Goldman Sachs adds Lakshmi Mittal to their board of directors

The world's largest investment bank, Goldman Sachs has elected steel tycoon, Mittal as an independent director. He will serve on its Audit, Compensation and Corporate Governance and Nominating committees. This surely is another feather in his cap. As said by Chirag in his earlier post on Goldman Sachs, it is only investment bank to have avoided the subprime muddle. Good to have an Indian on the board of such a reputed firm.

Besides Goldman  Sachs, he also serves as a director of Airbus maker European Aeronautic Defence & Space NV and ICICI Bank Ltd. of India. Though it is very common to have one person on two boards, famous persons are sometimes added to the board to add credibility to the company and boost shareholders' confidence. Bill Gates was elected to Berkshire Hathaway(run by world's richest man Warren Buffett) way board back in 2004. Alain Belda, chairman of Alcoa Inc. has been elected to IBM Board of Directors effective July 29, 2008.

Mittal founded Mittal Steel Co. in 1976.  Currently, he is the chairman and chief executive of ArcelorMittal which was formed as a result of his acquisition of Arcelor SA in 2006. Unofficial reports suggest that Mittal is keen to takeover the Rio Tinto mining group to secure larger supplies of iron ore. Bankers believe that Rio's iron ore assets are currently worth about $50 billion[thats one of the biggest.......mind you!!]. However, this figure might go down in the coming months, if the steelmaking boom starts to die out.

I think that he has only 2 options : either buy directly from existing shareholders or wait until the assets of Rio go on auction!! I am sure waiting for you to say something (on lakshmi mittal obviously) at our comments page.

Are the stock markets going up or down?

Where are the markets heading? A brief review of stock markets, gold, oil, rupee and more....


Stock Markets :Stock markets globally are very bearish with US Markets leading the downfall. Asian markets are bearish but I would put them as oversold, and they need a counter-rally. If someone is short should think of covering and shorting at higher levels. Overall the indian markets I think should bottom out somewhere near 3600-3800 levels in Nifty. At current levels in India, I would not prefer to short.

Gold : The fall of March-April 2008 kept Gold in sideways consolidation zone for some time. I think now this consolidation is over and it should start moving up. Also Dollar which was taking a couterrally from its big fall seems that this counterrally is over and now dollar should start moving down and Gold should start moving up. Overall I think Gold would also move up in times of high inflation. Inflation is likely to remain high in next some months which will keep stock markets depressed and Gold up. (Normally Silver also follows . I think fresh longs can be made in Gold.)

Oil (Crude) : Crude is taking a one side rally from consolidation zone of 85-90 dollars a barrel. It was consolidating in June, 2008 in a sideways zone and took a break last week. I think it should move up initially to a level of around 150 and then consolidate further. Overall the formations of it is all bullish. The bullish formations get neutralised only if it trades below 132. Hold to your long.

Dow : Dow closed at 11346 on Friday 29th June, 2008. It is too much oversold and should not be shorted. I would not short here but look at counterrally. 11700 - 12000 would act as strong resistance to it. I think most of world stock markets tend to follow Dow.

Indian Rupee- Dollar: Indian Rupee looks very weak as one of weakest currency related to other currencies. If Rupee trades below 43, then I think a very strong short covering can come which can take rupee to 44 levels. Take care.

Disclaimer: Trading is risky and all matter above mentioned is for educational purpose. Consult your Financial Advisor before you trade as there is every chance of losses.
You are requested to give your comments to this post as it will motivate me to write further and answer your querries.

Health Economics- Medical tourism,the new rage in India

Fact of the day:  According to the Ayurvedavatarana (the "descent of Ayurveda"), ayurveda first came into being when the Hindu deity Brahma had a revelation,after which he woke up and created the Universe.

I thought we should have something lighter than Liquidation for a lazy Sunday afternoon brunch.So here goes a late Saturday night post for a late Sunday morning read.

Medical tourism - the phenomenon in which hospitals in emerging markets offer "sun, sand and surgery" at low prices to patients from North America and Europe - is gaining in popularity. While India lags behind countries like Thailand as a result of airport infrastructure and other bottlenecks, health care providers such as Apollo Hospitals are expanding at 10% a year.

India especially seems to be a hot spot for medical tourism due to the following reasons-

• Hospitals in India cost up to 5 times cheaper for North-Americans and up to 3 times as cheaper for affluent South Asians such as Singaporeans.
• India as such is a popular tourist destination.It is as diverse as an entire continent (be it in terms of climate,landscapes,languages,food,culture or religion) and lighter on the pocket than most!
• It offers several traditional and authentic forms of medicine and cure such as ayurveda.
• We have several Indians as practicing doctors in the west .Westeners have on that count some familiarity and association with Indian doctors. 

