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Tuesday, February 26, 2019

Why Saudi Arabia matters to Pakistan

As the crown prince Muhammad bin Salman completed his two day Pakistan visit, the debate about Pakistan joining the Riyadh’s camp, against Tehran, for financial largesse dominated the public discussion. Pakistanis are vying cost and benefits of Saudi financial assistance. Both countries are linked by financial assistance, religious ties, energy markets, and defence agreement. Pakistan needs Saudis for various reasons.

Enhancing CPEC image
During the visit the crown prince announced a 10 billion$ refinery and an oil city in Gawadar, Baluchistan under CPEC. The city will have facilities for storing oil for its onward transport to China.

In fact, the prospect of Saudi investment has already helped divert global attention from the controversy regarding Chinese debts incurred by Pakistan, its economic crisis, and the possible connection with ongoing CPEC projects. Saudi investment can project Gwadar as an investment destination, encouraging Arab African and Asian nations to become part of CPEC.

The investment is an effort by crown prince to diversify Saudi economy and reduce its dependence on oil under vision 2030. Saudi Arabia is still largest oil exporter and rules the oil markets with its ability to drill oil at lowest cost in the world i.e. 4 $ per barrel.

Sovereign wealth fundThe public investment fund of Saudi Arabia has planned to increase its size to 2 trillion dollars till 2030. The country is hungry for investment opportunities especially in the field of science and technology, petrochemical and refining, mining, and entertainment.

Overseas Pakistanis
Saudi Arabia hosts 2.6 million workers from Pakistan, who send remittance worth 4.5 billion dollars every year. These remittances prove to be a valuable support for cash starved Pakistani economy.

Balance of payment (BoP) crisis
Pakistan frequently faces balance of payment crisis and therefore needs foreign support. Saudi Arabia has frequently helped Pakistan in dealing with its foreign payment difficulties. Though, critics claim this easy to get support held Pakistan away from taking hard measures to rectify its recurring BoP crisis.

Help deal with international powers
Saudi Arabia with its deep pockets, massive oil reserves, and considerable investment clout has say at international fronts and can help Pakistan sway international opinion in its favour e.g. In the midst of Kargil saga, at the time when New Delhi was blowing hot and cold, Pakistan asked Bandar bin Sultan for arranging US pressure on India. Bandar bin Sultan, erstwhile Saudi Ambassador to USA, was most powerful foreigner in US at that time.

Middle East influence
Millions of Pakistani labourers work in Middle Eastern countries. Saudi Arabia through tribal connection and religious ties hold considerable influence in Middle East and help Pakistan deal with these countries.

Religious clout
Saudi Arabia wields enormous influence on people among religious class through its huge investment religious institutions, mosques and madrassas related to Wahabism doctrine. Moreover, Hajj visas also offer an opportunity to Saudi Arabia to develop a rapport with Pakistani religious class.

Sunday, December 2, 2018

Is bitcoin energy consumption overblown?

Researchers from Oak Ridge Institute for Science and Education has found out that mining a dollar worth of bitcoin consumes more energy than digging up a dollar worth of gold.

"We now have an entirely new industry that is consuming more energy per year than many countries," said Max Krause, lead author of the study. "In 2018, Bitcoin is on track to consume more energy than Denmark."

Denmark during the year 2015 used 31.4 billion kilowatt-hours in electricity. Bitcoin mining, as of July 1 this year, consumed 30.1 billion kilowatt-hours of electricity roughly the same as Denmark has used.

The massive amount of energy used by bitcoin miner causes green house emission as the bulk of energy consumed comes from China- the largest bitcoin miner. Most of the electricity produced in China comes from burning coal causing green house gases emission.

Although the situation is not as bleak as it seems from the media analyses. The industry’s energy consumption can flatten in future.

Why bitcoin uses so much energy?

Bitcoin depends upon a blockchain-a decentralized ledger recording all the transactions of bitcoins. Blockchain solved the problem of double spending of digital currencies. Double spending is spending the same digital token multiple times.

Bitcoin used confirmation process built into its blockchain to avoid the double spending.

