My Economics goes for a toss

I studied economics in university though I am not an expert but can reasonably understand economics and markets.  

"Swish" and there is a fire when Harry Potter swirls his wand in a Harry Potter movie - that is magic, Crypto currency market is now something similar to it now "Swish" a tweet and crypto currency moves up or down defining all laws of economics (though wondering where is economics in Crypto currency after all!)

Elon Musk the founder of Tesla is using his magic wand popularly known as Twitter to move up and down the price of Crypto currency.

There had been series of tweets from Elon Mush since 2020 which influenced prices of Crypto currencies & more so in 2021.  In February 2021 Musk tweeted that Tesla has $1.5 Billion worth of Crypto currency and the company would soon accept Bitcoins as payment for Tesla cars this sent Crypto currencies values soaring more than 10%.   

Then came the twist in the tweet in May 2021 Elon Musk tweeted that Tesla will not accept Bit coins for payment towards Tesla citing environmental impact due to mining of Crypto currencies.  This sent Bitcoins prices head down from $ 55,000 to $ 48,000 within 24 hours and went to lows of $ 34,000.

Soon after this tweet another couple of tweets came out from Musk "Tesla has not sold any Bitcoin" another acknowledging Bitcoin miners plan to switch to renewable energy for mining Bitcoins - these tweets again picked up Bitcoin prices to around $ 43,000.  

Currently Bitcoin is trading around $ 38,000 

Cryto currencies are here to stay in the financial system, they do not fall within any economic definition and will continue to be influenced by multiple factors especially social factors.  Unless until Governments of the world sit down and bring in a set of regulations Cryto currency will behave similar to this and create headlines whenever there a sensational news  

Tax collection shows India in recovery path

Surprisingly there were all time high record GST collections in April 2021 @ Rs.141,348 crores despite lockdown in some states and quick spread of Covid 19 virus.  

In its press note, releasing April 2021 GST statistics, finance ministry has stated "Despite the second wave of Covid-19 pandemic affecting several parts of the country, Indian business have once again shown remarkable resilience by not only complying with the return filing requirements but also paying their GST dues in a timely manner during the month".  

This statement of the Government attracts some credit due to the fact of high GST collections consistently above Rs.1 crore mark for 7 months since October 2020.  However with lockdown coming down in full force in May there are expectations of much lower GST collections in May 2021 

Moving to direct taxes - Government announces that collection for Q1 2021-22 of direct tax is Rs.1.86 lakh crores which is more than double the last year collection amount of Rs.92,762 crores.  

Good Direct tax & GST collections shows good growth in Q4 of 2020-21 & Q1 of 2021-22 (maybe even in double digits).

Nice numbers on taxes on which we should be quite happy.  With economy moving up Government should step up infrastructure spending, rationalize taxes on oil, control inflation and move the economy into growth path.

Oil Price & Inflation in India

2021 has seen a big recovery in international oil prices by as high as 47% from $ 48.86 on 1.1.21 per barrel to $ 71.81 per barrel on 15.6.21.   This levels of $ 70+ were seen last only in late 2018.  Oil is at a 2.5 year high currently.  

This meteoric rise in oil prices is attributed to global economic recovery which fuels higher oil demand.  This economic recovery is attributed to high levels of vaccination in many developed countries.  With this price increase OPEC countries will be happy and there is scope for increase in production which may slightly reduce increases, but short term outlook for oil is bullish and it may go up further.   

Challenge for India will be already high oil prices due to high levels of taxes on oil will further push oil prices to new highs and trigger further inflation which is already high at levels of 6.3% in May 2021.  Government should now look to taper the price of oil by reducing taxes on oil and prevent a run away inflation due to oil.

CPI Inflation

As per data released by Ministry of Statistics and Programme Implementation (MoSPI) on 14.6.21 Indian inflation is currently at a 6 month's high of 6.3% mainly triggered by higher food inflation which is at a 6 month high of 5.01%.

Food inflation which is at a 6 month month high of 5.01% is triggered by higher food and energy prices with energy prices soaring to 11.58% during the month as against 7.91% in the previous month.  

There is also a big jump in Wholesale Price Index (WPI) mainly triggered by increase in crude oil prices.  WPI is increasing consistently for the pat 5 months 

As per Government the high rate of inflation in May 2021 is primarily due to low base effect and rise in prices of crude petroleum, mineral oils viz. petrol, diesel, naphtha, furnace oil etc. and manufactured products as compared to the corresponding month of the previous year

What is the stand of Reserve Bank of India

In its monetary policy report released on 7.4.21 RBI the following is the projection by RBI "CPI inflation is projected to average 5.0 per cent in Q4:2020-21, 5.2 per cent in Q1:2021-22 and Q2, 4.4 per cent in Q3, and 5.1 per cent in Q4,"

Now with 6.3% CPI inflation is above the target set by RBI.