India therefore stands out as a complete package,seemingly perfect. Then,what is it that keeps countries such as Thailand(otherwise only associated with piracy and fraud) ahead of India?

• There are staggering delays at every stage of entering India-long queues at the customs counter,flight delays,lack of flights(only about 15 international flights a day) and other handicaps such as inhospitality and crude conditions(corruption,an alien Indian typical culture and mindset)
• Compare this with Thailand,where tourism is already a major sector(earns the country it's daily bread and butter) and passage to and through the country is smooth. Over 250 international flights operate daily to the country's capital,Bangkok.
• Legal bottlenecks-a lack of trained and educated manpower,leaves a large cavity to be filled . Medicine is becoming increasingly unpopular among students. Lack of colleges and seats in medicine gives further incentive to students for opting other courses over medicine. Lack of manpower(handicap,unable to cope with the demand) at hospitals makes it a hassle for foreign clients to obtain an appointment from long distance.

Needless to say there is tremendous potential for medical tourism in India. Here's how the situation could and can be improved-

• Government assistance: Offer complete packages, authorised by the govt. This package should cover both tourism(sight-seeing,board and lodging,transport) as well as Healthcare at a leading Indian hospital such as Apollo or AIIMS.It should offer special benefits and discounts  Proper publicity and marketing of the scheme to make it popular among foreigners must be carried out(somewhat like the incredible india! campaign).
• Reformat the education system to give medical colleges a much needed tweak/boost.We require more doctors,not just for foreign patients but for locals as well.It is after all a matter of life and death!
• Lastly all services,especially transport services must pull up their socks and clean up their act.(weeding out bottlenecks and corruption)

Who is the founder of Apollo hospitals,the third largest private healthcare provider in the world?

Think you have the answer to my latest poser?Have something that you are eager to share with us. Well,worry not. Post all your comments or your answers on the comments page.

Banks raise billions as credit crisis gets worse and liquidity is squeezed

This time its the turn of the European Banks to take the hit - and that right on their balance sheet!! Due to subprime mortgage, short-term lending is poised to rise again even as central bankers are pumping billions and billions of dollars into their businesses.

This may be summed as an 'end-of-the-quarter' effect, where banks pump in a lot of cash to make their balance sheets look stable [even in the worst times] mainly to boost investor confidence and trump their competitors. Cold, hard cash is raised through a variety of processes, including international funding, and borrowing dollars from Americans (probably Federal Reserve...) and selling part-stakes (Merrill Lynch, Citigroup, Lehman Brothers did that last year to ADIA Sovereign Wealth Fund, and Bear Stearns sold itself fully to JP Morgan)

Latest reports also suggest Fed providing a tens of billions of dollars to central banks in France and Switzerland to help them overcome this financial mess.

Other American banks, saddled with huge write-downs in bad debts, have to bolster their red-inked ( full of losses) balance sheets too in the wake of this credit crisis. Notes one analyst, 'The quicker the capital is raised, the quicker it is lost nowadays'. Banks are also anxious to insure themselves against future losses from credit swaps and corporate loans on mortgage securities.

So why do you think the above situation is getting exacerbated ???

The answer lies in the title of my article - their is an unusual hyper demand for dollars from European banks that is creating a liquidity squeeze in the market since a year. The advantages to Europe are simple - interest rates being so low in USA, make it tempting to borrow at such low rates. Secondly, some banks are forced to borrow dollars so that they, in turn, can invest this money into dollar-driven investments(the financial investments made only in dollars - as it is a de facto currency of the world presently).

But all this may take a dynamic twist when the Fed revises its interest rates(i guess upwards this time) from a paltry 2%. What do you say about the above?? I'd like to hear your views....

I am signing off with my thoughts," It took a lot of years to set up this financial model, a single year to destroy it completely, and it sure requires a long time for healing it."

Bill Gates Quits Microsoft! Steve Ballmer to step up

Bill Gates shall no longer be in-charge of day-to-day operations at Microsoft. Steve Ballmer is likely to essay that role (executive charges) while Gates shall stay onboard as Chairman. It is apparent from interviews given by Gates that he shall not take his 'foot of the pedal or hand of the wheel' at Microsoft.He shall still have considerable say or sway rather over all major decisions.He shall work only once a week for Microsoft most probably with only the top level people.He will not as before take under his charge all projects but rather distribute his efforts(guidance) amongst specific targets or products.

The only service we know for sure that will be worked upon by Gates is MSN search-a service which has tremendous potential but needs improvement.

Th reason given by Gates for his de-facto retirement is that he wishes to spend more time on managing the Bill and Melinda Gates foundation,which is the largest transparently operated charitable organisation in the world.He is also the fiercest opposition to anti-trusts after Rockfeller.

