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Friday, October 31, 2008

...while Vohra picks...

Clubbing: The best car for clubbing has to be a Lamborghini as right now it is the most exotic car available in India.
Rush Hour: An Automatic Santro fits the bill as it is a small

car and is easy to drive. Being an automatic, it will be very convenient during rush hour.

Date: A Porsche 911 would be an ideal car for a date because it is classy and is perfect for impressing that someone special. Picnic: It has to be an SUV… probably a Toyota Innova as it is a family car, and has a lot of space. Therefore it should be perfect for a picnic.
Off-roading: A Land Rover is the best off-roader available in India.
Best value for money:
In segment A it’s Alto,
In segment B it has to be Swift
In segment C it’s Skoda Octavia
In segment D nothing comes close to beating a Honda Accord.

Automatic Santro fits the bill as it is a small car and is easy to drive. Being an automatic, it will be very convenient during rush hour.

Arush Vohra Owner of Autof Psyche

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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Thursday, October 23, 2008

Beginning of a powerful bull market

There are several reasons to seriously doubt that we are at the beginning of a powerful bull market such as we were in 1982. For one, in 1982, the US stock market was no higher than it had been in 1964 and it was down in real terms by more than 75% from its 1966 high. In fact, in 1982, measured in gold terms (in “real” real terms – not in real terms using the doctored CPI) the Dow Jones was lower than it had been in 1932 following the 90% bear market 1929-1932.

So, whereas in 1966, one Dow Jones Industrial Average

bought 28 ounces of gold, in 1982 it bought less than two ounces of gold (in 1980, one Dow Jones only bought one ounce of gold). At present the Dow still buys 12 ounces of gold and although this is down from its purchasing power of 44 ounces in 2000 (yes, the Dow has lost in gold terms or in “real” real terms 72% since 2000!), it is far from where stocks usually bottom out after major secular up-trends end. Simply put, in 1982, stocks were dirt cheap (P/E 7, dividend yield 7%) whereas now stocks are still pricey. Moreover, aside from so many other conditions, which were far more favourable in 1982 (debt-to-GDP only 130% compared to current debt-to-GDP of 350% ex unfunded liabilities, saving rate of 12% versus current saving rate of zero, MF cash positions of almost 15% compared to 4% now, et al) commodity prices and interest rates - the latter were then at over 15% on long- term Treasuries compared to around 4% now - were about to enter long term down-trends that would lift the valuation of equities, boost corporate profit margins and lift corporate earnings. However, these conditions no longer exist today! Interest rates will only decline further if there is a deflationary bust – not exactly a positive for equities. Also, whereas commodities could decline quite sharply in the near term should global demand collapse (major economic slump) the long term trend would seem to be on the up, courtesy of money printer Ben & stock manipulator Hank. Lastly, whereas in 1982 corporate profit margins were at depressed levels, today they still seem to be – from a historical perspective – close to record levels. So, all in all, I very much doubt that the current stock market strength is the beginning of a long-term uptrend. I would, therefore, use market rebounds around the world as a selling opportunity.

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Tuesday, October 21, 2008

Between eternity and time

Hurdles are plenty in way of implementing 3G policy. Any delay will make it costly for the telecom companies
If 3G doesn’t make sense to you, don’t worry. For the telecom companies, you make sense to 3G. In other words, your presence is what makes them believe in 3G. Service providers are now gearing up to apply for the Third Generation (3G) spectrum. 3G systems support increased data communications and wireless broadband Internet access. The 3G networks have markedly greater capacity and spectrum efficiency and 3G services facilitate higher speeds and data throughputs, which enable the delivery of a wide range of multi-media services. In an ideal 3G scenario, users would get abundance of value added services developed by independent service providers with plethora of business combinations and technical implementations.

According to Nirperder Mishra, Chairman TRAI said to B&E, “Broadband connectivity is critical for moving the country towards a knowledge-based society. The deployment of 3G will facilitate the penetration of broadband in the country and also help in achieving the target set by the government for broadband connections”. All in all 3G would give greater access to consumers to value-added services. However, even before the companies could start operating with 3G, dark clouds have started to hover around the entire issue.

Differences between the Finance Ministry and the Department of Telecom (DoT) is the latest controversy to have gripped the whole issue. The Finance Ministry has accused DoT of violating due process and undermining the explicit Cabinet decisions on inter-departmental approvals for policies that have a revenue impact. It has even accused DoT of coming up with a policy which has half-baked guidelines.

According to the 3G policy that was announced by the Ministry, foreign players will have to dole out at least Rs.40 billion for acquiring spectrum where as the existing players will have to pay a minimum of only Rs.20.20 billion. Besides the auction guidelines also makes it difficult for global telecom operators, like AT&T, Verizon, NTT DoCoMo and Deutsche Telecom to bid for 3G spectrum. Firstly the auction is only for 3G and not 2G so these companies would have to join hands with the existing players for having a fully functional operational and the existing M&A norms would be a major hurdle for them to gain an entry. Along with this, there is also uncertainty regarding the 3G spectrum beyond the alloted range of 5 MHz.

All this combined together makes it only possible for the existing players to bid for spectrum. There is also criticism from the GSM operators that the guidelines so set by the ministry is skewed towards the CDMA operators. All this summed up would further delay the introduction of 3G policy. What makes the matter worse for the telecom players is that TRAI has recommended that calls from personal computers-to-phones be allowed in the country. It would help Internet service providers (ISPs) open new revenue streams as they would be able to provide cheaper international calls and even free local calls to the consumers. Most importantly the ISPs would get the benefit without incurring any cost.

