Economic Archives - GUJRAT INDIA

Economic Basis for International Trade!

Trade is the exchange of commodity and services. International trade represents business transactions taking place at the global level, and it is fundamentally different from domestic trade. Trade at international level demands huge investments, network of franchisees and proficient people to run the show. Many corporate giants are trying to capture Asian markets, especially Indian market, which has become the industrial hub for such economic activities. Economic liberalization has been the focus of many developing countries for the past two decades and this has allowed multinational companies with huge investment potential to enrich the weaker economies.

International trade tries to generate more foreign exchange, which is always good for the economy. Say, if a country has rich resources of petroleum, naturally it will try to sell the surplus to countries not endowed with such natural resources. That is why Middle East nations are prosperous and economically independent. The diversity in productive possibilities in different countries is due to the presence of limited natural resources. When a country gets a head start in a particular product, it can become the high volume, low cost producer. The economies of scale give it a significant advantage over other countries, which find it cheaper to buy from the leading producers than to make the product themselves.

Every nation must try to specialize in the production and export of those commodities, which are available in plenty and must import such products in the production of which they have a resource deficiency. It should be remembered that there are severe man made barriers in international trade such as, export duties, quotas, exchange restrictions etc.,that hinder the free movement of products. Nevertheless, it is not also possible for a country to produce domestically every kind of product. In spite of all these restraining factors, global trade is thriving, thanks to the advanced technological aspects introduced in communication and faster means of transportation. Distance is no more a constraint and the world has become one small global village.

All domestic transactions, say in a country like India take place in rupees, which is the legal tender in the country. However, in its trade with other countries like USA, Germany, Japan, France and Britain, the payments have to be made in terms of dollars, marks, yens, francs and pound sterling respectively. The mechanism through which payments are effected between two countries having different currency systems is called foreign exchange. It may be also defined as the exchange of money or credit in one country for money or credit in another.

Foreign exchange rates can affect relative prices and net exports. A rise in the a nation’s foreign exchange will depress that nation’s net exports and output, while a fall in the foreign exchange rate will increase net exports and output. Because of the significant impact of exchange rates on national economies, countries have entered into agreements on international monetary agreements.

Economic Survival in the 21st Century – the Three Key Questions to Ask

In this “special report”, I want to pose a few important “philosophical questions” to my readers. Firstly — our Federal Reserve Chairman, Alan Greenspan, addressed the effects and implications of our aging population on things such as Social Security again in a speech [http://news.yahoo.com/news?tmpl=story&u=/ap/20040828/ap_on_bi_ge/greenspan_32] that he made last Friday. Readers may remember that I also briefly mentioned this issue in my June 24th commentary. I urge you to keep this worldwide phenomenon of the aging population firmly on the back of your minds. If you are like most people, then you earn you living by producing a certain thing – such as a consumer good, or a service that the masses want. Let’s face it – how many people really “struck it rich” by being pure traders or investment managers? The stock market and other financial markets are definitely very important to us investors/traders but this “super secular trend” of the aging of the worldwide population will impact every aspect of our lives, whether it is losing our relative competitiveness on the world arena, increasing pension and healthcare costs, or even a potential fundamental change of our political system.

The second question that I want my readers to think about is the potential end to the era of cheap energy prices – an era which we have basically enjoyed for the last two decades without thinking of the long-term repercussions. The United States, with less than five percent of the world’s population, currently consume approximately 25% of the world’s energy each year. Supply is maturing while demand continues to surge – as exemplified by the surging in demand from China and India. In the meantime, spare energy-producing capacity and inventory levels have been at all-time lows – potential for a perfect storm?

Finally, I want to ask my readers the following question: What kind of investor are you? What investing style do you adopt and what investing style are you most comfortable with? Can you be a contrarian and buy when the crowd is selling or are you merely a follower who is only comfortable if you fit in? These are straightforward questions – but these are questions that you really need to ask yourselves in order to truly make money in investing over the long run. If my readers take the time out to thinking about these three questions or issues – and ultimately have a firm grasp of even just one of the issues – then you will be in a much better economic situation than most Americans five to ten years from now.

To begin, what are the potential implications of the “aging population” phenomenon? Readers my recall that in my June 24th commentary, I stated: “Assuming that the current level of benefits remain into the future and assuming the level of taxes is not raised, then public benefits to retirees would dramatically increase going forward. On the extreme end, Japan and Spain will see a more than 100% increase in their outlays to retirees. Clearly, this is not sustainable. Either things such as defense or education spending will need to be cut, or the above countries will need to raise their taxes. Neither of the two scenarios is optimal. Borrowing more of their funds is not a long-term solution. Cutting funding in defense and education will comprise a country’s future, and raising taxes will place a huge social and financial burden on the population of the developed world – where taxes are already at a historically high level. Think about this: If you were a bright, young, French industrialist and you were forced to pay 60% of your income as taxes to support the elderly, what would you do? Why, you would vote with your feet and relocate to another country that is more tax-friendly and business-friendly – and so will other great talent that may have been a great contribution to the French economy. The governments of the developed world recognize this – but there are no easy solutions.