Quote of the day: "As we look ahead into the next century, leaders will be those who empower others." - Bill Gates.

And that exactly is what Bill Gates has been for Microsoft; a visionary. Since the earliest days he had a clear cut vision,a dream of Microsoft setting the standard,a dream where computer software becomes affordable and accessable to all.We see this in practice today-most homes and nearly all offices have a computer and over 90% of those computers run on Windows software.

When Microsoft signed a deal with IBM,IBM in their hurry did not bother with the details or legal formalities of the deal For them Bill was like any other youngster(23 then) trying to sell his innovation and make it big. They therefore did not press much and Gates with a future plan in mind got them to sign a non-exclusivity agreement which gave Microsoft the rights of license for the product. Later on when Microsoft cashed in on their free right to market their product,a stumped IBM could only grit their teeth in resentment.

Bill Gates is also extremely proud of the fact that he gets the best talent in America to work for the biggest company.He has said it often enough "I don't hire bozos".He takes only the best and that is one of the reasons why his company does so well.



Unlike Apple and many other brands,Microsoft is a people's brand-comfortable to use,convenient,homely and at a very affordable price.

More than any other computer company,Microsoft have diversified through innovation and continuos improvement-be it the XBox 360 or the internet explorer,Microsoft has a sweeping suite of products. They have been the first to identify the potential of several services and were onto the scene before anyone else(take for instance hotmail,the first ever e-mail service).

Microst also made Stanford a hotbed for recruitment-an incubator of sorts. They even encouraged the growth of new compaies and made sveral donations-including the building in which Google started.

Bill Gates has left behind him a legacy that no entrepreneur can ever parallel.

A question: What is the full and real name of Bill Gates?

Do you have the answer or a wild/random guess to the question above?How do you feel about Gates quitting?Will it affect Microsoft?

Tell us all on the comments page.

North Korea denuclearising : Reasons, benefits to the already ‘food crisis’ hit country

North Korea has finally given a 6 month due account of its nuclear programme to China, which contains the Korea's plutonium enrichment efforts. This handover comes under the global efforts which offer North Korea many diplomatic, political, safety and economic benefits/advantages/incentives. I've summed up a few:

1. US will remove North Korea from their list of 'states sponsoring terrorism' : a big move that will make them trustworthy and reputable in world affairs.
2. Nuclear Weapons, weapons grade material or any other reactors North Korea may have piled or built have to be disarmed according to the deal. This will make all its neighbors be on better terms with each other and make cordial relations with South Korea and Japan and other countries close-by.
3. There were some rumors that North Korea is dumping their nuclear reactors policy for a exchange of food aid (I saw that on CNN channel) but couldn't really believe it.

Furtheron, news is rife that North Korea is facing a serious 'famine' or food crisis. Being one of the most 'closed-mouth' country in the world, no one really nows the scenario inside North Korea, but international observers have analyzed that the country faces a shortage of more than 1 million tonnes of grain (thats huge !!!) which it has to feed to its population.Though there is no inside information, North Koreans have always looked less-nourished than their opulent over-the-wall neighbors South Korea. Countries like South Korea have committed or in the process of giving 50,000 tonnes of corn and US is known to have promised half a million tonnes of grain. Thats it for external contributions as of now.

Rising deaths from rural areas and greater awareness have led their leader Kim Jong-il to give remedies to this food crisis as 'high priority'. Otherwise soon North Korea will face a famine that it last saw in the mid 1990s when famine/food crisis claimed a million lives then.

So do you think the above two are interconnected? Or North Korea has simply succumbed to international pressure? Let us here your views too!

Ramifications of the Indo-U.S. Nuke deal – economic benefits,advantages and disadvantages

Update : Co-Sponsor of the bill, from the Democrats, Joseph Biden has been nominated as the Vice President along side Barack Obama. He is a strong backer of the deal - lets keep our fingers crossed until the results!! Read more>>

For almost 30 years the U.S. has been at the fore of aglobal fight to deny India access to Nuclear power technology, because it developed nuclear weapons and tested them.(Cruel Hypocrisy really,considering that the U.S. were among the earliest nations to develop nuclear weapons and test them)

Now after nearly three decades India have been offered a golden opportunity to emerge out of their nuclear seclusion and be at par with the top nations of the world in terms of nuclear energy output.

At present nuclear power production in India accounts for only a measly 3% of the total generation of 120,000 MW. Large scale nuclear power production would also mean less dependence on traditional sources of non-renewable fuel such as coal,oil and petroleum. Abundant nuclear power production would obviously lead to a fall in fuel and electricity prices.It especially holds relevance as a promising new alternative in the face of price rise and fall in oil output.

