Iceland’s stock exchange nose-dived 76% on opening this morning after trading was suspended for three days.
The Icelandic government took the decision to cease trading on Thursday after the country’s financial sector collapsed.
Local authorities say the index actually rose when financial stocks were removed as their continued suspension was causing a statistical anomaly.
The country has been on the verge of bankruptcy after the government was forced to take over its three largest banks, which held debts many times the island’s GDP.
Today, Iceland sought a €4bn loan from Russia, and may become the first Western country to seek support from the IMF in more than 30 years.
The country is also facing a legal challenge from the UK government, which has been forced to guarantee lost savings deposits in the British subsidiaries of Icelandic banks.
Tuesday, October 14, 2008
Monday, October 13, 2008
Switching to Cash May Feel Safe, but Risks Remain
By RON LIEBER Published: October 8, 2008
It’s a question we’ve all asked in our darker moments of late: Why not just put all of our investments in cash, 100 percent, just for a little while, until things calm down?
Some indexes around the world have fallen by a third or more.
Some people already seem to be acting on that instinct. In the first six days of October (through Monday), investors pulled $19 billion out of mutual funds that invest in United States stocks, matching the outflows for the entire month of September, according to TrimTabs Investment Research. “What clients are looking for is safety,” said John Bunch, president of retail distribution at TD Ameritrade. “They are seeking solutions that are backed by the federal government. Specifically, F.D.I.C-insured money funds and certificates of deposit. All of it is under the umbrella of, ‘Am I safe and insured?’ ”By fleeing for the comfort of safe and insured, however, investors with a time horizon beyond a few years may be doing real damage to their long-term finances. If you’re tempted to make a big move to cash right now, you’re doing something called market timing. It’s an implied statement that you’ve figured out the right moment to get out of stocks — and will also know the right time to get back in.So let’s dispense with the first part straightaway. The right time to move out of stocks was a year or so ago, before various stock indexes the world over fell by one- third or more. If you missed that opportunity, you’re hardly alone. But if you sell now, you’ll be locking in your losses. And once you’re in cash, there isn’t much upside. In fact, with interest rates low, you’re likely to lose money in cash, because inflation will probably eat up the after-tax returns you earn from a savings or money-market account. A guarantee of a small loss may sound good right now. But if you’re not bailing out of stocks once and for all, how will you know when it’s time to get back in? The fact is, any peace of mind you gain by being on the sidelines now will turn into a migraine once you see how much you can harm your portfolio over time by missing just a bit of any rebound.
H. Nejat Seyhun, a professor of finance at the Ross School of Business at the University of Michigan, put together a study in 2005 for Towneley Capital Management, where he tested the long-term damage that investors could do to their portfolios if they missed out on the small percentage of days when the stock market experienced big gains. From 1963 to 2004, the index of American stocks he tested gained 10.84 percent annually in a geometric average, which avoided overstating the true performance. For people who missed the 90 biggest-gaining days in that period, however, the annual return fell to just 3.2 percent. Less than 1 percent of the trading days accounted for 96 percent of the market gains. This fall, Javier Estrada, a professor of finance at IESE Business School in Barcelona, published a similar study in The Journal of Investing that looked at equity markets in 15 nations, including the United States. A portfolio belonging to an investor who missed the 10 best days over several decades across all of those markets would end up, on average, with about half the balance of someone who sat tight throughout. So moving to cash right now is just fine as long as you know precisely when to get back into stocks (even though you didn’t know when to get out of them). At some point, stocks will indeed fall enough that investors will remove the money from their mattresses and put it to work, causing prices to rise significantly. But, as Bonnie A. Hughes, a certified financial planner with the Enrichment Group in Miami, put it to me, there won’t be an e-mail message or news release that goes out when this is about to happen. It will be evident only afterward, on the few days when the market surges. And it gets worse for those who think they won’t have any trouble investing in stocks again later. Medium- or long-term investors who are considering a big move into cash right now are probably making an emotional decision, at least in part. For those who follow through, the same instincts will probably hurt when trying to figure out when to reinvest