Kerala floods, a man-made disaster

In late July 2018, severe flooding affected Kerala due to unusually high rainfall during the monsoon season. Kerala's worst floods in nearly a century affected all 14 districts placed on high alert. Report as on 21 Aug 2018 ... No. of Villages Affected:776 | Population Affected:54,11,712 | Lives lost: 373 | Missing: 32 | Evacuated:2,80,679 (7,500 in last 24 Hrs) | Relief Camps:5,645 | Inmates in Relief Camps: 12,47,496. The flooding has affected hundreds of villages, destroyed about 10,000 km of roads and thousands of homes have been damaged or destroyed. The total loss is estimated at about ₹20,000 crores.

• The rainfall on Aug 8, 2018 was 310 mm. Kerala has 41 rivers flowing into the Arabian Sea, and 80 of its dams are now said to be open after being overwhelmed.
• The overflow gates of the Idukki Dam were opened after a gap of 26 years. For the first time in history all five overflow gates of the Idukki Dam were opened. For the first time in the state's history, 35 of its 42 dams have been opened, flooding local low-lying areas.
• Around 42 teams from the Indian Army and the Navy, along with over 20 helicopters and hundreds of boats, were involved in rescue operations across the state. The Coast Guard is working in 28 locations and the National Disaster Response Force (NDRF) has deployed 39 teams so far. The NDRF has rescued over 4,000 people, while the Navy has rescued 550. 
• As all the districts in the state have been affected by flood, there have been demands to declare it a "national calamity" but the centre has declared the floods a “calamity of severe nature.”
• Heavy rains have caused severe landslides and have left the hilly districts isolated. Between June 1, 2018 and August 17, 2018, Kerala received 2226 mm rain fall against normal of 1620 mm i.e. 41% excess.
• Kerala state government has sought a special package of ₹2,600 crore for relief and rehabilitation. While HM Rajnath Singh has announced immediate relief of ₹100 crores during his aerial survey, PM Modi in his aerial survey has announced additional ₹500 crores. Very meager by any standards.

  

• UAE, where thousands of expatriates from Kerala work, has promised assistance to ₹700 crore, which is rejected by centre citing UPA policy of 2004. The Thailand’s offer of assistance and aid was also rejected. This international disaster relief policy is only limited to foreign governments with conditional aids. Since 2004, India has refused relief aid from Russia, United States and Japan for disasters across Uttarakhand and Kashmir.
• On August 15, Cochin International Airport, India's fourth busiest airport suspended all operations until 26 August, following runway flooding.
• Over 80% of the state has been cut off from power supply. Schools in all 14 districts of Kerala have been closed and some districts have banned tourists, citing safety concerns.
• More than 300 boats are also involved in rescue operations.
• Life and general insurance companies expect deluge of claims of about ₹500 crores, it is less than 3% of the total loss.
• Insurers are also expect big claim for Kochi airport, which has an insurance cover of ₹2,500 crore. (Claims from the 2015 Chennai floods were over ₹5,000 crore, followed by the Mumbai floods of 2005 over ₹4,000 crore and the J&K and Uttarakhand floods, at about ₹2,000 crore each).
• The Western Ghats Ecology Expert Panel (WGEEP), also known as the Gadgil Committee, headed by Madhav Gadgil, had suggested that 140,000 kilometres of the Western Ghats be classified in three zones and recommended strong restrictions on mining, quarrying, use of land for non forest purposes, construction of high rises etc. The report submitted in 2011 was rejected by the Kerala government and none of its recommendations were adopted. Madhav Gadgil says that the recent floods and landslides in Kerala was a "man-made calamity" and irresponsible environmental policy is to be blamed for. 
• There were allegations that the shutters of 34 dams were opened in one go. The unplanned opening of sluice gates of the several dams caused most submergence. CM Vijayan stated that Idamalayar and Idukki dams were opened after proper inspection and deliberation with officials. Vijayan said “Nobody could’ve foreseen this but still warnings were given and evacuations were done, but torrential rains were beyond any control."
• Kesari, a weekly affiliated with RSS published an editorial on its website criticising the central government appeared to be acting vengefully towards Kerala and was not responding with the political decency shown by Vijayan. Later it was taken off claiming its website was hacked.
• Kerala's flood relief fund drive is getting overwhelming response from all kind hearts across the world and donations have crossed ₹309 Crore on Aug 22, 2018.
• As people left camps, many found mud and slush up to six feet level in front of their houses. All possessions have been lost, and people have to start afresh in obtaining their books, certificates, Aadhaar card, ration card etc. More important is the drinking water, electricity supply, managing contagious diseases etc.

