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Finance

What do job cuts in European banks mean for India

The Washington Post today reported the following about Credit Suisse, the Swiss investment bank –

Credit Suisse <CSGN.VX> will cut another 1,500 jobs and scale back its capital-guzzling investment banking business as it seeks to meet tough new regulations, it said on Tuesday after reporting disappointing third-quarter results.

Nomura , the Japanese investment bank maybe cutting twice the number of jobs as compared to its Swiss competitor –

Japan’s Nomura Holdings <8604.T> posted its first quarterly loss in 2-1/2 years on Tuesday due to a sharp drop in investment banking revenues and tripled its cost-cutting target to $1.2 billion in a setback to its overseas expansion plans.The debt crisis in Europe has ratcheted up pressure on Japan’s top brokerage to tap the brakes on a global expansion that started with its purchase of the Asian and European businesses of failed Wall Street bank Lehman Brothers in 2008.Nomura lifted a cost-cutting target to $1.2 billion from the $400 million announced in July in a move that will likely lead to hundreds of more job cuts on top of the roughly 400 it set out to reduce in September.While Nomura did not give details of planned job cuts, its chief financial officer, Junko Nakagawa, said 60 percent of its cost savings would come from Europe, where it is losing money and has 4,500 workers, or about 13 percent of its total staff.

While these job cuts really may mean not much to the average Indian, these signify changing winds in the global market, something that has started since the fall of Lehman in 2008. Firstly, these signify tumultuous times in the European markets, with the economies floundering under the impact of potential bankruptcy of governments.

Secondly one has to understand that European job cuts will impact in certain ways the backend support ops as well. Possibly some job transfer to India may happen as well.

Thirdly, if job cuts are happening in Europe now, will a similar situation happen in India in future? And if Yes, how is the country going to guard against it? Thats also something that needs to be considered.

What do you think on this? Let us know.

 

 

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Finance, Planning, Politics, Public Issues, Strategy

Lessons from Greece for India

By now almost everyone will know the entire Greece story and if you don’t then please do read some economic news on the world. The effect of the controversy on one country (Greece), one region (European Union), one currency (Euro) and million of people is unbelievable. Not really unbelievable … because this has happened to countries before but everytime the nuances are different. The important thing is to get a few lessons from the entire debacle specially for India!greece

  • Taxation System: I read last week that Greece has over 11 million residents but only only a few thousand claim to have an income above 100,000 euros. Is it really possible? Nevertheless if residents can get away without paying taxes then they will. For now India also has a taxation system full of loopholes, where anyone with a big company has to pay taxes but small/big business don’t and black money is prevalent. Government needs taxes and without taxes budget deficit cannot be reduced.
  • Importance of Currency: One of the main issues facing Greece is the issue of currency! Greece comes under European Union and has Euros as its currency. If Greece had an independent currency then it could have taken a hit on its currency, exports become cheaper, imports become expensive, the life in the country changes but it would not be as complex as it is.
  • Market will not always be rational: A lot of people ask that why has the focus on Greece come now? Why didn’t it come last year? The budget deficit was still very large last year. All the existing problems have existed for many years. Thus why now? Its because markets are not always rational and we all should be used to it. The bandwagon effect is most prominent in financial markets and when a run begins it is very .. very .. very difficult to fight it even for nations.
  • Don’t spend more than you earn: This is very difficult to maintain specially for Governments but if you continuously do it for years then what can you do.

This is definitely not an exhaustive list. Would be great to hear your views as well!

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Public Issues

Disabled Thinking

Strat. In warmly welcomes Harshad Karandikar – a student from IIM Kozhikode on our rapidly expanding author base.

I am Harshad Karandikar, a passionate blogger, traveler, nature lover, a bit of a photographer and a half a dozen other things which I keep forgetting. I am a student at IIM Kozhikode, and this is my first post here. A stint abroad has made me introspect on quite a few things around me, and this post deals with one of these things which I feel strongly about.

Why, as a nation, as a society, as individuals, are we so callous to the plight of our disabled?

