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Thursday, November 17, 2011

Experimenting with new ways to make money!!

Outside a broad downright rots the laughing luxury.

That's just a random quote that you don't have to worry about right now. I really am looking at businesses that are over-head free that will generate some passive income for me. If you guys have any suggestions, please do let me know..

Hey guys! sorry I haven't posted anything up lately. Been really busy with work and doing a lot of networking. I thought you'd like to see a sample of the creative ways I've come up with to land a dream job so I started off this post with a video of me on YouTube. And guess what I am going to go ahead and try to make money off YouTube. I am always in it for the money. It's why I created this blog in the first place. There is no overhead involved at all and moreover I could rant and rave about stuff that I am passionate about.
But getting back to networking which I started this post off with, I wanted to share some tips and also hopefully give you some insights about what I have been learning from really networking like a ninja.  
So basically I continue to network regardless of the fact that I have a job because I am looking at meeting potential business partners and actually meeting new friends. More than just the whole idea of getting access to different people by expanding your social circle, I for one enjoy the whole idea of talking to different people. It is really enjoyable!
As for the tips, I have actually been mastering the principles in Dale Carnegie's perennial classic "How to Win Friends and Influence People". I think that book really is for real and is totally what you need for your mind and in adapting your mental approach to be a winner no matter what.
By the way, I realized this summer after reading Ramit Sethi's blog and watching him on the TV shows on ABC, CBS, etc that perfection is seriously for losers. If you mess up, don't worry about it. You gotta go about it like a jock. So anyway these are some of the tips:

  • Arouse enthusiasm among the people you talk to. This is done by finding out about who they are what they are PASSIONATE about. Read up on these topics even if you absolutely hate it so as to win their favor. This will go a long way into getting them to like you which is really what you need at the end of the day. 

  • Become a better conversationalist by actually keeping quiet and listening in earnest. 

  • Find an excuse to keep in touch with someone from time to time. I think the best would be once a month but this really depends. I have a professor that I keep in touch with once in three months. At the same time, the supervisor of my previous job and I communicate very frequently and even do it two to three times a week. 

  • One thing to really keep in mind is to maintain a win-win situation at all times. People are more bothered about a toothache they have than an earthquake that might have killed a thousand people. Basically, remember that a person's wants and concerns trump any of your own wants and concerns. 
So I promise you that I will post more often from now on. By the way check out my blog on investment banking

