The Benefits, and Challenges, of a Very Strong Euro

At the moment, the euro is worth $1.58. On March 18, it reached its historic high of $1.5904. Many analysts believe that if the current trend continues, the euro will rise above $1.60, maybe even as high as $1.70. So far this year, the euro has appreciated by more than 8.5%. Looking back, the European currency has gained almost 20% in international markets since January 2007.

The strength of the euro means: 

1.Rising prices of imported raw materials have less impact on the economies of the euro zone and on their inflation rates. That’s because prices for petroleum, grains and metals are quoted in dollars, which translate into fewer euros. 

2.Those companies that generate a large portion of their revenues overseas see that their goods and services are much more expensive, at least in countries that use the dollar and other currencies. These companies’ revenues suffer, and they become less competitive.

The strength of the euro has a global impact on European companies given today’s conditions because there are great imbalances in exchange rates.The impact is in the loss of competitiveness in the U.S. market as well as in other countries where U.S. products are imported more cheaply.

According to a recent report by Standard & Poor’s, “The strong appreciation of the euro versus the dollar threatens European businesses because, according to analysts, a 10% rise in the euro can have the impact of lowering exports by one percent, and lowering GDP by 0.25%.” In other words, once economic activity slows down as a result of the loss of competitiveness that stems from foreign exchange rates, the recovery process in the ‘real’ economy will be slow.”

 

Mauro Guillén, director of the Lauder Institute at Wharton, warns that “the European companies affected the most are those companies whose sales depend less on trade within the euro zone, and depend more on the U.S. market and the dollar zone (especially, the Near East).” In that regard, S&P identifies aerospace and defense as one of the sectors most exposed to exchange rate fluctuations.

          One of the companies that will suffer the most is EADS, which earns about 35% of its revenues in dollars. Another could be Britain’s Rolls Royce, which earns 25%. The automotive sector will also suffer, including BMW, which has 22.4% of its total sales in the U.S.; Daimler, which has 19.7% and Volkswagen with 5.2%. 

Chain Reaction

Nevertheless, Rafael Pampillón, professor at the Instituto de Empresa business school, believes that “if the big economies of the euro zone, such as Germany and France, grow less because they export less, they [Germany and Spain] will also buy fewer products fromSpain. As a result, there could be a chain reaction. Spain will also suffer some damage to its foreign sales.” Pampillón suggests that tourism will be one of the sectors that suffer the most in Spain. “Travelers from regions that have weaker currencies will realize that taking their vacations in Spain is more expensive than doing so in other tourist locations,” he says.

 

Some analysts believe that some companies exposed to Latin America are also feeling the impact. They argue that the impact is generated by the foreign exchange earned by companies that receive part of their revenues in the euro zone, and part in dollar-denominated countries. This includes the big banks. 

Counter View

Galán believes that Spanish companies are not affected by their exposure to Latin America. “Many of the companies exposed to Latin America are in the service sector, along with energy, construction, telecommunications and so forth. They have made a lot of direct investment in the region. In principle, therefore, they don’t need to make large scale international transactions of goods and services. They generate their business volume in their respective countries, with their own profit centers.” In principle, Galán adds, they should not be strongly affected by the appreciation of the euro versus the dollar. Although some companies may be affected by international transfers of inputs and outputs, that isn’t the key problem for Latin America. 

Incentive to be More Efficient

 

According to Guillén, “The strength of the euro will come at very little or no cost to the GDP of Spain and the euro zone…. The net effect is beneficial since a strong currency reduces inflation and increases the buying capacity of corporations.” Guillén goes even further, saying he is certain that the appreciation of the euro “provides an incentive for exporting companies to be more efficient. In addition, it lowers the cost of inputs that they import in order to produce (energy, raw materials…).”

 

At a time when the U.S. economy is slowing down and global financial systems are experiencing turbulence, Puig believes that “European exporters are more worried about the loss of growth in international markets than about the appreciation of the euro.” Given these conditions, he recommends “companies not only move into countries that have lower costs and weaker currencies but that they also focus on expanding in markets where demand is growing faster, such as in Asia.” China and India will both be key countries in coming years, says Puig.

 

Nevertheless, he notes that the instruments within reach “involve two concepts that are at the origin of corporate competitive advantage: organization and innovation.” Another useful variable for ending this sort of problem, he adds, “is diversification, not only in product categories but also geographies, in an effort to reduce this type of risk.”

Source-wharton.universia

Think like WARREN BUFFETT

Tips and suggestions regarding the investor mindset and ways that an investor can improve their stock selection that will help you get inside Buffett's head:

1. Ignore Market Forecasts
There is an old saying that the Dow "climbs a wall of worry". In other words, in spite of the negativity in the marketplace, and those who perpetually contend that a recession is "just around the corner", the markets have fared quite well over time. Therefore, doomsayers should be ignored.

On the other side of the coin, there are just as many eternal optimists who argue that the stock market is headed perpetually higher. These should be ignored as well.

In all this confusion, Buffett suggests that investors should focus their efforts of isolating and investing in shares that are not currently being accurately valued by the market. The logic here is that as the stock market begins to realize the company's intrinsic value (through higher prices and greater demand), the investor will stand to make a lot of money.

2. Wait for the Fat Pitch
Hagstrom's book uses the model of legendary baseball player Ted Williams as an example of a wise investor. Williams would wait for a specific pitch (in an area of the plate where he knew he had a high probability of making contact with the ball) before swinging. It is said that this discipline enabled Williams to have a higher lifetime batting average than the average player.

Buffett, in the same way, suggests that all investors act as if they owned a lifetime decision card with only 20 investment choice punches in it. The logic is that this should prevent them from making mediocre investment choices and hopefully, by extension, enhance the overall returns of their respective portfolios.