Untapped rural market would also open up for the Internet providers. “This could drive the growth of broadband in the country. Also, rural markets, where long distance tariffs still remain unaffordable, could benefit greatly,” said ISPAI president Rajesh Chharia. Telecom operators on the other hand have to wait till the 3G policy is implemented. While on one hand they have to pay huge amount to win spectrum, on the other the opportunity lost to Internet providers would be huge. It makes no sense to have a policy which is not able to provide benefits to the very companies who are part of it.

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Monday, October 20, 2008

Let’s tell you about the Gang of 10

Obama encourages the formation of this team to debate US oil drilling
In spite of the fact that Republicans led by John McCain are robustly

favouring the lifting of the moratorium on drilling in the US and trying to garner public support on the issue, the fact that Democrats are against such a lifting of restrictions, has created a new loggerjam of a debate between the two parties and their representatives.

Even if the energy policy has led to an impasse in the Senate between the two parties in the past, the latest encouraging remarks by Obama, where he has found righteousness in offshore drilling, is a major shift in the otherwise rigid stand of the Democrats. The formation of a bipartisan team, called ‘Gang of 10’, is being encouraged by Obama himself to look into the matter, and with a common broad based viewpoint (it consists of 5 Democrats and 5 Republicans).

By government’s own admission, 18 billion barrels of crude remain untapped in America’s restricted hinterland. Yes, the Democrats claim they do not want to be stooges of oil behemoths, about which they often blame the Republicans. But beyond this, is the fact that there is little chance of cutting down on oil prices even if such drilling were allowed. Firstly, the actual output will take more than a decade to flow, and the cost is colossus. Secondly, America in all has only 3% of world’s oil reserves, whereas annaully it consumes 20% – another reason why, as the Dems argue, drilling might not influence the price of oil. On the other hand, Republican’s have a meaty issue for their flagging electoral cause. The gasoline price rise is hurting the US middle class, and this issue has got an immediate media attention, with Democrats on the defensive. Notwithstanding reality, studies now reveal that nearly half of the electorate believes in the fact that oil prices will subside if crude is drilled in their own country. Didn’t we tell you Obama is the bright spot in Dem county?

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Saturday, October 18, 2008

Where, Mrs. Robinson, lies the problem?

If you thought oil would run out, take a walk (no pun!). Oil isn’t running out, but your money would, given the fact that despite current oil price falls (!!!), rising demand would ensure future oil price rise! And worse, alternative fuel also sucks! virat bahri of B&E confounds [us too!]...

“We are very sorry, Sir, no more is left, not a single drop :(”
“C’mon, mate, you must be joking; this can’t be happening.”
“Believe us Sir, the world has seen the last of black gold! It’s the end of ‘automobil’ity...”

Uhh, alright, it sounded more childish than I should

have wanted; but how does one put across the fact that oil may one day run out when, er, it perhaps would never! OPEC’s latest report estimates that between the years 1995-2003, new discoveries improved recoveries by 138 billion barrels. Production has already increased by 26% as compared to the 1960s. By 2020, oil production is likely to cross 1600 billion barrels annually. If such is the case, as Dustin Hoffman asks lovely Mrs. Robinson, where lies the problem? Demand honey, demand. Demand for oil would [should?] far outstrip supply in the coming years. Oil has become a necessary evil for us; it is guzzling down our, and my, bank balances like nobody’s business, yet you can’t imagine life without it. Goddammit, I can’t! And there lies the need to cut across to alternative or quasi-alternative fuel. This dire need to make black gold less ‘necessary’ so that it can become a much subdued ‘evil’ has given rise to numerous technological breakthroughs in alternative fuel technology, giving cars that can run on electricity, hydrogen, E 85 (85% ethanol and 15% gasoline), nuclear, solar, et al. Hybrids have shown some promise too. India has seen its first hybrid in the form of Hero Honda Civic. But considering that these alternatives are yet to convert into truly marketable solutions, aren’t we moving a bit too slow? Moreover we seem to have many technologies posing as possible solutions, but do we have ‘the’ solution in sight?

Let’s take the instance of hybrids firstly (combination of electricity and gasoline). They have seen the greatest success in developed world markets in particular due to the fact that they require no disruption of the existing oil infrastructure. In the US, some 347,102 hybrids were sold in 2007 (source: Green Car Congress), dominated by Toyota, with over 70% share of the market. Quite interestingly though, hybrids account for around 2.15% of the total new vehicle sales in the US that year. But considering the first hybrid to enter India, the Honda Civic, costs a whopping Rs.18-22 lakhs, one can’t see it moving into the common man’s realm very soon. Honda has in fact contemplated developing a hybrid hatchback, which will be smaller and cheaper than the Civic hybrid. Dick Colliver, Executive VP, Honda US, did admit to international media, “Our goal for this new hybrid model (is) to make it affordable to a new generation of car buyers.” Toyota has reportedly set up a stiff target for bringing in hybrid versions into all its models, and that target is... hold your breath... 2020!

Competitor GM’s hybrid plans have often been a subject of speculation. When I catch up with Larry Burns, in an exclusive to B&E, this Vice President of GM’s R&D and Strategic Initiatives, reveals, “By the end of the year, we will have eight hybrids on the market, and we will more than double that number by the end of 2011. Along with increased efficiency, hybrid systems give us additional engineering, manufacturing, and market experience with electric motors, power electronics, and advanced batteries – which are all critically important components in our future electric vehicles.” As per his viewpoint, electrically driven vehicles present the most compelling case as future alternative.

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative