Internet & Finance by Harman Bajwa

Awesome Power Point Presentation

2010-03-14T17:39:00.001-07:00

Death by PowerPoint

View more presentations from www.kapterev.com.

Steps to run a successful Online Marketing (including Social Media) Campaigns

2010-02-03T18:31:00.001-08:00

Understand -> Measure -> Develop Strategy -> Implement -> Iterate -> Improved Implementation -> Results

Understand:- Facebook :- 350 Million, Twitter : 75 million, LinkedIn : 58 million. These numbers matter no more than a 1 minute discussion factor for a Business (Small or Big). Important is, where exactly are the potential Target customers/clients. First, understand that.

Measure :- "What gets measured, gets done" Measure the amount of people who actively seek your product and people who gets activated to know more about your product due to Viral effect. Work around the platforms where they are in abundance and concentrate on increasing this number. Take control of ROI and a good Analyst will always strive to increase the ROI.

Develop Strategy: What are the keywords people use to find your product, what campaigns have been proven successful for your competitors etc. Use all the useful data in your strategy development. Example: A local Law firm need to target only a city, so it needs everything that makes it a bigger Internet brand, but primarily in the city. This Strategy will be completely different from the Strategy of Online Retailer who sells Worldwide.

Implement: Go ahead and implement. Use variable campaigns and keep checking the results of each of them. Remove the worst ones, add more resources to the best ones and improve the mediocre ones. This will help increase the ROI. I recently did a Presentation on Small Business & Use of Internet, which highlights the Strategy for Small Business Campaigns.

Iterate: Iteration is very important for enhancing the value of offering.

Tip: If you are running Facebook Ads (Assuming CPC: 25cents and CPM 30 cents), if you are on CPC and you are getting CTR of more than 0.1%, shift the campaign to CPM, this will save your Campaign cost by 40% (40% is assuming the Campaign Manager Cost is negligible ).

Improved Implementation: By now you will have your results. Add in the data you are collecting from your Campaigns to improve the campaigns.

Results:- Keep enjoying. Important is to be effective - in knowing, what you are doing. Try to beat the benchmarks in your industry. Keep costs low (compared to benchmarks) but not at the expense of a customer acquisition.

We follow the above steps for our Vancouver Internet Marketing or any other Clients. Do visit the website http://www.ismoip.com/ for more information on Internet Marketing

Cheers

Why & How should Small Businesses use Internet (Search, Social, Paid Ads) to reach their customers

2010-01-10T21:29:00.000-08:00

How can Neighbourhood Small Businesses use Internet to reach their potential Customers

Reality Check on some of my older Posts - Stock Market Rally, Gold and Crude Oil

2009-11-05T09:20:00.000-08:00

When we stop and are thinking, we often miss an opportunity. That is what has happened with many of us in recent market rally.

S&P touched a high of 1100, a rise of 62% from its March lows. I did mentioned this in my article dated August 18th . This was the first leg of the bullish trend, and if someone says that because he is smart so he did not invested and that smart guy should answer me, on how can 62% rise was just a test phase. Investor or Trader if good can not miss 62% move and should be part of atleast half of the first leg of the new trend.

Crude Oil:- On June 13th I mentioned that Crude Oil is in bullish Uptrend, however just be cautious. It was trading in the range of $65-70 and recently it touched the high of $82. Now that is an enough move to confirm the point I was making. From here if Crude closes above $83, then it possess a strong chance of entering the triple digit zone in the next upmove.

Gold is a story in its own peril. Perception is that gold is being bought as an hedge against inflation. However the major reason is, emerging economies are considering parking their reserves in something other than USD and Gold to them seems a valid and tested option. Proof of it came when last week India bought 200tons of Gold from IMF. I mentioned this on July8th, that if by any chance Gold crosses $1000 level, then we can see new era of Gold prices. I currently see it taking a shot at $1300 levels. It might take months or a year, but those levels are quite evident.

Once again I would say, that " When we stop and over think, we often miss an opportunity"

US smiling as US Dollar depreciates. Why? Read on.

2009-10-19T20:01:00.000-07:00

US Dollar depreciation is helping US and therefore we are not seeing any substantial action by US authorities to stop the depreication

We all are talking about the US Dollar depreciation. There are lot of talks going around about will Dollar be a world currency anymore? Is it worth to buy Dollar Assets as it is getting more volatile then ever?

These questions are valid if we look at the macro level and without any clear introspection into the depth of the issue. However if we look into depth, and ask one simple question :- Who is benefitting from this depreciating USD? Very obvious answer is:- United States of America.

US have a current account balance of USD -731 billion (2007 CIA estimates). This means it is importing more (goods, services and investment income), then exporting (goods, services and investment income). Only exports-imports = $821 billion. The difference in US current account and trade balance means, it is importing return on its foreign investments or it is selling part of its foreign investments or taking debt. Now in any case, if Dollar depreciates, it helps US in following ways:-

· Its exports become more viable. US exports consist of 27% capital goods and 49 % consumer goods, 76% combined. Its imports consist of 30.4% capital goods and 31.8% consumer goods, 62% combined. Now these 4 are amazing set of numbers. If dollar depreciates say by 10%, it directly tilts the balance in favour of exports and only these 2 segments can immensely improve the export-import trade balance in US’s favour. Assuming everything else constant, 10% depreciation can result in reduced imports and reduced imports bills.

· Trade imbalance improves. Let us take the example of USA’s largest trading partner, Canada. US exports 20.1% of its total exports to Canada and imports 15.7% of its total imports from Canada. In 2002, CAD index/ USD index was 0.55, it peaked at 1.40 in early 2008, dropped after that to 0.90 and now is back at 1.30. What does this say? Canada will struggle to maintain its trade surplus which stood at $78 billion in 2008. If CAD keeps on appreciating (it being more and more dependent on Commodities) and USD keeps depreciating, US will become better off of the 2 in coming years. One known casualty of this is Canadian Lumber industry.

