Cowboy Marketing

A slang term to describe a situation in which a company is unaware that a marketer hired to produce legitimate opted-in email campaigns is actually using mass spam emails to promote the company's stock. This is a very unethical practice because marketers are often compensated with stock options, allowing them to capitalize on the unfounded demand they create for the stock they are promoting.

This situation occurs when the marketer values his own interest over those of its client. Smart investors should not pay attention to spam emails and/or the stocks they promote. Buying these stocks will more often than not result in losing money because once the stock's price rises, the unscrupulous parties involved will cash out, causing it to plummet and leaving legitimate investors

Boomernomics

Boomernomics is an investing strategy that involves buying equities directly related to the spending behavior of baby boomers (people born between 1946 and 1964).

Investopedia explains -- Boomernomics Areas such as biotech, healthcare and luxury cars are the kinds of companies that stand to benefit from this age group. People using the boomernomics investing strategy also invest in companies that offer products such as motor homes or dentures, which are geared toward aging or retiring consumers.

Reuters-Gold,high on safe-haven buying

Gold futures continued their record-breaking spree as investors poured money into the safe-haven asset due to a deepening global recession, analysts said. The benchmark April contract witnessed an all-time high of Rs 15,780, before trading 1.81 per cent higher at Rs 15,735.

In 2008, gold soared to its year-high of 14,320 rupees, up 35.1 per cent from its 2007 close, before falling to 11,290 on Oct 24. Gold has more than doubled since 2004. ""Technical breakout has already taken place at 15,676 and there could be further technical buying," Rahman added. Buying is recommended on lower levels of Rs 15,690, with a target of 15,775 and with a stop loss of 15,630, Rahman added.

Interim Budgets and the business sentiments

The interim budget failed to uplift the business sentiments and positivity in the market, particularly the IT industry and banking sector IT Industry:IT industry had big expectations with Interim budget. Prior to the budget presentation the IT industry was pointing at the need for extensions of Software Technology Parks of India (STPI), Export Oriented Units(EOU) schemes, Employee Stock Ownership Plans (ESOPs) and some more Standard Operating Procedures (SOPs) with tax benefits

Banking Sector:The Government did not give any benefits to the banking sector in this year’s interim budget rather the Government indicated that the cost of borrowing might go up.

Impact on Indian stock market: Indian stock market opened on a weak note and dipped further as the Interim budget was not able to meet expectations. Bank stocks were among the worst performers on the Bombay Stock Exchange. Banking index opened weak and saw further downtrend to about 4-5%. The market closed with:

Sensex: 9305.45 (down -329.29 points)

Nifty: 2848.50 ( down -99.85 points)

What's in store in the Interim Budget?

Minister for External Affairs Pranab Mukherjee in the Lok Sabha has presented the Interim Budget 2009-10 in Lok Sabha today. While presenting the budget the Minister said India remains second-fastest growing economy in the world despite the global meltdown. Pranab presented the 6th Budget of UPA govt on vote of account, which was passed in the Lok Sabha. India's economy has slipped from a growth rate of about nine per cent in the past three years, but still looks healthy compared with most developed economies, many of which are in recession.

Here are the highlights of the Interim Budget 2009-10:
- Govt. focused on farms, jobs, fiscal devolution
-Govt spent Rs.70,000 crore on 37 infrastructure projects in 2008-09
-Govt may consider additional fiscal measures in budget
-Government will need to return to deficit targets after revival
-Govt to expand employment generation schemes
-Economy grew at 9% for three straight years
-Per capital income growth at 7.4% per annum for 4yrs

