Current Economy Crisis - Thoughts from Yogesh Chanbria

From Yogesh Chhabria :
Investor, Entrepreneur, Educator and Happionaire!

LATELY, I have been thinking a lot about the Lehman crisis. Spending
money that they didn't have and going beyond their means is one of the
main reasons for their situation today. In fact that is the cause for
the current economic crisis in the US.

When I see all this happening, I can only remember the good old days.
Then, karz (loan) was bad. People looked down upon those who took loans.
Parents would not give their daughter's hand in marriage to a man with
loans.

But of course, the times have changed now. Everyone I know has a loan.
The buzz word is EMI (equated monthly installment). Today, you can buy
everything on EMI - a house, a television, even an i-Pod. In fact I know
of someone who just bought a fancy BMW 3 series on EMI, instead of
buying a cheaper car outright with cash. I mostly prefer to take public
transport, but then I am an old man with old thoughts!

Anyway, coming back to what caused the crisis.

Imagine having Rs 2 lakh in your bank account, no regular income, yet
buying a house worth Rs 65 lakh, in the hope of selling it for a higher
price. Even if the price of the house fell by just 5 per cent (that is
Rs 3 lakh), you will go bankrupt.
This is what Lehman Brothers did; with around USD 20 billion they went
and bought assets worth over USD 600 billion. Isn't it suicidal and
simply foolish?

I am sure things would have been different, had I been the head of
Lehman brothers. But who wants an old conservative man like me to head a
complex financial institution.

But there are a few lessons that we can learn:

1.Live a balanced life and avoid overspending.

2. Don't buy things we don't need.

3. Don't buy Branded goods.

4. Don't buy excess Food, Clothes, Cosmetics, Footwear, electronics and
Fashion accuracies. Just think before you buy.

Tip: World still has a lot of growth ahead and the future holds
immense opportunities for us. Let us make the most of it and save and
invest it wisely instead of wasting our precious little on things we
don't need.

5. Try to balance life with work (No one is happy to work in their
professions).

6. Don't stress out your self, after work try to do some extra
activities like swimming, yoga, walking, running where you can divert
your mind from stress.

A thumb rule: Health is more important than money.

7. Try to understand each other (Wife and Husband) in financial matters
and help each other.

Tip: As soon as you get your monthly salary, set aside a fixed
amount, usually 35 per cent, for insurance, savings and investments. You
can then spend the rest.

8. Not all loans are bad. Loans that are 'need based' (home loans,
education loans) can always find a place in your finances against those
that are largely 'want based' (Credit cards, personal loans, car loans).

9. Borrow only if repayment is financially comfortable.

A thumb rule: Keep EMIs within 35 to 45 per cent of your monthly
income.

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U CAN MAKE A HUGE DIFFERENCE

U CAN MAKE A HUGE DIFFERENCE TO THE INDIAN ECONOMY BY FOLLOWING FEW SIMPLE STEPS. Please spare a couple of minutes here........ for the sake of India ... our country.. I got this article from one of my friends, but it's true, I can see this from day to day life, Small example,            Before 5 months                1 CAN $ = IND Rs 32            After 5 months. Now it is 1 CAN $ = IND Rs 37 Do you think Canadian Economy is booming? No, but Indian Economy is Going Down. Our Economy is in u'r hands INDIAN economy is in a crisis. Our country like many other ASIAN countries is undergoing a severe economic crunch. Many INDIAN industries are closing down. The INDIAN economy is in a crisis and if we do not take proper steps to control those, we will be in a critical situation. More than 30000 crore rupees of foreign exchange are being siphoned out of our country on products such as cosmetics, snacks, tea, beverages... etc which are grown, produced and consumed here . A cold drink that costs only 70 / 80 paisa to produce is sold for NINE rupees, and a major chunk of profits from these are sent abroad. This is a serious drain on INDIAN economy. "COCA COLA "and" SPRITE" belong to the same multinational company, "COCA COLA"? Coke advertisements says ' JO CHAHO HOJAYE, COCACOLA ENJOY' (Whatever the hell, let it happen, you drink coke) What can you do?

You can consider some of the better alternatives to aerated drinks.
You can drink LEMON JUICE, FRESH FRUIT JUICES, CHILLED LASSI (SWEET OR SOUR), BUTTER MILK, COCONUT WATER, JALJEERA, ENERJEE, MASALA MILK........ ..