· US external debt stands at whopping $13 trillion. Now depreciating dollar increases this debt numbers in US Dollar terms. But does that really matter until you are going to repay it. As of now US is going to borrow more. As per Goldman Sachs, it is going to borrow $1.7 trillion in final half of 2009, $1.4 trillion in 2010 and $1 trillion in 2011. Depreciating currency reduces these borrowing in foreign currency denominations. Depreciating Dollar automatically helps the cause as in near future US is net borrower and not lender.

Now let us see the US Dollar index performance:-

This is the index of USD pegged against 6 currencies (Euro: 57.6%, Yen 13.6%, Pound: 11.9%, CAD: 9.1%, Krona: 4.2% and CHF: 3.6%).

US dollar is very close to its historic lows of 72. If the trend continues and index created new lows, the worry is for countries exporting to US, holding USD reserves and not USA. Take the case of China, if Dollar depreciates, it makes its exports to US unviable. China being one of the largest investor in US Treasury (it holds $797.1 billion in Treasury), puts it in fix. If it sells dollars, Dollar depreciates further and Chinese Dollar assets declines, exports are hurt. Therefore China cannot liquidate its Dollar assets so easily.

To conclude, depreciating USD, is helping the current cause of United States, as it can help improve its deficits, monetarily on papers and in real terms by improving the export-import trade balance. It further helps to take more debt in short term (which it badly needs). Figures further support the fact. Foreign investors hold $3.45 trillion (in August) as compared to $3.08 trillion (in last December) according to Treasury department. Is world liquidity Dollar Assets? Actually not, they are buying more and helping the short term and long term US cause.

Therefore, whatever the furore is, USA is not doing anything substantial to appreciate its currency and is smiling happily as of now at the expense of others. Monetary and financial world being a tricky and thin line, of which policy will work for and which works against, makes this a very interesting time in history. Coming decade will be very interesting as it will give the answer to question:- Who smiled the last? Right now it is USA.

Disclaimer:- Facts, figures and views mentioned above are personal and does not indicate or reflect anyone else's view point or policy. It is only for the purpose of discussion and should not be considered right or wrong.

Future of USD (US Dollar)

2009-10-18T22:51:00.000-07:00

USD is reserve currency as of now. Will it remain a reserve currency forever? My answer to this is, no. Power shifts, systems evolve and benchmarks change. To sum up, only some thing that doesnt change is, "change" itself.

USD overtook Gold Standards to become the reserve currency and mode of transactions, reason for it was, after world war 2, US was able to provide the stable currency to instable world. It took Gold as reserves and supplied with USD for transaction hungry countries.

Things went on moving at ease. But 3 things again came together and we started talking about all this.

Those 3 things are:-

1. Power Shift.

2. Systems Evolve.

3. Benchmarks Change.

Now let us look in detail of the situation using these 3 parameters.

Power Shift:- After World War 2, US emerged as one of the strongest country and with enough liquidity, it made USD as medium of trade. No other country till date was able to rival the USD. However now due to collaborative efforts, like Euro, BRIC (very nascent stage), something is trying to rival and give world an alternative. Reminbi is still way too behind to take on USD. Whole world deposits excess and surpluses in US Treasury and US can take virtually any number of deposits due to its scale, where as others cant. So there is power shift but still a long way to go.

2. Systems Evolve: SDRs (Special Drawing Rights) of IMF is based on basket of currencies and seems a wise options, as no single economy is expected to dominnate and if SDRs are choosen as world currency, the fate of it will be not only limited to only one Nation's economy. However the problem is, as there is no base country and SDRs are just like derivatives based on bunch of economies. So very complex to trade in capital markets and get the fair value.

3. Benchmarks Change:- USD atleast is no longer the only benchmark to compare GDPs etc. Countries do use other comparative measures, due to the voltility of USD, countries are finding it difficult to project stable numbers and estimates of their well being.

To conclude:- With power shifts, system evolvement, USD may not be the only currency of trade, but it certainly will be strongest for 10-15 years. Other currencies share will improve and something innovative can take place like SDRs. Other option could be basket of currencies. But if it is basket then why cant SDRs. Debate has just begun, time will tell the new shift, if and when it happens!!!

In response to Linkedin Question :- Weather Economy is decided by Crude Oil or Money?

2009-08-25T20:36:00.000-07:00

Oil is just a commodity, yes a large one but after all a commodity. It is a resource required to drive the demand of various activities in the economic growth and set up of Economies. In 2008 almost $2.7 trillion of Crude Oil was traded, big enough right. But when you compare it to World GDP it is less than 5% of almost $60 trillion (World GDP). Yes there is lot of value added at various stages and that increases the influence on Crude Oil in deciding the final GDP numbers. But certainly it is not the Economy decider.

2nd factor which can explain you about why it is not the only driver is CPI. Energy including oil are 17% of Inflation basket (in US). There are 83% other things that is part of inflation basket, so does it explains the World GDP or economies certainly not.

Gulf Countries, they are always profitable even if Oil trades at 30$, if they have excess cash, they create Soverign Wealth Funds and invest in other countries, so higher prices doesnt mean more local investments.

Now coming to money.

Money supply drives prices, no matter whatever the reason be. Price of any thing, stock, commodity, food will increase if more money is chasing it, but does that mean money drives economy certainly not, it is just the means to buy something once economy has given you enough power to buy something.

So what drives economies:-

1. People:- Countries need to be young to grow, where you have more earning population and less dependent population. In other words the earning population earns enough to take care of dependent population.

