I have quarried in the past that risk free rate for doing the valuation of equities and got some interesting answers, wanted to share here.
This is holistic view where an average of 10 year debt YTM of five lowest ratio of govt debt to GDP:
The 10yr Treasury is still a decent risk free rate, but the U.S.’s sovereign debt load will soon match Greece‘s. It may already exceed that level if you count the unfunded liabilities of entitlement programs. View full article »
Today, I was really confused as what to write on. We have discussed various aspects, classes, faces & divisions of finance & banking sector But, today I choose to discuss something which may fall us apart from finance few minutes but also placing a question in your minds to think on for the future scenario. “Self-Employed Are Taking The Lead Over The Salaried Class”: This topic may be a deviation from finance but yet, a very much talked about topic with global approach without any bar or age, cast, race sector etc.
As the global business climate is turning towards dark , View full article »
Capital Protection Oriented Schemes (CPOSs) made its debut in the mutual fund industry few years back. As the name 
suggests, the mainstay of such schemes is to provide capital protection. Structurally they are similar to another existing mutual fund category called Fixed Maturity Plans (FMPs), which has been around for a while. For investors, the presence of these categories which are structurally similar, yet distinct in terms of positioning can be confusing. We decided to face-off the two categories and find out how similar or dissimilar they are.
To start with, let us first look at the two categories independently and understand View full article »
When it comes to mathematics, certain facts are universally agreed-upon. For example, regardless of your culture or educational system, you must agree that one plus one equals two unless you mistakenly fall for an invalid proof. When dealing with money, why are people inclined to believe that one plus one does not equal two?
I recently attended a core empowerment training and realized that One of the many reasons people can fall into debt is the difficulty of separating emotional thinking from rational thinking. The Debt Avalanche helps separate these two methods of thinking, View full article »
As Greece has called for the crisis meeting because the Debt talks are not working their way since months, going through the possibilities, just wondering why Greece should not adopt the Iceland way.
Not only would it be better for Greece, it would be better for Greece’s creditors.
1. It would be a credit default, so CDS would have to pay out. Much better for creditors than a 70% haircut where default insurance is void.
2. Greece would regain fiscal sovereignty.There would be plenty of pain, but less than the forced austerity Germany suggested.
3. The IMF would not be securing against Greece’s assets. This is a win for the Greek people, as the current bailouts don’t help them.
I could go on and on… but no need. Iceland showed the way. Greece need only follow.
Or there is one radical ways to follow on with Eye bursting, bowl moving, hyenia laughing radical.
How much the aviation industry owe to Indian government guess?? Only two of the major air line Kingfisher and Air India owe a total of INR 360crores.
The condition looks bizarre and they are burdened by debts and losses.
The only sigh of relief that came yesterday night when the news broke out that FDI in airlines may get a nod, Kingfisher, Jet Air fly high. But there is one hurdle by the regulator SEBI it might have to make this an exception to save this sector. As per the SEBI norms a 25% stake triggers an open offer. This should be exempted from the aviation sector 26% FDI cap will otherwise be breached due to the open offer.
View full article »
When Goldman acquired 1% In Jan 2011 at the cost of $ 450 million and valued the business at $50 billion, they proved them again being a smart investor. http://wp.me/pc3rd-cS
(Although it’s not right to say that Goldman never make valuation mistakes (John Paulson for example), they have huge corpus to cut its losses. Others don’t have that option.
In the 11 months time when Bloomberg published the news Face book Inc. is considering raising about $10 billion in an initial public offering that would value the world’s largest social-networking site at more than $100 billion, a person with knowledge of the matter said.
So Face book $100 billion valuation would be twice than it was valued in Jan 2011 stands today as the firm will file the IPO by this year-end and plans to goes public in first quarter of 2012.