“This picture gets grimmer when one takes note of a study that was done by the Bank Credit Analyst. In that study, the BCA predicts that by the year 2050, the percentage share of the developed countries of the global population will drop from over 30% in 1950 to less than 14% — or about equal to the population of the Islamic nations of the world. Similarly, Yemen will be more populous than Germany in 2050; while Iraq will be 30% more populous than Italy (Iraq is less than 40% the size of Italy today). Russia’s population is projected to continue to decrease – at a rate such that the population of Iran will be even higher to that of Russia’s in 2050. India will be the most populous nation in the world, and Pakistan will only lag the U.S. by approximately 50 million people. If the developed countries of today do not choose to work harder or become more efficient, then they will ultimately lose their comparative advantage, as the younger population of the world is inherently more hard-working, energetic, innovative, and creative. In today’s globalized world, this will be a killer for the average worker in the developed countries – the more so once the language barrier is eliminated (the successful commercialization of universal language translators is projected to happen in ten to fifteen years). I am generally more optimistic, as the elimination of the language barrier will greatly enhance business opportunities and efficiencies, but a person such as the average American worker will loss his or her comparative advantage in the global workforce. The availability of a huge supply of labor should also drive down wages in the global marketplace – and most probably increase the maldistribution of wealth in today’s developed countries.”

Like I have mentioned before, there are no easy solutions. If the average American sees an increase of 10 years in his or her life expectancy, can he or she reasonably or logically retire at the current normal retirement age of 65 (which was determined during the Roosevelt administration during the 1930s) without placing an undue burden on the system? The answer is most probably “no.” Applying the same working-years-to-retirement-years ratio to his or her new life expectancy, then the average American should probably work around five to six years more – thus giving a revised normal retirement age of 70 or so. Moreover, all this analysis is based on the outdated population distribution in the form of a pyramid – where the younger and more able workers represent a majority of the population (and where the elderly represents only a small minority of the general population). The pyramid distribution has historically facilitated government support of the elderly – as the monetary and social burdens have been shouldered by a relatively large younger population. The current experience of Europe and Japan suggests a more uniform distribution in the population of those countries going forward – as the birthrate in those countries are now dismally below the replacement rate of the population. The situation in the United States is not currently as drastic (given our relatively lax immigration policy) but we are heading towards the same direction. Thus to maintain the current standard of living at retirement, my guess is that the general population will not only have to work longer, but work longer hours in the present (and save more) as well.

The situation is more alarming when one considers that the combined population of China and India makes up over 1/3 of the world’s population. The number of unemployed workers in China is greater than the entire labor force of the United States. The competition for relatively unskilled jobs will continue, and it promises to accelerate going forward. The average American who does not stay ahead of the curve or does not keep pace of the trend will find his or her job being outsourced – not to mention the average wage being driven down by global competition. I, for one, believe that this continuing trend of globalization will make the world a better place, as hundreds of thousands of people will finally be empowered as they climb out of absolute poverty (again, over half of the world’s population currently live on less than two dollars a day) – and as the prices of consumer goods are driven down still further. The average American will probably disagree, but the trend of globalization and “offshoring” will not stop. The last time the United States adopted economic and military isolationism we had a Great Depression and subsequently, World War II. I sincerely do not think that this was a coincidence.

The trend of the general aging population and globalization will have a profound impact on all Americans. Ultimately, I think all Americans will benefit – although it may not be clear to people who are losing their jobs today. For the initiated and nimble, you will not only survive but thrive in these “interesting new times.” Imagine a market for your product that is over ten times the size of the population in the United States. China and India has historically disappointed – as the citizens of those countries have historically been too poor to consume much U.S. goods and services. Globalization and offshoring will change all these. A world more equalized economically will also mean a much more secure and less conflictive world.

Now, I want to address a similar concern of all Americans – as the era of cheap energy (basically the cheap energy prices as experienced by Americans for the last twenty years) comes to a close. While I think oil prices will decline in the short-term (i.e. for the next few months), I am longer-term bullish on both oil and natural gas prices (I will only discuss oil in this commentary). Consider the following:

The world supply of oil is flattening out. Readers may not know this, but the United States today still produce enough oil to satisfy approximately 40% of total domestic demand. The United States also had 22.7 billion barrels of proved oil reserves as of January 1, 2004, eleventh highest in the world. According to the Energy Information Administration (EIA), the United States produced around 7.9 million barrels per day during 2003. This is down sharply from the 10.6 million barrels averaged in 1985. The peak of domestic oil supply occurred sometime during the 1970s. Today, total domestic production is at 50-year lows – and still falling.
While Saudi Arabia (the world’s top exporter and contains 25% of the world’s reported reserves) has claimed that there are and will be no supply problems for the next few decades, they have not been transparent with their reserves data. According to Simmons & Company International, five to seven key fields in Saudi Arabia produce 90% to 95% of its total oil output – all but two fields are extremely old – with the last major find reported in 1968. The last publicized reserves data was in 1975 – when Saudi Aramco was still managed by Exxon, Mobil, Chevron and Texaco. In that report, the world’s best experts determined that all the key fields at that time contained 108 billion barrels of oil in recoverable reserves. If this holds true, then the peak of supply in Saudi Arabia will come soon. Moreover, if the report is correct, then there is really no “plan B” (unlike during the 1970s when the center of power shifted from the Texas Railroad Commission to OPEC due to the peaking of supply in the United States) – crude oil prices will soar.
The “last frontier” for the production of oil (namely the North Sea, Siberia, and Alaska) is now aging. Most companies are now struggling in order to even maintain their current production levels.
World oil demand continues to grow. Oil demand in the early 1990s stayed relatively flat (at around 66 to 68 million barrels per day) but over the next ten years to today, world oil demand increased 14 million barrels per day. Today, total world oil demand is greater than 82 million barrels per day. The energy “experts” who in the early 1990s predicted a flattening of oil demand growth and who wrote off demand growth in developing countries were dead wrong.
No new refineries have been built in the United States for the past two decades, even as refineries have been closing every year during that same time period. Refining capacity from 1981 to the mid 1990s also dropped drastically (this author estimates a drop of approximately 6 million barrels per day in refining capacity during that time period). Since 1994, however, an expansion in refining capacity at existing refineries has contributed to an increase in refining capacity from 15.0 million barrels per day to 16.7 million barrels per day (as of today). Despite this expansion, however, domestic refining capacity is still stretched to the limit, as utilization at U.S. refineries is now averaging nearly 90% — leaving no cushion room if something unforeseen happens.