Everyone deserves a healthy drink, including you!
Over and above all this, economic sanctions have been imposed on us. We have nothing against Multinational companies, but to protect our own interests we request everybody to use INDIAN products only for next two years. With the rise in petrol prices, if we do not do this, the rupee will devalue further and we will end up paying much more for the same products in the near future.


What you can do about it?

1. Buy only products manufactured by WHOLLY INDIAN COMPANIES.
2. ENROLL as many people as possible for this cause.


Each individual should become a leader for this awareness.

This is the only way to save our country from severe economic crisis. You don't need to give-up your lifestyle. You just need to choose an alternate product.

All categories of products are available from WHOLLY INDIAN COMPANIES.

LIST OF PRODUCTS

BATHING SOAP: USE - CINTHOL & OTHER GODREJ BRANDS, SANTOOR, WIPRO SHIKAKAI, MYSORE        SANDAL, MARGO, NEEM, EVITA, MEDIMIX, GANGA , NIRMA BATH & CHANDRIKA

INSTEAD OF - LUX, LIFEBOY, REXONA, LIRIL, DOVE, PEARS, HAMAM, LESANCY, CAMAY, PALMOLIVE


TOOTH PASTE: USE - NEEM, BABOOL, PROMISE, VICO VAJRADANTI, PRUDENT, DABUR PRODUCTS, MISWAK

INSTEAD OF - COLGATE, CLOSE UP, PEPSODENT, CIBACA, FORHANS, MENTADENT.


TOOTH BRUSH: USE - PRUDENT, AJANTA , PROMISE

INSTEAD OF - COLGATE, CLOSE UP, PEPSODENT, FORHANS, ORAL-B

SHAVING CREAM: USE - GODREJ, EMANI

INSTEAD OF - PALMOLIVE, OLD SPICE, GILLETE


BLADE: USE - SUPERMAX, TOPAZ, LAZER, ASHOKA

INSTEAD OF - SEVEN-O -CLOCK, 365, GILLETTE


TALCUM POWDER: USE - SANTOOR, GOKUL, CINTHOL, WIPRO BABY POWDER, BOROPLUS

INSTEAD OF - PONDS, OLD SPICE, JOHNSON BABY POWDER, SHOWER TO SHOWER


MILK POWDER: USE - INDIANA, AMUL, AMULYA

INSTEAD OF - ANIKSPRAY, MILKANA, EVERYDAY MILK, MILKMAID.


SHAMPOO: USE - LAKME, NIRMA, VELVET INSTEAD OF - HALO, ALL CLEAR, NYLE, SUNSILK, HEAD AND SHOULDERS, PANTENE

MOBILE CONNECTIONS USE - BSNL, AIRTEL INSTEAD OF - HUTCH


Every INDIAN product you buy makes a big difference. It saves INDIA . Let us take a firm decision today.


BUY INDIAN TO BE INDIAN we are not against of foreign products.

WE ARE NOT ANTI-MULTINATIONAL.

WE ARE TRYING TO SAVE OUR NATION. EVERY DAY IS A STRUGGLE FOR A REAL FREEDOM.

WE ACHIEVED OUR INDEPENDENCE AFTER LOSING MANY LIVES.

THEY DIED PAINFULLY TO ENSURE THAT WE LIVE PEACEFULLY. THE CURRENT TREND IS VERY THREATENING.


MULTINATIONALS CALL IT GLOBALISATION OF INDIAN ECONOMY. FOR INDIANS LIKE YOU AND ME IT IS RECOLONISATION OF INDIA ...

THE COLONIST'S LEFT INDIA THEN. BUT THIS TIME THEY WILL MAKE SURE THEY DON'T MAKE ANY MISTAKES.


WHO WOULD LIKE TO LET A" GOOSE THAT LAYS GOLDEN EGGS" SLIP AWAY.

PLEASE REMEMBER: POLITICAL FREEDOM IS USELESS WITHOUT ECONOMIC INDEPENDENCE .


RUSSIA , S.KOREA , MEXICO ..........THE LIST IS VERY LONG!!
LET US LEARN FROM THEIR EXPERIENCE AND FROM OUR HISTORY.

LET US DO THE DUTY OF EVERY TRUE INDIAN.


FINALLY: IT'S OBVIOUS THAT U CAN'T GIVE UP ALL OF THE ITEMS MENTIONED ABOVE,


SO GIVE UP ATLEAST ONE ITEM TO FOR THE SAKE OF OUR COUNTRY.

