The White Good Allowance!

ONGC- Oil & natural Gas Commission initiated this innovation recently, It is aimed at retaining the employees! Its a benefit where in an employee is offered between a lac and 4 lacs depending on his rank. The product purchased through the loan will belong to the company. The employee would be required to pay 0.10 % of the purchase value as monthly hiring charge to the company. he needs to make this payment for seven consecutive years after which he compulsorily buys it back at depreciated value and becomes eligible for the benefit again.
For Ex- Assume a Person buys a Car worth 4 Lacs, Whose life is 10 Years and its scrap value is 20000/- then Depreciation= 400000-20000= 380000/10= 38000 Per Annum.Assuming a straight line Method, His benefits will be as follows-

Year BOY Value Depreciation EOY VALUE
1 400000 38000 362000

2 362000 38000 324000

3 324000 38000 286000
4 286000 38000 248000
5 248000 38000 210000
6 210000 38000 172000
7 172000 38000 134000

So at the end of the 7th year the vale of 4 Lac car is 134000/- Rs.
The emplyee was also paying the hire charges for 7 Years. Hire Charges= 0.10% of 400000= 400 Per Month.
for 7 Years,charges = 84*400 = 33600/-
Total Cost= 33600 + 134000 = 167600/-
Net benefit = 400000-167600= 232400.
This is how the White good benefit is Calculated.BOY= Beginning of Year. EOY= Ending of Year.

The Great Depression 0f 1929- How it Occurred and why it Occurred!

The stock market crash of 1929, usually cited as the beginning of the Great Depression, was preceded by the Roaring '20s, a period when the American public discovered the stock market and dove in head first. The crash wiped out many people's investments and the public confidence was at an astonishing low. When bank failures erased the savings of those who weren't even invested in the stock market, people were shattered. Although the market crash was unavoidable, the bank failures could have been prevented with better regulation. In the crash of 1929, the Fed resorted cutting the money supply by nearly a third, thus choking off hopes of a recovery. Consequently, many banks suffering liquidity problems simply went under. The Fed's harsh reaction, while difficult to understand, may have occurred because it wished to give Wall Street some tough love by refusing to bail out careless banks.
Economist feel that by increasing the money supply and keeping interest rates low during the roaring twenties, the Fed triggered the rapid expansion that preceded the collapse. In some ways, it set up the market bubble leading to the crash and then kicked the economy when it was down.
Milton Friedman( Nobel Prize Winner for Economics) rightly suggested that the Fed's mismanagement of the economic situation greatly contributed to the Great Depression, there still would probably have been a minor recession regardless of government involvement. The government soon came to regret the freedom it had granted the Federal Reserve as it stood by during the crash of 1929 and refused to prevent the Great Depression that followed. Even now, it is hotly debated whether the Fed could have stopped the depression, but there is little doubt that it could have done more to soften and shorten it by providing lower interest rates to allow farmers to keep planting and businesses to keep producing. The high interest rates may even have been responsible for the unplanted fields that turned into dust bowls. By restricting the money supply at a bad time, the Fed starved out many individuals and businesses that might otherwise have survived.The RecoveryIt was World War II, not the Federal Reserve, that lifted the economy out of the depression. The war benefited the Federal Reserve as well by expanding its power and the amount of capital it was called on to control for the Allies. After the war, the Fed was able to erase some of the bad memories from the depression by keeping interest rates low as the U.S. economy went on a bull run that was virtually uninterrupted until the '60s.

A Tribute to the Heroes of the Mumbai Terror Attack!!

I severely condemn the death of 3 of our valiant Police Officers( Anti Clockwise)- Ashok Kamte, Hemant Karkare, Vijay Salskar and the death of hundreds of civilians, Army officers and commandos of NSG who laid down their lives for the Nation.

The 3 police officers in particular were known for their Counter Terrorist and Counter Insurgency Operations. Vijay Salskar and Hemant Karkare were Encounter Specialists while Ashok Kamte was Known for his Rough n Tough handling of terrorists and goons, he was also in news for taking on Ravikant Patil- MLA.

When most of the Youth through out the world are busy shaking their asses to the beats of the music in Discos and Pubs, People like Sandeep Unnikrishnan and many more who joined army at the age of 19-24 have sacrificed their lives for the nation.

"HAIL THE SOULS OF THE DEPARTED"

Pros and Cons of Capital Account Convertibility

Capital Account and Current Account are two essential components of Balance of Payments which is the difference between the aggregate inflows and outflows of a country's services, goods, expenditure abroad by Indians, expenditure in India by foreign nationals, Investments abroad, Investments in India by Non Indians, Transfer payments, Interest paid and received etc.