3. Think of Stocks as a Business

Buffett believes that stockholders should think of themselves as "part owners" of the business in which they are investing. By thinking that way, both Hagstrom and Buffett argue that investors will tend to avoid making off-the-cuff investment decisions, and become more focused on the longer term.

4. Increase the Size of Your Investment
While it rarely - if ever - makes sense for investors to "put all of their eggs in one basket," putting all your eggs in too many baskets may not be a good thing either. Buffett contends that over-diversification can hamper returns as much as a lack of diversification. That's why he doesn't invest in mutual funds. It's also why he prefers to make significant investments in just a handful of companies. 

5. Reduce Portfolio Turnover

Rapidly trading in and out of stocks can potentially make an individual a lot of money, but according to Buffett this trader is actually hampering his or her investment returns. That's because portfolio turnover increases the amount of taxes that must be paid on capital gainsand boosts the total amount of commission dollars that must be paid in a given year.

6. Develop Alternative Benchmarks
While stock prices may be the ultimate barometer of the success or failure of a given investment choice, Buffett does not focus on this metric. Instead, he analyzes and pores over the underlying economics of a given business or group of businesses. If a company is doing what it takes to grow itself on a profitable basis, then the share price will ultimately take care of itself.

7. Learn to Think in Probabilities
Bridge is a card game in which the most successful players are able to judge mathematical probabilities to beat their opponents. Perhaps not surprisingly, Buffett loves and actively plays the game, and he takes the strategies beyond the game into the investing world.

Buffett suggests that investors focus on the economics of the companies they own (in other words the underlying businesses), and then try to weigh the probability that certain events will or will not transpire, much like a Bridge player checking the probabilities of his opponents' hands. He adds that by focusing on the economic aspect of the equation and not the stock price, an investor will be more accurate in his or her ability to judge probability.

8. Recognize the Psychological Aspects of Investing
A successful investor will focus on probabilities and economic issues and let decisions be ruled by rational, as opposed to emotional, thinking.

More than anything, investors' own emotions can be their worst enemy. Buffett contends that the key to overcoming emotions is being able to    "retain your belief in the real fundamentals of the business and to not get too concerned about the stock market."


Bottom Line
"The Warren Buffett Portfolio" is a timeless book that offers valuable insight into the psychological mindset of the legendary investor Warren Buffett. 

-----Of course, if learning how to invest like Warren Buffett were as easy as reading a book, everyone would be rich! But if you take that time and effort to implement some of Buffett's proven strategies, you could be on your way to better stock selection and greater returns.------

by Glenn Curtis 

source- investopedia

What will happen to the frogs?

Anyone who follows paul Krugman's column would understand the frog story... I always wondered why he always speaks only about american economy, but we should understand that american economy is very important for us because they influence the world economy to a greater extent. Coming back to the frog story, he mentions about two frogs one being the economy and the other being the environment. Both frogs are facing acute problems and not sure where they will end up. Many economists have predicted the GDP to grow soon but the point to be noted is that it is "Jobless Recovery". Thats the word to be noted. It means that soon America may face a slow motion human and social disaster. People being jobless for more amount of time would again mean that they will lose their savings, homes and more in the process. What about the other frog.. If the consensus of the economic experts is grim, the consensus of the climate experts are utterly terrifying. This is a matter of real crisis and it is very interesting for us to watch out how Obama acts on these issues. Please watch out.. Again.. only one thing to end with.. its fun to know things ...

Is software sector back with a bang!!!!!!!!!!!!!!!!!!!

Hey everyone,

It has been long since I have participated in this blog and now its the right time for everyone of us to actively participate and share our knowledge. So what is this blog all about???. I m not sure if pessimists would have been happy after seeing Infosys latest quarter results but I m sure that this is a great news for optimistic people like me. Q1 has proved great for Infosys with 17% increase compared to last year. But there is a twist in this if we watch the news carefully, we can find that the percentage rise in net profits was 29.1% in march quarter but its just 17.3% in this quarter and similarly the revenue percentage increase was just half when compared to the march quarter of 2009. But one thing is for sure that there is improvement and that is what we want and expect. Cheers for Infosys... Hope other software companies also come up with similar results especially the largest software exporter of India, TCS ( my X company). Hope you people come up with new blogs .. Keep reading and enjoy knowing new things. Its always fun to know.

Who has been the India's worst and best PM?

Posted by Himanshu Sachdeva
Published in Times of India, by Mr. Vikas Singh - Monday May 11, 2009

In a few days, India will have a new Prime Minister. It's as good a time as any to take stock of the men -- and one woman -- who have served us. Who's been the best PM India's had, and who's done the most damage?

Jawaharlal Nehru:

• India suffered heavily because of his misplaced sense of idealism over Kashmir, resulting in a problem that troubles us to this day, and his naivete over China.
• But the fact is that much that is good about India today, including world-class institutes of higher learning, our space programme and the widespread use of English that gives India a competitive advantage in a globalised world, are the result of his vision.
• Unlike many other colonized countries that got freedom at the same time as India and promptly become tinpot dictatorships, India is still a vibrant democracy – and that is surely Nehru’s biggest achievement
• I think he deserves the title of our best PM ever.

Indira Gandhi:

• The Emergency was arguably the worst assault ever on Indian democracy.
• Much of the ills that plague our politics, including corruption, criminalization and the degradation of institutions like the Presidency, first flourished in her tenure.
• And she encouraged cynical misuse of religion -- the rise of Bhindranwale was originally encouraged by the Congress in a bid to embarrass the Akali Dal.
  On the positive side,
• She did lead India to one of its finest hours -- victory in the 1971 war. She was also in charge when India conducted the Pokhran tests. And she held India together during a deeply turbulent time.
  

