pateln01@gmail.com has shared: 2010: The year of uncertainty and volatility

2010: The year of uncertainty and volatility Source: money.cnn.com Despite some hiccups along the way, stocks delivered solid annual gains in 2010. The Dow jumped TK, the S&P 500 rose TK and the Nasdaq ended the year with a TK% gain.
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What to do when your risk tolerance differs from your spouse - Dec. 31, 2010

http://money.cnn.com/2010/12/31/pf/financial_makeover_toy_family.moneymag/index.htm?section=money_latest&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_latest+%28Latest+News%29

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(BN) M&A Bankers See India Deals Surpassing Record 2010

Bloomberg News, sent from my Android phone

Dec. 29 (Bloomberg) -- Indian mergers and acquisitions in 2011 may surpass this year's record $71 billion of deals, led by oil and gas, metals and mining companies, according to M&A bankers including Topsy Mathew of Standard Chartered Plc.

Billionaire Sunil Mittal's $10.7 billion acquisition of mobile-phone operators in Africa led an almost four-fold increase in takeovers this year as deals surpassed 2007's $69 billion, according to data compiled by Bloomberg.

"Large Indian corporates are going through a growth phase: they think there is a lot of opportunity, they think they have access to capital," 35-year-old Mathew, managing director for M&A for India, said in an interview Dec. 27. The London-based bank climbed 13 places to No. 2 among Indian takeover advisers this year, its highest ranking, Bloomberg data show. "They are capitalizing on the positive sentiment to undertake long-term strategic transactions," he said.

Companies in Asia-Pacific including India and China are expected to be the most acquisitive buyers in 2011 as attractive valuations and domestic competition drive deals globally, according to Bloomberg's M&A Global Outlook survey. Overseas companies may target Indian pharmaceutical and consumer firms, and local enterprises will seek natural resources, said Bank of America Corp., ranked No. 3.

'Highly Active'

"Outbound deals would continue to be highly active given that international companies' valuations are still relatively depressed, and Indian companies have access to debt and equity capital," Saurabh Agrawal, the 41-year-old head of India investment banking at Charlotte, North Carolina-based Bank of America, wrote in an e-mailed response to questions on Dec. 14. "Inbound and local deals will also take place."

Cross-border deals rose to a record $59.2 billion in India this year, according to data compiled by Bloomberg, after Mittal's New Delhi-Bharti Airtel Ltd. in March agreed to buy the African assets of Zain for $10.7 billion. Outbound M&A accounted for 74 percent of that volume.

The acquisition spree in India, China and Brazil contrasts with a slowdown in global deals. Mergers worldwide are down 46 percent from 2007's record, according to Bloomberg data. In the U.S., the world's largest market, volumes are 51 percent lower, and levels in Europe are down by 59 percent.

Pending Deals

Pending deals in India including the sale of a controlling stake in Mumbai-based software maker Patni Computer Systems Ltd. and Honda Motor Co.'s holding in New Delhi-based Hero Honda Motors Ltd. Buyout firms including Carlyle Group are bidding to acquire those shares, people familiar with the matter have said.

A group of state-run companies hired Citigroup Inc. last week to prepare a bid for Sydney-based Riversdale Mining Ltd., countering a A$3.9 billion ($3.9 billion) offer from London- based Rio Tinto Group.

"Resources will be a big focus, with Indian companies looking at consolidating their position in oil and gas, metals and mining," said Standard Chartered's Mathew. "There will be a particular focus on Indian public sector companies looking at oil assets internationally as well as Indian companies looking to acquire iron ore and coal assets for their steel and power operations."

Natural resources and telecommunications will continue to drive M&A, said Frank Hancock, managing director of corporate finance for Barclays Capital in Mumbai. Telecom takeovers accounted for 26 percent of deals in India this year, while energy and mining companies accounted for another 30 percent.

Takeover Rules

A proposed overhaul of Indian M&A rules may also stoke interest in domestic targets, Hancock, 50, said in an e-mail Dec. 14. London-based Barclays is ranked No. 4 on takeovers in India, its highest ever position.

"While cross-border will still make up 70 percent of the total pie, the balance between inbound and outbound will increasingly become more even," said Hancock. The new rules "are going to make it easier for a listed company to be taken over and thereafter delisted."

A panel formed by India's capital markets regulator in July recommended increasing the threshold shareholding level that would trigger mandatory open offers to 25 percent from 15 percent. Shareholders who already own more than 25 percent would also be allowed to offer to buy an additional 10 percent, half the existing requirement.