The fruits of total privatisation are seen in the telecom sector. Gone are the days when a cellphone was an item of luxury beyond the reach of the common man.

The nuclear deal could mean a similar privatisation in the energy. According to a report in Bloomberg,multinationals such as Westinghouse,Rosatom,GE and Areva have expressed a keen interest in operating a nuclear power plant in India,should the government encourage private investment. Indian companies such as Tata power and Reliance Energy are more than eagerly open to such a proposition.

But how does the U.S benefit from the deal?

A valid question. The U.S. would be supplying India with both nuclear technology and reactors,should the deal progress beyond endless chatter and talks. The U.S.A. is projected to mint over $150 billion of the deal.

That precisely is what the Left is worried about. The deal would mean that India is completely dependent on the U.S. for supply of technology and reactors. This places India in a vulnerable position,open to being exploited for the U.S. would be able to dictate the price,terms and conditions as they please.

Verdict

The pros outweigh the cons and hence India should go with the deal. They must however not haggle so much and must make a quick decision.In any case the deal will not bring change or improve the lives of the people who constitute the real India-India lives in small towns and villages,not metropolitan cities or big towns,and I'm afraid that the deal is going to benefit only the latter.

What is your take on the nuke deal?Is it a boon or a bane? We are open to all your views and criticisms.We encourage you to leave behind a comment on the comments page.

Behind Sam Walton: the founder of the world’s biggest company – Wal-Mart

I just read the famous autobiography of Sam Walton - 'Made in America' . Here is a small book review/note that I have made for my readers.

Walton takes the reader from the days when he sold newspapers and magazine subscriptions at the age of 10 to his last days when Wal-Mart was a thousand stores strong. He had always been hard-working and economical: he paid for full college fees on his own, helped on his family farm too, even waiting tables in exchange for a meal and sleeping in sleeping bags against hotel rooms. Gave up the prospects of joining post-graduate college to being a management trainee at J C Penny where he discovered his love for retailing. Subsequently he spent 3 years (1942-45) in the US Army before opting to start a Ben Franklin franchise in 1945. He worked day in and day out, and after learning the tricks of trade, and also his innovative methods, he set up Wal-Mart stores in 1962.

His story is about making a commitment, a commitment to be the largest retailer in the world and to share profits with employees, treating them as your own and motivating them. Walton mentions that the only way reason Wal-Mart stayed ahead of Competition was the relationship and communication skills he and his managers shared and were able to enjoy life-long.

"When the going gets tough, the tough get going" Sam Walton controlled expenses better than the competition, exceeded customer expectations. He advised: "Swim upstream", Go the other way, ignore the conventional wisdom and do the opposite of what everyone's doing - this is the only way you are going to be successful in life.

The best thing I liked about the book and the man was that Walton does a clear job of telling a nice story of how he built Wal-Mart. It's very enlightening to hear him speak of his failures, how he fought them, his invention of new business practices (most of his best ideas borrowed from every store he visited in the world) and his straightforwardness and truthfulness. Even after being adjudged the richest man in America in 1985, he confessed that he still drove a pick-up truck and would pick up a dollar note if he saw it was fallen on the street!

In summary, I recommend the book for all knowledge enthusiasts, and persons relating to shopkeeping and retailing/supply chain management also for business/economic students. I'd like to hear your views too! post a comment please.

Saudi Oil Output to highest ever level…..is it enough for oil prices to cool off?

News has just come in that King Abdullah of Saudi Arabia has said that the largest oil producing country of the world Saudi Arabia will up its oil output to 9.7 million barrels per day. He hinted that this number may also go up to 12.5 million barrels in the future.

In his statement, he also said that OPEC have never tried to shoot the oil prices towards north - he lays the blame of the present oil crisis on speculators. He also said that countries levy huge oil taxes and then sell to their citizens thus pushing up oil prices. In India, government adds atleast Rs. 10 towards the price of petrol and then gives a lot of subsidies in this regard (due to the sudden rise nowadays)! All his arguments may tempt people to think that oil prices will go down.........Due to increased supply by Saudi Arabia and subsequent cooling off. But some oil analysts and economists beg to differ.

Not only is crude oil technically very strong but it might just go all the way to $145 - $148 if a short selling comes in oil in the next few days. Short selling essentially means- when people take a bet that oil prices will fall. When their bet is successful, they speculate even more. Finally at unresistable rates all their bets reverse due to market forces which compel the oil prices to rise one-way. Therefore, it is expected that perhaps, oil prices may rally to $148 a barrel in the near future.

In this time of uncertainty, it would not be wise to call the shots so early. Rest all depends on the forthcoming meeting between OPEC and Federal Reserve (of US) later this month. Do check the blog then for more oil updates and analysis of the meeting.

till then, please post a comment.