Rajiv Gandhi:

• The 1984 Sikh riots and the Bofors scam will always remain blots on his record.
• So will his clumsy efforts to woo Muslim fundamentalists through the Shah Bano case while courting the Hindu right wing through his decision to open the locked Ayodhya gates.
• Rajiv was the first to talk of taking India into the 21st century, and he did a fair bit to help us get there.
• His contribution in triggering the country’s IT and communications revolution has not got the credit it deserved. Nor have his other worthy initiatives, like panchayati raj. His tragically early death left many wondering what might have been.

Narasimha Rao:

• Slumbered through the demolition of the Babri mosque and was plagued with charges of graft and buying support in Parliament, but played an important role, as the godfather of India's much-needed economic reforms.
• Had the sense to induct Manmohan Singh as finance minister and back him to a large extent; is also significant as the first non-Gandhi to complete a five-year term.
  

A B Vajpayee:

• The first non-Congress PM to complete at least full tenure, which marked an important landmark in Indian politics. His failure to do anything as Gujarat burned is a negative mark against him.
• Also, even though the BJP flaunts its anti-terror credentials, the fact remains that Vajpayee presided over one of the most humiliating moments in Indian history: the escorting of three terrorists to Kandahar by Jaswant Singh in exchange for hostages.
• But Vajpayee's tenure also saw India turn an initial setback into a proud victory at Kargil. He finally took India openly nuclear.
• And despite gloomy predictions to the contrary, the economy didn't collapse under the weight of the sanctions that followed.
• Ultimately, the US came around to India's N-programme and the economy boomed during Vajpayee's last years.
• The irony is, the BJP's proud claim of India Shining boomeranged on it in the 2004 elections.
  

Manmohan Singh:

His critics deride him as India's weakest PM ever. But the way he pushed through the N-deal with the US in the face of overwhelming political opposition would seem to believe that charge.

• The economy didn't do as spectacularly under him as his past record as finance minister had led one to hope. But it stayed on an even keel till it hit the speed breaker of the global recession.
• His biggest failure, perhaps, was that his government seemed to be a mute spectator as India reeled under a string of terror serial blasts, and it finally took a 26/11 to shake it out of its stupor.

As you might have noticed, only those PMs has been looked upon who completed at least one, or more, full terms in office.

Whats your take on this?

 

FIRST THE PRELUDE

 

this is my 1^st attempt at anything like this ,I have always been on the other side…..yeah you guessed it right reading others creation.. And from my rich past experience I very well know that ‘short is indeed sweet’ so I have tried to keep this within reading proportions.I wont brand myself as one who is  political but considering the recent sequence of events..its politics that has been hogging the imagination of public besides of course occupying unilmited space in all forms of media….so  its more like flowing with the tide.

 

NOW THE ISSUE

four phases of polls have elapsed and only the last phase ,to be held on 13^th May, is remaining. Over the past few months politics has covered the imagination of one and all and I surely don’t see myself as an exception. The people of India have voted their choice and the verdict would be out on 16^th May, till then we can only make speculations.If you ask my views I would say the Congress party is going to be the single largest party again but considering the result of the exit polls of various newspapers and channels BJP is also not far behind. The UPA government has succeeded in holding people’s belief in them and the latest trends show that UPA will have more seats than NDA. What worked against BJP is the lack of a solid agenda. They have only one major agenda ‘ Hindutva’ and I believe too much of Hindutva is dividing the society. New leaders like Varun Gandhi preferred being inducted into the Indian political scene by heralding themselves as the ‘Champion’ or ‘Messiah’ of Hindutva forces rather than opting for something like ‘Obama-esque’ call for change.

May be I am expecting too much.!!!! The Hindutva agenda which brought BJP into the power in 1999 is no longer relevant today rather it is dividing society which is already reeling under the apprehension and fear caused by twin factors of terrorism and economic crisis.At a time when confidence amongst citizen is at an all time low propagating such agenda would not do much good for the country. As compared to BJP, Congress has kept its campaign simple and sticked to the agenda of development. I do have a soft corner for the Congress and I hope the ‘Real’ Gandhi power again propel Congress ( UPA ) to the power – ‘JAI HO’. 

                

KAUN BANEGA PM

Hi friends,

 I read this article by M J AKBAR in TOI and I really liked it. Politics is the flavour of the season and the big question is who will be the PM? This article is a take on this. Read and enjoy...........

Sharad Pawar has thrown a cat among the pigeons by opening a can of PRIME MINISTERS. He may have done something more worrisome than that. He may have thrown a pigeon among the cats. Parties separated by geography, history, personality and ideology (or the lack of it) seem agreed on only one thing: that MANMOHAN SINGH has had his moment. The NDA view is explicable; it has its own candidate in L K ADVANI. But why do politicians who have served in Singh’s cabinet for the last five years believe that they should get the job for the next five? 

Marxists dislike SINGH with exactly the same fervor that SINGH dislikes Marx. The Left has a second reason for demanding a new order, which has not been widely recognized, far less appreciated. The Congress has accepted all conditions laid down by allies in order to forge anti-Left unity in Bengal and Kerala. But it refused to be equally accommodating to allies in key states where such unity could have hurt the BJP, whether in Jharkhand, Bihar or Uttar Pradesh. The Left sees a double game behind the congress rhetoric. 

The only nationally-known politician who has not cast an eye on SINGH’s job is KARUNANIDHI, possibly because he can foresee the results of Tamil Nadu. Even the Congress is ambivalent. On the record, SINGH remains the once-and-future PM. In its ads, the transition has taken place from Rajiv Gandhi to Rahul Gandhi. 

