India IDs Its Citizens
Big, Empty Houses
Insurance That Pays Off
Statistics will tell you strange tales, but I ran across one recently that pretty much dropped my jaw. It was in a story about India’s recent declaration that it’s going to create secure, biometric identity cards (complete with a computer chip containing fingerprints, iris scans, criminal records and credit histories) for every single one of its 1.2 billion citizens. The intention is for each Indian citizen to have a unique number and for all of this information to be linked in government computers, forming one of the largest databases ever created.
The goal is to begin issuing the new cards within 18 months.
But the statistic is this: Right now in India, only about 7% of the population–around 75 million people–are registered with the government for income tax purposes.
I have a feeling that there’s a great story behind this statistic, in part because there are an enormous number of people in the United States who would weep hot tears of joy if they weren’t registered with the government for income tax purposes.
I don’t know how the 93% of Indian citizens got left out or whether the government has been actively trying to cast its tax net wider. It’s a mystery.
Beyond that statistical conundrum, though, is the enormous challenge involved in this kind of nationwide ID project.
Aside from the obvious question of securing the database against misuse from both inside and outside the government, the logistics of getting the data gathered, transferring it to a technically sophisticated piece of plastic and distributing the completed IDs to 1.2 billion people are daunting. The experience of many citizens of both India and the U.S. with government agencies isn’t reassuring. (Anyone remember what dealing with the old Massachusetts Department of Motor Vehicles used to be like?) And the idea of a brand new government agency doing something that’s never been done on this kind of scale doesn’t fill me with hope.
But India is a place of almost infinite resourcefulness, and I’m sure that the job will get done if the political consensus supporting it remains firm.
So, what’s the payoff? Well, the bottom line is that the more its people become part of the national community and the national economy, the more economic power India will develop. India’s GDP growth rate was 9.2% in 2007, fell to 7.4% in 2008, and was forecast to slip to 3.4% in 2009.
But the bottom appears to be in for the global economy. And if India’s initiative increases the country’s ability to serve its people, the results could be dramatic. The persistent knocks on India have been its underdeveloped infrastructure, smothering bureaucracy and its enormous number of citizens living in poverty and without access to education and jobs.
It would be naïve to expect ID cards to strike a blow against the first two of these enormous impediments. But a government that knows its citizens’ names can take steps to address the third. This looks like a good thing to me.
There isn’t a real investment idea in my next topic, although there’s certainly the potential for one. It’s more of a speculation on an American phenomenon that’s showing signs of poor health.
The question is: what do you do with a McMansion that nobody wants?
I’m serious. There are a bunch of 4,000 sq. ft. (and larger … much, much larger) houses out there that were quite appropriate for a time of growing families, big paychecks and two SUVs in the driveway. A friend in Houston used to write about the number of nice, small houses in her town that were torn down so someone could consolidate two, three or four lots and build a Taj Mahal with a four-car garage on the consolidated site.
For all I know, there are lots of families who still love their super-sized abodes and wouldn’t trade them for anything. But I’ve seen a couple of stories about how much these castles cost to heat in the winter and cool in the summer, and to clean all year long. And then there are all the families whose children have grown up and left home, at least temporarily.
If people don’t want to pay to heat a place, and cool it, and make the payments on it, they move out and find a bungalow of manageable size. Then what happens to the big one?
I’ve noticed that empty buildings seem to attract tenants. The old mill buildings that line New England rivers have now mostly been filled up with apartments, businesses and community spaces.
Here are my suggestions for the country’s inventory of unwanted mega-homes, running from the more-or-less serious to the much less so.
1. Incubators for start-up businesses. McMansions are usually pretty well wired up, and it wouldn’t take much to put a few striving entrepreneurial enterprises into each one. Eventually the market would select the winners.
2. Bed and breakfasts. With six or eight bedrooms–each with its own bathroom–hippo homes are ideal for the small-scale hospitality industry.
3. Recycling for export. Since each of these behemoths contains enough building materials to make three or four regular homes, we could create jobs and spark a new export industry by carefully tearing them down and shipping them piece-meal to developing countries. Jobs for us; homes for them.
4. Group homes for aging Baby Boomers. Gargantuan houses may be too much for one couple, but might be perfect for a co-housing scheme. This will offer mutual support for the aging, and doctors who don’t want to make house calls might find it efficient to make co-house calls.
5. Museums of Conspicuous Consumption. A few of the more opulent trophy homes should be preserved intact so future generations can marvel at them in much the same way as we visit the stately homes of England or the “cottages” in Newport, Rhoda Island.
Whatever happens to the housing stock of the U.S. in the next couple of years, it will be interesting to see if any of my solutions to the Big Box Housing Problem are adopted.
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My stock idea for today has a great-looking chart, good earnings growth and a fine story. Which means there must be a “Yes, but …” attached. True.
The company is Cninsure (CISG), a fast-growing China-based insurance broker that offers property, casualty and life insurance in 21 Chinese provinces. The company was founded in 1998, just as the Chinese private sector was really powering up. Before the switch to capitalism, the Chinese state didn’t have any use for insurance; everything belonged to the state and the state was committed to taking care of people from cradle to grave.
But people who can make money, buy stuff and leave their villages to try their luck in the big cities are a different matter, and the Cabot China & Emerging Markets Report had a huge winner with China Life Insurance (LFC) in 2006 and 2007.
True to the capitalistic ideal, here comes Cninsure (my bet is that its pronounced C-N-insure, but I wouldn’t put money on it) to carve out a piece of the action. And that’s exactly what it’s been doing. In the last four years, revenue has jumped 331% (2005), 77% (2006), 92% (2007) and 105% (2008). Even with the Chinese economy in a slowdown, earnings for Q1 were up 36% on a 62% gain in revenues with an after-tax profit margin of 21.1%.
I’ve had my eye on CISG ever since it blasted off a tightening seven-month rising base in May. A base like that can generate some power, and CISG soared from below 8 in the middle of May to double figures by the end of the month. Since then the stock has built another base between 12 and 14 before another blastoff in mid-July.
The “Yes, but” is the stock’s trading volume. With fewer than 200,000 shares changing hands on average every day, the stock isn’t liquid enough to qualify for my portfolio. But that shouldn’t keep the more adventurous among you from taking a flyer on this healthy insurer.
If, on the other hand, you’d rather be following a fully advised portfolio of sizzling emerging market stocks, you might want to consider subscribing to the Cabot China & Emerging Markets Report, the newsletter that I write. It has the top five-year return of all newsletters followed by the Hulbert Financial Digest. I think you’ll like it.
For Cabot Wealth Advisory