Wednesday, October 12, 2011

Russia initiated its transition path with shock therapy, as did Poland, which has produced the most successful of the Soviet bloc economic transitions. However, Russia’s initial economic conditions and implementation of reforms were very different from Poland’s. In Russia, the necessity of shock therapy came from the pressing need to overturn economic collapse by bringing in market forces and to strengthen the political power of then President Yeltsin.[1]
China's transformation was gradual. In 1978, the Chinese Communist Party leadership committed the nation to gradualist market-oriented reforms. There was an opening up of the economy to the outside world.[2]
In 1989, the first post-Communist Polish government undertook an economic transition rapidly through big bang or shock therapy policy. Known as the Balcerowicz Plan, after then Finance Minister Leszek Balcerowicz, Poland’s market transition was implemented in January 1990.[3]
During the 1992–1994 period of price liberalization, mass privatization, foreign trade liberalization, and the introduction of full convertibility of the ruble, Russia abolished the last vestiges of a planned economy.[4] In early 1992, small shops and restaurants privatized. There were two tracks: one for the insiders, one for the public at large. Each citizen was then issued a voucher worth his or her proportional share. Voucher program was announced on August 18, 1992 and 10,000 ruble vouchers, approximately $25 issued. Hundreds of voucher funds, essentially Ponzi pyramids, were created by 1994; half of them collapsed. 25 million shares lost through voucher funds. 37 million sold for cash and exchanged for food, etc.[5]
The State retained full ownership of some enterprises like electricity and owned large shares of others. Large shares did not mean a significant role in management. In addition to dramatic privatization schemes, Yeltsin rid the country of the Communist Party’s rule, the step that Gorbachev shied away from, and finished off the remnants of the command economic system.[6] In terms of international trade, there were market-determined consumer price restrictions on imports and currency conversion. In 1990, an outline of a strategy of step-by-step movement to market was made out in the G7 summit.[7]
On the other hand, the Polish plan called for instantaneous decontrol of most prices, devaluation and then pegging of the Polish currency (zloty) to the U.S. dollar, elimination of all foreign exchange controls and legalization of all types of private enterprise. The plan also called for privatization of State Owned Enterprises, but privatization was not entirely put into operation because a political backlash surfaced that slowed the program down.[8]
With the move to free markets after 1989, privatization of state farms followed and was almost complete by 1994, with leasing as the main method but with restrictions on foreign purchases of real estate still in place.[9] There was an increase in exports to the EU, led by manufactured goods such as chemicals, steel, and transportation equipment, which continued into 1991. There was also resistance to privatization due to fear of unemployment and a fear of foreign buyers, especially Germans, gaining control of the holding companies and thus of the assets of the economy as a whole at low prices. Polish privatization has by and large been reasonably gradual and varied. After the early drastic change and shock therapy, Poland has become the model of evolutionary gradualism in privatization.[10] [11]
The Chinese gradual transition started with the agricultural reforms introduced in 1978 which included the acknowledgement of property rights and of production teams’ adherence to the principle of “to each according to his work”. There was then a restoration of the right to private plots and respect for household boundaries. Furthermore, allowance of free-market rural bazaars followed and there were more state purchases of agricultural products together with price increases for these goods.[12]
In 1999 the private sector was recognized as legitimate in the constitution, and in 2000 an agreement was reached for China to join the World Trade Organization, which it did in 2001.[13]
With Dengist marketization came greater income inequality, but there were some countertrends. The overall Gini coefficient for urban income in 1981 was a highly egalitarian 0.16.  This inequality decreased during 1979–1984 when rural incomes rose sharply.[14] The striking development of the 1990s in China was that income inequality increased rapidly. In urban areas, the Gini coefficient rose from 0.23 in 1988 to 0.28 in 1995. Whereas, in rural areas it rose from 0.301 in 1988 to 0.340 in 1995, and overall nationally it rose from 0.338 in 1988 to 0.429 in 1995.[15]
Unemployment rates were low in China, although it has substantial disguised unemployment. Economic growth focused on local government-owned Township and Village Enterprises and on coastal Special Economic Zones where direct foreign investment was encouraged through loosened rules.[16] From 1980-1990, GDP growth was 10.1 percent and from 1990-1998 it increased to 11.1 percent. From 1980-1990, inflation was 10.1 percent and then it fell to 8.60 percent from 1990-2000.[17] [18]
For Russia, 10 years of negative economic growth resulted in the halving of GDP. At the same time, inequality doubled as measured by the gini coefficient. Severe economic instability and hyperinflation triggered massive capital flight, which ranged from $10 to $40 billion in 1992, according to various estimates, reached $80 billion by 1998, and continued at the rate of $20 billion per year through 2001. Shock therapy failed to produce viable entrepreneurs and was pronounced to be harmful because of the spiraling inflation.[19]
In 1993, China had the world’s highest economic growth rate and Poland had Europe’s highest. Taking all factors into consideration, Poland has been one of the most successful of the transition economies.
Poland’s transition experience demonstrates both the peril and the promise of a shock therapy approach. Output fell sharply and a considerable increase in unemployment followed, leveling off in late 1993 at around 16 percent. Furthermore, a rapid rise in price levels due to triple-digit inflation took place. Then it was down to about 1 percent by the early 2003. The Gini coefficient rose from .28 in 1989 to .34 in 1998.[20]
Unemployment continues to be a predicament, having crept back up above 10 percent after temporarily falling below that level in 1998.[21]
In 1993, Poland had the highest economic growth rate in all of Europe at around 4 percent. This occurred in the mid to late 1990s with even higher growth rates. However, Poland’s growth started from a very low base after the economy’s preliminary decline. It also slowed considerably after 2000 and it was a little less than 1 percent at the beginning of 2003. Poland’s growth in the 1990s was led by strong export performance because of complete currency convertibility at a credible rate. The majority of the growth happened in a speedily growing private sector based on native Polish entrepreneurship, in spite of the slowness of privatizing existing State Owned Enterprises.[22]

