Tuesday, September 28, 2010
Japan’s Savings Crisis
Japan is heading toward a savings crisis. The potential future clash between larger fiscal deficits and a low household saving rate could have powerful negative effects on both Japan and the global economy.
Hyperinflation or Deflation? Dramatic Fiscal Austerity Measures: "Deficit Terrorists" Strike in the UK -- The USA is Next
Last week, England’s new government said it would abandon the previous government’s stimulus program and introduce the austerity measures required to pay down its estimated $1 trillion in debts. That means cutting public spending, laying off workers, reducing consumption, and increasing unemployment and bankruptcies. It also means shrinking the money supply, since virtually all “money” today originates as loans or debt. Reducing the outstanding debt will reduce the amount of money available to pay workers and buy goods, precipitating depression and further economic pain.
Monday, September 27, 2010
Trapped in the Spiral of Basel III. Tightening the Noose on Credit Spells Disaster

“The plunge in M3 [the largest measure of the money supply] has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly.”
Thursday, September 23, 2010
HDFC warrants are a good bet
Convertible warrants of mortgage lender Housing Development Finance Corp. Ltd (HDFC), which were issued last August, are trading way below fair value.
The warrants were priced at Rs. 55 (adjusted for the stock split) at a time when the company’s shares traded at a discount of around 25% to the exercise price of the warrants.
The pricing of the warrant—which is essentially a call option —suggested an implied volatility of around 25%, using the then prevailing dividend payment of Rs. 6 a year. Incidentally, the volatility in HDFC shares has been 25% in the past one year.
HDFC shares have risen by around 63% since then and the warrants have almost turned in-the-money. This has resulted in a sharp rise in the price of the warrants to Rs. 159 each.
WHAT LIES BENEATH
The $7.5 billion price tag for the 2010 CWG is already the highest ever for the event (the 2006 Melbourne Games may have cost close to $1 billion). The costs includes $89 rolls of toilet paper, $61 soap dispensers, $125 first-aid kits and treadmills rented for 45 days at $23,080 each.
13 NOVEMBER 2003 India were awarded the Commonwealth Games. Ironically, India’s theme was “2010 - Great Games for Sure.”
8 JANUARY 2005 It was announced that India was one year behind schedule in forming the organising committee as stipulated in the hosting agreement.
30 JANUARY 2005 Faced with the prospect of losing the hosting rights, organising panel is formed. Kalmadi named the OC chairman.
8 AUGUST 2008 Auditor-general warns of a “major embarrassment” as projects stalled due to inadequate funds, delay in approvals, changes in venue designs.
8 OCTOBER 2009 Mike Fennell, President of the Commonwealth Federation, meets the PM Manmohan Singh to let him know of his concerns related to the delays.
19 OCTOBER 2009 The IOA rejects the CWG Federation’s plan to set up an independent monitoring panel to look into preparations. This decision angers CGF CEO Mike Hooper.
30 OCTOBER 2009 Truce between Fennell and Kalmadi. Mike H o o p e r a l -
lowed to remain in Delhi to oversee the OC’s work.
5 JULY 2010 A CAG report concludes that the CCG infrastructure was hazardous to both athletes and spectators because of “large-scale corruption”.
31 JULY 2010 CWG rocked by reports alleging that building quality certificates had been faked as costs for the 12-day event ballooned.
31 JULY 2010 A letter written by Deputy High Commissioner of India in London, Rajesh N Prasad, to the Sports Ministry about allegations of corruption made by the UK government, says that 25,000 pounds sent from the CWG in India to a company, AM films, in UK, is unaccounted for.The UK g o v e r n m e n t raised a red flag after it followed the money trail from the CWG accounts in India to AM Films.
5 AUGUST 2010 CWG OC treasurer Anil Khanna was forced to resign after a blatant case of conflict of interest was exposed.