2. Economic development, which is dependent on government policies, open and investor friendly the country more wealth (in any form) will enter the economy thus making it grow.

3. Literacy. Can you name a developed world economy that is not literate, certainly not. More literate the people are, more connected they will be, more intellectual they will be and more options they will have to drive the economic activity.

4. Innovation:- Innovation does not mean only about winning Nobel Prize, it can also be doing something already being done, but in more efficient manner. Like, producing cheap, micro products etc.

To conclude: Crude is a commodity required to full fill certain tasks of economy. Money is one way of deciding the wealth the economy have and a mode of exchange, it in itself is not a wealth. Economy, is dependent on the activity that takes place within it or associated with it. Thus decided by all (All means all) the action that happens within it.

Follow the Original Discussion on on my linkedin Profile.

Market mood and current scenario! A perfect text book picture of doing exactly they have done before!!!

2009-08-18T13:39:00.000-07:00

Around a month ago in one of the discussion I talked about S&P range of 1010 and that is where it got tested!

I love to talk in numbers, however sometimes its better to speak logic and not just the numbers. I would like to share few points which have indirect or may be direct relation to market movement and can help us analyze the current situation where we stand and what should we do???

1. Mean Convergence is something that can never be ignored. S&P in its recent rally had gone far ahead of its mean (which ever you follow, I follow Mean Overshoot beyond moving average). So it needs to cool down and we are seeing the cooling effect.

2. First leg of any positive movement (from times immemorial) start in such kind of extreme panic. First correction is seen as a caution by most people as thoughts of recent meltdown still are fresh in minds of everybody. This factor is also proving true. 3. USD, everybody is speaking against it. (Only 5% people are bullish). So logically it is forming a base and I think may be a long term bottom. We should see strength in USD. 4. Gold, the channel its moving in, if you see the chart is getting narrower and narrower, which indicates that it need to chalk out its new course very soon (may be Oct), and things should work against it if USD rises and thats a possibility.

5. Sugar went into correction much before the rest of the things and whatever reason we say (Excessive rains in Brazil or less rains in India), it is bouncing and bouncing hard. Will other commodities follow, take your call.

6. China, and other Asian tigers once again have proven their metal. They are roaring and roaring hard, not dependent solely on Western Consumption. Now if you add a bit of Western recovery, then expect much better numbers.

7. Baltic Dry Index which was at $700 in December is now close to $3000 and is more or less close to rates where world trade and ship usage start getting normal.
8. Recent good set of numbers by so many companies (yes quality of numbers can be debated), expect numbers closer to these in coming quarter as well and that can contribute to lowering PE multiples, as its always easy to climb from lower base.

9. For the time being inflation argument has been thrown out of the window and central banks need not to worry about raising interest rates just to control inflation, the most common step they take. It seems that inflation will be normal.

10. After all it is the money flow that will drive the market, scenario right now is, we all (investors, traders etc) are deploying the money to stocks, brought the market to these levels, now all of us want to book some profit, we talk of hitting bottom again, but are we pulling out completely, I think, "no", Actually we are cautiously looking for an opportunity to enter the market as very few people took the benefit of recent rally to an extent they can feel satisfied.

So to conclude, please sit back and take a overall look, I am seeing this a perfect example of "Fear Overplaying+Markets Outplaying+ Smart guys doing exactly what they need to do, be fearless but diversified and watchful".

Why Gold is Gold and where is it heading?

2009-07-08T19:38:00.000-07:00

I hear lot of people talking that, why Gold is so precious, why people talk so much about it when it is just like any other metal from earth!!! Apathy is I have heard even some of the most intelligent people and Gold Traders talking this. Let me through some light on it.

Gold is precious because of its stable chemical properties.

Let me clear few points about why Gold enjoys the status of Gold!

Gold is among the least corrosive among the metals. It is most malleable and ductile metal. 1 ounce (28 g) of gold can be beaten out to 300 square feet. Gold kept at home for 100 years will weight almost same.Whereas, other metals like iron will corrode and lose weight as well as properties. We need to keep iron etc polished to save it from corrosion but not gold. This was one of the important reasons of Gold being chosen as the reserve currency in old times and even today.

There is no other stable metal that can replace gold.

Now coming to Gold bubble.

Gold has tried to cross $1000 level and has formed triple top. It is slipping of its support bed and level of $875 is very important. If Gold breaks this level, then it can head further down. However, if by any chance Gold crosses $1000 (very distinct possibility in near future), then we can see a new era Gold prices.

Hope it helps on knowing why Gold is Gold.

Is it the economy or the data?

2009-07-08T07:21:00.000-07:00

1. How reliable the data and the resources from where it is collected is are?

2. Do we really interpret the data in the way that is right and useful?

These are the sources covering data for years and innovating themselves from time and again. If the instititutions like World Bank, IMF, DOE etc can not be trusted for providing us the correct data then I think the analyst who do the job of analysing this data is in serious trouble. Because there is no other big source of data. I strictly dont think that there is any problem with reporting as it is going on for years. Right or wrong thats not our job and we dont have definitive figures to support our contradictions to this data.

Now moving the next part: Interpretation: Accept the fact that this is what we have and now look into it with open neutral heart. Good analysts never take a biased view and they analyse data and then come up with their view points. Sometimes over interpretation brings in so much variables and confusion that one tends to come up with view point far away from reality.

Examples:-

Some prominent research house (I cant name it for the reason of non-disclosures etc, you all know) came up with few numbers that China is going to be the biggest disappointment. They are inflating their growth numbers, their electricity production is declining which says they are not in good health. Agreed, but a common sense is, a country which is going to spend $600 billion on its infrastructure (approx. 22% of its GDP), can it be such a big disappointment. If some one goes to China, you feel the development on ground levels. Im not saying I favor China's numbers, Im just saying that we need to look at macro level and on both sides of bar.

