jump to navigation

Ukraine .vs. Energy Policy July 22, 2009

Posted by Bipin Agarwal in Future of transporation, Global Economy, Politics and economy.
Tags: , , , ,
add a comment

Energy policy will be increasingly important for every country, starting from OIL producing to OIL consuming countries. Ukraine, is dependent on Russia for its OIL and they have to navigate their policy carefully, and not let US define their policy based on what is important for US.

Bipin Agarwal

Advertisements

SOLAR GOLD rush .vs. Saudi Arabia July 19, 2009

Posted by Bipin Agarwal in Future of transporation, Global Economy, Politics and economy, Real Estate Development in Global Economy, Recession.
Tags: , , , , , ,
5 comments

Decoupling of Oil from world economy article on my blog received overwhelming response from all over the world. Reactions were all over the map from denial to skepticism to curiosity. Mission accomplished, at least the conversation started.

One of interesting question came from a university in UK, inquiring about the impact of OIL decoupling on Saudi Arabia. As we all know there is no other country more synonymous with OIL than Saudi Arabia.

Saudi Arabia current reality
Saudi Arabia is in an interesting position in the context of money, world economy, and politics. US president recently said that middle east peace is the hardest problem to tackle. It is further complicated by the nature of the government and demographic of the country.

Relationship between developed countries and Saudi is based on mutual benefits; OIL is the backbone of developed countries domestic economy, and foreign policy. Saudi is a buyer of lot of defense equipments (defense industry is critical for developed countries) that are of no use for Saudi.  However it seems that US (largest developed country) has a little upper hand because OIL is priced in Dollar. We all know that pricing of the OILis dependent on the relationship between Middle East and US, not demand and supply as lot of economist or people would like to believe. Without the support of developed countries OIL will be trading at dollar twenty a barrel.

How Saudi Arabia can play the game
Saudi Arabia should continue to have strong relationship with developed countries, and generate as much reserve as possible using OIL export. Saudi Arabia needs to pursue aggressive SOLAR strategy as well. From a branding point of view it means, they need to position as an Energy supplier of the world, not an OIL supplier. Some of thoughts are outlined below:

  • It is very important that Saudi Arabia make huge investment in SOLAR energy plants and Technology Company all over the world.
  • They currently have lot of dollar reserve. I would argue that lot of reserve should be directed to building and owning SOLAR energy capacity all over the world. Dollar will eventually lose value and they should not wait.
  • Energy grids, the way electricity is transported, is a critical component of the infrastructure that requires massive investment. This is a huge investment opportunity for Saudi Arabia. Best thing is that this investment will have no resistance from the receiving country. Off course the country has to be friendly, otherwise they can seize the asset. It is a pure investment play.
  • Significant number of countries in the world will welcome Middle East investment if it is meant for SOLAR energy production.
  • Saudi Arabia will reduce it dependence on OIL as the only source of revenue. Remember there will be lot of opposition from the developed countries, because they will lose influence over Saudi Arabia,
  • I think Saudi Arabia should not encourage lot of real estate development in their country. Currently this is a big source wasteful expense.

Summary
Every country will have to adjust to this reality of SOLAR GOLD over time. Middle East countries with significant reserve can take advantage of the SOLAR GOLD opportunity by investing in SOLAR power generation, solar technology company, and infrastructure  for electricity grid.

It is not possible to discuss every country in detail in this article. If you would like to discuss a county of your choice, please send me a note @bagarwal.india@gmail.com

You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask by sending email or writing a comment.

http://www.redhawkinvestments.com

Bipin Agarwal

bipin.agarwal@redhawkinvestments.com

https://twentyminutelifestyle.wordpress.com/abou

De-coupling of OIL from world economy July 9, 2009

Posted by Bipin Agarwal in Future of transporation, Global Economy, IT Offshoring - Future Direction, IT offshoring and Real Estate development, Politics and economy, Quality of Living, Real Estate Development in Global Economy, Real Estate Development in India, Real Estate development in USA, Recession.
Tags: , , , , , ,
4 comments

OIL Power – OIL, the dominant source of energy has impacted the world economy and power struggle among countries for a long time.  The effect has been more visible for last twenty five years. Middle East, Russia, other Oil producing countries have enjoyed unprecedented boost to their economy and foreign reserve  because of high oil prices. We all know that it is not a pure supply and demand dynamics. This game has worked well because there was no other significant sources of energy that was easily and readily available.