A week or so in Germany, and I was wondering, why are there so many disabled people on the streets? People bound to wheelchairs, blind people, people on crutches, they seemed a common sight, a tad too common for me. I saw them quite often in public, crossing streets, walking on the sidewalks, getting on and off trains, and getting on with their lives like everybody else. A few more days, and I was crossing the street in the square below my apartment, watching a wheelchair bound guy crossing the street at his own pace, when, like the sudden realization of a ghastly fact, it struck me. There aren’t more disabled people in Germany. It’s just that, unlike back home, they are given the chance to live life as normally as possible.

It is an abominable act of cruelty, apathy and incredible indifference, the way we marginalize the lesser privileged sections of our society. The very people who need to be given a helping hand and brought into the mainstream, are being shut out of our cities, our roads, our glitzy malls, and just about each and every public area we can think of. For the disabled in our society, it is akin to being under permanent house arrest. It is inordinately silly to imagine a wheelchair bound person attempting to travel in any of our cities. It is a stretch of our imagination to think of them crossing a busy street, negotiating a sidewalk, or even entering or leaving a building. Just how do you, pray, leave a building which has no lifts, no ramps, nothing but a cramped staircase, in a wheelchair? Just how do you cross a street which has huge concrete blocks as dividers, reduced so sensitively to just a couple of feet for pedestrians to cross? Just how do you reach that divider when there is an angry mob of vehicles snapping at our zebra crossings, revving, pushing, snarling at anybody who stays for a moment longer, who doesn’t get out of the way, who makes them wait that extra second? And how do you even reach that street in the first place, with sidewalks having sudden rises and dramatic falls and being taken over by just about every individual who has no right to be there? So, they don’t. They don’t cross the streets, they don’t travel on the sidewalks, they don’t even come out of their houses, enduring a lifetime of imprisonment and loneliness and marginalization.

And before we raise the inevitable – and sickeningly disgusting – excuse of ‘them’ being developed nations with enough money to take care of these things, and we being not, I would say – most of these things take not money, but just a more sensitive and disciplined approach. It does not take money to stop at a zebra crossing or a red light – just the sensitivity that there are entities called as pedestrians, cyclists and disabled people, who do not have the sheer physical power that us arrogant vehicle users do, but have as much – or even more – a right of way as we do. It does not take money to respect the sanctity of a pedestrian crossing signal – something which has become a mockery in our cities. It does not take money, atleast too much of it, to make our buildings accessible by ramps.It does not take a non-negligible sum to make our sidewalks rise and fall with a wee bit more grace and behave with a bit more consistency. All it takes is an attitude, an approach, a sensitivity to the plight of fellow human beings who have just been very, very unfortunate.

The pedestrian signals in my town in Germany made a funny ticking noise, which always made me wonder about its purpose. On the last day of my stay there, I saw a blind man step onto the road the moment the pedestrian signal turned green, and cross it with confidence. I marveled at the simplicity and yet depth of the thinking process which had gone into the design of the system when I realized that the ticking noise had stopped. Is this the western culture and way of thinking that we so passionately love to dismiss, hate and vilify?

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Business, Planning, Public Issues

World Economy: Green Shoots or Burning Forest?

Of late, the world seems to have been carried away by the ‘green shoots’ appearing worldwide especially in America (thanks to President Obama) – ‘healthy’ bank profits and rising consumer spending in the US, the positive effect of the Chinese stimulus package, surging demand for industrial commodities and oil, a resumption of global trade (as seen in the recent spurt in the Baltic Dry Index), etc. And the latest in the Indian context, the suddenly ‘intelligent’ Indian voter returning the Congress to power with a veritable ‘sweep’.

All fine observations when taken individually and made more noteworthy by the gloom hanging over the world till a couple of months ago. However, it seems that in their optimism, everyone has missed the forest burning all around these ‘green shoots’.