[1] The Economist, “Russia, the Sixth Wave” (December 5, 1992).
[2] Selden, The Political Economy of Chinese Development, p. 157. See also Kai-yuen Tsui, “Decomposition of China’s Regional Inequalities,” Journal of Comparative Economics 17 (1993): 600–627.
[3] Leszek Balcerowicz, Reforma Gospodardarcza. Propzycje, tendencie, kierunki dyskusji (Government Reforms:
Proposals, Tendencies, and Brief Discussion) (Warsaw: PWE, 1981), pp. 279–373.
[4] World Bank, From Plan to Market, pp. 36–37.
[5] M. Boycko,A. Shleifer, and R.Vishny, Privatizing Russia (Cambridge, Mass.: MITPress, 1995), pp. 86–87.
[6] Berkowitz, Daniel, and David N. De Jong. “Policy Reform and Growth in Post-Soviet Russia.” European
Economic Review 47 (2003): 337–352.
[7] Natalia Tabatchnaia-Tamirisa, “Trade Liberalization and Industry Protection in Russia during 1992–1995,”
Hitotsubashi Journal of Economics 38 (1997): 84. See also Simeon Djankov and Caroline Freund. “New Borders:
Evidence from the Former Soviet Union.” Weltwirtschaftiches Archiv 138 (2002): 493–508.
[8] Mark E. Schaffer, “The Polish State-Owned Enterprise Sector and the Recession in 1990,” Comparative
Economic Studies 34 (1992): 58–87.
[9] Ben Slay, “The Polish Economic Transition: Outcome and Lessons,” Communist and Post-Communist Studies
33 (2000): 65; OECD Economic Surveys: Poland, January 2000 (Paris: Organization for Economic Cooperation
and Development, 2000), pp. 50, 176; Darla Munroe, “Economic Efficiency in Polish Peasant Farming,”
Regional Studies 35 (2001): 461–480.
[10] Grzegorz Kolodko and D. Mario Nuti, “The Polish Alternative: Old Myths, Hard Facts and New Strategies
in the Successful Transformation of the Polish Economy,” Research for Action 33 (Helsinki: UNU/WIDER,
[11] Christine A. Bogdanowicz-
Bindert and Jan Czekaj, “Poland: A Privatisation Model That Works,” in S. Faulkner, J. McLoughin, and
S. Owsiak, eds., Polish Transition Ten Years On—Processes and Perspectives (Aldershot, U.K.: Ashgate, 1999),
pp. 78–118.
[12] Cao, Yuan Zheng, Gang Fen, and Wing Thye Woo. “Chinese Economic Reforms: Past Successes and Future
Challenges.” InWing ThyeWoo, Stephen Parker, and Jeffrey D. Sachs, eds., Economies in Transition: Comparing
Asia and Europe. Cambridge, Mass.: MIT Press, 1999: pp. 19–39.
[13] Naughton, Barry. “China’s Emergence and Prospects as a Trading Nation.” Brookings Papers on Economic
Activity (2) (1996): 273–344.
[14] Aizur Rahman Khan and Carl Riskin, Inequality and Poverty in China in the Age of Globalization [New York: Oxford University Press, 2001], p. 48). See also Long Gen Ying, “China’s Changing Regional Disparities during the Reform period,” Economic Geography 75 (1999): 59–70.
[15] Zhao Renwei, “Increasing Income Inequality and its Causes in China,” The Chinese Economy 33(4) (2000): 11.
Per capita GDP levels in 1966 are in U.S. dollars from Alvin Rabushka, The New China: Comparative
Economic Development in Mainland China, Taiwan, and Hong Kong (Boulder, Colo.: Westview Press, 1987),pp. 206, 217, and 226.
[16]  (Shujie Yao, “Economic Development and Poverty Reduction in China over 20 Years of Reform,” Economic Development and Cultural Change 48 [2000]: 451).
[17] GDP growth rates and CPI inflation rates for 1970–1980 and 1980–1990 are from Asian
Development Bank, Asian Development Outlook (Hong Kong: Oxford University Press, 1992), pp. 288 and 296.
GDP growth rates for 1990–1998 are from John Wong and Lee Ding, China’s Economy into the New Century:
Structural Issues and Problems (Singapore: World Scientific, 2002), p. 275.
[18] Inflation rates for 1990–2000 are
from The U.N. Human Development Report, 2002 (New York: Oxford University Press, 2002), pp. 190–191
[19] Evgeny Gavrilenkov, “Permanent Crisis in Russia: Selected Problems of Macroeconomic Performance,”
Hitotsubashi Journal of Economics 40 (1999): 53.
[20] OECD Economic Surveys: Poland [Paris: Organization for Economic Cooperation and Development,
1992], p. 86. Also, see Mark E. Schaffer, “The Polish State-Owned Enterprise Sector and the Recession in 1990,” Comparative
Economic Studies 34 (1992): 58–87.
[21]for unemployment in Poland for 1997–1999 from OECD Economic Surveys: Poland January 2000 (Paris: Organization for Economic Cooperation and Development, 2000), p. 31
[22] Marie Lavigne, The Economics of Transition:
From Socialist Economy to Market Economy, 2nd ed. (NewYork: St. Martin’s Press, 1999), pp. 284–286; for output
and inflation in all countries for 1997–1999 from World Economic Outlook 2000: Focus on Transition Economies
(Washington, D.C.: International Monetary Fund, 2000), pp. 203, 215.

