Obstacles to Global Recovery?

If you asked that question to the experts, they would say two things: another blip in the Euro-zone crisis, and the fear that the US budget policies will crash.

I've spoken to a few people about this, and most of them said that there is too much optimism regarding the Euro-zone and that governments have become complacent. And, if we direct our glance to the recent rise in long term Spanish borrowing costs, it seems global investors are starting to agree. I can safely say that there has been some complacency on the US side as well, with the central bank promising to spend an apparently unlimited amount of money to get unemployment down.

Some investors though, seemed elated by the Federal Reserve's announcement. They believe that the extra cash being pumped into the economy will insulate recovery against costs of more budget stagnation in Washington. But I think this is just a case of over optimism again.

Lets see what the budget stalemate holds: from recent events, US fiscal policy is to tighten by over $600bn by 2013 (4% of GDP) from the expiration of the old Bush tax cuts and new spending cuts. The Congressional budget believes this move will send the country back into recession in the first half of next year. A lot of well known economists seem to agree. Hopefully, the Democrats and Republicans will come to some kind of agreement to ease the blow. But let's wait till the tax cut expiration and spending cuts kick in.

The problem is, the President and the Congressional leaders are at such odd, that the US economy might have to go over the cliff before politicians actually do something about it. Not the best possible scenario. Don't forget, that the general elections are coming up soon, and I wonder whether that will change the dynamics between the two parties.

The thing about US Presidential elections is that they are like roller coaster rides. The electoral contest between President Obama and Romney is not as close as it used to be. Latest New York Times-CBS polls show Obama leads Romney in Ohio 53% to 43%. History has shown that no Republican has won the elections without Ohio. The President also seems to be ahead by 9% in Florida. Even if Obama wins and the Republicans still control the House of Representatives and Congress, pollsters say that their chances of taking Senate looks slim.

So come 20th January, the balance of power could remain the same.

The important question is will this budget dilemma remain? Some say no, because a Obama victory would mean support for his ways - even the Republicans would have to agree. Some say yes, because the Republicans may have a chip on their shoulder over Obama's accusations that Romney's cut in health spending would hurt senior citizens. The Democrats too would be quite brutish after their victory.

It all comes down to the elections. But if the Democrats lose, the future of this budget will depend on who the Congressional Republicans blame for failing to win: Obama or Romney.

The globalization of India

India has finally opened up its retail market to global supermarkets.

Many of you will remember how this plan last year was met with great opposition and had to be swept under the carpet. Now, firms such as Walmart and Tesco's will be able to buy up to a 51% stake in multi-brand retailers.

One has to understand Prime Minister Manmohan Singh's reasoning behind this. Not only will this bring growth into an ailing economy, but it will also generate much needed jobs. However, this was just one of the key reforms announced by the administration. Another would be the decision to allow foreign airlines to buy up to a 49% stake in local airlines to boost the failing aviation industry. This seemed a wise move after a 14% rise in diesel, much of which is subsidized by the government.

Last year, the opposition to this reform consisted primarily of tens of thousands of small businesses, who would be adversely affected by the presence of foreign business. The opposition party (Bharatia Janata party) called it 'a betrayal of democracy'. But Economists say this should be welcomed as it will change the way Indians shop and boost the economy.

Nonetheless, as with any foreign investment in India, there have been some conditions imposed on potential investors. An example would be that investors will have to invest at least $100 million in open outlets in towns with a minimum population of a million and source at least 30% of produce from India.

Multinational companies already have small outlets in India, but they have to deal with local stores. But this reform will allow them to sell directly to the public. The government hopes that this move will lower the price of products, improve the livelihood of farmers and ease supply side inflation.

Let's hope it all works out.

Nikola Tesla who?

Very few people know of Nikola Tesla.

He is not as well known as Einstein or Leonardo and definitely less famous than Stephen Hawking. I am even surprised to say that several assert he is less famous than his rival Thomas Edison.

The device you are reading this blog from was a direct result of his discoveries. His baby, the induction motor that interfaces with alternating current is a cornerstone of modern electrical systems. Mark Twain probably does it justice, by describing it as the 'most valuable patent since the telephone'.

