Thoughts on Investing

Ever wondered why NRE deposit rates were freed?

2012-01-29T15:02:00.004+05:30

Just have a look at the credit deposit ratio chart. It's the highest in 35 years.

ECB bought another 13.3 bill euros

2011-09-10T11:06:00.004+05:30

The European Central Bank says it spent euro13.3 billion ($18.7 billion) last week ending sep 4 purchasing government bonds in an attempt to keep the continent's debt crisis from pushing Italy and Spain into financial collapse.

Via Salon.com

Now the total amount of purchases by ECB amounts to 130 billion euros. With 22bil, 14 bil, 6 bil, 13.3 bil in four weeks it has now spent 55 bil euros (increasing the amount spent by 70%) in a matter of four weeks. Note that ECB started buying bonds in the market around 13 months ago!

At this rate the bailout fund of 440 bil euros will get exhausted in 28 weeks!! not counting the collateral that it needs to hold and the fact the bond yields are still rising even with purchases. If adjusted the money will last for only few months.

Greece - 91% chance of default

2011-09-08T23:39:00.002+05:30

Credit-default swaps on Greek government debt surged to a record, signaling a 91 percent chance the nation will fail to meet debt commitments, after its economy shrank more than previously reported.

Five-year contracts on the country’s sovereign bonds jumped 196 basis points to 3,001 basis points, at 3:45 p.m. in London, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Via Bloomberg

Does that remaining 9% really matter especially with today's fractional reserve systems used by financial institutions all over the world not only Greece.

Swiss Franc pegged to euro

2011-09-08T23:30:00.002+05:30

The Swiss National Bank devalued the franc, pledging to buy "unlimited quantities" of foreign currencies to force down its value. The SNB warned that it would no longer allow one Swiss franc to be worth more than €0.83 – equivalent to SFr1.20 to the euro – having watched the two currencies move closer to parity as Switzerland became a "safe haven" from the ravages of the eurozone crisis.

Via Guardian

Another safe heaven lost. Gold is slowly becoming the safest asset against currency devaluations and money printing all over the world.

Greek one year bonds at 70% yield

2011-09-03T18:07:00.003+05:30

Talks over new bailout funds for Greece were suspended Friday amid disagreements over how to fill a government-deficit gap that once again is veering off track, raising doubts about the country's future access to finance and triggering renewed nervousness in financial markets across Europe.

The suspension pushed yields on Greek government debt to levels indicating that investors see a default by Athens soon as a near certainty: Interest rates on one-year paper blew out past 70% and two-year yields rose close to 50%.

Via Wall Street Journal

Debt forgiveness annoucement is now just a formality.

Everonn troubles

2011-09-03T10:16:00.002+05:30

The shadows lengthened over troubled education firm Everonn Education Ltd on Friday after chairman Jamshed J. Irani resigned days after the arrest of co-founder and managing director (MD) P. Kishore in an alleged bribery and tax evasion case by the Central Bureau of Investigation (CBI).

Via Livemint

Usually such investigations lead to larger troubles within. Better safe than to be sorry latter.

ECB might have stopped buying bonds

2011-09-03T01:21:00.002+05:30

Bowing to the pressure from various corners on what it can do and cannot do, ECB may have stopped its bond purchases as yields of Italy and Spain started rising beyond their usual 5% yield last couple of weeks. The current yields on 10 year bonds are as follows

Italy - 5.28%
Spain - 5.12%

Greece two yields has now skyrocketed to 47% while 10 year bond is trading at 18%

Interesting times ahead in the next couple of weeks

IMF priority lender status for Greece in trouble

2011-09-02T23:14:00.003+05:30

IMF is worried about its priority creditor status

"The use of collateral, a concession to win Finland’s backing for 109 billion euros ($155 billion) of loans pledged by euro leaders in July, would deny the IMF priority creditor status and violate Greek bondholders’

Via Bloomberg.com

The trigger point for euro crisis may come up on 07th Sep when Germany votes on the rescue fund.

India fiscal deficit is 55% of expected in just 4 months

2011-09-02T00:49:00.004+05:30

The central government's fiscal deficit surged more than two-fold to Rs 2.2 lakh crore during the first four months of the current fiscal, on account of low revenue realisation and higher expenditure.

Fiscal deficit, the gap between overall expenditure and receipts, in the first four months of the financial year is almost 55% of the Budget estimate of Rs 4.12 lakh crore for 2011-12, as per the latest data of the Controller General of Accounts (CGA).

Via Moneycontrol

When you have very high expectations about what you can achieve, you tend to fall into much deeper s*!t. Another example above.

ECB bought another 6 bil euros of bonds

2011-08-29T23:55:00.002+05:30

The European Central Bank says it spent euro6.65 billion ($9.64 billion) last week purchasing government bonds in an attempt to keep the continent's debt crisis from pushing Italy and Spain into financial collapse.

Via Salon.com

Now the total amount of purchases by ECB amounts to 116 billion euros. With 22bil second week, 14 bil third week, 6 bil fourth week of August it has now spent 42 bil euros (increasing the amount spent by 70%) in a matter of three weeks. Note that ECB started buying bonds in the market around 13 months ago!

Greece forced to tap emergency fund

2011-08-28T00:45:00.002+05:30

Raoul Ruparel of Open Europe told The Telegraph: "The activation of the so-called ELA (Emergency Liquidity Assistance) looks to be the last stand for Greek banks and suggests they are running alarmingly short of quality collateral usually used to obtain funding."

He added: "This kicks off another huge round of nearly worthless assets being shifted from the books of private banks onto books backed by taxpayers. Combined with the purchases of Spanish and Italian bonds, the already questionable balance sheet of the euro system is looking increasingly risky."

Via Telegraph

Looks like Greek situation is getting excited again after the second bailout in July 2011

Russian Central bank to offer gold backed loans

2011-08-28T00:24:00.001+05:30

Russia's central bank will offer gold-backed loans for up to 90 days at an interest rate of 7 percent, it said in a statement on Friday, expanding its lending facilities for dealing with any future liquidity crunch in the banking system.

