In 2009, almost all central banks showed an increased love for gold. In the recent past, Russia’s central bank addded 800,000 ounces of gold to its reserves last month, increasing its holdings of the metal to $22.4 billion.
The bank’s gold reserves climbed to 20.5 million ounces from 19.7 million the previous month. And, India’s central bank also purchased gold in 2009 to increase its foreign reserves.
With the Reserve Bank of India (RBI) purchasing 200 tonne gold in two phases from the International Monetary Fund (IMF) in November 2009, the central bank’s gold holdings have increased from 357.75 to 557.75 tonne.
RBI held about 357.75 tonne, forming about 3.7% of the total foreign exchange reserves in value terms as at the end of September 2009. Out of this, 65.49 tonne is being held abroad since 1991 in deposits or safe custody with the Bank of England and the Bank for International Settlements.
Currently, RBI holds gold reserves worth $18.3 billion which is 6.33% of the country’s total forex reserve. Gold reserves held by India stood at $10.32 billion as on September 2009. Interestingly, India’s gold reserves have been rising steadily from $9.2 billion in May 2008 and touched $9.6 billion in May 2009, after falling to $8.57 billion in September 2008.
The country’s total foreign exchange reserves stood at $284.3 billion.
Talking about investment pattern for foreign currency assets which were worth $264.4 billion at the end of September 2009, RBI said $148 billion was invested in securities, $111.3 billion was deposited with other central banks, BIS and the IMF and $5.1 billion was parked in the form of deposits with foreign commercial banks placed with the external asset managers.
A small portion of the reserves has been assigned to the external asset managers (EAMs), with the main objective of gaining access to and deriving benefits from their expertise and market research.
The rate of earnings on foreign currency assets and gold, after accounting for depreciation, decreased from 4.82% in July 2007-June 2008 to 4.16% in July 2008-June 2009.
Articles, comments, thoughts on Equities, Commodities & Awareness about Global Warming...
Friday, 22 January 2010
Monday, 11 January 2010
Gloomy days are history for India's auto sector
Indian automobile sector ended up the year 2009 with high optimism as the industry sales showed a robust growth during the last month of the calendar year 2009.
According to a recent announcement made by the Society of Indian Automobile Manufacturers (SIAM) the automobile sales in India for the month of December 2009 stood at 1,000,500 units, showing an increase of 67.5% against the low base of 597,622 units in December 2008.
The growth is believed to be the highest so far in 2009–10, followed by the growth of 46% recorded in November 2009.
“A combination of factors like the three fiscal stimulus packages, low interest rates on vehicle financing made possible by PSU banks, cash infusion from the sixth pay commission and new models from manufacturers have helped December sales to rise,” says Pawan Goenka, President of the Society of Indian Automobile Manufacturers and President of Mahindra & Mahindra, at the ongoing Auto Expo 2010.
The rise in automobile sales would create repercussions on the metals industry, as the industry had faced one of the worst phases in the late 2008 and early 2009. Credits drying up and order deferments had put the metal companies in a fix. However, the times changed with government fiscal stimulus packages taking off well and industry once again started pounding.
On the stock exchanges, auto stocks posted heavy returns. On the Bombay Stock Exchange (BSE), the sectoral index, BSE Auto index gained significantly during the calendar year 2009. Since the start of the year, BSE Auto index surged from 2448.40 points to 7435.83 points through the year.
Leaders in auto sector, Tata Motors Ltd (BOM: 500570) gained 409.38% during the year 2009 on the BSE, Bajaj Auto Ltd (BOM: 532977) yielded 369.41% returns from 1st January 2009 to 31st December 2009. Mahindra & Mahindra Ltd (BOM: 500520) and Maruti Suzuki India Ltd (BOM: 532500) posted returns worth 307.08% and 205.36% respectively during the said period.
The 68 per cent rise in December 2009 sales was made possible by the sustained growth in cars and utility vehicles (50 per cent), continued growth in medium & heavy commercial vehicles on a low base last year (248 per cent), and in two-wheeler sales (67 per cent) last month.
Sales of large commercial vehicles, termed medium and large trucks and buses, rose for the fifth consecutive month. The December rise was an impressive 248 per cent, in which the industry sold a record 24,037 units. This is the highest growth posted by the CV industry for this year. The fourth quarter of 2009 was a low base in sales of large Cvs, when it dipped between 50 and 70 per cent. Industry executives say the high growth will continue even in the first quarter of 2010, on the back of buying before the new emission norms get effective in April. Total sales of CVs, (including light CVs) was 48,614 units.
Sales of three-wheelers, on the back of good demand for passenger carriers, grew by 83.7 per cent, at 34,993 units. Two-wheeler sales for December, led by Hero Honda and a resurgent Bajaj Auto, rose by 67 per cent, enabling manufacturers to sell 767,796 units.
Sales of passenger vehicles in December grew by 50 per cent, with the industry selling 149,097 units. November sales growth was the highest, at 67 per cent.
According to a recent announcement made by the Society of Indian Automobile Manufacturers (SIAM) the automobile sales in India for the month of December 2009 stood at 1,000,500 units, showing an increase of 67.5% against the low base of 597,622 units in December 2008.
The growth is believed to be the highest so far in 2009–10, followed by the growth of 46% recorded in November 2009.
“A combination of factors like the three fiscal stimulus packages, low interest rates on vehicle financing made possible by PSU banks, cash infusion from the sixth pay commission and new models from manufacturers have helped December sales to rise,” says Pawan Goenka, President of the Society of Indian Automobile Manufacturers and President of Mahindra & Mahindra, at the ongoing Auto Expo 2010.