Current Account mainly deals with the trade related aspects which are known as the visible items and the services which are known as the invisible items. It also includes the transfer payments, expenditure of foreigners in India and vice versa.

Capital Account on the other hand refers to the Investments made by Foreign Nationals and Foreign institutions in India, along with the Inter country grants received by India. The Investments made in India and grants received constitute the credits and the Investments made abroad by India and grants by India to other countries constitute the debits.

Current account or capital account convertibility refers to the conversion of local financial assets into foreign currency or the conversion of foreign financial assets into the local currency at the prevailing market exchange rate.

Capital account convertibility is a much important matter of concern as capital account convertibility in particular refers to the withdrawal of Investments by foreign Bodies.

How does it affect?

As capital account mainly deals with the Investments by foreign nationals in mamoth projects like Construction of Dams, ports, infrastructure development, Power projects, Energy Projects , Realty,Green Field Investments which generally require huge amounts.

From the Foreign Investor Point of view- a cent percent convertibility or Full convertibility of capital account will confer him the right to withdraw his investments completely whenever he feels like, which in turn may cripple the progress of the domestic economy due to the stagnation of work owing to paucity of funds. Many developing countries generally resort to partial convertibility where in the Foreign Investor can only partially with draw his investments when a need arises, thus mitigating the risk to a great extent. As the cumulative figures of Capital Investments by foreigners amount to billions of rupees,Developing nations opt for a partial convertibility .

For example- Indian Stock Market which was at 21K in mid Jan this Year shed around 65% of its wealth owing to Inflationary and Recessionary pressures. A fuller capital account convertibility could have resulted in further more damage to it along with further withdrawal of FII and FDI activity.

Prospects of Full Convertibility-

It will result in a substantial increase in Inflows of Foreign Investments into India, thus infusing more funds and providing ample scope of an accelerated progress but at the same time it leaves a huge risk of foreign investors backing out incase of any untoward events or incidents.

India always adopts a conservative approach( just like the attitude of its people) by allowing partial capital account convertibility, Tarapore Committee made a thorough analysis of capital account convertibility and suggested that India should allow fuller capital account convertibility.
On the other hand USA whcih has gone through a recession nine times and recovered, since 1930's follows a full capital account convertibility leaving it more proned to risk.

But always remember - "It is better Safe than sorry".

For a Crystal clear understanding of Capital account Composition check out the following link.

http://in.youtube.com/watch?v=QE6819vVrCA

OPEC-13

OPEC- Organisation of Petroleum Exporting Countries is a cartel of 13 countries, mainly dealing in the export of crudes. These countries play a pivotal role in determining the supply of Crude.

Following are the list of Its members along with their Brand name of their Crude Oil.

Country Brand name

1. Algeria - Saharan Blend.

2.Angola - Girassol

3.Ecuador - Oriente

4. Indonesia - Minas

5.Iran - Iran Heavy

6.Iraq- Basra Lite

7.Kuwait - Kuwait Export

8.Libya - Es Sider

9.Nigeria- Bonny Light

10.Qatar- Qatar Marine

11. Saudi Arabia- Arab Light

12.U.A.E- Murban

13Venezuela - BCF 17.

An Insight into the Monetary policy of India.

The Monetary Policy of India mainly aims at promoting economic growth by maintaining price stability.

The R.B.I meets regularly to decide what, if anything, to do with interest rates or Cash Reserve Ratios. Cash Reserve Ratio is defined as the percentage of cash which the commercial banks have to maintain with the Reserve Bank or Central bank of the country .

Stock traders almost always rejoice when the RBI cuts interest rates, but does a rate cut equal good news for everyone?

The interest rates, CRR are very important as many other rates, domestic and international, are linked directly to it or move closely with it, along with them the investment prospects and the quantum of loan disbursement also depends to a great extent .

Why Does It Change?

The interest rates, CRR, SLR ( Statutory Liquidity Ratio- The percentage of liquid assets which the bank has to maintain with itself) , PLR(Prime lending rate- Rates at which banks lend loans to the consumers) are monetary policy tools used to achieve the R.B.I's goals of price stability (low inflation or to overcome recessionary pressures) and sustaining economic growth. Changing the rates influences the money supply, beginning with banks and eventually affect consumers.

The R.B.I lowers interest rates in order to stimulate economic growth. Lower financing costs can encourage borrowing and investing. However, when rates are too low they can spur excessive growth and perhaps inflation. Inflation results in decrease of purchasing power and could undermine the sustainability of the desired economic expansion. On the other hand, when there is too much growth the R.B.I raises interest rates. Rate increases are used to slow inflation and return growth to more sustainable levels. Rates cannot get too high, because more expensive financing could lead the economy into a period of sluggishness. A rate cut could help consumers save money by reducing interest payments on certain types of financing that are linked to prime or other rates which tend to move in tandem with the RBI's rates.

