Archive for September, 2008

Facing Redundancy – understand your future


The credit crunch has had a huge impact on business confidence across the globe. Companies are now reacting to the deteriorating market conditions and are looking at ways to tighten their belts so their business can survive these hard times.

Most companies are cutting corners to stay competitive. May it be cuts in stationary or air travel or if the situation is more drastic –jobs.


We recently heard about a UK banker committing suicide by jumping in front of a train. On the other side of the coin, the CEO of an Italian company in India was burgeoned to death by a of disgruntled employees who were dismissed.


We find it most difficult to face redundancy due to social stigma, financial worries and an uncertain future. But the fact is that we worldwide we are seeing a vast number of cut in jobs and they will creep their way around the world including India.





For a pain-free redundancy 

· Always remember it is the “role” that is redundant and not “you” as an individual. It is easy for people to take it personally, but it is never an easy decision for any company to make redundancies.

· There are laws that dictate how redundancies should be handled to protect employees, so make sure you know your rights. If there is no alternative job available for you within the company then redundancy may be the only option. 

· Make sure that your CV is always up to date. If you need help with your C.V. there are services online and offline available to help you design one. 

· Before you leave the company, ask Human Resources or your manager for a reference. Take email addresses or telephone numbers of colleagues you worked with – sometimes redundancy happens unexpectedly so it is always good to be prepared.

·   Check local newspapers, websites of companies you are interested in and speak to friends and family in case they know of opportunities.

· Break out of your mould. Consider that you may have to look at alternative positions to the one you were employed in. It might be possible to transfer your skills into another role.

· Be flexible with your salary expectations – if there are lots of people looking for a fresh challenge it might be necessary to take a lower salary than you were earning before. This may only be a temporary measure but could be essential at this time.

· Make sure you are available for interview. There may be more candidates than vacancies, and there is nothing worse than losing out on a job interview because your phone was switched off or you slept through your alarm. Someone else will snap the position up.

· Try and get temporary experience whilst you are looking for permanent work. This looks great on the C.V. It shows you are willing to work whilst looking for the next job and offers you varied experience as well as sometimes opening more doors. 

· Dress impeccably. Make sure you have a clean interview suit ready to be worn and practice interview techniques with friends or family so that you can answer questions without hesitation. 


China and India – milk for babies

In India, it is a casually accepted fact that milk is adultrated. Most households, even in urban areas buy milk that is not pasturised,,,,from the local dudhwala who brings milk in cans and measures it out in front of the housewife. There are many a slips of water between the shop and home. 

The government bags of milk are are injected and milk is removed and water added. Blotting paper is also romoured to be used to thickened the milk. Our checks are so poor and so easily bribed away that they are non existance. But who really cares about the poor country India or for that matter who really cared about what China did with thier milk till it started killing babies in China. 

Well, the world did not really care about the small eyed yellow babies but the fact Chinese products are exported world over and may be on your table too!!! ran a story explaining the whole contamination procedure.

Have you eaten or drank any milk or milk based product that is made in China?

Great innovations of the last 20 years

Came across this great post

Please read and enjoy add to the list yourself

A historic week in September

Timeline of the week’s events in the face of the worst financial crisis since the Great Depression:


Sunday September 14, 2008

·    Frantic talks during the weekend fail as Paulson states that there will be no bailout for Lehman. The bank is dumped by potential suitors such as Barclays   and effectively allowed to go bankrupt.

·    Stocks expected to tumble Monday, threatening the start of the next leg of the bear market.

Monday September 15th

·    Lehman declares bankruptcy; serious risk of default on counterparty derivatives results in central banks pumping in $100 billion into the money markets, which follows the announcement of $70 billion on Sunday as they attempt to contain the impact of Lehman’s bankruptcy.

·    Bank of America  takeover of Merrill Lynch  for $50 billion, the world’s third-largest investment bank, to prevent a Lehman-style bankruptcy.

·    HBOS  Britain’s biggest mortgage bank, crashes 30% after being targeted by short-selling hedge funds that sought a similar fate for the bank as Northern Rock. I was probably one of the first to break the news of a hedge fund assault on the bank, as a similar attack of March this year was still fresh in my mind, and therefore had a head start on the scrambling mainstream media that only started to connect the pieces together some 24 hours later.

·    The world’s largest insurer, AIG , seeks bailout cash, with speculation that the insurer seeks a loan of between $30 billion and $75 billions from the Fed.

·    Stock markets crash; Dow Jones ends down 504 points.

Tuesday September 16

·    Money markets freeze with the interbank rate (LIBOR) jumping to 6.75% due to the extreme risk of counterparty default.

·    No U.S. interest rate cut, despite calls and speculation that the Fed could cut by as much as 50 basis points.