The rise in automobile sales would create repercussions on the metals industry, as the industry had faced one of the worst phases in the late 2008 and early 2009. Credits drying up and order deferments had put the metal companies in a fix. However, the times changed with government fiscal stimulus packages taking off well and industry once again started pounding.
On the stock exchanges, auto stocks posted heavy returns. On the Bombay Stock Exchange (BSE), the sectoral index, BSE Auto index gained significantly during the calendar year 2009. Since the start of the year, BSE Auto index surged from 2448.40 points to 7435.83 points through the year.
Leaders in auto sector, Tata Motors Ltd (BOM: 500570) gained 409.38% during the year 2009 on the BSE, Bajaj Auto Ltd (BOM: 532977) yielded 369.41% returns from 1st January 2009 to 31st December 2009. Mahindra & Mahindra Ltd (BOM: 500520) and Maruti Suzuki India Ltd (BOM: 532500) posted returns worth 307.08% and 205.36% respectively during the said period.
The 68 per cent rise in December 2009 sales was made possible by the sustained growth in cars and utility vehicles (50 per cent), continued growth in medium & heavy commercial vehicles on a low base last year (248 per cent), and in two-wheeler sales (67 per cent) last month.
Sales of large commercial vehicles, termed medium and large trucks and buses, rose for the fifth consecutive month. The December rise was an impressive 248 per cent, in which the industry sold a record 24,037 units. This is the highest growth posted by the CV industry for this year. The fourth quarter of 2009 was a low base in sales of large Cvs, when it dipped between 50 and 70 per cent. Industry executives say the high growth will continue even in the first quarter of 2010, on the back of buying before the new emission norms get effective in April. Total sales of CVs, (including light CVs) was 48,614 units.
Sales of three-wheelers, on the back of good demand for passenger carriers, grew by 83.7 per cent, at 34,993 units. Two-wheeler sales for December, led by Hero Honda and a resurgent Bajaj Auto, rose by 67 per cent, enabling manufacturers to sell 767,796 units.
Sales of passenger vehicles in December grew by 50 per cent, with the industry selling 149,097 units. November sales growth was the highest, at 67 per cent.
Saturday, 9 January 2010
Global tea prices likely to ease in 2010: FAO
The global tea prices are expected to dip in 2010 from a record high in the previous year as the weather patterns are observed normal in the major tea producing countries of Asia and Africa, said UN’s Food and Agriculture Organization.
The drought driven by weak weather condition in India, Sri Lanka and Kenya, had impacted the production badly amid increased demand, which led to a spurt in tea prices in 2009.
However, the global consumption surged sharply between 2007 and 2009 by 3.4% against the production. The concern is that tea producers could over-react to the current high prices by planting more crops, threatening an over supply in the market, FAO said.
The fact that demand for tea remained robust, despite the global recession, supports the assertion that tea consumption is “habit forming” and is relatively price inelastic for most blends except higher priced quality teas.
In addition, the share of household income spent on tea purchases is relatively small. Supply response to high tea prices has been delayed as it requires investment decisions that have long-term implications: it takes at least three years before a tea bush can be harvested.
Higher tea prices have not affected the consumer in developed countries because of intense competition in the beverages market.
The drought driven by weak weather condition in India, Sri Lanka and Kenya, had impacted the production badly amid increased demand, which led to a spurt in tea prices in 2009.
However, the global consumption surged sharply between 2007 and 2009 by 3.4% against the production. The concern is that tea producers could over-react to the current high prices by planting more crops, threatening an over supply in the market, FAO said.
The fact that demand for tea remained robust, despite the global recession, supports the assertion that tea consumption is “habit forming” and is relatively price inelastic for most blends except higher priced quality teas.
In addition, the share of household income spent on tea purchases is relatively small. Supply response to high tea prices has been delayed as it requires investment decisions that have long-term implications: it takes at least three years before a tea bush can be harvested.
Higher tea prices have not affected the consumer in developed countries because of intense competition in the beverages market.
Friday, 8 January 2010
BSE Sensex turns 25: The climb from 549 to 17467
The Bombay Stock Exchange (BSE) Sensex, the barometer of India’s stock market fortunes, has entered its silver jubilee year. It was launched on January 2, 1986 with 30 most actively traded stocks of that period, with 1979 as the base year. Today, the 30 stocks on the BSE Sensex, account for around 1/5th of the market capitalization of the Bombay Stock Exchange
There are more than 4,700 companies listed on the BSE, making it the biggest stock exchange in the world on the basis of number of listed companies. But not all stocks are actively traded. Even fewer are significant pointers of the trends in the market and the economy.
At the launch of the Sensex, the Bombay Stock Exchange had said that "the absence of an index number of equity prices to reflect the general trend of the market was felt for a long time by investors and also by newspapers who do not compile their own index numbers”.
What is Sensex?
The Sensex is a value-weighted index and is calculated based on a free-float capitalization method. This is a variation from the earlier market capitalization method, as instead of using a company’s all outstanding shares, only the shares that are readily available for trading are used. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and institutional investors. This method was introduced w.e.f September 1, 2003, to serve
The calculation of SENSEX involves dividing the free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips etc.
From its early days in 1986, the Sensex has traveled a long way and has increased by nearly 35 times to the present. On the first day of trading on April 1, 1986, the Sensex had closed at 549.43. It opened its silver jubilee year trading at 17,467.