Example 2:- US dollar is losing its sheen, because its lot more volatile in recent years, there are few other strong world powers emerging who want to end the dollar's monopoly as Currency of trade, so dollar will weaken and its days are over. I heard one very famous investor saying:- I cant invest in US stocks even if there are few very good stocks, just because they are in currency that have only one future: heading south. So is everything right with other currencies, take Euro's example, strong performance over the years but now high growth countries and cheap labour countries in Euro zone are facing the heat. There inflation in higher then more developed Europe and currency does not adjust to it (as it is one) thus on comparative basis they are not growing at the same rate of their GDP growth as the utility of the people is tied to factors that are beyond the control of their country.

Foreclosure data is US:- Are we at the bottom, just because housing sales rose in last month and prices of houses are improving. Huh! Another factor is there are still people who just stopped paying their installments and it will take another year for them to go through the process of foreclosure and equal time to bank to writeoff.

So to conclude, data sources are same and nothing much will change in terms of the resources of data. It is very complex structure and can not be rivaled. Today due to online media being at its strongest in its history, every analysis reaches everybody interested in it within no time. Its we as a user of data who need to set our limits and analyse the data with calm, open eyes and without bias. Rumor mills are also important part of society, because without them intelligent people wont get their due and smart money will not get chance to be parked at the place where it deserves to be.

Regards

Harman

Indian Insurance Sector - Comparison and Analysis

2009-07-08T07:15:00.001-07:00

Insurance premium in US stands at $1.4 trillion. 52% life health and 42% casualty. That is approx 9% of GDP. Figures are at 12.5% for UK, 10.5% for Japan. Indian insurance market approx. at $30billion and 3% of GDP is smaller than even Taiwan. So still there is lot of room for growth. The FDI in insurance sector is just 10% as of now, still enough scope for more investments to come before they reach the proposed cap of 49%. So in figures, things look good.

Now if we look subjectively, from where the growth will come from?

Along with FDI, you will also see the influx of insurance products from developed world. SME sector, is still vastly untapped for employee group insurance. With hospital boom coming up and happening, do you think they are banking upon only patients who can pay. Not really these fore sighted med companies know that, with the growth of medical insurance, they are bound to get more customers (patients), These med companies will push hard along with medical insurance companies to bring in some innovative and cheaper insurance products for huge Indian middle class.

So insurance sector still remains in nascent stage and lot need to be done. This is one game, which still have lot of juice in it.

However I personally is worried about ULIPs, insurance agents in India, keep pushing ULIPs harder and harder, because they get more commission by selling these plans rather than ordinary insurance plans.

Imagine if a new private company gets flow of redemptions now when these ULIPs have bleed ed and recent rally was not enough to break even the prices. Ordinary Indian does not know about the risks associated with these equity linked plans. So here government need to do something, I would say government should reform the commission paid to insurance agents and be more strict , so that commission should not decide what agent sells. It should be the need of customer, what should decide it.

Overall it is still a story will long journey and lots of action.

Analysis of Nifty 10% down, still room for correction

2009-06-22T20:27:00.000-07:00

I follow a very different indicator to evaluate the market levels and to answer the question--How much is too much? We do quant analysis for North American Markets, however due to my personal interest I do test the levels of Nifty too.

This indicator is based on the theory of mean convergence, everything need to converge back to towards its mean and the comfortable zones of activity are upto the standard deviations.

I like to check the index overshoot beyond its Moving Averages (50 day, 100 day and 200 day). Moving Averages are lagging indicator but this overshoot make them leading indicators too to an extent.

For nifty, historically if it overshoots by 15.33% more then its 100 day moving average, its time to be cautious. Next level is 24.9%. Highest ever overshoot was of 88% in early nineties.

Nifty historically has stayed for 13% of its days in this overshoot range of beyond 15%. So even though you book profits at these ranges, you do expectionally well, they serve as good stop losses too.

Current rally took nifty to a overshoot of 43% beyond its 100 day moving average, and that was way too much. The correction has brought us back to 26% which is still bit over extended. So on short term I would like to wait and I will open new positions only once the range of overshoot is under 15% levels.

One more thing is, in 17 years of nifty data I analysed whenever nifty crossed the 25% level, it fell back to its Moving Average or below it, before it made a new neat upmove. Now this time if we get a special outlier, great, but I dont believe in planning around execptions and so personally will wait for some further correction or atleast a consolidation.

Stock Overshoot beyond Moving Averages, how much is too much?

2009-06-21T20:44:00.000-07:00

Some of us rely on fundamentals, some on technicals and some on both. Question always is, how much move in stock market is too much. When can we know it is an excess? Can we quantify the excess? In search of these answers I did a study on US Indices. Lets take the example of S&P: I found that if S&P overshoots its 20 Week Moving Average by 5.15%, that is time to be cautious and if it overshoots its 20 Week Moving Average by 7.5%, then it is too much and one needs to be very cautious. As and when this has happened in history, the index comes down below its Moving Averages or atleast kissses it back for a re-run. On June 15th, 20 week moving average was 7.6% and results of my study was in line with the movement we saw after June 15th. Here is the link to check the outcome for 10 different Indices and Im sure you will find some amazing results in this work Click here to read priliminary report on Stock Price Overshoot beyond its Moving Averages.and here to read on US Index Stock Overshoot beyond Moving Average Study

I have not yet compiled it in simple plain language, which I will do soon. However still it is worth seeing and it helps a great deal in anticipating the next short, mid and long term market move, depending on the average we take. I am testing it on individual stocks and very soon I will try to come out with a simple way to calculate this Overshoot numbers which signifies caution. Your feed back is welcome.

