Selling women short

Yesterday I found an interesting book on the treatment of Wal-Mart towards women, especially from the minority community. It talks about the sex-discrimination at Wal-Mart, and the way these women stick on to jobs for want of better prospects. But promotions elude them, and good positions often go to the men, who are often paid more. Interestingly one women (I don’t remember the name) had to show her monthly bills and expenses in order to justify her higher pay requests. Humiliating no doubt, it shows the state of affairs in the most developed economy, and in the company that tops the fortune 500. high sales means higher revenues for the shareholders, but lower prices leads to lower pay scales. Its indeed unfortunate to find that in an economy, which had a women’s liberation long back, still struggles with such discrimination. Racial discrimination is rampant in these parts, but such things are often uncalled for.

Probably Sam Walton didn’t start this chain with such a philosophy. The well proclaimed pride associated with being a part of the Sam’s club didn’t go well with all the members. Most of them are exploited, and are often forced to continue with the job. The recent report of not even allowing any lunch breaks has added to the existing list of court cases against Wal-Mart. The US government should take some steps to protect the women's rights.

US current account continues to worsen

In response to http://economictimes.indiatimes.com/articleshow/msid-1240066,curpg-1.cms

With manufacturing being outsourced, and now the ‘low end’ services too, US is left with R&D and the typically high end services, which in turn is a fallout of R&D. but in course of time, these high end services would lose their levels, and would move out to the other countries. So innovation is the key to survival.

Cost differential has led to outsourcing of services by companies who are seeking opportunities. This is not unlike arbitrage in the derivatives segment, though with some constraints like red tapism.

It might not be far before US ends up being a gamut of trading companies, with nothing but margins to survive. Manufacturing is already getting locked up at china, while India still struggles to follow. With the world getting eased out, and globalization finding acceptance, it might not be long when free movement of resources, including people would blur any advantage a particular economy might have. Arbitrage opportunities would be reduced, and there would be one free for all economy.

The extraordinary story of Amul

Look at this article

http://in.rediff.com/money/2005/sep/23spec.htm

A plunge of figures

Quite a familiar sight for the day, but none too appealing! The sensex crashed 292 points, and nifty found itself 91 points down. Analysts had cautioned that it was just waiting to happen. With the soaring indexes, market seemed to be headed towards some correction. But this is a correction, or a meltdown, that’s yet to be seen. The market sentiments have been euphoric, thanks to the FII intervention. But the day it stops, who will save the market? Millions of reports and new celebrities are born. This is the most interesting game, even better than cricket; because a lot of stakes are involved. Make a wrong move, and your wealth could go down the drain, or a smart move could give you riches. For now, let’s wait and watch!!

Richard Branson, Oil Tycoon?

I got tired reading about Richard Branson's baloons, his ventures and his eccentricity. But I have always been thrilled reading about this activities. This new venture of oil exploration didnt come to me as a surprise!!

This article on businessweek

Wal-Mart problems

The top ranked company in the fortune 500 isn’t having a good time with its people. Loaded with about 40 cases regarding worker violations only belittles the grandiose of the behemoth. The latest news of workers being denied lunch breaks appears quite inhuman. I remember having read a case on Wal-Mart and its teething people problems. And in spite of this, its value is ostensibly larger than the GDP of many countries.

Now Wal-Mart has shown its interest in putting up an FDI in India. The recent government directive to allow FDI in retail has opened up new avenues for the retail giant, as India is a largely growing market. Rumors say that Wal-Mart is looking at partnering with Reliance, the largest private business house.

So is it that, if the deal goes through, they would have worker problems in India as well? But their bargaining power may not stand with the high degree of unionism prevalent in India. Otherwise why did erstwhile union problem free Haryana have to witness the Hero Honda fiasco?

Wal-Mart may not find India so comfortable if it’s got to employ people. Retail stores can never be fully automated, and with the zealous population of India, it might not be long before the retail conglomerate may have to rethink its strategy.