Indian Targets

Easing limits on foreign direct investment would also bolster overseas companies' appetite for Indian takeover targets, Sameer Nath, managing director and head of M&A at Citigroup's local unit, said in an e-mailed response to questions Dec. 20. New York-based Citigroup is No. 6 among takeover advisers in India this year.

"Liberalizing the FDI framework in a sensible way could be a positive for all parties," Nath said. Overseas companies may look to India for its telecom, health-care and consumer industries, while local companies will look overseas for oil and gas, metals, mining and technology assets, he said.

Financing remains a major prerequisite for large takeovers in the nation, bankers including Nath said. Outbound deals are particularly dependent on funding, Agrawal wrote.

A decline in borrowing costs has allowed Indian companies to replace debt with cheaper financing, putting them in position now to be more aggressive on acquisitions, said Ganeshan Murugaiyan, managing director and head of investment banking at UBS AG's local unit. The Swiss bank was ranked No. 7 this year in advising on takeovers in India.

"The benign debt market environment, especially from the second half of 2010, has helped several corporates to refinance the debt or raise long-term funds at attractive costs," Murugaiyan, 37, wrote on Dec. 14. "With this back-drop, we expect Indian corporates to be more acquisitive next year."

To contact the reporter on this story: George Smith Alexander in Mumbai galexander11@bloomberg.net .

To contact the editor responsible for this story: Jeffrey St.Onge jstonge@bloomberg.net

Find out more about Bloomberg for Android: http://m.bloomberg.com/android

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Gas prices: Bracing for more pain at the pump

http://rss.cnn.com/~r/rss/money_latest/~3/R96p6SntLK4/index.htm

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Washington's Revolving Door: Minimalist Approach to Wall Street Reform Leaves Business as Usual, Author Says

http://finance.yahoo.com/tech-ticker/washington's-revolving-door:--minimalist-approach-to-wall-street-reform-leaves-business-as-usual,-author-says-535761.html?tickers=C,BAC,AIG,XLF,JPM,GS,FAZ

It's raining money

Six inches of snow = Free diamond rings

http://rss.cnn.com/~r/rss/money_latest/~3/g42ThaFCjjg/index.htm

Passing the Risk puts everyone to blame?

the financial crisis was a zeitgeist brewing for thirty years: Tech Ticker, Yahoo! Finance

http://finance.yahoo.com/tech-ticker/the-financial-crisis-was-a-zeitgeist-brewing-for-thirty-years-535760.html?tickers=xlf,skf,%5Edji,%5Egspc,gs,c,bac

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China Raises Benchmark Interest Rate [CNN]

Just one way to try and combat Inflation (at least in the international environment). By taking a proactive measure, adding taxes on the front end is hoped to prevent or lower future troubles with this cushion.

http://rss.cnn.com/~r/rss/cnn_world/~3/BWyGsOyzcJE/index.html

Balancing the Budget: The Debate

One might think that it is not difficult to agree that we need to balance the budget. But the problem these days is how. If you've taken a negotiation course in college (undergraduate, graduate, or otherwise), you'll recall that it is hard to get people to agree, especially when it comes to agreeing on something that they don't find valuable to their case or interesting to begin with. So you might be asking yourself, do I have a solution to the budget "crisis." The short answer is no. The backup is that when it comes to a statewide budget, the scope of what is on the budget is important (in other words, our perception of the budget). Everyone seems to talk about how they want the budget to be how it was "how they remember it." Well this is essentially impossible in that the scope of the budget now is so large (in part due to the population, items on the budget, and of course our favorite inflation). So the next question might be, well can the budget ever be balanced? The answer is yes, but we need to realize that everything is just as important as everybody's view on the topics. The simplistic route would be contribution to the actual budget. What this means if one geographic area (be it towns, cities, counties, etc) contributes more than another, their % of the budget should be weighted more than an area that contributes less (as far as money received as well as costs accrued). The problem that I can tell is that everyone wants the benefits but no one wants to pay the costs. I think this would be a good starting point to helping in balancing the budget as well as repairing the other problems caused by the financial meltdown.



Note: Although this is a simplistic model, when establishing the full report in who gets what and how much they have to pay, and showing people the figures, any reasonable person should be able to better make a case rather than going off of the basis of not liking a "competitor's" view and only wanting to have their own.