-Investment as percentage of GDP rose to 39% in 2007-08 from 27.6%
-Gross domestic savings rate at 37.7% during 2007-08
-Foreign trade at 35.5% of GDP during 2007-08
-Forecasts indicate 2009 may be worse than 2008
-Refinance to banks for long term credit to infra projects
-IIFCL to refinance 60% of commercial bank loans for PPP
-FRBM targets relaxed to boost consumption demand
-Mukherjee: Steps to bring back 9% growth needed at earliest
-Mukherjee: Growth rate of exports down to 17.1% in 9 months
-Mukherjee: Need to accelerate pace of policy reforms
-Plan allocation for agriculture increased by 300% in 08-09
-India got record $32.4bn FDI in FY'08
-Defence Allocation hiked to 141,703 crore, linking it to 26/11 Mumbai terror attacks

4 History-Making Wall Street Crooks :Part 2

Michael Milken

Bernard Ebbers

In my previous post I have mentioned the two great criminals who had shadowed the Wallstreet and led to darkness.The other two Michael Milken and Bernard Ebbers are next in the list with the same trend but with different approach( they are truly called as smart zeroes)

The Junk Bond King: Michael Milken:He was doing nothing more than creating a complex pyramid scheme. When one company would default, he would then refinance some more debt. Both Milken and Drexel Burnham Lambert would continue to make their fees as a result of this behavior. The company made at least half of its profits from the work of Milken. Later on, Milken also started purchasing stock in companies that he knew would become potential takeover targets. Boesky, when charged with insider trading in 1986, helped implicate both the firm and Milken in several insider trading scandals. This led to criminal charges against the firm and more than 70 charges against Milken, who pleaded guilty, was sentenced to 10 years in prison and paid $1 billion in fines.

The Financial Statement Fraudster: Bernard Ebbers was the CEO of a long-distance telecommunications company called WorldCom. Over a six-year period, the company made 63 acquisitions, the largest of which was MCI in 1997. All of these acquisitions created problems for the company inasmuch as it was difficult to integrate the old company with each new one. To keep earnings growing, the company would write off millions of dollars in losses it acquired in the current quarter and then have smaller losses going forward to create the perception that the company was making more money than it really was. When WorldCom filed for bankruptcy, it admitted that it inappropriately booked the losses from its acquisitions from 1999 to 2002. Ebbers also took personal loans from the company. He resigned as CEO in April 2002 and was later convicted of fraud, conspiracy and filing false documents with the SEC. He was sentenced to 25 years in prison

There have been criminals who have tried to disguise themselves as honest business people. Many of these crooks rose quickly to power only to have a hard crash landing in the end.

4 History-Making Wall Street Crooks: Part 1

An article by Chris Seabury reflects on the interesting facts revolving around the criminals who had their shares in the Wall Street.According to the author, to fully understand the impact of these criminals on financial history, we must examine the individuals themselves, what they did and the legacy their misdeeds has left behind. While no two are alike, what these men share is the lasting effects of their crimes, which are still felt by Main Street many years later. earticle examines four of the most famous and unscrupulous Wall Street criminals: Richard Whitney, Ivan Boesky, Michael Milken and Bernard Ebbers.

The Unlucky Gambler: Richard Whitney was the president of the New York Stock Exchange (NYSE) from 1930 to 1935. On October 24, 1929 (Black Thursday), acting as an agent for a pool of bankers, he bought shares in many companies, creating a dramatic turnaround in the market. This caused him to be falsely hailed as a hero to the market, and did little to prevent its inevitable crash five days later. His fraud became perverse when he looted the NYSE's Gratuity Fund, which was supposed to pay $20,000 to each member's estate upon death.After an audit discovered the crime, he was charged with two counts of embezzlement and sentenced to five to 10 years in prison. As a result of his misdeeds, the newly formed Securities and Exchange Commission (SEC) set caps on how much debt firms can have and separated customer accounts from the property of brokerage companies.

