Saturday, July 30, 2011

Dooms day coming? Investors are now hedging against US debt default

US government is just a few days away from a default deadline, as warring politicians have not yet come to an agreement to raise the borrowing limit of the federal government. A few hours back the vote for debt bill in the Congress got delayed. So where are we heading?

As seen in the video given below investors, traders and executives across the globe are now starting to hedge for what was once unthinkable. Banks and money market funds are starting to hoard cash while businesses become even more wary about spending money.

There is also the worry about the impact of a downgrading of US debt by the global credit rating agencies. The US is the largest issuer of triple-A debt in the world, the issuer of the global currency and most bond prices around the world are benchmarked to the yield on US treasuries. Treasures and bonds make up the majority holdings of most of the conservative portfolios and there could be huge portfolio adjustments across the world if the US loses its top-notch rating. People may rush to put their money into safer physical assets like gold, oil and other metals driving their prices high.

Having said all that, I still believe that the US will come out of this unscathed but it might go to the wire. Democrats and Republicans are going to toil it out till the last moment to decide whether to increase income tax and an estate tax of the rich or to cut humanitarian social welfare or both.

Saturday, July 23, 2011

A possible U.S. Debt Default and should we be worried?

U.S. Debt Default might cripple the U. S economy and in an interlinked world economy, the ripple effect could be of unimaginable proportion. The impact on other economies, like India, would be grievous. In this post, we are trying to give an overview of the issue and how it might impact the world economy.

Wednesday, July 20, 2011

Social Media and Indian Financial Market Firms

The importance of social media for business has been established firmly by brands such as  Coca Cola, Ford, IBM, Dell, Burger King and Starbucks to name a few. These companies used social media platforms effectively to sell more products and services, engage and empower their customers to build a fan following, manage brand reputation, run effective marketing campaigns etc.

With more and more people in India coming online and social media gaining more and more online timeshare, Indian business also have started realizing the potential social media. Internet and online users are more significant for financial market firms in the investment, trading and banking sectors. With the push for online banking and online trading, social media becomes the natural choice for financial market firms to engage their customers.

Many Indian firms started off by using Orkut and then shifted to Facebook as the latter started gaining significant market share. Some firms have started setting up Linkedin and Twitter accounts. There are financial advisory and brokerage firms that have their own Youtube channels that post video update about market-related news and developments. Check out the Youtube channel of Kotak Securities and Karvy's Private Wealth channel. A few stockbroking firms have their own blogs, check out the blogs by Angel Broking and Geojit.

All these are steps in the right direction and if done right, social media can reap good rewards for a long time. But the million dollar question here is, Are We Doing it Right?

Wednesday, July 13, 2011

Why worry? your money in savings bank account is insured now.

Yes, it is true, your savings bank account may be already insured. It's a great initiative by RBI which formed Deposit Insurance and Credit Guarantee Corporation (DICGC) a fully owned subsidiary of RBI (Reserve Bank of India). Do they cover every thing? Almost... they cover all deposits such as savings, fixed, current, recurring, etc. Certain deposits of central and state govt are avoided and how much do they cover? They cover a maximum of 1,00,000 (1 Lakh Rupees) per depositor in a bank. Want to find out whether your bank is insured, please check out this list

When exactly DICGC is liable to pay?
If a bank goes into liquidation: DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit up to Rupees one lakh within two months from the date of receipt of claim list from the liquidator.

If a bank is reconstructed or amalgamated/merged with another bank: DICGC pays the bank concerned, the difference between the full amount of deposit or the limit of insurance cover in force at the time, whichever is less and the amount received by him under the reconstruction / amalgamation scheme within two months from the date of receipt of claim list from the transferee bank / Chief Executive Officer of the insured bank/transferee bank as the case may be.

What if, if I have more than one account on different banks?
In that case, each of your accounts will be insured separately.

During the recent subprime crisis in the US, many banks went bankrupt and a similar insurance had played a major role in securing at least some money of the account holder. Even though bankruptcies of major banks in India looks a remote possibility, it can never be ruled out. You will never know which of your friendly neighborhood bank will be the next Leman Brothers in the making.

Please do share us your thoughts on this scheme.