Tuesday, September 20, 2011

Microsoft Excel

I have been doing a lot of research how proficient I should be on Excel to be offered a full time opportunity in investment banking. I have noticed that I tend to forget a lot of the shortcuts and the commands that are tested sometimes in an interview.
From reading about what other investment banking analysts have to say, I am pretty sure that networking and making people like you might be a better investment of your time rather than mastering everything you can know about Excel.

Thursday, September 8, 2011

NFL Opening Night!

Well, it is back to football! I am very pleased and cannot put in words my excitement of having something to look forward to in the weekend and especially on Mondays.

I used to be a big basketball fan, but it was only last year that I realized what a fantastic game football really is. It has the right amount of scoring and involves a lot of strategy and different personalities and positions of players that just makes it trump all the other sports.

I want to leave you with a link to a video below. It is my favorite America's Game episode and it features the 1998 Minnesota Vikings.

Sunday, July 31, 2011

Differences in saving rates

Consider two countries that are equal in every respect but have different saving rate. The country with the higher saving rates accumulates more capital and therefore converges to an higher level of capital stock and output per worker.

This prediction of the model seems roughly consistent with the empirical evidence that emerges from looking at a cross section of countries. Statistics suggest that high investment rates are associated with high level of GDP per capita. But does the picture really tells us that if Gambia increases its saving rate from 5% to 10% this will lead to a doubling of GDP per capita in Gambia? We will go back to this point later. For now keep in mind that this relation has motivated many policy choices.

The Stalin 5 years plans in the thirties were basically based on this theory and a lot of programs in developing countries in the 60s had as a main goal the increase in saving (even forced saving though taxes) to increase capital stock and achieve a higher output per worker. Even more recently the IMF has stated that "To achieve gains in real per capita GDP an expansion in private saving and investment is key".

