I had advised my readers of de-laundering of money way back in May'08.
http://ecobizindia.blogspot.com/2008/05/india-taking-financials-with-pinch-of.html
Now not even in my wildest dreams could I have imagined the magnitude of the Satyam Fraud, however the idea behind it was most certainly the same. Yes. Take Financials with a pinch of salt, in this case though it was with a bucket-full of Salt and sadly so. we need to take a look at auditing and due-diligence practices world-over.
Wednesday, January 7, 2009
Satyam Fiasco- Part 1
Wednesday, December 17, 2008
The Madoff Ponzi- Loosing faith in America
Over the last 12 months the US and its regulatory agencies have made a mockery of themselves. If the financial crisis wasn’t enough to prove their inefficiency and ineffectiveness now we have Madoff popping its ugly head out robbing investors of over $ 50 Bn. To put things in to perspective this is the largest financial scam ever.
Securities and Exchange Commission Chairman Cristopher Cox said the agency failed to act for almost a decade on “credible and specific allegations” of wrongdoing by Bernard Madoff, who authorities say bilked investors of as much as $50 billion.
We have asked time and again what the regulators were doing when exotic derivative instruments were being invested in indiscriminately, we have asked the same question about off-balance-sheeting various assets. And now we beg again to know why a blind eye was turned to the Madoff Scandal.
This brings about a lot of questions pertinent to the way America’s businesses, policies and politics is governed. It is no secret that Madoff was a contributor or a lobbyist and donated over $.2 million in the past few years to various political parties. Lobbying is something I’ve always called an official form of bribery. To compliment that statement I’d like to throw one around. Who’s the biggest backer of any assistance to the Big-3? Yes spot on, none other than President Elect Barrack Obama. May I ask how much has been given for his campaign by these entities? I think it’s a big question it always has been. It’s a form to legalize cash for favorable policies and this time the world is seeing and not just like other times when they were just witnesses this time around the world is casualty.
The world has considered America a safe place to do business, the US Dollar a safe currency to hold and US assets the safest to bet on. All these beliefs have been shunned in the last 12 months, yes I put my hand up and say the dollar myth will be shunned soon.
Lets not fool ourselves here:
Regulators are literally blind.
The Fed doesn’t have a clue of what it’s doing.
American Debt is now beyond correction.
It’s not Wall Street but Main Street that’s in the doldrums.
America is trying to pull of the biggest scam ever.
And the dollar is no safe haven (really).
Friday, October 24, 2008
Wats Up India: The hara-kiri down here
The Sensex closed below 10K and has now broken the 9K barrier. 9771.7 yesterday’s close was the lowest close in 2 years. The NIFTY closed below 3k for the first time in 2 years. FIIs have been pulling out funds from the markets and Indian investors are too scared to invest. Mind you most of them had seen a 7 year long bull-run.
The FII’s pulling out money, have increased the demand for the dollar and the dollar is at an all-time high, a tad above Re 50 to a $ at the moment.
Meanwhile, Unitec defaulted on a payment to the government of INR 1500 MM for land dues for its ambitious Noida project. The company is amongst the largest realty players in India. Post this news when KPS Gill (of DLF) was contacted he said that it was difficult to draw on existing lines of credits in a liquidity crunch like this one.
Tata motors, Mahindra and Mahindra Maruti Suzuki and Ashok Leyland are taking huge hits on their ECB’s or forex loans. Tata Motors and Mahindra & Mahindra's forex exposure is seen at $4 billion and $700 Whereas Maruti Suzuki may have forex loans worth $500 million. Ashok Leyland has posted a forex loss of Rs 14 crore in the second quarter.
Tata Motors the commercial vehicle market leader, which commands more than 60% of the market has gone in for a production cut by as much as 40-50% over the last two months or so. Ashok Leyland has also announced similar cuts to the tune of 40 to 50% to reduce its inventory pile-up of 13000 vehicles.
Tata has also announced a cut of 400 non-permanent employees with immediate effect yesterday. The above indicates that the are far more job-cuts waiting in the wings. Furthermore, realty sector players have claimed that we should see job cuts to the tune of 20% in the sector as a whole. Additionally a large number of smaller players and fly-by-night operators who were in for the quick bucks may even be forced to shut shop considering significant correction in property prices. Of course, it was only recent news of the airlines cutting jobs with Jet leading the pack. We are also expecting significant job cuts across the banking and financial services sector and the IT sector.
Coming to property prices we have already seen a correction to the tune of 20% across all segments. Even at the renewed rates there is no activity. The prices are still expected to correct sharply. In my opinion we should see at least a further 25% to 35% correction.
Reliance Industries Ltd (RIL), the country’s largest company by market capitalization, has closed half its polypropylene plant at Jamnagar, Gujarat, because demand for the raw material used for packaging has slowed.