RBI earlier this month in its announcement kept the policy rates unchanged to bring about a boost to growth and keep a lid on inflation.  

RBI is committed to keep inflation lower to the extent possible to trigger economy into the growth path.

This is a wise approach.

Empowering team members - A winning model

I was reading the autobiography of Elon Musk, one of the key factor to his success as an entrepreneur is people.  He went about recruiting the best talent available however paradox is that their pay was not the best in the industry but they had more challenges to handle more innovations to create, make the impossible possible, in short they were empowered at every stage of their career to create something new and great.  Though some of key persons stint with Musk's enterprises were short their contribution was quite significant as they were pushed to their limits by Musk's management style which I can term as one form of empowerment.  If you read the history of India especially that of Moguls the generals are empowered to fight the war with a promise that on victory the winning generals usually gets huge rewards (both legal means and looting) of which a large portion they keep for themselves and balance share with their team, here empowerment comes from the incentive on successfully completing a task.  I was reading Bangalore ex-don Agni Sridhar's book "My days in the underworld", the common thread which runs in the book is for underworld gangsters to make it big in the underworld is to make a big target threat or killing this propels one's stature in underworld, here empowerment is big time action or an one off big task successfully executed which awes your friends and enemies alike.  If you read history of communist revolution in Cuba and specifically the traits of Fidel Castro & Che Guevara their empowerment stems from their resentment of America.

Empowerment is achieved in different forms and ways for different teams / team members.  There is no one fit rule on empowerment for everyone.  Empowerment is a subjective theme and should be administered in small doses through out the career of a team member to ensure that they perform to their potential and bring in laurels to the task and institution they work for.    

Empowerment of team members can be achieved by the following

• Training - An employee once she is clear what she has to do, how she has to do, for what she has to do & when she has to do a particular job she will be elated and feel empowered to carry out the task.  A point to note here is that training should not be momentary and commence only when a task needs to be carried out on the contrary training should be ongoing, meaning training should be carried out in anticipation of future tasks this will help the employee quickly to adopt to a task and carry on with it with high level of efficiency.  For example to execute a new task high level of team work may be required.  If the organisation has ongoing training's on team work the entire team is aware of the concepts of team work and feel empowered to carry out the task assigned.  
• Informed Team Members - how much training is important equally important is information to team members.  Any organisation is dynamic and there are multiple changes within the organisation or outside the organisation affecting the organisation's way of working.  Team members should be empowered and be made aware of all these dynamism to ensure that team members carry out their tasks effectively.  For example a change in product packaging should be communicated well in advance to all relevant team members so that they are empowered and the information is passed on to customers well in time and their concurrence taken, else there will be a backlash from the customer to the team member and the team member will get demotivated due to lack of information.  in short information / data is king which if provided well on time to team members they will be empowered and happy to note that they are updated and can answer any question confidently       
• Split into small teams - In many situations a task has to be coordinated and executed by a big team, in the team there will be a Manager and under him multiple team members will be assigned to carry out the task.  The team members will always look to instruction or guidance or push from managers to carry on tasks which puts an enormous pressure on the manager as he has the entire team to talk to and ensure they complete the task.  If the manager splits the team into multiple modules or platoons and for each module / platoon make one person a platoon leader he / she gets empowered to lead the small team, plus the manager needs only to interact with the platoon leader and so gets time for strategic decision making and actions.  This model can be successful for a 100 member team or a small 10 member team also.    
• Allow the module / Platoon leader to take decision  - It is always good for a manager to define the task clearly to the module / Platoon leader and also give them clear Standard Operating Procedures (SOPs), limits & guidelines within which they can take a decision for a task.  For example if a module / platoon leader is in-charge for making payments to non-standard vendors like hotel bills, entertainment expenses, car expenses.  These expenses are sensitive subjects and if there is no SOP or guideline or limit the module / platoon leader every time has to refer to the manager for a decision and so acts only as a messenger.  But if the manager gives a clear SOP / guideline / limit as to the grade of employee, the level of expenses etc the module / platoon leader can finalise decision himself / herself and instruct the team appropriately there by being empowered to take decision and also completing the task well on time and thereby saving a lot of manager's time who can use it for other productive purposes 
• Lead from the front - Che Guevara was a doctor by profession but his attraction towards communism and hatred towards America pushed him to join hands with Fidel Castro and fight the Government which was considered a puppet of America in Cuba.  In his first assignment to lead a team of revolutionaries there was quite a lot of hesitancy and doubts in the minds of the revolutionaries as how a medical professional with very little experience in battle fields can lead them, but when they saw Che Guevara fighting from the front lines and simultaneously issuing instructions to the team and at times attending to injured colleagues the team became empowered by their leader and pushed their limits and won the battle which was a first major victory for the revolutionaries.  In very critical tasks it is important that the leader is available upfront for the team to see and feel that they are not alone and their leader is around with them to support them and take care of them.  This will empower the team members to have self belief and confidence to move ahead with the task in hand
• Bottom up Decision making - I am not here to debate top down vs bottom up methods of decision making.  From an empowerment perspective Bottom up decision making works well as the team member / employee feels she / he is one of the decision making authority and that their decision should not go wrong or fail so employee gets empowered to put in additional efforts to ensure that the task is completed.  In this bottom up approach the team member can also share quite a number of ideas and information to his manager which can help expedite completion of a task.  Also a manger finds it easier to implement a decision which originated from a bottom up approach rather than a decision which originated from a top down approach
• Manager's Pat -  A manager's positive words or message on a team members performance goes a long way in empowering an employee and motivates them to carry out their tasks more efficiently and in majority of the cases it has a multiplier effect on their performance.  There may be times when the team members decision or action could have turned out to be bad, if the manager steps in and counsels the team member and corrects them will empower the team member to ensure that they do not repeat the same error and also to carry out the task with more vigor and enthusiasm.  
• Manager should step in -  Manager's delegate task to team members and team members carry on with the task.  If there are any hurdles or any obstacle from any other team member or teams, managers should voluntarily step in and support the team member, which makes the team member feel that there is support for them to carry out the task and hence feel empowered.  This means the managers should practice controlled delegation which ensures that they are aware of the actions of team members and step in whenever a situation to that effect occurs.
• Incentivise on core areas - In an organisation usually for most team members compensation and incentives are tied with organisational goals 100% which in effect means that an employee's individual contribution is not incentivised.  To empower an employee, compensation & incentive should have a small portion (atleast 20%) linked to employee's individual or team's performance.  For example for a logistics team member one criteria for compensation & incentive can be organisation sales achievement say 80%, the balance 20% should be awarded for say "Nil difference between book and physical stock", this will empower the employee to carry on his responsibility of inventory management with full vigor and dedication 
• Finally challenge the team member - This may not work for all team members but will work for team members who are open for challenges.  A manager can challenge an employee to carry out certain task within certain resources and the employee takes this as a challenge and gets empowered to carry on with this challenging task.  For example a difficult customer can be assigned to a sales team or team member with a challenge from the manager, this will empower & motivate the team to push for victory against the difficult customer