in stocks. “The emotional forces that drove them out of the market aren’t likely to let them back in ‘until things are better,’ ” Dan Danford of the Family Investment Center in St. Joseph, Mo., said in an e-mail message. “And for most people, things won’t feel better again until the market has already moved back up.” In fact, he added, plenty of people may not allow themselves to get back in until the market has already risen significantly. That situation is worth considering if you think your mood, or returns, can’t get any worse. “People feel worse missing out on the bounce-back that will inevitably come than they do hanging in there through the down period,” said Elaine D. Scoggins, a certified financial planner with Merriman Berkman Next in Seattle. The truly downbeat do not see the bounce as inevitable. This outlook is essentially a bet that our current predicament is so different that the equity markets won’t bounce back at all, even though they survived 1929, the Great Depression, 1987 and a major terrorist attack. I do not believe that the markets are in some kind of permanent decline, and I haven’t found an expert who does.That said, some retirees, or those close to leaving the work force, may be well-off enough to leave stocks behind for now. If the tumult in the economy and the decline in the markets have altered your risk tolerance, then it may make sense to move to a portfolio of Treasury bills, certificates of deposit and money market funds. Michael G. Coli, 56, of Crystal Lake, Ill., decided to take his 401(k) money out of the market in February. As an investor in his sons’ pizza restaurants, he noticed that an increasing number of customers were relying on credit cards. And as the owner of a winter home in Naples, Fla., he witnessed the housing market dive. Taken together, he decided to pull his retirement money, which he would need in five years, from the Vanguard Balanced Index Fund and move it all into certificates of deposit.“I had the feeling the economy was not on real firm ground,” Mr. Coli said. “I decided to get out and put it all in C.D.’s, and that is where I’ve been ever since.”If you can’t afford to live off the proceeds of cash investments (or dividends from your investment in your kids’ pizza joints), you may have no choice but to hold on to whatever stocks you have left. Then, you can hope for a rebound that will allow you to live out your later years more comfortably. Selling now and moving to cash could mean guaranteeing a lower standard of living for the rest of your life, because you’d be locking in your losses. But if you’re a bit younger, try to think of your investment portfolio in the same way you consider the value of your home, if you own one. After all, if you’re not moving anytime soon, your home is a long-term investment, too. “Today’s price is not your price. Your price is 10 or 20 years from now,” said Thomas A. Orecchio, of Greenbaum & Orecchio, a wealth management firm in Old Tappan, N.J. “Unfortunately, stock market investors don’t always see things that way.”
It’s a question we’ve all asked in our darker moments of late: Why not just put all of our investments in cash, 100 percent, just for a little while, until things calm down?
Some indexes around the world have fallen by a third or more.
Some people already seem to be acting on that instinct. In the first six days of October (through Monday), investors pulled $19 billion out of mutual funds that invest in United States stocks, matching the outflows for the entire month of September, according to TrimTabs Investment Research. “What clients are looking for is safety,” said John Bunch, president of retail distribution at TD Ameritrade. “They are seeking solutions that are backed by the federal government. Specifically, F.D.I.C-insured money funds and certificates of deposit. All of it is under the umbrella of, ‘Am I safe and insured?’ ”By fleeing for the comfort of safe and insured, however, investors with a time horizon beyond a few years may be doing real damage to their long-term finances. If you’re tempted to make a big move to cash right now, you’re doing something called market timing. It’s an implied statement that you’ve figured out the right moment to get out of stocks — and will also know the right time to get back in.So let’s dispense with the first part straightaway. The right time to move out of stocks was a year or so ago, before various stock indexes the world over fell by one- third or more. If you missed that opportunity, you’re hardly alone. But if you sell now, you’ll be locking in your losses. And once you’re in cash, there isn’t much upside. In fact, with interest rates low, you’re likely to lose money in cash, because inflation will probably eat up the after-tax returns you earn from a savings or money-market account. A guarantee of a small loss may sound good right now. But if you’re not bailing out of stocks once and for all, how will you know when it’s time to get back in? The fact is, any peace of mind you gain by being on the sidelines now will turn into a migraine once you see how much you can harm your portfolio over time by missing just a bit of any rebound.