The Golden rule of saving

An interesting question is whether higher saving, even if it always yields higher levels of steady state income, always yields higher steady state consumption. The answer is no and the intuition comes from the fact that returns to capital are decreasing.
Increasing my saving by 5% always reduces my consumption by 5% but the benefit it will bring in terms of future consumption depend on the returns to capital. If I have little capital returns to capital are high and my consumption will eventually increase.

If I have a lot of capital returns to capital are low, the benefits of additional saving are low and consumption might actually decline. The steady state level of consumption depends on the saving rate. It reaches a maximum at the point in which the marginal product of capital is equal to the depreciation rate. This saving for which the maximum consumption is achieved is called the “golden rule" of saving.

But if savings and investment is so important why do some countries (for example the African countries) fail to realize that and do not save and invest? So far we've been treating savings as an exogenous variable and so we are not really equipped to answer this question. A first simple theory of saving rates might be based on basic needs: some countries do not save simply because they are too poor to save. Suppose that when people have very low income they need all their income to satisfy their basic needs (like food) and thus their saving rate is 0 (They consume all their income).

When income reaches a basic level people start saving and save a constant fraction of their income as in the previous example. Also assume that this rate is the same across countries.

The model will display two steady states. Notice that the one steady state (the one with low capital) is unstable in the sense that if capital is above it , it will move toward the higher capital steady state but if a country starts with a capital below that level that country will converge toward a level of 0 capital stock. The situation depicted is called a poverty trap. Countries that start with a level of capital stock that is very low will never take off. Notice that here we have reversed the causality: it is not that countries are poor because they don't save but they do not save because they are poor.

The poverty trap model has been the rational for the kind of policy denominated big push, that is a massive investment from abroad that is able to raise the capital stock just above the first steady state so convergence to the higher steady state can happen. The big problem with this theory has been that even though these type of big push policies have been tried repeatedly (from Zambia in the 60s to Cambodia or Lithuania in the 1990s) they do not seem to have generated sustained growth. For example in the period 1960-1988 of 87 developing countries (income per capita below US$ 5000) 47 of them have failed to even improve their standard of living. So why are some countries unable to takeoff even with massive foreign aid?

Thursday, July 28, 2011

SAS (software)

This software is an integrated system of software products provided by SAS Institute Inc. that enables programmers to perform data entry, retrieval, management, and mining, report writing and graphics. It is very useful in providing statistical analysis for business planning, forecasting, and decision support. Additionally, I see it widely used in operations research and project management.

Recently I have been looking into preparation for the SAS base and advanced exams and also whether it is worth getting the qualification. 

I have been hearing that the exams are really easy, if you have used SAS at all in a real environment. The biggest areas to study are DATA [especially the different input FORMATs] and MERGE for the Base one.PROC SQL, and Macros for the Advanced one. As far as books are concerned, Burlew's "SAS Macro Programming Made Easy " seems to be good buy and so is Cody's books.

SAS seems to be having great potential in India. From what I have been researching, business analytics in India is in  a growth stage and now is the right time enter this field. In New Delhi,there are 2-3 good Institutes which provide training for BASE & Advance SAS.

There seems to be some study material for both Base and Advanced SAS exam here:

The key point I think is, after you passed the exam, you still need a lot of practice to really understand SAS programming. As always, no shortcut to become an expert!                      

Sunday, July 24, 2011

Money, inflation and interest rates

What is money?
A standard way to begin a discussion about money is to try to define what it is. This is somewhat difficult to do because historically many things have been used as money - shells, beads, cigarettes, pieces of paper. What characteristics make any of these suitable as a form of money? 

