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Showing posts with the label Economy

Food Price at its summit!!

The surging food prices is a great matter of concern with most of us. I remember US President Barack Obama once commented that prosperity in Indian and Chinese economy caused food price inflation in US market; as they are consuming more and more. Lots of hue and cry were raised to oppose that and justifiably he was criticized for such comment. Indian and China can boast of hosting world's greatest chunk of population but their per capita cereal or food consumption is no match with that of per capita US consumption. Leave apart per capita cereal consumption per year; if we see per capita cereal availability to Indians till 2008-09 was only 165kg and this remained more or less same since 2001. During the same period per capita cereal availability in China was 290kg per year and in US it was more that 1000kg! Source suggests it has further plummeted in India as of now. So, for the surge of food price increase in consumption level is no reason. Our Prime Minister...

Be Watchful; INVESTORS

The current turmoil in international markets are felt in Indian burses too. The recent Euro crises in Greece and and on going out break of Euro crises in Spain ( as expected) is creating tremor in global financial market. With Euro losing ground and dollar gaining strength; the gold price has sky rocketed. As every time the stock price become unpredictable the investors turn to gold as safe bet. In India gold has larger role besides being investors choice. As the marriage season is ensuing the demand of gold for ornaments is rising so the price is getting an extra boost. However with the current ups and downs of stock market offers the opportunities to day traders to make quick bucks but it is not at all safe for ordinary investors. They better keep away and watch carefully the market trend. Though may investment gurus vow that international market hardly cast any effect on Indian market but it is doubtful how far they are reliable. In fact in past there are evidence that they advise f...

Gold is Gold for ever!

The global recession is not going to recede soon and the current equity rally is likely to fizzle out; the several experts opine this. The trillion dollars package announced by US in G20 summit to counter current global recession may induce inflationary trend in the market all over the world. In this never seen before situation, the obvious question is where to invest? In any situation when the economy of any nation went tumble tosser, gold used to be considered as safe haven for investors. Till recent months this has been true for Indian investors but with dollar price rising high; the gold price is too high to attract investment. Do you know year 2008 was a year of gold! The Indian gold exchange traded funds (ETFs) have given returns around 26.5% ; the highest amongst any asset class that gives return, during financial year 2008-2009. That to when the global economy has been reeling under the pressure of recession. Now, the gold price touching the new high $1002.2 per ounce during ...

Coutering recession

In India, with the great democratic exercise like election being held in several installments, the fresh measure to counter global recession has been announced by Reserve Bank of India. A fresh cut in the lending rate has been announced hoping to limit inflation rate within 4% and meeting the moderate growth rate at least 6%. Now, industries can seek loans at a cheaper rate. The housing loans will also be cheaper, it is expected. How far current measure offer impetus to demands in housing and other core sectors is still doubtful; as several industrial sources comment. The reason being they say, that though there is a cut in the lending rate but Banks are reluctant to offer fresh advance apprehending further rise of bad assets.

Indian Trend

The deep recessionary trend world wide is taking its toll in developed as well as developing countries. If recession has put thousands of people out of employment in the recent history of United States; so with many other countries in the developed word. The developing countries like Russia, Brazil, China and India are yet to feel the full blown pinch. But the sinister sign is everywhere visible. In India, already the there is slump in demands in infrastructure, automobile, steel sectors are visible. Not mention about information technology sector, India's most emerging and earning in terms export sector. This year number of companies have stopped fresh recruitment, many have shown the pink chits to their employees, albeit in a limited scale. But the uncertainty in future is a certainty now! Every pundit or Guru is forecasting India's growth slump in tandem with global recession.