H. Nejat Seyhun, a professor of finance at the Ross School of Business at the University of Michigan, put together a study in 2005 for Towneley Capital Management, where he tested the long-term damage that investors could do to their portfolios if they missed out on the small percentage of days when the stock market experienced big gains. From 1963 to 2004, the index of American stocks he tested gained 10.84 percent annually in a geometric average, which avoided overstating the true performance. For people who missed the 90 biggest-gaining days in that period, however, the annual return fell to just 3.2 percent. Less than 1 percent of the trading days accounted for 96 percent of the market gains. This fall, Javier Estrada, a professor of finance at IESE Business School in Barcelona, published a similar study in The Journal of Investing that looked at equity markets in 15 nations, including the United States. A portfolio belonging to an investor who missed the 10 best days over several decades across all of those markets would end up, on average, with about half the balance of someone who sat tight throughout. So moving to cash right now is just fine as long as you know precisely when to get back into stocks (even though you didn’t know when to get out of them). At some point, stocks will indeed fall enough that investors will remove the money from their mattresses and put it to work, causing prices to rise significantly. But, as Bonnie A. Hughes, a certified financial planner with the Enrichment Group in Miami, put it to me, there won’t be an e-mail message or news release that goes out when this is about to happen. It will be evident only afterward, on the few days when the market surges. And it gets worse for those who think they won’t have any trouble investing in stocks again later. Medium- or long-term investors who are considering a big move into cash right now are probably making an emotional decision, at least in part. For those who follow through, the same instincts will probably hurt when trying to figure out when to reinvest in stocks. “The emotional forces that drove them out of the market aren’t likely to let them back in ‘until things are better,’ ” Dan Danford of the Family Investment Center in St. Joseph, Mo., said in an e-mail message. “And for most people, things won’t feel better again until the market has already moved back up.” In fact, he added, plenty of people may not allow themselves to get back in until the market has already risen significantly. That situation is worth considering if you think your mood, or returns, can’t get any worse. “People feel worse missing out on the bounce-back that will inevitably come than they do hanging in there through the down period,” said Elaine D. Scoggins, a certified financial planner with Merriman Berkman Next in Seattle. The truly downbeat do not see the bounce as inevitable. This outlook is essentially a bet that our current predicament is so different that the equity markets won’t bounce back at all, even though they survived 1929, the Great Depression, 1987 and a major terrorist attack. I do not believe that the markets are in some kind of permanent decline, and I haven’t found an expert who does.That said, some retirees, or those close to leaving the work force, may be well-off enough to leave stocks behind for now. If the tumult in the economy and the decline in the markets have altered your risk tolerance, then it may make sense to move to a portfolio of Treasury bills, certificates of deposit and money market funds. Michael G. Coli, 56, of Crystal Lake, Ill., decided to take his 401(k) money out of the market in February. As an investor in his sons’ pizza restaurants, he noticed that an increasing number of customers were relying on credit cards. And as the owner of a winter home in Naples, Fla., he witnessed the housing market dive. Taken together, he decided to pull his retirement money, which he would need in five years, from the Vanguard Balanced Index Fund and move it all into certificates of deposit.“I had the feeling the economy was not on real firm ground,” Mr. Coli said. “I decided to get out and put it all in C.D.’s, and that is where I’ve been ever since.”If you can’t afford to live off the proceeds of cash investments (or dividends from your investment in your kids’ pizza joints), you may have no choice but to hold on to whatever stocks you have left. Then, you can hope for a rebound that will allow you to live out your later years more comfortably. Selling now and moving to cash could mean guaranteeing a lower standard of living for the rest of your life, because you’d be locking in your losses. But if you’re a bit younger, try to think of your investment portfolio in the same way you consider the value of your home, if you own one. After all, if you’re not moving anytime soon, your home is a long-term investment, too. “Today’s price is not your price. Your price is 10 or 20 years from now,” said Thomas A. Orecchio, of Greenbaum & Orecchio, a wealth management firm in Old Tappan, N.J. “Unfortunately, stock market investors don’t always see things that way.”