Past Effort to Change – There have been lot of attempts to create new sources of energy including nuclear power, wind energy, bio-fuel, and clean coal. All of these efforts have been successful to some extent, but none of them significant enough to change the dynamic of world economy and power status. Lot of that has to be with the economics of the particular method (bio-fuel, clean coal), time it takes to set up the plan and disposal of waste (nuclear), predictability of the energy generation (wind). As a result, none of the method so far have emerged as a challenge to OIL energy.

Off-course like everything else, corporate interest and desire to maintain power status by countries has further compounded this challenge. Both OIL and defense industry (selling arms to protect the supply of OIL sources) has played a significant role in creating hurdles. Politics has played a big role as well. Keeping the OIL price high forces the poor country to spend their significant resources for buying oil, hence limits investment in other areas for productive growth. Further, the market for automobile has been too large for these corporate to let it go easily.

What Has Changed – It is fair question to ask. There is lot of new dynamic from developing countries to developed countries. Growth in the developing countries India and China have changed the market dynamics for Oil consumption. These countries cannot afford to import OIL they need to support the economic development.  Economic development is putting a lot of pressure on the politicians to find alternate source of energy. Developed countries, US and part of Europe have so much debt that they have to figure out a way to reduce OIL consumption. US is suffering the most from OIL dependence. There is lot of domestic pressure in US to end Oil dependence.

Solar, the GAME Changer – We all know that SUN is, as predictable a source of energy as far as humans are capable of visualizing. The capability to harvest this energy on a large scale in a economic way has been a major barrier to solar becoming a challenge to OIL.

Good news is that now we do have a scalable and reasonable economic solution to harvesting solar power.  Significant reason for this change is because we can cost effectively manufacture the devices capable of harvesting this energy as opposed to conventional means of either drilling (oil and gas), digging (coal), or changing the course of rivers (Hydro). Recent decision by US government to review sixty seven thousand acres of land for solar power generation is a further validation of the direction of solar based energy. Large corporation currently own large tract of land to participate in the opportunity, I call it SOLAR GOLD. Gold is not black any more.

Impact on World economy and Power – Every country will feel the impact of this change (SOLAR GOLD) differently. It is not possible to discuss every country in detail in this article, So I will talk about some regions, countries. If you would like to discuss a county of your choice, please send me a note @bagarwal.india@gmail.com

Middle East and Russia, there have been a lot of conversation that OIL at dollar eighty a barrel is what they need. It cost about couple of dollar to produce a barrel of oil. Why do you think world will come to the rescue of Middle east and Russia if Solar is available.  While Russia is better positioned then Middle east because of their defense capability, but that is not good enough.  President OBAMA is playing the card right by going to Russia, putting the arms control pact and engaging Russia for nuclear issues so that defense capability (industry) becomes a  non-issue. These are not well positioned for long term.

China & India – Both countries are heavily dependent on importing Oil and Gas currently. China has been pro-active in securing the oil supply like USA has done for decades. This does change the long term picture. Both countries will resort to using Solar in big way and this position them very well in the long term.  These two countries are currently not dependent on Oil Export for their economic prosperity and it will be huge advantage in the long term.

Other developing and emerging countries – This is a mixed bag. Some of the developing countries have OIL export in combination with other industries (Mexico – OIL and manufacturing). Other countries in this block have lot of domestic economy. It is unlikely that any of these countries will ever become a super power. There will be wide range from being no effect to significant impact for each of the country.

Europe – There is part of Europe that is well developed, West Germany, UK, France, Denmark, etc. then there is part of Europe that is still developing such as Eastern Europe. It is unlikely that any country in Europe will be a Super power in the long term, However Europe as a block (European block) has the potential to be a significant player, that is only if they can stay together which is very unlikely. It is human nature. US, China and for that matter some of the countries within Europe will do everything possible to make sure that Europe is divided and chances are that they will be successful.

USA -It is interesting. USA is a huge importer of OIL but also is superpower. How did that happen? Dollar as a world currency has helped USA more than anybody is willing to admit. Defense capability, other industries such as financial services, technology  helped USA to be the dominant world power. Immigration policy of USA to attract the brightest from all over world has played a key role. USA is also taking big steps to reduce dependence on the OIL. USA is pushing for electric car as a transport mechanism and pushing Solar to produce bulk of its electricity. Since all this is being done in the private sector with government incentives, USA is moving at a fast pace to maintain the Superpower status.