We would be sending useless forwards to our friends daily.
Instead please forward this mail to all your friends to create awareness.

"LITTLE DROPS MAKE A GREAT OCEAN ."

 

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Bankruptcy explained in simple words !!!

 

Bankruptcy explained

 

Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was 2 dollars as there were only two pieces of 1 dollar coins circulating around.

 

1) There were 3 citizens living on this island country.  A owned the land. B and C each owned 1 dollar.

 

2) B decided to purchase the land from A for 1 dollar. So, now A and C own 1 dollar each while B owned a piece of land that is worth 1 dollar.

 

* The net asset of the country now = 3 dollars.

 

3) Now C thought that since there is only one piece of land in the country, and land is non producible asset, its value must definitely go up. So, he borrowed 1 dollar from A, and together with his own 1 dollar, he bought the land from B for 2 dollars.

 

* A has a loan to C of 1 dollar, so his net asset is 1 dollar.

* B sold his land and got 2 dollars, so his net asset is 2 dollars.

* C owned the piece of land worth 2 dollars but with his 1 dollar debt to A, his net residual asset is 1 dollar.

* Thus, the net asset of the country = 4 dollars.

 

4) A saw that the land he once owned has risen in value. He regretted having sold it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollars from B and acquired the land back from C for 3 dollars. The payment is by 2 dollars cash (which he borrowed) and cancellation of the 1 dollar loan to C. As a result, A now owned a piece of land that is worth 3 dollars. But since he owed B 2 dollars, his net asset is 1 dollar.

 

* B loaned 2 dollars to A. So his net asset is 2 dollars.

* C now has the 2 coins. His net asset is also 2 dollars.

* The net asset of the country = 5 dollars. A bubble is building up.

 

(5) B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollars. The payment is by borrowing 2 dollars from C, and cancellation of his 2 dollars loan to A.

 

* As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollars.

* B owned a piece of land that is worth 4 dollars, but since he has a debt of 2 dollars with C, his net Asset is 2 dollars.

* C loaned 2 dollars to B, so his net asset is 2 dollars.

 

* The net asset of the country = 6 dollars; even though, the country has only one piece of land and 2 Dollars in circulation.

 

(6) Everybody has made money and everybody felt happy and prosperous.

 

(7) One day an evil wind blew, and an evil thought came to C's mind. "Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollars in circulation, and, I think after all the land that B owns is worth at most only 1 dollar, and no more."

 

(8) A also thought the same way.

 

(9) Nobody wanted to buy land anymore.

 

* So, in the end, A owns the 2 dollar coins, his net asset is 2 dollars.

* B owed C 2 dollars and the land he owned which he thought worth 4 dollars is now 1 dollar. So his net asset is only 1 dollar.

* C has a loan of 2 dollars to B. But it is a bad debt. Although his net asset is still 2 dollars, his Heart is palpitating.

* The net asset of the country = 3 dollars again.

 

(10) So, who has stolen the 3 dollars from the country ? Of course, before the bubble burst B thought his land was worth 4 dollars. Actually, right before the collapse, the net asset of the country was 6 dollars on paper. B's net asset is still 2 dollars, his heart is palpitating.

 

(11) B had no choice but to declare bankruptcy. C as to relinquish his 2 dollars bad debt to B, but in return he acquired the land which is worth 1 dollar now.

 

* A owns the 2 coins; his net asset is 2 dollars.

* B is bankrupt; his net asset is 0 dollar. (he lost everything)

* C got no choice but end up with a land worth only 1 dollar

 

* The net asset of the country = 3 dollars.

 

**************End of the story; BUT *********************

 

There is however a redistribution of wealth.

 

A is the winner, B is the loser, C is lucky that he is spared.

 

A few points worth noting -

(1) When a bubble is building up, the debt of individuals to one another in a country is also building up.

(2) This story of the island is a closed system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island's own currency. Hence, there is no net loss.

(3) An over-damped system is assumed when the bubble burst, meaning the land's value did not go down to below 1 dollar.

(4) When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the losers. The asset could shrink or in worst case, they go bankrupt.

(5) If there is another citizen D either holding a dollar or another piece of land but refrains from taking part in the game, he will neither win nor lose. But he will see the value of his money or land goes up and down like a see saw.

(6) When the bubble was in the growing phase, everybody made money.