Toyota culture-a peek behind Toyota’s unique culture of contradictions that drives them forward

Takeuchi,Emi Osono and Norhiko Shimizu have spent over six years studying the gigantic Japanese automobile corporation and have uncovered remarkable reasons for Toyota's success. Read further to have excerpts and interpretations of their ground breaking research.

Toyota is a conundrum from the outside-it seems to be a staggering giant on the verge of collapse.It pays relatively low dividends as compared to it's rivals and hardly lets go of employees(even if they grossly underperform) and scarcely welcomes fresh talent. Their dividends average only twenty percent of earnings as compared to rival Daimler-Chrysler's 47.5%.On the other hand it has accumulated over $20 billion in cash.

Toyota mangers also rise through the hierarchy very,very slowly-the average age of top cadre officials is 61 in Toyota,the age by which most officials in other corporates retire.

Toyota encourages conflicts, opposition and contrasts-leading people to innovate and think of new solutions. Contradictions are imposed at every possible junctions so that employees are able to think of innovative ways and solution to go about the problem.People do not have to blindly follow the orders of higher authorities-they are given much freedom and liberty to follow any course of action. Learning from experience and mistakes is an integral part of Toyota's functioning.

Hugemongous-that's how meetings in Toyota are held. Everyone from workers onwards to retailers are encouraged to discuss problems and even give constructive criticism without fear of repercussion.

Toyota sees employees not just as a pair of hands but as knowledge workers who accumulate chie - the wisdom of experience on the company's frontlines.

Toyota sets near impossible goals to achieve and forces it's employees to stretch beyond the maximum limit.It also successfully customizes itself to local standards and expectations. This also brings up the point of experimentation,another key feature that has made Toyota remarkably tolerant of failure and equally adept at innovation.


There are two contradictory forces at work here-forces of expansion that usher the winds of change to push the company forward and forces of integration which prevent Toyota from being blown down by the very same (winds of change).

Here are a list of the key contradictions that drives Toyota forward.

Toyota has a strict hierarchy,but it allows employees to push back.

I have already explained this one,no need to go through it again. Now lets have a look at the others.

Toyota moves at a snails pace,but at the same time manages giant leaps.

For instance Toyota made a late,sluggish entry into American and European markets-it's growth till date has been slow in those regions.But at the same time Toyota was the first company to come up with a truly eco-frindly,green car.

Toyota is highly efficient yet uses it's time in seemingly wasteful ways.

Hordes of people,many of whom who do not even participate attend their regular meetings. Senior executives spend an unnecessary amount of time visiting dealers and use an unholy number of multilingual coordinators-a post most companies have stashed as it erodes communication between the offices and head-quarters.


Toyota is frugal,but is ready to splurge on key areas.

In Japan the entire staff works in the same room,without even partitions or dividers as it occupies a lot of space and in Japan,space costs serious money. But at the same time we find that Toyota has invested over $22billion in research over the past decade and has spent over $170mn competing in the formula one circuit.



A paradox : Simple communication co-existing with a complex social network

As an unspoken rule,communication in Toyota must be as brief and simple as possible.At the same time employees must make sure that everyone knows what is happening and that each and everyone has a say.To ensure this there is a special A3 rule which states that any idea or plan must be conveyed on the briefest and simplest terms on a sheet of paper no larger than 11 inches by 17 inches,which is then put on display publicly for the benefit of all employees.

It is not however work alone that creates strong communication links within the company. Toyota lays stress on building complex complex social networks where employees are encouraged to attend parties and join in any of the numerous available clubs. This is done to ensure that everyone feels at home,feels secure,does not feel neglected or shunned and most importantly is comfortable communicating with his co-workers openly.

Found the Toyota method interesting? We are equally interested in what you have to say about Toyota. We can hear from you if you post your comments in the comments page.

The ‘midas touch’ conquers all: Goldman Sachs pulls off a stunning $2 billion profit

The results have been announced! Goldman Sachs have pulled off a $2.09 billion profit in one of the most turbulent and 'recession' hit time in today's era: a time that has seen the bankruptcy of Bear Sterns and a rattle Lehman Brothers (who posted a $2.8 billion loss). The result surely speaks for itself: it proves the financial domination of Goldman Sachs once again.

Citigroup has lost $ 5 billion in the past. Merrill Lynch and Lehman Brothers have been shaken. Bear Sterns is bankrupt and JP Morgan doesn't look good either (sitting on a huge Bear Sterns liability). So how did Goldman Sachs beat everyone's expectations and come out on the top??? Read on......