Composition of the Sensex
The composition of the index too has undergone change many times as only 11 of the original 30 companies continue to be part of the Sensex.
In 1986, Sensex comprised – ACC, Bombay Dyeing, Ballarpur Industries, Ceat Tyres, Century Spinning, Food Specialities (now Nestle), Great Eastern Shipping, GSFC, Glaxo, Gwalior Rayon (now Grasim), Hindustan Aluminium (now Hindalco), Hindustan Lever,(now Hindustan Unilever) Hindustan Motors, Indian Hotels, Indian Rayon, ITC, Kirloskar Cummins, Larsen & Toubro, Mahindra & Mahindra, Mukand, Pieco Electronics (now Philips), Premier Automobile, Reliance Industries, Siemens, TELCO (now Tata Motors), Tata Power, Tata Steel, Voltas, Zenith.
The present composition comprises ACC, BHEL, Bharti-Airtel, DLF, Grasim, HDFC, HDFC Bank, Hero-Honda, Hindalco, Hindustan Unilever, ICICI Bank, Infosys, ITC, Jaiprakahs Associates, Larsen & Toubro, Mahindra & Mahindra, Maruti Udyog, NTPC, ONGC, Reliance Communications, Reliance Industries, Reliance Infrastructure, State Bank of India, Sterlite Industries, Sun Pharma, TCS, Tata Motors, Tata Power, Tata Steel, Wipro.
The changed composition in itself narrates the new dimension acquired by the Indian corporate sector. India’s pre-eminence in the IT world is highlighted by the presence of its big three IT-ITES companies – TCS, Infosys and Wipro. There are five Public Sector entrants, unlocking the hidden opportunities thanks to the policy of disinvestment. While presence of three Reliance companies reflect on corporate splits, the inclusion of Bharti-Airtel, DLF, Jaiprakash Associates and Sterlite signify the arrival of new corporate giants. Making way for the new entrants are the bigwigs of the yester years – viz : Bombay Dyeing, Century, Hindustan Motors, Premier Automobiles , Great Eastern Shipping etc. A cursory look at the Sensex companies of the past and the present clearly defines the sun-rise and sun-set sectors of the Indian economy. The new composition also indicates the decline of over-bearing presence of Mumbai headquartered companies, which accounted for over 75 per cent in 1986.
SENSEX Over the Years
It took more than two years for the Sensex to cross the four digit mark. On July 25, 1990 the Sensex for the first time closed at 1001 points. It began to pick up momentum, with a slew of economic liberalization measures announced in 1991 by Dr.Manmohan Singh, the then Finance Minister of India. A market friendly budget of 1992-93 and expectations from a liberal import-export policy helped Sensex surge past 4,000 mark by March 1992, before the Harshad Mehta scam hit the market. Y2K coincided with the information technology boom, and the Sensex crossed 6000 in the year 2000.
Around 2005, Foreign Institutional Investors became active on the stock market and the Sensex crossed the 8,000 mark on September 8, 2005. February 7, 2006 was a golden letter day for the Bombay Sensex, as it crossed the 10,000 mark and closed marginally above. Little more than a year later, Sensex doubled again and breached the 20,000 mark on October 29, 2007. It touched 21,078 on January 8, 2008. Then the signs of global recession began to surface and the US sub-prime crisis hit the market hard, when several Foreign Institutional Investors began off-loading their holdings. It has now begun to stage a comeback.
Importance of Indices
It is often stated that the stock market indices play an important role in gauging the economic health and progress of a country. It all began with the construction of Dow Jones Transportation Average in 1884. Today, across the world we have several stock market indices. Notable among them being – the S & P Global, Dow Jones, FTSE, Hang Seng and Nikkei. Despite their overwhelming popularity with the investors, they have also been targets of criticism on many counts. There are plenty of incidences of rigging, corporate corruption, artificially over-valued stocks, conflict of interest of research firms, which cause volatility in stock markets and dent the images of indices as ‘true and fair’ reflectors of company’s health.
Yet, Stock Markets and their indices continue be important. Stock markets provide the much needed liquidity in the economy. The two stock market indices from India, the BSE Sensex and NIFTY have helped put the Indian Capital markets on the world map. The growing presence of Foreign Institutional Investors is integrating our markets with the global markets. Let the march continue. (Courtesy: Press Information Bureau)
There are more than 4,700 companies listed on the BSE, making it the biggest stock exchange in the world on the basis of number of listed companies. But not all stocks are actively traded. Even fewer are significant pointers of the trends in the market and the economy.
At the launch of the Sensex, the Bombay Stock Exchange had said that "the absence of an index number of equity prices to reflect the general trend of the market was felt for a long time by investors and also by newspapers who do not compile their own index numbers”.
What is Sensex?
The Sensex is a value-weighted index and is calculated based on a free-float capitalization method. This is a variation from the earlier market capitalization method, as instead of using a company’s all outstanding shares, only the shares that are readily available for trading are used. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and institutional investors. This method was introduced w.e.f September 1, 2003, to serve
The calculation of SENSEX involves dividing the free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips etc.
From its early days in 1986, the Sensex has traveled a long way and has increased by nearly 35 times to the present. On the first day of trading on April 1, 1986, the Sensex had closed at 549.43. It opened its silver jubilee year trading at 17,467.
Composition of the Sensex
The composition of the index too has undergone change many times as only 11 of the original 30 companies continue to be part of the Sensex.
