ALL men are like that! A pet complaint voiced by women. A loud hint at a man's natural promiscuous instinct. Promiscuity indeed is wired into men's DNA. Their ancient, natural urge to multiply and populate the world never did abate even with present concerns of overpopulation!
Swarthy, sexy Krishna, He with the gopis hanging lustily around - wouldn't all men love to emulate Him! Go get it - whenever, wherever. No questions asked. And yet, when it comes to their wives, most men will not be satisfied with anyone less than a Sita. Pavitra, untouched by anyone but themselves, docile and ever willing to prove her innocence by jumping into the fire for them!
There's this incident Barbara Pease talks of, when this man went off for the Crusades after strapping his wife in a chastity belt. He leaves the key with his best friend with instructions that in case he doesn't return for four years, the friend should give the key to the wife, telling her she's free. He had been gone just half an hour when he heard thundering hooves behind him and looked back to see his friend arrive in a cloud of dust, panting, "You gave me the wrong key!"
However, though the playfulness and flirtations of Krishna are one thing, it's when this same behaviour is allowed to grow unfettered and undisciplined in men that it becomes dangerous. It's this basic instinct of a man that is responsible for most crimes and a lot of chaos around. Just consider some regrettable events that dominated media in last couple of weeks. They all boil down to a man's insatiable need for sex.
New York Governor Eliot Spitzer is brought down by a hooker Ashley Dupre, ruining his "straight" image. The man known once as Mr Clean, a respectable guy with a decent wife and three teenage daughters, was caught spending thousands of dollars on a call girl at a fancy Washington hotel on the eve of Valentine's Day. Why?
Just because the Guv, despite having everything, couldn't control his wayward testosterone's primal demands! What is it with men in power who just cannot restrain their urges even though they are well aware of the ignominy faced by their equally oversexed peers and predecessors?
I mean if what happened to Bill Clinton, who now sheepishly trails behind wife and Presidential hopeful Hillary, isn't lesson enough to all men in power never to let down their trousers in an unguarded moment, nothing ever will be! And women, with the power of this knowledge have shamelessly used it to their advantage down the ages - history's irresistible seductresses.
In recent times, remember Pamela Bordes, former Miss India and glamorous escort and mistress to several British notables in the 1980s? Or Christine Keeler of the Profumo Affair, named after Minister John Profumo ruined because of the scandal surrounding his involvement with a prostitute? Then take Scarlett Keeling, 15, who was drugged, raped and killed on the popular Anjuna Beach in Goa. Why?
Again because some man couldn't control his primal sexual urge to just take what he desired, with or without permission! Typically, there are attempts to divert attention from the real culprit and blame Scarlett herself or her upbringing by mother Fiona Mackeown, criticised for her hippie lifestyle and dependence on social security.
But the fact remains if it weren't for the overwhelming libido of one misguided, self-centred man, Scarlett would have still been alive. The conviction of former IPS officer R K Sharma in the Shivani Bhatnagar case last week is another case of a man giving in to his sexual weakness, and having taken his fill, attempting to withdraw. By that time, the woman who is totally emotionally involved, finds it difficult to let go and that's what resulted in the scenario that ended with Shivani's life in this case.
More than 90 per cent crimes of passion and sexually deviant behaviour are committed by men. And when women have been accused of such behaviour, they have been tested to have an excess of male hormones in them. Normally, sex for a woman is relevant only after she is emotionally involved with a man; not so for a man.
They say a woman needs a reason for sex; a man just needs a place! However having said this, it would be unfair to throw away the baby with the dirty water on the basis of the behaviour of a few irresponsible men. Civilisation and generations of conditioning have ensured that men are for the most part able to curb their irresponsible testosterone. Well, just about almost...
Monday, March 31, 2008
O-Zone: Men, Rein it in!!
Though I am no feminist, I still couldn't help myself sharing this lovely piece of article I happened to chance upon! Hope you all enjoy it reading AND learning from it!!!!!
Friday, March 28, 2008
Ponzi Schemes
In December 1919 a certain Mr. Charles Ponzi of New York initiated an "investment" scheme in which he put up $150 dollars and got ten friends to do the same. He promised his friends a 50% return on their "investment" in 90 days. He then got a second set of friends, many times larger than the first, to put up similar amounts and promised them the same "return on investment" that he had promised the original group of "investors." With the money he collected from the second set of "investors," he paid the first set back their $150 dollars plus the promised 50% "return" ($75 dollars). Naturally, the original investors were thrilled and enthusiastically began promoting the scheme. The process was quickly repeated with the second set of "investors" - and rapidly mushroomed from there.
The intrigue was simplicity itself: give Ponzi money and in 90 days (and usually much sooner than that) he would give you your money back plus 50%, plus 10% to the recruiter. There was only one problem with the scheme: while the originators and early participants were handsomely paid off from the cash flow of those they recruited, the last ones who were brought into the scheme found that there was no one left to be recruited, and the cash flow stopped - leaving them "holding the bag." Before the scheme broke down, however (in May of 1920 - six months after it began), Ponzi had made more than a million dollars. Whether Ponzi knew it or not, what he had done was formulate or give expression - so to speak - to much of the thinking which lies behind today's New World Economic Order.GREEDThe driving motivation behind the scheme, from top to bottom, was greed. Everyone - from Ponzi on down to the last "investor" recruited - knew that in the end someone would be left "holding the bag;" that people would get hurt; and that some would be hurt very badly. They didn't care! - just so long as it wasn't them. Most who involved themselves in the scheme felt that they could get "in and out" of the pyramid before it collapsed - and "to hell" with those who were "dumb" enough to get caught.
Needless to say, it took very coldhearted people to push the scheme, and very greedy and selfish-minded ones to participate. The scheme Ponzi devised is today called a "Ponzi Pyramid." It's called this because if one were to chart out the scheme on a piece of paper it would resemble a pyramid with the originator(s) perched atop the pyramid and the losers sitting at the bottom. Money flows from the bottom of the pyramid to the top.
Originally, most pyramid schemes involved the use of "chain letters." The originator would send out a letter to ten friends asking for a certain amount of money, say $10 dollars (for a total of $100 dollars). They were then told to make ten copies of the letter and send one each to ten of their friends. A second circle of "investors" was thus produced, creating a second step in the pyramid that consisted of 100 people. These 100 were told to "buy into" the scheme by producing $10 dollars each and "sending it up the pyramid" (total amount $1,000 dollars) and then to recruit ten more "investors," making a third circle of "investors" consisting of 1000 people.
The process was then repeated, with the new circle of "investors" contributing $10 dollars each ($10,000 total) to be "sent up" the pyramid making the new total "invested" in the pyramid $11,100 dollars ($10,000 dollars contributed by the third circle of investors plus the $1,000 dollars contributed by the second set of "investors" plus the $100 dollars contributed by the first set of "investors"). As the money is passed up the pyramid, each step (circle of "investors") takes out a portion of the "investment" according to a prearranged schedule as a "return" on his or her "investment." By the time the fifth step of the pyramid is reached (100,000 people, each contributing their $10 dollars ($1 million dollars) the total amount of money has become astronomical considering the small amount of money with which the scheme was initiated.
In 1923 the Supreme Court determined that this was fraud (Cunningham v Brown 44 SCt 424) - and since then such pyramid schemes have been known colloquially as "Ponzi schemes." According to the Supreme Court, what made the scheme illegal was that there was no "product" involved in the scheme. Nothing was "bought and sold."INTRODUCING "PRODUCT" TO THE SCHEMEWhat to do? - introduce a product around which the scheme could be reorganized. The product could be anything; that wasn't important - what was important was the scheme remained the same.
The real money didn't involve the product, it involved the scheme; that is to say, the creation of an "investment pyramid." The product was at best a contrivance - a subterfuge. At worst, it was a fiction. Recruits (i.e., "investors") were not sold on the hope of making money off legitimate sales of the product; rather they were sold on the hope of making money by speculating on the pyramid. Speculation was the name of the game; the product was only a device around which the speculation was organized.
MULTILEVEL MARKETING
The most well-known (but by far not the most widespread) form of such speculation in today's world is multilevel marketing (MLM). Recruits to MLM schemes are enlisted in the hope of huge profits to be made on their "downline commissions," not on the sales of the product per se. They anticipate recruiting others to build "legs," thus creating a pyramid, with a pyramid's law of averages. But like the original Ponzi Pyramid, success for everyone is impossible. There aren't enough human beings in the world to recruit. Once new recruits stop coming into the multilevel pyramid, the scheme inevitably collapses. Ami Chen Mills writes concerning her experience with an MLM:
"My experience with multilevel marketing began with Mark, the classified sales rep in a small newspaper office where I once worked. After an unremarkable stint at an ad desk, Mark announced that he had struck gold - and was leaving us to make a fortune in his own business. He would work for the Boss Man no more, and we who stayed behind would regret our miserable lives when, in a few years, Mark tore himself away from the country club to visit, and paid for lunch with a tiny fraction of his $50,000-a-month salary.
"'You'll be sorry', he said on strolls to and from the taqueria for our usual low-budget burritos. 'You'll see'. Mark was suffering from an acute case of the American Dream; it first surfaced, as he now tells it, at a recruiting meeting in Santa Cruz for Equinox distributors. For two months, the only language Mark could speak was the language of Equinox International, an ostensible environmental and health company which produces herbal supplements, water filters and other sucking and sifting gadgets to ward off air and water-borne toxins. Yet the miraculous Equinox products were not the main event for Mark. Rather, Equinox and its executive progeny had convinced Mark that if he did not sign up to become an Equinox distributor right away, he would be squashed flat by the thundering steam train they call the Opportunity of a Lifetime.
"When we coworkers learned that Mark had already maxed out two credit cards to fly to Equinox "training seminars" in Portland, Denver and Hawaii and when we further learned Mark was preparing to take out a $5,000 loan to buy into the company as a 'manager', we each decided to take our turn with Mark, to talk some sense into the boy.
"My own conversation with Mark took place in the office after hours, and went something along the lines of, 'So, are you sure you can make all that money'? 'Oh yeah, no problems'. Mark looked at me askance, considering something, then retrieved a magazine from his desk. 'Look at this', he said, flipping through pages filled with pictures of Equinox founder Bill Gouldd. (The extra "d" was added by Gouldd according to the advice of a 'spiritual adviser'. Mark told me it stood for 'dollars'.) There was Bill Gouldd next to his sports car collection. There was Bill Gouldd at his expansive mansion on a hill. There was Bill Gouldd with a buxom blonde at his side. According to the magazine, there was no doubt that Bill Gouldd was making money.
"My next approach was to question the fundamental premise of multilevel marketing, the sketchy business of selling not a product, but a dream. The conversation was making Mark uncomfortable. I saw a flash of panic in his eyes before they glazed over. Then he said this: 'They told us there'd be ripe apples who are ready - who see it. They told us there'd be green apples that weren't ripe yet. And they told us there'd be rotten apples ... You're a rotten apple', he said. There was an uncomfortable silence. I smiled thinly and suggested we both go home.
"'What about the product? Does anyone pay attention to what the distributors are selling'? I wondered."
No, Ami! - no one pays attention to the product; it's the scheme that counts! the pyramid!
You say, of course, that you're too sophisticated to be caught up in a Ponzi or multilevel pyramid scheme. That's for the common folk. You invest in real estate and the stock market. That's different. No! - not really! - at least, not anymore! And those who bought real estate as an "investment" in the late 1980s and then tried to sell it a few years later for a profit [after the real estate market had maxed out] have found out that it's not.THE REAL ESTATE MARKETNow to be sure, the real estate boom (and inevitable bust) of the 1970s and '80s was not an organized Ponzi scheme. No one fiendishly devised it and pushed it on an "unsuspecting" public. There was no single "mastermind" behind the scheme; no lone Svengali planned and promoted it; no Bill Gouldd. But it was a Ponzi Pyramid nonetheless, at least in the sense that people bought and sold homes not to live in them, but to speculate on them.
Like all those who "invest" in Ponzi schemes, greed was what motivated them. "Easy money" was what enlivened and excited them. People came to expect that housing values would rise endlessly. No one really knew how or why - they just seemed to sense that they would, and that there was money to be made in all this. People could buy a house one year, hold it for a few years without putting any real cash into it to fix it up, and then sell it for a twenty or thirty percent profit. The house wasn't what was important in the scheme. It was the speculation that was important! Like Equinox's herbal supplements, water filters and "other sucking and sifting gadgets," houses were merely the "product" around which the speculation was organized. Speculation was the name of the game; building or rehabilitating homes had nothing really to do with what was going on.
As the speculation boom took off, houses which sold for $35,000 dollars at the beginning of the 1970s were selling for $150,000 dollars at the end of the 1980s - a run up of over 400 percent in less than fifteen years. The run-up in these values had nothing to do with the "real" value of the home - i.e., what it cost to originally build it (minus the costs of inflation and improvements). It resulted in speculation. Houses were incidental to the speculation. It was the "paper" (i.e., the mortgage) that was being "bought and sold." People were buying paper, they weren't buying houses. People bought real estate sight unseen. So long as people could be found to buy the same house (i.e., the "paper" on the house) every two or three years at a twenty to thirty percent markup, the pyramid held and the speculation continued. Eventually, however, there were no more buyers. The price of the paper had reached a point where it no longer had any real connection to the value of the house. Buyers quit coming into the market.
Those that had bought at the height of the speculation craze, found they couldn't unload their purchases. The mortgage (i.e., the "paper" on the house) was technically worth more than the house itself. People found that when they sold their homes, they couldn't get enough money to pay off the banks (i.e., liquidate the "paper"). The pyramid broke down, foreclosures ensued, and bankruptcies followed shortly thereafter. Thousands of people lost everything they had. And who was at fault? - everybody! Both the big investors and the small investors. Greed - not a desire to find a place to live - had brought them into the market; and their own corruption and depravity had "sold them down the river."
And were there any innocent victims? You bet there were! - but they weren't the investors who got left "holding the bag" when the pyramid collapsed; they deserved what they got! They speculated on the market and lost! The real victims were instead the families who legitimately needed a home to live in; "blue collar" families who needed a roof over their heads, not a device to speculate with. These people were left out in the cold through no fault of their own - and for the most part, they're still there, left having to rent houses in run down neighborhoods from landlords that could "give a damn."
THE STOCK MARKET
And what about the stock market? More specifically, what about today's stock market? It's the same. Today's bull market is nothing more than a colossal Ponzi scheme - the same kind of scheme that undergirded and drove the real estate market of the 1970s and '80s. And the same kind of greed and avarice that animated and energized Ponzi in 1919 and real estate "investors" in the 1970s and '80s is the same avarice and greed that is energizing today's bull market. The sad fact of the matter is, today's stock market is an "investment pyramid" that will continue to survive only so long as new money is pumped into it. When new money ceases to flow into the pyramid, it will collapse just as surely as the real estate pyramid collapsed in the late 1980s and Ponzi's failed in 1920.
WHAT STOCK IS REALLY ALL ABOUT
Stock represents ownership (usually partial ownership) in a business corporation. It gives the owner of the stock the right to participate in the profits (supposedly the legitimate profits) of the company. When the stock market is functioning properly, people buy stock (ownership) in a company in order to participate in its growth and reap the bona fide profits that are derived from the sale of the corporation's product. Money is invested into the company in order to increase the corporation's ability to produce more product. The value of the company (and, ipso facto, its stock) rests in the value of the product the company produces. When the value of the aggregate product rises, the stock (or value of the company) rises in accordance. When the aggregate value of the company's product falls, the value of the stock (or company) falls. The price of the company's stock is supposed to be in equilibrium with the dividend (or profit) that investors can expect as a return on their investment. This is called the price / earnings ratio, a ratio which measures the value of a stock against the profits one can expect to derive from the sale of the company's product.
THE PRICE / EARNINGS RATIO
When the price / earnings ratio favors the investor, the investor can expect to recover the price he originally paid for the stock within a relatively short period of time and from that point on live off the company's profits (i.e., derive an income from the company's quarterly dividends). When it doesn't favor the investor, it takes a relatively larger amount of time for the investor to recover the money he originally paid for the stock. When the amount of time increases to an unreasonable length before an investor can expect to recover his original investment, the price / earnings ratio is said to be "out of equilibrium." If the price of the company's stock continues to rise after that point is reached, then it is being speculated upon.