There are currently three factors at work which should contribute to a continued increase in the world oil price – the maturing of supply, growing demand, and the lack of a cushion in refining capacity and low inventories. The “culprit” has usually been labeled as China, but it is interesting to note that the United States has had virtually no domestic energy policy (in terms of conservation and encouraging the development of alternative fuels) for the last twenty-something years. China demand, however, has soared over the last few years. It is now the second biggest oil consumer, having just surpassed Japan for the title. Demand for oil in China has more than doubled over the last 10 years (to today’s 6 million barrels per day), and this amazing increase is projected to continue, especially given the fact that oil demand in China is still a lowly 2 barrels per person per year (compared to 25 barrels per person here in the United States). Furthermore, it is interesting to note that the number of cars in China only totaled 700,000 as late as 1993 and 1.8 million as late as 2001. Today, the number of cars in China totaled more than 7 million – and this number could potentially have been much higher if not for the Chinese government intervention in limiting the number of cars that could be sold and driven each year. Now the most scary part: Current oil demand in India is only 0.7 barrels per person per year – given this fact, oil demand in India could potentially explode over the next decade – barring a huge worldwide economic recession or depression.

I believe my readers should be made aware of the current energy supply/demand situation. Given the above, what is the best course of action for the average American? How about the best course of action if you were the head of a motor company like GM or an airline pilot employed by a legacy airline like Delta? How about the best course of action for a mutual fund manager or a commodity fund manager? Since there are no easy solutions, there should be no easy answers either. In the short-run (three to five years), Americans will have to pay up if we want to drive gas-guzzling SUVs, and legacy airlines like Delta will have to continue to cut costs by probably further slashing labor costs as their first priority. A further improvement in extraction technology should help, but the serious development of alternative fuels will have to start now. I also believe that the next serious decline will be induced by a combination of an “oil shock” and a rise in interest rates. Readers may recall the relative strength chart that I developed in my August 15th commentary showing the AMEX Oil Index vs. the S&P 500 and the huge potential inverse heads and shoulders pattern in that chart. For now, the relative strength line should bounce around the neckline (the line drawn on that chart) – possibly even for a few years – but once the relative strength line convincingly breaks above the neckline, crude oil prices could rise to $80 or even $100 a barrel. I sure hope that my readers would not be taken by surprise if gas prices at the pump soars to $4.00 a gallon five to six years from now.

Finally, I want to pose to my readers the following question: Have you taken the time out to learn more about your psychological makeup and how it has affected your investment or trading decisions? What type of person are you when it comes to the market? Are you a so-called buy-and-holder, a swing trader, or a day trader? An independent thinker, a contrarian, a momentum investor or merely a follower? I am asking you these questions because of my following considerations:

This author believes that we are currently in a secular bear market in domestic common stocks. While I believe that this current rally still have more room to go, I believe that a cyclical bear market will emerge in due time – this upcoming cyclical bear market may even take us back or below the lows that we hit during October 2002. If this is true, then a buy-and-hold portfolio would definitely not work – unless you were in natural resources or precious metals mining stocks.
When this cyclical bull market tops out, all your friends, relatives, and the popular media will be telling you to buy more or to hold your common stocks. The bears and all bearish thoughts will be ostracized and frowned upon. This has happened in every bull market in everything in all human history. If you are in cash now, would you be able to remain in cash when the top finally comes or will you be unable to resist and buy in because you are afraid of “the train leaving the station without you,” so to speak?
Most people are inherently not good day traders or even swing traders. To be good in even the latter, you need a huge amount of dedication and discipline.