In response to this article on businessweek

Derivative mutual funds

The SEBI has lifted the ban on mutual funds using derivatives in their
portfolio. Until now, the fund houses could use futures and options
only for the purposes for hedging. It was probably set up keeping the
larger interests in mind, wherein mutual funds are taken largely by
retail investors, who do not have a high risk appetite.

The stakes involved and the volatility of the FO segment did not allow
retail investors their share of the pie. It was largely reserved for
the larger investors, with huge market caps. To buy a nifty index
future lot, one would have to buy 200 nifties, and at the present
value of over 2500, it comes out to be over Rs 5 lakh. Even if a 5%
margin is applied, the amount to be invested is Rs 25,000. Indian
investors do not remain a part of the retail segment, when their
investments cross Rs 50,000. Furthermore, options are coupled with
huge premiums, which are beyond the affordability of the most.

In such a situation, the permission of mutual fund houses to start
funds trading in derivatives has given rise to another round of
speculation. Experts feel that this will increase the liquidity of the
market by some Rs 60,000 crore. The BSE Sensex rose from 8189 to 8283
or 1.148% yesterday, 15th of September. We can expect a lot of
interesting things happening in the next few days.

The smartest guys in the room

Fortune reporter McLean's article in early 2001 questioning Enron's high valuation was cited by many as an early harbinger of the company's downfall, but she refrains from tooting her own horn, admitting that the article "barely scratched the surface" of what was wrong at America's seventh-largest corporation. The story of its plunge into bankruptcy (co-written with magazine colleague Elkind) barely touches upon the personal flamboyances highlighted in earlier Enron books, focusing instead on the shady finances and the corporate culture that made them possible. Former CEO Jeff Skilling gets much of the blame for hiring people who constantly played by their own rules, creating a "deeply dysfunctional workplace" where "financial deception became almost inevitable," but specific accountability for the underhanded transactions is passed on to others, primarily chief financial officer Andrew Fastow, whose financial conflicts of interest are recounted in exacting detail. (Skilling seems to have cooperated extensively with the authors, though clearly not to universal advantage.) A companywide sense of entitlement, particularly at the top executive levels, comes under close scrutiny, although the extravagant habits of those like Ken Lay, while blatant, are presented without fanfare. The real detail is saved for transactions like the deals that led to the California energy crisis and a 1986 scandal, mirroring the problems faced a decade later, that left the company "less than worthless" until a last-minute rescue. The book's sober financial analysis supplements that of Mimi Swartz's Power Failure, while offering additional perspectives that flesh out the details of the Enron story.

Copyright 2003 Reed Business Information, Inc

Herd mentality

I my quest to fnid out the ways and means of the stock market, I came across an interesting article. The pink section of today's DNA told a story. Robert P Miles, the Warren Buffet investment advisor had, in a conference, asked people to bid for a business that would generate Re 1 every year for 10 years. And people started bidding. Herd mentality followed, and raised the tag to Rs 1000. this clearly shows how irrational the stock market can be. And this is how stocks tend to get overvalued.

The rational method of evaluation of the stock is the discounted cash flow method, an inevitable part of the finance basics. A cash flow of Re 1 for 10 years would bring the present value to nothing more than Rs 6.14 (taking 10% discounting rate) But the people did raise the price!!

ABN Amro dividend yield fund

ABN Amro mutual fund has launched the dividend yield fund, which would
focus on the companies having a dividend yield higher than the BSE
Sensex. The other dividend yield funds available today are:

• Birla dividend yield fund – The stocks in this fund are selected if
its dividend yield is twice that of the sensex.
• Principal yield dividend fund – Dividend yield of the stocks
invested in needs to be 1.5 times nifty.
• Tata dividend yield fund – stocks should have a dividend yield
higher than the BSE sensex.

The entry load for this fund is 2.25% for investments upto Rs 5 crore.
No exit load, and the minimum investment is Rs 5000. the last date of
the offer is 30th August.