Regards Harman.

Does it really take complicated formulas and strategies to create wealth?

2009-06-21T08:54:00.000-07:00

In response to linkedin question:-

The question was :-

Does it really take complicated formulas and strategies to create wealth? Read on -

Warren Buffet's advice for 2009
Extract -
Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older. This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

* Hard work: All hard work bring a profit, but mere talk leads only to poverty.

* Laziness: A sleeping lobster is carried away by the water current.

* Earnings: Never depend on a single source of income. [At least make your Investments get you second earning]

* Spending: If you buy things you don't need, you'll soon sell things you need.

* Savings: Don't save what is left after spending; Spend what is left after saving.

* Borrowings: The borrower becomes the lender's slave.

* Accounting: It's no use carrying an umbrella, if your shoes are leaking.

* Auditing: Beware of little expenses; A small leak can sink a large ship.

* Risk-taking: Never test the depth of the river with both feet. [ Have an alternate plan ready ]

* Investment: Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles remain financially healthy. I'm equally confident that those who resolve to start practicing these principles will quickly regain their financial health.

Let us become wiser and lead a happy, healthy, prosperous and peaceful life.

Article Source - http://www.financialexpress.com/news/warren-buffetts-advice-for-2009/423658/
Having read this one would wonder does it really take all that we try and do to create wealth or does it abiding by some simple and straight maxims to achieve it -
your thoughts folks.

My answer to it is:-

Let me answer this point by point.

Hardwork:- . So the question is, what is ideally a hardwork and what is not. For me:- Everynight when I go to bed if I feel that in a day I did atleast one thing that was more than my daily routine and was a value addition, it means I worked hard. Over longer period of time, to quantify (financially) you should strive to keep your monthly income (from all sources) to grow every year atleast a percent more then inflation rate.
Laziness: Early in the morning if I make a plan for the day and at the end of the day if I feel that I missed the plan and wasted time on something not useful, that means I was lazying around.
Savings: The best habit on planet, but for a family where bills await you much before the pay check arrives, question arises of how to save?
I suggest as soon as a pay check comes 1st thing you should spent it on is towards your investments, make sure you set a minimum limit (ex: 10% +/- of paycheck) and stick to it. Be disciplined and each year, amount should increase minimum by the rate of inflation. Know what you will need later like:- retirement, downpayment, child's school fees etc.
Borrowing:- This point is bit tricky. Borrowing is not that bad as thought. Simply put, if you are borrowing to buy something that is liability (ex: consumer durables, holidays, for regularly eating out) then it is bad, unless its a necessity. However if you are borrowing to create an asset (house, small business, for me even good books) then it is a good thing. Be sure that when you go out to borrow, you shop hard, you bargain hard (ex:- Mortgage payment of $100000 for 25 years at 5% is $584/month and at 4.5% is $556/month. So a 0.5% will make you pay 5% more every month for 25 years and this 5% will cost you $15635 over 25years, that is whopping 15% of the principal borrowed ) and time your borrowing (ex: if you are going to buy something after 2 months, dont borrow today and keep paying interest for extra 2 months. So be a borrower but smart borrower.
Accounting:- Well said quote, however how to practice it. I suggest, plan your monthly budget, be accountable to yourself at personal level. Keep the same principle for work too.
Auditing: Very important in wealth creation. One example is mentioned above. Another could be: imagine you are have a credit card liability (at 17% thats what cards charge at an average) of $5000 and you are paying $100 every month, it will take you 7.75 years and $9311 to clear your debt. However if you convert it to personal loan of $5000, at 8% you need to pay $102/month (almost same), you will clear your debt in 5 years (2.75 years before) and with only $6083...Huge saving of leakage of over 50% and time.
Risk taking: Its difficult to genralize the risk. Some thing is risky for you may not be for me and so on. However the closest answer I can provide is:- Diversify your risk and investments. Over longer period of time equities have delivered highest returns(11% historically) then other asset classes, even though they are risky. Check your risk profile (may be here you need a financial advisor, but remember that they are more concerned in selling the product where they are paid higher commision, so be careful and consult more than1 before hiring them) and decide accordingly your diversification ratios and investments.
Investments: This is my favorite point and I can write a book on it, however already being so long, I would try to keep it short.
Savings are meant nothing if kept idle in checking or normal 2% savings account, because inflation will eat it up over the years. Once you have created your risk profile, you should start investing immediately. Blend of equities+bonds+others if yield 8% returns, investing $2000/monthly will give you $ 9,47,000+ by 25th year, imagine if you keep this investment raising year after year.......
So wealth creation is easy if basics are clear and one follow a disciplined approach.
Hope it was useful.

Wealth Creation discussion

TSX - Moving Average Convergence Study

2009-06-16T14:46:00.000-07:00

Hi,

Today I was seeing one interesting factor of market movements. How much it takes for prices to move away from their moving averages, so that they again converge back close to their moving average.

For the purpose of study I picked up Canadian Index(TSX) and 10 other Canadian Sub Indexes. The study threw some very interesting facts.

Historically in past 7 years, TSX has never moved more than 8% above its 100 day moving average. Whenever it does so, there is a mean convergence. This convergence either could be with sudden drop in price (often it happens in the form of profit booking) or this convergence could be if prices consolidate and average moves up.

Benefits of this indicator:- 1. Whenever the index price is moved more than normal from its average, it need to converge back. So if someone follows moving average, which is a lagging indicator, one can exit the stock much before than the price-average crossover (normal indication to sell-buy).2. In trending market when ever the convergence comes closer to 0, it is a good time to buy or re-enter the stock.

Very soon I will post my study on 10 Canadian Sub Indexes, which shows sooem startling facts. As of now just look at the TSX convergence chart for 100 day moving average.