In theory, the bidders in this auction house cannot be faulted. The PRIME MINISTER is only the first among equals in a democracy, hence there is merit in the argument of meritocracy. But there has been a caste system in the UPA, with the Congress using its Brahmin status to seize all the major offices of state, and all the important instruments of state authority. Pawar, who made a serious bid to become Congress prime minister in 1991, was sent to the comparative wasteland of agriculture. The price of 58 months of silence is two months of questions. 

Ambition is not restricted to one party. It is hardly a secret that the most vociferous defender of the government in this campaign, PRANAB MUKHERJEE, would not mind becoming PRIME MINISTER himself. If Congress numbers are fewer than its well-paid pollsters predict, MUKHERJEE’s name will be mentioned by allies, even if it is eventually rejected by his own party. This is why he plays word-games on whether he has an alliance with MAMATA BANERJEE or a seat-arrangement. The implication is that an alliance is a marriage while a seat-arrangement is flirtation. One of the many difficulties facing the next version of the UPA is that the Left will not support a government with Mamata in it, and vice versa. It was all so much easier when Mamata was such a good friend of the BJP. Her conversion to secularism is terribly inconvenient. 

The path of ambition is paved with more than one theory. The simple one is the purchasing power of numbers. You have to bring MPs to the bargaining table if you want to sustain your claim. People underestimate SHARAD PAWAR when they think his numbers are only restricted to Maharashtra. He has received verbal assurances from other parties, some of which may even be sincere. But each assurance is subject to post-poll reality. Naveen Patnaik may want Pawar as PM, but that will be a secondary concern if he cannot get a majority in the Orissa Assembly. He will have to worry about who, between BJP and Congress, will want him as chief minister. A quid pro quo will be attached to the answer. 

The second theory is more piquant. It believes in survival of the weakest. This least-resistance model has been tried and tested on Inder Gujral and H D Deve Gowda in the early days of the coalition era. It is a variation of the old hare-and-tortoise fable, in which the backrunner will be the only person in the race when the frontrunners have cancelled themselves out. In this scenario, a powerful personality will be perceived as too much of a threat to one or more of the partners, leaving Mr Humble Smiley the eventual winner. 

But such tortoises are heroes of fables. Every contender has a right to dream till 8AM on MAY 16. That is the hour at which the wake-up call will sound.

Want to be rich? It’s about being rude to people

There are fewer ways to make quick money without much effort these days than there are investors in Royal Bank of Scotland Group Plc.

Investment banking? It will be broken for a generation. Hedge funds? You have more chance of getting the Pope to organise your stag night than you have of rustling up fresh funds. Private equity? To put it politely, an industry based entirely on swapping solid-looking equity for funny-sounding debt is looking just a shade past its sell-by date.

Here’s a tip that should come easily to the legions of former bankers and fund managers: If you want to make a lot of money, just try being rude to people.

Hold on, that doesn’t make sense, you may say. Surely the way to get on in life is to be as polite as possible. A soft cloud of charm can carry even the lamest executive all the way to the boardroom. Tell everyone you meet they are fantastic, listen to their ridiculous suggestions, buy them a drink as they launch into a tedious anecdote, and they will think you are great. The way to the top is to be courteous, you say.

No less an authority than Dale Carnegie in his self-help classic book “How to Win Friends and Influence People” makes the point emphatically. Rule No. 1 for making people like you: Become genuinely interested in them. Rule No. 2: Smile.

Rich and rude

New research has turned that wisdom upside down. The richer people are, the ruder they are, according to Dacher Keltner, a psychology professor at the University of California, Berkeley.

Keltner and co-researcher Michael Kraus videotaped 100 undergraduate students who didn’t know each other, and studied their body language during one-minute gaps in conversation.

The results were clear: Students from a higher socio-economic background were more likely to be rude during the silence. They would doodle, fidget or start grooming themselves. Less-privileged students made far more effort to engage with the other person, making “I’m interested” signals such as laughing or raising eyebrows.

In short, the richer people were a lot ruder, while the poor were a lot more polite. The psychologists viewed the results as basic animal behavior. The higher up the food chain you are, the fitter and stronger you are. The wealthier animals are signaling that they don’t need anyone. The poorer animals are ingratiating themselves because they need help....No reliance

“It is the experience of wealth that leads individuals to become disengaged,” Keltner says. There is much truth to that. The richer you are, the less reliant you are on other people. It doesn’t matter much what others think of you, since you are unlikely to be asking them for a favor any time soon.

And yet while the rich may be rude because they are wealthy, it is just as likely to be the other way around. Just as plausibly, they are wealthy because they are rude.

Carnegie and other self-help writers have missed the point the last few decades. Getting ahead in life isn’t about making people like you. It is about getting them to serve your interests.

Success depends, more than anything, on an inner ruthlessness. As anyone who has spent much time with chief executives will know, they are mostly an unpleasant bunch.

They bully, cajole, threaten and fume. There are very few examples of them flattering or charming their way to the top. They are more likely to be shouting and raging at people, demanding the impossible, and casting old friends and colleagues aside the moment they become an inconvenience. The accumulation of wealth requires an ability to crush rivals, stamp on employees, and sweep aside all opposition. Charm doesn’t come into it.

As your bank or hedge fund slides toward insolvency, just carry on barking at your secretary, snubbing waitresses, and blanking old friends who nod at you in the elevator. Everyone will assume you are still loaded -- and will hold off pulling the plug on you for a few more days at least.

Black MONDAY, TUESDAY, FRIDAY..........

BLACK  MONDAY

The title given to one of the most notorious days in recent financial history. On October 19, 1987, the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning of a global stock market decline. By the end of the month, most of the major exchanges had dropped more than 20%.

Investopedia explains.....