Investing or trading has always been dominated by emotions and always will be. My thinking in starting www.marketthoughts.com has always been that that if I can get my readers to buy in now, it will be a much easier decision for them to sell and hold cash once the DJIA reaches 11,000 or 12,000 or so – as opposed to being in cash and staying out for the rest of this secular bear market. 99% of Americans are just not disciplined or dedicated enough to stay in cash during a secular bear market – not to mention staying in cash during the entirety of a secular bear market and buying and holding common stocks during the entirety of a subsequent secular bull market. The average human psyche is just not capable of doing this. Because of this, I sincerely believe that success in the stock market (for most people) during the next five to ten years would involve catching the swings at the right or near-right times. For readers who just cannot resist, I am also going to continue to recommend some common stocks at opportune times, but in no way should my readers take my recommendations as gospel and in no way should my readers put all their eggs in one basket. If you are a person who can stay in cash for the next ten years and wait until the Dow Industrials has a P/E below 10 and a dividend yield of over 5%, then more power to you – you are either already rich who have no need to make money in the market anyway or you are a very disciplined and independent-thinking person. Most Americans just cannot do that – but I am here to help.

Navigating Through Tough American Economic and National Health Care, Health Insurance Reform Issues

For Practicing Agency Brokers, Trusted Insurance Advisers, And Financial Planning Consultants….

From time to time, there is a need for guidance in Financial Services Practice; now is definitely one of those times. There are two distinct issues working in tandem which determine modifications in the future conduct of our business: The Economy and the Reforms. Here are ideas on how to navigate our way through the maze. This can most certainly be done. With care, thoughtful performance, and innovation, Financial Services Professionals can serve the general public and make the experience satisfying and profitable. Let’s begin with some commentary on the general economic circumstances first. Following that, we’ll take up the Reform issues, how to move through them, and how the way we advise members of the general public on savings, insurance, investment, and retirement concerns.

1.To begin the economic discussion, we need to address the full and true extent of just what we as a nation and we as practitioners are up against. As of this writing, in the winter of 2009, unemployment, including the employed, self-employed, and business owners, has passed 10%, about 15 to 16 million people. Add another 6 to 7 percent to that, which includes the part-timers, disabled, retired, and those of working age who have stopped looking. We are looking at about 22 million Americans not drawing active paychecks. The closing of businesses, branch locations, shops, stores, retail, wholesale, and service sectors, adds to the severity of the overall problems. It is conceded that there are many who are drawing from savings, taking early pensions/Social Security income, receiving extended unemployment compensation, and retirees on full pensions. That said, the loss of productivity is simply staggering. All this decreases the taxes available from which cities, counties, states, and the federal government must fund budgets. Naturally, all this leads to ever worsening annual deficits and unfunded liabilities. Finally, federal government for the past 30+ years has pursued deficit-spending policies which add to all of this. A look at USDEBTCLOCK.ORG tells the whole story in real time. Take a look and notice a few things.

The national debt stands at some $12+ trillion, while the federal budget shows in the neighborhood of $3+ trillion. Take a closer look and it can be seen that $1.7 trillion is taxes, while the difference is annual debt – sale of treasuries, printing of currency. The unfunded liabilities of Medicare/Medicaid, Prescriptions, Social Security top $106 trillion! To get an idea of what these liabilities mean, consider that this funding is what must be contractually paid out in entitlements over the lifetime of those presently enrolled in these programs, say, from now and over the next 20 to 30 years. And that will become progressively larger as the Baby Boomers begin checking into the systems. This is merely the highlighted treatment of the issues and doesn’t take in figures on the levels below the federal programs and subsidies: state, and related deep concerns over inflation, tax increases, brain drain, not to mention the TARP, STIMULUS, industry handouts/loans, and funds to individuals and non-governmental organizations under Acts in force, such as new mortgages and existing mortgage relief.

We read, see, and hear the word “unsustainable” a lot. Another phrase is ” the debasing of our currency.” Still another is “breaking the buck.” Are these figures actually important to us? Well, yes. One example will suffice: the interest alone on just the national debt is about $340 billion/year, or about 12% of the national budget. And that is going to get much higher. Relate that to a family making, say, $75,000/year. With this level of household debt, that family will pay some $9,000/yr. merely to pay interest, not even to reduce its debt obligations! Just recently on CNBC, a professor of finance designated the U.S. Dollar as fiat currency, which it is. Watch just about any television station and note all the advertisements about gold. Yet, many Americans just roll on as if everything is going to be just fine. Let’s hope for that miracle. The American People have been through some very difficult times over the past 250+ years and have managed to rebound. That could happen again. This time, however, things are quite different and difficult.

Does all this mean that Americans should just roll over, play dead, and let the federal government take care of everything? As a nation, will we file for default and a kind of national bankruptcy? This may be a legitimate senario; and it could be solved through establishment of a new currency sometime in the future, after everything gets paid off in near worthless U.S. currency. But, nations and the people in them, get hurt—badly. Russia, Panama, Argentina, Germany, Cuba (and there are more examples out there), all went through this, and the people there know just how bad this is: a national nightmare from which one cannot awaken. Special note on Argentina: The collapse of that country’s currency, the Peso, not long ago, lead to black markets, swap meets, trading for needed goods with hard assets, such as gold, bartering and trading in kind, not to mention increases in violence and crime. When new prices and wages readjust to some new currency, the resultant pricing of goods and services is extremely unfavorable to individuals and businesses. One can hope and pray that this does not happen or at least is some years away. Some experts suggest anything from 2 to 20 years—-read: nobody knows for sure! That said, this leads to strategies that we in the financial services industry can and should probably look into and maybe adopt. If all this sounds like gloom and doom and just too ridiculous, let me assure readers that this writer has done his research, can back it all up, and is most assuredly not making it all up as he goes along! Independent corraboration and documentation on all of this is readily available on the internet, libraries, university papers/archives, and other public records.