One way to think about this is to define money in terms of the services it provides. Money is an asset. An asset is something that serves as a store of value, that is something that can transfer purchasing power from today to the future. Notice that money might not be the best way to store value (cash for example is money and does not pay interest and loses value because of inflation). But, lots of things, stocks, bonds, real estate, can and do fulfill that function. Money is really quite different from other assets because it provides
another important service - it serves as a medium of exchange. The medium of exchange role implies that it is freely exchanged for goods and services and it has wide acceptance and (generally) well understood value; in other words money can be used to make transactions. Another service that money provides is that it serves as
a unit of account. The role of unit of account means that when we talk about the value of other assets or consumption goods we use monetary units as a standard way of denominating them. The unit of account means also means that money is the good we use to measure prices, that is we define the concept of price of an object as the number of units of money that are required to purchase that object. This is important to recognize as when we think about inflation, that is how price level change, we have to think about how the stock of money changes. The fundamental prerequisite for functions 1,2 and 3 is that money has to have current and future value.
After outlining its functions we can then state that money is the stock of assets that can be used to make transactions (stock of liquid assets). How does money come into being and why are people willing to accept some forms of money? Or in other words where does the value we attach to money come from? We know that different forms of money have evolved naturally in many societies. One example that is often cited is that cigarettes became used as a form of money in POW camps during World War II. They are also often used as a form of money in U.S. prisons. What problems does the existence of an accepted form of money solve? The easiest way to understand this is to imagine a simple economy in which individuals all specialize in the production of a single good. Some grow wheat, some harvest wood, some raise chickens and some educate the young. Specialization, as we learned studying international trade, is efficient but how do educators and wood harvesters get to eat? how food producers get wood and educate their young?. People benefit from
transacting with one another. But if this were a pure barter world, then transactions could only take place when we found someone who offered in trade something we desire and who desired that which we produce. This is called the double coincidence of wants. The point is that transacting in such a world would be very inefficient.
Suppose, instead that there were some accepted medium of exchange. It need not be anything with intrinsic value. It could be stones of a certain size and shape, or pieces of paper embossed with a picture of long dead politicians. All that is required is that everyone agree that it is the medium of exchange and agree on its relative
value. In this world, educators could now exchange education services for money and use the money to purchase wheat and wood without worrying about whether the producers of wheat and woods that he encountered had any need for education services. The acceptance of a medium of exchange thus facilitates transactions in the society because it removes an important impediment to economic activity. As money
plays an important role in society it is important that its supply keeps up with the growth of the society. But who decides what is money?
There can be two main types of money: Commodity money and Fiat Money. Commodity money is a form of money that also has intrinsic value (for example gold coins or cigarettes): everything can be commodity money as long as it is accepted: for example candies sometimes are given as change: this is the case of commodity money. Fiat Money is a form of money that has no intrinsic value (for example dollar bills). Fiat money is declared money by some institution. Commodity money was the only form of money that was used on the world until fairly recent times. Now most countries use Fiat Money even though some countries are still -de facto- using commodity money systems. The main advantage of commodity money (for example gold) is that its value is guaranteed from the fact that people use gold for a variety of reasons (jewelry, industrial use etc.) and so it does not require a social convention.
The main disadvantage of commodity money is that its supply cannot be controlled easily. For example when gold was the only form of money, shortages of gold or big gold discoveries affected the quantity of money. Fiat money (Let it be money) on the other hand does not have intrinsic value (it is useless) and all its value comes from social acceptance, from the diffused belief that money will be used and accepted in
the future. The quantity of Fiat money can be controlled easily and cheaply, since mostly it consists of pieces of paper. The fact that Fiat money can be controlled by the issuer might be an advantage and a disadvantage. If the issuer is trustworthy (like for example the Federal Reserve Bank) having control over the money supply is a good thing because it can be used to achieve price stability. If on the other hand the issuer is not very trustworthy (like the Argentinian Central Bank in the '80s ) then control is a bad thing because it allows the government to use money creation to finance all sort of expenditures and this leads to price instability, to large unexpected wealth transfers and, in extreme cases, to the collapse of the exchange system (we
will discuss more about this later).