6 AUGUST 2010 CWG OC suspends two top officials and terminated its contract with the Sports Marketing and Management (SMAM)
9 AUGUST 2010 TS Darbari became the first CWG OC member to go under the ED scanner for alleged money laundering. He is also sacked along with another official M Jeychandran
21 SEPTEMBER 2010 Officials from Canada, New Zealand, Scotland describe the Games village as ‘unliveable.’ CGF CE Mike Hooper calls the Games village ‘filthy’
The anatomy of the Vodafone transaction
Previously Hutch and later Vodafone advertised their cellular services as ”wherever you go, our network follows”. It seems the advertisement inspired not just potential customers, but the taxman too
Very interesting case
Must SEE GRAPHICS
http://dl.dropbox.com/u/5973996/Users/Rajendra/vodafone_tree.pdf
Very interesting case
Must SEE GRAPHICS
http://dl.dropbox.com/u/5973996/Users/Rajendra/vodafone_tree.pdf
Deconstructing the rally
Markets across the world had been discounting doom and gloom, what with fears of a double dip in the US and worries about European debt
The Nifty’s trailing price-earnings (P-E) multiple is now at 25.3 and price-to-book at 3.9. In January 2008, when the market peaked, the Nifty’s trailing P-E was around 28.2 and price-to-book 6.5. From a P-E perspective and assuming one thinks the market in early 2008 was a rational one—a very big assumption—then market valuations are not too high.
http://www.livemint.com/2010/09/20220037/748D60AD-4526-49DD-8DF0-5D933D0A9DC4ArtVPF.pdf
The Nifty’s trailing price-earnings (P-E) multiple is now at 25.3 and price-to-book at 3.9. In January 2008, when the market peaked, the Nifty’s trailing P-E was around 28.2 and price-to-book 6.5. From a P-E perspective and assuming one thinks the market in early 2008 was a rational one—a very big assumption—then market valuations are not too high.
http://www.livemint.com/2010/09/20220037/748D60AD-4526-49DD-8DF0-5D933D0A9DC4ArtVPF.pdf
The Skills Deficit
Two years after the world economy suffered a nervous breakdown in the wake of the collapse of Lehman Brothers, global financial markets remain unsettled, and the recovery that started so vigorously in 2009 seems to be stalling.
The slowdown has predictably led to calls for further fiscal and monetary stimulus. The argument seems simple: only a massive dose of government spending and massive central-bank support for the financial system prevented a slide into a second Great Depression, so more of the same medicine is now needed to prevent a slide back into recession.
EIH rights issue key to Ambani’s game plan
Kannan Ramaswamy, the William D. Hacker Chair Professor of Management at US-based Thunderbird School of Global Management, is not surprised by RIL’s move into the hospitality sector but has many questions.
“Historically, Reliance in their annual general meetings (AGMs) has been very clear on how they are going to roll out their growth and diversification strategies..,” he said.
“At the last AGM, Mukesh did mention about doubling the enterprise value of the group, but there was hardly any detail on how the group will go about it. There was some reference to retail and telecom but...the meeting was surprisingly short on details. Although the quest for growth remains as strong as ever, the plans have still not crystallized,” he says.
“Historically, Reliance in their annual general meetings (AGMs) has been very clear on how they are going to roll out their growth and diversification strategies..,” he said.
“At the last AGM, Mukesh did mention about doubling the enterprise value of the group, but there was hardly any detail on how the group will go about it. There was some reference to retail and telecom but...the meeting was surprisingly short on details. Although the quest for growth remains as strong as ever, the plans have still not crystallized,” he says.
Holding all the Aces
Must Read for Marketing & Strategy Students
Market approach
Only too aware of it, Tata Motors has unleashed a slew of initiatives. First up is a new platform in the 0.5-tonne category, called the Zip, which could be priced between Rs 160,000 and Rs 190,000. But isn’t it a bit late in the day? Mahindra & Mahindra created this sub-category with its Gio last year, which was geared to hasten upgrades from three-wheeler load-carriers to four-wheelers. However, Tata Motors is hopeful that its 0.5-tonne passenger-carrier, the Iris, will be the first such four-wheeler in India. The vehicle is being tested in Rajasthan and will be rolled out by October.
Market approach
Only too aware of it, Tata Motors has unleashed a slew of initiatives. First up is a new platform in the 0.5-tonne category, called the Zip, which could be priced between Rs 160,000 and Rs 190,000. But isn’t it a bit late in the day? Mahindra & Mahindra created this sub-category with its Gio last year, which was geared to hasten upgrades from three-wheeler load-carriers to four-wheelers. However, Tata Motors is hopeful that its 0.5-tonne passenger-carrier, the Iris, will be the first such four-wheeler in India. The vehicle is being tested in Rajasthan and will be rolled out by October.
Don’t cap microfinance lending rates
Should lending rates of microfinance institutions (MFIs) — often 28-36 % — be capped? Some folk think so. Officials in Andhra Pradesh once closed down MFIs for usury, but the RBI came to the rescue, declaring there could be no cap on lending rates. Banning MFIs would only drive poor people into more expensive loans from moneylenders. MFIs have provided finance to 20 million poor people, whom nationalised banks could not reach. The RBI itself has promoted microcredit by classifying bank loans to MFIs as priority sector loans.
If the finance ministry insists on MFI curbs, the least bad solution may be a cap on dividends. If high profits are ploughed back into expansion, it benefits new borrowers. That’s not the case if high profits go out as high dividends. Capping MFI dividends at 12% for the next five years will be better than an interest cap of 24%. This will still discriminate against MFIs: Infosys, Tata and Ambani don’t even try to promote inclusive finance, yet face no dividend cap.
If the finance ministry insists on MFI curbs, the least bad solution may be a cap on dividends. If high profits are ploughed back into expansion, it benefits new borrowers. That’s not the case if high profits go out as high dividends. Capping MFI dividends at 12% for the next five years will be better than an interest cap of 24%. This will still discriminate against MFIs: Infosys, Tata and Ambani don’t even try to promote inclusive finance, yet face no dividend cap.
Brady Bonds For the Eurozone
Today’s conventional view of the eurozone is that the crisis is over – the intense, often existential concern earlier this year about the common currency’s future has been assuaged, and everything now is back under control.
By the end of 2008, Ireland’s three main banks had lent more than three times the country’s national income. The crash came in 2009, as Ireland’s real estate boom turned to bust, leaving the country with large insolvent banks, a collapse in budget revenues, and Europe’s largest budget deficit.
This is disconcertingly reminiscent of the spring – when Jean-Claude Trichet, the ECB president, lashed out at a skeptical bond market and declared a Greek default unfathomable. But markets today think there is a 50% chance that Greece will default within the next five years – and a 25% chance that Ireland will do so. The reason is simple: both Greece and Ireland are likely insolvent.
By the end of 2008, Ireland’s three main banks had lent more than three times the country’s national income. The crash came in 2009, as Ireland’s real estate boom turned to bust, leaving the country with large insolvent banks, a collapse in budget revenues, and Europe’s largest budget deficit.
This is disconcertingly reminiscent of the spring – when Jean-Claude Trichet, the ECB president, lashed out at a skeptical bond market and declared a Greek default unfathomable. But markets today think there is a 50% chance that Greece will default within the next five years – and a 25% chance that Ireland will do so. The reason is simple: both Greece and Ireland are likely insolvent.
'Group buying' goes viral
New concept of Marketing
You know an idea has arrived when it leads to ‘me-too’ products that turn it into a full-fledged industry. eBay did it with online auctions and Facebook did it with social networking. And now, sites like Snapdeal, Grabbon, Taggle, DealsAndYou are trying to popularise the concept of ‘group buying’ online.
Group buying works like cooperatives, where a large number of people buy from a merchant. The group-buying site, after negotiating directly with merchants, selects and advertises an offer for a day to its subscribers — typically a hotel stay, a restaurant booking, an excursion or a 'spa day' at an attractive, one-off price. The deal is only available for a short time, often just one day.
You know an idea has arrived when it leads to ‘me-too’ products that turn it into a full-fledged industry. eBay did it with online auctions and Facebook did it with social networking. And now, sites like Snapdeal, Grabbon, Taggle, DealsAndYou are trying to popularise the concept of ‘group buying’ online.
Group buying works like cooperatives, where a large number of people buy from a merchant. The group-buying site, after negotiating directly with merchants, selects and advertises an offer for a day to its subscribers — typically a hotel stay, a restaurant booking, an excursion or a 'spa day' at an attractive, one-off price. The deal is only available for a short time, often just one day.
Govt move to cap lending rates at 22-24% may shut most MFIs
Avast majority of India’s microfinance institutions (MFIs) may have to shut if the banks from which they borrow force the firms, under instruction from the finance ministry, to make loans at 22-24%, according to industry experts.
Some say capping lending rates at 24% could wipe out 80% of India’s 260 or so MFIs, which make small loans to poor people
Some say capping lending rates at 24% could wipe out 80% of India’s 260 or so MFIs, which make small loans to poor people
Marriage between banking, telecom will give birth to Mass mobile banking
Very good Article in Length about Mobile Banking
Changing times: Timex enters Titan territory
For Marketing People
US-based Timex Group has virtually withdrawn from the sub-'1,000 watch market, which was once its mainstay. The company thinks the '4,000-plus segment is now big enough as Indian consumers are willing to pay a premium for making a style statement.
US-based Timex Group has virtually withdrawn from the sub-'1,000 watch market, which was once its mainstay. The company thinks the '4,000-plus segment is now big enough as Indian consumers are willing to pay a premium for making a style statement.
A V Rajwade: A new G20 agenda?
Many conventional correlations in the global economy are breaking down
As preparations for the next G20 summit (Seoul, November) gather momentum, there has been some progress since the last summit — the Basel Committee on Banking Supervision constituted by Mathe Bank for International Settlements has agreed on new norms for banks’ capital adequacy standards (Basel III). These norms prescribe a significant increase in shareholders’ funds, and have also increased the capital charge for market risk. The US has enacted tighter and highly complex banking regulations, and the European Union (EU) is also well on its way to finalising financial reforms later this year. Neither of these may achieve the full extent of the reforms envisaged by the G20, but very strong and powerful bank lobbies have been working hard, in Basel, Brussels, London and Washington, to dilute the prescriptions
As preparations for the next G20 summit (Seoul, November) gather momentum, there has been some progress since the last summit — the Basel Committee on Banking Supervision constituted by Mathe Bank for International Settlements has agreed on new norms for banks’ capital adequacy standards (Basel III). These norms prescribe a significant increase in shareholders’ funds, and have also increased the capital charge for market risk. The US has enacted tighter and highly complex banking regulations, and the European Union (EU) is also well on its way to finalising financial reforms later this year. Neither of these may achieve the full extent of the reforms envisaged by the G20, but very strong and powerful bank lobbies have been working hard, in Basel, Brussels, London and Washington, to dilute the prescriptions
With the door to Doha closed, India opens up windows to the world
Seeing no progress on the stalled multilateral trade talks, potential partners are keen on bilateral pacts with India.
Nine years after New Delhi started implementing its Plan B — bilateral trade agreements — to beat the impasse at the World Trade Organisation’s Doha Round of liberalisation talks, India seems to be finally rolling.
Nine years after New Delhi started implementing its Plan B — bilateral trade agreements — to beat the impasse at the World Trade Organisation’s Doha Round of liberalisation talks, India seems to be finally rolling.
| PLAN B | ||
| INDIA’S BILATERAL TRADE TALKS | ||
| Partner | Start of talks | Status |
| Thailand | 2001 | Under negotiation; likely to be signed in 2010 |
| Singapore | 2002 | Signed in December 2007; to be reviewed |
| Sri Lanka | 2003 | Under negotiation |
| Mauritius | 2003 | Under negotiation |
| China | 2003 | Joint feasibility study underway |
| Asean | 2003 | Trade in goods pact signed in August 2009; agreement on services to be signed soon |
| Malaysia | 2004 | Likely to be signed by December 2010 |
| BIMSTEC | 2004 | Under negotiation |
| GCC | 2004 | Under negotiation |
| Japan | 2005 | To be signed in October 2010 |
| SACU | 2005 | Under negotiation |
| Chile | 2005 | Signed in March 2006; to be reviewed |
| Israel | 2006 | Under negotiation |
| SAFTA | 2006 | In force |
| EU | 2006 | Under negotiation |
| EFTA | 2008 | Under negotiation |
| Australia | 2008 | Joint feasibility study underway |
| Nepal | 2009 | Treaty in force until 2016 |
| South Korea | 2009 | Under negotiation |
| New Zealand | 2009 | Under negotiation |
| Indonesia | 2009 | Joint feasibility study underway |
| Turkey | 2010 | Joint feasibility study underway |
| Pakistan | _ | No formal agreement; Most Favoured Nation status accorded |
| Asean = Laos, Vietnam, Singapore, Thailand, Malaysia, Indonesia, Brunei, Cambodia, Myanmar, Philippines BIMSTEC = Bangladesh, India, Sri Lanka, Thailand, Myanmar GCC = Kuwait, Bahrain, Saudi Arabia, Qatar, UAE, Oman SACU = South Africa, Lesotho, Swaziland, Botswana, Namibia SAFTA = India, Pakistan, Sri Lanka, Bangladesh, Bhutan, Maldives, Nepal, Afghanistan EFTA = Switzerland, Iceland, Norway, Liechtenstein | ||
Shankar Acharya: Overvalued Re fuels external deficits
good article
Why have rising trade and current account deficits in the last year not led to a depreciation of the rupee?