There is no question that Kerala floods was a man-made disaster and is a result of ecological destruction and lack of protocols and weather forecasting algorithms to manage this type of calamities. While its occurrence could not have been avoided, its impact on life & properties could have been contained. Modi government rejecting unconditional cash aid of ₹700 crores from UAE & significant aid from Thailand willingness and granting meager amounts for relief operations has sent a very wrong message to the people of opposition ruled states. Modi has violated most of the UPA policies and why he preferred to follow this particular policy remains unexplained. For Visakhapatnam 2014 Hudhud cyclone damages, Modi announced ₹1000 crores aid but paid only ₹750 crores. During 2017 Bihar floods, against a request for ₹7,600 crore, the Centre had given ₹1700 crore, including the ₹500 crore initial relief given to the state. Keeping aside Centre-State politics, the government should gracefully accept the assistance for Kerala and junk the 2004 policy or precedent.

What to do with your money right now?

If you are just retired and with plenty of cash, retirement benefits, naturally you will have a dilemma what do with the money safely with maximum returns, liquidity and with minimum income tax liability. While equities and mutual funds seems to get you good returns, never go by television recommendations unless you have in depth knowledge of what you are set up to do.

• Never lose money. Focus on capital preservation strategies.
• Remember, risk exists every where. 
• Spread your money across asset classes; debts, equities, mutual funds, real estate and gold. 
• Retain certain amount of cash both at home and in bank to manage unforeseen situations.
• Make sure to have enough life, accident and health insurance cover for you & family.
• Stay away from hyped markets. That would be the right time to exit.
• Avoid cryptocurrencies unless you are tech savvy, prepared to gamble and lose.
• Don't lend money to friends & relatives. You may end up losing money and also relationships.

INSURANCE

• Insurance is not investment. It is the price you pay for some kind of protection of your family against contingencies of unforeseen events like death / accidental death / hospitalisation shocks. 
• Do take appropriate life, personal accident and mediclaim policies for self and family.
• Don't buy equity-linked insurance plans (ULIPs). Your money goes to the agent and the insurer and not into your investments. They are losing propositions.
• Buy either term policies (these are the cheapest) or buy money-back schemes, which are also cheap but you get your money back. Read the fine print carefully rather than trust an agent's verbal assurances.

80C INVESTMENTS

• Investments in PPF, NSCs, 5 year Bank deposits, NPS etc. may save you on income tax liabilities, But be aware of 5+ year lock in periods.

EQUITIES

• The last two years equities have seen terrific returns from the stock market. Is the economy booming? No, but a lot of investors hope that it will start growing faster. 
• The World Bank and other institutions forecast that growth should accelerate in 2018-19. Many savvy investors have already entered the stock market on that expectation. 
• As more money has come into the market, it has boosted share prices and created a positive feedback loop where investors have pumped even more money into stocks.
• Despite forecasts, markets could go in either direction.
• Unless you are an active watchful person, on daily basis, with propensity to exit as per strategy, risks are high.
• Index funds have shown persistent growth over years with lower risks. Invest in less risky index funds rather than in risky equities.
• Equities may not get you periodical returns but in long term they are sure get you impressive gains.
• Good to be a equities trader rather than and equities investor.
• Those who have time and inclination to do their own research may invest directly in stocks or via equity mutual funds. The second route is fire-and-forget. Both methods can fetch great returns. Both methods also carry the risk of capital loss.
• May be it is good to stick to mutual funds and commit to systematic investment plans (SIPs) for three years, or longer. These are likely to fetch excellent returns.
• The economy may recover. But uncertainty exists.
• Series of assembly elections and a general election scheduled in the next 15 months. Political uncertainty might cloud short-term returns. What happens if there are apprehensions that the Narendra Modi government will not return?