Monday, July 11, 2011

Dogs of Nifty - Revisit after 8 months

In one of our blogs about stock picking strategy, I had shared a very simple stock picking strategy called "Dogs of Nifty", which is an Indian version of the "Dogs of Dow" strategy. To see if the theory  really works, I created a finahub portfolio with an initial investment of rough rupees one lakh. Its been 8 months since I created the portfolio and let us see how the portfolio performs after 8 months. Do remember that, as per the strategy, the portfolio composition can be changed only after 1 year.

Following is the snapshot of the portfolio after 8 months. The portfolio is running a loss of Rs 11,287.60. Only two stocks (hero honda and ITC) are in green, rest of the stocks are in red.

It is still early to say that the portfolio will be in loss and that the strategy failed but still we can analyze the reason for such a bad show as of now. We created the portfolio on Nov 1st, 2010 and as evident from the Nifty index chart given below, Indian markets were soaring at that period of time.

Nifty was around 6100 on Nov 1st 2010 and at 5700 level as of now (11th Jul  2011).  The Dogs of Nifty strategy centers around finding index loggerheads but a bull run is not exactly the time to find loggerheads as valuation of all stocks will be affected by the overall positive market sentiments. In other words the loggerhead stocks were bought at a higher price than what it should have been and that will affect the profitability of the portfolio.

Having said all that, one needs to remember that the markets behave in periodic cycles and the current market phase is different from that of the month of November. So we will have to wait till Nov 2011 to make a meaning full comparison and the final verdict, until then let's keep our fingers crossed.

Let us know what you think about Dogs of Nifty, and it's relevance.

Saturday, July 9, 2011

You can hate IE but can't ignore it, not yet!

As developers/web designers it is easy to hate Internet Explorer (IE), the whole Microsoft machinery seems to be geared up in helping you at it. Often you hate it so much that you don't want to take a look at your web site in IE, wishing it did not exist in the face of the earth. This creates issues if you are deploying web applications/websites for the general public. We just ran into one and it is very embarrassing. We added a small menu bar to the top of our website, this was to allow users to sign in to the website from any public page without having to go to the sign in page.
The menu bar is a small innocuous HTML DIV that is positioned on the top right corner of the website. The changes were made in the site template and will affect all most all web pages in the site.
It worked perfectly in Firefox, Chrome, and Opera but we ignored IE :(.  We moved the change into production and send out a mail to all our users. We had also made some UI layout changes so the email made high claims about our new look & feel and how happy we are to get it to you, our dear users.

What we did not know was that the small menu bar had completely ruined our main tabs for the pages in IE 8.0.   IE users that came to our site must have found it to one annoying site to use. The most uneasy thing about the whole episode is that we have a relatively very high IE user percentage, hope we haven't alienated all those users.

Internet Explorer's market share is sinking but the market share it holds right now is still huge. According to NetMarketShare on May 2011, Internet Explorer has 54.27 percent of the browser market, followed by Firefox with 21.71 percent, Chrome with 12.52 percent, Safari with 7.28 percent and Opera 2.03 percent
Clearly, the average Internet user is on IE and if you need them on your websites better take care of them.

So it is OK to hate IE but you just can't ignore it, at least not in next five years...

Wednesday, July 6, 2011

We are changing -

It's us again. We are making some more interesting changes to our site for better user experience. Among this, the major change is to allow social sign in and more close integration with We also enhanced the stock picks a section to get stock picks from the people you follow. Major changes are

Hassle free Social Registration / Sign In
Now users can register/sign in using various social tools such as facebook,twitter,google,yahoo, linkedin and openId.

Improved Stock Picks section
Now users can easily see the stock picks shared by the people they follow on their Stock Picks tab itself. They will be able to share stock picks to their followers too.

Scribbles are Messages now
To avoid any possible confusion, scribbles are now renamed to Messages now. Now users can be sent and receive messages from a single place (Messages tab). Previously they had to go to other users public profile to post a scribble.

Close integration with facebook
Apart from facebook login support, now users can Like the marketupdates they see. Users can also recommend public profiles of other users to their facebook friends.

Please check out the site and let us know what you feel about the changes.
Invest Together