1. Dented competition: With the virtual closing of Bear Sterns, Goldman Sachs profited from reduced brokerage competition. It also made a lot of hard cash by earning fees while raising capital for banks and financial institutions hit with large credit losses.
2. Formidable Risk Management: With arguably the best risk management department in Wall Street, Goldman executives trumped all others by avoiding exposure to subprime loans and bad debt write-downs. They gave the industry's smallest loss on that count : a mere $775 million as against $2 billion expected by analysts.
3. Volatile and Tough Markets: "When the going gets tough, the tough get going." An unpredictable future and a turbulent recession-hit financial market compelled Goldman Sachs to out-think its competitors and that is exactly what they did perfectly!
4. Perfect strategy: CEO Lloyd Blankfein made use of different revenue streams and the broking,investment banking, risk management dept, and trading businesses to make money even in a credit crunch/credit crisis. During the credit crunch, instead of worrying about capital, they earned huge fees by arranging capital for other credit-hit companies and financial institutions.

This fresh news comes at a time when everyone is seeing red. Lets see what others have to speak about these results here!

Surprise! Surprise!- Japanese pharmaceutical Daiichi Sankyo Co. has takenover Indian pharma giant Ranbaxy

At a time when Indian companies are going global by making acquisitions,the largest takeover of a listed Indian company,namely Ranbaxy, by reputed Japanese pharmaceutical Daiichi SankyoCo. comes as a stark contrast and a shock to many. In an unprecedented move Daiichi has offered to take a majority stake(50.1%) in Ranbaxy,with a deal valued at around $4.6 billion.Ranbaxy's Malvider Singh has agreed to remain MD and CEO of the company.

A match made in heaven -

Where Ranbaxy lacks Daichii is strong,where Daichii splutters Ranbaxy excels,hence the deal brings benefits for both corporations.It has created in the eyes of many a true powerhouse-a strategic combination of innovation and generics.

The Japanese market and the world market in general is opening up to the possibilities offered by generics.Ranbaxy is ranked among the ten best generic companies in the world.Since Daiichi is weak on this front,Ranbaxy made a viable option for takeover.Ranbaxy's marketing and Human Resource pool strength was only further incentive to do so.

Post the buyout Daiichi Sankyo will be the second-largest pharma company in India with about 5% market share in the 33,000 crore domestic pharma retail market,just a fraction behind domestic major Cipla.It would also mean that Daiichi which was initially present in only 21 countries can(with the takeover) further it's operations to 56 major nations.

Ranbaxy on the other hand gains from Daiichi Sankyo's excellent product pipeline, technologhy and infrastructure.

What is your take on the deal? Please feel free to share your views on the topic by posting comments here.

Oil prices going to cool off soon...but not until they hit their highs!!

Barely weeks after stunning the world with news that oil prices will touch $200 a barrel, Goldman Sach's oil analyst Arjun Murti predicts oil prises are going to plummet to nearly $75/barrel. He attributes this sharp decline to 2 factors.

1. Soon prices of oil would rise to a great extent, that there will be a sharp decline in demand of oil, consequently, pushing down oil prices steeply.


2. Some OPEC countries have issued statements that they might increase
   oil production following this oil crisis in order to ease the supply
   pressure and cool off the demand. This is too likely to push down oil
   prices.

According to me, the ongoing 'slowdown' in the growth of the global economy and falling growth in industrialized countries will push down oil prices alongwith food prices and other necessary commodities' prices also. Further on, if India and China are unable to offset high commodity prices, they would too fuel a slowdown in oil consumption in their own countries thus pushing down oil prices( but not for too long).

Moreover, Saudi Arabia is all set to break records by ramping up oil output to highest levels following the decision to increase production of 500,000 barrels per day. The increase would bring Saudi Arabia’s oil production to 10 million barrels a day, the country’s highest ever!! With greater supply, and diminishing demand - anyone can guess where petrol/diesel prices are going ----down!!

My fellow bloggers agree too! They go to the extent of saying the Oil Bubble is likely to burst.

Tell me what you think of oil prices here.

Inflation climbs to a record 8.75%......Are we experiencing hyperinflation?

Latest figures on Friday 13th June suggest prices of commodities are rising and inflation is climbing faster. This leads us to the question : Is India experiencing hyperinflation?? The answer is a definite NO. India has experienced bad times earlier, the worst being the famine year of 1943 when inflation touched more than 50%!! So a mere 8.75 doesn't quite look dangerous. But it can still be. Consider the bank interest rate to be 6% and PF account/ Post Office/ Mutual Fund returns at 8-9%. This means that our money is hardly growing, moreover, value of money is eroding.

With wages increasing and input prices (thanks to oil/petrol/gasoline) increasing, prices consumers pay have to increase with the costs of production. In turn we demand higher wages, sending prices higher still. Hence, inflation.