Suppose you try to spend one bitcoin twice by spending it on two different addresses. The first transaction will be confirmed from both sides- the spending and receiving side as well -whereas the second transaction will go to the unconfirmed pool. This will eliminate the problem of double spending.

But before spending the coin you need to mine it. The cryptocurrency miners seek result of some sort of algorithmic puzzle. The bitcion network is designed to produce only one block per ten minutes. The miner who succeeded in solving the puzzle first would get the coin.

In order to solve the puzzle first miners puts in more and more computational power in the act of mining- i.e. solving the puzzle.

More computational power needs more energy, thereby increasing energy demand by the network.

Can the bitcoin energy consumption reduced?

As the network only produces one block per ten minutes, thereby increased computational power and energy consumption doesn’t increase the amount of bitcoin production. The network is designed to reduce the reward of solving the puzzle to half every four years.

Miners will only put in additional energy in the mining process to the point where money is to be made. If the price of bitcoin stabilizes, the mining profitability would reduce to the level where additional power usage doesn’t generate enough bitcoins to offset the electricity cost. The reduction in profits would prove to be a disincentive for miners and would lead to reduced electricity consumption.

So, Bitcoin industry can potentially reduce its energy consumption in future in order to remain profitable.

Tuesday, October 30, 2018

Rice bran oil production potential of Pakistan

Abid Butt, chief executive of e2e supply chain management, is an entrepreneur who has established Pakistan’s first rice bran oil mill.

Rice bran as it is called is a byproduct of rice milling process. Rice when converted from brown rice to white rice it gives rise to this byproduct. The bran is the outer coating of your everyday grain of rice, and is often removed during processing and used as animal feed - but a new study confirms it’s actually really nutritious.

Rice bran oil according to American Heart Association is the healthiest edible oil in the world. It’s per liter cost is equal to that of sunflower oil but it is comparatively healthier.

Many of the health benefits of bran can be utilized by extracting oil from it and using it for cooking purpose. The initiative by Mr. Butt may help Pakistanis make good use of the wasted byproduct. The plant according to him has the capacity of 10,000 tons and cost him around 1 billion rupees.

“The plant machinery cost me a little over Rs1 billion and has been imported from India — a leading country in rice bran oil technology. The production capacity of the plant is 10,000 tons.” says Mr. Butt.

Abid Butt intends to sell the oil to local edible oil companies for blending it with their products. But he also has an alternative of selling it by branding it themselves.

He says that as raw material is abundantly available locally, Government can reduce its edible oil import bill by millions of dollars.

As we know, the largest import of Pakistan after crude oil is edible oil. Pakistan spends around 2.7 billion dollars on import of edible oil annually.

Increasing edible oil production at home is a good option. Pakistan at present produces 6.7 million tons of rice annually and can reduce its import edible oil bill by around 510 million dollars by utilizing bran oil production potential.

In order to utilize full potential of bran oil technological barriers need to be overcome. Technological barriers include low shelf life of bran related products owing to presence of enzymes. Research may be under taken to enhance the shelf life of the oil. “Pakistan can gradually improve the efficiency of rice bran oil technology. We would like to get the support of Pakistani universities to improve the efficiency of this technology,” Butt said.

Rice bran which is used as low value animal feed or discarded despite the fact that it is rich in protein, healthy fats, dietary fibers and vitamins is going to be a rich source of essential nutrients for Pakistanis.

Sunday, May 6, 2018

Mediterranean diet and Mediterranean lifestyle for health living.

Mediterranean diet, as the name suggests, refers to diet eaten in Southern Italy, Greece island of Crete and other areas of Greece in early 1960s. At that time, the average life expectancy of the region was highest in the world and incidence of heart diseases, certain cancers and other diseases was lowest in the world.

The diet includes olive oil, legumes, fish and other sea food, whole grains, nuts and fresh fruits and vegetables.  Many studies concluded that the diet is good not only for physical health but also for mental health and reduces the risk of many diseases from cancer to depression. 

Researches proved that healthy diet along with healthy lifestyle is the secret to region’s good health and long life expectancy. The routine fat intake is lower than 35% of their daily calories and much of that too from heart healthy olive oil. 