Arena Pharma - Profit booking ainticipated, re-enter at lower levels

2009-06-15T16:37:00.000-07:00

Stock has more than doubled from its mid- April lows since the positive news on the Lorcaserin has been published. It is moving strength to strength and is on a vertical upswing. Stock is trading at 38% premium then its 200 day moving average. This is a huge premium which needs mean convergence. The RSI indicator is overbought and is currently at 79+.

One need to book some profits in the stock and wait to get it closer to its average to re-enter. Overall due to successful trial of its main drug, the stock looks promising.

If stock corrects, which it should, one should either buy closer to nearest average and maintain the same average as stop lost. If stock goes below its moving average(200 day) then wait and let it cross back its 200 day average to re-enter.

Crude Oil - In bullish trend but very short term correction anticipated!

2009-06-13T20:50:00.000-07:00

Good for Oil :
1. Signs of Economic Recovery.
2. Industrial Index (with stocks of Industrial companies), is showing strength.
3. Stimulus boost in China close to $600 billion, especially infrastructure based.

Not so good signs for Oil.
1.Demand to drop by 1.5% (DOE estimates).
2. High Inventory Levels.
3. Crude stored at sea in oil tankers to take the benefit of contango, once released will add to inventories.
4. Repayment of debt by banks to US government in the tune of $88 billioon can strengthen the dollar temporarily, inverse correlation of dollar with crude (also seen recently).
5. Techincally, a profit booking required as the spread between the moving averages and crude oil is widening, mean converage is anticipated.
6. Crude oil is technically is in over bought zone (RSI : 74).

To Conclude:
Short term correction is anticipated, but bulish until it doesnt break its 50 day SMA downwards. Once it does, then stay out for sure.
You can follow me on Twitter or my blog or contact me, Il keep you updated on next trading move of crude.

Industrail Index - Canada

2009-06-11T18:03:00.000-07:00

Current Price - $79.70 (CAD).
Industrail Index ($SPTIN) makes a good buy right now. At the time when most of the market has run up and need some profit booking. This one looks good on technical basis. Copper and Aluminium chart further favors the $SPTIN, if someone wants to attach macro fundamentals to the stock. RSI is showing strength. Its is close to its 50 day SMA, so one can keep 50 day SMA as a short term stop loss. This trade is for the ones who missed the current rally and want to be in somewhere. There is a risk but as compared to Energy, Financials, Minerals and IT, this index looks slightly better in terms of risk. Be strick and stop out if it comes under 50 day SMA.

Lithium - Story to be watched

2009-06-10T20:13:00.000-07:00

US government has kept $2 billion for battery manufacturers. Due to new emmision standards, lithium ion powered vehicles looks imminent. This is a good sign for lithium ion battery manufacturers in US. Battery manufacturing is a very capital-intensive business. The stimulus money will be in the form of 7-8 awards of approximately $100-150M each awarded to US battery companies. (Winning one of those wards must be like winning the lottery for those lucky seven battery companies.)

Current global demand is 16,000 tons per year, or 84,000 tons of lithium carbonate. So the lithium story looks good until its real substitute doesn’t arises. Now let us look at some companies by which we can take the benefit of lithium boom that is expected.

I believe that lithium is the mineral to watch out for but there are very few listed companies which deals in it. The big listed ones SQM and ROC (Rockwood Holdings) have already run up in past few months. However from long term prospective one should enter these stocks as and when you get the opportunity. There are few other Lithium based listed companies (AMerican Lithium Minerals, Canada Lithium Corp, Lithium One Inc, First Lithium Resources) which are worth checking too.

MEMC Electronic Materials - Buy

2009-06-10T19:55:00.000-07:00

MEMC is in very good business with lot of interesting prospects. It is a long term story fundamentally and if someone believes in renewable sources of energy, then this is one the story to be part of.

Stock had break out of its long time channel and is above its major daily moving averages. It has shown good volumes. Over it there is still a short interest in stock at aprrox 9million which could a further boost to stock. It has support at $18 and then at $14 levels. I recommend a buy on this stock with a long term prospective. Keep watching for further recommendations.

For detailed analysis, anyone can get in touch me with.

Please note:- Views expressed about this or any other stock on this blog are personal. Investment decisions are subject to market risks. Any decision you take, should be your own and not just based on this blog.

RBC - Stay Invested

2009-06-10T19:50:00.000-07:00

Royal Bank of Canada

Fundamentally and due to the size of the company, it is essential to be part of this story until some one trades in Canada. Company can expect improved earnings from wealth management segment due to increase in equity valuations across the board. High earnings in the capital market segment due to fixed income trading may not be sustainable.

Technically, it makes sense to time the Royal bank trades based on 100 day SMA (if friction cost is minimal) or 200 day SMA if friction cost is significant. As it improves the expected return by more that 120% annually as compared to Buy and hold strategy. In very short term, can book some profits if, bought at bottoms, if you have missed the opportunity then stay invested until it trades above 100 day SMA and with average volume of 1.5 million. If it breaks this MA or trades with declining volume, this might be a good time to review the positions.

I will keep tracking it and will let you know the time to exit.

Options For Paying Off Student Loans

2007-09-22T00:01:00.000-07:00

Federal education loans have become a way of life for millions of students, so has the student loan consolidation program to pay off the various loans that a student avails. Education loans are no longer considered to be a burden. They are now seen as an inevitable necessity owing to the high cost of education. Similarly, student loan consolidation program is not thought to be only meant for those students who are financially weak or incapable of paying off the loans. Rather student debt consolidation is seen as an excellent way of simplifying the repayment of education loans. And it is seen as a prudent way of saving significant sums of money in terms of interest.