Economics and Politics

The current economical environment worldwide is not stable, whatever encouraging news may pour in. In India, our leaders and their Babus are all set to misguide the public in general as if everything is under control, the inflation, the industry and the growth story. But keep in your mind ,it is the poll ahead. So the rosy pictures are drawn to make you believe so you bring them back to power. The demand slump cut downs the price of goodies or consumer durables. The car price is low, the flat price is getting flatter, since there is no taker. Who are those investing in real estates? They are not looking for the roof over their heads but just perking their funds for faster and safer appreciation. So for you and me it may be the better time to look for a roof over head. But mind you , the flat which you and me can buy are not cheaper yet; neither the price of rice, wheat or vegetables or anything for our every day consumption. So keep your funds safe, may be there are far more grim days...

The Great Depression!!

>A shanty town ship " Hooverville" A mother of seven, aged 32 years only, photo taken in 1930s Wall Street crash! Wall Street gone tumble tosser, consumers cut down their expenses pulling down the demands. Industries started layoffs, to cut down expenses. The demand further plunged due to escalating unemployment rate. So the Great Depression crept in. The debtors could not repay their loans, banks began to fail. The depositors lost money; there was no deposit insurance in 1930s, as of now. 744 banks failed in the first ten months of 1930 losing $140 billion. Can you imagine, before the decade was over around 9000 banks failed in America! Do you know what Hooverville, Hoover blanket, Hoover Flag, Hoover soup meant? In US during that turbulent time Herbert Hoover was the president. The battered people; who sold their houses and started living in shanties; created townships which were known as Hooverville. To brave the wintry cold they covered themselves with news papers, ...

Gobal meltdown and aftermath !! 1929 Crash

The devastation of First World War and technological progression both together offered a great opportunity of investments and employments in 1920s. That ushered great optimism in the Wall Street as well. Most of the American participated in stock market speculations and investments. You could buy the stock at a fraction of their prices, called “buying on margin”, the rest borrowing from brokers. Obviously share prices sky rocketed. Again the old rule “what goes up must come down” worked. Unfortunately; what went up struggling for number of days; came down in three days! That was the crash. It was on October the 24th, 1929 famous as “Black Thursday”; a massive sell off took place. The volume of trading was more than triple. The price came tumbling down. This time again Richard Whtney of J.P. Morgan and company tried to rescue the market, he started buying the shares aggressively. The downfall halted for time being. The market looked up on 25th, the Friday. On 26th, the Saturday (then tr...

GLOBAL MELTDOWN & THEREAFTER !

What goes up that comes down; this old adage is still valid. We all know that. But when it makes a free fall, then it crashes. This exactly happened in the all major stock markets all over the world, the Wall Street took lead. Thank god! History of Wall Street suggests what comes down crashing, stands up sooner or later. Sooner the better and worse the later; this is true with the recovery, as witnessed, no less than ten crashes, in the last century. Let us recapitulate what we have seen in the last century. Since it is going to be a long narrative, I shall write it in few installments. Hope you will hold your patients. The first financial crash Wall Street witnessed in last century was in 1907. The New Year saw Wall Street in very depressed condition. The stocks were traded at 25% lower prices. It was due to tight money supply condition. At that time Otto Heinze came with a get-rich-quick scheme. He was joined by his brother Augustus Heinze, who was a copper magnet. Finally the tri...

The avalanche in Wall Street

The avalanche in Wall Street and burses all over the world is the sole point of discussions everywhere. In fact poor are bearing the burnt when they go to the market and fail to understand what relation the price of rice or cooking oil has with the stock market. So the middle class are, though most of them have burnt their fingers while participating directly investing in equities or through the mutual funds route. The worst sufferers are Americans, though the sub-prime crisis was initially caused by those who took loans but failed to pay. It is obvious that they have spent the money for procuring more goodies or using it for speculative purpose. But now their speculation having turned out to be abysmally wrong, many of them are filing for insolvency or bankruptcy taking with them till date no less than dozens of reputed bankers. The current symptoms suggest another great depression like 1929-30s is surfacing fast. Though the socialistic measure of pumping exchequers money into the b...

The US Rescue Package!