Poor people are the worst sufferers because they have all their savings in cash. Rs. 1000 means Rs. 912.50 (converts into a loss of Rs. 87.5 for the poor ......isn't that devastating).Furthermore, oil prices and food prices are rising too and all combined poor people are finding it hard to make ends meet.

Most monetarists, economists and analysts believe that increasing interest rates will counter inflation. Granted, it reduces consumer spending and investment(slow growth too). But till when will the Indian government increase interest rates?? Consider inflation at 9%. Can interest rates be sustained at over 9%? What about other developing countries like Vietnam where inflation is 25%( according to latest figures). Can their government increase bank interest rates to 25% ?

Alternative Solution

One solution pointed out is that the RBI(Reserve Bank of India)/Central Bank of any country can increase rate of borrowing and reduced credit to people.

Finally, increase the supply of food, oil, commodities to all people. Give food surplus (to some extent) to the poorer strata of the society - hence pushing demand for food down. Following this, China reduced their rate of increase by 20.3 points from April while vegetable prices decreased 15.7 percent.

I am all ears to your solutions too! Submit them here!

Yahoo teams up with Google: What it means for online rivals and customers

After unsuccessfully trying their hand at advertising ads like google adsense, Yahoo have irked a deal with Google to use the latter search engine's advertising technology on their own portal (in the US and Canada). This announcement comes weeks after Yahoo failed to accept the bid Microsoft had placed to buy the company.

The deal will be quite lucrative and is likely to generate $800 million every year, starting from this one. Google ads will most probably appear alongside Yahoo search results just as they do along with Google search results (but only in US and Canada searches).The deal is on for 3 years but could swell to 10 years if Yahoo decide to renew the contract. (Check the official announcement from google too!)

This partnership will benefit advertisers and customers and also Yahoo, but might hamper traditional rivals and competitors. A Google-Yahoo deal with spell danger for all online sites like Microsoft, Facebook, AOL and others. This is going to kill competition and create a virtually competition less market in the online advertising industry if the 2 biggest stalwarts join hands. Nevertheless, Yahoo users and visitors will enjoy high search advertisement technology. Finally, such a Yahoo-Google partnership will benefit all publishers, web developers, site owners and advertisers by providing consistent as well as updated advertising technology to the above.

In the end, Consumer is king. Therefore we will enjoy better ads, better service and obviously better search.

Tell me what you think about this deal here.

Carbon Credits: The new stalwarts of battling global warming

Carbon credits are a new age 'commodity' which has been introduced to counter carbon emissions and mitigate global warming. These carbon credits can be bought and sold in the international markets at a pre-defined rate (which are like stocks and commodities and fluctuates due to market forces too).

Each company/factory/business must keep a balanced carbon credit. If one iron and steel smelting factory produces a lot of carbon during one year, it can be compensated by buying carbon credits from those businesses that excel in reducing carbon content in the air. There are many companies that sell carbon credits to commercial and individual customers who are interested in reducing their carbon footprint, and therefore these companies earn a handsome profit.

This mechanism of carbon credits was first brought out in the Kyoto Protocol, an international agreement to lower global warming, and has been signed by more than 170 countries. In fact, just recently did Al Gore win the Nobel Peace Prize alongwith IPCC chairman Rajendra Pachauri for great work on global warming.

Carbon credits have helped bring air pollution down. These credits assign a special monetary value ( i guess 40 euros per metric tonne of carbon released) to the cost of polluting air. If a factory is allowed to release only 50,000 metric tonnes of carbon every year, it has two options. Either it limits the emissions to 50,000 metric tonnes or buys carbon credits for its carbon emissions.

Carbon Credits have arisen as a direct competitor to carbon taxes. The former have many advantages:

1. Businesses can understand them better and can manage their activies.


2. Opens up a market for carbon emissions reduction.


3. Shifts the concerns over global warming.


4. Analysts and economists can predict future prices and analyse the trends of it too- thus making it an alternative asset class to gold, silver and stocks.


5. Earlier taxes were given to the government. Now credits are given to green companies that strive to reduce carbon content in the air. Its more like an added incentive for them.

India and other countries dole out huge subsidies as soaring oil price grips the world

Even after the steep price hike in petrol/diesel, recent studies suggest that the Indian Government is doling out huge oil subsidies which go upto 2-3% of GDP. While the government run oil companies like ONGC and Bharat Petroleum are facing huge losses, other private players like Reliance are eluding bankruptcy by shutting down petrol pumps.

Most of the countries, like India, are doing the same. The cost of subsidies in different countries may vary because there is a huge gap between soaring international prices and fixed domestic prices. Countries like Malaysia, Venezuela, China can afford to provide petroleum products like petrol/diesel cheaply to their people. Moreover, the annual cost of oil subsidies in Malaysia is likely to touch 7% of its GDP this year!!