In 1986, Sensex comprised – ACC, Bombay Dyeing, Ballarpur Industries, Ceat Tyres, Century Spinning, Food Specialities (now Nestle), Great Eastern Shipping, GSFC, Glaxo, Gwalior Rayon (now Grasim), Hindustan Aluminium (now Hindalco), Hindustan Lever,(now Hindustan Unilever) Hindustan Motors, Indian Hotels, Indian Rayon, ITC, Kirloskar Cummins, Larsen & Toubro, Mahindra & Mahindra, Mukand, Pieco Electronics (now Philips), Premier Automobile, Reliance Industries, Siemens, TELCO (now Tata Motors), Tata Power, Tata Steel, Voltas, Zenith.
The present composition comprises ACC, BHEL, Bharti-Airtel, DLF, Grasim, HDFC, HDFC Bank, Hero-Honda, Hindalco, Hindustan Unilever, ICICI Bank, Infosys, ITC, Jaiprakahs Associates, Larsen & Toubro, Mahindra & Mahindra, Maruti Udyog, NTPC, ONGC, Reliance Communications, Reliance Industries, Reliance Infrastructure, State Bank of India, Sterlite Industries, Sun Pharma, TCS, Tata Motors, Tata Power, Tata Steel, Wipro.
The changed composition in itself narrates the new dimension acquired by the Indian corporate sector. India’s pre-eminence in the IT world is highlighted by the presence of its big three IT-ITES companies – TCS, Infosys and Wipro. There are five Public Sector entrants, unlocking the hidden opportunities thanks to the policy of disinvestment. While presence of three Reliance companies reflect on corporate splits, the inclusion of Bharti-Airtel, DLF, Jaiprakash Associates and Sterlite signify the arrival of new corporate giants. Making way for the new entrants are the bigwigs of the yester years – viz : Bombay Dyeing, Century, Hindustan Motors, Premier Automobiles , Great Eastern Shipping etc. A cursory look at the Sensex companies of the past and the present clearly defines the sun-rise and sun-set sectors of the Indian economy. The new composition also indicates the decline of over-bearing presence of Mumbai headquartered companies, which accounted for over 75 per cent in 1986.
SENSEX Over the Years
It took more than two years for the Sensex to cross the four digit mark. On July 25, 1990 the Sensex for the first time closed at 1001 points. It began to pick up momentum, with a slew of economic liberalization measures announced in 1991 by Dr.Manmohan Singh, the then Finance Minister of India. A market friendly budget of 1992-93 and expectations from a liberal import-export policy helped Sensex surge past 4,000 mark by March 1992, before the Harshad Mehta scam hit the market. Y2K coincided with the information technology boom, and the Sensex crossed 6000 in the year 2000.
Around 2005, Foreign Institutional Investors became active on the stock market and the Sensex crossed the 8,000 mark on September 8, 2005. February 7, 2006 was a golden letter day for the Bombay Sensex, as it crossed the 10,000 mark and closed marginally above. Little more than a year later, Sensex doubled again and breached the 20,000 mark on October 29, 2007. It touched 21,078 on January 8, 2008. Then the signs of global recession began to surface and the US sub-prime crisis hit the market hard, when several Foreign Institutional Investors began off-loading their holdings. It has now begun to stage a comeback.
Importance of Indices
It is often stated that the stock market indices play an important role in gauging the economic health and progress of a country. It all began with the construction of Dow Jones Transportation Average in 1884. Today, across the world we have several stock market indices. Notable among them being – the S & P Global, Dow Jones, FTSE, Hang Seng and Nikkei. Despite their overwhelming popularity with the investors, they have also been targets of criticism on many counts. There are plenty of incidences of rigging, corporate corruption, artificially over-valued stocks, conflict of interest of research firms, which cause volatility in stock markets and dent the images of indices as ‘true and fair’ reflectors of company’s health.
Yet, Stock Markets and their indices continue be important. Stock markets provide the much needed liquidity in the economy. The two stock market indices from India, the BSE Sensex and NIFTY have helped put the Indian Capital markets on the world map. The growing presence of Foreign Institutional Investors is integrating our markets with the global markets. Let the march continue. (Courtesy: Press Information Bureau)
Saturday, 2 January 2010
The Best M&A Deals of the Decade
The past decade has certainly been tumultuous for mergers and acquisitions. As we went into the new millennium, the U.S. economy hit the peak of the dot-com bubble and M&A activity reached $1.2 trillion. Of course, this is when Time-Warner (TWX) agreed to a whopping $182 billion merger with the now-independent-again AOL (AOL).
However, M&A activity quickly evaporated with the arrival of a recession, the exposure of major corporate scandals and the 9/11 attack. It wasn't until 2004 that dealmaking picked up: with cheap capital, a growing economy and the emergence of private equity, M&A peaked again at $1.2 trillion in 2007, with about $794 billion coming from private equity transactions.
Then, of course, the M&A market plunged again because of a credit crunch and severe recession. In fact, deal activity still remains fairly light, although some signs hint at a resurgence, such as seen recently by the Exxon-XTO megadeal.
So, in the midst of all this, what were the best deals of the decade? Like anything of this sort, these choices are highly subjective and will probably result in a good amount of disagreement. But here are my picks:
JPMorgan (JPM) buys Bear Stearns and Washington Mutual:
Jamie Dimon became the chief of JPMorgan in 2006, which was the result of a merger with Bank One. Unlike his peers, he understood that patience can be an M&A virtue. As a result, he focused on building his capital base and bolstering risk management.