Via Reuters

Gold is gaining importance day by day

Jeremy grantham's Aug letter

2011-08-25T23:10:00.001+05:30

I am not an expert in euro finance by a wide margin. But I know one thing. Forget the debt for a second: the current uncompetitiveness of Greece, Ireland, Portugal, Spain, and Italy did not occur quickly. It took 10 long and obvious years. They had to work at it. The cure was always going to cause a lot of pain and threaten the well-being of the euro - Jeremy Grantham

Full Letter

Predictions

2011-08-25T22:25:00.003+05:30

Although i seemed to have got it right this time when i was reasonably clear that we hit the top in Nov 2010 courtesy the following article i have written on 26th June 2011 - i did not happen to make a ruppee in the market using this? My money is not where my mouth is in this case - a lesson learnt.

Did we peak in Nov 2010?

Difficult days ahead - RBI

2011-08-25T22:21:00.002+05:30

The Reserve Bank today warned of difficult days ahead, saying inflation will remain at elevated levels for some more time while the economic growth rate will moderate in the current fiscal.

Via Moneycontrol

Although RBI has been wrong a number of times as i have quoted here the above seems to be real scenario playing out currently unless there is a crisis or a semi crisis.

Japan's rating is cut by Moody's

2011-08-25T00:26:00.002+05:30

Moody's Investors Service today lowered the Government of Japan's rating to Aa3 from Aa2, concluding the rating review that began on May 31. The outlook is stable.

The rating downgrade is prompted by large budget deficits and the build-up in Japanese government debt since the 2009 global recession. Several factors make it difficult for Japan to slow the growth of debt-to-GDP and thus drive this rating action.

Via Moodys

Aa2 is equivalent to the rating AA in terms of S&P

AAA: Moody judges obligations rated AAA to be the highest quality, with the "smallest degree of risk".
AA (AA1, AA2, AA3): Moody judges obligations rated AA to be high quality, with "very low credit risk", but "their susceptibility to long-term risks appears somewhat greater". (AA+, AA and AA- in S&P)
A (A1, A2, A3): Moody judges obligations rated A as "upper-medium grade", subject to "low credit risk", but that have elements "present that suggest a susceptibility to impairment over the long term". (A+, A and A- in S&P)

Via wikipedia

ECB buys another 14 bil european bonds

2011-08-22T23:05:00.003+05:30

ECB has again intervened in the markets last to buy 14 billion Euros worth of bonds of Italy and Spain. Its combined total buying since last is now 110 billion euros. This is the reason why Spain and Italy's bond yields are consistently at 5% while Portugal and Ireland's yields are consistently at 10%.

Via fxstreet

Earlier post: ECB buys 96 billion euros worth of bonds

Farmland prices are setting records

2011-08-20T21:37:00.002+05:30

Farmland prices are setting records and farmer incomes have been buoyed by exports and biofuels, easing the pain of some rough summer weather from drought, floods and fires.

The Chicago Federal Reserve Bank on Wednesday said farmland prices in the Midwest in the second quarter were up 17 percent from a year ago -- the biggest jump in 34 years.

Via Reuters

Jim Rogers, Micheal Burry prove themselves right once again.

India's debt increased by 5.9% in Q1 2011

2011-08-20T19:11:00.004+05:30

Recently our Finance minister is getting worried about our fiscal situation not because we are spending more than we have budgeted this year but the revenue collection has fallen short of projection drastically.

Revenues: Our countries revenue for the year 2011-12 has been budgeted at around 8 trillion (lakh crore) so for the first quarter apr-jun 2011 we should have earned around 2 trillion (lakh crore), but in reality the revenues are only around 0.9 trillion (lakh crore), falling short by almost 53% in Q1 2011.

Expenditure: Our countries expenditure for the year 2011-12 has been budgeted at around 13 trillion (lakh crore) so for the first quarter apr-jun 2011 we should have spent around 3.1 trillion (lakh crore), but in reality we have been prudent enough to spend only 2.6 trillion (lakh crore) Q1 2011 which is 16% less than expected.

Fiscal Deficit: Even though we are prudent on spending since our revenues have fallen drastically our fiscal deficit which is expected to be 1.3 trillion (lakh crore) for the entire year is now 0.7 trillion (lakh crore) for the first quarter itself

Debt: India's public debt which is around 29.75 trillion (lakh crore) in 2010 already rose by 5.9% in first quarter to 31.49 trillion (lakh crore), thereby increasing our interest payment costs every year.

The reason for the above situation is that we had a windfall last year from the 3G spectrum sale, but this year there is no such silver bullet atleast for now.

What it means for you and me? Each one of us (1210 million population) has a debt of 26000 rupees and we need to pay an interest of 2158/- every year. Seems less until we acknowledge that we still have 41% of the population earning less than 56 rupees a day and we have only 3.3 crore (33 million) tax payers who have to share the burden.

Source: RBI, Contify Banking

Finland's backdoor deal with Greece

2011-08-20T00:23:00.003+05:30

Greece was pursuing a private deal with Finland in which Greece promised to collateralize Finnish contributions, in essence eliminating Finland's contribution to the Greek Bailout round. As Kathimerini reported, "Greece and Finland agreed on Tuesday to virtually cancel the latter’s participation in the former’s second bailout package"

Finland’s share in the 109-billion-euro package amounts to about 1 billion, which Helsinki will pay to Greece but Athens will repay it through a new loan contract to be signed for this purpose and which will be valid for the next 25 years (likely to be the maturing period of the new loans, too).

This means in practice that Finland’s contribution to the new package will be returned in full and deposited in a special account to be created by the Finnish government. End result is that everyone else has immediately come demanding the same treatment: first the Austrians, next the Dutch, and last the Slovenians.

And what happens if Finland backtracks on its collateral demand: will it back out of the Greek bailout as well? Or, if Finland digs in, and all the non-German countries follow suit, will Germany say Enough and tell Europe (and China) to fix its own problems?

Via Zero Hedge

Seems like entire Europe wants only Germany to pay for this mess and the integrity of Europe as a single entity is again in question

Apple costs you 32 biggest euro banks

2011-08-20T00:03:00.003+05:30

That's the stark result from a steep fall in the share price of banks including Spain's Santander, France's BNP Paribas, Germany's Deutsche Bank and Italy's Unicredit, compared to a steady rise in Apple's valuation, according to Thomson Reuters data.

Via Reuters

And still the stock is trading only at 14 time trailing earnings.

You Can Count on China To Back the Euro

2011-08-16T23:28:00.003+05:30

A very insightful spiegel interview with George Soros

SPIEGEL: As an investor, would you still bet on the euro?
Soros: I certainly would not short the euro because China has an interest in having an alternative to the dollar. You can count on China to back the efforts of the European authorities to maintain the euro.

SPIEGEL: Is that the reason why the euro is still so strong compared to the dollar?
Soros: Yes. There is a mysterious buyer that keeps propping up the euro.

SPIEGEL: And it is not you.
Soros: It is not me (laughs).

SPIEGEL: Is the current crisis even worse than the one in 2008?
Soros: This crisis is still the continuation of the same crisis. In 2008, the financial system collapsed and it had to be put on artificial life support.

World central bank gold reserves

2011-08-16T00:36:00.003+05:30

Click on image to enlarge

Seems like since 2007 country by country realized that gold is actually important to back their currencies in uncertain times.

Source: World Gold Council

ECB purchases bonds worth half Ireland's GDP since 2010

2011-08-15T21:47:00.007+05:30

ECB (European Central Bank) spent 22 billion euros last week (which equates to 10% of Ireland GDP) to get the Italian and Spanish bond yields from euro area records of 6+ per cent to 5+ per cent a reduction of 100 basis points.

Since 10th May last year ECB has spent around 96 billion euros (half of Ireland or Portugal GDP) to help the pheripheral countries (Greece, Ireland, Portugal, Spain and Italy) delay defaults on their debt

Via Bloomberg

Rice Supply Crunch

2011-08-15T10:19:00.002+05:30

Though USDA forecasts show there will be no global shortage of rice, with production of 456.2 million tons and demand for 455.2 million tons, about 925 million people went hungry last year, the second-highest figure on record, the UN estimates.

Thailand, the biggest shipper, is bringing back a policy of buying rice from farmers at above-market prices for storage. Exports from Vietnam, the second-largest, may drop 6.9 percent, according to the FAO. Farmers in the U.S., the third-biggest shipper, will harvest 20 percent less after planting more corn and wheat in response to rising prices, the government says.

The smallest increase in rice stockpiles in five years means global grain inventories will extend a decline that already drove food costs to a record.

Via Bloomberg

More unrest can be expected world over with low food levels and high prices.

New Micheal Lewis article on Germany

2011-08-15T01:00:00.003+05:30

With Greece and Ireland in economic shreds, while Portugal, Spain, and perhaps even Italy head south, only one nation can save Europe from financial Armageddon: a highly reluctant Germany. The ironies—like the fact that bankers from Düsseldorf were the ultimate patsies in Wall Street’s con game—pile up quickly as Michael Lewis investigates German attitudes toward money, excrement, and the country’s Nazi past, all of which help explain its peculiar new status.

When Morgan Stanley designed extremely complicated credit-default swaps all but certain to fail so that their own proprietary traders could bet against them, the main buyers were German. When Goldman Sachs helped the New York hedge-fund manager John Paulson design a bond to bet against—a bond that Paulson hoped would fail—the buyer on the other side was a German bank called IKB. IKB, along with another famous fool at the Wall Street poker table called WestLB, is based in Düsseldorf—which is why, when you asked a smart Wall Street bond trader who was buying all this crap during the boom, he might well say, simply, “Stupid Germans in Düsseldorf.”

Another amazing article from Micheal Lewis

Greece selective default increases its debt?

2011-08-14T03:01:00.003+05:30

Under the selective default by Greece, euro zone leaders agreed to provide 109 billion euros in extra funds to Greece. This money will be supplied by the European Financial Stability Facility (EFSF), the euro zone’s bailout fund.

At the same time, private-sector creditors, had to choose one of the four options as mentioned in Greece default - options for investors

All this might seem extremely attractive for Greece if it wasn’t for the fine print of the IIF scheme. This requires Greece to provide collateral (Zero-coupon bonds) to partly guarantee the new loans, in a so-called “credit enhancement”.

Zero-coupon bonds are not as expensive to buy as normal bonds. But these 30 year instruments will still cost just over 30 percent of their face value. Greece will therefore need to find 42 billion euros to finance credit enhancements for the 135 billion euros of bonds covered in the IIF’s scheme, according to a paper presented to the euro zone leaders at their summit.

To calculate the net effect of all this on Greece’s debt, it is necessary to add the 35 billion euro cost of the credit enhancement and the 20 billion euros for bank recapitalisation and then subtract the 11.25 billion benefit from the bond swap/rollover and the 12.6 billion reduction from the buyback. This sum comes to 31 billion euros.

Via Reuters - Hugo Dixon

Why Italy and Spain add a new dimension to crisis

2011-08-14T02:43:00.004+05:30

Now you should understand why Italy and Spain add a new dimension to Euro area debt crisis. They are behemoths compared to the minnows Greece, Spain and Portugal.

Source: Trading Economics, European employment observatory

Milton Friedman on government

2011-08-14T01:03:00.002+05:30

An excellent video where Milton Friedman bashes the government and explains on how government social programs achieve exactly the opposite of what they are intended for.

The Crisis of Credit explained

2011-08-13T13:34:00.002+05:30

Credit crisis nicely explained!

France, Spain, Italy and Belgium ban short-selling

2011-08-12T23:56:00.004+05:30

"France, Spain, Italy and Belgium’s bans on short-selling may fail to reverse the fall in financial stocks and instead may concentrate bets against banks elsewhere in Europe, according to lawyers, investors and academics"

You just killed the scapegoat, now who do you have to blame for your debt crisis?

"British financial stocks dropped 41 percent in the four months after regulators imposed a ban on short selling following the collapse of Lehman Brothers Holdings Inc. in September 2008. The benchmark FTSE 100 index fell 15 percent in the period. When the Securities and Exchange Commission prohibited short-sales for three weeks in September 2008 a Bloomberg Index tracking the 880 U.S. stocks affected fell 26 percent, outpacing the Standard & Poor’s 500 Index’s 22 percent decline"

Via Bloomberg

US Govt - starts renting business

2011-08-12T00:28:00.001+05:30

Uncle Sam wants you — to rent a house from Uncle Sam.

The Obama administration said on Wednesday that it was soliciting ideas on how to turn the federal government’s inventory of foreclosed houses into rental properties that could be managed by private enterprises or sold in bulk.

Via New york times

Usual suspects - Short sellers

2011-08-12T00:19:00.002+05:30

A European market regulator is considering recommending a temporary ban on negative bets against stocks across the Continent in an effort to stop the tailspin in the markets.

Two people with knowledge of the discussions, who declined to be identified by name because the talks are confidential, said the authority might propose a ban on betting against all stocks or just financial stocks.

This week, Greece banned short-selling for the next two months on all of its stocks.

Via New York times

Did anybody ban fresh issue of debt?

Hey France - Welcome to the crisis party

2011-08-10T23:10:00.003+05:30

The cost to insure French government debt against default rose 11 basis points to a record 172 basis points. France’s top credit grade was affirmed by S&P, Moody’s Investors Service and Fitch Ratings amid concern that Europe’s sovereign debt crisis is intensifying.

Via Bloomberg

If the crisis starts affecting France having huge debt, which is the second largest economy in euro and Euro's credit rating itself depends on France. Who can Bailout enormous France?

Gold hit another record of 1800$ per ounce, the market rout continues... after a breather yesterday.

Market - Carnage

2011-08-09T00:45:00.002+05:30

Dow Jones, Nasdaq, S&P all falling 5% today, on the back of 3-4% on last Friday. I have not seen such a carnage for a while on the US markets. Meanwhile Gold - safe heaven is breaching all its records. Italy, Spain and other euro bonds are rallying as ECB is buying them frantically. Silver is staying where it is. Brazil Bovespa is crashing now at 48000 while Bank of America (BOFA) which bought insolvent Merill Lynch and countrywide seems to be getting its due. It is now 6.60 USD down 20% today. Year to date it is down from 16 to 6.6 some 60% shaving. I believe Jim Rogers large bank short should be BOFA.

Interesting times!!!!

Central banks lapping up gold

2011-08-07T12:20:00.002+05:30

Central banks became net buyers of gold last year (2010) for the first time in two decades, adding 76 metric tons to their reserves, and in the first half of this year, they bought almost three times that amount.

In February and March, Mexico added around 93 metric tons to its reserves, Russia purchased 48 metric tons during the first half of this year, and Thailand bought 17 metric tons in June, according to data from the World Gold Council.

This week, the Bank of Korea confirmed that it made its first purchase of gold since the Asian financial crisis of 1997-1998, buying 25 metric tons of gold in June and July of this year.

Via Market Watch

Seems like everybody wants join the gold party

US loses AAA rating

2011-08-06T13:18:00.002+05:30

Standard & Poor’s downgraded the U.S.’s AAA credit rating for the first time, slamming the nation’s political process and criticizing lawmakers for failing to cut spending enough to reduce record budget deficits.

S&P lowered the U.S. one level to AA+ while keeping the outlook at “negative” as it becomes less confident Congress will end Bush-era tax cuts or tackle entitlements.

Via Bloomberg

There are a number of bond funds which hold only AAA rated securties which will now dump US bonds and there could be pressure on the yields making it more difficult for US to service the debt.

Triple AAA trillionaires

2011-08-06T00:50:00.002+05:30

In terms of AAA debt outstanding

Source: Economist.com

Incidentally most AAA rated nations have the largest debts outstanding. Is it because investors have excess money to buy the debt or is it because of the trust that they will be repaid no matter what?

Italian Prosecutors Seize Documents from Moody's, S&P

2011-08-05T01:39:00.004+05:30

Italian prosecutors have seized documents at the offices of rating agencies Moody's and Standard & Poor's in a probe over suspected "anomalous" fluctuations in Italian share prices, a prosecutor said on Thursday.

The first complaint was filed against Moody's after it published a report in May 2010 about the risk of contagion for Italian banks from the Greek crisis.

A second complaint filed in May this year targeted Standard & Poor's after it threatened to downgrade Italy's credit rating because of its huge public debt

One of the consumer groups behind the complaints said the probe was aimed at finding out whether the market's sharp drop was due to a "precise scheme by hedge funds and other unidentified players that could be linked to the negative comments about Italian public finances by the rating agencies."

Via CNBC

Please shoot the messenger (rating agencies) and blame the hedge funds. People would be happy that they found the guilty (scapegoat). No one complained while accepting large sums (debt) and now since the turning point has come a search for scapegoat started. Incidentally a large portion of what Spain and Italy have borrowed is coming overdue shortly as shown below

Source: BusinessInsider.com and Bloomberg

Bond Yields & Economy

2011-08-05T00:27:00.002+05:30

A global rout in equities drove the Standard & Poor’s 500 Index to its worst nine-day slump since March 2009, while two-year Treasury yields plunged to a record low amid concern the economy is weakening.

Via Bloomberg.com

Isnt the highlighted in bold above supposed to be opposite, when the economy weakens yields on Treasuries go up because people will be requiring greater yields/reward for buying the government debt?

Rating companies bias

2011-08-04T09:02:00.003+05:30

It just came to my mind that the largest debtor in the history of the world US is enjoying AAA rating from US and Europe credit rating agencies S&P, Moodys and Fitch, while largest creditor in the world China is slapped with A+ rating with negative watch. Even UK with its humongous debt is AAA. What an irony.

China's Dagong Credit Rating agency has US and UK at A+ rating while China's rating is at AA+

Downgrade of US credit rating to A+

Downgrade of UK credit rating to A+

It seems like ratings depend on the country in which the rating agency is located.

So when you want to know the truth, the golden rule is dont ask a debtor how good he is because you already know the answer. When there is uncertainity and bias included in ratings calculation it is usually preferable to go what creditor nations say as they hold the reins to world credit.

China and Russia blast US profligacy

2011-08-04T09:01:00.001+05:30

People’s Bank of China Governor Zhou Xiaochuan said China’s central bank will monitor U.S. efforts to tackle its debt, and state-run Xinhua News Agency blasted what it called the “madcap” brinksmanship of American lawmakers. Russian Prime Minister Vladimir Putin said two days ago that the U.S. is in a way “leeching on the world economy.”

China’s Dagong Global Credit Rating Co. today cut its grade for the U.S. to A from A+ with a negative outlook.

Via Bloomberg.com

Well deserved blasting

Egypt rejects IMF loan

2011-08-02T22:49:00.002+05:30

Egypt rejected IMF loan even when they are cheapest at 2.5 percent although others such as Qatar offered a loan at 7.5 percent, before agreeing to reduce that to 4.5 percent, Radwan said. Egypt sold 3 billion Egyptian pounds ($504 million) of three- year bonds yesterday to yield 13.35 percent.

Khalil said that after succeeded in ousting Mubarak and pressuring the generals to prosecute him. “We will be much more difficult to satisfy,” he said.

Via Bloomberg

IMF being a lender wants to satisfy Egypt politicians, is it is a favor for ousting Mubarak. It seems so as IMF, World bank loans typically fund Merc's of politicians.

Gold, Italy & Spain break records yet again

2011-08-02T22:38:00.002+05:30

Gold futures surged to a record $1,645.80 an ounce as escalating concern that the global economy is losing momentum spurred demand for the precious metal as an investment haven.

Via Bloomberg.com

Yields on 10-year Spanish government bonds touched 6.426pc at one point, while Italy's 10-year bonds also hit highs of 6.219pc -edging closer to the 7pc levels that forced its smaller Greek and Portuguese neighbours to ask for a bail-out.

Via Telegraph.co.uk

Pakistan Terrorists in China

2011-08-02T00:37:00.002+05:30

"Violence in western China’s Xinjiang region in the past two days left at least 20 people dead in the city of Kashgar, with police calling one of the incidents a “premeditated terrorist attack” led by militants trained in Pakistan, according to official Chinese reports"

We thought Pakistan is only against India, it seems that China is troubled as well.

Hints in company financials

2011-07-31T23:37:00.003+05:30

The first hint that financials are more smoke than flesh and blood is when they're confusing to read, when a trail you're following turns into a blind alley instead of a clear boulevard, and when you can't determine who's paying what to whom. The balance sheets of well-run, profitable enterprises make no secret of their true virtues; indeed they shout them - Jim Rogers

Euro austerity parallels

2011-07-31T21:57:00.002+05:30

President de la Rua offers hope in a third option, an austerity plan his seventh in the past two years that includes cutting government salaries and pensions and promises the government will spend only what it makes while managing to pay off its debt.

The above quote is from Argentina Debt crisis during 1998-2002. Sounds familiar Greece, Ireland, Portugal and our new joiners Spain and Italy.

When countries split

2011-07-31T21:39:00.000+05:30

When countries split -- think Czech and Slovakia or the USSR or Indonesia and East Timor -- there is often tremendous animosity between the former neighbors. The wounds of ethnic, cultural and economic battles must first heal before an open dialog can begin - Jim Rogers

Closing borders

2011-07-31T21:35:00.001+05:30

In 1962, Burma (now Myanmar) was the single-richest country in Asia. Then it closed its borders to foreign influence. Today, it's one of the poorest places on earth - Jim Rogers

Russians Wonder Where to Park Their Cash

2011-07-31T02:09:00.002+05:30

The U.S. debt debate is prompting second thoughts in Russia about the wisdom of parking roughly 45% of its $530 billion in reserves in dollar assets.

An economic adviser to President Dmitry Medvedev said Friday that Russia should strive for an agreement to hold Chinese debt and diversify away from the dollar amid worries that the U.S. debt may lose its triple-A rating even if an outright default is averted.

Russian holdings of U.S. Treasury securities fell to $125.4 billion in April 2011 from $176.3 billion in October 2010, Treasury Department data showed.

Via Wall Street Journal

Jim Rogers is right, China is soon becoming the most important country in the world, US humongous debts are not helping it delay either.

Debt ridden countries (Spain, Italy) bailing out defaulters (Greece)

2011-07-31T00:41:00.003+05:30

"Greece is due to receive the next installment of its original, €110 billion ($158 billion) bailout in September. But Italy and Spain, both of which committed to extend bilateral loans to Greece with other euro-zone countries, have seen their own borrowing costs rise recently."

"We're trying to get around this obstacle by getting the EFSF to finance the next tranche," one official said, referring to the European Union's rescue fund, the European Financial Stability Facility. "The only problem is this is on very short notice."

"Spain's 10-year bonds are yielding 6.12%, and Italy's 10-year yields 5.92%—both well above rates Greece pays on loans under the first bailout program"

Via Wall Street Journal

This sure is getting really worse and fast

Moody's fresh warning to spain

2011-07-30T01:07:00.002+05:30

Spain's battered economy suffered more bad news Friday as Moody's threatened to downgrade the country's rating and that of four major banks, while the unemployment rate remained the highest in the industrialised world.

Spain, with an economy the size of the Greek, Irish and Portuguese economies combined, has been battling to convince markets that it should not be lumped together with the three lame ducks now under EU and IMF rescue programmes. But it continues to suffer from the risk of contagion from the crisis.

Moody's announced that it was planning to downgrade Spain's debt rating, currently at a "Aa2", due to the country's budget problems.