DEBTS

• Debt comes in many shapes and sizes. Bank fixed deposits are the default option. You can also buy mutual funds dealing in different types of debt. In addition, you can buy corporate debentures, or subscribe to corporate fixed deposits.
• Interest rates rise when inflation rises. If inflation rises, the value of money erodes faster. If interest rates rise, any portfolio of previous debt instruments loses value because that same money invested now could be earning more interest.
• Bank deposits are safest, highly liquid but with low returns. The new FRDI Bill highlights the fact that bank deposits are not guaranteed beyond the limit of Rs 1 lakh. That limit was set in 1993. The limit might get raised to Rs.5 lakhs, prior to the passing of Act. Be informed of this.
• Avoid PSU banks with huge NPA's. Also avoid private banks with low equity, lower reserves and higher NPAs. Any government would be reluctant to take this step, fearing a political backlash. Since many PSU banks are struggling to cope with bad debts bail-ins are now neither impossible, nor illegal.
• Mutual funds exploit changes in interest rates. Safety varies. Mutual funds that focus on corporate debt give much higher returns but take larger risks. It's important to understand that you can lose capital in a debt fund. So understand safety, risks and returns before investing.

REAL ESTATE

• Real estate is entirely local market. The investment is illiquid. Selling may take several months. But returns are impressive. 
• This segment has huge percentage of 'black money' intertwined with 'white money'. 60:40 is the default ratio. Even 80:20 is not uncommon. 
• Booms and busts are cyclical and occur side by side too.
• Sometime legal complications might get your investment locked for several years.
• Apart from politicians, corrupt bureaucrats and unethical businessmen, you may get entangled with mafia and local goons.
• So invest only in legally clear properties. Obtain the help of known advocates and chartered accountants. Remember brokers are not your friends.
• Stay away from hypes.

GOLD

• Gold and precious metals are the age-old hedge against inflation and uncertainty.
• But gold yields no interest and capital appreciation is uncertain.
• Making charges for jewellery add considerably to cost. It's still worth investing as security. 

Neither a borrower nor a lender be ... William Shakespeare

Read the source article

A Cyclist - is a disaster for the economy

1. He does not buy the car and does not take a car loan. 
2. Does not buy vehicle insurance. 
3. Does not buy fuel. 
4. Does not use the services of repair shops and car washes. 
5. Does not fear “civic responsibility”. 
6. Does not use paid parking. 
7. Does not become obese. 
8. Yes, and well, dammit ! Healthy people are not needed for the economy. They do not buy drugs. They do not go to private doctors. They do not increase the country's GDP ! Total disaster!!! This is how corporate think 
9. On the contrary, every new McDonald's outlet creates 30 jobs: 10 Dentists, 10 Cardiologists and 10 Weight Loss Experts. 

So, what do you prefer- Cycling or fast food? 

It was amusing. Bikes were very popular before cars. Cars were viewed as a natural progression (it is sure easier going up a hill). This progress drove industrialization, higher productivity, and so forth. Giving up cars and using bikes do indeed threaten the car companies.


The present arbitrary economic system is flawed, which favors wastage & destruction and sees efficiency & lowered unnecessary consumption as a good thing. The numbers like the GDP are calculated with no eye to the long-term future, and the fact is that 'All resources are finite'.