The Bush Government's rescue operation through legislation of bill to address the current avalanche in US economy, may be a welcome relief but not a solution. This is observed by the George Soros, the investment Guru. Here is what Geroge Sores wrote about the rescue package in Financial Times.com : The emergency legislation currently before Congress was ill-conceived – or more accurately, not conceived at all. As Congress tried to improve what Treasury originally requested, an amalgam plan has emerged that consists of Treasury’s original Troubled Asset Relief Programme (Tarp) and a quite different capital infusion programme in which the government invests and stabilises weakened banks and profits from the economy’s eventual improvement. The capital infusion approach will cost tax payers less in future years, and may even make money for them. Two weeks ago the Treasury did not have a plan ready – that is why it had to ask for total discretion in spending the money. But the general i...

THE OIL GAME

The world oil price rebounded above $100 per barrel after touching recent low to $99 per barrel. On September the 10th the member of OPEC countries met to discuss the oil price which dramatically declined from their peak $147 per barrel in July amid a global economic slowdown. All over the world the rate of inflation rose high and they are still hovering around their recent peak level. However a surprise decision to cut production by 520000 barrels a day taken by member of OPEC cartel. It is reported that OPEC president and Algerian energy minister, Mr Chakib Khelil said the output cut would start immediately. He further added "if you do your own calculations, it is a cut of 520000 barrels per day"; announcing a new OPEC output quota of 28.8 million barrels per day. The International Energy Agency (IEA) meanwhile cut its estimate for global oil demand this year and next, saying consumers mainly in the United States are changing their lifestyles in response to high prices. T...

CRUDE FACTS ABOUT CRUDE OIL

Rising crude oil price has taken the global economy on ride. In India the inflation rate has crossed 12.01% last week, this is based on whole sale price index in India, but the real rate of inflation considering consumer price index is anything between 60-70% and so with other developing economy in the world. Now the oil price is cooling down and revolving around $125 per barrel from its all time high $153 per barrel, is still failing to make any visible impact on the rising inflation rate. Let us see what the crude facts about global crude demand are and supply position. The demand of oil has increased considerably in the developing nations, no doubt since last ten years. In China for the demand of oil has been registered as compounded annual growth rate of 6.5% for the last ten years (1997-2007). Last year India has taken the 4th largest oil consuming country in the world overtaking Germany and Russia. At the same time India`s position as a oil producer in 23rd in the world. This is ...

SPECULATION, INFLATION AND COMMODITY MARKET

The excessive volatility in commodity market can be attributed to excessive speculation. The current phase of inflation under which all the countries, the developed, developing and not to mention the poor, are reeling is a direct fall out of this. The excessive speculation in commodity market if allowed unfettered the mankind may go through this roller coaster rides for ever. Obviously it will be sickening and threats to derail the world economy and spreading famine, unemployment, drought and obviously another world war. Let us not forget the terms of surrender for Germans in 1st world war contained the seeds of the 2nd. The “reparation” clause as a term of surrender imposed upon Germany by the victors was not sustainable, so the result was the Second World War. The rest is history. The recent oil price hike, as alleged by Saudi Arabia, is not due to shortage of crude but excessive speculation of crude in the global commodity market. The oil price is looking down currently around $122 ...

SHAKY STOCK MARKET!

Indian stock markets are currently rocking due to ongoing political crisis. The stability of government is the major factor. If the present government escape the fall, appears to be imminent due to lefts joint opposition on nuclear deal, the market may (watch my word “may”, it cannot be assured!) look up. In fact the global oil price is showing sign to calm down. The last crude price fall was very sharp it was around $20, last week in the international market. The fall was registered in both New York and London “Brent” crude prices. In India the market is not watching the triangular situation, the stability of government, the inflation and the global crude price. With the ray of better days ushering in the crude market, to-morrow is the d-day, the government stability for till it completes its tenure will be confirmed; last but most important factor is the inflation. The measures taken up, by the central bank, are likely to show results in two months now. Prices of some cereals and fo...

INDIAN GROWTH STORY - A SHAM!