The price / earnings ratio of most of today's stocks on the world's exchanges long ago reached the point where it could be said that what's driving the market is "speculation" rather than any legitimate form of real "investment." Indeed, the price of today's stocks on the New York Exchange is more out of equilibrium than it was just prior to the collapse of the market in 1929 which brought on the Great Depression. The price of most of today's stock bears no real relation to the profits that can be expected from holding the stock (i.e., from the income that can be expected from the company's quarterly dividends). People buy stock today not to derive an income from the stock's dividends (which is the only real legitimate reason for buying stock); rather they buy stock to speculate with it.
STOCK SPECULATION AND THE CREATION OF A STOCK PYRAMID
"Like the real estate market of the 1970s and '80s, people are buying stock not to participate as owners in the company, but to hold the stock for a few years and sell it down the road. Like the participants in the real estate market of the '70s and '80s who bought and sold "paper" (i.e., mortgages) without ever having seen the houses (or real estate) the mortgages were drawn upon, today's stock market "investors" are buying and selling "paper" (in this case, stocks) without having any real idea about the company they are "buying into." Their "buy" and "sell" orders are based more on various bizarre mathematical models (and in some cases astrological charts) than on any real knowledge of the business activity of the companies the stocks are supposed to represent. This is speculation - there's no other word for it. And it makes no difference whether the stock is bought through one's 401k account or through a mutual fund (the ultimate in speculation devices) and held "responsibly" to be sold in ten or twenty years in order to send one's children to college, or whether it's held for two or three months in order to finance a riotous drinking and sex binge in the Bahamas. If the stock is being held so that it can later be sold for a profit, this is speculation. It's the same as owning a house not to live in it, but to sell it later for a profit. There's no difference.
The truth of the matter is, people who buy stock in today's stock market are not that much different from Mark who bought herbal supplements, water filters and "other sucking and sifting gadgets," from his MLM, Equinox. Stock market investors and holders of 401k accounts - in all their pompous arrogance and pride - would, of course, object to being compared with Mark. Still, there's little difference. It's the speculation that counts, not the product - i.e., not the company, not the real estate, and not the herbal supplements, water filters and "other sucking and sifting gadgets." It's the speculation! It's the investment pyramid! It's the gamble of getting into and out of the market before it collapses - and damn those who do get caught and the innocent victims of the speculation, the countless numbers of employees who depend on employment from the companies whose stock is being speculated on (and manipulated) in the world's exchanges.
THE STAGGERING AMOUNT OF TODAY'S SPECULATION
And just how much speculation has there been in the stock market? Estimates vary, but one can begin to get an idea when one examines the run-up of the market since the Nixon Administration. At the close of the Nixon/Ford presidencies the stock market (specifically, the Dow Jones Average) hovered around the 700 mark. Today it flutters around the 8,000 level - a run-up of over 1,100 percent (an eleven fold increase) in just over twenty-five years.
Does anyone actually believe that the real value of American corporations has increased by this amount - especially when the GNP has only been increasing by a fraction of that figure? If one thinks so, he's very, very naive or just a plain fool. Even if one were to say that the nation's GNP (GDP) has increased by an average of 5% a year over the last twenty-five years [which is way beyond the reality of the situation when the entire twenty-five year period is taken into account, even when one factors in inflation (the real figure is more like 2.3 percent a year)], that would only account for a rise of about 350% in the value of these corporations.
What's to account for the other 750%? In other words, if the rise in GNP accounts for only thirty-one percent of the surge in the so-called value of these stocks, what's to account for the other sixty-nine per cent?
WHERE DID THE MONEY COME FROM?
Consider for a moment: a 1,100 percent rise in the stock market! Think about what that means. Eleven times the money that was in the stock market twenty-five years ago is in it today. If the rise in GNP (i.e., the normal growth of the economy) can account for only 31 percent of the funds which have flowed into the market since the Nixon Administration, where did the other 69 percent come from? We're taking about billions and billions and billions of dollars here. And be clear! - the money didn't materialize out of nowhere. The greatest amount of this growth came during a period of low inflation (during the Reagan, Bush and Clinton presidencies), so the government printing office didn't "create" the money. We're talking about REAL dollars. Obviously, the money has been diverted from elsewhere.
Essentially it's come from:
(1) Lowering the wages of average American workers and diverting the money thus saved into the market.
(2) Opening up sources of funds which used to be "off-limits" for investment into the stock market [i.e., pension and retirement funds, public funds, funds held in trust (both public and private), etc.] and pouring this money into the market.
and
(3) The creation of mutual funds and 401k accounts to expand the amount of people capable of participating in the market.
THE STOCK MARKET VORTEX
As money has poured into the stock market, the sheer volume of it has pushed stock prices up. As stock prices have soared, others have joined in the stampede to "get in" on the "easy money," creating an upwardly spiraling vortex which, as it grows in size and strength, sucks in ever greater amounts of money which in turn pushes stocks that much higher reaching eventually into the absurd.
What kind of absurdity? - take, for example, the stock of one company with annual revenues of only $14-million which was recently bid up to the point where $52-billion had been dumped into it - and not just by wild-eyed crazies, but by "reputable" mutual fund managers of some of the most well-known mutual funds in the country. And this was an American company doing business in the American market where reporting procedures are considered to be quite strict in comparison to stocks offered on foreign exchanges - for instance, in Latin America and the so-called Pacific Rim - where more and more American investment money is being dumped. God only knows the absurdities that have been reached in those overheated exchanges.
The stock market is today nothing more than a mammoth Ponzi pyramid, and like all such pyramids, greater and greater amounts of money have to be found to feed into it in order to prevent its collapse. And the money that is being fed into it are the diverted wages of American workers, the pension and retirement funds of our senior citizens, trust funds, and the "savings" of ordinary Americans who have been persuaded to divert their savings from their bank accounts to mutual funds and 401k accounts.
One would think, of course, that the "game" can't go on forever; that eventually the funds that are required to feed into the pyramid will dry up. And that is beginning to happen insofar as the nation's pension and trust funds are concerned. [The only thing that hasn't been thrown into the maw is the nation's social security funds - and now there's talk of doing that.]
But so long as the wages and salaries of America's workers can continue to be squeezed there will be money available to feed into the vortex; so long as work can be shifted from high-paying U.S. jobs to low-paying jobs in Mexico, Indonesia, the Philippines, China, etc., the amount of money thus saved can be fed into the exchanges, thus preventing the collapse of the pyramid. If all else fails, of course, U.S. taxpayer funds can be fed into the pyramid to prevent its collapse - as is being done even now in Korea, Indonesia and Thailand (almost $100-billion in the last four months alone).
But there is a price to be paid - the pauperizing of ordinary people not only in the United States, but throughout the world - and this brings us to our next article, "The New World Economic Order: A Closer Look at Today's Ponzi Pyramid" and to a mysterious and enigmatic lyric in Revelation 6:6:
"A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine." (Rev. 6:6)
The intrigue was simplicity itself: give Ponzi money and in 90 days (and usually much sooner than that) he would give you your money back plus 50%, plus 10% to the recruiter. There was only one problem with the scheme: while the originators and early participants were handsomely paid off from the cash flow of those they recruited, the last ones who were brought into the scheme found that there was no one left to be recruited, and the cash flow stopped - leaving them "holding the bag." Before the scheme broke down, however (in May of 1920 - six months after it began), Ponzi had made more than a million dollars. Whether Ponzi knew it or not, what he had done was formulate or give expression - so to speak - to much of the thinking which lies behind today's New World Economic Order.GREEDThe driving motivation behind the scheme, from top to bottom, was greed. Everyone - from Ponzi on down to the last "investor" recruited - knew that in the end someone would be left "holding the bag;" that people would get hurt; and that some would be hurt very badly. They didn't care! - just so long as it wasn't them. Most who involved themselves in the scheme felt that they could get "in and out" of the pyramid before it collapsed - and "to hell" with those who were "dumb" enough to get caught.
Needless to say, it took very coldhearted people to push the scheme, and very greedy and selfish-minded ones to participate. The scheme Ponzi devised is today called a "Ponzi Pyramid." It's called this because if one were to chart out the scheme on a piece of paper it would resemble a pyramid with the originator(s) perched atop the pyramid and the losers sitting at the bottom. Money flows from the bottom of the pyramid to the top.
Originally, most pyramid schemes involved the use of "chain letters." The originator would send out a letter to ten friends asking for a certain amount of money, say $10 dollars (for a total of $100 dollars). They were then told to make ten copies of the letter and send one each to ten of their friends. A second circle of "investors" was thus produced, creating a second step in the pyramid that consisted of 100 people. These 100 were told to "buy into" the scheme by producing $10 dollars each and "sending it up the pyramid" (total amount $1,000 dollars) and then to recruit ten more "investors," making a third circle of "investors" consisting of 1000 people.
The process was then repeated, with the new circle of "investors" contributing $10 dollars each ($10,000 total) to be "sent up" the pyramid making the new total "invested" in the pyramid $11,100 dollars ($10,000 dollars contributed by the third circle of investors plus the $1,000 dollars contributed by the second set of "investors" plus the $100 dollars contributed by the first set of "investors"). As the money is passed up the pyramid, each step (circle of "investors") takes out a portion of the "investment" according to a prearranged schedule as a "return" on his or her "investment." By the time the fifth step of the pyramid is reached (100,000 people, each contributing their $10 dollars ($1 million dollars) the total amount of money has become astronomical considering the small amount of money with which the scheme was initiated.
In 1923 the Supreme Court determined that this was fraud (Cunningham v Brown 44 SCt 424) - and since then such pyramid schemes have been known colloquially as "Ponzi schemes." According to the Supreme Court, what made the scheme illegal was that there was no "product" involved in the scheme. Nothing was "bought and sold."INTRODUCING "PRODUCT" TO THE SCHEMEWhat to do? - introduce a product around which the scheme could be reorganized. The product could be anything; that wasn't important - what was important was the scheme remained the same.
The real money didn't involve the product, it involved the scheme; that is to say, the creation of an "investment pyramid." The product was at best a contrivance - a subterfuge. At worst, it was a fiction. Recruits (i.e., "investors") were not sold on the hope of making money off legitimate sales of the product; rather they were sold on the hope of making money by speculating on the pyramid. Speculation was the name of the game; the product was only a device around which the speculation was organized.
MULTILEVEL MARKETING
The most well-known (but by far not the most widespread) form of such speculation in today's world is multilevel marketing (MLM). Recruits to MLM schemes are enlisted in the hope of huge profits to be made on their "downline commissions," not on the sales of the product per se. They anticipate recruiting others to build "legs," thus creating a pyramid, with a pyramid's law of averages. But like the original Ponzi Pyramid, success for everyone is impossible. There aren't enough human beings in the world to recruit. Once new recruits stop coming into the multilevel pyramid, the scheme inevitably collapses. Ami Chen Mills writes concerning her experience with an MLM:
"My experience with multilevel marketing began with Mark, the classified sales rep in a small newspaper office where I once worked. After an unremarkable stint at an ad desk, Mark announced that he had struck gold - and was leaving us to make a fortune in his own business. He would work for the Boss Man no more, and we who stayed behind would regret our miserable lives when, in a few years, Mark tore himself away from the country club to visit, and paid for lunch with a tiny fraction of his $50,000-a-month salary.
"'You'll be sorry', he said on strolls to and from the taqueria for our usual low-budget burritos. 'You'll see'. Mark was suffering from an acute case of the American Dream; it first surfaced, as he now tells it, at a recruiting meeting in Santa Cruz for Equinox distributors. For two months, the only language Mark could speak was the language of Equinox International, an ostensible environmental and health company which produces herbal supplements, water filters and other sucking and sifting gadgets to ward off air and water-borne toxins. Yet the miraculous Equinox products were not the main event for Mark. Rather, Equinox and its executive progeny had convinced Mark that if he did not sign up to become an Equinox distributor right away, he would be squashed flat by the thundering steam train they call the Opportunity of a Lifetime.
"When we coworkers learned that Mark had already maxed out two credit cards to fly to Equinox "training seminars" in Portland, Denver and Hawaii and when we further learned Mark was preparing to take out a $5,000 loan to buy into the company as a 'manager', we each decided to take our turn with Mark, to talk some sense into the boy.
"My own conversation with Mark took place in the office after hours, and went something along the lines of, 'So, are you sure you can make all that money'? 'Oh yeah, no problems'. Mark looked at me askance, considering something, then retrieved a magazine from his desk. 'Look at this', he said, flipping through pages filled with pictures of Equinox founder Bill Gouldd. (The extra "d" was added by Gouldd according to the advice of a 'spiritual adviser'. Mark told me it stood for 'dollars'.) There was Bill Gouldd next to his sports car collection. There was Bill Gouldd at his expansive mansion on a hill. There was Bill Gouldd with a buxom blonde at his side. According to the magazine, there was no doubt that Bill Gouldd was making money.
"My next approach was to question the fundamental premise of multilevel marketing, the sketchy business of selling not a product, but a dream. The conversation was making Mark uncomfortable. I saw a flash of panic in his eyes before they glazed over. Then he said this: 'They told us there'd be ripe apples who are ready - who see it. They told us there'd be green apples that weren't ripe yet. And they told us there'd be rotten apples ... You're a rotten apple', he said. There was an uncomfortable silence. I smiled thinly and suggested we both go home.
"'What about the product? Does anyone pay attention to what the distributors are selling'? I wondered."
No, Ami! - no one pays attention to the product; it's the scheme that counts! the pyramid!
You say, of course, that you're too sophisticated to be caught up in a Ponzi or multilevel pyramid scheme. That's for the common folk. You invest in real estate and the stock market. That's different. No! - not really! - at least, not anymore! And those who bought real estate as an "investment" in the late 1980s and then tried to sell it a few years later for a profit [after the real estate market had maxed out] have found out that it's not.THE REAL ESTATE MARKETNow to be sure, the real estate boom (and inevitable bust) of the 1970s and '80s was not an organized Ponzi scheme. No one fiendishly devised it and pushed it on an "unsuspecting" public. There was no single "mastermind" behind the scheme; no lone Svengali planned and promoted it; no Bill Gouldd. But it was a Ponzi Pyramid nonetheless, at least in the sense that people bought and sold homes not to live in them, but to speculate on them.
Like all those who "invest" in Ponzi schemes, greed was what motivated them. "Easy money" was what enlivened and excited them. People came to expect that housing values would rise endlessly. No one really knew how or why - they just seemed to sense that they would, and that there was money to be made in all this. People could buy a house one year, hold it for a few years without putting any real cash into it to fix it up, and then sell it for a twenty or thirty percent profit. The house wasn't what was important in the scheme. It was the speculation that was important! Like Equinox's herbal supplements, water filters and "other sucking and sifting gadgets," houses were merely the "product" around which the speculation was organized. Speculation was the name of the game; building or rehabilitating homes had nothing really to do with what was going on.
As the speculation boom took off, houses which sold for $35,000 dollars at the beginning of the 1970s were selling for $150,000 dollars at the end of the 1980s - a run up of over 400 percent in less than fifteen years. The run-up in these values had nothing to do with the "real" value of the home - i.e., what it cost to originally build it (minus the costs of inflation and improvements). It resulted in speculation. Houses were incidental to the speculation. It was the "paper" (i.e., the mortgage) that was being "bought and sold." People were buying paper, they weren't buying houses. People bought real estate sight unseen. So long as people could be found to buy the same house (i.e., the "paper" on the house) every two or three years at a twenty to thirty percent markup, the pyramid held and the speculation continued. Eventually, however, there were no more buyers. The price of the paper had reached a point where it no longer had any real connection to the value of the house. Buyers quit coming into the market.
Those that had bought at the height of the speculation craze, found they couldn't unload their purchases. The mortgage (i.e., the "paper" on the house) was technically worth more than the house itself. People found that when they sold their homes, they couldn't get enough money to pay off the banks (i.e., liquidate the "paper"). The pyramid broke down, foreclosures ensued, and bankruptcies followed shortly thereafter. Thousands of people lost everything they had. And who was at fault? - everybody! Both the big investors and the small investors. Greed - not a desire to find a place to live - had brought them into the market; and their own corruption and depravity had "sold them down the river."
And were there any innocent victims? You bet there were! - but they weren't the investors who got left "holding the bag" when the pyramid collapsed; they deserved what they got! They speculated on the market and lost! The real victims were instead the families who legitimately needed a home to live in; "blue collar" families who needed a roof over their heads, not a device to speculate with. These people were left out in the cold through no fault of their own - and for the most part, they're still there, left having to rent houses in run down neighborhoods from landlords that could "give a damn."