2. Here are some practical suggestions for Financial Services Professionals. While nobody can predict the future, this portion of the narrative is best described within two arbitrary time frames: A. 2010 to 2014-2015. B. Beyond that to, say, 2020-2025. This time division is established for specific reasons. At the time of this writing, the U.S. Government is poised to pass and place into effect a national healthcare/health insurance reform act. It doesn’t much matter whether or not one is in favor of this particular piece of legislation or some others, reform is necessary and will come very soon regardless of what the final act turns out to be.

Care rationing is a matter of fact, already in place for some years, and will get more pronounced for everyone. There really is no other sustainable way to do any kind of reform in attempts to control steeply increasing costs of insuring seniors and those below age 65 yr. who can either not afford to be insured, can’t qualify, or act as though they don’t want to protect themselves(checking into their local hospital ER so we can all pay for that; and hospitals, in order to remain in business are already tightening up on the emergency provisions of the law). The projected costs of the one that looks like it will become the law of the land, warts and all, is estimated at between $1 and $2 trillion over the next 10 years. It will no doubt end up by 2019 considerably more. If it doesn’t, it will stand alone among all the U.S. entitlement programs in the history of the Republic to come in at or below the CBO cost estimates. Look for increasing income taxes, fewer paychecks to tax, very slow employment recovery, very fragile equities markets, more federal currency creation, more inflation, weakening U.S.Dollar.That’s the context in which we find ourselves and determines what we do as financial services advisors and implementers. Good luck. That said, let’s discuss Part A – the next 3 years.

Part A. During the next three years, things will proceed at more or less normal conduct of business in an atmosphere of continuing inflation and increasing taxes. As practitioners, we can expect to market the same or similar coverages as we do now. Adverse Selection(taking into account pre-existing conditions) will still be there to control premiums on life, individual, family, group healthcare, disability coverage, long term care insurance, retirement plans(more on this later), to mention the prominent ones. We still will be doing our due-care, due-diligence, financial planning, fact finding, observing compliance, and doing what is best for the client. There are going to be less people and businesses with which to work, and they will have less money with which to do things. Remember, the client always comes first. Words to live by.

Certainly, we owe it to those who favor us with their business to let them know what is coming as soon as we know what is in store for them and for ourselves. For the most part, we will try to continue as before – for about the next several years. After that, things begin to get very different. Let us progress to Part B, Beyond that.

Part B. After 2014-2015, health insurers drop Adverse Selection and pre-existing conditions no longer play a part in the health underwriting process, at least for much of the individual, family, small group medical insurance, and Medicare Supplementary coverages. We’ll all most likely be undergoing training, certification testing, and more state/federal regulation. There’s an upside to all of this. As long as the health insurance industry remains in play, we should be able to make as much or even more money. Nobody knows what the effect of some U.S. Health Insurance Company, Co-op, or Exchange might have on the viability of the health insurers. The CBO states that some very small percentage of the public will enroll in the Public Option plans. That remains to be seen. Many people will be subject to non-enrollment penalties and fees.

What we do know about public plans and elimination of pre-existing conditions is the example we have in Texas. This public option is called the Texas Health Insurance Risk Pool, under the jurisdiction of the State of Texas. In Pool plans, there are no pre-existing conditions to stop one from procuring a pretty good major medical insurance coverage; in fact, one actually has to have significant medical condition or conditions to be eligible. Approximately 29,000 Texans are presently enrolled, out of the millions who have commercial coverage of individual, family, or group coverage. Even with State and Federal subsidy grants each year, the premiums on these plans run 2.5 to 4 times what a similar commercial plan might cost and the coverage is not as good. In a word, it is really expensive. It may be that, since the great majority of Americans probably generally qualify by providing medical evidence of insurability anyway, the impact of accepting all applicants by the commercial insurance companies may not send the overall individual/group premiums skyrocketing(an outcome with which this author does not agree). Those who can’t afford health insurance may get federal subsidies. The fact is that nobody really has a clue. We won’t discuss the MA and OR state-run health care/insurance plans. Not working out very well. Adverse Selection Elimination is a main culprit, leading into healthcare rationing and increasing premiums.

For insurance professionals, the marketing opportunities may just turn out to be positive. Bringing into the insuring public millions of previously uninsured and underinsured younger people may be a good thing. Supplementing health insurance for seniors will be there. We need to work hard at staying in the game and not getting squeezed out by federal competition. All people out there will certainly still need competent financial services professionals, maybe even more than at present. There are those in professional positions of economics, demographics, medicine, actuarial science, and other disciplines who think that any public option may not drive out the insurers, especially knowing that private enterprise, ingenuity, innovation, increased efficiency, would allow the private sector even to drive out the public option. Look at how the Post Office, Medicare, Medicaid, VA hospitals, Social Security, and other entitlements have worked out. Remember that $106 trillion(and climbing) of unfunded liabilities and where that has put the nation and the American People. As these liabilities keep coming due, they increase the federal budget! Doesn’t sound like some great efficiency to this writer.