Recently ended G8 summit and India`s move a step forward towards nuke deal; has raised lot of hues in media locally and internationally. Indian growth story, despite of it`s current depression due to uncontrollable inflationary pressure, is gaining popularity. Political mileage is being extracted to maximum extent by the ruling parties and its allies. Though; the leftist have withdrawn their support, portraying a bleak outcome of the deal in future, for imaginary reasons, best understood by them. The Government seems to be unperturbed. For the common men, especially the educated urban people, the inflation and the nuke deal both are important but the former merits immediate attention. The crude price is making record every passing day, breaking the previous high with no sign of respite, makes it impossible for India or any other developing nation to rein inflation. Indian growth story is passing, albeit hopefully for short period, though a bad time. But is the growth story consistent...

INFLATION; INDIAN JUGGLERY

Inflation is word what perhaps a primary school boy is getting use to. So much the pressure of inflation affected all strata of society in India or greater part of the globe. In India as with everything else, even inflation is not without its doze of hypocrisy! It is one of the few countries where a democratic Government juggles with the figure. Most of the developed and developing countries use Consumer Price Index (CPI) to calculate inflation, but for India it is Whole Sale Price Index (WPI). Government`s plea is that they cannot collect the data always on which the CPI is based! Ridiculous! WPI includes 100 out of 435 commodities, what are not important from consumer point view. In fact the retail price what consumer pays is much higher than the wholes sale price. In recent months there has been more than 30% hike in several commodities what are for common consumptions. In some cases it is even 60%! Whereas the latest Government figure declared 11.63% rate of inflation. Imagine the...

Global Stock Markets; the difference

The inflation in tandem with spiraling oil price is taking heavy toll on stock indices in Indian as well as all the major global burses. The south bound journey of stock indices is continued all over. No one seems to know how long they will last or when they will bottom out! Individual investors are shaky to burn their fingers; institutional investors seem to have diverted their fund towards more rewarding commodity market where speculation in oil is high. This may be another reason for the oil price`s apparently sky bound journey. The recent declaration of Iraq to open up their oil fields to corporate sectors is likely to take time. In the mean time Saudi Arabia has promised to increase their output from this month but nothing seems to work. Every day the oil price is touching new high and so the inflation. However, if we compare the different stock markets, we find that the countries which are commodity exporters are better than those economies which are net commodity importers. For...

OIL TO SPOIL

The oil price rise is presumably out of fear of irregular supply from Nigeria, Venezuela and Middle East crisis in Asia. Beside this off course, the hands of middlemen and OPEC countries are conspicuous. In terms of extracting exorbitant price the OPEC countries are keeping crude oil production at low ebb. These countries have nothing except oil. Their fortune will dry up along with their oil wells; this they know well. So, they are all out making hay till the oil wells are dried up. That way you cannot blame them, their lack of concern for those who are going starve due to oil price hike and resulting chain reaction causing all around inflation, is historically usual. The rich countries like US, West European counties, in far eastern Asia like Japan are dolling out subsidies to absorb the shock for time being. But they too are feeling the tremors, keep afar the poor sub-Saharan countries, after all stark naked has nothing to lose! This meteoric rise of oil price, has chosen a time, wh...

RISING FUEL PRICE RAISING INDIAN SOFTWARE INDUSTRIES PROSPECTS

Indian sunrise sector, IT industry was reeling under pressure to keep its profit margin throughout the last year. The reason was Indian Rupee was gaining strength against Dollars. Results, the imports became cheaper and exports were less remunerative. This is obvious every time Rupee appreciates in terms of Dollars. Dollars being till date the major currency for international trade, the fluctuation of exchange rate affects the profit margin of any industry that either import raw materials, capital goods, labor or anything and so with the industry that exports similar goods or service. Major IT companies like Infosys, TCS, Wipro, Satyam and all other that sell their products or services, suffered loss in comparison to their profit margin for previous couple of years. Their share price shot up and market capitalization grew to a level, never seen ever, it touched its zenith in late 2007. The prolonged euphoria lasted so longer than expected in Indian stock market is truly nerve wrecking ...