Would like to end with the sarcastic note:
To those who use the big story justification, everyone will be on a social network in the future, and you need to pay a premium to be part of the movement. Having heard variants of the big story before used to justify other bubbles (dot com, telecomm, PCs), I don’t buy this. I think the market may be right about the macro story but is being hopelessly over optimistic about the micro pieces. In other words, we may all be parts of social networks a decade from now, but can all of these social networking platforms (Facebook, Twitter, Groupon…) be profitable? My guess is that there will be a few big winners and lots of losers, before the final story is written. (Remember that the market was right in 1998 about dot-com retailing being the wave of the future but most dot-com retailers never made it through to nirvana. Amazon did and it is worth almost $ 80 billion, but it is the exception.)
How is this any different from the ridiculously overvalued “Groupon” which is in the midst of a spectacular collapse? The Nasdaq is going to continue to drop. IPOs cannot save it since the Euro-Stock Market correlation is at an all time high. The concept of an IPO does not trouble me, but the supposed “valuation” of Face Book is frankly comical.
The survival of the European Union would be in doubt as the clinching point at the end of a long list of the indescribably titanic catastrophes that would follow were the euro to bite the dust. The other indications the EU economy reflected was it moving towards the Japanese style economy. Endless easing and banks buying whatever government is selling. But the irony is that Europe is not Japan, 27 different countries with different savings patterns, economic models, political interests, etc, etc.
The ECB buying bonds can only postpone judgment day, but it can not prevent it (it also increases the level of debt!).
I’m no economist, but why can’t the ECB be the lender of last resort in a way that it guarantees government bond buying for a period of time (say, 5 years) anytime the yields go up over a threshold (say, 5%) with a commitment from all the euro zone countries that any country backed up in this way would pay the losses on such bonds, with payment deferred (by say, 25 years) and adjusted to inflation over that period?
Let the wealthy Northern European Countries buy the real estate from Poor Southern European Countries. Transfer whole islands and wipe out debts. A billion Euros per 10 square kilometer of prime Mediterranean beachfront land
Greece has over 7,000 islands, many are uninhabited. Sell Crete to Germany and have Greece erase its entire debt! Greece can be saved for less than 3% of its territory.
Italy can be saved by selling Sicily.
Ireland could part with a few cold but scenic Atlantic islands.
Portugal has the Madeira Islands.
There is no point in issuing Eurobonds before taking the necessary steps for fiscal discipline in most unbalanced countries. Only after that is done can ECB start with Eurobonds. And yes, value of the Euro against the USD and the Yuan will have to be readjusted. Euro zone, and specially Italy, Spain, Belgium have strongly suffered with an overvalued Euro that has destructed its industry. Time to change.
Angela Merkel is a political survivor who will not risk her neck for a deeply unpopular transfer union. Eurobonds are not an option.
So what is left?
1. Raise taxes. (No tea party in Europe) or
2. Default
Quitting the Euro amounts to default, as the debt is in Euro
Reforms are important, but it seems that in the current conditions nothing will calm the markets.
The story of Satyam computers limited has now taken a new turn and it has been hit hard this time. The WORLD BANK on November 23rd barred Satyam from performing its business with them for a period of 8 years, one of the biggest punishments given by the World Bank after 2004. This is a direct question mark on the credibility of Satyam Computers Limited.
In the matter of 15 days Satyam computer again put on the task and the share prices has plunged down. Earlier the company was in the news because of the insane decision taken by the management to buy Maytas properties private limited and Maytas Infrastructure limited, both promoted by the Raju Son’s.
This was one of the unprecedented moves under the current circumstances where the real estate sector is toppling. The offer made by Satyam to buy these infrastructure companies was much more above the real estate sector giant Unitech, no chocolates for guessing the bid it was the personal interest of the management which came above the shareholders common interest.
The move was unethical and reverted back by the management, a software company diversifying into real estate is itself a question mark, because Software Company didn’t have a debt or very less debt into their balance sheet vice versa to a real-estate company.
In the process Mr Ramalingam Raju lost almost Rs 9630 crores value of the company, when the corporate governance is beginning to show its positive signs in India with quite good regulations the move has dampened the spirit and the shadow of India in the world.
Shouldn’t Mr Ramalingam Raju take the responsibility of what had happened and resign from his position, by showing his placidness. Other wise the institutional investor could exercise their rights.