Why have rising trade and current account deficits in the last year not led to a depreciation of the rupee?
Savings rate deregulation: What do bankers say?
What's the impression the RBI is giving about deregulating savings deposit rates? Will it be a total deregulation? Will it come with some caveats and conditions? And what are the bankers saying? Are they prepared?
Parliamentary panel to quiz RBI governor on IPL
The members were not satisfied with the replies given by RBI Deputy Governor Shyamala Gopinath on involvement of banks in the IPL irregularities, especially remittances of foreign exchange, sources said after a meeting of the Parliamentary Standing Committee on Finance. The committee, comprising members of the Lok Sabha and the Rajya Sabha, met under the chairmanship of former finance minister and senior BJP leader Yashwant Sinha. Gopinath was questioned on the role of RBI and commercial banks, regarding transfer of funds to the Board for Control of Cricket in India (BCCI) and IPL franchisees, the owners of the high-profile Twenty-20 cricket teams.
Monday, September 6, 2010
US: the frugal superpower
In recent years, I have often said to European friends: So, you didn’t like a world of too much US power? See how you like a world of too little US power—because it is coming to a geopolitical theater near you. Yes, US has gone from being the supreme victor of World War II, with guns and butter for all, to one of two superpowers during the Cold War, to the indispensable nation after winning the cold war, to “The Frugal Superpower” of today. Get used to it. That’s our new nickname. US pacifists need not worry any more about “wars of choice”. We’re not doing that again. We can’t afford to invade Grenada today.
Hobson’s choice before Subbarao
Reserve Bank of India (RBI) governor D. Subbarao begins his third year in office this week. His first year was spent managing fallout of the global financial crisis and second managing the recovery in Asia’s third largest economy. Subbarao’s third year in office, in many ways, will be more critical than the first two. Apart from high inflation and economic growth, he needs to manage the simmering tension between the finance ministry and the central bank.
Friday, September 3, 2010
China vs India: our Games, their Games
The stadiums built for the Olympics are another example of China’s better-than-the-best mindset
If, by the wave of a magic wand, we had a squeaky clean bunch of people running the Commonwealth Games, would we be able to do a fabulous job? Would we be able to do what Beijing did with the Olympics? As the dirt flies around our Games preparation, this is the question that’s been bothering me. So I am digressing from the world of personal luxury to explore instead what would definitely be a luxury for the nation today: a beautifully organized Commonwealth Games.
If, by the wave of a magic wand, we had a squeaky clean bunch of people running the Commonwealth Games, would we be able to do a fabulous job? Would we be able to do what Beijing did with the Olympics? As the dirt flies around our Games preparation, this is the question that’s been bothering me. So I am digressing from the world of personal luxury to explore instead what would definitely be a luxury for the nation today: a beautifully organized Commonwealth Games.
Mukesh Ambani
In an interview with ET Now, Mukesh Ambani, CMD, Reliance Industries, talks about their bonus issue as well as the vision Reliance has, as also their growth plans.
Banks, relax - until the next crisis
Nice Article
Every economic crisis gives rise to suggestions for radical reform . But these suggestions typically last only as long as the crisis. Once the crisis has blown over, it is business as usual.
Every economic crisis gives rise to suggestions for radical reform . But these suggestions typically last only as long as the crisis. Once the crisis has blown over, it is business as usual.
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