THE STOCK MARKET
And what about the stock market? More specifically, what about today's stock market? It's the same. Today's bull market is nothing more than a colossal Ponzi scheme - the same kind of scheme that undergirded and drove the real estate market of the 1970s and '80s. And the same kind of greed and avarice that animated and energized Ponzi in 1919 and real estate "investors" in the 1970s and '80s is the same avarice and greed that is energizing today's bull market. The sad fact of the matter is, today's stock market is an "investment pyramid" that will continue to survive only so long as new money is pumped into it. When new money ceases to flow into the pyramid, it will collapse just as surely as the real estate pyramid collapsed in the late 1980s and Ponzi's failed in 1920.
WHAT STOCK IS REALLY ALL ABOUT
Stock represents ownership (usually partial ownership) in a business corporation. It gives the owner of the stock the right to participate in the profits (supposedly the legitimate profits) of the company. When the stock market is functioning properly, people buy stock (ownership) in a company in order to participate in its growth and reap the bona fide profits that are derived from the sale of the corporation's product. Money is invested into the company in order to increase the corporation's ability to produce more product. The value of the company (and, ipso facto, its stock) rests in the value of the product the company produces. When the value of the aggregate product rises, the stock (or value of the company) rises in accordance. When the aggregate value of the company's product falls, the value of the stock (or company) falls. The price of the company's stock is supposed to be in equilibrium with the dividend (or profit) that investors can expect as a return on their investment. This is called the price / earnings ratio, a ratio which measures the value of a stock against the profits one can expect to derive from the sale of the company's product.
THE PRICE / EARNINGS RATIO
When the price / earnings ratio favors the investor, the investor can expect to recover the price he originally paid for the stock within a relatively short period of time and from that point on live off the company's profits (i.e., derive an income from the company's quarterly dividends). When it doesn't favor the investor, it takes a relatively larger amount of time for the investor to recover the money he originally paid for the stock. When the amount of time increases to an unreasonable length before an investor can expect to recover his original investment, the price / earnings ratio is said to be "out of equilibrium." If the price of the company's stock continues to rise after that point is reached, then it is being speculated upon.
The price / earnings ratio of most of today's stocks on the world's exchanges long ago reached the point where it could be said that what's driving the market is "speculation" rather than any legitimate form of real "investment." Indeed, the price of today's stocks on the New York Exchange is more out of equilibrium than it was just prior to the collapse of the market in 1929 which brought on the Great Depression. The price of most of today's stock bears no real relation to the profits that can be expected from holding the stock (i.e., from the income that can be expected from the company's quarterly dividends). People buy stock today not to derive an income from the stock's dividends (which is the only real legitimate reason for buying stock); rather they buy stock to speculate with it.
STOCK SPECULATION AND THE CREATION OF A STOCK PYRAMID
"Like the real estate market of the 1970s and '80s, people are buying stock not to participate as owners in the company, but to hold the stock for a few years and sell it down the road. Like the participants in the real estate market of the '70s and '80s who bought and sold "paper" (i.e., mortgages) without ever having seen the houses (or real estate) the mortgages were drawn upon, today's stock market "investors" are buying and selling "paper" (in this case, stocks) without having any real idea about the company they are "buying into." Their "buy" and "sell" orders are based more on various bizarre mathematical models (and in some cases astrological charts) than on any real knowledge of the business activity of the companies the stocks are supposed to represent. This is speculation - there's no other word for it. And it makes no difference whether the stock is bought through one's 401k account or through a mutual fund (the ultimate in speculation devices) and held "responsibly" to be sold in ten or twenty years in order to send one's children to college, or whether it's held for two or three months in order to finance a riotous drinking and sex binge in the Bahamas. If the stock is being held so that it can later be sold for a profit, this is speculation. It's the same as owning a house not to live in it, but to sell it later for a profit. There's no difference.
The truth of the matter is, people who buy stock in today's stock market are not that much different from Mark who bought herbal supplements, water filters and "other sucking and sifting gadgets," from his MLM, Equinox. Stock market investors and holders of 401k accounts - in all their pompous arrogance and pride - would, of course, object to being compared with Mark. Still, there's little difference. It's the speculation that counts, not the product - i.e., not the company, not the real estate, and not the herbal supplements, water filters and "other sucking and sifting gadgets." It's the speculation! It's the investment pyramid! It's the gamble of getting into and out of the market before it collapses - and damn those who do get caught and the innocent victims of the speculation, the countless numbers of employees who depend on employment from the companies whose stock is being speculated on (and manipulated) in the world's exchanges.
THE STAGGERING AMOUNT OF TODAY'S SPECULATION
And just how much speculation has there been in the stock market? Estimates vary, but one can begin to get an idea when one examines the run-up of the market since the Nixon Administration. At the close of the Nixon/Ford presidencies the stock market (specifically, the Dow Jones Average) hovered around the 700 mark. Today it flutters around the 8,000 level - a run-up of over 1,100 percent (an eleven fold increase) in just over twenty-five years.
Does anyone actually believe that the real value of American corporations has increased by this amount - especially when the GNP has only been increasing by a fraction of that figure? If one thinks so, he's very, very naive or just a plain fool. Even if one were to say that the nation's GNP (GDP) has increased by an average of 5% a year over the last twenty-five years [which is way beyond the reality of the situation when the entire twenty-five year period is taken into account, even when one factors in inflation (the real figure is more like 2.3 percent a year)], that would only account for a rise of about 350% in the value of these corporations.
What's to account for the other 750%? In other words, if the rise in GNP accounts for only thirty-one percent of the surge in the so-called value of these stocks, what's to account for the other sixty-nine per cent?
WHERE DID THE MONEY COME FROM?
Consider for a moment: a 1,100 percent rise in the stock market! Think about what that means. Eleven times the money that was in the stock market twenty-five years ago is in it today. If the rise in GNP (i.e., the normal growth of the economy) can account for only 31 percent of the funds which have flowed into the market since the Nixon Administration, where did the other 69 percent come from? We're taking about billions and billions and billions of dollars here. And be clear! - the money didn't materialize out of nowhere. The greatest amount of this growth came during a period of low inflation (during the Reagan, Bush and Clinton presidencies), so the government printing office didn't "create" the money. We're talking about REAL dollars. Obviously, the money has been diverted from elsewhere.
Essentially it's come from:
(1) Lowering the wages of average American workers and diverting the money thus saved into the market.
(2) Opening up sources of funds which used to be "off-limits" for investment into the stock market [i.e., pension and retirement funds, public funds, funds held in trust (both public and private), etc.] and pouring this money into the market.
and
(3) The creation of mutual funds and 401k accounts to expand the amount of people capable of participating in the market.
THE STOCK MARKET VORTEX
As money has poured into the stock market, the sheer volume of it has pushed stock prices up. As stock prices have soared, others have joined in the stampede to "get in" on the "easy money," creating an upwardly spiraling vortex which, as it grows in size and strength, sucks in ever greater amounts of money which in turn pushes stocks that much higher reaching eventually into the absurd.
What kind of absurdity? - take, for example, the stock of one company with annual revenues of only $14-million which was recently bid up to the point where $52-billion had been dumped into it - and not just by wild-eyed crazies, but by "reputable" mutual fund managers of some of the most well-known mutual funds in the country. And this was an American company doing business in the American market where reporting procedures are considered to be quite strict in comparison to stocks offered on foreign exchanges - for instance, in Latin America and the so-called Pacific Rim - where more and more American investment money is being dumped. God only knows the absurdities that have been reached in those overheated exchanges.
The stock market is today nothing more than a mammoth Ponzi pyramid, and like all such pyramids, greater and greater amounts of money have to be found to feed into it in order to prevent its collapse. And the money that is being fed into it are the diverted wages of American workers, the pension and retirement funds of our senior citizens, trust funds, and the "savings" of ordinary Americans who have been persuaded to divert their savings from their bank accounts to mutual funds and 401k accounts.
One would think, of course, that the "game" can't go on forever; that eventually the funds that are required to feed into the pyramid will dry up. And that is beginning to happen insofar as the nation's pension and trust funds are concerned. [The only thing that hasn't been thrown into the maw is the nation's social security funds - and now there's talk of doing that.]
But so long as the wages and salaries of America's workers can continue to be squeezed there will be money available to feed into the vortex; so long as work can be shifted from high-paying U.S. jobs to low-paying jobs in Mexico, Indonesia, the Philippines, China, etc., the amount of money thus saved can be fed into the exchanges, thus preventing the collapse of the pyramid. If all else fails, of course, U.S. taxpayer funds can be fed into the pyramid to prevent its collapse - as is being done even now in Korea, Indonesia and Thailand (almost $100-billion in the last four months alone).
But there is a price to be paid - the pauperizing of ordinary people not only in the United States, but throughout the world - and this brings us to our next article, "The New World Economic Order: A Closer Look at Today's Ponzi Pyramid" and to a mysterious and enigmatic lyric in Revelation 6:6:
"A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine." (Rev. 6:6)
Tuesday, March 25, 2008
Oh Mighty Speedbreaker!!
I drive through the silent darkness, all alone,
If I don’t see you in time, I’ll surely break a bone!
God knows what was in the mind of your maker,
All hail thee, You are the mighty Speed Breaker!
Unmoving on the road, you lay in your slumber,
10-to-1, even the mighty buffaloes you outnumber!
Instead of warning us to be careful and slowly tread,
Why do you put up a sign that says “Hump Ahead?”
And then there’s your cousin, the infamous pothole,
Seems like you’re a part of the Indian road’s soul!
As soon as the rain comes I hear you cheer,
‘Cause in infinite numbers you can now appear!
If I don’t see you in time, I’ll surely break a bone!
God knows what was in the mind of your maker,
All hail thee, You are the mighty Speed Breaker!
Unmoving on the road, you lay in your slumber,
10-to-1, even the mighty buffaloes you outnumber!
Instead of warning us to be careful and slowly tread,
Why do you put up a sign that says “Hump Ahead?”
And then there’s your cousin, the infamous pothole,
Seems like you’re a part of the Indian road’s soul!
As soon as the rain comes I hear you cheer,
‘Cause in infinite numbers you can now appear!
God only knows why the hell you exist at all,
Slowing down traffic that’s already in a crawl!
Only bike guys with girlfriends really like you,
They brake sharply and come a little closer too!
Originally Published by Aditya on his site www.pointlesseverything.com .. Reproduced with slight modifications here!!
Saturday, March 22, 2008
A weekend drawing to an end!
Hey guys, so how did the Holi weekend go?? Hope you all feasted on the lovely items being cooked around at this time of the year while still remaining recognizable?? Ha ha, with all the chemical colours flying around, I am not sure how true this will be! Anyways, I finally had an awesome weekend, just the way I like it!
Going to bed after midnight these past few nights, I've managed to stay in bed till 9:30 am! After that a quick shower, followed by a yummy breakfast, fruits and then an early lunch and I am back in bed by 1 p.m. !! Finally waking up around 6 pm to an arousing aroma of coffee filtering in through the kitchen and answering the numerous calls on the landline and an occasional friendly call on the cell!!
Meanwhile, I have been doing nothing but lazing around, eating, sleeping and reading novels! These days, I'm hooked on to James Patterson. I quite enjoy his way of writing and most importantly, his topic -- Serial Killers! It's amazing at times to dwelve a bit deeper into the psychology of these killers and the ones who catch them!
Finished off Honeymoon and Jack and Jill (yep, the one featuring his most lovable and awe-inspiringcharacter Alex Cross) in the two offs which I've enjoyed so far but I've left myself with nothing to read for tomorrow. Lets see what I'll do -- maybe go around town with a couple of friends! N hey, do check out his profile -- he writes well, and very often!
By the way, out of the 11 novel published in the Alex Cross series, I've only read 4 till now! So, now my eyes are all set on the xt book in this enthralling Series: Cat and Mouse .. Read the excerpt, I am sure you too will get hooked to it!
Thursday, March 20, 2008
Random nonsense thoughts
Do good things ever happen Sleeping to my heart's content is my ultimate dream -- this is seldom, if ever, achieved..
The world is a small, small place!! Does anything ever remain hidden?? People pour their collective inputs to find the last remaining hidden treasure -- in this case it would be me , sleeping away to glory in one of the world's yet to be discovered corners -- This is another dream and well, never mind, this is me at my philosophical best!! Sleep deprivation can lead you to new levels, depriving you of all intellectual, reasonable, straight-forward, logical and coherent thought or writing skills!!
While you ponder, debate and understand the gibberish i scribbled, I'll steal a quick nap!! thanks for being such a generous listener!! errr.. reader.. whichever is more apt!!
For all the foodies here in Calcutta (Kolkata), finally we have an online delivery site which has tied up with an impressively long-list of restaurants and food counters!! Now you can browse the menus of your favourite restaurants online and place a variety of orders while sitting in the relative comforts of your home, office or simply a neighbour's place!!
The week-ends here!!
Hey guys, I finally willed myself to post something original today! Dunno whether the effort is worth the pnihsment I am subjecting to my body! I mean its not like I'm seriously ill or anything.. It's got more to do with the sultry, hot, sweaty and the sticky weather of calcutta!!
Gosh, how I wish for cooler days! I also wish for days when the olfractory nerves in my head are pumping in a lot of blood and oxygen to my tired, over-worked brain! Oh sweet gods of gods, thank you for finally giving us a lllllllllooooooooooooooonnnnnnnnnngggggggggggggggggg weekend!! I just pray now that the electricity board does not mess around with the lights in the middle of the night, there are no emergencies -- either at home, work or outside, and I am allowed to catch my beauty nap of 4 hrs in the afternoon in utter bliss apart from of course getting up late in the morning!!
Sounds like a dream huh?? Well, only the coming time will tell!! But I sure need a pretty quiet weekend, with no bombs going off anywhere in my vicinity! I pray that my phone does not ring but I sure hope to receive lovely msgs from my loved and dear ones!! Have a great weekend and enjoy all the festivities coming your way!
Gosh, how I wish for cooler days! I also wish for days when the olfractory nerves in my head are pumping in a lot of blood and oxygen to my tired, over-worked brain! Oh sweet gods of gods, thank you for finally giving us a lllllllllooooooooooooooonnnnnnnnnngggggggggggggggggg weekend!! I just pray now that the electricity board does not mess around with the lights in the middle of the night, there are no emergencies -- either at home, work or outside, and I am allowed to catch my beauty nap of 4 hrs in the afternoon in utter bliss apart from of course getting up late in the morning!!
Sounds like a dream huh?? Well, only the coming time will tell!! But I sure need a pretty quiet weekend, with no bombs going off anywhere in my vicinity! I pray that my phone does not ring but I sure hope to receive lovely msgs from my loved and dear ones!! Have a great weekend and enjoy all the festivities coming your way!
Tuesday, March 18, 2008
What brought about the downfall of Bear Stearns
How subprime killed Bear Stearns
A problem with risky mortgages has led to a global financial crisis. The bigger issue: Experts don't know when it will end.
It started last summer when borrowers with weak credit started defaulting on their mortgages. Last night, it brought down an 85-year-old pillar of Wall Street.
How did we get to this point? How did rising foreclosures among subprime borrowers lead to Bear Stearns being scooped up in a fire-sale for two bucks a share?
The answer starts with investment banks: They sold complex securities backed by debt that was a lot riskier than most realized. The realization that the banks had failed to manage this risk sparked widespread concern among investors and other financial firms. Suddenly, investors found they couldn't put a value on much of what the banks were selling. As a result, the lending markets that keep Wall Street humming seized up because people feared they wouldn't get paid back.
"We got to the point where the various parties in the financial system started not to trust each other," said Lawrence White, an economics professor at New York University.
What's worse is that no one knows when it will end.
Every week, it seems, another part of the U.S. financial system falters and the federal government has to come up with a new rescue plan. The Federal Reserve Bank's actions have helped soothe the markets in past crises, but the magnitude of the current meltdown may prove unprecedented, experts said. Today's troubles ensnare not only traditional banks, but investment firms, hedge funds, insurance companies and non-bank lenders.
No place like home
The roots of the current crisis lie in the euphoria of the real estate boom. With housing prices soaring and the economy solid, financial firms dove into the lucrative mortgage market. To meet the insatiable desire for mortgage-backed securities, firms loosened their lending standards and extended credit to people with weaker financial backgrounds.
But the lenders didn't put in place the necessary controls to handle the risk of a downturn in the housing market, said Amiyatosh Purnanandam, assistant professor of finance at the University of Michigan. The financial firms weren't ready to cope with a downturn in the value of the housing market or of these securities.
The signs were there: The rates paid on risky securities, such as junk bonds, moved closer to those of super-safe Treasuries, an indication that investors didn't feel the need to pay a premium to take on more risk.
"Every time we see a big crisis, someone messed up the risk management," Purnanandam said.