Those With a Sense of History May Find It’s Time to Invest
By ALEX BERENSON Published: October 11, 2008
The four most dangerous words for investors are: This time is different.
Ruby Washington/The New York Times
Five Weeks of Financial Turmoil In 1999, technology companies with no earnings or sales were valued at billions of dollars. But this time was different, investors told themselves. The Internet could not be missed at any price.They were wrong. In 2000 and 2001 technology stocks plunged, erasing trillions of dollars in wealth. Now investors have again convinced themselves that this time is different, that the credit crisis will push economies worldwide into the deepest recession since the Depression. Fear runs even deeper today than greed did a decade ago. But in their panic, investors are ignoring 60 years of history. Since the Depression, governments have become far more aggressive about intervening when credit markets seize up or economies struggle. And those interventions have generally succeeded. The recessions since World War II, while hardly easy, have been far less painful than the Depression.Now some veteran investors, including G. Kenneth Heebner, a mutual fund manager who has one of the best long-term track records on Wall Street, say that the sell-off has gone much too far and stocks are poised to rally powerfully if the downturn is less severe than investors fear.“The fact is, there are a lot of tremendous bargains out there,” said Mr. Heebner, who manages about $10 billion in several mutual funds. Indeed, by many measures stocks are as cheap as they have been in the last 25 years.He pointed to Chesapeake Energy, a natural gas producer that he owns in his CGM Focus mutual fund. In July, Chesapeake traded for $63 a share. On Friday, it fell as low as $11.99.He says that investors with a stomach for risk and a long time horizon should consider following Warren E. Buffett, who in the last three weeks has invested $8 billion in Goldman Sachs and General Electric.Mr. Heebner expects world economies to contract over the next year. But he said the market plunge in the last week was no longer being driven by rational analysis. Stocks are probably falling because of a combination of panic and forced selling by hedge funds that must meet margin calls from their lenders, he said.Mr. Heebner’s funds have not avoided the carnage this year. The CGM Focus fund is down about 42 percent so far in 2008. But his long-term track record is impressive. In the decade that ended Dec. 31, 2007, CGM Focus rose 26 percent a year, including reinvested dividends, making it among the best-performing mutual funds.Mr. Heebner is not alone in his optimism. “I think in years to come — I wouldn’t say months to come — we will perceive this as being a great value-buying opportunity,” said David P. Stowell, a finance professor at Northwestern and a former managing director at JPMorgan Chase. “Two and three years from now, it will seem very smart.”Even before their jaw-dropping plunge of the last month, stocks were not expensive by historical standards, based on fundamentals like earnings and cash flow. Now, after falling 30 percent or more since early September, stocks in stalwart, profitable corporations like Nokia, Exxon Mobil and Boeing are trading at nine times their annual profits per share or less. Many smaller companies are even cheaper. Some of those stocks are trading at five times earnings or less. Those ratios are historically low. Over all, the Standard & Poor’s 500-stock index is trading at about 13 times its expected profits for 2009, its lowest level in decades. In contrast, at the height of the technology bubble in early 2000, the stocks in the S.& P. traded at about 30 times earnings, the highest level ever. At the same time, the 10-year Treasury bond paid about 6 percent interest, compared with less than 4 percent today. Investors have fled stocks in favor of government bonds, insured bank deposits and other low-risk investments because they are deeply afraid of the worldwide economic crisis, said Stephen Haber, an economic historian and senior fellow at the Hoover Institution. But he said he believed that fear might have gone too far. “If there is good and wise policy, and government moves effectively, this need not play itself out in ways like the Great Depression, which is the image that is playing itself out in people’s mind,” Mr. Haber said. Government action typically does not work immediately, and banking crises around the world often require multiple interventions, he said.Still, optimists remain in the minority on Wall Street. Most investors seem to believe that the credit crisis will do substantial damage to stocks and overall economic activity.