Finally, there is this prediction regarding earned and renewal compensation. Don’t look for some sudden drop off just because of Reform. This author has found from experience that most people are quite cautious and suspicious of new programs and will tend to retain what they have for just as long as they can, until they gain confidence in such programs, or are forced into them. Even then, many, if not most, will still retain current health insurance coverage in some form to pick up what Reform does not. That was this writer’s great surprise with Harris County here in Texas, when in 1970, the County government replaced an outdated and woefully inadequate set of fringe benefits with full comprehensive coverage. Most all the supplemental coverages that were marketed to large numbers of employees from 1965 to 1970 remained on the books for many years. That is likely to happen in our national future. So take heart.

Earlier, the topic of currency debasement, creation of trillions of dollars by the Fed out of thin air, and inflation(about 2.5% annually, by the way) was touched upon, especially as related to obtaining goods, services, and accumulation/distribution of retirement funding. This leads into the arena of retirement capital, funds formation, equities markets, cash value life insurance, annuities, precious metals, commodities, bank deposits, money markets, treasury instruments, and the like. This also includes non-tax qualified and tax-qualified retirement vehicles, such as IRAs and 401(k)s, as examples. One suggestion is the recommendation that some portion of a client’s capital or retirement portfolio of funds be placed in hard assets. Gold and silver come to mind. We would defer to a precious metals specialist for that. Hedging and potential gains are two objectives that come to mind.

Everything is open to new ideas based upon the changing circumstances. Your practice is obviously going to change; caution and creativity are the guides. Whether we operate in single needs, multiple needs, or comprehensive planning modes and implementations, all of our recommendations are going to be different as compared to past years. It is a bit like attempting to walk in quicksand. And this applies to all product implementation, not just the health insurance arena. So be careful out there.

The way we operate in ethical conduct of business will change. The suggestion is put forth that in the future, starting in 2010 and beyond, we in financial services when advising businesses and individuals, will need to either form alliances with other financial professionals who are licensed in areas where we are not, or refer people to other trusted advisors in order to fully inform the people we serve of the risks and rewards to allow them to make proper, informed decisions that work for them and provide them the opportunity to form strategies and thus to protect themselves. We are definitely in for quite a ride; so fasten your seatbelts. A tip from one who is an investor, not a sales agent: dollars are currency;gold is money. Get to know the difference. Know all the new rules, regulations, and compliance requirements. Study. Engage with other professionals. There is a big job ahead for all of us, starting now.

This is by no means an exhaustive analysis of what’s ahead, but it is a beginning. Still, taken to heart, it gives us inspiration to continue to provide the most excellent advice and coverage implementation to our clients and would-be clients. We who are true professionals are in the unique position to guide, advise, offer direction, clarify, and eliminate confusion. No government bureaucrat can come close to what we do. Imagine that!

An Insight Into the Emergence of Women-Owned Businesses As an Economic Force in India

1. Introduction

During the last two decades, Indian women have entered the field of entrepreneurship in greatly increasing numbers. With the emergence and growth of their businesses, they have contributed to the global economy and to their surrounding communities. The routes women have followed to take leadership roles in business are varied. Yet, most women business owners have overcome or worked to avoid obstacles and challenges in creating their businesses. The presence of women in the workplace driving small and entrepreneurial organizations creates a tremendous impact on employment and business environments.

Indian women business owners are changing the face of businesses of today, both literally and figuratively. The dynamic growth and expansion of women-owned businesses is one of the defining trends of the past decade, and all indications are that it will continue unabated. For more than a decade, the number of women-owned businesses have grown at one-and-a-half to two times the rate of all businesses. Even more important, the expansion in revenues and employment has far exceeded the growth in numbers.

The result of these trends is that women-owned businesses span the entire range of business life cycle and business success, whether the measuring stick is revenue, employment or longevity. This strengthens the view that all governmental programs and policies should target at strengthening women’s entrepreneurship in their native lands.

Although, many of the earlier obstacles to women’s business success have been removed, yet some still remain. This has initiated the scholars of entrepreneurship and small businesses to study the influences of and the impact on business ownership by women. The number of these research studies are growing steadily.

2. What Are The Characteristics Of Women Entrepreneurs In India?

Indian women of today have taken many strides towards business ownership. The broad classification of women business owners include women who establish, inherit, or acquire a business; women who start businesses with spouses or business partners but are either at the forefront or behind the scenes; and finally, women who start fast-growing or part-time or slow-growing firms. Although earlier researches on women entrepreneurs have suggested that significant differences existed between female and male entrepreneurs. However, more recent studies have shown that there are far more similarities than differences between women and men entrepreneurs in terms of psychological and demographic characteristics. The dominant predictors of success in case of women entrepreneurs are work experience and years of self-employment.

Generally, women view their businesses as a cooperative network of relationships rather than as a distinct profit-generating entity. This network extends beyond the business into the entrepreneur’s relationships with her family and the community. Certain cross-cultural studies on women entrepreneurs have reported that their management styles emphasizes open communication and participative decision-making, and their business goals reflect a concern for the community in which the business operates.

The majority of women business owners operate enterprises in the service sectors, whereas the majority of male business owners operate enterprises in non service sectors, particularly manufacturing. Women are not only achieving economic independence and wealth creation for themselves, but through job creation, they are also providing opportunities for others, particularly for other women.