A slowdown in home values last year touched off the maelstrom. Subprime homeowners found they could no longer afford their monthly payments, leading to a spike in delinquencies and defaults. Investors panicked because they could no longer value the securities backed by these mortgages.
At first, some thought the problem would be contained within the mortgage industry. But within a few months, it spread like wildfire through the debt market as people lost faith in the investment banks' ability to manage risk in general. Investors are hesitating to put money in securities backed by municipal bonds, student loans, credit cards and even mortgages backed by Freddie Mac and Fannie Mae, which have an implicit government guarantee, for fear they won't be paid back.
"What happened was we figured out the whole scheme wasn't working the right way," said George Tsetsekos, dean of the LeBow College of Business at Drexel University. "It's an issue of confidence in the marketplace over the ability of institutions to receive back the funds that were lent."
Financial firms are also shying away from extending credit to one another, afraid that the collateral backing the loans will lose value.
The banks are saying "I don't want to be involved in any relationship where you owe me money because I don't know if you will be able to honor that obligation," White explained.
Faith in the currency wanes
The dollar is compounding the problem. The dollar's fall against other currencies has made it less attractive for foreign investors to put their money in dollar-denominated U.S. securities. And that is pulling much-needed funding out of the system, Tsetsekos said.
Without liquidity, the global financial markets started breaking down, forcing the Federal Reserve to repeatedly inject cash into the system and take the hard-to-trade mortgage securities as collateral in return.
The crisis reached new heights last Thursday when Bear Stearns suffered a classic run-on-the-bank after questions about the investment bank's finances surfaced. The bank, one of largest underwriters of mortgage-backed bonds, had suffered greatly in the meltdown and didn't have the diversity of revenues that cushioned its rivals.
Clients began withdrawing funds or demanding more collateral from Bear Stearns (BSC, Fortune 500), leading it to turn to the federal government for help. On Friday, JPMorgan Chase (JPM, Fortune 500), along with the Federal Reserve Bank of New York, announced they would step in with funding while the investment bank explored its alternatives.
Two days later, JPMorgan announced that it would buy the venerable Wall Street firm, once known for its high-quality risk management, for a shockingly low $2 a share, a 93% discount from Bear Stearns' closing price on Friday.
The move, however, has not calmed everyone's nerves. Instead, some investors are looking for the next institution to fail, with their sights set on Lehman Brothers (LEH, Fortune 500), whose shares were down 32% in late-afternoon trading Monday.
"Once you see one bank subject to this kind of run, depositors starting worrying maybe the bank across the street may be equally as susceptible," White said. "Clearly that's what the Fed is worried about."
A problem with risky mortgages has led to a global financial crisis. The bigger issue: Experts don't know when it will end.
It started last summer when borrowers with weak credit started defaulting on their mortgages. Last night, it brought down an 85-year-old pillar of Wall Street.
How did we get to this point? How did rising foreclosures among subprime borrowers lead to Bear Stearns being scooped up in a fire-sale for two bucks a share?
The answer starts with investment banks: They sold complex securities backed by debt that was a lot riskier than most realized. The realization that the banks had failed to manage this risk sparked widespread concern among investors and other financial firms. Suddenly, investors found they couldn't put a value on much of what the banks were selling. As a result, the lending markets that keep Wall Street humming seized up because people feared they wouldn't get paid back.
"We got to the point where the various parties in the financial system started not to trust each other," said Lawrence White, an economics professor at New York University.
What's worse is that no one knows when it will end.
Every week, it seems, another part of the U.S. financial system falters and the federal government has to come up with a new rescue plan. The Federal Reserve Bank's actions have helped soothe the markets in past crises, but the magnitude of the current meltdown may prove unprecedented, experts said. Today's troubles ensnare not only traditional banks, but investment firms, hedge funds, insurance companies and non-bank lenders.
No place like home
The roots of the current crisis lie in the euphoria of the real estate boom. With housing prices soaring and the economy solid, financial firms dove into the lucrative mortgage market. To meet the insatiable desire for mortgage-backed securities, firms loosened their lending standards and extended credit to people with weaker financial backgrounds.
But the lenders didn't put in place the necessary controls to handle the risk of a downturn in the housing market, said Amiyatosh Purnanandam, assistant professor of finance at the University of Michigan. The financial firms weren't ready to cope with a downturn in the value of the housing market or of these securities.
The signs were there: The rates paid on risky securities, such as junk bonds, moved closer to those of super-safe Treasuries, an indication that investors didn't feel the need to pay a premium to take on more risk.
"Every time we see a big crisis, someone messed up the risk management," Purnanandam said.
A slowdown in home values last year touched off the maelstrom. Subprime homeowners found they could no longer afford their monthly payments, leading to a spike in delinquencies and defaults. Investors panicked because they could no longer value the securities backed by these mortgages.
At first, some thought the problem would be contained within the mortgage industry. But within a few months, it spread like wildfire through the debt market as people lost faith in the investment banks' ability to manage risk in general. Investors are hesitating to put money in securities backed by municipal bonds, student loans, credit cards and even mortgages backed by Freddie Mac and Fannie Mae, which have an implicit government guarantee, for fear they won't be paid back.
"What happened was we figured out the whole scheme wasn't working the right way," said George Tsetsekos, dean of the LeBow College of Business at Drexel University. "It's an issue of confidence in the marketplace over the ability of institutions to receive back the funds that were lent."
Financial firms are also shying away from extending credit to one another, afraid that the collateral backing the loans will lose value.
The banks are saying "I don't want to be involved in any relationship where you owe me money because I don't know if you will be able to honor that obligation," White explained.
Faith in the currency wanes
The dollar is compounding the problem. The dollar's fall against other currencies has made it less attractive for foreign investors to put their money in dollar-denominated U.S. securities. And that is pulling much-needed funding out of the system, Tsetsekos said.
Without liquidity, the global financial markets started breaking down, forcing the Federal Reserve to repeatedly inject cash into the system and take the hard-to-trade mortgage securities as collateral in return.
The crisis reached new heights last Thursday when Bear Stearns suffered a classic run-on-the-bank after questions about the investment bank's finances surfaced. The bank, one of largest underwriters of mortgage-backed bonds, had suffered greatly in the meltdown and didn't have the diversity of revenues that cushioned its rivals.
Clients began withdrawing funds or demanding more collateral from Bear Stearns (BSC, Fortune 500), leading it to turn to the federal government for help. On Friday, JPMorgan Chase (JPM, Fortune 500), along with the Federal Reserve Bank of New York, announced they would step in with funding while the investment bank explored its alternatives.
Two days later, JPMorgan announced that it would buy the venerable Wall Street firm, once known for its high-quality risk management, for a shockingly low $2 a share, a 93% discount from Bear Stearns' closing price on Friday.
The move, however, has not calmed everyone's nerves. Instead, some investors are looking for the next institution to fail, with their sights set on Lehman Brothers (LEH, Fortune 500), whose shares were down 32% in late-afternoon trading Monday.
"Once you see one bank subject to this kind of run, depositors starting worrying maybe the bank across the street may be equally as susceptible," White said. "Clearly that's what the Fed is worried about."
Monday, March 17, 2008
Has the Indian Customer Evolved??
Some fifty years ago, David Ogilvy said: “The consumer is not a moron, she’s your wife”. I believe that this was true about the Indian consumer then and is as true about her today. Nothing has really changed. So, is the question in the headline redundant?
It would not be wrong or boastful to say that the average Indian advertising today is perhaps superior to that of any other country in the world. This is not just a nationalist point of view; when many of us in the business share Indian work with the outside world, it is received with much appreciation.
This was not the case decades ago. At that time, lots of advertising was basic, relying on the brand name repetition six or seven times in thirty seconds. This was done in the belief that this was the only way in which the ‘unevolved’ Indian consumer could connect with and remember the advertising. Just imagine the plight of the consumer!
This was an advertiser and advertising view of the consumer, not the truth about the Indian consumer. It has taken fifty years for the Indian advertiser to evolve, realise the truth that the Indian consumer is not backward. So the more relevant question should be ‘Has Indian advertising evolved?’ And the answer is a loud ‘Yes’.
In the early days, advertising ignored the fact that the Indian consumer has been, for centuries, brought up on understanding messages metaphorically. The Dohas (couplets) and Chaupais that our parents recited without consuming “memory plus” tablets are a simple example of the fact that the Indian consumer not only remembered these messages but also enjoyed them.
However, the advertiser after his MBA, and his agency, after reading a lot of western books on advertising, used selective memory to only focus on “We sell or else”. And thus created a lot of advertising that was rational, ‘A for apple’ and hence boring. They conveniently forgot that the same David Ogilvy also wrote: “You can’t bore people into buying your product”. Engagement and entertainment were given up for making product-oriented sales messages. And yes, there were enough brothers in research who validated that this was the way to do it.
Much can be taken out from the roadside seller’s selling techniques. Remember the long chain of Bhel puri sellers on Marine Drive or Chandni Chowk or the Agarbatti sellers in trains and buses. How well they packaged their sales messages in interesting copy and story telling. These people lived the lives of “We sell or else” in reality. If the salesman didn’t sell by the evening, he and his family had to go to bed without dinner or had to have kilos of bhel puri for it.
So he sold his wares persuasively, entertainingly without talking about the ingredients with which or the process in which the product was made! If he did, he did it interestingly and not like a science class.
Unfortunately, the modern marketer or his agency partners did not have the fears of going hungry. So they decided that they were ‘clever’, consumers were ‘morons’ and hence had to be spoon-fed messages to be persuaded to buy their products. This is a result of people taking themselves too seriously. When a normal, gentle, good-humoured father till breakfast at home, becomes Mr Manager or Einstein’s gift to mankind in office, the result is people who forget they are consumers and human beings and believe they are brain surgeons. And the result: clinical operations and not heart-warming stories.
I distinctly remember a discussion with a brand manager many years ago. It was for a brand of headache pills. I presented a humourous script. The brand manager got quite upset and said: “People don’t have a sense of humour when they have a headache”. I argued that “people don’t watch TV when they have a headache. The task of advertising is to make them remember us when they are not watching TV and do have a headache”. He just didn’t relent and I lost the battle and had to create a ‘boring’ script. It took me many years to realise the reason why he did not want humourous advertising. He wanted a very boring and irritating ad, so that people would get a headache and then he could sell his pill!
It is only when we get consumed by our product that we forget the consumer and treat her like an idiot who has to be fed with features that are more important to us than to her. Look at the charm of Daag acche hain. I think my middle-class family in Jaipur would have understood and loved it in the ’70s as much as the middle class consumer connects with it today.
Unfortunately, thanks to the ‘misplaced perception’ of the advertiser and advertising community of those times, my poor mother had to suffer some magnified, microscopic view of some lab test where some black particles were released from something that looked like a close-up of the weave of a charpai. Pepsi’s ‘ Nothing official about it’ and Asian Paints ‘Celebrate’ campaigns are landmarks that remind us that our consumer has always been evolved and likes to participate or be engaged with our advertising. Cadbury’s and Hamara Bajaj did not have to sell features in the early nineties. They did not have to spell out their messages. They treated the consumer as intelligent beings who liked to fill in the blanks and enjoy their intelligence to be recognised.
Everyone loved Fevicol in the ’80s; everyone still loves it in 2008. And mind you, these people did not have to go and do an “advertising appreciation course” in the interim to enjoy these campaigns Back in 2004, I was waiting for my car outside Rambagh Palace Hotel in Jaipur when the watchman — a handsome looking 70-year-old man with an eight-inch Rajasthani moustache — walked up to me. He probably had not studied beyond class four or five. He said: “Sir, you have left Jaipur for good?” I replied in the negative and told him it is my hometown, that my mother lives here. I come here very often. He laughed and I could see a twinkle in his eye as he said: “So you are stuck to Jaipur as if with Fevicol”. QED. The ultimate reflection of the intelligent consumer! W
ith a ten-fold increase in media exposure, the pressure is now more on us — advertiser and advertising agencies. Consumers have grown smarter and are able to make bigger connections — fill paragraphs, not just blanks. If we don’t treat them with the respect they deserve, they will oust us from their lives and we will be left writing only intelligent articles on “Has the Indian consumer evolved?”
(The author is executive chairman and national creative director, Ogilvy & Mather India)
It would not be wrong or boastful to say that the average Indian advertising today is perhaps superior to that of any other country in the world. This is not just a nationalist point of view; when many of us in the business share Indian work with the outside world, it is received with much appreciation.
This was not the case decades ago. At that time, lots of advertising was basic, relying on the brand name repetition six or seven times in thirty seconds. This was done in the belief that this was the only way in which the ‘unevolved’ Indian consumer could connect with and remember the advertising. Just imagine the plight of the consumer!
This was an advertiser and advertising view of the consumer, not the truth about the Indian consumer. It has taken fifty years for the Indian advertiser to evolve, realise the truth that the Indian consumer is not backward. So the more relevant question should be ‘Has Indian advertising evolved?’ And the answer is a loud ‘Yes’.
In the early days, advertising ignored the fact that the Indian consumer has been, for centuries, brought up on understanding messages metaphorically. The Dohas (couplets) and Chaupais that our parents recited without consuming “memory plus” tablets are a simple example of the fact that the Indian consumer not only remembered these messages but also enjoyed them.
However, the advertiser after his MBA, and his agency, after reading a lot of western books on advertising, used selective memory to only focus on “We sell or else”. And thus created a lot of advertising that was rational, ‘A for apple’ and hence boring. They conveniently forgot that the same David Ogilvy also wrote: “You can’t bore people into buying your product”. Engagement and entertainment were given up for making product-oriented sales messages. And yes, there were enough brothers in research who validated that this was the way to do it.
Much can be taken out from the roadside seller’s selling techniques. Remember the long chain of Bhel puri sellers on Marine Drive or Chandni Chowk or the Agarbatti sellers in trains and buses. How well they packaged their sales messages in interesting copy and story telling. These people lived the lives of “We sell or else” in reality. If the salesman didn’t sell by the evening, he and his family had to go to bed without dinner or had to have kilos of bhel puri for it.
So he sold his wares persuasively, entertainingly without talking about the ingredients with which or the process in which the product was made! If he did, he did it interestingly and not like a science class.
Unfortunately, the modern marketer or his agency partners did not have the fears of going hungry. So they decided that they were ‘clever’, consumers were ‘morons’ and hence had to be spoon-fed messages to be persuaded to buy their products. This is a result of people taking themselves too seriously. When a normal, gentle, good-humoured father till breakfast at home, becomes Mr Manager or Einstein’s gift to mankind in office, the result is people who forget they are consumers and human beings and believe they are brain surgeons. And the result: clinical operations and not heart-warming stories.
I distinctly remember a discussion with a brand manager many years ago. It was for a brand of headache pills. I presented a humourous script. The brand manager got quite upset and said: “People don’t have a sense of humour when they have a headache”. I argued that “people don’t watch TV when they have a headache. The task of advertising is to make them remember us when they are not watching TV and do have a headache”. He just didn’t relent and I lost the battle and had to create a ‘boring’ script. It took me many years to realise the reason why he did not want humourous advertising. He wanted a very boring and irritating ad, so that people would get a headache and then he could sell his pill!
It is only when we get consumed by our product that we forget the consumer and treat her like an idiot who has to be fed with features that are more important to us than to her. Look at the charm of Daag acche hain. I think my middle-class family in Jaipur would have understood and loved it in the ’70s as much as the middle class consumer connects with it today.
Unfortunately, thanks to the ‘misplaced perception’ of the advertiser and advertising community of those times, my poor mother had to suffer some magnified, microscopic view of some lab test where some black particles were released from something that looked like a close-up of the weave of a charpai. Pepsi’s ‘ Nothing official about it’ and Asian Paints ‘Celebrate’ campaigns are landmarks that remind us that our consumer has always been evolved and likes to participate or be engaged with our advertising. Cadbury’s and Hamara Bajaj did not have to sell features in the early nineties. They did not have to spell out their messages. They treated the consumer as intelligent beings who liked to fill in the blanks and enjoy their intelligence to be recognised.
Everyone loved Fevicol in the ’80s; everyone still loves it in 2008. And mind you, these people did not have to go and do an “advertising appreciation course” in the interim to enjoy these campaigns Back in 2004, I was waiting for my car outside Rambagh Palace Hotel in Jaipur when the watchman — a handsome looking 70-year-old man with an eight-inch Rajasthani moustache — walked up to me. He probably had not studied beyond class four or five. He said: “Sir, you have left Jaipur for good?” I replied in the negative and told him it is my hometown, that my mother lives here. I come here very often. He laughed and I could see a twinkle in his eye as he said: “So you are stuck to Jaipur as if with Fevicol”. QED. The ultimate reflection of the intelligent consumer! W
ith a ten-fold increase in media exposure, the pressure is now more on us — advertiser and advertising agencies. Consumers have grown smarter and are able to make bigger connections — fill paragraphs, not just blanks. If we don’t treat them with the respect they deserve, they will oust us from their lives and we will be left writing only intelligent articles on “Has the Indian consumer evolved?”