A rate cut can prove beneficial for home financing, but the impact depends on what type of mortgage the borrower has, fixed or floating, and which rate the mortgage is linked to.For fixed-rate mortgages, a rate cut will have no impact on the amount of the monthly payment. Low rates can be good for potential homebuyers, but fixed-rate mortgages do not move directly with the RBI's rate changes. A rate cut changes the short-term lending rate, but fixed-rate mortgages are based on long-term rates, which do not fluctuate as much as short-term rates. When the RBI resorts to a rate cut, floating-rate payments will decrease. The amount by which a mortgage payment changes will depend on the rate the mortgage uses when it resets.

This is how the monetary policy affects the working capital requirements of companies, investment prospects of induviduals throught out the country, disposable incomes of people, Mobilisation of savings and eventually result in the growth of the nation.

Rupee Depreciation v/s Dollar appreciation.

The recent uptrend in the value of dollar with respect to rupee and other currencies can be attributed to few factors.

1- G-7 mechanisms.

2- Crude and Dollar relationship.

3- Gold and Dollar relationship.

4- Indian Context.

G-7 mechanisms- The G-7 nations own huge assets and have large exposures in dollar holdings, so a fall in the value of dollar results in the decline of their wealth and a rise in the value of the assets will result in boosting their dollar holdings wealth. The current uptrend is not purely bases on the Market mechanisms but based on the G-7 Mechanisms.

2- Crude and Dollar relationship- Crude and Dollar enjoy an inverse elationship which means that a consistent rise in price of crude will result in decline in the value and demand for dollars and vice versa. This is due to the fact that Crude is pegged to dollars, Crude can be traded only in dollars, before purchasing crude nation need to pep up their dollar reserves to make crude transactions. when the price of crude tends to be very high , Nations try to resort to using crude very conservatively and purchase less of crude , in this scenario the demand for dollars decrease and on the other hand when the crude tumbles nations try to accumulate their dollar reserves to purchase more of crude, this results in the surge in the value of Dollar.

3- Gold and Dollar- Financial crisis has resulted in the shifting the focus from the capital markets to the commodities market, Among the commodities gold iss the safest bet, Gold too is traded in dollars, People try to accumulate the gold reserves for which they buy or demand lot of dollars which actually results in a surge in the value of dollar.

4- Indian Context- It is a fact that whenever RBI purchases dollar against rupee the value of dollar rises against the rupee and when RBI tries to sell the Dollars against Rupee the Dollar declines against the Rupee. RBI in the recent years had always accumulated Dollar reserves but never sold its dollar reserve holdings. The Forex reserves of India as on 7th Nov-08 stands at $244,059 Million.

The Conservative stands of RBI has resulted in its not disposing of the dollar reserves. If the Rupee continues to get the beating gainst the dollars, RBI might end up resorting to some stringent measures to curb the Dollar Domination against the Rupee.

So Let's wait for the moves of the RBI.

Along comes another crisis!!

Just when the whole world is deep in fears of recession creeping in, Prominent automakers General Motors and Ford Motors jolted the already gloomy sentiments of the investors by announcing a loss of 4.2 Billion $(GM) and ford too ended up depleting its asset base by 7.7 Billion $ following which ford has announced to resort to Job cuts and layoffs.The US Auto Industry is reportedly seeking billions of dollars as financial aid from the Federal. Ford on the other hand is looking for a bridge loan.

After the financial crisis the next potential threat was deemed to be the Credit card crisis but looks like the autocrisis is likely to hit earlier than it.

History of sorts!

Barack Obama created history of all sorts by becoming the first Black President of the U.S. Having won at a time when the nation was amidst economic crisis, the whole world awaits the moves of the 44 th President of the U.S. as his moves will play a pivotal role in determing the fate of the country.

Apart from the history of being the first black person to represent U.S., The U.S.stock markets created another history of sorts by stumbling down to a level, which was never witnessed on the day when the Presidential election results were out.

Barack Obama will be sworn in in January, so hope the whole world awaits a dynamic leader to rein supreme and lead the nation to glory no matter how the circumstances wary.

"Barack Obama - heal the world from the ongoing trauma".

Japan Follows the footsteps of its Asian Counterparts.

Bank of Japan cut down the interest rates for the first time in 7 years in order to protect its economy from the onslaught of the financial crisis which has been deepening day by day. It has followed the footsteps of its counterparts- India and China. US too had gone for a rate cut.

