4 Feb, 2010 | by Sanjeev Kumar
Although the economists still can’t agree on the real quantative impact of various stimulus packages that were adopted by economies from around the world but one cannot dispute the fact that the size of the stimulus did matter and did work in most cases.
To investigate this further let us look at the various stimulus packages that were adopted during the CRISIS.
Obviously by the sheer size and percentage of National GDP China’s US $ 586 billion stimulus Package which accounts for above 12.9% its GDP stands out from the REST. It is possibly followed by Saudi Arabia, Malaysia, and the mother of all STIMULUS thrown by United States under its American Recovery and Reinvestment Act of 2009 which is the largest by any measures (US$ 787 billion).
At the time there were market pundits who were debating the pros and cons and some even doubted if the stimulus packages will deliver and I am glad to admit that some of us including myself had a different view. Based on my judgement and commonsense I concluded in a piece that I wrote in March of 2009 titled “ Getting the Patient Out of Intensive – The Economy “ that it should deliver and put the US and the world economy back to growth. But having said we should have no illusion that the road ahead is still bumpy and uncertain. continue reading »
31 Jan, 2010 | by Richard Vinhais
I tend to shy away from politically focused posts as the feedback is generally overly intense, sometimes irrational and usually futile. It’s almost as bad as trying to discuss the perennially hot topic of religion. The discussion always begins amicably enough, but it inevitably seems to devolve into senseless argument. I think Oscar Wilde said it best: “Arguments are to be avoided; they are always vulgar and often convincing”.
After watching the recent State of the Union address (embedded below; please watch it if you have not…It’s worth it) I felt compelled to share a few thoughts, given that much of the focus of the speech is centered on the economy. A harsh reality is that politics and business are firmly joined at the hip, whether you want to believe that or not. A clear example of this would be the special bond between corporate entities and career politicians. How many times have you heard of “gray-area” reciprocities that have transpired over the past few decades alone? You know what I mean – transactions that just didn’t seem to pass the common sense test. Remember the cozy relationship between Halliburton and former Vice President Dick Cheney? Wiki “Political scandals of the United States,” and you’ll get a flavor of just how extensive the list is.
I know, I know … you’re probably thinking I’m heading down the path of “all politicians are criminals” stereotype. That’s really not my intention here, so please bear with me. We all know that political malfeasance is much more commonplace then it should be. When was the last time you had that following thought running through your head after news of a scandal broke: “Wow, I can’t believe he or she would do something like that”? It’s almost expected these days. The only questions are: “How egregious is the act?” and “Will the public ultimately accept the indiscretion for what it was?” It’s that simple; however, variables that dictate the public’s appetite for forgiveness is not. Blagojevich = Bad, Clinton = Not so bad or even good. Go figure. continue reading »
9 Jul, 2009 | by Sanjeev Kumar
Developing countries’ share of global equity market capitalization jumped to a record 24 % in the first half of 09 from the past levels of 15% at the start of 07 as more investors flock attracted by the growth story.
Investors are now beginning to realize that developed nations are possibly faced with decades of very low growth and may need decades to work off the mountain of debt which is the biggest since World War II. According to IMF recent forecast the total debt of developed nations used to fund various bank bailouts and stimulus packages could reach above 113% of GDP by 2014. This is more then three times the estimated forecast of 34% for developing nations. Though one could argue that developed countries have had bigger debt burden in the past ( post World War II ) reaching close to 250% of GDP in case of U.K., and over 100% in case of USA but these debts were repaid pretty quickly. On the other hand, we have to take into account that developed nations recorded decades of high growth just after the World War II ended which allowed them to get their fiscal house in order. In the current circumstances it is highly unlikely that the developed economies will see growth levels of post World War II era going forward.
Developed countries are in a catch-22 situation if they spend more to keep stimulating the economy they risk running into a huge unsustainable fiscal deficit. The combination of low growth and ballooning budget deficit could be very damaging to developed economies. The talk of the town is now increasingly focused on getting the fiscal deficit under control. It looks like the Governments in the developed world have resigned to the fact that they are entering into a low growth era. World Bank is now forecasting the GDP of high-income countries to shrink by over 4.2% in 09 and the overall global economy to contract by 2.9% in 2009. continue reading »
10 Jun, 2009 | by Sanjeev Kumar
The message from this global financial crisis is loud and clear; the system that we currently have is flawed, susceptible to produce crises and prone to systemic risk.
As a first step, we will have to fully address the SYSTEMIC RISK and the accumulation of excesses in global the economy that tends to build up during the period of strong growth. The hope is that the market participants, the governments and the regulators around the world have learnt their lessons from the ongoing crisis and will take this as an opportunity to reconstruct the financial system and the way it operates. Although one could argue whether it is safe put your faith in the ability of the market, the governments or the regulators to fix the SYSTEMIC RISK issue. No doubt, they have bungled up in the past and they would probably do it again. But that is not the point. We all make mistakes and learn from it. So we have to give them the benefit of the doubt. I hope we are all done with the blame game. The regulators and politicians were pretty quick to put all the blame on the banks, the investors, the insurance folks, the rating agencies and everybody else but not themselves. How convenient.