Summary

Every country will have to adjust to this reality of SOLAR GOLD over time. If you are a  country that is largely dependent on Oil export only, there is lot of work cut out for you.  Country currently importing huge amount  of Oil (USA, lot of European, developing countries), there is a significant opportunity for you to position yourself for success. It will require a focused effort, a combination of policy, investment, and incentives both in the area of energy production, education, and infrastructure.  A country with a population base (critical mass) will have an inherent advantage (USA, China, India) to play in the super power league.

You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask.

http://www.redhawkinvestments.com

Bipin Agarwal

bipin.agarwal@redhawkinvestments.com

https://twentyminutelifestyle.wordpress.com/abou

Future economy .vs. Bill Gross, George Soros, and Nouriel Roubini June 22, 2009

Posted by Bipin Agarwal in Future of transporation, Global Economy, Politics and economy, Recession.
Tags: , , , ,
3 comments

Everybody who has any interest in economy, market, recession, recovery from financial meltdown, probably have either heard or read about these three people;

  1. Bill Gross (Bond king, PIMCO)
  2. George Soros (philanthropist, and ex. Hedge fund trader)
  3. Nouriel Roubini (Dr. doom, NYU economic professor)

If you are thinking, that these three ultra smart people will have similar views and thinking about the current and  future state of economy, You are dead wrong. Alan Greenspan, ex. Fed chairman is also very influential, who can move the market but you cannot count on making your economic strategy dependent on him, because he is a paid consultant and he is paid by the likes of PIMCO, UK government, political think tanks, etc. Let me first give you a little background of the above three people, on their incentive, and interest which I believe have hugely effected their views.

Bill Gross: This Sunday June 21st there was front page write up on Bill Gross in New York Times. Article outlined clearly that his view are more reflective of how he is going to make big money based on his partnership and connection with US government.  If it is good for him, that is what counts.  He is a fund manager and trader. He is a strong supporter of PPIP (Public-private investment program), because that is how he and his funds will make billions in fees and his investors may do well.

George Soros: Last week George Soros wrote in Financial Times that worst of the recession is behind us. Government should continue to do more in the form of stimulus until credit market is liquid, after that, they need to figure out as how to get out of the market and work on reducing their debt. Market are not efficient, his theory of reflexivity (or his fixation with the theory) drives his views. He is a big supporter of OBAMA administration. His life experiences are definitely inspiring. He spends more of his personal time on Philanthropy, and world cause. His most recent gift to Eastern Europe of 100 million dollars  to deal with economy is most recent example of giving.

Nouriel Roubini: Dr. Doom as he is now known in the world is a economic professor.  He is famous, is making lot of money by consulting, publishing research paper, etc. In the current economic environment, where People are fearful, will pay you a lot of money if they think you have a solution. The fact is, he has no solution, He only has suggestion to government that will not listen to him any way. He is in a safe zone. He is covered. If economy turns out to be his way, he is covered. If economy gets better I do not think people will ask him question and in any case, he will take the credit.

Conclusion & summary: After reading the overview I provided above, and off-course you should read more about them, you cannot formulate any definite point of view of the future economy.  But unfortunately, these are the guys who make headlines on Financial Times, New York times, CNBC, Bloomberg, Yahoo news, etc.  It is possible that you can make money by investing with Bill Gross, and his funds, You certainly do not want to buy expensive research form Roubini, that will make you only poor and no better insight then you already may have. George Soros is interesting. He is optimistic and making some good obvious suggestion to government.

I personally think that lot of the pain about residential real estate we had to go through is behind us. We still need to realize the full extent of losses for commercial real estate, credit card portfolio loss.  It is possible that the loans sitting on the balance sheet of financial institutions are still overvalued, so what? these loans will be written down over time when they mature or people decide to sell their house or foreclose. There could be another couple of hundred billions in write-off by financial and non-financial institutions, however that will not impact the economy much. Biggest unknown right now is, the USA government deficit financing and how it will impact the USA domestic and worldwide economy. Unfortunately, you one can not predict the economic outlook for short or medium term (up to 10 years) based on economic fundamentals only, economy is hugely effected by the political events and strategy. In the long run,  it is more important to know, who will come out as a winner once the dust settles down.  USA, China, Mexico, Germany, India, Africa, and Brazil are well positioned for long term overall economy. However it will not be a smooth ride. Hold your rope tight.