Headphones Podcast Episode 9.0 Selling the Sale

• Black Friday -The first Friday after Thanksgiving where business, generally retail but can include all sectors, before profitable (in the black)
• Cyber Monday = The first Monday after Black Friday where consumers buy their goods online due to great deals found on the internet and done using the high speed internet at work

• Cyber Monday is just a fad as more people get high speed internet at home
• Sales can be found anyways if you buy enough in any place due to loyalty programs already in place at many locations

Direct Link

Headphones Podcast Episode 7.0 The Classic Tax

Episode 7.0 - The Classic Tax; Date: 11/22/2010; Description: I wonder if adding additional fees, taxes, surcharges or whatever you want to call it to each property based on value and position of the Monopoly board could work to better imitate real life scenarios. I think it can be done but would require a little additional effort beforehand to make it work. This would also create an additional role for another player (akin to another job in the real world).

Where in the World is My TV Show?

Today's posting is about creating a business model about the seemingly impossible internet tv "issue." I think that we are creating a bigger issue that it really needs to be. Rather than posting videos after they have aired on TV much like a blogger reviews a new product after it releases, these shows need to be shown online at the same time as the TV broadcast. How can this be profitable? There are a plethora of options, especially in this decade of technology. First off, if a person has a TV subscription and internet connection, both sources have gotten paid for the work being done. So showing it online, on the TV station's website is a form of over-the-air broadcasting. Since the show is essentially paid for, the station benefits by letting the viewer watch it online for free because they get to watch it on time and the piracy to get the show elsewhere disappears because there is no desire to get it from some other source. If the person does not have a means to get the TV show or station currently, charging a nominal fee for the show (charged through the ISP) allows the person to watch the show and piracy is again averted. Basically, approached the Pay-per-View and Apple hybrid model of watching TV shows live online brings the niche market of internet TV viewing into the mainstream because people now have a means of watching TV in more than one location than just the family room. Showing ads like regular TV still occurs much like Hulu does now but can be interactive moreso than TV can ever be, especially since it can be better catered to the viewer. Commentary can be done live, or afterwords but provides feedback to the show owners to get a better feel for how viewers enjoyed the show. In short, showing shows on TV at the same time as on the internet, with ads, is the business model that needs to be adopted. Allowing people to get the shows through Zune and iTunes simply allows for additional revenue and less work since the show has already been made available digitally.

Podcast Link: Episode 3.0

CNN Repost

CNN Breaking news - Federal Reserve unveils $600 billion stimulus plan aimed at improving economy, boosting jobs. reply STOP 2 unsub

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MSNBC: The U.S. Economy

BREAKING: U.S. economy grew at an annual rate of 2 percent in the third quarter | More: http://sms.msnbc.com

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mobile blogging

coming soon

Fragmentation

Today's post is not so much about finance as it is about revenue generation. Many people ask why there is a clear divide between app stores, and is there really a difference. There are differences which is the fragmentation, not in the devices per se (which I'll get to a little later). The difference in app stores is more of a brand issue than a device issue. Apple has only 1 product (granted there are 3 actual devices - iPhone, iPod, iPad but they all run on the same base operating system). How is this different than Android? The difference is the operating system, as Android devices have the same base operating system (only divided by upgrades and updates - Windows 3.1 is broadly not the same system as Windows 95 or Windows 7). The profit structure has its differences under Google's Android and Apple's iOS but money can be made (or not made if you're creating the app for free use). The devices are merely a means to fill market segments by location, cost, functionality, capabilities to list a few.

So what is the moral of this story? Remember in grade school when we all had to learn about least common multiples and the like. Well, it comes into play here when trying to understand exactly why sometimes there really isn't a fragmented market, just companies segmenting the market to make that additional dollar in a "free" or "competitive" market.

We will be returning shortly...

As an effective company can cut costs by reducing redundancies, Finance Today will be returning soon as there have been few to no significant events that cannot be covered in an unique basis.

Thank you.

Dilbert–The Boss breaks everyone into groups…

 

Believe it or not, managing groups is an integral part of management in operations for the most part but also in handling regularly occurring events. The idea is that the size of a group actually does make a difference in where it is placed in the grand scheme (and by scheme, I mean organizational plan) of the company and the type of project (pure, functional, or matrix) that is being completed.

Outsourcing

What comes to mind when outsourcing is mentioned? The top three things are (1) labor, (2) cost savings, and (3) a different (usually 3rd world) country.

Only 1 out of 3 assumptions though is actually a good reason for outsourcing.  If you guessed at cost savings you are already ahead of the game. The first assumption is valid only upto the point that labor is an area where a firm needs to save money. For example, call centers are a good place to save money. The problem with going international is that now additional laws have to be followed, and regional sensitivity to culture and resources have to be maintained. Also by going to this country, if there is a problem getting the goods back or all the laborers go on strike, then that part of the process comes to a halt.