When the financial system went into a tailspin, Dimon had the firepower to capitalize on the opportunities. For relatively little money, JPMorgan purchased Bear Stearns and Washington Mutual, deals that helped Dimon to expand his investment banking footprint as well as his deposit base (especially in big markets like California and Florida). And yes, he got attractive government support in these transactions.
News Corp. (NWS) buys MySpace:
Launched in 2003, MySpace quickly turned into a phenomenon. As social networking became the "next big thing," it also promised to be a strategic asset for the rapidly changing media business. Yet, MySpace had a problem: the website was stuck in a complicated structure from its parent company, Intermix. But News Corp.'s Rupert Murdoch saw this as an opportunity to pluck the asset at a bargain price of $580 million (in 2005). He was also able to outmaneuver the dealmakers at Viacom (VIA), who failed to read some key documents.
By 2006, MySpace snagged a $900 million advertising deal with Google (GOOG).
While it's true that MySpace has lost it luster to Facebook, the fact remains that the site is still a formidable force and has critical synergies with the traditional media assets of News Corp.
Equity Office Properties sells to the Blackstone Group (BX):
When it comes to buying cheap commercial real estate, Sam Zell is the master. Actually, his nickname is the "Grave Dancer." Then again, he has had lots of practice. Back in 1976, Zell founded Equity Office Properties and built an empire through savvy acquisitions. By 2006, the company had 600 office buildings across 16 states.
But Zell realized that the markets were getting frothy. So why not sell out at the top? That's what he did when he agreed to a $35 billion buyout deal from the Blackstone Group. Unfortunately, Zell's next deal was not so promising. He bought Tribune Co., which eventually went bust.
eBay (EBAY) buys PayPal:
eBay's M&A track record has been spotty, as seen with the problems with its acquisition of Skype and even its attempted purchase of Craigslist. Despite this, the company pulled off a stellar deal with the $1.5 billion purchase of PayPal.
eBay had already tried to build its own e-payments solution, but it was too late. PayPal was becoming the category leader and also had some powerful technologies, especially with fraud detection. Now, PayPal is a key to eBay's growth and is gaining lots of ground in foreign markets. In the latest quarterly report, the payments division recorded $688.1 million in revenues, which was a 15% increase over the prior year's results. There are about 78 million active users on the platform.
However, M&A activity quickly evaporated with the arrival of a recession, the exposure of major corporate scandals and the 9/11 attack. It wasn't until 2004 that dealmaking picked up: with cheap capital, a growing economy and the emergence of private equity, M&A peaked again at $1.2 trillion in 2007, with about $794 billion coming from private equity transactions.
Then, of course, the M&A market plunged again because of a credit crunch and severe recession. In fact, deal activity still remains fairly light, although some signs hint at a resurgence, such as seen recently by the Exxon-XTO megadeal.
So, in the midst of all this, what were the best deals of the decade? Like anything of this sort, these choices are highly subjective and will probably result in a good amount of disagreement. But here are my picks:
JPMorgan (JPM) buys Bear Stearns and Washington Mutual:
Jamie Dimon became the chief of JPMorgan in 2006, which was the result of a merger with Bank One. Unlike his peers, he understood that patience can be an M&A virtue. As a result, he focused on building his capital base and bolstering risk management.
When the financial system went into a tailspin, Dimon had the firepower to capitalize on the opportunities. For relatively little money, JPMorgan purchased Bear Stearns and Washington Mutual, deals that helped Dimon to expand his investment banking footprint as well as his deposit base (especially in big markets like California and Florida). And yes, he got attractive government support in these transactions.
News Corp. (NWS) buys MySpace:
Launched in 2003, MySpace quickly turned into a phenomenon. As social networking became the "next big thing," it also promised to be a strategic asset for the rapidly changing media business. Yet, MySpace had a problem: the website was stuck in a complicated structure from its parent company, Intermix. But News Corp.'s Rupert Murdoch saw this as an opportunity to pluck the asset at a bargain price of $580 million (in 2005). He was also able to outmaneuver the dealmakers at Viacom (VIA), who failed to read some key documents.
By 2006, MySpace snagged a $900 million advertising deal with Google (GOOG).
While it's true that MySpace has lost it luster to Facebook, the fact remains that the site is still a formidable force and has critical synergies with the traditional media assets of News Corp.
Equity Office Properties sells to the Blackstone Group (BX):
When it comes to buying cheap commercial real estate, Sam Zell is the master. Actually, his nickname is the "Grave Dancer." Then again, he has had lots of practice. Back in 1976, Zell founded Equity Office Properties and built an empire through savvy acquisitions. By 2006, the company had 600 office buildings across 16 states.
But Zell realized that the markets were getting frothy. So why not sell out at the top? That's what he did when he agreed to a $35 billion buyout deal from the Blackstone Group. Unfortunately, Zell's next deal was not so promising. He bought Tribune Co., which eventually went bust.
eBay (EBAY) buys PayPal:
eBay's M&A track record has been spotty, as seen with the problems with its acquisition of Skype and even its attempted purchase of Craigslist. Despite this, the company pulled off a stellar deal with the $1.5 billion purchase of PayPal.
eBay had already tried to build its own e-payments solution, but it was too late. PayPal was becoming the category leader and also had some powerful technologies, especially with fraud detection. Now, PayPal is a key to eBay's growth and is gaining lots of ground in foreign markets. In the latest quarterly report, the payments division recorded $688.1 million in revenues, which was a 15% increase over the prior year's results. There are about 78 million active users on the platform.