(The author is executive chairman and national creative director, Ogilvy & Mather India)
Thursday, March 13, 2008
What makes shirts wrinkle-fee
The next time you buy a shirt or trouser that claims to be stain-and wrinkle-free, thank nanotechnology for it. This is not all. Some of the scratch-free paints, sunglasses offering better UV protection and skin-care products in the market today use nanotechnology.
The Indian government has allocated Rs 1,500 crore for the development of nanotechnology which involves studying and working with matter on an ultra-small scale.
One nanometre is one-millionth of a millimetre and a single human hair is around 80,000 nanometres in width. While Rs 500 crore has been spent for this cause, the remaining Rs 1,000 crore is available for support.
The nanotech market globally is expected to cross $1 trillion by 2010. In India, the maximum research in nanotechnology is taking place in the biotechnology and medicine segments.
For instance, Virtuous Innovation, a group company of Khandelwal Laboratories, has already developed a patented technology on Gene Repair Therapy (GRT) to stimulate dormant genes in an attempt to cure diseases like cancer and AIDS.
The company will soon launch a nano silver gel, developed from nano particles of silver to cure burns at 10 per cent of the cost of existing topical pharmaceutical creams to cure burns. The product is undergoing clinical trials.
"We have invested over Rs 150 crore in four companies in the last five years to develop nanotech drugs, related technologies and other products," said Dr Vinayak Kumar Tripathi, chief executive officer of Virtuous Innovation.
Tripathi said his scientists have patented 23 innovations in the US, out of a total of 100-odd innovations in nanotechnology, patented by Indian companies and institutes. India's innovations using nanotechnology got a fillip last year with the commercialisation of Nanoxel by Dabur - an injectible vial for dispensing the cancer drug paclitaxel, in India and abroad.
Biotech companies like Bharat Biotech is developing a novel topical oestrogen hormone replacement therapy and the Delhi-based Panacea Biotech is working on novel drug delivery research using mucoadhesive nanoparticles. That's not all.
The Defence Research and Development Organisation (DRDO) has developed diagnostics tools for TB and typhoid, using nanotechnology. While India's premier public sector drug research institute, National Institute of Pharmaceutical Education and Research (NIPER) in Mohali too is developing nanotechnology toxicity guidelines and a laboratory where the toxicity of newly-developed drugs can be tested, said sources.
More investment in research will speed up the progress of nanotechnology. The Department of Information and Technology (DIT) launched 'The Nanotechnology Development Programme' under which eight small and medium R&D projects and two major projects - namely, Nanoelectronics Centres, a joint project of the Indian Institute of Science (IISc) Bangalore and Indian Institute of Technology, Bombay (IITB), and Generic Development of Nanometrology for Nanotechnology at the National Physical Laboratory (NPL), New Delhi - have been initiated.
Between IITB and IISc, around Rs 100 crore has been spent to set up the infrastructure and machinery. Another Rs 25 crore was allocated to both the centres, which will allow students from other universities and research units to use the facility for nano research. Private firms too can also use these facilities for research work for which they will be charged on an hourly basis.
Applied Materials, for instance, opened a Nanomanufacturing Lab at IIT Bombay. The company contributed equipment worth $7.5 million (around Rs 30 crore). Some of the other firms that are using these facilities are Intel, IBM, GE, TCS among others. So far about $500,000 (around Rs 2 crore) has been invested in such activities.
The results of these investments are now showing with the launch of products in the commercial market. V Ramagopal Rao, Professor, Electrical Engineering Department, IITB says, "With the funding support from the government as well as an equal interest from global firms, the research in nanotechnology has increased. The number of papers published from India has also gone up considerably."
He added that despite the long gestation period for a product to be commercially viable, the government is bullish about this as the cost in the later stages comes down considerably.
Prof Rao, along with his colleagues at IITB, has developed a cardiac diagnosis product - iSens and Silicon locket - using nanotechnology that will provide the exact reading of an individual's heart.
"India will have 60 per cent of the world's cardiac patients in a few years' time. We have been working on this project for the last two-and-a-half-years and in the next few months, the prototype will be available in the market. This product will give an accurate picture of one's heart condition."
iSens, a bio-chip, allows early detection of heart attack and has been developed with an initial investment of Rs 2.7 crore. The project is proposed to get a second round of funding under the National Programme of Smart Structure for Rs 3-4 crore.
Work on the Silicon Locket, that is already being used in many of the hospitals, was done with the help of IT major Tata Consultancy Services (TCS) for an investment of Rs 1 crore.
The Indian government has allocated Rs 1,500 crore for the development of nanotechnology which involves studying and working with matter on an ultra-small scale.
One nanometre is one-millionth of a millimetre and a single human hair is around 80,000 nanometres in width. While Rs 500 crore has been spent for this cause, the remaining Rs 1,000 crore is available for support.
The nanotech market globally is expected to cross $1 trillion by 2010. In India, the maximum research in nanotechnology is taking place in the biotechnology and medicine segments.
For instance, Virtuous Innovation, a group company of Khandelwal Laboratories, has already developed a patented technology on Gene Repair Therapy (GRT) to stimulate dormant genes in an attempt to cure diseases like cancer and AIDS.
The company will soon launch a nano silver gel, developed from nano particles of silver to cure burns at 10 per cent of the cost of existing topical pharmaceutical creams to cure burns. The product is undergoing clinical trials.
"We have invested over Rs 150 crore in four companies in the last five years to develop nanotech drugs, related technologies and other products," said Dr Vinayak Kumar Tripathi, chief executive officer of Virtuous Innovation.
Tripathi said his scientists have patented 23 innovations in the US, out of a total of 100-odd innovations in nanotechnology, patented by Indian companies and institutes. India's innovations using nanotechnology got a fillip last year with the commercialisation of Nanoxel by Dabur - an injectible vial for dispensing the cancer drug paclitaxel, in India and abroad.
Biotech companies like Bharat Biotech is developing a novel topical oestrogen hormone replacement therapy and the Delhi-based Panacea Biotech is working on novel drug delivery research using mucoadhesive nanoparticles. That's not all.
The Defence Research and Development Organisation (DRDO) has developed diagnostics tools for TB and typhoid, using nanotechnology. While India's premier public sector drug research institute, National Institute of Pharmaceutical Education and Research (NIPER) in Mohali too is developing nanotechnology toxicity guidelines and a laboratory where the toxicity of newly-developed drugs can be tested, said sources.
More investment in research will speed up the progress of nanotechnology. The Department of Information and Technology (DIT) launched 'The Nanotechnology Development Programme' under which eight small and medium R&D projects and two major projects - namely, Nanoelectronics Centres, a joint project of the Indian Institute of Science (IISc) Bangalore and Indian Institute of Technology, Bombay (IITB), and Generic Development of Nanometrology for Nanotechnology at the National Physical Laboratory (NPL), New Delhi - have been initiated.
Between IITB and IISc, around Rs 100 crore has been spent to set up the infrastructure and machinery. Another Rs 25 crore was allocated to both the centres, which will allow students from other universities and research units to use the facility for nano research. Private firms too can also use these facilities for research work for which they will be charged on an hourly basis.
Applied Materials, for instance, opened a Nanomanufacturing Lab at IIT Bombay. The company contributed equipment worth $7.5 million (around Rs 30 crore). Some of the other firms that are using these facilities are Intel, IBM, GE, TCS among others. So far about $500,000 (around Rs 2 crore) has been invested in such activities.
The results of these investments are now showing with the launch of products in the commercial market. V Ramagopal Rao, Professor, Electrical Engineering Department, IITB says, "With the funding support from the government as well as an equal interest from global firms, the research in nanotechnology has increased. The number of papers published from India has also gone up considerably."
He added that despite the long gestation period for a product to be commercially viable, the government is bullish about this as the cost in the later stages comes down considerably.
Prof Rao, along with his colleagues at IITB, has developed a cardiac diagnosis product - iSens and Silicon locket - using nanotechnology that will provide the exact reading of an individual's heart.
"India will have 60 per cent of the world's cardiac patients in a few years' time. We have been working on this project for the last two-and-a-half-years and in the next few months, the prototype will be available in the market. This product will give an accurate picture of one's heart condition."
iSens, a bio-chip, allows early detection of heart attack and has been developed with an initial investment of Rs 2.7 crore. The project is proposed to get a second round of funding under the National Programme of Smart Structure for Rs 3-4 crore.
Work on the Silicon Locket, that is already being used in many of the hospitals, was done with the help of IT major Tata Consultancy Services (TCS) for an investment of Rs 1 crore.
After fruit juices, it's milk-time baby!!
With the domestic dairy sector slated to cross Rs 500,000 crore in revenues by 2011, milk seems to have found favour with FMCG majors. These companies are trying to develop niche categories to milk in the money. Here are some brief and interesting operating highlights:
. The domestic dairy sector slated to cross Rs 500,000 crore in revenues by 2011
. FMCG companies are trying to develop niche categories to milk in the money
. Coca-Cola and PepsiCo have already announced plans to enter the milk-based beverage segment in India
. FMCG companies are trying to develop niche categories to milk in the money
. Coca-Cola and PepsiCo have already announced plans to enter the milk-based beverage segment in India
Coca-Cola and PepsiCo have already announced plans to enter the milk-based beverages segment in the country. Reliance Retail, which has entered the diary segment with Dairy Pure, its milk brand, may also expand into niche categories. Industry observers believe that Bharti Retail may also be working its way towards marking an entry into the dairy space.
"Going by the changing preference of consumers for healthier options, this category is likely to grow bigger in the coming years," says Anand Shah, the retail and FMCG analyst at Angel Broking. According to Dairy India 2007 estimates, the current size of the Indian dairy sector is Rs 250,000 crore and has been growing at a rate of 5 per cent a year.
At present, the Rs 500 crore ready-to-drink flavoured milk category makes up for the largest chunk of the milk beverages market. The main players in the category include Indian dairy majors Gujarat Cooperative Milk Marketing Federation (GCMMF) and Mother Dairy, along with Hershey, Nestle India and Amrit Food.
GCMMF has a wide range of flavoured milk options under the Amul brand, which includes Amul Cool, Kool Koko and Cool Cafe, while Mother Dairy has Chillz on the shelf in the category. Nestle also introduced Milkmaid Funshakes last year.
"The liquid milk and allied products category continues to be our main focus since milk consumption is very high in the country," R Sodhi, chief general manager, GCMMF, said.
While Amul, with its health drink Stamina, is the only player in the whey-based drink category, lassi has caught the fancy of many, leading to innovations like probiotic lassi. "Lassi is a very important category in our overall dairy portfolio. We have been growing at a rate of 40 per cent in this category over the last few years," Paul Thachil, CEO, Mother Dairy Fruits & Vegetable, said.
While Amul, with its health drink Stamina, is the only player in the whey-based drink category, lassi has caught the fancy of many, leading to innovations like probiotic lassi. "Lassi is a very important category in our overall dairy portfolio. We have been growing at a rate of 40 per cent in this category over the last few years," Paul Thachil, CEO, Mother Dairy Fruits & Vegetable, said.
When sales of carbonated soft drinks began to lose their fizz around the world, soft drink companies entered the milk-based drink domain. Pepsi launched chocolate milk under the SoBe brand and Pepsi's joint venture with Starbucks rolled out Frapuccino, a refrigerated milk coffee beverage. Coca-Cola, on the other hand, partnered Nestle USA's beverages division to develop Choglit, a skim milk-based chocolate-flavoured drink.
However, starting the milk beverage business may not be simple. "For a new dairy set-up, backward integration would be the biggest challenge. Setting up procurement, processing and production lines are time-consuming activities and a new company would need to invest significantly to achieve these ends. A stable set-up can only be achieved over a period of 10 to 20 years," Sodhi adds.
Wednesday, March 12, 2008
Fed's move moves the world markets!!
The latest booster dose by the US Federal Reserve, which increased liquidity in the system by lending $200 billion to financial institutions, is likely to energise the battered equity markets around the world, including India. The US markets were the first to respond, with the Dow Jones Industrial Average gaining 416 points, or nearly 4%. This represents the single biggest gain in the last 5 years!!
The Federal Reserve on Tuesday offered to lend up to $200 billion to cash-strapped financial institutions in exchange of mortgage-backed securities (MBS), as it struggles to stifle the ongoing crisis in credit markets. The Fed move comes against the backdrop of a deepening crisis in the US housing market, and a looming recession. Back home, analysts say the step is likely to soothe investor sentiment for the time being, but an uncertain global market outlook and weak technical indicators raise doubts about the sustainability of any rally.
On Tuesday, BSE’s 30-share Sensex ended at 16,123.15, up 199.43 points, or 1.25%, while the 50-share Nifty, of the NSE, closed at 4865.90, up 65.50 points, or 1.36%. The broader market also participated in the rally, with gainers outnumbering losers 2,110:605 on the BSE. All broad-market indices rose 2-4 %.
“Any rise should be considered as an opportunity to book profits for short-term traders, unless the Nifty closes above 5250 on a weekly closing basis,” said Viral Doshi, a technical and derivatives strategist. Analysts said unless any move by US Fed triggers fresh money flow into emerging market equities, including those in India, short-term investors could contemplate booking profits on further upside hereon. The US Fed is expected to cut benchmark interest rates by 75 basis points on March 18, a move that investors are hoping would trigger fresh flows into most emerging market equities.
Foreign funds extended their selling spree in Indian equities to Tuesday. According to provisional data on institutional trades, foreign funds were net sellers of Indian equities at Rs 539.24 crore, while domestic institutions were net buyers of Rs 303.36 crore of shares.
Elsewhere in Asia, markets ended higher with Japan’s Nikkei and Topix gaining roughly 1% each. Hong Kong’s Hang Seng rose 1.3% and Singapore’s Straits Index rose close to 1%. In India, shares of capital goods and real estate stocks, which were battered in recent sessions, rebounded on technical reasons and some value purchasing. “The rally in capital goods and real estate is more of a retracement after the fall. It is too early to say whether investors may flock back to these stocks,” Mr Doshi said. D
Deutsche Bank has maintained an underweight rating on the real estate sector, excluding DLF, citing slowdown in demand for residential property in proportion to the supply. The investment bank expects DLF to buck the gloomy trend in the sector because of the company’s lower exposure to residential properties. “A slowdown in residential demand in select markets due to poor affordability is evident from the decline in property registrations and mortgages. Given the supply ramp-up , this glut is expected to spread,” Deutsche Bank said in a strategy note.
The Federal Reserve on Tuesday offered to lend up to $200 billion to cash-strapped financial institutions in exchange of mortgage-backed securities (MBS), as it struggles to stifle the ongoing crisis in credit markets. The Fed move comes against the backdrop of a deepening crisis in the US housing market, and a looming recession. Back home, analysts say the step is likely to soothe investor sentiment for the time being, but an uncertain global market outlook and weak technical indicators raise doubts about the sustainability of any rally.
On Tuesday, BSE’s 30-share Sensex ended at 16,123.15, up 199.43 points, or 1.25%, while the 50-share Nifty, of the NSE, closed at 4865.90, up 65.50 points, or 1.36%. The broader market also participated in the rally, with gainers outnumbering losers 2,110:605 on the BSE. All broad-market indices rose 2-4 %.
“Any rise should be considered as an opportunity to book profits for short-term traders, unless the Nifty closes above 5250 on a weekly closing basis,” said Viral Doshi, a technical and derivatives strategist. Analysts said unless any move by US Fed triggers fresh money flow into emerging market equities, including those in India, short-term investors could contemplate booking profits on further upside hereon. The US Fed is expected to cut benchmark interest rates by 75 basis points on March 18, a move that investors are hoping would trigger fresh flows into most emerging market equities.
Foreign funds extended their selling spree in Indian equities to Tuesday. According to provisional data on institutional trades, foreign funds were net sellers of Indian equities at Rs 539.24 crore, while domestic institutions were net buyers of Rs 303.36 crore of shares.