How does the diet work?
It is the overall diet approach that makes the difference. It is the combination of foods, rather than single superfood stuff that makes a healthy way to eat. 

Hence, if you are taking unhealthy diet adding one or two elements from Mediterranean diet isn’t going to make any difference. On the other hand, if you change whole of your eating habits, reducing processed food intake, increasing seafood consumption and opting for variety of foods and vegetables can add years to your life.

Implementing the diet plan in your daily life
Despite the health benefits of the diet, average person cannot afford to increase the costly food items like fish and olive oil in their diet. The move towards Mediterranean diet can be made by substituting costly olive oil with other plant based oils like soybean and canola oil.

Joan Salge Blake, clinical associate professor and dietetic internship director Boston University, offered the following advice for less wealth health conscious consumers:-
1.    Buy in-season.
2.    Look for variety and sale.
3.    Don’t overcook
4.    Consider frozen and canned food.
5.    Try affordable alternatives.

Mediterranean lifestyle
Mediterranean diet is an important part of healthy lifestyle followed by the Mediterranean region. The region has many cultural elements different from that of other parts of the world.  

“We need to redefine the Mediterranean diet, the truth is that it’s a lifestyle. It’s the whole approach. It’s the food. It’s the social interaction. It’s getting the right kind of exercise. It’s being outside. It’s getting sunlight and sunshine.” Dr. Aeem Malhotra , British cardiologist, told New York Times.

The habit of Siesta- enjoying shuteyes in the afternoon for a few minutes to a few hours- is very common the region. The life in the region comes to halt in the afternoon for mesimeri ( Greek for quiet time).

Other life routines in the region include walking to stores rather than driving. Greeks are habitual mountain climbers in their daily routine as majority of Greece is covered with mountainous region. Eating with family or friends and taking long time to eat is another thing in Greece culture. Taking long time to eat reduces the possibility of over-eating and hence reducing the risk of obesity.

Thursday, May 3, 2018

Rare Earth Metals: From America's dominance to Chinese hegemony

The recent discovery of rare earth metals in Japanese deep sea proves that rare earth metals are not that rare as their name signifies.

Today’s modern life is impossible without rare earth metals. Rare earth metals are 17 elements including 15 separately presented lanthanides as well as scandium, and yttrium.

These metals are used in manufacturing batteries, vehicles, LCDs, plasma screens, fiber optics, medical imaging, hybrid vehicles, wind turbines, microphones, speakers and other green technology devices. This group of metals is indispensable for high performance optics and lasers and key to the most powerful magnets and superconductors in the world.

Their various applications have given rise to western powers’ fear of Chinese dominance in high technology. China currently has near monopoly in Rare earth metals supply.

  "The Middle East has oil; we have rare earths ... it is of extremely important strategic significance; we must be sure to handle the rare earth issue properly and make the fullest use of our country's advantage in rare earth resources." Deng Xiaoping, a Chinese politician from the late 1970s to the late 1980s.

China is rapidly reducing export quota of rare earth in order to strategically move Chinese manufacturers up the supply chain so that they may sell valuable finished goods to the world rather than lowly raw material.

This presented America with a challenge in keeping its dominant position in high tech but also its hegemony over developed nation, who are in dying need of the elements.

The significance of the metals can be gauged from the fact that many geopolitical experts consider these metals to be the sole reason of U.S. stay in Afghanistan. United States, according to them, wants to make European powers their ally, against China, by controlling the supply of Afghanistan’s rare earth metals.

In 2010, Pentagon estimated Afghanistan’s mineral deposits to be worth 1 trillion $, once mined. The New York Times reported that White House officials are looking at Afghanistan’s mineral resources as compelling reason to extend their stay in the country.

“We live in a different world than the past, where commodity prices mattered because a monopoly allowed sometimes a single nation or a group of nations to charge an extremely high price for that material, and people are still thinking along those lines,” Michael Silver said. “That’s not the world we live in today, particularly with rare-earth metals, which is kind of what got me involved in the Afghanistan situation.” Michael Silver head White House Initiative and CEO of American Element

Critics on the other hand points to the fact that Afghanistan is a war zone moreover; mining and refining these metals from the mountain is costly. Another factor which goes against America is Afghanistan has no coast of its own and the only cost effective route for the metals is through Pakistan’s pushtun belt.