Other countries like Germany, Britain, South Korea have been less tolerant and are maintaining global rates. The Indian Government can never take this route as they will be reluctant to do so on the onset of the General Elections.

Oil subsidies for the haves and the have-nots.

Subsidies have proved to be non adequate in protecting the interests of the lower strata of the society. They benefit rich people, those who own ACs and cars. Finally, Industrialists have to pay less for energy generation. A recent IMF study proves my point: the richest 20% households consume 42% of all fuel subsidies.

While the oil subsidies were introduced to help the poor people, they have had the opposite effect. Had the oil subsidies been used for better purposes like education, human resources and health, they would have a positive impact on the poor. Furthermore, this would reduce the demand for oil and hence, less demand would lead to reduced prices!!

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Coping with this ongoing inflation and a food/oil crisis

Only recently has the Congress led-UPA Government hiked the prices of essentials like petrol and diesel by Rs. 5 and Rs. 3 respectively. This, in turn, is likely to have a 'not-so-negative' impact on the overall economy. Whereas Inflation has now touched 8% level, the growth level has been sustained at around 7-8% too! Striking a right balance between growth and price control(curbing inflation) has always been a big challenge and so will it be this time around.

With prices skyrocketing, Indian middle class' savings and purchasing power will reduce considerably: prices of LPG have risen by Rs. 50 a cylinder . Now not only food costs more, but cooking food will grow dearer too.

RBI's balancing act of growth momentum and inflation by revising CRR(Cash Reserve Ratio) to 8.25% from 8% would work to suck out liquidity from the market and curb inflation to some extent. Kudos to YV Reddy for that, but the petroleum minister Murli Deora has increased petrol prices, making it dearer for commuters to travel by any kind of transport(barring cycles). Now we'll simply have to bear the brunt of the oil crisis in India alongwith the never-ending price rise of vegetables and fruits.

The economics of inflation as told by monetarists

Many monetarists may believe what Nobel Laurette Milton Friedman said : "Inflation is always a monetary phenomenon." He means that money determines the overall price level of an economy. Here's how: If you spend more money buying oil, there is less money to buy food items. So, after a few days, the price of food items should decrease in tandem with the demand for it. Most monetarists conclude that inflation arises when money supply expands more than the output. Therefore, the solution lies in not short-term policies relating to money, eg. CRR, petrol hike, but long-term plans and an equally efficient agriculture as well as transport infrastructure.

All suggestions and critics are welcome at our comments page.

Sovereign Wealth Funds: The guide to economic prosperity or financial dictatorship??

Sovereign Wealth Funds or popularly known as SWFs have all their coffers filled with money, currency and cash and their pockets heavy in coins. Just how do they accumulate so much capital and gain world-wide exposure?? Its simple: take the concept of a mutual fund. A mutual fund accumulates funds of a hundred thousand investors and gives an annual return to them. Likewise, sovereign funds are mostly held by central banks, accumulating money during the fiscal management of the nation's banking system. Due to this, these funds may hold money in currency, dollars, SDRs or IMF positions.

With high oil prices, financial globalization and large global imbalances and dwindling positions on assets, several oil exporters and Asian countries like Singapore, UAE, Kuwait, China, South Korea, Malaysia and Saudi Arabia have expanded their SWFs fast and rich -thereby making their presence felt globally Only recently did the SWFs like Abu Dhabi Investment Authority bale out Citigroup during the credit crunch, and so did others pump money into Merrill Lynch and Morgan Stanley because of the credit crisis. This reiterates my suggestion that SWFs will invade everything - right from pension funds to the Wall Street stalwarts.

China - Russia vs USA and European countries

With growing alliances between China and Russia, a greater co-operation between the two states, trade links both commercial and military , China and Russia would look forward to a dream run in the 21st century with their multi-multibillion dollar fund proving their financial prowess against the likes of US and UK. Europe will gets its first jolt when China becomes a natural customer of Russia's energy reserves even as Russia continues the restructuring of its economy.

Stabilizing force

SWFs are large enough to weather market downturns or even go against market trends. Many Sovereign Wealth Funds may also move a lot of money and allocate them properly thus reducing the risk of price effects on assets they own, thereby making it stable and reducing volatility. They could come quite handy in the present food crisis(if they opt to help) SWFs increase market liquidity and provide depth to the stock market.

Although SWFs are supposed to have a stabilizing effect on the world economy, they may also have unhedged, unclear, large, volatile positions in financial markets and have potential to cause market disturbance. SWFs, essentially held by central banks, can also come in its own way in the functioning of the central banking by mounting huge losses which may not be easily accounted for.