(7) If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A) and take part in the game. But you must know when you should change everything back to cash.

(8) As in the case of land, the above phenomenon applies to stocks as well.

(9) The actual worth of land or stocks depends largely on psychology (or speculation).

Be wise n right on speculation if u want to win!!!

 

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An Open Letter From Grand Pa.............ABOUT LEHMAN BROTHERS

An Open Letter From Grand Pa By Yogesh Chabria LATELY, I have been thinking a lot about the Lehman crisis . Spending money that they didn't have and going beyond their means is one of the main reasons for their situation today. In fact that is the cause for the current economic crisis in the US.When I see all this happening, I can only remember the good old days. Then, karz was bad. People looked down upon those who took loans. Parents would not give their daughter's hand in marriage to a man with loans.But of course, the times have changed now. Everyone I know has a loan. The buzz word is EMI (equated monthly installment). Today, you can buy everything on EMI - a house, a television, an i-Pod. In fact I know of someone who just bought a fancy BMW 3 series on EMI, instead of buying a cheaper car outright with cash. I mostly prefer to take public transport, but then I am an old man with old thoughts! Anyway, coming back to what caused the crisis. Imagine having Rs 2 lakh in your bank account, no regular income, yet buying a house worth Rs 65 lakh, in the hope of selling it for a higher price. Even if the price of the house fell by just 5 per cent (that is Rs 3 lakh), you will go bankrupt. This is what Lehman Brothers did; with around USD 20 billion they went and bought assets worth over USD 600 billion. Isn't it suicidal and simply foolish? I am sure things would have been different, had I been the head of Lehman brothers. But who wants an old conservative man like me to head a complex financial institution. But there are a few lessons that we can learn: 1. Live a balanced life and avoid overspending. Tip: As soon as you get your monthly salary, set aside a fixed amount, usually 35 per cent, for insurance, savings and investments. You can then spend the rest. 2. Not all loans are bad. Loans that are 'need based' (home loans, education loans) can always find a place in your finances against those that are largely 'want based' (personal loans, car loans). 3. Borrow only if repayment is financially comfortable. A thumb rule: Keep EMIs within 30 per cent of your monthly income In that respect, there is one American who I really respect – Warren Buffet. He has lived in the same ordinary house for over three decades, drives his own medium sized car and leads an extremely regular 'middle class' life. If that's all it takes for the richest person on earth to be happy, why do all of us need to take extra stress just so that we can get things which aren't even essential?

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50 Factors that Affect the Value of the US Dollar

Would you believe something as mundane as a rainstorm in New England can affect the value of the Dollar? It's true. The US Dollar is subject to numerous influences, from politics to Walmart, and everything in between. The following list contains 50 factors that affect the value of the US dollar, both big and small.

 

Balance of trade and investment

The balance of trade and investment is often cited by analysts as the most important influence on the value of the dollar, with good reason. The balance of trade, related to the current account, represents the difference between what the US exports and imports in terms of goods and services.

The balance of investment, or financial account, represents the difference in exports and imports of capital. If exports exceed imports, in either the current account or financial account, it is called a surplus. When imports exceed exports, on the other hand, it is referred to as a deficit. The following points elaborate on how the current account and financial account affect the USD.

1. Balance of trade: Otherwise known as the current account balance, the trade balance is equal to the difference between imports and exports. The US has been running a trade deficit with the rest of the world for most of recent memory. At $2 billion a day and growing, the trade deficit is making foreign investors increasingly nervous and can affect the dollar significantly.
2. Falling prices on foreign goods: When the prices of foreign goods decrease, they become more attractive to American consumers, creating a larger trade deficit. Conversely, a rise in the prices of foreign goods, through natural price inflation or because or increased demand, can make American goods look more attractive and help to narrow the trade deficit. This also supports American industry and the economy. All of this serves to help the dollar.
3. Balance of investment: When the US imports more than it exports, it means investors from other countries have to buy US assets to keep the dollar from falling. Simply stated, if the US imports more than it exports, foreign investors must buy dollar-denominated assets like bonds or treasury securities in order to offset the difference.

Politics

Government policies often have a great impact on the value of the dollar. Savvy foreign investors know to keep an eye on the state of our political affairs, especially as they impact the strength of our economy and our ability to service the national debt.