A series of researches have shown that the workforce of women-owned businesses tend to be more gender balanced than the workforce of men-owned businesses, although women business owners are more likely to hire women. Put simply, an investment in women’s entrepreneurship is an investment in the economic independence and well-being of all women.

In comparison to their women counterparts who established their businesses two decades earlier, women who have started their businesses sometime during the past decade are more likely to have the following:

o a higher level of education, previous professional and managerial experience, as well as executive level experience

o a greater appetite for capital, both credit and equity

o a strong motivation for autonomy and achievement

o a dynamic personality

o a passion for what they do

o creativity to innovate and implement

o independence and self reliance

o high self confidence

o willingness & ability to take risks

o alertness to opportunities

o ability to marshal resources

o ability to respond to market & environment signals

Thus, from the above discussion, we can conclude the following traits of personality of women entrepreneurs:

Risk taker Proactive Opportunist Visionary Inventor Tolerance of ambiguity Commercialiser Desire for independence Trader High energy Innovator Ability to bounce back Flexible Results oriented Need for achievement All rounder Internal control Decisive Self confident Self Motivated Pragmatic Flair

3. Why Do Indian Women Undertake Entrepreneurship?

In spite of the growing number of female entrepreneurs, the share of female entrepreneurs is still significantly low when compared to their participation rate. However, there are several factors responsible for increasing the level of female entrepreneurship in India:

1. Nature of Entrepreneurship: Women enter into entrepreneurial activity because regular employment does not provide them with the flexibility, control or challenge offered by business ownership.

2. Motivation : Several evidences suggest that women do not lack the motivation to enter into business ownership. They are often highly motivated than their male counterparts to overcome the barriers to business start-up.

3. Empowerment : Indian women are becoming more empowered now-a-days. Legislation is being progressively drafted to offer them more opportunities at various levels.

4. Social Conditions : Population growth results in a strong positive relationship on entrepreneurial activity. Across genders, the increase in demand and competition for jobs pushes more people into necessary entrepreneurship. For women, in particular, the relatively high involvement in necessary entrepreneurship indicates that self-employment is used as a way to circumvent institutional and cultural constraints with respect to female employment, as well as a way to provide supplemental family income.

5. Economic Conditions : Auspicious economic conditions favour the participation of women in entrepreneurial activity. The smaller amount of financial capital requirement and higher proportion of available bank loans positively correlates the level of female entrepreneurship to economic conditions. In fact, in a country like India, the relationship between the size of unofficial economy and entrepreneurial activity is positive.

6. Literacy & Education: Increased levels of education has played a crucial role in initiating the process of entrepreneurship. It is not only the illiterate that are starting the businesses but those with education & skills are also exploiting profit opportunities.

4. What Are The Needs Of Women Entrepreneurs In India?

1) More and better access to finance/credit is mentioned very frequently. Give a woman 1000 rupees and she can start a business. Give her another 1000 rupees and she will be able to feed not only for her family, but for her employees as well.

2) Access to business support and information, including better integration of business services.

3) Training on business issues and related issues

4) Better access to local and foreign markets.

5) Day care centres & nurseries for children, and also for the elderly;

6) Positive image-building and change in mentality amongst women, whereby women see themselves as capable achievers and build up confidence.

7) Breaking through traditional patrons and structures that inhibit women’s advancement.

8) Role modelling of women in non-traditional business sectors to break through traditional views on men’s and women’s sectors.

9) More involvement and participation in legislation and decision-making processes.

10) Removing of any legislation which impedes women’s free engagement.

11) Awareness-raising at the governmental as well as private level to truly and really create entrepreneurial opportunities and not just programs that stay on paper.

5. Which Important Problems Are Faced By Women Entrepreneurs In India?

1. Women hardly interact with other women who are successful entrepreneurs. This results in a negative impact on their networking skills.

2. The areas, where one can see women acting as entrepreneurs, is in the very typical women’s sectors of 3Ps. This is also the area, where women are accepted in society to be experts in and thus have the capacity for entrepreneurial activities.

3. It is clear, that women have the responsibility of getting children and taking care of them. Very few societies accept fathers taking over the role of staying home and taking care of the children. Once these children are old enough to take care for themselves, they have to bear an additional responsibility of taking care of elder parents. If they want to become entrepreneurs, the society expects them to be able to do both: take care of family and home and do business.

4. Women are very critical when it comes to themselves – can I really do this, am I good enough, maybe I have to learn more, others can do it better. It is quite interesting that many successful women have been educated in only girls colleges and schools, which often deliver a safe environment to try out ones personal strengths, learn to overcome weaknesses and be proud of oneself.

5. Discrimination – it is hard to believe but women are still treated differently in our society. Women do get lower salaries compared to men doing the same job, women do not have access to men dominated networks who take their decisions about successors in the company during golf plays or sauna meetings….

6. Missing networks – through centuries business men have build up their networks but women still have to learn to catch up.

7. A lot of women tell stories about not being taken serious by bankers, when they wanted to get a loan for their business. Often enough, they have to bring their husbands or fathers to be able to be heard and receive financing. So, the domination of men in the banking world is a problem.