Sunday, April 22, 2018

Investing through mutual funds and its benefits

In an article, I have written about benefits of diversification. But small investors face the problem of spreading out their small investing capital across different industries. If you are small investor you cannot diversify effectively owing to variety of factors like having to pay service fees like brokerage commission, minimum investment to be made in one particular security.

The solution to above mentioned problems can be solved by investing through mutual funds. Mutual funds are investment vehicle made up of pool of moneys collected by large number of investors for the purpose of investing in securities, bonds and other financial markets instruments.

There are many benefits of investing through mutual fund. When you invest through mutual funds, you get to enjoy the benefits of diversification. Your mutual fund asset manager has enough capital to invest across variety of assets, hence delivering you the benefit of diversification.

Another benefit of investing through such vehicle is enjoying economies of scale. Your fund can bargain discounted prices for investments. Moreover, other favorable terms can also be agreed because of increased collective bargaining power.

Your fund manager is a professional manager who has learnt about investing through experience and university learning. He is therefore better able to manage your money in a professional style. He can diversify using various statistical techniques. The third advantage of investing through mutual funds is being able to use the skills of professional manager.

There are as many as 40 mutual funds registered with SECP. You can invest in any of the funds mirroring your preferred style of investing.

Some of the funds use aggressive style of investing. They try to generate more returns but the down side is that they are more risky. Some others are income funds, which target generating regular income along with securing your capital.

There are sector funds which invest in specific geographical territory or specific industry e.g. energy mutual funds invest only in stocks and bonds of energy companies. They don’t invest in other industries. As a fund become more specific towards particular territory or industry, its ability to diversify reduces. Try to invest in funds which have consistent track record of generating returns. Although the returns generated by mutual funds are dependent on performance of stock markets.   

There are two types of funds 1. Open ended mutual funds 2. Closed ended mutual funds
Open ended funds are available over the counter and bought and sold on demand. Their net asset value (NAV) is calculated at the end of every trading day whereas closed ended funds are those which are only available on the stock market and has fixed number of shares.

Thursday, February 8, 2018

Investing strategies: used by billionaires to amass their fortunes

There are many investing strategies, which investors use. Value investing, contrarian investing and growth investing are mostly used investing strategies. Let’s briefly study them.

Value investing is the most successful investing strategy. It was founded by Benjamin Graham, mentor of Warren Buffet. In this strategy investors see for underpriced securities based on some formula other than market price. This formula for ascertaining the value of the security is generally some multiple of income of the corporation. Value investors usually have to wait for longer in order to realize the full value of their assets.

Along with Warren Buffet many other successful investors follow the value investing strategy of investing. According to researches value investing proved to be the most successful way of investing.  Many billionaire investors favor value investing over other forms of investing. Warren Buffet, Howard Marks, Seth Andrew Klarman, Charles Brandes, Walter J. Schloss, Irving Kahn, Mario Joseph Gabelli, Michael F. Price   are some of most successful value investors.     

Another strategy is contrarian investing. Contrarian investing is buying when other people are selling and selling when other people are buying. Every up and down in the overall stock market or some specific share price offers opportunity of selling and buying to these contrarians respectively.  Warren Buffet is also sometimes referred to as contrarian investor, owing to the obvious reason of many similarities between contrarian and value investing strategy. Other famous proponents of contrarian investing are Michael F. Price, James Beeland Rogers, Marc Faber, David Dreman, Mark E. Ripple, and William Albert Ackman.

Growth investing is another strategy which many successful investors use.  Those who follow growth investing strategy invest in companies that show above average growth even when their shares seem to be highly priced. Unlike value investors, growth investors buy stock in companies that are trading higher than their intrinsic value-assuming that the intrinsic value would grow eventually exceeding current valuations. These investors focus on capital appreciation. Venture capital funds can be classified as growth investors.