4. Budget deficit and national debt: The US government's budget can affect the dollar's value, too. If foreign investors see that the government is spending more money than it currently has, they know that it will be forced to borrow from future generations as well as from the private sector from foreign entities. The US national debt currently stands at $9 trillion and is growing by over $1 billion per day.
5. Little or no default on debt: When the government keeps a good credit history, risk goes down and the dollar goes up. Fortunately, the US is currently considered the world's most credit-worthy borrower, which in large part explains why the dollar has remained strong.
6. President's popularity: Often, the popularity of the US president is tied to the value of the dollar. Experts debate whether or not the two have an effect on each other, but reports point out that "international investors like to a see a strong U.S. executive because they prefer a single national decider setting the agenda and fear a fractious, parochial Congress."
7. Terrorist attacks and war: Attacks damage consumer and business confidence, hampering economic growth. They also increase the likelihood of war, and consequently, a budget deficit to support associated spending. An ongoing war can quickly become expensive. It makes investors nervous because it will likely increase our national debt, and slightly increase the risk of default.
8. Geopolitical events: Anything that could be seen as precipitating a conflict or foreign involvement can affect the dollar negatively. The value isn't necessarily about what it's actually worth, but rather what investors think it's worth. Perception is often reality in the forex markets.
9. Consistent policies: If investors feel that things will largely stay the same, they'll flock to the dollar because it's a safe bet. This increases demand and thus, the value of the dollar. Remember, unlike many other investment vehicles, forex is hurt by volatility. This is especially true with regard to financial policy: if investors believe US policy is on the right track, they'll want to put money in dollar-denominated investments. Conversely, investors can lose faith in an economy that can change with new policies, so they'll see the dollar as less of a safe bet.
10. Government expansion: New departments and increased government functions cost money, too. Like other government expenses, expanding or creating new groups like the TSA and the Department of Homeland Security can lower the dollar's value due to their opportunity cost against other expenses in the budget.
11. Elections: Confidence in or wariness of a new administration can cause investors to flock to or flee from the dollar. Also, as new members of Congress are elected, new laws are passed which can affect our economy. Foreign investors may react positively or negatively to these changes, affecting the dollar's value.
12. Tax cuts for consumers: Tax cuts for consumers fuel spending, which can improve the economy of our country as well as others, like China. This can be good for the dollar as long as it does not deepen the trade deficit or our budget deficit. On the other hand, increases in taxes discourage personal spending, but they help with government spending and debt. This can slow the economy, but at the same time lessen our deficits.

Other countries

Political impact on the dollar does not originate entirely from the US; it can come from all over the world. Trade, conflict, consumption, and other issues can affect the dollar from outside our country.

13. Turmoil in other countries: When other countries are in a state of conflict, their respective currencies may be perceived as unstable. In this case, investors may flock to the dollar because it is considered a safer bet.
14. Stability in other countries: On the other hand, if other countries are consistent in their policy-making as well as politically and economically stable, the dollar may weaken because investors have more confidence in these alternative currencies. They'll see them as less risky and diversify into non-dollar denominated assets.
15. A change in foreign reserves: The USD benefits strongly from being the world's reserve currency. Most central banks hold more dollars than any other currency, but the dollar faces problems when they decide to diversify their currency investments. This could mean that they sell dollars, or simply just stop buying more. This is especially damaging when a large purchaser like China decides to stop adding to its foreign reserves.
16. A strengthening Euro: The dollar faces competition from the rising Euro. It's an attractive alternative to the dollar when investors choose to diversify or if the dollar becomes unstable.
17. Acceptance of oil in dollars: As long as the majority of world oil contracts are settled in USD, other countries have to use the currency. This increases demand for the dollar and therefore, its value. Additionally, most oil exporters hold a significant portion of their oil proceeds in dollars.
18. Strong foreign economies: If other countries' economies are booming, the dollar may fall because it will become a relatively less attractive place to invest.

Entitlements

As a significant government expense, entitlement programs can have a large impact on the way investors view the value of the dollar. If it looks like the US is letting things get out of hand, these programs can shake the confidence of investors. These are a few of the programs and issues that affect the dollar.

19. Social Security: It's apparent to Americans and foreigners alike that Social Security is a sinking ship that will only get worse with time. Clearly, this causes investors to lose faith in the US money management system, but when the US works to reform the program, some of this confidence is restored and the dollar can benefit.
20. Medicare/Medicaid: Like other costly entitlements, government sponsored-health care programs are becoming difficult to maintain, which could drive investors to seek countries with more stable budgets.