“We have never before seen for such sustained periods of time such a sustained turn away from risk taking,” said Steven Wieting, the chief United States economist for Citigroup. “This has broken out of the boundaries we’ve seen.” Economic activity appears to have slowed sharply in September, Mr. Wieting said. The panic last week took the biggest toll on financial companies, as well as companies that are highly leveraged. But stocks fell 10 to 30 percent even for companies typically thought to be resistant to economic downturns, like the manufacturers of consumer staples.For example, Newell Rubbermaid fell to $12.82 on Friday from $17.34 on Oct. 1, a 26 percent decline in 10 days. Newell Rubbermaid now trades at its lowest levels since 1990, and just eight times its expected earnings for next year. Yet Newell Rubbermaid, whose brands include Calphalon, is profitable and insulated from the credit crisis, said William G. Schmitz Jr., who follows household products companies for Deutsche Bank. “There’s really no balance sheet risk,” Mr. Schmitz said. The company also pays a 6 percent dividend.Newell Rubbermaid said in July that it would earn $1.40 to $1.60 a share for 2008, excluding restructuring charges. For 2009, stock analysts predict it will make $1.53 a share. And while a slowing economy may mean that people will be buying fewer products from Newell Rubbermaid, the recent plunge in oil prices will reduce its costs, Mr. Schmitz said.“The way the stock’s reacted, you’d think they were going out of business,” he said. Martin J. Whitman, a professional investor for more than 50 years, said that as long as economies worldwide could avoid an outright depression, stocks were amazingly cheap. Mr. Whitman manages the $6 billion Third Avenue Value fund, which returned 10.2 percent annually for the 15 years that ended Sept. 30, almost two percentage points a year better than the S.& P. 500 index. The fund is down 46 percent this year.“This is the opportunity of a lifetime,” Mr. Whitman said. “The most important securities are being given away.”
The four most dangerous words for investors are: This time is different.
Ruby Washington/The New York Times
Five Weeks of Financial Turmoil In 1999, technology companies with no earnings or sales were valued at billions of dollars. But this time was different, investors told themselves. The Internet could not be missed at any price.They were wrong. In 2000 and 2001 technology stocks plunged, erasing trillions of dollars in wealth. Now investors have again convinced themselves that this time is different, that the credit crisis will push economies worldwide into the deepest recession since the Depression. Fear runs even deeper today than greed did a decade ago. But in their panic, investors are ignoring 60 years of history. Since the Depression, governments have become far more aggressive about intervening when credit markets seize up or economies struggle. And those interventions have generally succeeded. The recessions since World War II, while hardly easy, have been far less painful than the Depression.Now some veteran investors, including G. Kenneth Heebner, a mutual fund manager who has one of the best long-term track records on Wall Street, say that the sell-off has gone much too far and stocks are poised to rally powerfully if the downturn is less severe than investors fear.“The fact is, there are a lot of tremendous bargains out there,” said Mr. Heebner, who manages about $10 billion in several mutual funds. Indeed, by many measures stocks are as cheap as they have been in the last 25 years.He pointed to Chesapeake Energy, a natural gas producer that he owns in his CGM Focus mutual fund. In July, Chesapeake traded for $63 a share. On Friday, it fell as low as $11.99.He says that investors with a stomach for risk and a long time horizon should consider following Warren E. Buffett, who in the last three weeks has invested $8 billion in Goldman Sachs and General Electric.Mr. Heebner expects world economies to contract over the next year. But he said the market plunge in the last week was no longer being driven by rational analysis. Stocks are probably falling because of a combination of panic and forced selling by hedge funds that must meet margin calls from their lenders, he said.Mr. Heebner’s funds have not avoided the carnage this year. The CGM Focus fund is down about 42 percent so far in 2008. But his long-term track record is impressive. In the decade that ended Dec. 31, 2007, CGM Focus rose 26 percent a year, including reinvested dividends, making it among the best-performing mutual funds.Mr. Heebner is not alone in