Via aharamonline

Spain remains in the front line of the euro zone's debt crisis. Yesterday the spread on Spanish sovereign debt over German benchmark bonds reached 340 points, confirming that last week's euro-zone summit, which agreed a second bail-out for Greece, did not mark an end to the single currency's problems. This morning Moody's, a ratings agency, warned it might soon downgrade Spanish debt.

Via Economist

Apple has more cash than US govt

2011-07-29T23:52:00.000+05:30

While the world's most powerful government has just $73.76 billion in its reserves, the world's top technology company has a neat cash pile of $75.87 billion Thursday.

Via Yahoo

India's historical debt to gdp ratio - Not bad

2011-07-29T01:13:00.003+05:30

Click to enlarge

Power seekers and Hatred

2011-07-29T00:45:00.003+05:30

"In Nigeria, beginning in 2003, Muslim religious leaders hamstrung polio vaccination campaigns by spreading rumours that the shots are actually sterilisation drugs, part of a conspiracy by Westerners to reduce African birth-rates".

Power seekers and politicians never leave any stone untouched to spread hatred and win followers.

"CIA ran an operation to verify Osama bin Laden's location by gathering DNA samples through a false-flag hepatitis B vaccination programme. As James Fallows notes, American officials are defending this operation, not denying it."
- Via economist

Starting a business in India? Takes less than a day

2011-07-28T12:28:00.000+05:30

India will soon join an elite group of countries where starting a business will take less than a day.

The Ministry of Corporate Affairs has simplified the procedures for incorporation to enable promoters to get their companies incorporated within 24 hours.

The new procedure to issue online certificate of incorporation will be implemented from August 11.

Rediff.com

World investment report - 2011

2011-07-27T21:56:00.007+05:30

Despite much ado about our IT-BPO sector it is disappointing that none of our pure plays TCS, WIPRO, Infosys make it into the IT BPO Top 10. Below is the chart from UNCTAD World 2011 investment report on Top 10 players in various outsourcing modes

Click to enlarge

Cows for Bride - South Sudan

2011-07-27T11:35:00.002+05:30

Emmanuel Gambiri said an educated wife in his cattle-herding Mundari tribe in South Sudan costs 50 cows, 60 goats and 30,000 Sudanese pounds ($12,000) in cash.

At that price, some men who otherwise can’t afford a bride turn to stealing livestock in order to buy a wife and gain status, said Gambiri, citing a friend who is now a cattle rustler. A surge in “bride price” has fueled cattle raids in which more than 2,000 people are killed each year.

Since the end of a civil war, in which almost 2 million people died, thousands of men have returned home looking for wives. Greater competition has triggered a bidding war.

“In rural areas, if you bring them cash, they will say, ‘No, we just want the cows’.”

Full article via Bloomberg

Greece default - options for investors

2011-07-27T02:06:00.004+05:30

If you’re a holder of Greek bonds right now, you have four choices.

Choice 1. You can do nothing, and hope that Greece pays you in full and on time.

Choice 2. You can extend your maturities out to 30 years, and accept a modest coupon of 4.5%; in return, your principal will be guaranteed with an embedded zero-coupon bond from an impeccable triple-A-rated EU institution, probably the EFSF.

Choice 3. You can extend your maturities out to 30 years, take a 20% haircut, and get a higher coupon of 6.42%; again, the principal is guaranteed with zero-coupon collateral.

Choice 4. You can extend your maturities out to 15 years, take a 20% haircut, get a coupon of 5.9%, and have only a partial principal guarantee through funds held in an escrow account.

Nicely explained by Felix Salmon on Reuters.com

PS: Haircut - reduction in principal, coupon - yield on the bond
PS: Greece 10 year bonds were trading at 17.5% yield and 2 year bonds at 35% yield last week.

Fitch calls default, Greece

2011-07-26T22:52:00.002+05:30

Fitch ratings agency declared Greece would be in temporary default as the result of a second bailout. - Reuters.com

Ratings agencies Standard & Poor's and Moody's are likely to follow Fitch's lead since banks and insurers are set to write down the value of Greek bonds by 21 percent, with more losses maybe to follow.

Finally a default!!

Ratings agencies Standard & Poor's and Moody's are likely to follow Fitch's lead since banks and insurers are set to write down the value of Greek bonds by 21 percent, with more losses maybe to follow.

"We have long thought that the most likely outcome for Greek bondholders would be that they would take a small haircut first followed by a larger one at a later date. To give Greece a fighting chance they probably need a write down close to 65 percent," said Gary Jenkins, head of fixed income research at Evolution.

Riley told Reuters Greece may languish in default for only a few days and would likely get re-rated at single B or CCC.

Let's see how many days Greece stays in default

Inflation: Pranab seeks British lessons

2011-07-26T10:21:00.003+05:30

Perturbed by high inflation despite the Reserve Bank of India's monetary tightening initiatives, India on Monday asked Britain for lessons to rein in price rise.

"Supply side and monetary measures are being actively taken to address it. I look forward to hearing from you how UK is addressing the challenge of managing inflation," Finance Minister Pranab Mukherjee said in London - Rediff.com

One possible way to reduce inflation is changing the formula for inflation calculation like what US is doing:)

A more reliable one is stop printing money - M3 Broad based money supply has increased by over 16% year on year - RBI latest weekly supplement

The second option is very difficult for government to do as they do not want the currency to shoot up impacting exports although only for shortterm. The first option is an interesting lesson we can learn.