Economic theory

The laws of supply and demand are ever-present in economics, and currency trading offers a prime example of this law in action. These are a few of the effects that supply and demand exert on the value of the dollar.

21. Demand for dollars: This factor can be tied to most others, but it can function on its own as well. For example, "if French investors saw an opportunity in the U.S., they might be willing to pay more francs in order to get dollars to invest in the U.S." More francs per dollar means the dollar's value has risen.
22. Demand for physical currency outside the US: Some countries accept dollars as a physical currency, so they need a supply. For example, "large international demand for US currency bills in the 1990s gave the US government a unique and inexpensive-to-produce export." Although it requires supplying more currency, this is a factor that can strengthen the dollar's value.
23. Increase in money supply: With every new dollar printed, each one is valued less than before. The more dollars there are in circulation, the less the currency is valued because the supply has been increased. In practice, this usually causes inflation, which directly eats into the value of the dollar. While this would seem difficult to measure, the Federal Reserve periodically publishes M2 and M3 data reports on the US money supply.

Interest rates

Just like consumers might shop around for the highest-yielding savings account, foreign investors look for the best deal in currencies. Here's how interest rates affect the dollar's value.

24. Rise in interest rates: Higher interest rates mean more profit for investors, so a US rate hike will generally strengthen the dollar. In the long-term, however, the law of interest rate parity dictates that currency valuations and interest rates should move in opposite directions. The opposite also holds true. If the Fed lowers interest rates, investors might drop the dollar in the short-term because there's not enough profit in it.
25. Attractive interest rates in other countries: Regardless of whether US interest rates are rising or falling, the dollar's value also depends on how US interest rates stack up to those of other countries. If US rates are lower, investors may switch to different currencies that can offer a better return. On the other hand, if other currencies have unattractive interest rates, that allows us to entice investors with a better deal.
26. News about interest rates: Investors like to be ahead of the game, so if news of an interest rate hike or fall is released, the dollar may fluctuate in response to the coming inflow or outflow of investments that are expected to happen in the future.

American consumers

American consumers have the most at stake in the dollar's value. A fall in the dollar makes consumers' money worth comparatively less, putting a squeeze on the budgets of the Average Joe. Yet there are several things that consumers do that serve to drive down the buying power the dollar. Here's how Americans do it.

27. Consumer savings: Americans aren't big on savings. In fact, most families have a negative net worth. While this has contributed to a strong economy in the short-term, it means the US is ill equipped to support the economy in the long-term. Additionally, negative domestic savings drives us to import foreign savings, which harms the dollar.
28. Gas prices: Rising gas prices leave consumers with less money to spend elsewhere, or worse, drive them to borrow money to keep up their standard of living.
29. The Walmart/Honda factor: When Americans buy foreign goods like items at Walmart or Honda cars, we contribute to an economy that supports more imports than exports. This creates a trade deficit that weakens the dollar.
30. Slow spending: Just as too much spending can hurt the dollar, too little spending can have a negative effect as well. Analysts report that when we hit a slow shopping season, "the Fed might see that as a sign of consumer fatigue and choose to cut rates in an attempt to stimulate growth. That could hurt the dollar."

Housing

Recently, we've seen how a housing boom and subsequent bust can cause problems for families, investors and lenders in the form of defaulted loans and drops in the value of homes. These same issues cause problems for the dollar, too.

31. Slow housing market: A slow housing market creates a domino effect. Sellers are forced to lower their asking prices, which creates a decline in household spending and results in slowed economy growth, all of which hurts the dollar.
32. Strong housing market: A growing, steady housing market builds the equity and net worth of home owners, spurring spending and growing our economy. This supports the dollar.
33. Overinflated housing market: This kind of housing market results in a fall of equity and personal wealth, but it doesn't stop there; it makes the dollar fall as well, as the effect of declining home prices ripples throughout the economy.

Industry and economic indicators

American industry both affects and reacts to the value of the dollar. When the dollar falls, our goods become cheaper and more attractive. However, when we have a strong dollar, our industries have to compete harder against cheaper foreign labor and goods.

