Sunday, 12 January 2020

The Value of Pi and Global Business cycles

For the last few months, I was studying forecasting and predictions. I studied a few models like ARIMA and Smoothing and Winter Holt models, and with the use of few data from store sales prediction to future price predictions I used to play and it’s fun!

Being in an investment field for more than 6 years, I never found interesting to predict or forecast stock shares prices. My belief was that share prices or equity markets can’t be predicted because the price is a reflection of market information and events.

Inequity markets, I firmly believe that it works in cycles, but never found something like this before. I am going to share a few insights from the original work and study done by Mr. Martin Armstrong.

In the study, Mr. Armstrong discovered global business cycles. He studied financial pattern between 1683 and 1907. And discovered panic waves yielding 8.6 years. Means 8.6 years of financial event occurred. Now, interestingly these patterns are shocking because when he multiplied it with the numbers of days in a year (leap year) 365.25, the value came to 8.653 * 365.25 = 3146. 769. It was exactly pi * 1000. A pi is a significant number in math.

Now, six small waves of 8.6 years created one full cycle of 51.6 years. Assume that the red line covers 51.6 years and the blue line covers 8.6 years.

NOTE: Before, moving forward one should know a few important historic financial panic events.
If we take 1929 (the Great depression) as the base year and let’s create a chart.

In this, 1929 is the base year and 1929 + 51.6 = ~ 1980. In 1980, the US economy was in a deep recession suffering from high inflation.

Now, here, the original study gave six small cycles (blue line) to complete one big cycle (red cycle), however, I took 4 tipping points in one big business cycle.

So, I divided 51.6/4 = 12.9 and I came to a point at 12.9 years (shown as *) in the chart.
For simplicity, I gave alphabetically letters from A to I.  Now, each letter is at a distance of 12.9 years.

Now, take historic events for each alphabetic letter,
(Years are approximate to calculation)

A: 1929 – The great depression
B: 1942 – Time of World War 2
C: 1955 –
D: 1967 –
E: 1980 – The US economy in deep recession and high inflation
F: 1993 – In 1990 Japan bubble burst and in 1997 Asian crisis
G: 2006-7 – Subprime crisis
H: 2019-20 – Trade Wars
I: 2032 -

My 12.9 years breakup is little different than Mr. Armstrong’s study, as I mentioned I divided one big cycle of 51.6 years into 4 financial tipping points.

In this view, I have taken only a big cycle, however, there are smalls cycle patterns also. But, the reason to write this blog is to raise alarm, that we are at the tipping point of a big financial event. As we have seen in the past, somehow pieces are falling in line, it may be due to politics, bad decisions, greed, assets bubbles, subprime, etc, but somehow the pieces are taking place ever time. In the future too, we don’t know which piece falls apart and financial pain triggers. But it does exist.
Based on the original study and thought process, it also says that the peak of one nation may be low for another nation. Which, I believe the slowdown in Western economies could be gain in Asian economies. Mr. Armstrong also explains about intensity and volatility in his study, which answers the question, why events do not occur at exact same time! And why every point in history and the coming future will not be exact time (year). However, Mr. Armstrong’s The Economic Confidence Model gives exact dates at 2.15 years of intervals.
This article is not to influence any individual or scare any investor. But, to create awareness and make a difference by being on the right side of the business cycle. 

Monday, 9 September 2019

Statistics Articles Links

Data Science Articles Links

1. Extending churn analysis to revenue forecasting using R :

2. Exclusive Interview with Sonny Laskar – Kaggle Master and Analytics Vidhya Hackathon Expert:

3. A Comprehensive Guide to Data Exploration :

7. Rich with Visulization techniques:

Machine Learning Article Links

1. Using Linear Discriminant Analysis to Predict Customer Churn:

2. Choosing the Correct Type of Regression Analysis:

3. 8 Tactics to Combat Imbalanced Classes in Your Machine Learning Dataset:

4. Benchmarking 20 Machine Learning Models Accuracy and Speed:

5. Learn Artificial Intelligence with Machine Learning - 2019 :

7. Comparing supervised learning algorithms :

8. Do you know how to choose the right machine learning algorithm among 7 different types? :

9. How to build Ensemble Models in machine learning? (with code in R) :


10. Fundamental Techniques of Feature Engineering for Machine Learning :

11. Machine Learning Algorithms: Which One to Choose for Your Problem :

12.  Deployed your Machine Learning Model? Here’s What you Need to Know About Post Production Monitoring :

13.  Mathematics behind Machine Learning – The Core Concepts you Need to Know :

14. How to perform feature selection (i.e. pick important variables) using Boruta Package in R ?:

15. Classification Accuracy is Not Enough: More Performance Measures You Can Use :

16. Precision vs Recall :

17. Check the comment on Cross Validation - Titaninc Study :

Sunday, 16 June 2019

Retire @ 40 : Right Planning for An Early Retirement

A young and charming couple Ankit and Anchal, aged 27 years came to us for financial planning. Anchal works with a pharmaceutical company as an Analyst and Ankit work as Product Manager in an E-commerce company.  They asked us several questions, one of them was, ‘We want to retire at 40, Is it possible?’ Post 40, Anchal wants to teach French and Ankit wants to start an NGO.