Elsewhere in Asia, markets ended higher with Japan’s Nikkei and Topix gaining roughly 1% each. Hong Kong’s Hang Seng rose 1.3% and Singapore’s Straits Index rose close to 1%. In India, shares of capital goods and real estate stocks, which were battered in recent sessions, rebounded on technical reasons and some value purchasing. “The rally in capital goods and real estate is more of a retracement after the fall. It is too early to say whether investors may flock back to these stocks,” Mr Doshi said. D
Deutsche Bank has maintained an underweight rating on the real estate sector, excluding DLF, citing slowdown in demand for residential property in proportion to the supply. The investment bank expects DLF to buck the gloomy trend in the sector because of the company’s lower exposure to residential properties. “A slowdown in residential demand in select markets due to poor affordability is evident from the decline in property registrations and mortgages. Given the supply ramp-up , this glut is expected to spread,” Deutsche Bank said in a strategy note.
Tuesday, March 11, 2008
Domestic Investments -- The latest Trends
With the economy growing consistently well over 9 per cent for the past two years and consumer spending touching new heights, many Indian firms have been busy lining up massive investment plans (to expand production capacities to meet the higher demand levels) for the next few years.
The massive demand for the products of Indian firms is reflected in the whopping 68.6 per cent rise in the order books of India Inc during the first ten months of 2007 compared to corresponding period last year. The total orders received by Indian firms was worth US$ 32.57 billion (January-October 2007) as against US$ 19.31 billion in the same period a year ago.
Simultaneously, the rising consumer demand has provided a further growth avenue for Indian firms. In fact, according to McKinsey, Indian consumer is likely to quadruple US$ 1.77 trillion by 2025, spurred by the ten fold increase in middle-class population and three-fold rise in household income.
Consequently, firms are making investments to ramp up production capacity to reap economies of scale. Also, this increase in investments is across varied industrial sectors like retail, real estate, steel, infrastructure, automobile, telecommunication among others.
The increase in the domestic investment levels can be gauged from the continuous rise in gross domestic capital formation (GDCF) as a percentage of GDP. GDCF (at constant prices) as a per cent of GDP has increased from 27.2 per cent in 2003-04 to 33.8 per cent in 2005-06 and further to 36.77 per cent in 2006-07.
Private Capital Investment
The continuous improvement in the investment scenario and business confidence of India Inc is also reflected in the increase in both the number of companies making/planning capital investments and the extent of such investment. The turnaround in corporate investment, which began in 2002-03 and peaked in 2004-05, is expected to be sustained in 2007-08.
A report prepared by RBI analyses the corporate investment scenario based on the companies covered by institutional finance. According to it, the total cost of projects sanctioned assistance by banks/financial institutions (FI) in 2006-07 amounted to US$. 71.12 billion, as against US$ 32.94 billion in 2005-06.
Significantly, there has been increase in the scale of projects taken up the by the corporate sector. While there were 49 projects amounting to US$ 18.81 billion in 2005-06 with a projected cost of over US$ 125.43 million, in 2006-07 there were 88 large projects amounting to US$ 50.51 billion (accounting for over two-thirds of the total project cost) in 2006-07.
In fact, if we include the proposed investment of companies contracting external commercial borrowings (ECBs) and those issuing domestic equity capital, then total investment proposals for 2006-07 works out to US$ 86.69 billion spread over 2004-05 to 2011-12.
In 2006-07 alone, the capital expenditure envisaged amounted to US$ 38.89 billion, as against US$ 24.27 billion envisaged in 2005-06. Significantly, the 60.2 per cent rise in capital expenditure comes on the back of 23.1 per cent increase in 2005-06.
Industry-wise, infrastructure has the highest share of 35.9 per cent of total cost of projects, followed by coke and petroleum products (15.5 per cent), metal and metal products (14.1 per cent) and textiles (9.2 per cent).
State-wise, Gujarat ranks first with the proposed investment of US$ 18.6 billion in 86 projects accounting for 25.8 per cent of total investment in the country followed by Andhra Pradesh (8.9 per cent), Maharashtra (8.6 per cent) and Tamil Nadu (8.6 per cent).
Corporate Performance
The impressive performance of the domestic companies has also been playing a major role in the steady rise in the investment plans of these companies. For example, the sales of non-governmental non-financial companies rose by 26.2 per cent in 2006-07. Similarly, gross and net profits increased by 41.5 per cent and 45.2 per cent, respectively.
In fact, the top 500 companies (including public sector) aggregate total income grew by 28.4 per cent to US$ 485.07 billion in 2006-07, says a report by leading global business information provider Dun & Bradstreet.
In the current fiscal too, the performance of the corporate sector has been quite encouraging. While sales grew by 17.4 per cent in the first half of 2007-08, gross and net profits rose by 28.1 per cent and 31.1 per cent, respectively. Similarly, other income from non-core activities registered a 63.6 per cent.
Another factor reflecting the confidence of the Indian Inc on the prospects of the domestic economy is the massive increase in the number of companies being incorporated. About 55,000 companies have been incorporated annually in the last two years, taking the total number of incorporated companies to 865,000 from 712,000 companies at the end of 2005.
Some Investment Highlights
Some of major investments that have been lined up for the next few years include:
NTPC plans to invest US$ 40 billion in the next five years to transform itself into an integrated player.
The Anil Dhirubhai Ambani Group (ADAG) plans to invest US$ 37.63 billion in power and transport sectors in five years.
Real estate major, Parsvnath Developers, plans to invest US$ 15.05 billion to diversify their business.
Vedanta Resources will invest US$ 6.02 billion to set up a 5 million tone steel plant.
Infrastructure major GMR Group has planned to invest more than US$ 15.05 billion over the next five-six years to enhance its power generation capacity.
Indian Oil Corporation (IOC) plans to spend US$ 10.99 billion over the next five years to carry out its expansion programmes.
Special Economic Zones
Special Economic Zones (SEZs) are being developed to attract huge inflow of domestic (and foreign) investment in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities.
To achieve this government has announced many fiscal incentives like: duty free import of capital goods; income tax exemptions; exemption from Central Sales Tax, Minimum Alternate Tax, State Sales Taxes and other levies; simplified compliance procedure among others.
Consequently, many producers and developers have evinced a keen interest in setting up SEZs. Ever since SEZ Act has come into force, the number of SEZs notified has already reached 195 (as on January 24, 2008). In addition, formal and in-principle approvals have been given to 439 and 138 SEZs, respectively. These are in addition to the 19 functional SEZs that have been set up prior to SEZ Act, 2005.
The rapid pace of activity in these zones can be gauged from the fact that, in the two years since the SEZ Act 2005 has come into force, they have facilitated a rise of 200 per cent in exports from these zones. They have also been instrumental in an incremental investment of US$ 17.66 billion.
The massive demand for the products of Indian firms is reflected in the whopping 68.6 per cent rise in the order books of India Inc during the first ten months of 2007 compared to corresponding period last year. The total orders received by Indian firms was worth US$ 32.57 billion (January-October 2007) as against US$ 19.31 billion in the same period a year ago.
Simultaneously, the rising consumer demand has provided a further growth avenue for Indian firms. In fact, according to McKinsey, Indian consumer is likely to quadruple US$ 1.77 trillion by 2025, spurred by the ten fold increase in middle-class population and three-fold rise in household income.
Consequently, firms are making investments to ramp up production capacity to reap economies of scale. Also, this increase in investments is across varied industrial sectors like retail, real estate, steel, infrastructure, automobile, telecommunication among others.
The increase in the domestic investment levels can be gauged from the continuous rise in gross domestic capital formation (GDCF) as a percentage of GDP. GDCF (at constant prices) as a per cent of GDP has increased from 27.2 per cent in 2003-04 to 33.8 per cent in 2005-06 and further to 36.77 per cent in 2006-07.
Private Capital Investment
The continuous improvement in the investment scenario and business confidence of India Inc is also reflected in the increase in both the number of companies making/planning capital investments and the extent of such investment. The turnaround in corporate investment, which began in 2002-03 and peaked in 2004-05, is expected to be sustained in 2007-08.
A report prepared by RBI analyses the corporate investment scenario based on the companies covered by institutional finance. According to it, the total cost of projects sanctioned assistance by banks/financial institutions (FI) in 2006-07 amounted to US$. 71.12 billion, as against US$ 32.94 billion in 2005-06.
Significantly, there has been increase in the scale of projects taken up the by the corporate sector. While there were 49 projects amounting to US$ 18.81 billion in 2005-06 with a projected cost of over US$ 125.43 million, in 2006-07 there were 88 large projects amounting to US$ 50.51 billion (accounting for over two-thirds of the total project cost) in 2006-07.
In fact, if we include the proposed investment of companies contracting external commercial borrowings (ECBs) and those issuing domestic equity capital, then total investment proposals for 2006-07 works out to US$ 86.69 billion spread over 2004-05 to 2011-12.
In 2006-07 alone, the capital expenditure envisaged amounted to US$ 38.89 billion, as against US$ 24.27 billion envisaged in 2005-06. Significantly, the 60.2 per cent rise in capital expenditure comes on the back of 23.1 per cent increase in 2005-06.
Industry-wise, infrastructure has the highest share of 35.9 per cent of total cost of projects, followed by coke and petroleum products (15.5 per cent), metal and metal products (14.1 per cent) and textiles (9.2 per cent).
State-wise, Gujarat ranks first with the proposed investment of US$ 18.6 billion in 86 projects accounting for 25.8 per cent of total investment in the country followed by Andhra Pradesh (8.9 per cent), Maharashtra (8.6 per cent) and Tamil Nadu (8.6 per cent).
Corporate Performance
The impressive performance of the domestic companies has also been playing a major role in the steady rise in the investment plans of these companies. For example, the sales of non-governmental non-financial companies rose by 26.2 per cent in 2006-07. Similarly, gross and net profits increased by 41.5 per cent and 45.2 per cent, respectively.
In fact, the top 500 companies (including public sector) aggregate total income grew by 28.4 per cent to US$ 485.07 billion in 2006-07, says a report by leading global business information provider Dun & Bradstreet.
In the current fiscal too, the performance of the corporate sector has been quite encouraging. While sales grew by 17.4 per cent in the first half of 2007-08, gross and net profits rose by 28.1 per cent and 31.1 per cent, respectively. Similarly, other income from non-core activities registered a 63.6 per cent.
Another factor reflecting the confidence of the Indian Inc on the prospects of the domestic economy is the massive increase in the number of companies being incorporated. About 55,000 companies have been incorporated annually in the last two years, taking the total number of incorporated companies to 865,000 from 712,000 companies at the end of 2005.
Some Investment Highlights
Some of major investments that have been lined up for the next few years include:
NTPC plans to invest US$ 40 billion in the next five years to transform itself into an integrated player.
The Anil Dhirubhai Ambani Group (ADAG) plans to invest US$ 37.63 billion in power and transport sectors in five years.
Real estate major, Parsvnath Developers, plans to invest US$ 15.05 billion to diversify their business.
Vedanta Resources will invest US$ 6.02 billion to set up a 5 million tone steel plant.
Infrastructure major GMR Group has planned to invest more than US$ 15.05 billion over the next five-six years to enhance its power generation capacity.
Indian Oil Corporation (IOC) plans to spend US$ 10.99 billion over the next five years to carry out its expansion programmes.
Special Economic Zones
Special Economic Zones (SEZs) are being developed to attract huge inflow of domestic (and foreign) investment in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities.
To achieve this government has announced many fiscal incentives like: duty free import of capital goods; income tax exemptions; exemption from Central Sales Tax, Minimum Alternate Tax, State Sales Taxes and other levies; simplified compliance procedure among others.
Consequently, many producers and developers have evinced a keen interest in setting up SEZs. Ever since SEZ Act has come into force, the number of SEZs notified has already reached 195 (as on January 24, 2008). In addition, formal and in-principle approvals have been given to 439 and 138 SEZs, respectively. These are in addition to the 19 functional SEZs that have been set up prior to SEZ Act, 2005.
The rapid pace of activity in these zones can be gauged from the fact that, in the two years since the SEZ Act 2005 has come into force, they have facilitated a rise of 200 per cent in exports from these zones. They have also been instrumental in an incremental investment of US$ 17.66 billion.
The Indian Growth Trajectory
Last year the Economic Survey declared that India had moved into the East Asian growth trajectory. The FM settles all debate this time by saying that the economy has moved decisively to a higher growth phase. The Survey continues to emphasise what it did last time - managing macro-economic growth even while containing inflation. It remains sanguine about economic growth even in the face of a slowing US and global economy and notes that the economy is likely to remain domestic demand driven in the medium term. Even while the Survey talks of effective delivery systems at the state and the local level, it remains to be seen how the budget addresses the issue of effective delivery and of managing and measuring outcomes.
This time, it latches on to Per Capita Income and Investment to perhaps make the point that the high GDP growth has trickled down to the Aam Aadmi . It proudly notes that the rate of growth of per capita income has sharply climbed to 7.2% per annum - implying that average income of the Aam Aadmi can virtually double in a decade. It also points that out private final consumption expenditure at per person level is up and so are the saving rates.
Interestingly, it also points to the limited capability of state governments to deliver goods and services to people. It suggests a Smart Card based System to enhance the delivery and efficiency of government schemes such as NREGA, Public Distribution System etc. The management of supply is also being viewed as a critical aspect for inflation management.
The Eco Survey also indicates that the targets for revenue and fiscal deficits for the year 2007-08 appear well within reach. But, it also strikes a cautionary note by saying that the current revenue buoyancy is riding on the performance of an economy more globalised than before. Thus, global developments that have a bearing on India's domestic economy would need to be watched. It also applauds the move by 26 states to a rule based programme for fiscal reforms.
On Inflation, the survey notes that the change in the structure of the economy has made inflation management a more complex task. It mentions that monetary policy mechanisms - particularly to tackle inflation arising of capital inflows-have become important. Even while it acknowledges that agricultural import tariffs remain high, it is unlikely to do much to reduce these rates in an election year, particularly when a sensitive constituency like agriculture needs to be addressed.
It sees agriculture as an important sector to push GDP growth upwards and to make growth more inclusive and biased in favour of women. It also sees higher farm incomes providing equitable growth. Even here, it stresses on the need to build outcome oriented perspective in the implementation of public programmes. Increasing productivity in the face of limited area of cultivation is important, it says.
It expects capital inflows as a proportion of GDP to decline, but, feels that the decline will be modest but enough to take the pressure on reserve accumulation and exchange rate appreciation.
It sees the country continuing to attract significant cross-border portfolio inflows as India is expected to continue to remain a relatively attractive investment destination. It notes the importance of insurance and pension funds for both the equity and the debt markets and hints at further initiatives to expand and deepen both the Government Securities and the Corporate Bond markets. It also sees the debt markets as a critical financing mechanism for the infrastructure sector.
Even while it expects pressure on the rupee to weaken, the Survey is not optimistic about exports on account of world GDP and world imports. It says that he outlook for exports in the year 2008-09 is not as bright as it was in the years before. Policy changes and relief measures for export oriented sectors can be expected.
Employment is a key area of focus for the UPA government; its flagship NREAGA programme is meant to address precisely this issue. The survey notes that while employment growth actually rose to 2.62% per annum in the period 1999-2000 to 2004-05, unemployment actually rose as an absolute measure on account of a faster increase in the labour force. The share of agriculture in total employment is still declining. The survey also points out an improvement in important social indicators but stresses on the need for better governance and improved service delivery at the local level.
This time, it latches on to Per Capita Income and Investment to perhaps make the point that the high GDP growth has trickled down to the Aam Aadmi . It proudly notes that the rate of growth of per capita income has sharply climbed to 7.2% per annum - implying that average income of the Aam Aadmi can virtually double in a decade. It also points that out private final consumption expenditure at per person level is up and so are the saving rates.
Interestingly, it also points to the limited capability of state governments to deliver goods and services to people. It suggests a Smart Card based System to enhance the delivery and efficiency of government schemes such as NREGA, Public Distribution System etc. The management of supply is also being viewed as a critical aspect for inflation management.
The Eco Survey also indicates that the targets for revenue and fiscal deficits for the year 2007-08 appear well within reach. But, it also strikes a cautionary note by saying that the current revenue buoyancy is riding on the performance of an economy more globalised than before. Thus, global developments that have a bearing on India's domestic economy would need to be watched. It also applauds the move by 26 states to a rule based programme for fiscal reforms.
On Inflation, the survey notes that the change in the structure of the economy has made inflation management a more complex task. It mentions that monetary policy mechanisms - particularly to tackle inflation arising of capital inflows-have become important. Even while it acknowledges that agricultural import tariffs remain high, it is unlikely to do much to reduce these rates in an election year, particularly when a sensitive constituency like agriculture needs to be addressed.
It sees agriculture as an important sector to push GDP growth upwards and to make growth more inclusive and biased in favour of women. It also sees higher farm incomes providing equitable growth. Even here, it stresses on the need to build outcome oriented perspective in the implementation of public programmes. Increasing productivity in the face of limited area of cultivation is important, it says.