34. Low growth in manufacturing: Manufacturing levels serve as an indicator for the health of the US economy. An industry slowdown means a general slowing in the economy and can cause investors to become wary of the dollar.
35. Strong manufacturing growth: Conversely, strong manufacturing growth can indicate that the economy is picking up, creating a more attractive dollar.
36. Outsourcing: Outsourcing creates a trade deficit and causes US employment to suffer, resulting in a fall of the dollar. However, outsourcing also makes US companies more profitable and more attractive targets for foreign investment.
37. Entrepreneurship: Entrepreneurship creates attractive investment opportunities for foreign investors, supporting a stronger dollar.
38. Employment growth: Like manufacturing growth, employment growth is a good indicator for the overall health of the economy. Positive employment growth will attract more investors and create a stronger dollar. Unnaturally high unemployment causes the dollar to drop because the government loses tax revenue that could help with the deficit. It also takes consumer purchasing power away, which causes the economy to suffer.
39. Wage data: Higher or lower wages can either attract or scare off investors, creating a fluctuation in the dollar's value.

US capital markets

US stocks, bonds, and other investments can be appealing no matter where you are in the world. The performance of US capital markets can either attract or reduce foreign investment, which directly affects the dollar.

40. Bear markets: Falling values create investment losses that shake investor confidence and cause them to diversify or liquidate their portfolios, resulting in a loss for the dollar if the diversification involves an exodus from dollar-denominated assets.
41. Bull markets: Strong market values have the opposite effect, creating profits that attract new investors and encourage current investors to put more money into dollar-denominated assets. A booming market can attract investors, but it can also cause the dollar to fall when it corrects itself and investors pull out.
42. Accounting scandals: Accounting scandals like Enron can burn investors and cause foreign investment in US stocks to fall.

Economy

The current performance of the US economy is synonymous with the financial health of our nation. It signals to investors our ability to pay back debts as well as the profit level they may earn.

43. Economic growth and stability: In general, a strong economy will raise confidence, assuring foreign investors that they'll earn a good profit on a stable investment. Economic growth is even better, attracting investors who hope that their investment will grow, too. A boom in the economy can cause an investment rush that results in a temporary overvalue of the market. This can lead to a dollar loss when it corrects itself in a slow of the economy.
44. Economic recession: What goes up must come down. A slowing economy hurts the dollar, causing investors to pull out for fear that their investment will lose value.
45. Outperforming other economies: Economic performance is all relative. If the US economy is stronger than others, investors may turn to the dollar as a safe bet.

Weather

Weather affects the agricultural industry, energy consumption, and local economies. Any change, for better or for worse, can create a ripple affect that impacts the economy as a whole and causes the dollar to fluctuate.

46. Unfavorable farming conditions: Unfavorable farming conditions can result in slow crops and force grocers to turn to other countries to satisfy US agricultural needs. This further opens up the trade deficit and weakens the dollar.
47. Unusually hot summers: An unusually hot summer can cause a rise in energy costs for both consumers and industries. This can create a strain on the economy and cause the dollar to fall. Just like an unusually hot summer can sink the dollar, an excessively cold winter can do the same thing. It can cause energy costs to rise, and since must of our energy is imported, the dollar may be adversely affected. Additionally, consumers will presumably have less disposable income to pour into other areas of the economy.
48. Natural disasters: Natural disasters like Hurricane Katrina create a strain on local economies as well as the local and federal government as we work to repair damage and spend money on relief and rebuilding. This can cause the dollar to struggle.

Inflation

Inflation directly eats into the value of the dollar. The law of purchasing power parity (PPP) holds that a nation's currency and its general price levels should move in opposite directions.

49. Slow in inflation of foreign goods: A slow in inflation of foreign goods keeps prices of those goods steady, allowing American consumers to purchase the same amount or more of the same goods. This does not help to close the trade deficit and can weaken the dollar.
50. News about inflation: Of course, any news about possible inflation of the dollar or foreign goods can cause the foreign exchange market to react preemptively and fluctuate the dollar one way or another.

 

 

24-August-2008

NSE and BSE Tips: Pick of the week.

	Script Name	Target	Recommened	Term	Recommended by:
01				Medium Term Short Term Long Term
02				Medium Term Short Term Long Term
03				Medium Term Short Term Long Term
04				Medium Term Short Term Long Term
05				Medium Term Short Term Long Term
	Source: Published over the net, differnet media channel and brokerage houses.
	Disclaimer: All information provided is on "as is" basis and for information purposes only. Kindly consult your financial advisor or stock broker to verify the accuracy.
	Risk associated: Completly owned by Investor

 

 

 

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