Honestly speaking, we are all to blame for this financial crisis including the folks on the main street who happily leveraged themselves not worrying about the shortcomings. In fact some folks on the main street got very comfortable with the idea of living on borrowed money without having the ability or resources to meet their obligations. And the reason for that was simple they figured that was the norm. continue reading »
20 May, 2009 | by Nidish Kamath
Forbes magazine had an interesting piece about large business acting as lenders to small business. This comes right behind the biggest credit meltdown in history. This lending comes in the form of retail financing or vendor financing, and in some cases, in the form of corporate venture funding. In 2008, as per NVCA, corporate venture funding arms amounted to 19.2% of all venture deals, an amount that works out to $5.4B out of total deals worth $28B. Similarly, the Forbes article pointed to $52B raised for corporate non-venture financing.
What does this mean for the shareholders in these corporations? Let us look at a few numbers. A stock screen on Yahoo for companies with positive free cash flow, and picked companies that have positive cash balance on their balance sheets reveals about 896 stocks, and most notable among them being Berkshire Hathaway with $16440 of cash available per share. Since free cash flow does not include the cost of debt servicing by these companies, one should also look at the total debt assumed by these companies. A vast majority of these companies have very little to zero debt on their balance sheets. So, to keep matters simple, let us assume there is no debt servicing expense.
The stock screen reveals that, on an average, after excluding outliers such as BRK-A, each company has a 15% return on equity, and $1.3B of cash in the bank. There is a total cash position of $1.2 trillion. In other words, the $5.4B continue reading »
23 Apr, 2009 | by Matt Cummings
There has never been a more important time than now to re-assess business development, sales and marketing programs to ensure your marketing focus is very selective. That’s best done by test marketing your service or product.
Major corporations never think about introducing a product without first testing it. Professional service organizations, on the other hand, never test market their services. They’ve been cruising on a development bubble for years and felt it wasn’t necessary. It is now.
There is a way to test market your services and respond directly to client needs with minimum marketing and business development costs while still increasing business.
You must begin with an unbiased audit of your present marketing and client retention programs. This is best accomplished by a seasoned, independent business development consultant. Once the audit has been done the consultant will have a clear understanding of exactly how you market your services, what your key people see as your strengths and weaknesses, how you see yourself in the marketplace and how you feel you are perceived by potential clients. This is the basic information you need to start the process of blending your present marketing and business development initiatives with client trends, past, present and future, into a marketing program that is so focused, so accurate and so successful that it never fails to increase business and profits. continue reading »
17 Apr, 2009 | by Sanjeev Kumar
All the talk about Recession and now DEPRESSION can make anyone nervous. Wall Street “ Pros “ make their predictions, and in doing so, create more chaos. This sentiment is probably shared by most folks on the main street. The market is behaving like a Yo-Yo. To get a perspective, let’s look at the rallies we had in the past week. One wonders, is this a sustainable rally or a one off, I want to feel good BEAR market rally. We are seeing markets rally despite of all the negative NEWS. One might argue that the Market is always FORWARD LOOKING. Which begs the question, is it forward looking or just SPECULATING? Let us just look at some of the headline stories of March 09, to get a perspective. GE downgraded; Germany’s growth collapsing by a record since world war II; UK and France Industrial output at lowest in over four decades; Jobless rate in the US reaching 10% in at least three states; U.S. household net worth plunging by a record $ 5.1 trillion; Japan’s GDP shrinking by over 12% annually; World Bank is now predicting a negative global growth in 2009. In spite of all these very negative news we saw the markets rallied.
Though, we saw the markets back in the RED again on 27th of March 09 after 5-6 days of consecutive rallies one could argue, what was the basis of this rally? Well may be some “INVESTORS” were expecting the worst and they believed these news were not that BAD after all? The launch of TALF and TARP program also probably helped carry the positive sentiments. The consensus view is that these programs would help but the reality is, we have a lot of continue reading »
28 Mar, 2009 | by Sanjeev Kumar
The markets seem to be questioning the government’s ability to find a workable solution to this current turmoil in other words government’s ability to find a FIX. And this is becoming increasingly evident by the way markets have reacted in the past few weeks. Al though one might say that the market itself is INEFFICIENT by design and DYSFUNCTIONAL in the current environment. And there are also those who would say that the whole MESS was created by the same market participants themselves in the first place. People who thought the party would never end and carried on with their reckless business practice. So going by the norm that the market is always right is a probably flawed perception? Well, whatever one might say, it’s hard to entirely disagree especially when we have a market that is increasingly behaving like a yo-yo. It either gets too optimistic or finds itself in a fluke rally only to shed all its previous gains or it takes an extreme negative view on everything loosing foresight.
Some would disagree with the above observation and some might agree. Whatever side you are on, one can safely say that without government support the market may not have survived.
But even with government support the market is not working as it should. continue reading »
22 Mar, 2009 | by Erik Luhrs
Unconscious fear-based business models propel most firms – and the people within them – head first into self-fulfilling failure. But with just five easy steps that dreaded scenario can be turned into fantastic success.
During 2008, all of us who are entrepreneurs and business owners faced the most devastating challenges since the Great Depression. But by simply following five proven steps we can all avoid stressful and financially detrimental pitfalls and mistakes in 2009. For years, through my business consulting company Make Your Business Boom, we’ve been showing clients throughout the world an innovative five-step method to identify profit-killing fears disguised as organizational plans and strategies. Companies that have implemented the formula have found that their poor performances of the past are quickly replaced with powerfully profitable positive results.
The fact is that individuals, groups, teams, and entire corporations consciously and unconsciously manifest fear into everything they do. Managing, marketing, branding, selling, and negotiating are all aspects of business that suffer from the fear factor – especially during times of extreme economic recession. To root out that toxic emotion and move the mental and emotional hurdles out your path to success, just follow these five steps: continue reading »