Rising popularity of the student loan consolidation program coupled with federal support has resulted in student loan consolidation companies offering a lot of attractive features. The interest rates on consolidated loans are always on the lower side. Apart from this, they also proffer varied options for repaying the consolidations so as to make them suit the varied needs of customers / students. Let’s look at these options in detail.

The Options For Repaying Loans

he first option is obviously the ‘standard payment’ of fixed monthly installments. You may go for this option if you are confident of getting a job encompassing decent remuneration right away. Even if you do get a job that pays you well, remember to consider the possibilities of you losing the job for some reason like change in company policy or taking a sabbatical from work in near future.

The second option is ‘graduated payment plan’. As per this option, the initial loan payments are kept low to give you some breathing time. You can use this initial period to settle other bills or pay the installments of short-term loan like car loans. If it’s likely to take some time after graduation before you find a decent job that pays you really well, then this is the best option for you. After you get a good job and initial period is over, you can commence paying off the loan in normal installments.

The third option is a ‘variable plan’. According to this plan, the amount of installments is adjusted as per fluctuations in your income and expenses. This option is excellent if you have the kind of new job or business that involves uncertainty of monthly income.

The fourth option is ‘extended payment plan’. While exercising this option, you should try not to extend the payment plan for too long a period. It should only be done if you are likely to have a moderate source of income for a long period of time. Otherwise, extending the payment period for too long usually makes you pay more money as interest on the loan than you would have paid on your original loans.

If you wish to choose the kind of payment option and other conditions that best suit your case, remember to go in for student loan debt counseling. It will certainly help you to choose the best student loan consolidation program.

Source : Sourabh Jain.

Link : http://www.americanchronicle.com/articles/viewArticle.asp?articleID=37569

Savings on monthly out go by consolidation (Example)

2007-06-08T02:50:00.000-07:00

Is there any real saving. Check it out.
Now as we have already learnt about loan consolidation, benefits and hitch associated with it in previous post. Now let us be more clear about it with the following examples.
Here it shows what you save on your monthly out go if you consolidate you existing federal loans in to 1 loan.
Suppose if you have 3 loans

Case 1.
Balance of payment is $10000, rate of interest is 6.54% on loan 1 and remaining re payment period is 5 years. Your monthly out go will be $195.
Balance of payment is $12000, rate of interest is 7.94% on loan 2 and remaining re payment period is 7 years. Your monthly out go will be $187
Balance of payment is $15000, rate of interest is 7.14% on loan 3 and remaining re payment period is 7 years.
Your monthly out go will be $227Total out go per month on all three loans will be $615.

Case 2.
Balance of payment is $10000, rate of interest is 6.54% on loan 1 and remaining re payment period is 20 years. Your monthly out go will be $75.
Balance of payment is $12000, rate of interest is 7.94% on loan 2 and remaining re payment period is 20 years. Your monthly out go will be $100
Balance of payment is $15000, rate of interest is 7.14% on loan 3 and remaining re payment period is 20 years.
Your monthly out go will be $118Total out go per month on all three loans will be $293.

Case 3.
Now if you consolidate all of the three loans into 1 loan at interest rate of 7.25% for 20 years. Your monthly out go will be $292.
So if your current scenario is some what similar to Case 1, then loan consolidation is the way you should be going. If you have some kind of cash crunch while paying your monthly re payment amount.
But if you fall some where under case 2, then no need to get consolidated loan as it could help out to make your calculations easy but you would be paying some un necessary fees.All good up to here,
now let me give you a solid reason for not going for loan consolidation even if you fall under Case 1 provided you have enough liquidity to re pay your existing monthly installment
Reason : Case 1 total re payment including interest will be $46476.Under consolidated loan of 20 years for same principle amount will be $70080
So go for loan consolidation only if you seriously need to minimize your current monthly re payment. Still try to keep the re payment years as low as possible (that is 18 years is better than 20 years) so as to minimize your total interest out go.
If you doubt any calculation or want to do some more calculations, go to the following calculator link:http://www.1728.com/calcloan.htm
Decide wisely, All the Best. Keep visiting for more information

Refinancing Mortgage (Introduction)

2007-06-08T01:44:00.000-07:00

Let us start with the definition:
By refinancing mortgage a borrower pays down an old loan with a new loan. People who refinance mortgage tend do so to get a lower interest rate, lowering their payments or to take cash out of their home equity.
More to follow soon

This is 1st post on this topic

Loan Consolidation Programs - Benificial or not ?

2007-06-07T20:22:00.001-07:00

Loan Consolidation Programs :
What is Loan Consolidation ?
By Loan consolidation we mean putting all your loans in to one loan. For example putting your Stafford Loan, PLUS loan and Federal Perkins loan under one debt.This loan consolidation is widely beneficial for school, college students

History
The Federal Loan Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999. Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP. Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of $46 million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a $3,100 million saving comprised in part of avoiding $2,500 million in subsidy costs

Current Scenario;
Top Consolidation lenders ranked by total FY 2006 consolidation loan originations
Lender name # of loans Amt of loans ($)
Federal Direct Student Loan Program - 1,169,110 - $19,197,268,873
Swallie Mae - 866,295 - $19,841,423,841
Citibank - 232,126 - $4,843,119,089Nelnet - 198,624 - $4,796,065,812
Next Student - 89,284 - $3,320,024,025JP Morgan Chase - 115,777 - $2,668,451,098
Goal Financial. LLC - 111,426 - $2,494,856,673
College Loan Corporation - 75,360 -$2,245,128,826
AES/PHEAA - 166,730 - $2,037,618,548
Student Loan Express - 114,790 - $1,880,997,383

Source : Wikipedia.