his optimism. “I think in years to come — I wouldn’t say months to come — we will perceive this as being a great value-buying opportunity,” said David P. Stowell, a finance professor at Northwestern and a former managing director at JPMorgan Chase. “Two and three years from now, it will seem very smart.”Even before their jaw-dropping plunge of the last month, stocks were not expensive by historical standards, based on fundamentals like earnings and cash flow. Now, after falling 30 percent or more since early September, stocks in stalwart, profitable corporations like Nokia, Exxon Mobil and Boeing are trading at nine times their annual profits per share or less. Many smaller companies are even cheaper. Some of those stocks are trading at five times earnings or less. Those ratios are historically low. Over all, the Standard & Poor’s 500-stock index is trading at about 13 times its expected profits for 2009, its lowest level in decades. In contrast, at the height of the technology bubble in early 2000, the stocks in the S.& P. traded at about 30 times earnings, the highest level ever. At the same time, the 10-year Treasury bond paid about 6 percent interest, compared with less than 4 percent today. Investors have fled stocks in favor of government bonds, insured bank deposits and other low-risk investments because they are deeply afraid of the worldwide economic crisis, said Stephen Haber, an economic historian and senior fellow at the Hoover Institution. But he said he believed that fear might have gone too far. “If there is good and wise policy, and government moves effectively, this need not play itself out in ways like the Great Depression, which is the image that is playing itself out in people’s mind,” Mr. Haber said. Government action typically does not work immediately, and banking crises around the world often require multiple interventions, he said.Still, optimists remain in the minority on Wall Street. Most investors seem to believe that the credit crisis will do substantial damage to stocks and overall economic activity.“We have never before seen for such sustained periods of time such a sustained turn away from risk taking,” said Steven Wieting, the chief United States economist for Citigroup. “This has broken out of the boundaries we’ve seen.” Economic activity appears to have slowed sharply in September, Mr. Wieting said. The panic last week took the biggest toll on financial companies, as well as companies that are highly leveraged. But stocks fell 10 to 30 percent even for companies typically thought to be resistant to economic downturns, like the manufacturers of consumer staples.For example, Newell Rubbermaid fell to $12.82 on Friday from $17.34 on Oct. 1, a 26 percent decline in 10 days. Newell Rubbermaid now trades at its lowest levels since 1990, and just eight times its expected earnings for next year. Yet Newell Rubbermaid, whose brands include Calphalon, is profitable and insulated from the credit crisis, said William G. Schmitz Jr., who follows household products companies for Deutsche Bank. “There’s really no balance sheet risk,” Mr. Schmitz said. The company also pays a 6 percent dividend.Newell Rubbermaid said in July that it would earn $1.40 to $1.60 a share for 2008, excluding restructuring charges. For 2009, stock analysts predict it will make $1.53 a share. And while a slowing economy may mean that people will be buying fewer products from Newell Rubbermaid, the recent plunge in oil prices will reduce its costs, Mr. Schmitz said.“The way the stock’s reacted, you’d think they were going out of business,” he said. Martin J. Whitman, a professional investor for more than 50 years, said that as long as economies worldwide could avoid an outright depression, stocks were amazingly cheap. Mr. Whitman manages the $6 billion Third Avenue Value fund, which returned 10.2 percent annually for the 15 years that ended Sept. 30, almost two percentage points a year better than the S.& P. 500 index. The fund is down 46 percent this year.“This is the opportunity of a lifetime,” Mr. Whitman said. “The most important securities are being given away.”
Sunday, October 5, 2008
U.S. bank failures almost certain to increase in next year
SAN FRANCISCO, California (AP) -- Here's a safe bet for uncertain times: A lot of banks won't survive the next year of upheaval despite the U.S. government's $700 billion rescue plan to restore order to the financial industry.The biggest questions are how many will perish and how they will be put out of their misery, whether it's outright closures by regulators scrambling to preserve the dwindling deposit insurance fund or in fire sales made under government pressure.