US: US banks’ unexpected return to ‘profitability’ just before the stress tests has been exposed as the most egregious financial engineering (with the explicit approval of the Obama administration). Almost 8 million jobs have been lost and millions more (excluding those are GM and Chrysler) will be on the chopping block in the next few months. Home foreclosures are continuing unabated. Consumer credit has fallen off a cliff. Losses from credit cards, vehicle finance and mortgages are threatening to blow a hole in those ‘stress-tested’ balance sheets. And did I mention the murky, $600+ trillion world of OTC derivatives.

Asia: Trade has shuddered to a standstill with all major ports seeing 50% declines in traffic. China’s ‘export cities’ are shutting down ouright forcing millions to return to their rural homes. Growth which was expected to bottom out at 6.8% in Q4’08 slipped further to 6.1% in the first quarter of this year. Corporate profits in Japan are at their worst in more than a decade with even the likes of Toyota and Sony reporting full year losses. Singapore, Malaysia and Thailand may all see double digit GDP decline this year.

Europe: The UK and Spain were the first to feel the pinch due to the bubble in their construction industries. Germany, which was the region’s powerhouse has faltered with output registering its largest ever fall since WWII and the government not able to sell its own debt. With surging unemployment and falling tax receipts, the costs of maintaining the welfare state have not even started figuring in public dialogue.

India: The RBI’s claims and the SBI’s misleading 8% home loans not withstanding, corporate and consumer credit remain pretty tight. Which explains the stock market’s recent runup: with bank credit unavailable, IPOs and FPOs fueled by a surging SENSEX are now the only source of capital. WPI numbers may be moderating but CPI numbers tell a different story while the IIP continues to remain horrendous.

And to add just that extra bit of spice to this mix, another global pandemic is spreading across the planet. The ‘green shoot’ experts are saying that H1N1 is less virulent than expected and may be brought under control soon. But isn’t that what was said when H5N1 reared its ugly head a few years ago.

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Business, Finance, Planning, Strategy

Antitrust Laws in the wake of Intel Fine

Reading about the recent fine of $1.45 billion imposed on Intel by the European Union on TechCrunch, various thoughts came to my mind regarding the strategy of Intel. Intel is the most successful chip manufacturer in the world and it has maintained is dominance over the years. The giant must have taken many steps in this regard to keep its competitors (read AMD) behind.

Quoting from Wikipedia the competitive law or antitrust law has 3 main elements

  • prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels.
  • banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal, and many others.
  • supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to “remedies” such as an obligation to divest part of the merged business or to offer licences or access to facilities to enable other businesses to continue competing.

It has been claimed that Intel paid computer manufacturers¬† like Acer, Dell, HP, Lenovo and various retailers to postpone, cancel or downright avoid using AMD. By doing so it ofcourse broke the first prohibited practice on the list. Moreover it caused a lot of damage to AMD. I can’t imagine how AMD has managed to survive through such a hostile environment where no one is willing to buy your product, or with companies buying and then cancelling their orders later. AMD must be given due credit for it.

According to TechCrunch, the worldover commission for x86 CPU chip is worth Euro 22 billion per year, and worth Euro 6.6 billion per year in Europe itself. Intel controls 80% of this which means they make Euro 5.28 billion per year by selling x86 CPU chips in European Union. I believe a lot of credit must go to Intel chip technology for this but a sizable credit should also go to the strategy of manhandling their rivals like AMD. Lets give 30% credit to the prohibitive strategies and this gives us Euro 1.58 billion per year owing to the “wrong” policies of Intel that harm the industry and break the antitrust laws.

Lets try to analyze! According to the courts, Intel has been breaking the antitrust laws since many many years and has maintained an unlawful monopoly over the CPU chip market. Through this they have made billions and AMD has lost billions (Intel made Euro 1.58 billion per year according to above estimates). For breaking the rules the court have fined Intel Euro 1 billion! Yes, you read it correctly, Euro 1 billion of fine on Intel. But that means Intel will still make a profit after paying the fine even this year. So following wrong strategies and breaking competitive and antitrust laws seems profitable according to this. May be I have got it wrong but if the courts are sure than what Intel is doing is wrong then they definitely need to re-analyze the situation.

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