The Airline players have been awarded a bailout package due to the sudden downturn. Whilst Airport BOT players GVK, GMR have decided to approach the government for change in contracts (read: additional benefits) due to the lower traffic volumes at the airport. For the main-street what this means is that there could be significant job cuts waiting in the wings (pun-intended).
Vodofone has approached the government, asking them to post-pone the 3G-spectrum bid to the beginning of 2009. Stating that it would not be possible for players to raise money in times of such tight liquidity.
In spite of RBI’s recent moves to infuse liquidity into the system through CRR and rate cuts. ICICI has just yesterday increased home loan rates by 1%. I have said this before and I say it again, we need higher margins in this country. Tight margins just won’t help you sail through tough times.
It’s festive season here in India (Diwali), supposedly the best time for business in the year. But the regular hustle and bustle at malls and stores, jewelers, car dealerships and banks for loans is simply missing. The glitter seems to have been taking out of the season due to the negative sentiment and the worsening global environment.
The recession has dawned upon us. India is still better coped to deal with it and the long term growth story seems to be in tact owing to economic comparative advantages. There may be a little detour enroute to getting there and we will see tough times till 2010, and hopefully its just till then.
Thursday, October 16, 2008
Linkedin Answer: Is New coffee start-up still a good business opportunity
The above question was an open question asked on Linkedin and what I post hereunder is my answer to it. I thought the answer was pretty interesting and it can be a yardstick to measure the strategic performance of almost any business. More so in economically tough times where businesses models are going to be stress tested.
------------
My personal opinion is that it’s going to be a real tough one. The competition in the sector is enormous, as a business you’ll compete with stores like Mocha, CCD, Barista (now Lavazza), Coffee Beans, Costa Coffee and the scores of other local operators. That is however just one aspect. Any place you go these days, be it a mall, an airport, or anywhere you’ll definitely find a coffee shop in some form or the other be it an actual store or a kiosk. The price of entry in most modern markets is to be fast, good and cheap…. Obviously cheap is a relative concept to the kind of perceived value your business provides. Not just that when entering a market where significant competition exists you need to be fast, good, cheap plus have an x-factor. Two questions you would need to ask yourself. Can I be fast, good and cheap, to make a dent in the market you would need to be industry standard at two and a market leader at one. Then you need to ask yourself what is the x-factor I can provide to my customers to induce a switch from their preferred brand. Further questions you may ask yourself: What will be the difference in experience I provide over competition? Do I have a price advantage I can leverage? Is there an un-satiated need of my target audience that I can satiate? Can I have number 1 market share/ Mind share? If you find answers to the above questions and you believe that you could be FGC + provide the x-factor then you have an up and running business model and all that then remains is the execution. I tried to think on the above lines and honestly could not come up with how this could be done in the coffee market in India. I thus believe that it’s going to be a tough ask, never the less it still is possible to make inroads into the market.
Thursday, September 18, 2008
TED Spread- Don’t Say I didn’t tell you….
Update: Well here we go again we are well past the 3% mark, the TEDs currently at 3.13%, well I see it zooming past further too.
------------
Well just yesterday I mentioned that we could see the TED spread shoot past its peak of 1987.
http://ecobizindia.blogspot.com/2008/09/ted-spreaad-again.html
So here we are today the Ted spreads at a hefty 2.99%, the highest figure since we have data.
The Great Depression II is truly here; trust is at all time lows, the market will punish even fair performers for all the trust is lost. Additionally there’s no easy way out of this, de-leveraging is going to be a long and painful process. We are sure to see the pain well into 2010 may be even more.
For all those looking for an investment opportunity, hit the Gold. It’s your best bet against a falling US currency and depletion of purchasing power. In fact it’s the only hedge. By the way gold’s rallied a 11% in the last trading session, I see more of it, much more.
The way I see it, Gold will shoot past the $1000 barrier soon enough and the next target thereon is $1200, which I see it shoot past in the next 3-4 weeks.
-Puneet Gulwani
Monday, September 15, 2008
The TED Spread Again
Update 17th Sept, 2008: TED Spread shoots further, zooms to 2.17%... this is the highest in the current crisis.... just a tad lower than Oct, 1987.... we could see it shoot past there in the next couple of days
------
Update 16th Sept, 2008: TED Spread now shoots upto 1.82%
T-Bill 3 M: 1%
LIBOR US 3M: 2.82%
-----
Well here we go again. It's fairly evident now that the FED and the US government doesn’t have any further appetite for bailouts!!!.... With Lehman filing for bankruptcy and Merrill being sold clubbed with 'No More Bailouts' the TED spread today shot up to 136 basis points.... higher than the previous months figure.... need I say this is what was expected....
Well it looks like it's going to shoot up further additionally it’s is expected to stay above the 110 basis points mark till at least March'08...
(PS the previous post was drafted much before it was posted….. the post timing however was coincidental with the hara-kiri on Wall Street.)
Subscribe to:
Posts (Atom)