So what is outsourcing? it is simply a firm or any entity performing an activity with someone else without having to do it themselves (and of course paying them for it). Any firm or entity would do this because they figure they can get more value from doing with someone else than themselves. Much time is spent researching where to outsource and which part of the firm to outsource so it is not just a matter of outsourcing within the country but how much value can the firm get from doing this activity externally than internally.

The Markets and Monopoly

An interesting NPR article about how the current collapse of the market can be related to the game of Monopoly.

 

http://www.npr.org/templates/story/story.php?storyId=129021829&sc=17&f=1003

iGoogle

I was recently asked what a good way to have information at a glance would be. I asked this person what service they used (as a matter of how to help them with a personalized answer, not that it is better or worse than anyone else). This person replied that they have a gmail account and that is all they use. I replied that Google offers a plethora of services that allow for this. For example, Google has a page called iGoogle. This page can be setup with widgets (this is sort of where the widgets on the Android platform originated). All sorts of widgets can be added (i.e. mail, news, feeds, weather, etc.). This person then proceeded to ask if I use this service. I do as it helps to consolidate where I need to go for the various sites I go to. I have my page setup for news, feeds, calendar, and the How-To Geek. I have it setup for efficiency on what I look at regularly. Yahoo and Microsoft offer similar services which have different layouts, but can offer the same thing.

 

So you may ask what this has to do with finance. Shouldn’t this be on your tech review blog? Not this time because this has to do with efficiency and productivity, a core part of any firm. Any group of services can be made efficient once a common thread is found. Productivity basically takes this efficiency and uses it to the firms goal(s). Why should I do this in my personal life? In short, anything I read or learn about can be put to good use if the general theme behind it is understood. If I read a news story about how the economy is doing bad, it can help understand why someone is having trouble paying me. Or if I read a story on why Microsoft is having trouble in the tablet PC market where Apple is currently succeeding, I would look at the circumstances of both and realize that Apple is going after the consumer market, where Microsoft is going more for a broad business environment, though they can apply their strategy to the consumer market since they are established there as well.

In short, it is important to know what your firm can an cannot do, where it is established, and how it can ensure competitiveness through efficiency and productivity.

Incepted

Last night, I finally was able to see Inception. I already wanted to see it but after hearing all of the hype, I decided to check it out for myself. I will not review it here and try not to spoil it but I will say this about the movie. It seems like it can relate very well to extreme circumstances in this day in age. I talk, of course, about the financial meltdown. When a business is made in any form that is difficult for more than one person to follow, the end result will be very devastating. In the movie, the main character is the only who has performed an Inception while the others remain very skeptical and hesitant. Much like any cause of the financial meltdown (I will not specify as any particular part can be made worse the the others), few people actually understood what was sold to the masses.

 

So why, you ask, do I related these two. Only because, like Ariadne, understanding comes not from rushing into something thinking one can handle it but from taking a step back and bringing the idea to the forefront. The other example is when the Professor tells Cobb that he never taught him how to be a thief. Much like business school, acting based on facts is of utmost importance than actually making money or how costs are cut.

 

At this point, you’re saying, whoa you got all philosophical on me for a second. I say no. Think for a second about the number of times anyone has wanted to go for the next big score only to have it blow up in their face or the times anyone has said “You get what you pay for.” Responsibility will get what you want, like the movie, but the rewards will be that much more than was expected.

To Recover or Not To Recover

The jobs report was recently released and the U.S. is not doing quite as well as we had hoped. The numbers only looked good because census takers were recently employed but were also more recently let go. This basically left us in the same employment situation as before, but time does not stop for the census. People who have given up looking for work actually caused the numbers to change as well. The main flaw in our system for checking unemployment (which causes a small controversy every few years) is that it only counts those people actively looking for jobs and are unemployed. It does not count people who are unemployed and not looking for work and those who are employed and looking for another job.

Some have asked, well why not just add these figures into the unemployment figure. This is a great idea more in theory than in practice. First off, counting these people takes time. By the time anyone can clearly figure out who has or hasn’t found a job for a particular period, the data would irrelevant as the person could have found a job (and/or started looking for another job – temporary work is still an issue). Second, keeping track of changing employment data for much of America consumes a lot of resources. The budget for this is not quite this big, and not many people would find this a good allocation of resources.

So what to make of this? The nation’s employment figures are too high for many people to like but until factors like consumer spending, and bank lending start flowing a little more smoothly (day-to-day changes occur regardless of how good or bad the economy is), it will be daunting to get data that is accurate and (I hesitate to say) makes us feel good enough to think the economy has recovered.