The Market Manipulator: Ivan Boesky career on Wall Street began in 1966 as a stock analyst. In 1975, he started his own arbitrage firm, and by the 1980s, his net worth was estimated to be in the hundreds of millions. Boesky looked for companies that were takeover targets. He would then buy a stake in those companies on speculation that news of a takeover was going to be announced, then sell the shares after the announcement for a profit. Throughout the 1980s, corporate mergers and takeovers were enormously popular. Before the deals were announced, the prices of the stocks would rise as a result of someone acting on inside information that a takeover or leveraged buyout (LBO) was going to be announced. This is a sign of illegal insider trading, and Boesky's involvement in this illegal activity was discovered in 1986 .Boesky was charged with stock manipulation from inside information on November 14, 1986. He agreed to pay a $100 million fine and serve time in prison. He was also banned from trading stock professionally for life.

Is Corporate Social Responsibility Responsible?

The concept of corporate social responsibility deserves to be challenged. It seems that political correctness has obfuscated the important business points. It is absolutely correct to expect that corporations should be “responsible” by creating quality products and marketing them in an ethical manner, in compliance with laws and regulations and with financials represented in an honest, transparent way to shareholders. However, the notion that the corporation should apply its assets for social purposes, rather than for the profit of its owners, the shareholders, is irresponsible.

The corporation’s goal is to act on behalf of its owners. The company’s owners--its shareholders--can certainly donate their own assets to charities that promote causes they believe in. They can buy hybrid cars to cut back on fossil fuel consumption or support organizations that train the hard-core unemployed. But it would be irresponsible for the management and directors of a company, whose stock these investors purchased, to deploy corporate assets for social causes. Read more

Humorous but True

"Never base your budget requests on realistic assumptions, as this could lead to a decrease in your funding."

— Scott Adams, Dilbert

Swiss banks to announce massive losses--

ET reports: Two of Switzerland's largest banks ,UBS and Credit Suisse, are set to announce combined losses for 2008 of 29 billion Swiss francs. According to the report, UBS will announce an annual loss of 21 billion Swiss francs (€14bn, $18bn), the largest in Swiss history and reflecting the fact the company was one of the banks hardest hit by the US subprime loan crisis. Last November, UBS posted a net profit of 296 million Swiss francs for the third quarter following a year of losses, but warned that a renewed loss was looming for the following quarter. Under a rescue plan unveiled in October, the Swiss government injected six billion francs in new capital to UBS and lent $54bn to the bank to transfer its non-liquid assets into a separate fund.

The massive spread of so-called "toxic" assets -- mainly linked to financial instruments now worth very little because of the US home-loan crisis -- throughout the global banking system is at the core of the crisis. Sonntag also reported that UBS would announce "5,000 to 8,000 new job cuts" adding to an earlier decision to cut 9,000 positions.The German language daily also reported that Credit Suisse would announce a loss of eight billion Swiss francs for 2008, althought the bank is not expected make any further job cuts.

World's Top 10 wealthiest CEOs--

1.Warren Buffet -stake worth $35.9 bn
2.Larry Ellison-($19.7 billion)
3.Mukesh Ambani-with $16.8 billion
4.Lakshmi Niwas Mittal
5.Bernard Arnault-stake worth $12.2 billion
6.Anil Ambani-worth around $9 billion
7.Abdul Aziz Al Ghurair-$7 billion and
7. Steve Ballmer-($7 billion)
9.Sunial Bharti Mittal-$6.9-billion stake
10.Tadashi Yanal-stake worth $6 billion

Mr.Karnik - the chairman of Satyam Board

Finally the board of directors of Satyam has appointed former NASSCOM chairman Kiran Karnik as the chairman of the board. The government initially appointed a three-member board with Mr Karnik, HDFC chairman Deepak Parekh and former Securities Appellate Tribunal chief C Achuthan as members. It was expanded later with the induction of three more members, CII chief mentor Tarun Das, former ICAI president TN Manoharan and LIC’s S Balakrishnan.

Karnik also serves on the board of other firms, including BPO firm EXLService Holdings. His appointment to the Satyam board had earlier led to concerns over potential conflicts of interest, but it was later clarified that EXL and Satyam don’t compete with each other. Apart from EXL, he also serves on the advisory board of venture capital firm IDG Ventures India.