Weakened by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s, when more than 800 federally insured institutions failed in a three-year period. That was during the clean-up phase of a decade-long savings-and-loan meltdown that wound up costing U.S. taxpayers $170 billion to $205 billion, after adjusting for inflation.
The government's commitment to spend up to $700 billion buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout.
"It will help, but it's not going to be the saving grace" because a lot of banks are holding construction loans and other types of deteriorating assets that the government won't take off their books, predicted Stanford Financial analyst Jaret Seiberg. He expects more than 100 banks nationwide to fail next year.
The darkening clouds already have some depositors pondering a question that always seems to crop up in financial panics despite deposit insurance: Could it possibly make more sense to stash cash in a mattress than in a bank account?
"It sounds like a joke," said business owner Mauricoa Quintero as he recently paused outside a Wachovia Bank branch in Miami. "But it sounds safer than the turmoil out there right now."
Not as many banks are likely to fail as in the S&L crisis, largely because there are about 8,000 fewer today than there were in 1988.
But that doesn't necessarily mean the problems won't be as costly or as unnerving; banks are much larger than they were 20 years ago, thanks to laws passed in the 1990s.
"I don't see why things will be that much different this time," said Joseph Mason, an economist who worked for the U.S. Treasury Department in the 1990s and is now a finance professor at Louisiana State University. "We just had a big party where people and businesses overborrowed. We had a bubble and now we want to get back to normal. Is it going to be painless? No."
With more super-sized banks in business, fewer failures could still dump a big bill on the Federal Deposit Insurance Corp., the government agency that insures bank and S&L deposits. The FDIC's potential liability is rising under a provision of the bailout that increases the deposit insurance limit to $250,000 per account, up from $100,000.
Using statistics from the S&L crisis as a guide, Mason estimates total deposits in banks that fail during the current crisis at $1.1 trillion. After calculating gains from selling deposits and some of the assets of the failed banks, Mason estimates the clean-up this time will cost the FDIC $140 billion to $200 billion.
The FDIC's fund currently has about $45 billion, a five-year low. But the agency can make up for any shortfalls by borrowing from the U.S. Treasury and eventually repaying the money by raising the premiums that it charges the healthy banks and S&Ls.
Through the first nine months of the year, 13 banks and S&Ls have been taken over by the FDIC, more than the previous five years combined.
The FDIC may be underestimating, or least not publicly acknowledging, the trouble ahead. As of June 30, the FDIC had 117 insured banks and S&Ls on its problem list. That represented about 1 percent of the nearly 8,500 institutions insured as of June 30. Entering 1991, about 10 percent of the industry -- 1,496 institutions -- was on the FDIC's endangered list.
Although the FDIC doesn't name the institutions it classifies as problems, this year's June 30 list didn't include two huge headaches: Washington Mutual Bank and Wachovia. Combined, WaMu and Wachovia had more than $1 trillion in assets; the assets of the 117 institutions on the FDIC's watch list totaled $78 billion.
Late last month, WaMu became the largest bank failure in U.S. history, with $307 billion in assets, nearly five times more, on an inflation-adjusted basis, than the previous record collapse of Continental Illinois National Bank in 1984. The FDIC doesn't expect WaMu's demise to drain its fund because JP Morgan Chase & Co. agreed to buy the bank's deposits and most of the assets for $1.9 billion.
Regulators dodged another potential bullet by helping to negotiate the sale of Wachovia's banking operations to Citigroup Inc. in a complex deal that could still end up costing the FDIC, depending on the severity of future loan losses. On Friday, a battle of banking giants erupted when Wachovia struck a new deal with Wells Fargo & Co. without government help, and Citigroup demanded that it be called off.
The banking outlook looks even gloomier through the prism of Bauer Financial Inc., which has been relying on data filed with the FDIC to assess the health of federally insured institutions for the past 25 years.
Based on its analysis of the June 30 numbers, Bauer Financial concluded that 426 federally insured institutions are grappling with major problems. That's about 5 percent of all banks and S&Ls.