Benefits of Loan Consolidation to students :
As tuition costs are rising with each passing day students need to take debt to fund their studies. But even after graduation the early days jobs sometimes are not so highly payable as required to pay back the loans with by the time would have accrued to more then one. So here the loan consolidation comes handy.
Main benefits of consolidation are :
You can put all your loans under on debt.
Just it makes your loan out go calculation a bit hassle free.A fixed interest rate is charged on the entire loan amount for whole tenure instead of different interest rate as on your previous loans.
Payment period increases, usually it is 10 to 30 years under student loan consolidation programs.
Thus reducing your monthy out go in time when you are not earning at your complete potential.
Due to this most of your loan amount is transferred to later years of career when you are in most probability bound to earn more.
So in all, you relieve your some tension and can concentrate on other interesting aspects of life.

Hazards of consolidation :
As every thing on this planet has got a some kind of ugly face, so does these consolidated loans. As your payment time increases this results in increase of your net interest out go.So you pay more interest here.
Secondly, while consolidation, Loan consolidation company charges you fees. So tell your company to be clear with the fees and pay all the fees upfront so as to save yourself from bad surprises later on.But as at the time when you take consolidated loan this is the best option you have so for building and strengthening your early stage career without bothering much of your loan liabilities, this is a good option for students.
So know as you know the good and rider part of consolidation loans, you can make a choice on which way to go. Weather to choose loan consolidation program or to go with existing loans.
Wishing you a wise and fruitful decision making.

Benefits of Long term Investment. Road to Million

2007-06-04T10:59:00.000-07:00

"This is oringal article written my me years ago. I wasnt MBA then. I was just like any other youngester with dreams in my eyes. Till today, even though I have moved from India to North America and have gone through lots of experience in life including my MBA, I keep this article just to remind me my one of the best habbit."

Benefit of long term Investment
Road to Wealth accumulation

I need a luxury life. I need a big farm house. I need a lavish life. But no way possible with my current income. Yes, this is what run in most of our minds.

So if you think after reading this article you are going to have that magic wand to make money. I am sorry to say that you will be disappointed. Yes if you think you will get to know the road to reach that level where you can have enough bank balance which is growing with every passing year, then you will be delighted.

Note : All calculations are based on Indian standards and in Indian currency 41 rupee = $1, you can calculate according to your local currency and scenario.

Your current scenario :
You earn for example say Rs.30,000 a month. You think of saving it. Sometimes you put Rs.5000 in FD or sometimes you put in mutual fund but with no discipline. You think that Rs.5000 saved a month is not going to make millionaire.You are wrong, it does.
How, read on?
Investing with discipline and waiting your investment grow over years lead to huge accumulation of wealth. If you are in your mid 20s then there is no better investment than equity mutual fund which by any standard is expected to give you compounded annual growth rate of 20%. If you take some pain which is worth taking and buy some good stocks, rotate them at right time by which I mean over a period of 2-3 years you are on road to compounded annual growth rate of 30% + in growing economy like India . Above listed return rate is what have been provided by Indian stock market and India related funds.

Now let me show you your reward if you invest for a decade with patience.
Look at the table below which show the final accumulation by just investing a sum of Rs..5000 or Rs.10000 but regularly every month. For a period of 10 yrs or 20 yrs.
Return are if you get annual rate of return 10%, 20%, 30% compounded annually

Amount Invested/Month * No. of years * Rate of Return = Final Wealth

All calculations in Rupee (Indian Currency $1 = Rs.41) and according to what Indian middle class saves. Please make your calculations as per your native currency and saving standards. The prime idea of this example is to show the power of compounding over the years.

5000 * 10 * 10 = 1007287
5000 * 10 * 20 = 1721554
5000 * 10 * 30 = 2956070
5000 * 20 * 10 = 3619931
5000 * 20 * 20 = 12380956
5000 * 20 * 30 = 43707972
10000 * 10 * 10 = 2014575
10000 * 10 * 20 = 3443108
10000 * 10 * 30 = 5912141
10000 * 20 * 10 = 7239863
10000 * 20 * 20 = 24761912
10000 * 20 * 30 = 87415945

If you doubt these figures then go to SIP calculator at the link and calculate yourself : http://www.ecst.csuchico.edu/~chetan/cgi-bin/sip.html

Now 10% return if you want you can get it out of debt and equity mixed fund. For 20% return you need to choose equity fund. For 30% return you can get it out of mutual fund but the record till date does not favor so high return . But mind you in a good year some mutual fund in India have even delivered 100%+ returns, but that are some exceptions. In the whole over long run equity has delivered highest returns but at the same time it is riskier than other asset classes.

Yes one more point : if you need some money for a short period of time say 1-2 years take a loan against your mutual fund or other asset as loan you will get at around 11% reducing (in India) and your underlying asset will grow at 20% + compounded. So here too you stand to gain.
It is that simple but we don’t make calculations and miss out the opportunity. Some say I need wealth today what I will do it after 10-15 years. OK if you don’t need it then, accumulate it and gift it to me at the end of 15-20 years.
I hope after reading this, you will start investing today itself as each day you miss out, you are losing that interest growth on your investment.

So happy investing and be rich.
All the Best. Any query, you can mail me at bajwaharman@yahoo.com. I will try to answer it.

New Innovative Retail Business Idea

2007-06-03T08:12:00.000-07:00

I was thinking of a business which was never done before. After a long study, thinking and experimenting of all what was in my limits I came to this all.

My idea behind it consists of following points :

It should be unique and never done before.
It should be built on the main motive of ultimate customer satisfaction.
It should provide unlimited opportunity for growth in future.
It should bring a revolution.
It should be controlled by promoters from the grass root to the tip level so as to keep the bottom line (profit % age) always on the positive side.

For details visit www.retail-business-idea.blogspot.com