As per the stated asset allocation, the fund will invest 65-100 per
cent of its assets in high dividend yield stocks, and up to 35 per
cent of its assets in stocks which do not have a high dividend yield.
The fund can also invest up to 35 per cent of its assets in debt and
money market instruments

Commodities

A bulk good traded on an exchange or cash market is a commodity. We have food grains, gold, silver, oil, and the being traded in the commodities markets. A basket of commodities constitutes a commodities index. This index has a different weight for each commodity and its performance is a decisive factor in a number of commodity derivatives. It seems that from now on trading would be possible in small amounts. This would attract retail investors. Already commodities mutual funds are finding their takers, it would not be long before commodities would be sold in equities, just the way the securities are sold. We can expect a dramatic increase in transactions in the commodities exchanges like NCDEX (national commodities and derivatives exchange)

First and second

In response to

http://tinyurl.com/blxnj

To be the amazon of Indian price sensitive market, firstandsecond needs to work on lowering the prices and improving its service. It's common knowledge that an online shop implies lesser cost than a brick and mortar store for the entrepreneur. So getting a better bargain on books would only be a right of the net savvy customer. Indians may not be too inclined to shop online, but a new breed of online enthusiasts would be ready to buy books, music or even groceries if available at a discount. And this tribe will only grow; now that Internet has crossed 10 years of existence in India (VSNL was launched as the first ISP on Aug 15, 1995)

There is no description or reviews of the books. Even a few sample pages could do the trick. When I search for a book on firstandsecond.com, I am presented with a plethora of options, most of which are supposedly foreign editions with skyrocketing prices. I don't see many takers for this kind of service. In spite of a far lesser collection of indiatimes, it does deliver cheap and fast. Finally, as a customer, I would not purchase a book online when I get a 20% off on the MRP at the bookstores at Fort area of Mumbai, or I would rather go for some experience shopping at Oxford or Crossword!

Amazon may have graduated from the largest online bookstore to the largest online store in the mature American market, but the huge untapped potential in India does lay in online shopping experience. But the key remains in tapping the Indian needs, the first being low prices!!

1Gbps Internet

The internet is not an area of no constraints. The main bottleneck is
the low bandwidths. But with the new broadband of 1Gbps getting real,
the day is not far when we would be hooked on the Internet (always
online), just the way we are always online on your wired or mobile
telephones.

The GPON is set to set up a new wave of changes, watching movies
online is only for the privileged few. But watching it online would be
real, people might even decide not to buy TV and have computers
instead.

The rampant piracy would rise to no limits. Currently only small
software are available online, but in future, you might even find
operating systems getting downloaded (and installed too) in a jiffy.

If you wanted to install updates, it would take seconds. That would
require an additional constraint, that of the server. So now the
services would be constricted by the capacity of the server, not the
connecting media.

Will this new technology be restricted to Internet only? Currently, we
use a 10 Mbps LAN, it would be a shame if we can download a file
faster from the Internet than from the office LAN!!

Perhaps its too early to wonder, but I am eagerly waiting for this new
technology to happen!!
In response to the hindu business line article

Mumbai Rains

I had thought that I would go at least two steps forward. But could go only one. Thanks to the impending bureaucracy and the inability to let secrets like employee salary go to someone as a trainee, I doubt if I would be able to get the declaration. But at least I have been successful in pushing the vouching policy forward. I should get some response tomorrow, otherwise some more emails would go out from my computer.

Today is a heavy rain day. Its raining, as I would say, cats, dogs, buffaloes, pigs, and elephants too! Local services are disrupted, and people are panicking. Somehow I wonder why I don't panic. And the fact is that there is no one waiting for me at home, so why struggle? Even if I have to sit in office for the night, I don't mind. There is the computer, the books, the AC, the Internet; and I can always get something to eat!!

People have rushed to go out, and this is what happens when people stop thinking rationally. Looking at things objectively may not be everyone's cup of tea. And they might have problems of their families waiting. But I dont have, so chill!! If I had spare clothes with me, I would have gone to marine lines and sat in front of the impending waves.