Real estate sale registrations in Mumbai hit 24-month low

2011-07-20T23:03:00.002+05:30

Mumbai, the largest residential market in the country, has hit a new 24-month low as far as sale registrations are concerned. For the month of June, the city clocked a 27% dip in sales registrations, which is close to the levels that were last seen during June 2009 - Economic Times

Crop yields dropping

2011-07-17T00:10:00.002+05:30

Despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin. - Jeremy Grantham

Best quip of the debt crisis

2011-07-16T23:30:00.002+05:30

Italian Finance Minister Giulio Tremonti has warned his senators that they had no room for error “because it’s like on the Titanic: not even the first-class passengers get saved”.
Even Italy's politicians are scared - Economist

Gender employment

2011-07-16T18:29:00.006+05:30

Another statistic which emphasizes that usually the hardest to fall will be the fastest to rise.
Source: PEW Social Trends

Disaster Buying

2011-07-16T18:08:00.002+05:30

Usually the best time to buy a disaster is not right after but after sometime - Jim Rogers

How true, only if i had known earlier in 2008, i would have saved money by waiting rather than jumping the gun when the stock market started to fall.

The world of seven billion

2011-07-16T18:05:00.003+05:30

Interesting stats from National Geographic

Buy and Sell

2011-07-16T02:24:00.001+05:30

Historically, you buy stocks when they're yielding 6% and selling at eight times earnings. You sell them when they're at 22 times earnings and yielding 2% - Jim Rogers

US Debt ceiling cartoon :)

2011-07-16T02:20:00.003+05:30

Source: firstpost.com

Market Lions Leanings

2011-07-14T22:33:00.003+05:30

Watch the last column on confused - :) :) :) :) Hillarious

Source: Market Lions Digest

Hillarious testimony of Bernanke

2011-07-14T00:34:00.003+05:30

The following is hillarious piece of excerpt from Ben Bernanke's (US Federal Reserve - Central bank Chairman) testimony to the House Financial Services Committee where senator Ron Paul has stumped Bernanke

Paul: The price of gold today is $1,580 the dollar during these last few years the dollar was devalued almost 50%. When you wake up in the morning, do you care about the price of gold?

Bernanke: Well, I pay attention to the price of gold but I think it reflects a lot of things. It reflects global uncertainties. The reason people hold gold is its protection against what we call tail risk ... they have gold as a protection.

Paul: Do you think gold is money?

Bernanke: [Long pause] No.
Bernanke went on to acknowledge that gold is an asset and that central banks hold it as reserves.

Paul demanded to know why the Fed didn't hold diamonds as an asset instead of gold if it wasn't really money and Bernanke, who seemed stumped, said it was a "long term tradition."

Full testimony and video available at thestreet.com

Gold hits record high again

2011-07-14T00:22:00.004+05:30

August gold has peaked so far Wednesday at $1,588.70 an ounce on the Comex division of the New York Mercantile Exchange, a record for a most-active contract. As of 1:08 p.m. EDT, it was up $23.10, or 1.5%, to $1,585.40 an ounce. Spot gold was $18.60 higher at $1,585.90 an ounce.

Source: Kitco.com

One heck of a run in the last 10 years - 800% return

Bull Markets - Templeton

2011-07-13T01:27:00.001+05:30

"Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria" - Sir John Templeton

Crisil launches Gilt Index

2011-07-12T23:51:00.002+05:30

The Crisil Gilt Index provides an appropriate representation of the movement of yields in government securities. The index comprises 12 most liquid G-secs - Economic Times

Gilt funds - Alternative when interest rates peak

2011-07-12T23:39:00.003+05:30

Top Gilt fund returns today when interest rates have been rising since two years

Source: MutualFundsIndia.com

Top Gilt fund returns when interest rates are decreasing during 2009

Source: Rediff.com

India car sales - slowest growth in 27 months

2011-07-12T23:18:00.002+05:30

Fuel prices have risen almost 9% in the last two months and the central bank has pushed up policy rates 10 times since March 2010 to curb inflation.

Sales rose just 1.62% in the month as against 7% in May and 13% in April, data released by the Society of Indian Automobile Manufacturers (SIAM) on Monday showed. The growth is the slowest since March 2009, when sales grew 1.16% - Economic Times

Euro debt contagion - Italy, Spain - welcome

2011-07-12T22:48:00.003+05:30

Yields on 10-year notes

Italian bonds - 5.96% yield - Highest since 1997
Spain bonds - 6.03% yield - Highest since 1997

New comers to the debt crisis - join the club of Ireland, Greece and Portugal.

Source: Bloomberg.

Crisis stalks Italy, EU calls emergency meeting

2011-07-10T23:29:00.002+05:30

"We can't go on for many more days like Friday," a senior ECB official said. "We're very worried about Italy."

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy's finances. Reuters Exclusive

Italy is now on table!!

Farmer Suicides

2011-07-10T23:00:00.002+05:30

Larget group of suicides in UK is from Farmers Fox interview with Jim Rogers

We thought it only happens in India!!

Politicians and Smart?

2011-07-10T22:38:00.001+05:30

Most politicians are not that smart that's why they become politicians , the study show that the people in America who become the best politicians are the people who excelled at playground , they did not excel at anything else , most of them had never had jobs they do not know how the world works , it's frightening - Jim Rogers on Fox

Greece - 30% yield on 2 year Govt Bond

2011-07-10T11:07:00.003+05:30

The yield on two-year Greek notes rose to a euro-era record of more than 30 percent last week. The nation’s debt burden will rise to 158 percent of GDP this year from 143 percent in 2010, according to EU forecasts - Bloomberg.