The Commodity -- Winners of 2009
Commodities as an asset class competed well with others and some of them gave reasonably good returns to investors including gold which rose 26%
The holdings of world’s largest gold backed exchange traded fund, SPDR Gold Trust (GLD) reached a high of 1,134 metric tonnes in June 1 this year and presently hovers at 1,134 MT.
Copper has risen to 15 month high in New York on declining inventory and growing demand. The Chilean strike is contributing to supply tightness. Copper for March delivery added as much as 1.4 percent to $3.3395 a pound, the highest price since September 2008. Futures more than doubled this year as China imported record amounts of the metal in the first half. Copper for April delivery on the Shanghai Futures Exchange gained as much as 2.3 percent to 59,180 yuan ($8,665) a ton, the highest price for a most-active contract since Aug. 28, 2008. It closed at 58,530 yuan, Bloomberg reported
Most agricultural commodities including rubber, sugar, cocoa, turmeric and pepper witnessed a bullish sentiment on fall in production and rising demand. Tight supplies and low investment by West African producers drove cocoa futures prices on the ICE market in New York to a 30-year high of $3,510 per tonne on December 16.
Turmeric futures surged by 254.95 to reach 13971 in November 17 this year due to erratic rainfall in main sowing areas and production fell to 41 lakh bags. Guar surged 73% at NCDEX to Rs 2872 per quintal on delayed and below normal monsoon.
n India rubber prices in spot and futures market have already doubled in a year due to lower production globally and rising demand from automobile industry. The spot market prices have surged above Rs 140/kg for RSS 4 while last year the prices were close to Rs 60 levels. The crude oil rally has also enhanced the appeal of natural rubber over its petroleum-based substitute, synthetic rubber.
Rubber futures in Tokyo have almost doubled this year as China, the world’s largest consumer, led a recovery in demand under the government’s stimulus measures that boosted the nation’s car sales to a record.
Garlic prices in China rose 1500 percent since March this year while wholesale ginger prices rose 85% in China as a three-year drop in prices forced farmers to turn to more profitable crops resulting in supply shortage this year.
Ginger prices continue to soar on short supply, with the retail price moving up to Rs 100 a kg. International prices have also shot up to $1,800-$1,850 per tonne, according to news reports..
Soybean futures in India surged by 65% in April to Rs 2819 but fell 32% by September on higher global seeds production. Sugar prices have reached a 28/1/2 year high and is already up 165% this year on tight supplies in India and Brazil.
Production of agri-softs are concentrated in a small group of developing nations mostly in tropics where bad weather, political instability, credit shortages and inability of farmers to respond to higher prices often create supply shortages.
The holdings of world’s largest gold backed exchange traded fund, SPDR Gold Trust (GLD) reached a high of 1,134 metric tonnes in June 1 this year and presently hovers at 1,134 MT.
Copper has risen to 15 month high in New York on declining inventory and growing demand. The Chilean strike is contributing to supply tightness. Copper for March delivery added as much as 1.4 percent to $3.3395 a pound, the highest price since September 2008. Futures more than doubled this year as China imported record amounts of the metal in the first half. Copper for April delivery on the Shanghai Futures Exchange gained as much as 2.3 percent to 59,180 yuan ($8,665) a ton, the highest price for a most-active contract since Aug. 28, 2008. It closed at 58,530 yuan, Bloomberg reported
Most agricultural commodities including rubber, sugar, cocoa, turmeric and pepper witnessed a bullish sentiment on fall in production and rising demand. Tight supplies and low investment by West African producers drove cocoa futures prices on the ICE market in New York to a 30-year high of $3,510 per tonne on December 16.
Turmeric futures surged by 254.95 to reach 13971 in November 17 this year due to erratic rainfall in main sowing areas and production fell to 41 lakh bags. Guar surged 73% at NCDEX to Rs 2872 per quintal on delayed and below normal monsoon.
n India rubber prices in spot and futures market have already doubled in a year due to lower production globally and rising demand from automobile industry. The spot market prices have surged above Rs 140/kg for RSS 4 while last year the prices were close to Rs 60 levels. The crude oil rally has also enhanced the appeal of natural rubber over its petroleum-based substitute, synthetic rubber.
Rubber futures in Tokyo have almost doubled this year as China, the world’s largest consumer, led a recovery in demand under the government’s stimulus measures that boosted the nation’s car sales to a record.
Garlic prices in China rose 1500 percent since March this year while wholesale ginger prices rose 85% in China as a three-year drop in prices forced farmers to turn to more profitable crops resulting in supply shortage this year.
Ginger prices continue to soar on short supply, with the retail price moving up to Rs 100 a kg. International prices have also shot up to $1,800-$1,850 per tonne, according to news reports..
Soybean futures in India surged by 65% in April to Rs 2819 but fell 32% by September on higher global seeds production. Sugar prices have reached a 28/1/2 year high and is already up 165% this year on tight supplies in India and Brazil.
Production of agri-softs are concentrated in a small group of developing nations mostly in tropics where bad weather, political instability, credit shortages and inability of farmers to respond to higher prices often create supply shortages.
Why America banned gold ownership in 1993
For 5,000 years man has sought gold. It has been said that as much as three-quarters of the earth’s land surface was first explored because of man’s insatiable desire for gold.