Conclusion

Empowerment comes in different models and ways, it can be big or small.   One type of empowerment which works for one team member will not work even for this team member's next seat colleague.  Manager's challenge is to identify the team members caliber and assign them with appropriate empowerment mechanism.

 

Stock market on a high

Record closing of Sensex (52,232 points) & Nifty today despite a RBI warning of bubble in their annual report is surprising.  It is astonishing to see the market participants are taking a bullish view despite high valuations and drop in industrial activities due to Covid.  Maybe the market is factoring in the future - demand pick up after covid.  Which may also be a factor.  The good news due to market boom is that corporates will have more money in their pockets to spend on investments, improve their capacities, invest in R&D.  There are slew of new IPOs planned for next 6 months to 1 year notably among them are Zomato (around Rs.8,250 crores), Paytm (around Rs.22,000 crores), Lava (around Rs.1,400 crores), Delhivery (around Rs.5,000 crores), Bajaj Energy (around Rs.5,450 crores).  Success of these IPOs also rest on a booming stock market which will help build confidence of investors especially retail investors.  More paradox of this stock market rally is that in parallel commodity prices are also increasing especially gold which is at 5 month highs & oil which is almost at 2 year highs.  There seems to be a buoyancy in the system which is difficult to mystify.  

To me this buoyancy of the stock market is propelled by three main reasons.  Firstly interest of retail investors who find stock market returns attractive and tax efficient compared to traditional investment avenues.   Secondly there is a good inflow of FPI money into the markets  which moves the market upwards.  Thirdly pension funds are coming of age in India and there is significant flow of funds into pension funds (Asset under management of NPS crossed Rs.6 lakh crores) and moving up very fast.   

Of the above three reasons first two are a bit fragile and can stop anytime and there can be severe backlash also  This is where the RBI bubble caution comes into play.  

My piece of advise, retail investors do not follow the herd be sensible in investing go for a mix of equity and debt and do not leverage too much on equity as the same is over valued and already at high levels.