IPL player pricing: Dhoni worth $1.5 mn !!

The Indian Premier League (IPL) has changed the face of Indian cricket, drawing huge audiences, corporate biggies, film stars and ravishing cheerleaders from abroad. A sensation in itself, it intrigued minds at the country’s premier management institute by its pure economics. ET reports:Professor Satish Deodhar and fellowship student Siddhartha Rastogi at the Indian Institute of Management, Ahmedabad (IIM-A) are jointly working on a paper to figure out the economics of this cricketing revolution. The paper, Player pricing and valuation of cricketing attributes: Exploring the IPL Twenty20 Vision, was recently uploaded on the institute’s official website. Deodhar said, “The study aims to find what implicit process of valuation may have occurred in deciding the final bid prices of the players, when team owners bid for cricketers for a total of $42 million. Given the data on final bid prices, a host of cricketing attributes of the players, and other relevant information, we try to understand which attributes seem important and what could be their relative valuations.” The duo hopes this study will facilitate better understanding of player price formation, offer benchmark estimates for bidding for new players and underscore the predictive value of such data driven analysis. This season, Dhoni’s charisma and association is expected to work wonders with actresses. Andrew Symonds could be a crowd-puller due to the controversies he has been in, especially in the Indian context. Valuation estimates of important player attributes: An Indian player, on an avg, fetches a premium of $203,156 over foreign players A half century in any form of ICC approved match fetches $2683 An increase in T20 batting average by 1 run fetches $4658 One more stumping in any form of ICC approved match fetches $2596 An additional wicket in any form of ICC approved match fetches $377

Mutual Fund industry assets up --

Source:ET

The Indian Mutual Fund industry is on front foot once again. The industry’s assets under management (AUM) have risen by about 9.5% in Jan ’09 vis-à-vis Dec ’08. This is the second consecutive monthly rise in the AUM after a series of downfalls witnessed in the last quarter of 2008. With an asset base of Rs 4,60,949 crore, the industry may still have a long way to go to regain its highest absolute peak ever of Rs 6 lakh crore. LIC Mutual Fund is once again the biggest AUM gainer in percentage terms. Other asset management companies (AMC) to have recorded significant rise in assets include IDFC, DWS Investments, Birla Sun Life, Tata, Principal, ICICI Prudential and Kotak. Each of these AMCs has recorded an increase of over 10% in their AUM.

While Reliance continues to be the largest player of the industry with an asset base of Rs 76,168 crore, followed by HDFC at Rs 51,420 crore, there has been a re-shuffling for the third position. ICICI Prudential has once again overtaken UTI to be the third largest fund house of the country.

Tax-free Dividendsnow for shareholders !!

At a time when returns from the markets are tough to come by and expectations are low, a select band of companies have announced tax-free dividends for its shareholders. The list includes a host of PSU companies like SAIL, GAIL, Concor and Nalco, and also private sector companies like Cummins, Financial Technologies, Dabur and Crompton Greaves. While these companies have mostly announced interim dividends for the current financial year, since this is an attractive way of rewarding investors at a time when a large number of these investors may exit their holdings.

Also analysis based on historical stock price movement have shown that companies offering high dividend yields in a bear market tend to give superior capital appreciation in a bull market. However, market veterans pointed out that in reality not too many retail investors look at annualised dividend yields while buying into a stock. The best strategy is to look at the saleability of a stock before buying into such a stock. At times illiquid stocks also offer high dividend and investors buying those scrips because of such attractive payouts are stuck.

Christmas tree---

Christmas celebrations are long gone and you may be thinking what do I have in store for it now.Well, I am talking of an options trading strategy that is generally achieved by purchasing one call option and selling two other call options at different strike prices,which is termed as Christmas Tree in the world of finance. And the reason behind the term is when drawn structurally, the strike price of the long option is located below the two successively higher written calls and loosely resembles a Christmas tree.