Interestingly enough, the cause of the massive drop cannot be attributed to any single news event because no major news event was released on the weekend preceding the crash. While there are many theories that attempt to explain why the crash happened, no consensus argument can explain why Black Monday happened, but most agree that mass panic caused the crash to escalate.

BLACK TUESDAY

October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million shares were traded in a panic selloff.

Investopedia explains.....

By many, Black Tuesday is considered the end of the Roaring '20s and the start of the Great Depression

BLACK WEDNESDAY

The day when the British government was forced to withdraw the pound from the European Exchange Rate Mechanism. The date of the Black Wednesday crash was September 16, 1992, and five years later the UK Treasury estimated that the loss from that day was around £3.14 billion.

Investopedia explains.....

September 16, 1992, is also known as the day that George Soros broke the Bank of England. It has been reported that he made a $1 billion profit that day, which cemented his reputation as one of the greatest forex traders who has ever lived.

BLACK FRIDAY

1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold speculators, including Jay Gould and James Fist, who attempted to corner the gold market. The attempt failed and the gold market collapsed, causing the stock market to plummet. 

2. The day after Thanksgiving in the United States. Retailers generally see an upward spike in sales and consider this to be the start of the holiday shopping season. It's common for retailers to offer special promotions and to open early to draw in customers.

Investopedia explains.....

The idea behind the term "Black Friday" is that this is the day in which retail stores have enough sales to put them "in the black" - an accounting expression that alludes to the practice of recording losses in red and profits in black.

CORNER A MARKET

To acquire enough shares of a particular security in order to manipulate its price.

Investopedia explains.....

This is why people with significant interest in a particular stock are watched very closely by the Securities and Exchange Commission.

Should you cut prices?

March 6, 2009 - 5:51am — Sat Duggal and Hunter Hastings

I was struck by a recent article in the Wall Street Journal that discussed price setting in the consumer packaged goods industry. 

The article highlighted the professed confidence that P&G, Clorox, Nestle and others have about their higher prices sticking with consumers. It talked about the downward pricing pressure in everyday-use categories such as laundry detergents and toilet paper. This got me thinking about the extent to which pricing is perceived to influence a brand’s fortunes in today’s market.

The real issue is not price, but value. Or, to be more specific, perceived value. Consumers will generally down-trade only if they do not perceive the incremental value in premium brands. This raises significant questions for a number of premium and luxury brands. Are mere “feel-good” emotional benefits going to be adequate in selling a me-too product at a substantial premium? 

 In today’s world however, consumers are far more skeptical and discerning about the value they are receiving.

That however does not mean that brand owners have to abandon their premium positioning. Here are a few ideas on how to counter the current price and value challenge:

1. Focus on the functional value:  You have to deliver clear functional performance IN ADDITION  to the emotional value of your brand’s offering. Gillette provides a clear technological edge in its shaving systems (pun intended) while also appealing to male confidence in being at their best. If consumers can experience (see, hear, smell, taste, feel) the difference in your product, they can make the linkage to the emotional appeal and you have a fighting chance at maintaining a premium

2. Introduce a value message for your brand:  In this I think consumer brands have something to learn from B2B marketing where it has been very important for businesses to articulate the incremental value ($s, hours, etc.) of their product to hard-nosed procurement managers. So buying a piece of Oracle software is justified because of the incremental value it generates in savings and time-to-market as compared to DIY approaches or other competitive offerings. My wife was similarly touting a premium nail polish that she recently bought as a trial at a salon. While it cost her nearly twice her usual department-store bought brand, it not only gave her a richer and deeper color but also stayed on much longer without getting frayed.

3.  Change the frame of reference:  A prime steak sold at the local grocer may appear pricey when compared to other meat or even other meal options. However to the discerning gastronome segment, the frame of reference is steak restaurant-quality beef, and the grocery store steak that offers steakhouse quality may actually appear like a very good deal. Similarly many personal care products can point to the appeal of their product’s favorable pricing when it is compared with salon treatments. 

4. Innovation can still command a premium:  Desirable innovative products, like the new Kindle 2 from Amazon, can sell-out even in these dark times. These are not aspirational products simply because of their brand imagery or emotional appeal. They provide a unique consumer experience and offer both a transaction value (e-books are cheaper than printed books) and a strong “lifetime value” to their consumer. Similarly, me-too products which do not offer a clear product differentiation are likely to face downward price pressure

It is really rough out there today, even for the leading brands from well touted marketers such as P&G and Nestle. Resisting pulling the pricing lever to protect short-term volume is as much a philosophical decision as a business-savvy one. The brands that will maintain long-term profitable health are the ones that are able to focus on the value that they generate for their consumers.

contributed by "rohit sharma 14-B"

Derivative?????????

1. A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset.  2. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

3. Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Derivatives are contracts and can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days source investopedia

What Is an ETF?

1. An ETF is a portfolio of stocks, bonds or other investment class that trades on a stock exchange, much like a regular stock does. ETFs are essentially index funds in that they track the performance of a specific index or asset. 

2. Leveraged ETFs attempt to track the index with borrowed capital in order to increase investment exposure. The fund will typically be levered by a factor of two or three for every dollar of investor capital. However, it is important to note that these levered ETFs attempt to mirror the daily rate of change for an index. They then reset each night and attempt to repeat this feat each day. For instance, if the Russell 2000 trades up 1% for the day, the 2x tracking ETF will attempt to match that with a factor of two, or 2%. The 3x version would follow at 3%. The farther out in time you go, the less correlated the returns will be.

3. However, with the additional leverage comes additional risk. If traders are not careful, they could find themselves in a world of pain. A common mistake with some traders is trading a leveraged ETF withmargin. This can exacerbate what is already a volatile trading vehicle into a surefire margin call. 

