Tourism in India

Taj Mahal
The Taj Mahal is India’s premiere tourist destination. As one would hope, there are rigorous security checks at the entrances. But, if the officials responsible for the security don’t understand that they are manhandling one of India’s most vital assets, they are doing their country a disservice.

It was disconcerting to watch their handling of an American teacher. The teacher was carrying a paper cut-out doll, a well known children’s character, often photographed with the world’s leading landmarks, and shown to young students in foreign countries, who are then tasked with identifying the landmark, and writing about it.


This cut-out, according to the over-zealous official, was disallowed according to statute determined by the national assembly. The teacher’s efforts to appeal to logic were in met with disdain. So, she gave up on diplomacy, and explained to the senior officer that the official list of disallowed items at the gate did not include anything that could, even in the broadest terms, include the paper doll. The doll got in, but no-one won.

That experience was not unique among the tourists.

In contrast, a local youth carrying a hockey stick, apparently the weapon of choice among the young men in Agra, was allowed in without question.

India really needs its tourists.

Looking at the national statistics makes that clear. The country has a population of 1.22 billion people. More than 150 times as many as tiny Switzerland. Both countries earn the same amount from tourism – $16.6 billion. But India needs its tourist a lot more. Switzerland is running an international trade surplus of $66.5 billion, while fighting against an appreciating Swiss Franc. India runs a deficit of $80.15 billion and the Rupee is in decline.

The tourist in India soon realizes that the government is heavily reliant on visitors for its revenue. Every bill at hotels and restaurants contains a plethora of taxes, usually adding more than a third to the cost of the meal.

Government expenditures at 14.4% of GDP vastly overshadow the revenue (8.8%). It desperately needs the money because its not anywhere close to balancing the books.

Taxing tourists also acts as a disincentive, but with so few alternatives, one would expect an effort to treat guests well. Apparently not.

More at:
India tourism statistics at a glance
India tourism statistics
CIA World Factbook – Switzerland
CIA World Factbook – India

What were you thinking, man

Hindsight is 20/20 vision, but sometimes so is foresight. Investment is simply a numbers game, and the mathematics of compound interest form the foundation of how well the investment performs. Often using the magic of compound interest, and the history of past performance, investment sales people offer the promise of fantastic wealth extrapolating from an often selective history.

Right from the outset the extrapolation is dangerous, but when one takes account of the twenty and twenty fee structures that hedge funds charge, the wealth becomes illusory.

Just playing a little bit the spreadsheet makes this obvious.

if you want to invest in equities, the lowest cost options are index linked funds. These are funds that aren’t managed, but have a portfolio made up of the shares that comprise a specific index, say S&P, or Dow Jones. Usually for an index linked fund the fee runs at 0.2% of the capital invested. A hedge fund would need to outperform the index linked fund after deducting its higher expenses.20121222 FNC667

Plugging the figures into the spreadsheet makes it apparent how difficult that is. If the index is growing at 7%, which over an extended periodis considered to be very good, the hedge fund would need to be earning 12% just to break even with the index linked fund, after expenses.

Playing a little bit more with the numbers, the reality hits home. Taking economic growth of 3% over an extended period, together with the 7% return used earlier, a $100 billion hedge fund, which is small to medium-sized fund in relation to the $2 trillion hedge fund market, after 40 years would be the market. And that’s just assuming that the fund makes returns that break even with an index linked fund. If, after fees, it outperforms the indexed linked funds, as they promise, then it gets to be the market quite a bit sooner.

Perhaps that explains why the hedge fund market is shrinking now, quite rapidly.

More at:
Going nowhere fast
Rich managers, poor clients
And the winner is…
Hedge funds for beginners
Index Fund Understanding

Robbing the rich to give to the richer

Hedge funds have a fee structure called two and twenty. Two percent on the capital invested, and twenty percent on the profits they earn on the assets in which the capital is invested. That means that the returns have to be really good before investors get something themselves.

Many investors are getting a negative return, meaning that they’d be better off with the money stuffed in a mattress. The hedge fund managers are earning fortunes, but it seems that’s still not enough.

Two recent studies have found that the hedge funds are adjusting their figures subsequent to the initial announcement. What at first looks like good accounting is, on closer examination, just another way of gauging from investors.

Some of the prior adjustments are downwards, and that happens a lot in cases where the fund needs to be above its previous highest valuation before performance fees are earned. By reducing earlier figures, the performance target is lower.

The others, not constrained by the performance target, and that revise their figures upwards do so to look better for prospective investors.

The research found that investors who chose an adjustment of the earlier figures as an immediate trigger to sell out of the fund outperformed those who stayed invested by a considerable 3.3%.

And hedge fund managers wonder why their popularity is at an all time low?

More at:
Trimmed hedges
Change You Can Believe In? Hedge Fund Data Revisions
Is There a Cost to Transparency? 
How to make money