Investopedia explains Christmas Tree...
This strategy is used when an investor believes the stock is going to make a move higher. It is a variation of the ratio spread, so a significant upward move in the stock price will result in a very large loss due to the extra short call. The staggered strike prices for the written calls in the Christmas tree strategy reduce the amount of loss incurred when the share price rises more than expected, unlike the ratio spread, where the call options have the same strike.

The Layoff Payoff: A Severance Package

Some job hunters may know how to negotiate their salaries and benefits when they are hired, but may not realize that when terminated from a job, they can negotiate how they depart. Most employers offer a severance agreement that outlines the financial terms on which the employee will leave the company. Negotiating a suitable agreement involves considering how to conduct yourself during discussions with the employer, the cash and benefits you need to survive and whether to hire legal help. Negotiating this accord can ease your transition to a new job, relieve stress and possibly provide a nice financial cushion.

However, a monetary arrangement isn't the only topic to discuss during this deal. Continuation of insurance benefits, assistance finding another job and other perks can also be bargained for. Your power in this negotiation comes from the fact that companies don't want you to bad-mouth them or sue and they may not want you to work for or share secrets with their competitors.Read more...

Debt funds--Bonds a respite to investors!!

The bond investors have never seen such good times like the last year. But no one knows how long the good times will last. Income funds—those that invest in long-term securities i.e., bonds—have offered solace in times when people are asking for no more than preservation of the capital invested . Most of these funds have delivered more than 20% returns last year. The corpuses of bond funds of the major fund houses have gone up by at least ten times in last few months. There is a feeling that soft interest rates would be here for a while and this is one thing that bonds love.

Inflation is off its peak, thanks to a fall in prices of crude oil and commodities. Interest rates may fall further.GDP growth that was around 9% last year has fallen to 7.6% in second quarter of the current financial year. Add to this the lull that has engulfed the equity markets which is showing no signs of receding. A money manager has to invest somewhere, right? So, after the fall in stock prices, bonds are his next best bet.

When yields fall, bond prices rise. Most fund mangers feel that with interest rates in America nearing zero, global investors would make a beeline for higher yielding securities like Indian bonds. This could lead to a fall in yields, enabling bond funds to post good returns. But it is only a matter of time, before the focus comes back on equities.

Asset Allocation--

Every rational investor seeks for an efficient portfolio(highest return from a given level of risk), in theory we come upon a certain percentage allocation for equity-based and fixed income assets that,put together, should generate a return commensurate with the amount of risk we are comfortable with.Investors are generally categorized as risk averse or risk takers.In reality,there are many grey shades along the risk-return spectrum and re-examining the investor's asset allocation defines his place on the spectrum.While asset allocation may not be the sole driver of long term performance,but it does define the range of returns and volatility within which a portfolio is expected to perform.Risk return clustering occurs at each level of asset allocation.WIth an increase in the proportion of equity in the portfolio,the dispersion of return as well as risk increases(due to the volatility of equity returns).Of course the risk and voltality can never be predicted but better the quality of the fund selection,higher the probability to get better returns.

Riak profiling is major and important step whereby an investor's capacity for taking risk is fleshed out and articulated and many investoors would find that that thier actual portfolio is not in line with their expectations.By modifying the ratio of fixed income to equity an appropriate risk return profile can be attained.

Asset allocation isn't a one time phenomenon.An investors requirements will naturally change with age ,income level etc. and these changes will be reflected in the asset allocation.Yeah but for long term investments definitely it remains unchanged.The benefits of risk profiling and asset allocation becomes apparent over a period of time for both investors as well as advisors.An ideal case orf efficient portfolio is a hypothetical construct that a few can achieve in the real world.But it bring investors as close as possiblle to their own best case scenerios if not the ideal ones.It also helos in cementing long-lasting customer relationships.