You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask.

http://www.redhawkinvestments.com

Bipin Agarwal

bipin.agarwal@redhawkinvestments.com

https://twentyminutelifestyle.wordpress.com/abou

Investment outlook for next twenty years May 22, 2009

Posted by Bipin Agarwal in Future of transporation, Global Economy, Politics and economy, Quality of Living, Real Estate Development in Global Economy, Real Estate Development in India, Real Estate development in USA, Recession.
add a comment

Where to invest? This is an age old question, answer to the question changes with time depending on the political environment, social and economic environment, and individual circumstance. Current political, economic  environment and social value system (individaul .vs. family) could not give more confusing, and conflicting messages.

Economic and Political Environment – Debt rating of so called rich countries are on credit watch with negative outlook. Recently UK was put on negative watch by S&P, US is next an dso are so many other countries.  China is focused on domestic spending, export monopoly, political turmoil, and desire to be on the top in next twenty years. Record number of war conflicts, from Iraq, Africa, to Asia, along with growing number of business bankruptcies, government sponsored stimulus adds further complexity to the decision of future of investments.

Investment Environment – There is lot of confusion about the area of investment. Everybody I talk to seems to be confused where to invest. Gold, real estate, retail, commodity, transporation, stock, bond, fixed deposit, or just cash?. Future economic environment will  be inflation, or deflation, or stagflation? There is no one answer that applies to every investment decision. It depends on your particular situation, net worth, objectives, lifestyle, risk appetite?.

This write-up is not a wealth management planning guide. Primary focus of this article is to outline the macro level investment opportunity for people who can take long term view of their investment and are looking for investment return much higher then, offered by fixed deposit and have the risk appetite. Again specific decision will have to take into account the political and financial system of the country.  Best way to decide about the macro ares of investments is to somewhat ignore all this confusion, and focus on fundamental needs of life. People need a place to live, they need to eat and also they need to move.  Somebody asked me, what about clothes, well this is not a future growth industry because of level of automation and consolidation that has happened in this industry. The three macro area of investing are:

  1. Real Estate
  2. Food
  3. Transportation

Real Estate – Real estate investing is not about just building the house and offices and expecting them to sell. After all, real estate valution is the cause of  the current economic issues. This has been the case across all the countries including developed, developing, and poor.  Key driver for real estate moving forward will be affordability.  Population is growing and will cross 7 billion by 2013. From cost and maintenance point of view it is impossible to build single family home (large or small) spread over large land.  Recent effort by TATA in India to build a small home for bottom 30% of the population for a cost of 10,000 dollars is a good step in the direction. However, key failure in this scheme is that every house is sitting on a land and there is no vertical construction. Another encouraging trend across the world is about apartment/condo living. This makes effective use of land and also offers lower maintenance cost. There are other effort such as what China is doing in building concentrated community (business and residents together), Eco-friendly community effort at different places, and ‘Twenty-Minute Lifestyle’ effort by REDHAWK investments.

Food – This is a tricky one. You may be thinking, what is wrong with me? Everybody needs  food, this is a obvious opportunity, what is so tricky about it. Well, size of this opportunity is dependent on the eating habits of the people. Most logical one, veg .vs. non-veg. We all know it takes five to six times of more raw food and water to feed a non-veg eater.  There is one exception when people eat fish. They are naturally grown and lot of people in Europe will not consider them non-veg.  In spite of the above debate, this opportunity is going to grow. Agriculture will be a large part of opportunity. We should expect that per capita spending on food will go up because of the limited fertile land that is available.  What Korea, and some other countries are trying to do by leasing large part of fertile land is because of two reason, 1) fear, to make sure food is available for their population. 2) future business opportunity.

Transportation – It is a human nature to move around.  People move  in search of better life, opportunity, curisity, and pleasure. Globalization, and disaprity in the wealth of rich and poor has further intensidied the desire to move. Migration from village to city, from city to bigger city, across the country, movement withing the city and across city, all requires some form of transportation, personal or public. Infratructure spending for transportation will surpass any other organized spending by government and people.  Given that government have limited resources, we will see increasing investment opportunity in the area of transportaion infrastructre by building road, rail link, airport and trasnporation serives.

Summary – Investment opportunity for future should not be confused with the wealth management.  There are lot of corporations that can give you wealth mangement advise based on your personal situation. This write-up is fcoused on business making investment decision and people investing in these business to create wealth. By definition, Investment should not be short term focused. Ability or need to create liquidity is a key data point while making investment decision.

You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask.

http://www.redhawkinvestments.com

Bipin Agarwal

bipin.agarwal@redhawkinvestments.com

https://twentyminutelifestyle.wordpress.com/about