The rivalry between George Westinghouse's support of AC and Edison's DC showed how correct Tesla was. Despite this, time has not been kind to Nikola.

Born in Croatia to Serbian parents, Tesla moved to New York in 1884. Some of his early work included radio controlled vehicles, wireless energy, and not to mention the first hydro-electric plant at the Niagara Falls. Despite this, he was often frowned upon due to his eccentricity, claims of alien contact, assertions linking celibacy to intelligence, and the fact that he was in love with a pigeon.

Recent history has shown that while Tesla is mostly forgotten, Edison was bathed in fame and fortune and is regarded as one of the greatest inventors of his time.

What many forget that while Edison's DC worked well for light bulbs, it could not transmit electricity for long distances. Westinghouse Corporation was a big fan of AC. By stepping the voltage up and down, it could be transmitted longer distances, with greater voltage and lower current. They had a problem with the motor, but Tesla solved that.

Eidson tried hard to portray this as dangerous - with public electrocutions of animals - and secretly funded the development of the electric chair to further elaborate his point. But this was not enough to deny what was clearly superior.

The UK's national grid - transmitting electricity at 400,000 volts - is a testament to Tesla's achievement.

In my opinion, Tesla was more of a thinker who cared more about concepts and ideas. Edison was the practical one, concerned with commercial potential and the trial and error method. But if Tesla was such a genius, why is he not remembered as well as Edison?

Take Sir Joseph Swann for example. He invented the light bulb in Newcastle around the same time as Edison, yet he did not get the credit. Why is that? Because in the society it is not enough to have ideas, one also has to be pragmatic. Engineer's had to know whether an idea was possible with the available technology. Tesla was a genius, without a doubt, but obsessively pursuing technology like wireless energy transfer at a time when it was clearly impossible does not give you credit. Edison was determined and forceful. He would pursue ideas that could be turned into products.

Einstein is remembered over Hendrik Lorentz. This is despite several scientists arguing that Einstein just completed several threads created by Lorentz.

Let's not forget that most of Tesla's achievements were intangible. This was unlike Edison's bulb, Ford's cars, or computing products from the likes of Gates and Jobs. Consumers could touch and see those. Tesla has the classic cult following - a unit of of the magnetic field, a crater on the moon, a power plant in Croatia, and a rock band named after him. 'Geeks' are his greatest worshippers.

He died penniless and mainstream recognition eludes him. But recently science historians have raised enough money to begin a museum to commemorate him. Hopefully, this will reignite some of the interest this great man deserves. 

The mobile month

It is September. We as consumers must be prepared for the overflow of new mobile phone handsets that are about to grace the market with their presence. This month is extremely important to the manufacturers to decide who his no. 1 - but more importantly, who will survive as a main player.

Yesterday, Nokia introduced its new Windows 8 phone. The Finnish giants have placed all their eggs in one basket. This phone may determine whether the company will manage to escape its downward spiral and also whether Microsoft can break into the mobile phone industry as well as Apple has.

Speaking of Apple, next week they launch their new iPhone. But, the company is so secretive about their developments, they haven't even announced a launch event. Like the New iPad, this will probably just be the New iPhone. In my opinion, they should really get a move on or else sales may trickle down as fickle consumers start believing that current models 'are so last year'.

Alongside all of this, Andriod models from Samsung, HTC, and Motorola (now controlled by Google) will be trying to push ahead of the rest. Looking at research reports from Gartner and IDC, it seems that the Andriod model and Apple iPhone has grabbed most of the market.

Andriod apparently had 68% of smartphone shipments in the second quarter of 2012. The Apple iOS captured 17% while Blackberry operating system fell to 5% - less than half of what it had last year. Phones with Windows 7 just had 3.5% of the market.

Now consider the manufacturers' market shares of phones sold. Samsung has almost 30%, Apple has 19%, Nokia has 7.6% (including the soon to be extinct Symbian phones). RIM (5.2%) has fallen behind HTC (6.2%).

I would not bet against Samsung and Apply still being on top come christmas. The interesting part is to see how well Nokia, HTC, and Motorola do. Can they convince consumers that they have something cool, something different? I won't even mention RIM, seeing as Blackberry 10 is not out till 2013.