Satellite Radio

So now its time for a high tech radio. The erstwhile AIR got replaced with the local FM stations. This has caught well with the public, and its popularity can be seen virtually everywhere in cities like Mumbai. Whether Worldspace, with its model of paid radio subscription would find many users is a matter of thought. In a market like India, where anything that's free, goes; it may not find a big audience. Its site www.worldspaceasia.com mentions about Punjabi and the Indian effect. At Rs 1800 per annum + initial hardware charges, it can work provided it gives some value. Spending Rs 150 a month may not be difficult (even airtel and other mobile operators are letting people speak at Rs 200 a month), but what's important is the content. It has to find an initial acceptance. I can see their ads in Mumbai, but it gives no clue as to what it is all about.

The government had sanctioned new FM bands all over the country. But before the subscription of satellite radio starts, FM would find a better acceptance because of the fact that it's free and the hardware needed can be purchased even at Rs 50. So it's all about price, and the value it provides!!

Inflation

The dreaded word in the context of Indian economy: inflation. So what is inflation? The government says that it can contain inflation to 5%. What does it signify?

At the basic level, inflation is nothing but a rise in prices. And why does it have to rise? Read ahead and find out!

Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every rupee you own buys a smaller percentage of a good or service.

Some variants of inflation are:

• Deflation: When the general level of prices are falling
• Hyperinflation: Its an extreme case, when the prices rise dramatically, leading to breakdown of the country's monetary system.
• Stagflation: combination of high unemployment and inflation.

Why inflation?

Inflation or the rise in prices is due to the effects of demand and supply. The demand and supply curves intersect to determine the prices. The two conditions that tend to rise the prices are:

• Demand pull inflation: This occurs when there is more demand for a scarce product. A concept very apt for a country like India
• Cost push inflation: When companies' costs go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of imports.

The prices might rise, but if it is supported by a corresponding rise in wages then the buying capacity remains the same. Hence a term real wage is used to determine this.

How is inflation measured?

Measuring inflation is a difficult problem for government statisticians. To do this, a number of goods that are representative of the economy are put together into what is referred to as a "market basket." The cost of this basket is then compared over time. This results in a price index, which is the cost of the market basket today as a percentage of the cost of that identical basket in the starting year.

There are two main price indexes that measure inflation:

• Consumer price index - A measure of price changes in consumer goods and services such as food, clothing, shelter and automobiles. The CPI measures price change from the perspective of the purchaser.
• Producer price indices - A family of indexes that measure the average change over time in selling prices by domestic producers of goods and services. PPIs measure price change from the perspective of the seller.

In general, investors follow CPI more than PPIs.

Interest rates directly affect the credit market (loans) because higher interest rates make borrowing more costly. By changing interest rates, the RBI tries to achieve maximum employment, stable prices, and a good level growth. As interest rates drop, consumer spending increases and this in turn stimulates economic growth.

A control has to be maintained as a tradeoff between high inflation and deflation. The optimum level is a level of 2-3%. India, of course is higher on the scale.

Your investments would be affected by inflation in a big way. The returns you received would not be effective enough. The inflation would eat into your returns. For instance, if you earn a return of 12% and the inflation stands at 5%, you are actually making only 7%. Just think if it were the other way round; you would lose money in spite of investing!!

Gyan taken from http://www.investopedia.com/university/inflation/default.asp

P/E Ratio

Theoretically, a stock's P/E tells us how much investors are willing to pay per dollar of earnings. For this reason it's also called the "multiple" of a stock. In other words, a P/E ratio of 20 suggests that investors in the stock are willing to pay $20 for every $1 of earnings that the company generates. However, this is a far too simplistic way of viewing the P/E because it fails to take into account the company's growth prospects

A good example is Microsoft. Several years ago, when it was growing by leaps and bounds, its P/E ratio was over 100. Today, Microsoft is one of the largest companies in the world, so its revenues and earnings can't maintain the same growth as before. The result is a current P/E ratio of 43 (at the time of writing, in June 2002). This reduction in the P/E ratio is a common occurrence as high growth startups solidify their reputations and turn into blue chips.