Since the dawn of time, one of the major uses for gold was as adornment. It made (and still makes) spectacular jewelry. But very quickly, gold began to assume its primary role – that is, as a reliable and predictable store of value. In other words, as money.
Man’s desire for gold has been surpassed only by his stupidity at trying to manipulate money. There are numerous historical examples of the terrible consequences of this folly. Some historians believe that it was not Attila the Hun who caused the fall of the Roman Empire. Rather, it was the debasement of the gold and silver coinage, through plating, clipping and counterfeiting.
The world then settled into a long period of economic stagnation which we now know as the Dark Ages. This was followed by the Renaissance and the Age of Enlightenment. However, there was nothing enlightened about one “advancement” during this period – the invention of paper money. This was a new twist on man’s age-old effort to manipulate the quantity of money. The results have been disastrous.
The French Revolution in the late 1790s has been linked to a failed debasement of the French franc. History is riddled with the bodies of paper currencies. The errors of the past are repeated again and again.
Sooner or later, almost all governments succumb to the temptation of currency debasement. Like drug addiction, once begun it is hard to stop. Paper currencies make this easy (and computer entries make it easier still). Most governments refuse to stop the flood of fiat currency, even when they know the result will be the debasement (and ultimately the collapse) of their monetary system.
And here comes that lust for gold again. The search for gold fueled the discovery and exploration of North, Central and South America. In the United States, “manifest destiny” did not just happen. It was fueled by the California gold rush in the mid-1800s and in Alaska later that century. The chase was on worldwide, with the world’s largest gold discovery taking place in South Africa in the late 1800s.
So we have this interesting and complicated series of events overlapping - a quest to find more gold and man’s attempt to manipulate money. Throughout the past two centuries, gold and paper money have competed for the primary monetary role.
When I started in the business in the late 1960s, the dollar was as “good as gold.” The U.S. had emerged from two world wars as the strongest economic power on earth. We had accumulated the largest gold stockpile in history. The result was a stable dollar that everyone in the world, it seemed, preferred to their own currency.
With the system working so well, government just couldn’t leave well enough alone.
In 1933, FDR banned gold ownership for U.S. citizens. Millions of gold coins were confiscated and melted down. The ban lasted for 42 years, with the right to own gold finally restored in 1975. It has taken many years for some Americans to recognize the essential role gold should play in a portfolio. But still, most Americans do not appreciate gold as an asset class.
I can remember the collapse of the London gold pool in 1968. A gold buyer at that time was generally an immigrant from Europe, many of whom remembered the German hyper-inflation of the 1920s. The Reich Mark had failed and another paper money experiment bit the dust. Gold prevailed. That was a classic example of gold working in a crisis.
But, we don’t have to look back that far to see how gold can be the ultimate money. Back in the 1970s, I was a CEO of Deak-Perera (Washington), Inc. in Washington, DC. They were the premier foreign currency exchange company at the time, with outlets in virtually every major gateway city and airport in the U.S.
When the flood of refugees from Vietnam began pouring into the United States, the State Department asked Deak-Perera to become the exclusive foreign exchange/precious metals dealer at the various refugee camps. We would eventually purchase literally tons of gold from refugees, many of whom arrived with all their worldly possessions jammed into a suitcase or small bag. Some people presented stacks of piasters, Vietnam’s former currency. We had to tell them that their paper money was absolutely worthless.
Others had been wise enough to put their trust in gold. Many refugees clutched small golden wafers, called taels, which were popular throughout Southeast Asia. When they presented their taels, we were able to exchange their gold for U.S. dollars on the spot. Their foresight gave them the wherewithal to begin a new life in the United States.
The lesson is clear: In a monetary crisis, gold is the very best insurance you can have. This is true whether it’s the gradual erosion of purchasing power, as we are seeing now with the U.S. dollar, or the sudden, catastrophic plunge of a currency due to economic, social or political unrest which has occurred many other times in many other countries.
Gold works. It has before, it will again. Make sure you heed this lesson of history.
Glen O. Kirsch is Executive Vice President of Asset Strategies International INC
Since the dawn of time, one of the major uses for gold was as adornment. It made (and still makes) spectacular jewelry. But very quickly, gold began to assume its primary role – that is, as a reliable and predictable store of value. In other words, as money.
Man’s desire for gold has been surpassed only by his stupidity at trying to manipulate money. There are numerous historical examples of the terrible consequences of this folly. Some historians believe that it was not Attila the Hun who caused the fall of the Roman Empire. Rather, it was the debasement of the gold and silver coinage, through plating, clipping and counterfeiting.
The world then settled into a long period of economic stagnation which we now know as the Dark Ages. This was followed by the Renaissance and the Age of Enlightenment. However, there was nothing enlightened about one “advancement” during this period – the invention of paper money. This was a new twist on man’s age-old effort to manipulate the quantity of money. The results have been disastrous.
The French Revolution in the late 1790s has been linked to a failed debasement of the French franc. History is riddled with the bodies of paper currencies. The errors of the past are repeated again and again.
Sooner or later, almost all governments succumb to the temptation of currency debasement. Like drug addiction, once begun it is hard to stop. Paper currencies make this easy (and computer entries make it easier still). Most governments refuse to stop the flood of fiat currency, even when they know the result will be the debasement (and ultimately the collapse) of their monetary system.
And here comes that lust for gold again. The search for gold fueled the discovery and exploration of North, Central and South America. In the United States, “manifest destiny” did not just happen. It was fueled by the California gold rush in the mid-1800s and in Alaska later that century. The chase was on worldwide, with the world’s largest gold discovery taking place in South Africa in the late 1800s.