6. What Are The Challenges Faced By Women Entrepreneurs In India?

One of the major obstacles faced by women entrepreneurs has been that they are not taken seriously. Even though women have achieved credibility as competent entrepreneurs in areas such as retail, personal services and business services, perceptions that women-owned businesses are less successful, credit worthy & innovative continues to be a barrier.

Besides this, there are several other challenges being faced by Women Entrepreneurs:

1. Lack of Visibility as Strategic Leaders: Changing the perceptions about the likely success of women-owned businesses depends on increasing women’s visibility in leadership positions within the greater business community. In an assessment of women’s presence as CEOs or Directors of large business enterprises, it has been anticipated that the exodus of women to entrepreneurial growth firms might be because women believe that have greater representation in strategic leadership positions in privately-held or family-owned firms as they provide better opportunities for leadership than available to women in publicly-traded companies.

2. Differential Information and Assistance Needs: Another significant need of many women business owners is obtaining the appropriate assistance and information needed to take the business to the next level of growth. In a study conducted to gather information needs of women entrepreneurs, those who were just starting their ventures, requested assistance and training in implementing the business idea, identifying initial sources of financing, and advertising/promotion. The entrepreneurs who were already established, had a somewhat different set of needs including financing for expansion and increasing sales. Another conducted study had identified ten most desired needs of fast growth entrepreneurs:

(a) using cash flow to make operational decisions

(b) financing growth

(c) increasing the value of the business

(d) compensation for self and associates

(e) hiring, training and motivating for growth

(f) succeeding in a rapidly changing world

(g) successful selling

(h) sales force management

(i) management success

(j) problems and pitfalls of growth.

Unfortunately, this differences in information and assistance needs can be found across cultures as well.

3. Family Influences on Women Entrepreneurs : The overlapping of the family and the firm is not significant for women business owners. Unfortunately, little research has been conducted on the dynamics of family-owned firms headed by women. As the boundaries between the firm and the family tend to be indistinct, women operating family businesses face a unique set of issues related to personal identity, role conflict, loyalties, family relationships, and attitudes towards authority. Additionally, family businesses owned by women are at a disadvantage financially and are forced to rely on internal resources of funding rather than outside sources. The critical role of family in business, also emerges in cross-cultural studies which show a women relying heavily on the family for start-up capital.

7. What Steps Need To Be Initiated For Women Entrepreneurial Development In India?

A possible set of three inter-linked and inter-dependent clusters of recommendations can be aimed at “pushing” a larger number of women entrepreneurs towards growth opportunities, unlocking their potential as creators of wealth and jobs, and providing a more conducive legal and regulatory framework. These recommendations can also ensure the proper positioning of “pull mechanisms” to enable the growth-oriented women entrepreneurs to expand and grow in terms of investments, markets and profits.

1. Prioritizing and Pushing at the micro-level : There is a large and seemingly ever-increasing number of women entrepreneurs operating in micro-enterprises and in the informal economy. They can be facilitated to grow into sustainable, formally registered & large enterprises with the help of following actions:-

o Conducting gender analysis for all entrepreneurial support programmes

o Gathering data on women and men entrepreneurs

o Applying “target group segmentation” to women entrepreneurs

o Using targeted approaches for priority categories in order to provide additional “push” to women entrepreneurs to the next level of growth

o Promoting mobilization and organization of representative associations

o Examining differential impacts of governmental policies, programmes and actions

o Promoting development of demand-led supports for women entrepreneurs

o Promoting more flexible and innovative financial products by banks

2. Unlocking and Unfettering Institutional Framework: Policies, laws and overall regulatory environment are frequently seen as barriers and disincentives to expansion and growth. However, they need to be promoted in such a way that women entrepreneurs see the advantages of and benefits that come with compliance.

o Reviewing impact of existing and new instruments on women entrepreneurs

o Identifying those instruments that act as barriers to expansion and growth

o Modifying or dismantling these instruments

o Taking account of the social and cultural contexts affecting policy implementation and redress inequalities and abnormalities

o Making use of IT and associations so as to minimize the administrative burdens on women entrepreneurs

o Holding regular consultations with key factors like women entrepreneurs, women entrepreneurs’ associations, financial institutions, etc, to review progress and identify new bottlenecks.

3. Projecting and Pulling to Grow and Support the Winners : The first two sets of recommendations are aimed at trying to “push” more women entrepreneurs into growth situations as well as ensuring that laws & regulations do not stand in their way. The third possible recommendation relates to facilitating and “pulling” the women entrepreneurs into situations where they can actively pursue growth strategies.

o Providing incentives for expansion and growth after removing barriers and disincentives

o Encouraging and rewarding dynamic representative associations of women entrepreneurs

o Promoting strong links and synergies with existing major economic players

o Profiling the economic and social contributors among women entrepreneurs to the national economy

o Promoting and rewarding programmes that serve women entrepreneurs

o Making full use of data gathered to inform new policies, programmes and supportive actions

o Ensuring synergies between (a) women related ministry (b) economic ministry (c) welfare & social development ministry in the government.

8. Conclusion

With relevant education, work experience, improving economic conditions and financial opportunities, more women around the world are creating and sustaining successful business ventures. This will not only have an impact on the economies of the countries in which women own their businesses but also will change the status of women in those societies. It is likely that, as we begin this millennium, this will be the century of the entrepreneur in general and of the women entrepreneur in particular.