·    AIG, the world’s biggest insurer, is bailed by the Fed for an initial $85 billion for an 80% stake in the insurer.

·    Stocks bounce on AIG bailout; Dow Jones rallies 142 points.

Wednesday September 17

·    HBOS is taken over by Lloyds TSB   for £12 billion amidst a stock price crash of 66% in three days. The shotgun wedding was to prevent another Northern Rock-style collapse and nationalization, precisely the possibility warned of on Monday. My analysis called for restrictions on short-selling to give distressed financial institutions room to breathe.

·    Gold as a safe haven soars by an historic one-day move of $85 following the news of the AIG nationalization and Lehman’s continuing impact on counterparties, with no end in sight to the crisis.

·    Russians shut down their exchanges, fearful of a similar collapse to that which followed the LTCM crisis a decade earlier.

·    Stock market slide resumes as the market lines up the next financial dominos to fall; investors fearful of capital losses dump financials, and the Dow Jones ends down 450 points.

Thursday September 18

·    Lloyds TSB takeover of HBOS confirmed for £12 billion ($21 billion) or £2.32 per share in an all-stock deal.

·    Central banks around the world flood the markets with over $250 billion more cash as the interbank market’s freeze sees the money market rate surge to above 6.75%.

·    Morgan Stanley the big investment bank to be targeted, with expectations of a merger with Wachovia 

·    U.K. FSA announces a ban on short-selling of financial stocks. I suggested this as a necessary move some 24 hours earlier. This and the central bank extra liquidity is seen as extremely bullish on a short-term basis at least, as short covering will lead to a strong rally as well as speculators jumping on the band wagon.

·    U.S. stocks soar in late trading following speculation of further restrictions on short-selling and a huge bailout. The Dow Jones ends up 410 points.

Friday September 19th

·    U.S. Treasury announces the mother of all bailouts – Stocks soar across the board on the intention to allocate an initial $700 billion and probably countless trillions more to buy up much of the financial sectors’ bad illiquid debt. The U.K. FTSE rockets higher by 8%.

·    The SEC also expands short-selling restrictions to 799 financial stocks, which contributes to the short-covering rally that leaves the Dow Jones up 369 points.

·    Washington expands the “mother of all bailouts” by guaranteeing money market funds that invest in high-risk instruments like commercial paper

Is your bank safe?

The Fed’s and other central banks’ action does not mean that all the banks have now been saved, as last week’s example of the world’s fourth-largest investment bank, Lehman, going bankrupt illustrates that literally many hundreds if not a thousand plus banks will go bust during the course of the worsening credit crisis, with all of the consequences for depositors. The following report by EWI presents a list of the 100 safest banks.

After all the money put in by the US government, the bailout plan is under scrutiny by FBI. The markets are still on a free fall and democracy as we know it had died. A new form of controlled democracy is on the rise.

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Banking Crisis – A blessing in disguise

While most of us are panicing at the banking crisis, it may prove to be sharp wakeup call and a blessing in disguise. The crisis is leading to re-evaluvating our priorities in spending and saving

We are finally curbing our excesses. In countires like India, which have been partly insulated due to controls of the ministry and Reseve Bank, we are truely counting our blessing.

If the current crisis will lead to better checks and controls Kudos to it.

This is not to discount the people who have lost savings and are still gapling with problems….but we definately need to look at the brighter side and say – this is not all too bad – to come out as tough winners instead of winning losers,


Within a matter of months, three of the “Big 5” independent Wall Street merchant banks have collapsed. Other banks are de-leveraging at a brutal pace. So far, the global banking industry has written off half a trillion dollars. The IMF has estimated the full extent of the global bad debt at some $1 trillion, including at non-banks andNouriel Roubini, an economics professor at New York University, has been talking of an ultimately $2 trillion size problem. Alan Greenspan said just last week that “there’s no question that this in the process of outstripping anything I’ve seen and it still is not resolved and still has a way to go and, indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes.”


Problems in the banking sector spill into the broader economy. As these complex Wall Street investments sour, banks need to keep more capital on hand to assure investors that they can weather any future losses from loan portfolios. That means banks are playing defense.

If you want a business loan, car loan, home loan, student loan or virtually any other kind of loan, they’re hesitant to lend, lest they wind up with more bad loans. With lending drying up, auto dealers are sitting with inventory they can’t move and real-estate agents are showing homes they can’t sell. The economy is slowing as credit is squeezed.

The crisis feeds on itself. As banks and corporations are perceived to be short of capital and their stock prices fall, their need to raise capital grows even as lenders are defensive. That forces them to sell assets at low prices, and it becomes a vicious circle. That’s what insurance and finance giant American International Group now faces.