Company growth rates - How fast has the company been growing in the past, and are these rates expected to increase or at least continue into the future? Something isn't right if a company has only grown at 5% in the past and still has a stratospheric P/E. If projected growth rates don't justify the P/E, then a stock might be overpriced. In this situation, all you have to do is calculate the P/E using projected EPS.

Industry - It is only useful to compare companies if they are in the same industry. For example, utilities typically have low multiples because they are low growth, stable industries. In contrast, the technology industry is characterized by phenomenal growth rates and constant change. Comparing a tech to a utility is useless. You should only compare high growth companies to others in the same industry, or to the industry average

Industry averages for various companies

http://www.investopedia.com/offsite.asp?URL=http://biz.yahoo.com/p/industries.html

Managers and leaders

Do the companies need managers or leaders? What are their functions?
One may say that both are needed. Quite right, but can we have two
people, one for management and one for leading? My reading of an
article in a HBR publication has given me a new revelation.

It says that manager's goals arise out of necessities, rather than
desires; and leaders are proactive in their approach. They set their
own targets, and work towards them. Managers, on the other hand, are
problem solvers. So both are needed, isn't it?

Leadership requires powers to influence the thoughts and actions of
other people. The risk of power games comes into the picture when
• There is a risk of equating power with the ability to get immediate results
• Risk of ignoring many different ways people can legitimately accumulate power
• Risk of losing self control in the desire for power

As a personality, manager emphasizes rationality, he is a problem
solver. Leadership is a kind of psychodrama in which the leader must
control himself before trying to control others.

In spite of being a 'born leader', there can be a great deal of
stagnation because of their limitations in visualizing purposes and
generating value at work.

Managers tend to adopt an impersonal attitude towards their goals.
These goals are created out of a need, and are more oriented towards
the organization, rather than the person. Leaders tend to get
passionate about their goals, and can have serious implications if
they fail to achieve those.

I don't feel like putting any more gyan, will do that sometime later.

Is IT important?

The value of IT can never be understated. One can see its ubiquity,
its presence in virtually all the business processes. There may not be
many industries not depending on IT for its day to day activities.

But has the IT dept got the value it deserves? There are many
effective organizations and leaders whose value has been completely
overlooked due to lack of problems! They have been waylaid by the
perception that "everything works fine, so you guys must not be doing
anything", swiftly followed by the "what have you done for me lately?"
yardstick. They had made the mistake of not marketing themselves to
their internal customers. Their effort for a silent and efficient
operation became the negative perception of their effort and
productivity.

When was the last time you called your local telephone service
provider and thanked them for bringing you a dial tone? When was the
last time you called your local power company to thank them for
keeping your lights on? When was the last time your department was
credited for consistently delivering more value for less money,
regardless of how the rate of consumption increases?

It is highly likely that your own customers, no matter how closely you
work with them, have become habituated to the services provided and
have no understanding of the complexity involved in their delivery.
Assumptions give rise to incorrect or undesired conclusions.

The importance of IT (to everyone) Information technology, while
arguably one of the most important infrastructure elements in a
corporate operating backbone, is also one of the most underpublicized,
undermarketed, and misunderstood components of any corporation. There
are two primary contributors to this lack of understanding. The first
is a complete misinterpretation of the maxim "The customer is always
right." The second is that marketing, in the form necessary to connect
with the customer, is just plain difficult and is viewed as an
inconsequential luxury by most IT organizations, which are already
under constant pressure to perform with declining funding and often
contradictory business directives

So what to do? How to go ahead marketing IT? does it require a plan?
Well, for any formal marketing, a plan is necessary. I'll put that
later.

Mainframes to Linux

Open Source ascendant