Apart from the interest rate cut the nation awaits more measures from the Japanese central bank to infuse liquidity in to the market. Moreover the economic growth estimates of Japan have dwindled to a new low due to the global fears of recession creeping in.Financial crisis had its toll on japan too.

Its now wait n watch for the measures to be initiated by its central bank.

RISK MITIGATION!!!

High market volatility often ends up in drastically affecting the stock performance, which results in a need for risk mitigation. In Life there is no " Control Z",the same with the stock Markets, during recession or Bear markets its always " Better safe than sorry". In these market conditions there is a need for horizontal risk mitigation where in a person's portfolio comprises of more scrips and the amount to be invested in each scrip will be spread over the number of scripts.

Apart from the number of scripts, its important that the defensive stocks - Pharma stocks and FMCG Stocks hold a major share of the portfolio in order to minimise risk and optimise returns during the recessionary periods. Many Pharma stocks and FMCG stocks have fared well in comparison to the other scripts during these periods. When most of the stocks hit new low, Few of the pharmaceutical and FMCG stocks reached new highs during recessionary and bear market conditions.

If one would like to keep away from stocks then its better to opt for any bonds, Gold ETF's, Fixed Deposits and government securities.

CHINA'S Economic Growth witnessing a slowdown mode!

China's economic growth estimates tumbled to below 10% for the first time in 3 years further sending shivers down the spines about possibility of a recession creeping in, adding to its woes the Quarterly results announced by the US Firms ended up negatively, pulling down the dow by around 5.2% and nasdaq by around 4.6% which resulted in them ending up at 5 year lows! The European markets were hit by around 4.5% along with the asian markets which ended up in the red!
Economists feel that the bottom has not been hit yet, US Treasury predicts that the recovery will begun only in the late 2009. On the other hand, Nymex Crude ended up low by 7% at around $67 a barrel- 16 month low, due to the recession fears and rising inventories of the Oil Firms in the US. The Price of oil is further expected to decline drastically once the world confirms that Recession has crept in!

NEW STOCK MARKET TERMS - Post Financial Crisis.

I Came across a mail, i thought of sharing with you all! A Laugh riot!!! Humour in Crisis!
CEO --Chief Embezzlement Officer.

CFO-- Corporate Fraud Officer.

BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.

VALUE INVESTING -- The art of buying low and selling lower.

P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.

BROKER -- What my broker has made me.

STANDARD & POOR -- Your life in a nutshell.

STOCK ANALYST -- Idiot who just downgraded your stock.

STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.

FINANCIAL PLANNER -- A guy whose phone has been disconnected.

MARKET CORRECTION -- The day after you buy stocks.

CASH FLOW-- The movement your money makes as it disappears down the toilet.

YAHOO -- What you yell after selling it to some poor sucker for $240 per share.

WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share.

INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse.

PROFIT -- An archaic word no longer in use.
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PAUL KRUGMAN WINS NOBEL PRIZE.

The Royal Swedish Academy of Sciences on Monday announced that American Paul Krugman has won the Nobel economics prize "for his analysis of trade patterns and location of economic activity."
"What are the effects of free trade and globalisation? What are the driving forces behind worldwide urbanisation? Paul Krugman has formulated a new theory to answer these questions," the academy said in its citation.
The citation said Krugman's approach is based on the premise that many goods and services can be produced at less cost in long series, a concept known as economies of scale.
Krugman is an American economist, columnist, author, and intellectual. He is professor of economics and international affairs at Princeton University, and is also a columnist for The New York Times, writing a blog and a twice-weekly op-ed column for the newspaper since 2000.
Krugman was born into a Jewish family and grew up on Long Island, and majored in economics (though his initial interest was in history) as an undergraduate at Yale University. He earned a Ph.D from MIT in 1977 and taught at Yale, MIT, UC Berkeley, the London School of Economics, and Stanford University before joining the faculty of Princeton University, where he has been since 2000.
Other awards:
1991, American Economic Association, John Bates Clark Medal
2002, Editor and Publisher, Columnist of the Year
2004, Fundaci�n Pr�ncipe de Asturias (Spain), Prince of Asturias Awards in Social Sciences, the "European Pulitzer"
2004, Doctor of Humane Letters honoris causa, Haverford College

He has authored a few books with Wells including Economics: European Edition (with Robin Wells and Kathryn Graddy, Spring 2007); Macroeconomics (with Robin Wells, February 2006); Economics (with Robin Wells, December 2005); and Microeconomics (with Robin Wells, March 2004). From 1982 to 1983, he spent a year working at the Reagan White House as a staff member of the Council of Economic Advisers.