EuroZone

I was recently asked what exactly is the EuroZone. Why not just say Europe or any specific nation or nations the topic covers? I then was intrigued as all I could explain about the EuroZone was that it relates only to those countries who use the Euro as their currency.

This definition though is rather narrow or broad depending on your view of things (a la glass half full, half empty, or too much glass). The EuroZone includes those countries in that use the Euro has their sole currency. Such countries that have done this are Austria, Belgium, France, and Germany, among others.

In order to enter the EuroZone, a country must first adopt the Euro alongside its own currency and is monitored by the European Exchange Rate Mechanism. The Euro is monitored and regulated broadly by the European Central Bank. The European Central Bank can loosely be related to the United States Treasury (but as with many international relationships, the laws and regulations vary by region). Interest Rates and Inflation are paramount as the recent financial crisis has been argued as proof of the lack of regulation or oversight though others argue that how regulations are measured and implemented is key.

 

Here are a couple of articles with more information on the EuroZone and the European Central Bank:

http://en.wikipedia.org/wiki/Eurozone

http://en.wikipedia.org/wiki/European_Central_Bank

Cap and Trade (aka Emissions Trading)

By definition, this is an administrative means for the government to provide incentives to businesses to reduce emissions and control pollution through economic incentives.

 

To elaborate, the government issues a limit (or cap) on the amount of pollutants that can be emitted. Business then issue credits to show how much they have reduced their share of these pollutants by compared to the amount of limit the government has imposed. In theory, those who have reduced their emissions will have leftover credit while others will break even and others will pass their limit. Those who pass their limit would be have to buy credits from those who reduced their pollution to avoid penalties from the government. This would reward those who reduce their emissions while those who did not would have in one form or another be “paying” for not changing.

 

Read all about it here: http://en.wikipedia.org/wiki/Emissions_trading

Cournot Model (Competition)

By definition this model assumes that each firm treats the output of other firms constant in order to determine it’s own output. In theory, this would lead to market equilibrium because each firm is doing this so over time, price and output would lead to the most ideal output in all firms in the market. Also, prices are essentially determined by the expected output of the other firms.

Tranche

The basic definition of Tranche is a portion or slice of something else. In finance and monetary terms, it deals with dealing risk among the capital or liability being sold or structured in the institution or among institutions in the market.

 

Grades are issued per Tranche to help determine the measure of risk. In theory, this is to help buying institutions determine the liability to them as well as general riskiness (usually versus the rest of the market).

 

Although the benefit of having external firms having a grade preset for firms that are consistently accurate and updated, it can prove difficult for investors who do not have the experience or full implications of the data presented to them. This relates to the inherent flaw of preset information in that it is only as good as the person analyzing that data. In order for the data to be most useful, equal access is only the first step, if not a prerequisite, in ensuring that the data is analyzed as it should, rather than pure random data extraction.

 

In short, Tranche as an idea is good. In practice, it is only as good as how it is presented and analyzed in the market.

The Good, The Bad, and the Funny

What's the difference between a good accountant and a bad accountant?

A bad accountant looks at a cloud and says there's nothing there.

A good accountant looks at a cloud and says "Let me reconcile the debate on the density of clouds and bill you tomorrow for it."

Tree Saver

Today I received several notices from my bank telling me that terms had been changed on my accounts. I received one envelope per account. I find that a reason that banks could be losing money is due to this waste of money. I find it startling that banks would not find a much easier solution to save money. I just so happen to have a solution. I say A solution because there are always alternatives (as any economics students can tell you). This solution is to send ONE letter to every customer saying that they can login to their online account to view change(s) made to their account(s). The bank could further offer to either have the customer download/print the terms change themselves or have the bank mail them a copy based on account(s) chosen, quantities, etc. This idea is similar to how students can order transcripts. Not only do the banks save money by not having to print off as many forms, mail as many letters, etc., they can make money based on the number of people who actually order these service changes. I for one would print it out myself because the bank took the initiative to actually print it off myself.

Game Theory – Backward Induction

1. Backward Induction – Looking forward to the final decision node(s) and reasoning backwards

2. Equilibrium Strategy (of a firm given sequential strategic interaction) – a sequence of a firm’s best actions, where the actions are taken at the corresponding nodes

 

This theory in a basic sense is saying that if you have a particular outcome that you want to related to a current state, reasoning backwards would be the best way to create the best link between point A and point B.

 

 

Terms and definitions credited to ‘Marginal Economics and Organizational Architecture’ textbook by Brickley,  Smith, and Zimmerman