The countries inline for more problems are Greece, Ireland, Portugal, Spain & Italy with Spain and Italy being big dominoes as GDP numbers are big.
Greece - GDP - 330 Bil
Ireland - GDP - 227 Bil
Portugal - GDP - 228 Bil
Spain - GDP - 1460 Bil
Italy - GDP - 2113 Bil

Gas & coal crunch

2011-07-10T10:37:00.000+05:30

"The coal ministry says there is no coal available, the ministry of petroleum and natural gas says that there is no gas available, what do we do?" said the chairman of a state-run power producer. Officials said the government has virtually ruled out construction of any new gas-fired power station in the next Five-Year Plan because of the acute shortage of natural gas. Economic Times

Failed politicians and wars

2011-07-09T02:33:00.001+05:30

Jim Rogers learning from his guinness record world tours - "Wars are caused by failed politicians, not by people like you and me, i dont wanna kill anybody, my children dont wanna kill anybody but politicians seem to get pleasure out of getting into fights" - Jim Rogers on Leaderonomics

Most people are afraid of other people

2011-07-09T02:30:00.003+05:30

Jim Rogers learning from his guinness record world tours - Most people are afraid of other people, i would go to here (one place) and they would say where have you been i would say here (other place), oh they are terrible dangerous people, so where were you going, i would say we are going here (another place), oh you gonna get killed if you go there, of course when i got there they said the same thing. But if everybody were to go dinner or drink beer, watch football together they would find that we are all the same - Jim Rogers on Leaderonomics

We're all the same

2011-07-09T02:27:00.004+05:30

Jim Rogers learning from his guinness record world tours - "One of most important things about life is that we are all the same, it doesnt matter if we have different color skin, different languages, different food, different religions, its astonishing that we all want the same thing for our children, the same thing for our lives" - Jim Rogers on Leaderonomics

Civilization phases

2011-07-07T22:27:00.001+05:30

”Plato said in The Republic that the way societies revolve is they go from dictatorship to oligarchy, to democracy, to chaos and back to dictatorship.” China, according to Rogers, is in the early stages of oligarchy. And, America, if it’s not careful, is heading for chaos - Jim Rogers

Parabolic Move

2011-07-07T22:21:00.002+05:30

In April silver run up 25 percent , anything that goes up 25 percent in a month is due for a correction, thanks goodness there was a correction in silver because if it will go straight up and continue to go straight up it will turn into a parabolic move and i would have to sell - Jim Rogers quote

Residex index rolls over

2011-07-07T21:35:00.004+05:30

The latest quarter Jan-Mar 2011 Residex Indices for cities which indicates real estate prices seems to roll over with Bangalore prices dropping sharply by 12.8%. Kochi prices dropped the highest at 14.85%

Click to enlarge

Morning with Charlie - Full notes

2011-07-06T00:00:00.002+05:30

An excellent piece of work by Ben Claremon of the last such meeting with Charlie. Enjoy the insights from Charlie Munger

A morning with Charlie - Latest notes - Part 1

2011-07-03T13:14:00.002+05:30

"You need a new cult hero," Munger said. "I'm doing you all a favor by not having another one of these meetings."

"We'll be talking about a lot today," he told the crowd of 500. "Some of it is academic. Some philosophical. And some will be about investments because I know you're all a bunch of greedy bastards."

Enjoy the interview a fool.com

Jim Rogers on farming

2011-07-02T22:23:00.002+05:30

The average age of farmers in America is 58 years old. In 10 years, they’re going to be 68, if they’re still alive. Throughout the world, we have serious, maybe even catastrophic developments in agriculture, which is going to hurt us all over the next couple of decades - Jim Rogers

Indexmundi interview

Market Swings

2011-07-02T22:18:00.002+05:30

Oil has gone down over 50 percent on three or four different times since 1998, that's what markets do, and they will continue to do that - Jim Rogers

Indexmundi interview

US - Largest Debtor

2011-07-02T22:16:00.002+05:30

The U.S. is not just the largest debtor nation, it is also the largest debtor nation in the history of the world. And, throughout history, when this sort of thing has happened, no country has resolved this sort of challenge itself without a crisis or a semi-crisis - Jim Rogers

Indexmundi interview

Contrarian Investing

2011-07-02T22:09:00.002+05:30

What I’ve found over the years of investing is that when everybody is on one side of the boat, you should go to the other side, at least for a while - Jim Rogers

Indexmundi interview

Charlie munger's new parody

2011-07-02T20:02:00.003+05:30

A new parody by Charlie Munger describing the contributions of wantmore, tweakmore, totalscum, countwrong, and oblivious to the tragic "Great Recession" in Boneheadia and the thoughts of some people relating to this disaster. Mr Oblivious is clearly Alan Greespan. Enjoy the awesome parody.

Charlie munger's Parody - Courtesy http://myinvestingnotebook.blogspot.com

Top 5 yielding Government bonds

2011-07-02T02:15:00.006+05:30

**Updated after my friend pointed out a mistake and now it becomes top 6 to accomodate the important ones having issues Greece, Ireland and Portugal that can create global repurcussions if they default which seems to be very logical end to their ongoing issues.

Greece - 10 Year Government Bond Yield - 16.78%
Pakistan - 10 Year Government Bond Yield - 14.06%
Brazil - 10 Year Government Bond Yield - 12.39%
Venezuela - 10 Year Government Bond Yield - 12.08%
Ireland - 10 Year Government Bond Yield - 11.97%
Portugal - 10 Year Government Bond Yield - 11.38%

Source: TradingEconomics.com, Bloomberg.com

Loan Deposit Ratio History - India

2011-07-02T02:07:00.005+05:30

Source: RBI. Click to enlarge

Current Loan to Deposit ratio is 74.87

European banks more fragile - Wilbur Ross

2011-07-02T01:23:00.005+05:30

Loan to Deposit ratio of banks
American = 66%
European banks = 130% average (Some have ratios also at 170%)

So European banks are more fragile says Wilbur Ross

For Indian banks - It is 75%

Interesting comment by ICICI bank

2011-07-02T00:04:00.002+05:30

ICICI hikes lending rate by 25 bps to 9.50 pc and also announced an increase of 0.25 per cent in its benchmark prime lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans) effective from Monday. The BPLR is used for determining the interest rates on loans and advances sanctioned up to June 30, 2010.

The fixed rate consumers will not be impacted by the said increase and their contracted rates will remain unchanged, the bank added.

ICICI has fixed rate loans? Interesting?

Greece - govt bonds yield 28% any takers

2011-06-26T01:24:00.004+05:30

Greece two year goverment bonds are yielding 28% while ten year bonds are yielding 16.5% which means that you get 28 euros interest every year on 100 euros invested in Greece govt two year bonds. The catch is will Greece keep its promise, by the current going it will not:)

Source: Bloomberg, TradingEconomics.com