Todays Trivia

One of the most important industry that operates the entire world today is the Computer SERVER industry. The market worth of the whole industry is $53 Bn and the market leader is IBM with around 33% of the market with HP closely behind on 30%.  

Day Trading Rules and Setups

This is the summary of the one of the chapter from a book called 'How to Money Trading Derivatives' by Ashwani Gujral

1. do your Homework
The trader should study the specific stocks and dericvatives and their relation to the overall market atleast for one hour other than market hours.

2 Stick to the Schedule
Before the market opens the trader should have list of potential stocks based ont the previous day homework.
He should review how these stocks behaved day before and draw conclusion based on the study.

3. Learn how to manage your Loss
If the market is not acting to your expectation, just get out. Big losses always start from small losses.

In a day trading scenerio, and unless there is some unexpected news, eight out of 10 times the market forms a range in the first couple of hours by establlishing high and low, and then towards the end of the day breaks out or down from the range and establishes a direction.

4. Maximum shares per Trade
In choppy sideways market you should also reduce your volume. When the markets are slow, reduce the exposure size

5. Number od Trades per Day
the maximum nuber of trades should be five per day. This is also justified when trader is trading more than one stock per day.

6. Avoid Trading during the slow period of the day
Trades are consistently more successful before 11 am and the after 2 pm. This is because before 11 am you tend to catch the highs or lows of the day and after 2 pm you catch the breakout.

7. A very simple technique to reduce the risk in day trading, and even in swing trading situation, is to buy oversold and sell overbought.

Cont......

Europe a big concern?

This is an attempt to bring out the essence of the Krugman's column about Europe on 17th March "THE HINDU". I am a great fan of Krugman and once again he gave an interesting article. In this he has compared the response of the US and the Europe to the global financial meltdown. 

Europe has failed in implementing effective fiscal and monetory policies.  On the Fiscal side we can see that  the economists beleive that the Obama's stimulus plan itself is very less and if we compare it with Europe, we can observe that the Europe's efforts are miniscule. When we take the Monetory policy the European Central Bank has been very slow to react and has sheid away from any strong measures to unfreeze credit markets.

 

The question is Why is Europe falling short?

The answer is simple. European Union doesnt have the kind of continentwide instituitions needed to deal with a continentwide crisis. There is no single Government to take the responsibility for the European economy as a whole. Does all these mean that Europe was wrong to let itself become so tightly integrated? Does it also mean that the creation of Euro was a blunder?. It may not be. Because still if the Politicians in Europe start showing more leadership, the entire scene can change.

Would that happen ? We have to wait and watch!!!!!!! Look out for more :)

17-03-09

Politics & the Nation

Take a look at some of the important points from CPI(M)'s manifesto

• Reverse moves for full capital account convertibility
• Re-impose strict controls on outflow and inflow of finance capital
• Prohibit participatory notes used by FIIs \
• Halt dilution of govt equity in PSU banks
• Scrap Banking Regulation (Amendment) Bill
• Prevent takeover of Indian banks by foreign banks
• Scrap proposed legislation to increase FDI cap in insurance sector
• No privatisation of pension funds
• No diversion of pension fund and PF to stock mkt
• A new central service -- Indian Corporate Law Service -- created

The government has introduced a new central civil services cadre called the Indian Corporate Law Services (ICLS) to create an army of experts who would be involved in corporate law making and its enforcement in the country. This gives a new service option to those who qualify the toughest entrance test to get into government service.
The government would train the officers at the newly-set up Indian Institute of Corporate Affairs (IICA), a policy think tank, before placing them in various offices of the ministry of corporate affairs.

Finance & Economy

A look at the advance tax figures for the country

• India’s advance tax collection till March 15, the last date for the payout, stood at Rs 2.82 lakh crore. While this is way below the budgeted Rs 3.95 lakh crore for FY09, the income tax department hopes the figure would approximate the previous fiscal’s Rs 3.2 lakh crore by the fiscal end.
• State Bank of India, the largest taxpayer in the country, registered a 41% growth in tax outgo at Rs 5,733 crore for the current fiscal.

International

Israeli politics

• Israel has seen elections in February. No political party won substantial seats in the 120 member Knesset to form government on its own. Let's take a look at the political firmament:
• Likud: Led by Benjamin Netanyahu this party has been asked to form the government now. But it still needs support from other political parties to form a stable government.
• Yisrael Beiteinu: Led by Avigdor Lieberman, this party supports Israeli settler movement and opposes exchanging land for peace with the Palestinians.
• Kadima: Led by Tzipi Livni, this was the party that was in power till the elections in February. It supports the formation of a Palestinian state in the West Bank and Gaza.
• Labour: Led by Ehud Barak.
  There are a lot many other parties; all having single digit seats in the Knesset. Israel mostly had coalition governments. This time round, it is the Kadima party which has won the largest number of seats in the Knesset -- 28. But it decided to stay in the opposition.

connection between NREGA and cropping pattern in the country

The sum and substance of this report is that paucity of labour is forcing farmers in UP to shift away from sugarcane to rice and wheat cultivation.

for furthur details visit at following link

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ET&BaseHref=ETM/2009/03/16&PageLabel=8&EntityId=Ar00800&ViewMode=HTML&GZ=T

Important financial news ( point- wise ) 

1. Tata group's total debt is set to exceed Rs 1,00,000 crore in the current fiscal but it appears comfortable in the liquidity front.Increase of more than Rs 30,000 crore in group's overall outstanding debt position from year-ago level of about Rs 70,000 crore is primarily due to its aggressive capital expenditure plans and past acquisitions.

