolios. I have spoken to a number of people and I get the same response, be it ABN AMRO or Fisher Investment, they just don’t seem to believe there are good enough reasons to be actively present in India. Or have Indian companies in their portfolios.

One of the big concerns seems to be corruption and lack of international standards.

I have written about this before. You won’t find it in regular company press releases. Fraud, corruption are becoming a huge issue for western companies in all industries. My last employer got fined several billions by the US regulators for mishaps in very different countries across the world.

So there is always this debate in the board room, should we be present in India, the largest, or fastest growing market in the world. Can we afford not too. What is our exposure and financial risk when something goes wrong. Etc,

The other concern is political stability. Investors love stability!
It will be interesting to see how all of this plays out in the next couple of decades.

Jeroen

Lots and lots of reasons for this:

1) Preference for staying in the comfort zone. Question for Indians -> would you bother looking up a Nigerian company for investment?

2) If India GDP is $4 trillion, the World GDP is $100 trillion. That's still just 4%. So at best, a global equity portfolio might have 4% weightage to India.

3) There is something called MSCI All Country Index. India's weightage in this just 2%. Most professional investors maintain allocation based on the benchmark like MSCI index

4) India weightage is low, relative to India GDP %, because it depends on technical parameters like liquidity, free float (what is the % owned by non-promoters) etc

5) INR has historically depreciated by 4% pa against USD. So their India investment has to generate 4% pa returns just to breakeven.

6) Investment in S&P500 and EuroSTOXX 50 (Eurozone) index companies automatically gives exposure to all countries in the world. For eg: Investment in Unilever Plc will give you exposure to Hindustan Unilever, along with subsidiaries in all other countries. Most global portfolios have 25% to 50% allocation to the "mother market" (USA). 50% of revenues of S&P500 companies comes from beyond US shores.

7) These days, money chases highly innovative companies like Apple, Tesla, Amazon etc. All such innovative companies are based out of USA.

So basically, our universe of high quality stocks is 500. But for an investment manager sitting in Europe/USA, their universe of investable stocks is 5,000.

Thanks, all additional good reasons. But I am not talking to investors who just like to have a global spread. That I could do myself fairly easily.

I am particularly interested in more value based investing. Looking for companies that might be undervalued now, (but still pay decent dividend preferably!)

One other constraint or risk is of course exchange rates. Dollars and euro’s still seem to be king.

Jeroen

If you are hunting yourself, start by Googling "Dividend yield by country". After that, drill down further. Usually commodity exporting country indices will have high dividend payouts.

Google has an in-built tool to check how much a currency has depreciated over long term. For eg, if you find a Brazilian high dividend yield company/index, Google "Brazilian Real to EUR"



In this case, Brazilian Real has depreciated by 50% between 2006 to 2023. I think this too works out to be 4% pa depreciation on an average

Economic growth worldwide has been significantly driven by a few individuals/companies achieving great success, and pulling the rest of the economy up with them.
Rockefellers, Carnegie, The Japanese conglomerates, Korean Chaebol, Formosa Plastics, TSMC, Tatas, Birlas, Ambanis, Foxconn...

These things get evened out over time as the government intervenes to rein in the excesses of capitalism, but this system is still far superior at generating broad based prosperity than socialism.

8. Other than these, I think an important reason is our lack of market depth, especially in equity markets (debt markets are a little better). While this has improved significantly over the last few years, it's still not where it should ideally be.

For example, if a Foreign portfolio investor wants to invest a significant amount of money (like say $50 billion, which is a very small amount for a company like Berkshire Hathaway, as an example). There is simply no depth in our markets that can easily absorb this kind of money in a relatively short time. Either those stocks will go through the roof to reach unreasonable valuations (which makes them not worth buying anymore), and/or the supply will dry up. ETFs will have the same fate, since they are nothing but a basket of stocks.

On the other hand, it would not make sense for these foreign funds to invest a small amount - because then your total returns will still be small, even if your percentage returns are huge. And that's just not worth it.

This is inaccurate it seems. Can be verified using IMF's own data - close nonetheless, will most likely cross next year.



There is an interesting example for that. According to that link, the UAE has the second-highest median income in the world - even more than Norway or Switzerland which sounds almost comical because an entry-level engineer can be paid as low as $950 (including ones with a Master's degree) - which is lower than the minimum wage in Southern Europe. I guess this is offset by disproportionate salaries for other professions. Offcourse, only those familiar with the problem would know this, not evident from the data alone.

Well said. I think this is so because they are counting only the incomes of the citizens of the UAE and keeping out all those Asians etc. working there on permits of various sorts. I may be wrong.

With regard to the $ 4 trillion brouhaha my take is that certain quarters of political fans are over eager to announce the arrival or almost so of the vaunted $ 5 trillion mark. Fact is no matter which Govt is in power by a combination of real growth and USD inflation India will get there sometime between the next 5 to 10 years.

Some of the facts stated in this video are just jaw-dropping - a reminder that our economic growth carries many challenges along with it, least of all, our attitudes towards women.

Offcourse, these statistics & facts might seem alien to us upper-middle-class lot, since we've grown up seeing women in our family and friends circle prosper in their respective careers, an unfortunate bubble we live in. Also matters by region, Tamil Nadu has a relatively higher rate of female employment due to a strong manufacturing sector while based on what I've heard from my friends, some rural areas of UP, Bihar & even Haryana are no better than pre-2017 Saudi Arabia. Economic growth won't fix everything I assume.