It expects capital inflows as a proportion of GDP to decline, but, feels that the decline will be modest but enough to take the pressure on reserve accumulation and exchange rate appreciation.
It sees the country continuing to attract significant cross-border portfolio inflows as India is expected to continue to remain a relatively attractive investment destination. It notes the importance of insurance and pension funds for both the equity and the debt markets and hints at further initiatives to expand and deepen both the Government Securities and the Corporate Bond markets. It also sees the debt markets as a critical financing mechanism for the infrastructure sector.
Even while it expects pressure on the rupee to weaken, the Survey is not optimistic about exports on account of world GDP and world imports. It says that he outlook for exports in the year 2008-09 is not as bright as it was in the years before. Policy changes and relief measures for export oriented sectors can be expected.
Employment is a key area of focus for the UPA government; its flagship NREAGA programme is meant to address precisely this issue. The survey notes that while employment growth actually rose to 2.62% per annum in the period 1999-2000 to 2004-05, unemployment actually rose as an absolute measure on account of a faster increase in the labour force. The share of agriculture in total employment is still declining. The survey also points out an improvement in important social indicators but stresses on the need for better governance and improved service delivery at the local level.
Economic Survey 2007-08: Petroleum Sector
With international crude oil prices touching an all-time high of 102 dollars a barrel, the Economic Survey on Thursday advised privatisation of old oil fields to raise output and reduce India's import dependence.
State-run firms Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) have seen oil output fall from old fields like those in Gujarat and Assam, and new technology will be needed to raise recovery.
India, which spent 48.389 billion dollars to import its crude oil needs in 2006-07, has already spent 48.02 billion dollars on crude imports in the first nine months of the current fiscal because of rise in international oil prices.
"The international price of crude oil and petroleum products has increased phenomenally in recent months. The crude oil price of the Indian basket touched an all-time high of 92.13 dollars per barrel on November 26, 2007," it said.
The surge in global oil prices had "a significant impact on the oil marketing companies and the Indian economy as India imports about 72 per cent of the crude oil requirement."
The Government this month raised price of petrol and diesel by Rs 2 per litre and Re one a litre respectively, that could contribute 0.19 per cent increase in inflation.
The pre-Budget survey that was tabled in Parliament today, suggested: "Sell old oil fields to private sector for application of improved/enhanced oil recovery techniques."
Besides stepping up domestic production, the remaining deficit would have to be bridged by entering into strategic geo-political alliances to access energy assets in the region, the Survey said, pointing to the need of making investments in energy chain in Middle-East and Africa.
State-run firms Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) have seen oil output fall from old fields like those in Gujarat and Assam, and new technology will be needed to raise recovery.
India, which spent 48.389 billion dollars to import its crude oil needs in 2006-07, has already spent 48.02 billion dollars on crude imports in the first nine months of the current fiscal because of rise in international oil prices.
"The international price of crude oil and petroleum products has increased phenomenally in recent months. The crude oil price of the Indian basket touched an all-time high of 92.13 dollars per barrel on November 26, 2007," it said.
The surge in global oil prices had "a significant impact on the oil marketing companies and the Indian economy as India imports about 72 per cent of the crude oil requirement."
The Government this month raised price of petrol and diesel by Rs 2 per litre and Re one a litre respectively, that could contribute 0.19 per cent increase in inflation.
The pre-Budget survey that was tabled in Parliament today, suggested: "Sell old oil fields to private sector for application of improved/enhanced oil recovery techniques."
Besides stepping up domestic production, the remaining deficit would have to be bridged by entering into strategic geo-political alliances to access energy assets in the region, the Survey said, pointing to the need of making investments in energy chain in Middle-East and Africa.
Fruit Juices -- Providing the Real Punch!!
This juice is worth its squeeze. At least cola majors Coca-Cola and PepsiCo think so. A couple of weeks back, when beverages giant The Coca-Cola Company announced its results for the October-December 2007 quarter, it attributed the growth in its Indian market to its mainstay brand Coca-Cola and its expanding portfolio of fruit drinks (beverages with 20 per cent fruit pulp).
Fruit drinks are increasingly filling the crates that were otherwise capped with fizzy carbonates in the Indian market. In October 2007, Coca-Cola India took its orange fruit drink Minute Maid national after a carefully phased launch that first covered major cities. Last month, PepsiCo rolled out its fruit drink, Tropicana Twister, nationally.
PepsiCo also announced that it expects to treble its turnover in the next three years, expecting a good portion of this increase to come from fruit drinks. Coca-Cola India has meanwhile launched its second communication campaign for Minute Maid and the company has also finished its test-marketing 200 ml carton packs of “Mazaa Aam Panna” in Agra, Bhopal and Bareilly. The company plans to launch the drink this summer.
The action by the global giants is partly in response to the local players. In March 2007, homegrown beverages major Dabur had launched Real Twist, its fruit drink in three flavours – Mango-Orange, Mango-Apple and Mango-Pineapple.
“Growth in the fruit drinks segment has been accelerated by increased consumption by teenagers in the last two years. With Réal Twist, we are meeting the needs of teenagers who were looking for a product that is different and with which they can associate,” says K K Chutani, general manager-marketing, Dabur India.
It’s also because the fruit drinks segment is ripe for plucking. At Rs 1,200 crore, the juice and juice drink category is among the fastest growing segments of the approximately Rs 9,500 crore packaged beverages category. While fruit drinks as a category is growing at 18-20 per cent, carbonated soft drinks are growing at 6-8 per cent.
However, more than 90 per cent of sales happen through the unorganised route — juice centres, street corner shops and so on. It’s this 90 per cent that companies are tapping. “Hygiene is a huge issue at most of these outlets. A well-packed fruit drink can surely tap this market,” says Venkatesh Kini, vice-president-marketing, Coca Cola India.
Competitors agree. “It’s the fastest growing liquid beverage category. The young consumer has clearly displayed a liking and a need for fruit drinks,” says Sucheta Govil, executive director- innovation, PepsiCo India.
The other part of the strategy is to cater to the evolving consumer tastes. “The Indian consumer of today is clearly seeking healthier alternatives,” says Sharda Agarwal, a former marketing director of Coca-Cola India and a co-founder MarketGate Consulting.
“Bottled water and fruit-based drinks are benefiting from the healthier tone that Indian consumers have taken. Moreover, the soft drink market is maturing,” agrees Sunil Alagh, chairman, SKA Advisors.
Hence, TV campaigns of both companies emphasise the presence of fruit. For instance, Pepsi’s campaign shows a young boy sipping from a bottle of Tropicana Twist only to find pretty girls hurling oranges at him, in a way symbolising the fruit rush that the consumer gets after drinking the juice. “We plan to spread awareness about health benefits of fruit and fruit juices through various nutritional programmes,” says Govil.
Coca-Cola India’s campaign for Minute Maid shows fruit pulp disappearing from oranges only to be found in the drink, promoted widely as Pulpy Orange. The company focused a large amount of it promotions on sampling.
Apart from television and print advertisements, Coca-Cola India distributed free samples to consumers at malls, offices, shopping arcades multiplexes and other places in most major metros to create awareness. “We distributed more than a million free samples. Once consumers taste our product they would be hooked to it,” says Kini.
But the same confidence seems to be missing on ground. In a dipstick study conducted by Business Standard, It was found that close to 50 per cent of restaurants, bars and hotels surveyed did not stock the new variants launched by Pepsi Co or Coca Cola India.
Bar and restaurant owners believe that these drinks are of little use to them as customers prefer carbonated drinks as they mix well with other spirits. They also believe that most of their customers are not in an health conscious frame of mind at their joints and hence most do not see any value in stocking these drinks.
Hotel owners are also of a similar opinion that customers trust them on hygiene, but would not prefer such fruit drinks due to the preservatives present in them. Says one, Fresh fruit juice always tastes different, these drinks are just not the same.
Another points out that their fresh fruit juice are higher ticket items at Rs 30-45 a glass than these drinks. “Fruit juice and fruit drinks will sell more at kirana and convenience stores. They require the more traditional FMCG medium of distribution,” agrees MarketGate’s Agarwal.
But the other 50 per cent who stock support the products are positive. Pepsi retailers are optimistic that there will be demand for the drink once the advertising and campaign picks up. Minute Maid retailers claim that they already sell 1-2 bottles in the same time in which they sell 10-12 bottles of Coke or Sprite.
Further they believe that sales are low because its winter. It’s a common belief amongst them that once summer sets in demand will surely increase for these drinks. Hotel owners in affluent areas claim that they are already experiencing a pull for the drink.
This pull is essential as the focus on fruit drinks is also an attempt at portfolio diversification. Both Coca-Cola and PepsiCo discovered this, much to their discomfort, when consumers started to shy away from Colas following reports of contaminated water in the carbonates— twice in the last five years. A diversified portfolio, consultants believe, will empower companies when crisis strikes.
Both companies decline that this is the real reason behind pushing fruit drinks. They say that they are merely leveraging the market opportunity. Says Kini, “The market for carbonated drinks is 10 times larger than the fruit drinks segment. We are launching this product because our research shows that the Indian customer is ready.”
Globally, however, both Coca-Cola and Pepsi have no qualms in accepting that their focus is on building a strong portfolio of non-carbonated drinks. Coca-Cola’s global strategy has been to target newer markets with carbonated drinks and to build a strong non-carbonated drink brands and healthier carbonated drinks like diet-colas, sugar-free drinks and so on.
The results are also showing globally. For instance, Pepsi’s juice brand Tropicana Premium’s global sales is higher than carbonated drinks like Mirinda and 7Up. Also sports drink Gatorade and Diet Pepsi rank second and fourth in terms of world wide retail sales clearly signifying the shift towards health drinks.
Non-carbonated drinks is also more profitable. In 2007, 62 per cent of the volume sales of PepsiCo Beverages North America were accounted for by carbonated drinks, while non-carbonated merely contributed 38 per cent. However, in terms of revenue, non-carbonated drinks contributed to 69 per cent while carbonated drinks generated only 31 per cent.
While it’s too early to compare volumes in India, the pricing of the products can shed some light on the attractiveness of the segment. While a 500 ml bottle of Pepsi or Coke costs Rs 20, a 350 ml PET bottle of Tropicana Twister costs Rs 22, while Minute Maid costs Rs 25 for a 400 ml PET bottle.
While Coca-Cola and PepsiCo are climbing up the price ladder, Dabur is driving its price point down with Real Twist. That’s because the company has traditionally marketed fruit juice and nectar, which contain 80 per cent or more of fruit pulp.
After targeting, housewives, children and senior citizens with its premium juice offering Real and its variant Real Activ, the company has extended its portfolio with Twist to reach out to the youngsters. Real Twist is priced at Rs 45 for 1.2 litres on the other hand its fruit juices like Real and Real Activ are priced between Rs 72 and Rs 85 per litre.
Even PepsiCo and Coca Cola India are looking at the age group of 18-29 years and 20- 29 years respectively. Both companies have also tweaked the taste of their global products to suit the Indian palate.
“Indians like their juice with more orange and more sweet. Hence, we have made it so,” says Coke’s Kini. Will consumer response be equally sweet?
Fruit drinks are increasingly filling the crates that were otherwise capped with fizzy carbonates in the Indian market. In October 2007, Coca-Cola India took its orange fruit drink Minute Maid national after a carefully phased launch that first covered major cities. Last month, PepsiCo rolled out its fruit drink, Tropicana Twister, nationally.
PepsiCo also announced that it expects to treble its turnover in the next three years, expecting a good portion of this increase to come from fruit drinks. Coca-Cola India has meanwhile launched its second communication campaign for Minute Maid and the company has also finished its test-marketing 200 ml carton packs of “Mazaa Aam Panna” in Agra, Bhopal and Bareilly. The company plans to launch the drink this summer.
The action by the global giants is partly in response to the local players. In March 2007, homegrown beverages major Dabur had launched Real Twist, its fruit drink in three flavours – Mango-Orange, Mango-Apple and Mango-Pineapple.
“Growth in the fruit drinks segment has been accelerated by increased consumption by teenagers in the last two years. With Réal Twist, we are meeting the needs of teenagers who were looking for a product that is different and with which they can associate,” says K K Chutani, general manager-marketing, Dabur India.
It’s also because the fruit drinks segment is ripe for plucking. At Rs 1,200 crore, the juice and juice drink category is among the fastest growing segments of the approximately Rs 9,500 crore packaged beverages category. While fruit drinks as a category is growing at 18-20 per cent, carbonated soft drinks are growing at 6-8 per cent.
However, more than 90 per cent of sales happen through the unorganised route — juice centres, street corner shops and so on. It’s this 90 per cent that companies are tapping. “Hygiene is a huge issue at most of these outlets. A well-packed fruit drink can surely tap this market,” says Venkatesh Kini, vice-president-marketing, Coca Cola India.
Competitors agree. “It’s the fastest growing liquid beverage category. The young consumer has clearly displayed a liking and a need for fruit drinks,” says Sucheta Govil, executive director- innovation, PepsiCo India.
The other part of the strategy is to cater to the evolving consumer tastes. “The Indian consumer of today is clearly seeking healthier alternatives,” says Sharda Agarwal, a former marketing director of Coca-Cola India and a co-founder MarketGate Consulting.
“Bottled water and fruit-based drinks are benefiting from the healthier tone that Indian consumers have taken. Moreover, the soft drink market is maturing,” agrees Sunil Alagh, chairman, SKA Advisors.
Hence, TV campaigns of both companies emphasise the presence of fruit. For instance, Pepsi’s campaign shows a young boy sipping from a bottle of Tropicana Twist only to find pretty girls hurling oranges at him, in a way symbolising the fruit rush that the consumer gets after drinking the juice. “We plan to spread awareness about health benefits of fruit and fruit juices through various nutritional programmes,” says Govil.
Coca-Cola India’s campaign for Minute Maid shows fruit pulp disappearing from oranges only to be found in the drink, promoted widely as Pulpy Orange. The company focused a large amount of it promotions on sampling.
Apart from television and print advertisements, Coca-Cola India distributed free samples to consumers at malls, offices, shopping arcades multiplexes and other places in most major metros to create awareness. “We distributed more than a million free samples. Once consumers taste our product they would be hooked to it,” says Kini.
But the same confidence seems to be missing on ground. In a dipstick study conducted by Business Standard, It was found that close to 50 per cent of restaurants, bars and hotels surveyed did not stock the new variants launched by Pepsi Co or Coca Cola India.
Bar and restaurant owners believe that these drinks are of little use to them as customers prefer carbonated drinks as they mix well with other spirits. They also believe that most of their customers are not in an health conscious frame of mind at their joints and hence most do not see any value in stocking these drinks.
Hotel owners are also of a similar opinion that customers trust them on hygiene, but would not prefer such fruit drinks due to the preservatives present in them. Says one, Fresh fruit juice always tastes different, these drinks are just not the same.
Another points out that their fresh fruit juice are higher ticket items at Rs 30-45 a glass than these drinks. “Fruit juice and fruit drinks will sell more at kirana and convenience stores. They require the more traditional FMCG medium of distribution,” agrees MarketGate’s Agarwal.
But the other 50 per cent who stock support the products are positive. Pepsi retailers are optimistic that there will be demand for the drink once the advertising and campaign picks up. Minute Maid retailers claim that they already sell 1-2 bottles in the same time in which they sell 10-12 bottles of Coke or Sprite.
Further they believe that sales are low because its winter. It’s a common belief amongst them that once summer sets in demand will surely increase for these drinks. Hotel owners in affluent areas claim that they are already experiencing a pull for the drink.
This pull is essential as the focus on fruit drinks is also an attempt at portfolio diversification. Both Coca-Cola and PepsiCo discovered this, much to their discomfort, when consumers started to shy away from Colas following reports of contaminated water in the carbonates— twice in the last five years. A diversified portfolio, consultants believe, will empower companies when crisis strikes.
Both companies decline that this is the real reason behind pushing fruit drinks. They say that they are merely leveraging the market opportunity. Says Kini, “The market for carbonated drinks is 10 times larger than the fruit drinks segment. We are launching this product because our research shows that the Indian customer is ready.”
Globally, however, both Coca-Cola and Pepsi have no qualms in accepting that their focus is on building a strong portfolio of non-carbonated drinks. Coca-Cola’s global strategy has been to target newer markets with carbonated drinks and to build a strong non-carbonated drink brands and healthier carbonated drinks like diet-colas, sugar-free drinks and so on.