2. A US-based private equity firm will partner with Phaneesh Murthy’s iGate to bid for Satyam Computer Services.  The unnamed PE firm has funds worth around $5.5 billion under its management.  The firm is partnering with iGate because of the management expertise in running an IT business, Mr Murty ( ceo of Satyam ) said. As per the conditions laid out by the Satyam board, iGate will have to show access to a minimum amount of Rs 1,500 crore on or before March 20, to be eligible for the bidding process. 

3. Effects of recession: The five biggest investment banks in the world (Lehman Brothers et al) have vanished in the financial carnage. The two biggest mortgage companies in the world, Freddie Mac and Fannie Mae, are under government overlordship. The biggest insurance company in the world, AIG, is on government life support. The biggest bank in the world, Citibank, has survived only with massive government help. General Motors, the biggest auto company in the world, is also on life support. The greatest icons of US capitalism are on crutches. 

4.Standard Chartered Bank has appointed Sreeram Iyer as Chief Operating Officer (COO), India.

5.State Bank of India has turned out to be the largest tax payer in the country with a tax outgo ofoutgo of Rs 5,733 crore for the fiscal yearending March 31, 2009. This is a 41% increase over the tax it paid last year. The bank’s tax outgo during the January-March quarter is Rs 1,810 crore.Engineering major Larsen & Toubro is also among the largest tax payers in the country, with a total tax outgo of Rs 802 crore, which is a 47% increase over the previous fiscal year’s collection. L&T’s tax outgo during the January-March 2009 quarter is Rs 245 crore.The all India tax collection until March 15, the last date for advance tax payment, has totalled Rs 2,82,021.60 crore. This is lower against the projected tax collection of Rs 3,95,000 crore for the current fiscal year. 

6.Citigroup Inc awarded Chief Executive Vikram Pandit $10.8 million of compensation in 2008, a year in which the bank required two govt. rescues totalling $45 bn.About $7.7 million of the compensation was a sign-on bonus the bank gave Pandit in January 2008, according to a regulatory filing on Monday. Pandit also received a salary of nearly $1 million and stock options of $1.6 million. Wall Street compensation has come under intense scrutiny recently, particularly at banks that have received government bailouts. Pandit was awarded an amount similar to the $9.9 million that Bank of America awarded to its CEO, Kenneth Lewis. 

Pandit did not receive a regular bonus for 2008. He has said he will accept no incentive pay and will accept base annual pay of $1 until Citigroup returns to profitability.

"IS WARREN BUFFETT CRAZY?"

WARREN BUFFETT called this "a great time to be in banking," talked about the massive "earnings power" of banks like Wells Fargo, and said that the government actually doesn't need to supply most banks with "lots of capital." (Another explanation for Buffett's relatively upbeat forecast was that, in industry parlance, he was just "talking his book," since he has big stakes in banks like Wells Fargo and U.S. Bancorp.) But the truth is that the recent history of U.S. banking suggests there's a chance, at least, that Buffett was right.

The key to understanding Buffett's less-than-apocalyptic take on the banks is the idea of the spread:

- the gap between the interest rate banks can charge for the loans they make and the interest rate they have to pay for the money they borrow -- from depositors or other lenders. When the Federal Reserve slashes interest rates, particularly when they slash them as aggressively as they have in the past year, spreads widen, so that every loan a bank issues becomes more profitable. And that's especially true today, because the risk aversion of investors and financial institutions has meant that the interest rates on loans have fallen less than they normally would have, given the steep decline in the fed funds rate.

Needless to say, the average interest rate it charged the people it was lending to was a lot higher than that. In fact, though it's hard to get exact data on this, it's possible that, as Buffett said, the spreads on loans have "never been wider." And when you combine that with the sheer number of loans these giant banks have on their books, you're talking about individual banks earning tens of billions of dollars on their own.

Does that mean that the banks are fine? Not necessarily. The basic problem the banks face is that they need to recapitalize themselves. One way to do that is by taking their profits and, as it were, banking them. But the banks still have lots of old, bad assets on their books, and it's possible that, as many predict, the value of those assets will fall more than their earnings will rise. And if the economy gets significantly worse, the increase in bad loans will probably cancel out the effect of wider spreads.

So why might most of the banks come out of this okay, without having the government nationalize them? One reason is that since most of these banks have slashed their dividends to pennies, every dollar they earn essentially goes to recapitalization, instead of going out the door to shareholders.

The interesting thing about this prescription is that, in some ways, it's precisely how the U.S. got out of its last big banking crisis, which happened during the recession of 1990-1991. Today's crisis is different in some important respects (in the earlier crisis, banks were able to make easy profits by investing in government debt, while today the profits on such an investment would be quite small). And there are some banks today which may be carrying so many bad loans that even their increased earnings power won't save them.

At the very least, though, history suggests that Buffett has not gone around the bend, and that it's a mistake to think that nationalization is the only plausible solution to our current banking crisis.

14-03-09

Politics & the Nation

Why is guarding our borders a challenge?
Today, India is ringed by turbulent states -- Pakistan ,Nepal Bangladesh and Myanmar.
That's a whopping 10,619 km of border to be guarded! If you add the 3440 km border with China, what have you? The fact that terrorists have perfected the art of infiltration, aided and abetted by state or non-state actors in our neighbourhood makes it a very complex task indeed.

International

• Bernie Madoff pleads guilty
• He pleaded guilty to all the 11 counts of charges levelled against him by the prosecutors.
• Some legal experts and others have speculated that he is sacrificing himself to protect his wife, his family and friends.
• Prosecutors gave assurances they are investigating Madoff's wife and other family members and employees to determine what role, if any, they played in the scam.
• The 70-year-old financier who was once chairman of the Nasdaq exchange will be sentenced June 16 on 11 counts, including securities fraud and perjury. He could also be fined and ordered to pay restitution to his victims and forfeit any ill-gotten gains.
• What is most notable about this whole affair is the speed with which the American judicial/prosecution system was able to bring him to justice.
• The $65 bn scandal broke out in December. He pleads guilty before the expiry of the third month! Can we ever, in India, expect such speedy justice?

Opinion

Reformation of corporate Governance

In spite of what the government says, Satyam is not a stand-alone case. There have been similar cases in the past, such as the Dharma Teja in India and Enron or WorldCom in the US.

Independent directors:

IDs are responsible for two things: overseeing strategy and overseeing financial propriety and legal compliances.

Remuneration to IDs needs to be regulated in a manner that will ensure that they adhere to their cardinal responsibility without fear or favour: by doing away with commissions on profit and restricting their remuneration to reasonable sitting fees.

Simultaneously, they should be protected from any liability, so that they are empowered to discharge their responsibilities.

Secondly, the whistleblower mechanism needs to be encouraged and institutionalised. the media and regulators are the two external whistleblowers, often acting on suspicious movements in the company, while employees are the internal ones.

Role of auditors:

Auditors are required to check the accounts faithfully, yet they fail.

Firstly, rotation of auditors should be mandatory after every three years, and a strong disincentive by way of heavy fines should be legislated to ensure that auditors do their job properly.

Promoters and management :

For vanishing companies the Companies Act already prescribes barriers that such promoters will be barred from raising further capital in the market and their names are put on the government’s website, etc. A suggestion has also been made that promoters should be barred from holding management positions after some time.

Enforcement system coherence:

In the Satyam case both Sebi and the Serious Fraud Investigating Office had to approach the local courts to get an access to Raju to even conduct investigations.

current affairs 13-3 -09

Politics & the Nation

• The third Third Front
  For those of us who are political novices, some gyan about 'Third Fronts' from today's ET:
  Vishwanath Pratap Singh led the first third front government at the Centre in November 1989. It was called the National Front and had parties like DMK, TDP and Akali Dal, apart from Janata Dal. The NF needed the support of the Left Front & BJP to cross the half-way mark, as Congress was still the largest party with over 190 seats. The National Front collapsed 10 months later, when BJP withdrew support and Singh lost a confidence vote, in the aftermath of the Mandal-Mandir agitation.
  The second time a ‘third front’ was formed was in 1996. It was christened the United Front and was headed by Deve Gowda. .It had several parties like DMK, Tamil Manila Congress, TDP, AGP, apart from Janata Dal. The United Front had to be supported by Congress to secure a majority in the Lok Sabha. Congress withdrew support to the Gowda government in a year but supported it under the leadership of I K Gujral. The UF government collapsed after it refused to budge to Congress demand for removal of DMK ministers, following the Jain Commission report which supposedly passed adverse remarks against DMK's links with LTTE.
  Now in its third version, the regional parties and the Left have appeared on one platform in Tumkur, Karnataka. Pundits are however writing it off in spite of its gaining some political gravitas. Let's wait and see how events will eventually unfold.
  Finance & Economics
  
• FDI inflows are on the rise
  Foreign investment inflows into India grew 90% in the first eight months of the current fiscal year, indicating that the country continues to be an attractive destination for investors despite a fall in economic growth rate.
  Foreign direct investment (FDI) inflows during the April-November period stood at Rs 85,700 crore compared with Rs 45,000 crore in the corresponding period of the previous fiscal, despite most of the developed world reeling under the impact of a global recession. According to the FDI data compiled by the commerce and industry ministry, investments from three Asian countries — Mauritius, Singapore and Japan — contributed more than 55% of the total inflows during the period.
  
• A dip in inflation is no longer headline news!
  India's inflation rate fell for the sixth straight week to 2.43% for the week ended February 28, in line with expectations, but there was little succour for household budgets with food items more than 8% dearer than what they were a year ago.
  
• Some encouragement from IIP numbers?
  India's industrial output fell by 0.5% year-on-year in January, but a strong showing by the consumer durables and capital goods sectors helped lift the sense of gloom, as economists predicted a recovery was underway and numbers would improve in the months ahead.
  These are only provisional figures as yet. Finally when the figures are released, it is likely that they will see a revision upwards. Experts are predicting that by the time the final revisions are in place, the IIP figure may even be in the positive territory.Science &

Technology

• A battery that gets charged in a few seconds
  Scientists at MIT are designing a battery that can recharge in a few seconds as against a couple of hours at present.
• If the attempt succeeds this will be like a manna from heaven for all the laptop and cell phone users, besides perhaps speeding up the use of battery driven vehicles.
  What exactly happens when a battery is being charged?
  When a lithium battery is being recharged, positively charged atoms or ions flow from the lithium electrode to the carbon one. When a battery is discharging, the ions flow the other way.
  

International
In spite of the IMF expectations that global GDP growth would dip below zero in the current calendar year, how can we say that the World may escape a repeat of the 1930s experience?
One, world leaders and central banks have been far more proactive than during the Great Depression. We’ve seen country after country announce huge stimulus packages.
Two, there is growing realisation that co-ordinated policy action, at least by the bigger powers, can alone save the day. So despite all the posturing about raising protective barriers and rise of economic nationalism, chances are we will not see a return to protectionist trade practices on a large scale.
Three, the Fund itself is likely to see a sharp increase in its resources. The US administration has called for a tripling of ‘IMF firepower’. So, with a little luck, the immediate global resource crunch might be resolved.

Mukesh Ambani pipped Lakshmi Mittal to the post as the richest Indian.

The other richest Indians are Anil Ambani, Sunil Mittal, Azim Premji and the Ruia brothers.