08-02-2003, 09:07 AM
Hi Brother Ehrar!
Looks like u have plenty of free time at office to post something so lengthy! Anyway, the observations were interesting but,unfortunately, almost one dimentional! U will ask how! I will tell u (don't mind if i am a bit probing at times, it is just to add some spice in the argument, nothing personal!) Ever heard of a term called 'dependency graph'. If u have read the Economist magazine a few weeks back, it had an interesting article on it. This graph represents population < 17 and >60. These are poeple who are not in active employment and are dependent on others or their pensions. Interestingly, in western world, this dependency graph has an upward slope, whereas in developing countries, it has downward slope. It means in developing countries, there are more young people who are entering the job market than those who are retiring. This is the case with Pakistan as well.
So u have presented the case from a retiree's point of view, what about those young people who are entering job markets or are already under-employed or unemployed? Don't we need growth and investments for these people.
As far as forcing people to take risk in the capital markets. Nobody expects or even hope that individuals should directly be involved in these markets on their own. That is where the role of a portfolio manager comes in. He determines what is the risk-return utility of an individual, taken into a/c a number of factors(age is one of them)
Then these professionals like urself give constant advice to these people. Now this may raise the question of costs involved. Look if we develop the markets fully and with our talented and plentyfull workforce, we should be able to afford these services at reasonable price.
As for determining the interest rate that ur money should earn on fixed investment, this should be decided by market forces not by any central authority. If we pay artifically high interest rates (16% on fds is 4 times as high as in a developed country) then where can u put this money to use. Of course, whoever is paying this rate has to earn some margin on it to lend. That means that the loans which these institutes give out have to be charged higher than 16% interest. This lending rate is way too high for start up companies. Higher interest rates are a big hurdle for economic growth. As u know current Fed Rates are 40 years low in US (around 1%) and they are willing to cut even further if economy stalls. The only other way i see is govt schemes where govt. gurantees this rate, which are basically handouts and every citizen bears the burden of such schemes.
As for the control of a few groups on our market. There i agree with u a 100%. The number one problem is Demutualization of our stock exchanges (currently these exchanges are not run by public companies)past chairman of SECP (Mr Mirza) has raised his voice in this direction. Of course he had abstained from forcing his opinion on current exchanges.
The other aspect is a wider involvement of general public in investing(not speculation). Currently 48% of US households own stocks in one form or the other. In our country, this is considered either a game or too technical (only institutal investors can get involved). This has to change. More bright professionals like yourself should be involved in it. More research should be carried on different companies. I tell u there is no harm in learning even from our enemies(obviously i am referring to India) in this respect. I was simply amazed how much information about Indian companies u can get on internet. And they are not some rich first world economic power. But they are producing more information Samurais (the latest "in" word) than anyother country in the world! Amazing and they don't even look different than us!!!!!
The sooner we discard this image of a stock broker as a pawn-chewing,
beree-puffing, chapal-wearing character from Bolton market, the better off we will be.
I think i will take a break at this stage and come to this topic again.
In the meantime, thank u for starting this topic.
Regards
Edited by - Pervez on Aug 02 2003 042303 AM
Edited by - Pervez on Aug 02 2003 043406 AM
Edited by - Pervez on Aug 02 2003 044357 AM
Edited by - Pervez on Aug 02 2003 052323 AM
Edited by - Pervez on Aug 02 2003 33705 PM
Edited by - Pervez on Aug 02 2003 41033 PM
Looks like u have plenty of free time at office to post something so lengthy! Anyway, the observations were interesting but,unfortunately, almost one dimentional! U will ask how! I will tell u (don't mind if i am a bit probing at times, it is just to add some spice in the argument, nothing personal!) Ever heard of a term called 'dependency graph'. If u have read the Economist magazine a few weeks back, it had an interesting article on it. This graph represents population < 17 and >60. These are poeple who are not in active employment and are dependent on others or their pensions. Interestingly, in western world, this dependency graph has an upward slope, whereas in developing countries, it has downward slope. It means in developing countries, there are more young people who are entering the job market than those who are retiring. This is the case with Pakistan as well.
So u have presented the case from a retiree's point of view, what about those young people who are entering job markets or are already under-employed or unemployed? Don't we need growth and investments for these people.
As far as forcing people to take risk in the capital markets. Nobody expects or even hope that individuals should directly be involved in these markets on their own. That is where the role of a portfolio manager comes in. He determines what is the risk-return utility of an individual, taken into a/c a number of factors(age is one of them)
Then these professionals like urself give constant advice to these people. Now this may raise the question of costs involved. Look if we develop the markets fully and with our talented and plentyfull workforce, we should be able to afford these services at reasonable price.
As for determining the interest rate that ur money should earn on fixed investment, this should be decided by market forces not by any central authority. If we pay artifically high interest rates (16% on fds is 4 times as high as in a developed country) then where can u put this money to use. Of course, whoever is paying this rate has to earn some margin on it to lend. That means that the loans which these institutes give out have to be charged higher than 16% interest. This lending rate is way too high for start up companies. Higher interest rates are a big hurdle for economic growth. As u know current Fed Rates are 40 years low in US (around 1%) and they are willing to cut even further if economy stalls. The only other way i see is govt schemes where govt. gurantees this rate, which are basically handouts and every citizen bears the burden of such schemes.
As for the control of a few groups on our market. There i agree with u a 100%. The number one problem is Demutualization of our stock exchanges (currently these exchanges are not run by public companies)past chairman of SECP (Mr Mirza) has raised his voice in this direction. Of course he had abstained from forcing his opinion on current exchanges.
The other aspect is a wider involvement of general public in investing(not speculation). Currently 48% of US households own stocks in one form or the other. In our country, this is considered either a game or too technical (only institutal investors can get involved). This has to change. More bright professionals like yourself should be involved in it. More research should be carried on different companies. I tell u there is no harm in learning even from our enemies(obviously i am referring to India) in this respect. I was simply amazed how much information about Indian companies u can get on internet. And they are not some rich first world economic power. But they are producing more information Samurais (the latest "in" word) than anyother country in the world! Amazing and they don't even look different than us!!!!!
The sooner we discard this image of a stock broker as a pawn-chewing,
beree-puffing, chapal-wearing character from Bolton market, the better off we will be.
I think i will take a break at this stage and come to this topic again.
In the meantime, thank u for starting this topic.
Regards
Edited by - Pervez on Aug 02 2003 042303 AM
Edited by - Pervez on Aug 02 2003 043406 AM
Edited by - Pervez on Aug 02 2003 044357 AM
Edited by - Pervez on Aug 02 2003 052323 AM
Edited by - Pervez on Aug 02 2003 33705 PM
Edited by - Pervez on Aug 02 2003 41033 PM