The results are also showing globally. For instance, Pepsi’s juice brand Tropicana Premium’s global sales is higher than carbonated drinks like Mirinda and 7Up. Also sports drink Gatorade and Diet Pepsi rank second and fourth in terms of world wide retail sales clearly signifying the shift towards health drinks.
Non-carbonated drinks is also more profitable. In 2007, 62 per cent of the volume sales of PepsiCo Beverages North America were accounted for by carbonated drinks, while non-carbonated merely contributed 38 per cent. However, in terms of revenue, non-carbonated drinks contributed to 69 per cent while carbonated drinks generated only 31 per cent.
While it’s too early to compare volumes in India, the pricing of the products can shed some light on the attractiveness of the segment. While a 500 ml bottle of Pepsi or Coke costs Rs 20, a 350 ml PET bottle of Tropicana Twister costs Rs 22, while Minute Maid costs Rs 25 for a 400 ml PET bottle.
While Coca-Cola and PepsiCo are climbing up the price ladder, Dabur is driving its price point down with Real Twist. That’s because the company has traditionally marketed fruit juice and nectar, which contain 80 per cent or more of fruit pulp.
After targeting, housewives, children and senior citizens with its premium juice offering Real and its variant Real Activ, the company has extended its portfolio with Twist to reach out to the youngsters. Real Twist is priced at Rs 45 for 1.2 litres on the other hand its fruit juices like Real and Real Activ are priced between Rs 72 and Rs 85 per litre.
Even PepsiCo and Coca Cola India are looking at the age group of 18-29 years and 20- 29 years respectively. Both companies have also tweaked the taste of their global products to suit the Indian palate.
“Indians like their juice with more orange and more sweet. Hence, we have made it so,” says Coke’s Kini. Will consumer response be equally sweet?
Friday, March 7, 2008
Remoulding your worries to drive your activities -- An insghtful excerpt
You already have the means to change the pattern of escalating worry by using the power of your mind. The systematic Evaluate-Plan-Remediate approach allows you to examine the process of worry and break it down into smaller, more manageable problem units that can be solved or resolved.
For example, suppose you receive a team e-mail from your supervisor about the agenda for an upcoming budget review meeting. In the past, you've always been asked to present the target revenues for your department, but you have yet to be asked this year.
You feel a twist in your stomach, a sign that worry is creeping in. Your thoughts begin to speed up: "Why haven't I been asked? Did someone else get the assignment? Did I do a poor job last time? I must be an idiot! Am I being demoted or eased out?" Using the Evaluate-Plan-Remediate worry-intervention method, you can stop the worry as soon as you start to feel it taking over.
1. Evaluate: "Yes, I haven't yet been asked to present the projected revenues at the budget review meeting. That's all I know right now."
2. Plan: "I need to get information. I should contact my supervisor and ask her directly if she expects me to present this part of the budget."
3. Remediate: "I'll call my supervisor and make an appointment to see her in person."
This simple sequence can replace that sense of panic with an immediate evaluation of the situation and a plan for necessary action. If you can make this process a habit every time you feel that twist in your stomach or twinge in your head, you'll turn your worry into action.
Step 1: Evaluate
The key to evaluating the cause of the worry is to confront it. Don't ignore those little signals your body is giving you. They won't go away until you face what causes them. Use the following guidelines for this step.
Name the problem: Just giving a name to a problem can help reduce stress because by identifying the specific problem, you've already eliminated all other possibilities. Naming makes things more manageable. Discover the stress-creating pattern that describes your situation.
For example, do you take on too many responsibilities? Find it difficult to balance work and life issues? Work in the wrong job? Have problems with colleagues or supervisors? Procrastinate when a deadline looms?
Think constructively about the problem: this may seem like a difficult step, but all it takes is an honest examination of your own automatic worry process. It requires that you keep back and watch yourself in order to identify how your mind leaps from the bad news or perceived danger that triggers the worry to the "awfulizing" of the initial event. Apply these practices:
Examine your automatic thoughts. Monitor your automatic thoughts. What words pop into your mind? Write down the words and look at them more objectively. Often you can see how exaggerated they are. For example, do you use negative descriptors (idiot, stupid) against yourself?
Correct errors in logic. Next, examine your automatic thoughts for errors in logic. For example, why would your supervisor include you in the e-mail message about the budget meeting unless you had a role in that meeting? Your hasty assumption that you were being excluded in an error in logic.
Develop alternative hypotheses. Even though you may leap to the worst-case scenario, there may be other hypotheses that could explain the situation. Your supervisor may have assumed that you were working on the revenue report, or she may have a different task in mind for you.
Revise your fundamental assumptions about yourself and your work. Instead of calling yourself stupid and assuming that the disaster will certainly occur, start becoming your own best supporter. This may prove to be a difficult step to take because these fundamental assumptions can reflect ancient and deep-seated ways of looking at yourself and your world. However, if these assumptions are untrue and block constructive thoughts, they need to be replaced with healthier and more honest ones. The important thing is to discard the distortions that prevent your from achieving rational and productive solutions.
Step 2: Plan
Planning ahead can take time and may seem to be a burden, but the value of planning is a more than adequate return on your time investment. Planning can intercept the toxic worry and replace it with effective action. Here are some practices you can apply in advance.
Get the facts: Wise worry confronts real problems. Toxic worry exaggerates and misrepresents reality. Brooding about the "what-if" possibilities passively burns up your energy. So get active! Find out what the truth of the matter is. Go to the sources of information, and don't rely on hearsay, gossip, or your own vivid imagination.
Structure your life: Much worry results from unstructured living and thinking habits. A cluttered desk with files scattered about means wasted time finding the material you need and the risk of losing important information. In the same way, a mind cluttered with "what-if" possibilities can hide the "that-is" reality. Worried people typically spend more time and energy worrying than they do accomplishing productive tasks.
Structuring your life is being kind and considerate to yourself; organizing your desk helps you find things. Structuring your life reduces your risk of losing vital files, information, keys and also prevents you from losing perspective. Use structure as an anti-anxiety agent: lists, reminders, schedules, rules, and budgets are all methods of structuring your life for your own benefits.
Take the time to structure your space. For example, organize your desk. Use colored file folders with clear labels. Put your keys in the same spot every day. And organize your computer desktop and mailbox. Also structure your time.
Set goals. Decide what you want or need to accomplish in the coming week.
Prioritize your goals. Break them down into small, manageable activities.
Use a date book to avoid missing appointments and to stay on target.
Be fair to yourself. Make your plan for the week reasonable.
Match important activities to the times of your high-energy peaks -- the times of the day when you feel most alert and vigorous.
Save the simple, repetitive tasks for your low-energy periods.
Avoid getting involved in activities that don't match your goals.
Be sure to take breaks to restore energy -- stand up and stretch, take a short walk, or chat briefly with a colleague.
Step 3: Remediate
The next step is to find a remedy for toxic worry. Reason, planning, and action are powerful antidotes to the paralysis of stress and worry. Consider these guidelines.
Take direct action: If you've evaluated the problem and planned what you can do about it, then go ahead, take the plunge and just do it! Make the phone call, change your behavior, clean up that desk, connect with a friend, or confront that difficult colleague. Taking action is empowering. Your feeling of vulnerability and your toxic worry will fade.
Let it go: Why let go? No matter how much you may want to effect a change, some problems, can't be solved by any action on your part. You just have to wait and see how things turn out. Worrying about the matter won't help. For example, if your supervisor suddenly announces a major reorganization, you can't do anything about it until the event happens and you have more information about how it will affect you.
You just have to sit tight and wait. Or perhaps you're up for a big promotion, but you won't find out about the decision for a month. You will be better off in every way -- physically, emotionally, and mentally -- if you can let the worry go until later.
What does letting go mean? Letting go means giving up your sense of control, and this can be difficult to do. Often people feel that if they worry enough, they might affect the outcome. But in those cases and times when control doesn't help and worry only hurts, it's worth the effort to give up both worry and control.
How can you let worry go? Different people have different ways. Some find that meditation helps. Some listen to music or sing a song. Trying putting your worry in the palm of your hand and blowing it away. Close your eyes and imagine the worry putting on its coat and hat and walking slowly out of the room. The important thing for you is to say goodbye to useless worry.
5 Tips
Do a reality check: Find out whether your worry has any basis in fact. Toxic worry can distort the real situation. Check to make sure that things are really as bad as they seem. Even when there is an actual problem, it may be easier to solve than you think.
Never worry alone: Invite a friend to help as a listening partner. Sharing your worries with the right person can make you feel better by unloading the weight of worry. Just talking out loud about your concerns helps to sort them out and to clarify where your concerns may be valid and where you may be distorting the problem. The listener, at this point, needs simply to listen, rather than trying to solve your problems. Your goal here is to understand your own worry process and gain the power to find your own solutions.
Get help from the right sources: People who have the information you need. Often you don't have the information or tools necessary to attack a problem. Instead of worrying, take control by getting the help you need. Find out who the authority is and where you should look for answers.
Ask a friend for a hand: If you find the idea of organizing a cause for new worry, ask a friend or colleague -- someone whose desk is neat and who is never late to a meeting -- to give you a hand. Ask for help from more than one person; you may discover ideas and ways to structure your life that are actually easy and fun!
If it's out of your control: If there's nothing you can do about a problem (or nothing more, if you already worked on it) -- if it's simply out of your control -- you have to let the worry go. Blow it away, and start a new project, read a different book, walk another path.
For example, suppose you receive a team e-mail from your supervisor about the agenda for an upcoming budget review meeting. In the past, you've always been asked to present the target revenues for your department, but you have yet to be asked this year.
You feel a twist in your stomach, a sign that worry is creeping in. Your thoughts begin to speed up: "Why haven't I been asked? Did someone else get the assignment? Did I do a poor job last time? I must be an idiot! Am I being demoted or eased out?" Using the Evaluate-Plan-Remediate worry-intervention method, you can stop the worry as soon as you start to feel it taking over.
1. Evaluate: "Yes, I haven't yet been asked to present the projected revenues at the budget review meeting. That's all I know right now."
2. Plan: "I need to get information. I should contact my supervisor and ask her directly if she expects me to present this part of the budget."
3. Remediate: "I'll call my supervisor and make an appointment to see her in person."
This simple sequence can replace that sense of panic with an immediate evaluation of the situation and a plan for necessary action. If you can make this process a habit every time you feel that twist in your stomach or twinge in your head, you'll turn your worry into action.
Step 1: Evaluate
The key to evaluating the cause of the worry is to confront it. Don't ignore those little signals your body is giving you. They won't go away until you face what causes them. Use the following guidelines for this step.
Name the problem: Just giving a name to a problem can help reduce stress because by identifying the specific problem, you've already eliminated all other possibilities. Naming makes things more manageable. Discover the stress-creating pattern that describes your situation.
For example, do you take on too many responsibilities? Find it difficult to balance work and life issues? Work in the wrong job? Have problems with colleagues or supervisors? Procrastinate when a deadline looms?
Think constructively about the problem: this may seem like a difficult step, but all it takes is an honest examination of your own automatic worry process. It requires that you keep back and watch yourself in order to identify how your mind leaps from the bad news or perceived danger that triggers the worry to the "awfulizing" of the initial event. Apply these practices:
Examine your automatic thoughts. Monitor your automatic thoughts. What words pop into your mind? Write down the words and look at them more objectively. Often you can see how exaggerated they are. For example, do you use negative descriptors (idiot, stupid) against yourself?
Correct errors in logic. Next, examine your automatic thoughts for errors in logic. For example, why would your supervisor include you in the e-mail message about the budget meeting unless you had a role in that meeting? Your hasty assumption that you were being excluded in an error in logic.
Develop alternative hypotheses. Even though you may leap to the worst-case scenario, there may be other hypotheses that could explain the situation. Your supervisor may have assumed that you were working on the revenue report, or she may have a different task in mind for you.
Revise your fundamental assumptions about yourself and your work. Instead of calling yourself stupid and assuming that the disaster will certainly occur, start becoming your own best supporter. This may prove to be a difficult step to take because these fundamental assumptions can reflect ancient and deep-seated ways of looking at yourself and your world. However, if these assumptions are untrue and block constructive thoughts, they need to be replaced with healthier and more honest ones. The important thing is to discard the distortions that prevent your from achieving rational and productive solutions.
Step 2: Plan
Planning ahead can take time and may seem to be a burden, but the value of planning is a more than adequate return on your time investment. Planning can intercept the toxic worry and replace it with effective action. Here are some practices you can apply in advance.
Get the facts: Wise worry confronts real problems. Toxic worry exaggerates and misrepresents reality. Brooding about the "what-if" possibilities passively burns up your energy. So get active! Find out what the truth of the matter is. Go to the sources of information, and don't rely on hearsay, gossip, or your own vivid imagination.
Structure your life: Much worry results from unstructured living and thinking habits. A cluttered desk with files scattered about means wasted time finding the material you need and the risk of losing important information. In the same way, a mind cluttered with "what-if" possibilities can hide the "that-is" reality. Worried people typically spend more time and energy worrying than they do accomplishing productive tasks.
Structuring your life is being kind and considerate to yourself; organizing your desk helps you find things. Structuring your life reduces your risk of losing vital files, information, keys and also prevents you from losing perspective. Use structure as an anti-anxiety agent: lists, reminders, schedules, rules, and budgets are all methods of structuring your life for your own benefits.
Take the time to structure your space. For example, organize your desk. Use colored file folders with clear labels. Put your keys in the same spot every day. And organize your computer desktop and mailbox. Also structure your time.
Set goals. Decide what you want or need to accomplish in the coming week.
Prioritize your goals. Break them down into small, manageable activities.
Use a date book to avoid missing appointments and to stay on target.
Be fair to yourself. Make your plan for the week reasonable.
Match important activities to the times of your high-energy peaks -- the times of the day when you feel most alert and vigorous.
Save the simple, repetitive tasks for your low-energy periods.
Avoid getting involved in activities that don't match your goals.
Be sure to take breaks to restore energy -- stand up and stretch, take a short walk, or chat briefly with a colleague.
Step 3: Remediate
The next step is to find a remedy for toxic worry. Reason, planning, and action are powerful antidotes to the paralysis of stress and worry. Consider these guidelines.
Take direct action: If you've evaluated the problem and planned what you can do about it, then go ahead, take the plunge and just do it! Make the phone call, change your behavior, clean up that desk, connect with a friend, or confront that difficult colleague. Taking action is empowering. Your feeling of vulnerability and your toxic worry will fade.
Let it go: Why let go? No matter how much you may want to effect a change, some problems, can't be solved by any action on your part. You just have to wait and see how things turn out. Worrying about the matter won't help. For example, if your supervisor suddenly announces a major reorganization, you can't do anything about it until the event happens and you have more information about how it will affect you.
You just have to sit tight and wait. Or perhaps you're up for a big promotion, but you won't find out about the decision for a month. You will be better off in every way -- physically, emotionally, and mentally -- if you can let the worry go until later.
What does letting go mean? Letting go means giving up your sense of control, and this can be difficult to do. Often people feel that if they worry enough, they might affect the outcome. But in those cases and times when control doesn't help and worry only hurts, it's worth the effort to give up both worry and control.
How can you let worry go? Different people have different ways. Some find that meditation helps. Some listen to music or sing a song. Trying putting your worry in the palm of your hand and blowing it away. Close your eyes and imagine the worry putting on its coat and hat and walking slowly out of the room. The important thing for you is to say goodbye to useless worry.
5 Tips
Do a reality check: Find out whether your worry has any basis in fact. Toxic worry can distort the real situation. Check to make sure that things are really as bad as they seem. Even when there is an actual problem, it may be easier to solve than you think.
Never worry alone: Invite a friend to help as a listening partner. Sharing your worries with the right person can make you feel better by unloading the weight of worry. Just talking out loud about your concerns helps to sort them out and to clarify where your concerns may be valid and where you may be distorting the problem. The listener, at this point, needs simply to listen, rather than trying to solve your problems. Your goal here is to understand your own worry process and gain the power to find your own solutions.
Get help from the right sources: People who have the information you need. Often you don't have the information or tools necessary to attack a problem. Instead of worrying, take control by getting the help you need. Find out who the authority is and where you should look for answers.
Ask a friend for a hand: If you find the idea of organizing a cause for new worry, ask a friend or colleague -- someone whose desk is neat and who is never late to a meeting -- to give you a hand. Ask for help from more than one person; you may discover ideas and ways to structure your life that are actually easy and fun!
If it's out of your control: If there's nothing you can do about a problem (or nothing more, if you already worked on it) -- if it's simply out of your control -- you have to let the worry go. Blow it away, and start a new project, read a different book, walk another path.
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