Both, Ankit and Anchal is 27 years old and planning for a baby at around 33. They are planning to pursue their interest in respective fields till the age of 60 years and later want to enjoy retirement. Till 40, the couple is expecting to increase their salary by 7% p.a.

Ankit has a shop in his hometown, where he earns Rs 10,000 per month. They didn’t want to include it in their retirement plan. So, we linked this monthly amount with their financial goals related to their child’s education and marriage. 


We worked on a bucket strategy for ensuring happy retirement at the age of 40.

In this financial planning calculation, we have represented values on an annual basis. However, we suggested them to execute the plan on a monthly basis.

Bucket A:  Age 28 to 40 years

Surplus amount [Gross Income – Gross Expense] was suggested by us to be invested for 13 years. Hence, the surplus investment made at the age of 28 would be useful to take care of expenses at the age of 41. Thus, expenses would be taken care of, till 53. 

Bucket B: Age 41 to 53 years

Surplus saving at the age of 41 years [Rs. 28,50,449] would again be invested for a period of 13 years, which would take care of the expenses at 54 years. However, expenses are rising at 6% inflation rate.

The couple expects to receive a combined income of Rs 1,50,000 per month from the NGO, dance and French classes. This amount which they would receive till the age of 60 would be utilized in Bucket D.

Bucket C: Age 54 to 63 years

Surplus saving at the age of 41 [Rs. 28,50,449] would become Rs 1,56,55,838 at the age of 54. And hence, the corpus is more than enough to meet the expenses at the age of 54.

Corpus accumulated at the age of 61 was due to the investment made at the 48th year from surplus saving. This amount is more than enough to meet expenses at the age of 63.

Bucket D: Age 64 to 80 years

After full-time retirement at the age of 60, the couple also expects to reduce unnecessary expenses. We create basket D at the age of 64 because the surplus saving at the age of 51 is not enough to meet expenses at the age of 64.

So, we decided to use the corpus which has been built since age 41 from the combined income of Rs 1,50,000 per month.

However, the interesting thing is that corpus accumulated since age 41 from the combined income of Rs 1,50,000 per month would be sufficient to take care of expenses tillage 80.
Apart from the retirement plan at 40, Ankit and Anchal also have surplus to save for their foreign trips after 40. Proper allocation of funds can accumulate enough amount of corpus for the couple to arrange four foreign tours any time after age 40.

For a child’s education, the couple would have sufficient time to build the corpus. However, we suggest the couple to set a target of Rs 1,70,00,000 [Education inflation cost at 7% p.a].

To reach the goal, we suggest the couple contribute Rs 5,000 every month to Equity Mutual Funds. Mutual Fund SIP amount would be arranged from their shop’s rent.

For their child’ marriage, which might be approximately 34 years later, the couple would have had an advantage of compounding. However, we suggest the couple to set a target of Rs 1,40,00,000 [Inflation cost increases at 5% p.a].

For achieving this goal, the couple needs to allocate only Rs. 2,500 in the form of monthly SIP for the next 34 years.

The couple would successfully be able to allocate funds towards their child’s future goals because of the right decision at an early stage. If the couple delays the financial planning for their child’s education till the time his/her schooling starts, then the couple would be left with only 20 years to invest. Now, in the same situation, the couple needs to start Mutual Fund SIP of Rs 15,000 instead of Rs 5,000 currently. This makes all the difference.

This plan works for most of the couples who are focussed regarding their plans. However, above all, they have proper guidance to allocate funds at the age of 28.

One should not wait for a certain age to start saving or channel funds, rather, start early to get the benefit of compounding.

NOTE: Current and Future Cost are not mentioned in the blog. 

You’ve just started your career: First 3 things you should be doing with your money!

With annual growth of around 7-8%, India is creating lots of employment opportunities for first time dynamic and skillful young generation. However, it is proposed that India should create more than 1 million jobs every month.

With more employment and young people coming to work with decent salaries increase money flow. However, around 90% of employed youth saves significantly less. This is mainly due to lack of awareness.

For engagement in this article, we have asked Mr. Singh to contribute,
Mr. Singh has started his career in IT company in Mumbai, with a salary of Rs. 70,000 per month. Mr. Singh is 26 years old and he is single!

With my conversation to Mr. Singh, he asked me to mention Top 3 things he should be doing with his money.

Number 1 Thing: Identify the Goals

Even before Mr. Singh starts saving, he should have clear financial goals. Now, goals can vary from person to person depends on a person’s priority towards life. Without a goal, a person might not align toward regular savings. So, above all, I would prefer Mr. Singh to set up financial goals. Generally, financial goals can be Retirement at age 60, foreign vacation every once in 2 years, etc. However, one should also be clear on goals like kids’ education, Home down payment, emergency funds, etc, even before Mr. Singh marriage and kids he should start recurring saving towards these goals. Because with the help of very minimum saving every month he can achieve goals efficiently. 

After identifying goals, Mr. Singh needs to prioritize the goals. This will make 50% job is done.

Of course, goals keep on changing on the way, this also needs revision in between. For example, we are planning for Kid’s education portfolio around 2 crores after 30 years, but It may be possible kid wants to pursue sports. So, like this, there are always changes in goals, and priorities also keep on changing.

Number 2 Thing: Allocate money to the Goals

After completing prioritizing the goals, it’s time to allocation funds towards particular goals. Basically, there are two ways to start investing in particular goals a) Recurring investment (monthly/quarterly) b) Lumpsum investment.

Mutual Funds are the best products to allocate money. Because, in mutual funds, there are open-ended funds which can be liquidated anytime, can be modified according to needs, can be track performance on daily bases, etc.

Mr. Singh has just started this career, so I would suggest him to start SIP [Systematic Investment Plan]. Mr. Singh can allocate different mutual funds SIPs to different goals. For example, Mr. Singh is planning to save Rs. 15,000 every month.  Now, out of Rs. 15,000, Rs. 2000 can be allocated to Long Term goals, Rs. 5,000 and Rs. 3,000 can be allocated to different goals according to priority. Now, left Rs. 5,000 can be allocated to emergency funds.  Once, emergency fund reaches a certain limit, an extra amount of money can be diverted to another less prioritized goal. [Allocations of funds depends on the client’s risk level and goals priorities]. Now, to execute the financial planning and to finalize funds allocation we request Mr. Sing to take a look at Number 3 Thing.

Number 3 Thing: Hire Professional Financial planner: 

Hiring a professional financial planner is very important. If you have the right knowledge and understand financial products and its flavors, and mainly if you think you have time to track financial plan and modify goals according to needs, then there is no need to hire professional help.

You have to ask this question to yourself. If the answer is ‘NO’, then you should prefer professional advice by paying minor fees. You’ll get free advice also, but quality comes with value, not price.

Money management is not luxury, it’s an essential tool for efficient.

Sunday, 29 April 2018

Who Knows How to Cheat ‘Middle-Income trap’

“Great man come out of the middle class.” _Ralph Waldo Emerson

The Economic definition of the Middle Income Trap is, where a country reaches a certain income level and will get stuck at that level. Many scholars have written books and articles on this topic. I’ll try to reflect my understanding of the topic and some consciences.

The middle-income trap to our generation is like, having an iPhone X on EMIs. Everyone wants luxury – due respect to their income class. Robert Kiyosaki said, “The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets. The poor and middle-class work for money. The rich have money work for them.”

Prime examples of middle income trapped countries are South Africa and Argentina.

Yet only a few – most notably South Korea, Taiwan, and Israel – have managed to continue right up to high-income status.

India has entered the middle-income position in 2008 and the per capita income is increasing slowly. The Per Capita Income of the country as per the World Bank’s 2016 estimate is $ 1670.

The middle class is becoming the working poor. If they have one tragic event – illness, loss of job – they have the need for the food bank.

In India, the IT/BPO sector helped many Indians to shift from poor class to middle class – between 2000’s to 2011. Very quickly, these employees’ salary touched to developed countries salaries [in $ terms]. India’s per capita income between 2000 and 2011 was increased with CAGR around 11.5 %, similarly between 2011 and 2016 increment was only CAGR around 3.03 %. Are we heading towards 'Luddite moments'? 

This IT/BPO industry alone can’t take India to the next level. If a country like an India fails to lift per capita income levels, we would be in The Middle-Income trap by somewhere between 2025 to 2035.

To escape the trap Indian needs radical changes in Education industry. Need checklists on Infrastructure projects and manufacturing activities, proper policies to implement Industry 4.0. Government’s initiatives like, Make In India, Startup India, Skill India etc. are to strengthen the ecosystem. India’s reforms also got 30 notches jump in ease of doing business.

We are in 2018, we still have around 8 to 12 years to prepare ourselves to cheat the middle-income trap. Every individual needs to upgrade learning and skills – especially middle-income level employees.

“Progress is impossible without change, and those who cannot change their minds, cannot change anything” _ George Bernard Shaw