So we have this interesting and complicated series of events overlapping - a quest to find more gold and man’s attempt to manipulate money. Throughout the past two centuries, gold and paper money have competed for the primary monetary role.
When I started in the business in the late 1960s, the dollar was as “good as gold.” The U.S. had emerged from two world wars as the strongest economic power on earth. We had accumulated the largest gold stockpile in history. The result was a stable dollar that everyone in the world, it seemed, preferred to their own currency.
With the system working so well, government just couldn’t leave well enough alone.
In 1933, FDR banned gold ownership for U.S. citizens. Millions of gold coins were confiscated and melted down. The ban lasted for 42 years, with the right to own gold finally restored in 1975. It has taken many years for some Americans to recognize the essential role gold should play in a portfolio. But still, most Americans do not appreciate gold as an asset class.
I can remember the collapse of the London gold pool in 1968. A gold buyer at that time was generally an immigrant from Europe, many of whom remembered the German hyper-inflation of the 1920s. The Reich Mark had failed and another paper money experiment bit the dust. Gold prevailed. That was a classic example of gold working in a crisis.
But, we don’t have to look back that far to see how gold can be the ultimate money. Back in the 1970s, I was a CEO of Deak-Perera (Washington), Inc. in Washington, DC. They were the premier foreign currency exchange company at the time, with outlets in virtually every major gateway city and airport in the U.S.
When the flood of refugees from Vietnam began pouring into the United States, the State Department asked Deak-Perera to become the exclusive foreign exchange/precious metals dealer at the various refugee camps. We would eventually purchase literally tons of gold from refugees, many of whom arrived with all their worldly possessions jammed into a suitcase or small bag. Some people presented stacks of piasters, Vietnam’s former currency. We had to tell them that their paper money was absolutely worthless.
Others had been wise enough to put their trust in gold. Many refugees clutched small golden wafers, called taels, which were popular throughout Southeast Asia. When they presented their taels, we were able to exchange their gold for U.S. dollars on the spot. Their foresight gave them the wherewithal to begin a new life in the United States.
The lesson is clear: In a monetary crisis, gold is the very best insurance you can have. This is true whether it’s the gradual erosion of purchasing power, as we are seeing now with the U.S. dollar, or the sudden, catastrophic plunge of a currency due to economic, social or political unrest which has occurred many other times in many other countries.
Gold works. It has before, it will again. Make sure you heed this lesson of history.
Glen O. Kirsch is Executive Vice President of Asset Strategies International INC
Aluminium: Doom to boom in 2010
Aluminium has been the worst performer among base metals in 2009 and investors will never forget the setback they suffered by putting their money in aluminium in the previous year. But, there is no guarantee that the scenario will remain the same in 2010.
But, like any other base metal, China holds the key to the aluminium prices. If Chinese demand soars the prices will climb up and India’s aluminium producers are set to cash in on that.
Long term prospect of aluminium is bright as China is still in the middle of completing urbanization and its metal intensive growth is likely to continue for many years to come.
About 65% of aluminium consumption is in the east and middle south China. The urbanization of North West and south west has great potential for aluminium demand in the coming years.
In the short term, overcapacity, plenty of inventories and reopening of smelters due to return to profitability will cap any upswing in aluminium prices.
However, the current average cost of the Chinese smelters is $2,000 and is rising further due to increase in bauxite and alumina and coal and power prices. These cost push factors provide a strong floor for aluminium prices.
LME aluminium is expected to trade between $2,000 to $2,400 in 2010.
Indian aluminium producers are best placed with captive bauxite, alumina, power and are insulated from across the board cost increases to a large extent.
In the pure aluminium space, the top company will be India’s Nalco. It is one of the cheapest aluminium producers and has volume upside of 30% in both aluminium and alumina due to brown field expansion.
Aluminum has been the worst performer among the base metals this year with returns close to 47% only.
Enam, a leading brokerage and research house has come out with its latest report on China’s aluminium sector and its outlook saying that aluminium demand in China is expected to grow by 15% in 2010 on the back of revival in construction and auto segments.
But, like any other base metal, China holds the key to the aluminium prices. If Chinese demand soars the prices will climb up and India’s aluminium producers are set to cash in on that.
Long term prospect of aluminium is bright as China is still in the middle of completing urbanization and its metal intensive growth is likely to continue for many years to come.
About 65% of aluminium consumption is in the east and middle south China. The urbanization of North West and south west has great potential for aluminium demand in the coming years.
In the short term, overcapacity, plenty of inventories and reopening of smelters due to return to profitability will cap any upswing in aluminium prices.
However, the current average cost of the Chinese smelters is $2,000 and is rising further due to increase in bauxite and alumina and coal and power prices. These cost push factors provide a strong floor for aluminium prices.
LME aluminium is expected to trade between $2,000 to $2,400 in 2010.
Indian aluminium producers are best placed with captive bauxite, alumina, power and are insulated from across the board cost increases to a large extent.
In the pure aluminium space, the top company will be India’s Nalco. It is one of the cheapest aluminium producers and has volume upside of 30% in both aluminium and alumina due to brown field expansion.
Aluminum has been the worst performer among the base metals this year with returns close to 47% only.
Enam, a leading brokerage and research house has come out with its latest report on China’s aluminium sector and its outlook saying that aluminium demand in China is expected to grow by 15% in 2010 on the back of revival in construction and auto segments.