Managing money wisely

• Inflation, taxes, government policies, geo-political situations and economic cycles affect all investments. 
• The day you part with your money, you have taken a risk. Bigger the risk the greater scope for higher returns.
• Holding cash is worst form of investment, which depreciates with time in an inflationary economy like India.
• Understanding risk and managing prudently helps protect wealth and generate higher returns. Saving at the beginning of career alone is not enough. What you do with savings that will help staying ahead is more important.
• Bank fixed deposits are fairly safer but its interest rates falls short of inflation rate.
• Debt mutual funds that invest in bonds for short-term goals returns increase as bank FD interest rates fall. The average returns of such funds over a period of five years are around 12-17%. While FD interest is taxable, debt mutual funds held for three years or longer, you can adjust your gains against inflation, with indexation. Any capital loss can also be offset against capital gains on other investments, like shares or properties sold. 
• Debt is not a bad thing, if used correctly. While education or home loans are good debts, credit card debt or a personal loan, to buy something you could live without, is a bad debt.
• Staying debt free is important because debts carry much higher interest burden than what you earn on your investments. As retirement approaches one must become completely debt free to have peaceful retired life.
• Stocks carries considerable risk although liquidity is good. Hence invest that much money which you can afford to lose. Stock or commodities trading, while returns could be high, risks are also higher if traded without research & strategy.
• It is always good to buy blue chip stocks when the markets are down, at a time when nobody is buying and everybody's selling, for long term holding. Investing in long-term equity mutual funds (MFs) is an option. The risk is higher if your holding them is for few weeks or months.
• Overall, the Indian stock markets have returned a good 10-11% compounded annually over a 10-year period, despite the ups and downs.
• Opting for a systematic investment plan (SIP) where you invest a fixed amount of money every month regardless of market fluctuations suits for investing salary surplus amounts.
• The basic principle of investing is to reduce your risk as you get older. A common thumb rule is that individuals should hold a percentage of stocks equal to their age in bonds, government debt and other safe assets and rest in equities. For a 30-year-old, 30% of the portfolio should be in bonds, government debt and other safe assets and rest 70% in equities.
• If you are in your 20s, 30s or even 40s and have years before you retire then "take some risks and opt for more volatile investment that will potentially give you more returns in the long term". However, if you are retiring in the next few years, depending on your circumstances, invest in a conservative manner.
• Always look at big-ticket expenses (child's education or marriage, retirement) that you could incur over the years. Keep aside money for contingencies and have a plan for a fixed monthly income after retirement (through pension, post office or mutual funds monthly income plans, senior citizen savings schemes, FDs and bonds). Not everything will go as per plans, but planning is imperative.
• Insurance is a premium for someone to pay your family a big sum of money, if you die. That premium is just a cost. For peace of mind, it is important to take insurance that covers health, disability, accident, life and property, you should only buy the cover you really need. The life insurance cover's simple thumb rule is to multiply monthly expenses by 300. You may not need life insurance if no one is dependent on you.
• Remember insurance payments are not investments. Insurance is good. Investment is good. Combined into a single product, they make you poorer.
• Real estate, with low risk over long term, is great investment usually with very high returns but with very poor liquidity. Therefore invest into real estate that much money which you may never need it. 
• Investing in rentable properties is a good idea to get some monthly income.
• Spread the Risk. Research carefully and diversify your investments, placing pre-decided amounts in different asset classes: equity, mutual funds, bonds, FDs and property. Rebalancing and realigning your portfolio at definite intervals, according to your goals and risk appetite, is a good idea.
• Invest in tax saving instruments like PPF, ELSS etc for minimizing tax outgo.
• Spend wisely. Overspending is a bad habit. Before you buy anything ask yourself: Am I buying this because I want it or do I really need it? Can I live without it? And, can I really afford it?
  Remember the words of Warren Buffett: "If you buy things you don't need, soon you will have to sell things you need."
• As lifespans lengthen, the need for money between the ages 70 and 85 increases because of medical expenses, medical insurance premium etc increases. At this age, people need house help and insurance doesn't cover everything. The costs involved in maintaining an older person, who is not fit, is much higher than the expenses of an average person.
• Beware of credit cards which are good, if used judiciously. Otherwise small print terms and service charges are bound to make you poorer, in case of reckless spending using card.

Whatever you decide to invest in, do it regularly. Do not watch your investment too often. Do not speculate. Stay invested for the long term. Your money will not only be safe, it will grow many times over. 

Neither a borrower nor a lender be,

for loan often loses both itself and friend ... Polonius