Says Jeremy Siegel in today’s WSJ

The turmoil in the financial markets will reorganize the financial landscape. But this does not mean the financial industry will shrink dramatically. In fact the current crisis could well lead to an increase in the demand for financial services, as the world grapples with the need for new financial instruments, new risk management techniques, and the increasing complexity of the financial world.

Despite the recent turmoil, there is good evidence that the worst is over, especially for the commercial banks with access to Federal Reserve credit. Despite yesterday’s severe sell-off, most are significantly higher than their July 15 low, and some such as Wells Fargo and UBS are up over 50% (see chart above).
Nevertheless, the current crisis will change the financial landscape. Certainly Bear, Merrill, Lehman and others will disappear as separate corporate entitles. But other institutions, specifically the commercial banks that absorb these firms, and who have direct access to Federal Reserve credit, will become larger.

The demand for financial services will in no way disappear as the automobile pushed out the horse and buggy a century ago. Although unemployment on Wall Street will undoubtedly rise, many workers will be reabsorbed elsewhere in the industry. The current financial crisis calls out for new products and services as well as more, not less, information about what is safe and profitable in the future environment.

It is easy to be pessimistic about the future of financial services in the current climate. But objective facts indicate that the future demand for these services will be high. Looking beyond past losses, the demand for financial services, especially internationally, has been strong. The growth of the developing countries, combined with the aging in the developed countries, will lead to huge international capital flows that will be facilitated by new and existing financial intermediaries.
It is shocking that firms that withstood the Great Depression are now failing in what economists might not even call a recession. But their failure was not caused by lack of demand for their services. It was caused by management’s unwillingness to understand and face the risks of the investments they made. The names of the players will change, but the future growth of the financial services industry is assured.


In Germany, Speigel reports 

Industry representatives are fond of saying that Germany is “overbanked.” In their view, there are too many financial institutions with too many branches — and not enough profit. And under these conditions, they say, German banks stand little chance of prevailing in the long term against their international competitors, which — thanks to soaring profits in their home markets — are expanding into more and more markets.

Economics of Terrorism

The terrorist attacks on New Delhi in crowed market areas on a saturaday evening have chilled most Indian to the soul….we are all wondering – are our loved ones safe? Will we be next?

Here are some thoughts on how the econmics of terorism works


Terrorism specifically affects…

• Tourism

• Stock markets

• Trade:bilateral trade 4% 

• Insurancec costs rise, loss to insurers

• Oil markets: reduce Supply (Iraq); reduce Demand (London)

• Foreign direct investment

• Portfolio investment (size and composition)

• Saving and consumption 

• Investment 

• Utility: personal impact costs (life and property;disruption to production; fear and grief; injury; response costs, e.g. medical; etc.)



Terrorism beliefs

Terrorists are not desperately poor uneducated people from the Middle East. A surprisingly large share of them have college and even graduate degrees. Increasingly, they seem to be from Britain, like the shoe bomber Richard C. Reid and most of the suspects in the London Underground bombings and the liquid explosives plot.

This has left the public wondering, Why are some educated people from Western countries so prone to fanaticism? Before trying to answer that question, though, some economists argue that we need to think about what makes a successful terrorist and they warn against extrapolating from the terrorists we catch. It is a problem economists typically refer to as “selection bias.”

Most terrorists really are committed true believers, willing to die for their cause. Within the Muslim world, the researcher found a positive relationship between level of education and support for terrorism — the higher your level of education, the more likely you are to support terrorism against Western (including Israeli) targets. Suicide bombers also tended to be better educated than the average population. 


The economic impact of terrorism

The “impact” part of the attack is trivial from an economist’s point of view (sad, to be sure, and it involves such dicey moral and technical issues as how to value the loss of lives, but nonetheless trivial). 

To understand terrorism we need to analyze its elements:

There are four elements in this definition:

(a)   the inducement of intimidation or fear;

(b)  the use, or threat of use, of extra-normal violence;

(c)   the premeditated character of such violence; and

(d)   the political objective.

 The last element – the political objective – is of particular interest because it requires that terrorists must reveal their identity and that they must communicate their demands.


Bombings are by far the preferred method of terror. The reason, once more, has to do with the cost of the action. Hostage taking is logistically more complex and operationally more risky than is bombing. Bombing is not only cheap for the terrorist but more costly to detect for government (far fewer communications available for interception for instance, making it harder to track down potential bombers). Once more, as theory predicts, a lower cost will attract more activity.

Terrorism is not a “crime of passion.” Contrary to public opinion, terrorists do not take lives indiscriminately. Instead, terrorists are rational: they take lives

deliberately, or else they use the threat of taking lives as a tool of negotiation to achieve their objectives at least-cost