About 15 percent of the banks on Bauer's cautionary list have more than $1 billion in assets. Not surprisingly, the troubles are concentrated among banks that were the most active in markets where free-flowing mortgages contributed to the rapid run-up in home prices that set the stage for the jarring comedown. By Bauer's reckoning, the largest numbers of troubled banks are in California, Florida, Georgia, Illinois and Minnesota.
"It's important for people to remember that not all these banks are going to fail, just because they are on this list," said Karen Dorway, Bauer Financial's president. "Many of them will recover."
James Barth, who was chief economist of the regulatory agency that oversaw the S&L industry in the 1980s, doubts things will get as bad as they did then.
"It's scary right now, but it's not as scary as a lot of people are making it out to be," said Barth, now a senior fellow at the Milken Institute, a think tank.
Mani Behimehr, a home designer living in Tustin, California, isn't feeling reassured after what happened to WaMu and Wachovia. After he heard the news that WaMu had been seized and sold to JP Morgan, he rushed out to withdraw about $150,000 in savings and opened a new account at Wachovia only to learn about its sale to Citigroup two days later.
"I thought this is the strongest economy in the world; nothing like that happens in this country," said Behimehr, 46, who is originally from Iran.
The tumult is creating expansion opportunities for healthy banks. Industry heavyweights such as JP Morgan, Citigroup and Bank of America Corp. have already rolled the dice on major acquisitions of financially battered institutions in hopes of becoming more powerful than ever.
Smaller players such as Clifton Savings Bank in New Jersey are bragging about their relatively clean balance sheets to lure depositors away from rivals that are wrestling with huge loan losses. The bank, with about $900 million in total assets, says just one of its 2,300 home loans is in foreclosure.
"There is going to be a flight to quality," predicted John Celentano Jr., Clifton Savings' chief executive. "People are going to start putting their money in places that were being run the way things are supposed to be run: the old-fashioned way.
Source:- http://www.cnn.com/2008/US/10/05/shaky.banks.ap/index.html
Weakened by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s, when more than 800 federally insured institutions failed in a three-year period. That was during the clean-up phase of a decade-long savings-and-loan meltdown that wound up costing U.S. taxpayers $170 billion to $205 billion, after adjusting for inflation.
The government's commitment to spend up to $700 billion buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout.
"It will help, but it's not going to be the saving grace" because a lot of banks are holding construction loans and other types of deteriorating assets that the government won't take off their books, predicted Stanford Financial analyst Jaret Seiberg. He expects more than 100 banks nationwide to fail next year.
The darkening clouds already have some depositors pondering a question that always seems to crop up in financial panics despite deposit insurance: Could it possibly make more sense to stash cash in a mattress than in a bank account?
"It sounds like a joke," said business owner Mauricoa Quintero as he recently paused outside a Wachovia Bank branch in Miami. "But it sounds safer than the turmoil out there right now."
Not as many banks are likely to fail as in the S&L crisis, largely because there are about 8,000 fewer today than there were in 1988.
But that doesn't necessarily mean the problems won't be as costly or as unnerving; banks are much larger than they were 20 years ago, thanks to laws passed in the 1990s.
"I don't see why things will be that much different this time," said Joseph Mason, an economist who worked for the U.S. Treasury Department in the 1990s and is now a finance professor at Louisiana State University. "We just had a big party where people and businesses overborrowed. We had a bubble and now we want to get back to normal. Is it going to be painless? No."
With more super-sized banks in business, fewer failures could still dump a big bill on the Federal Deposit Insurance Corp., the government agency that insures bank and S&L deposits. The FDIC's potential liability is rising under a provision of the bailout that increases the deposit insurance limit to $250,000 per account, up from $100,000.
Using statistics from the S&L crisis as a guide, Mason estimates total deposits in banks that fail during the current crisis at $1.1 trillion. After calculating gains from selling deposits and some of the assets of the failed banks, Mason estimates the clean-up this time will cost the FDIC $140 billion to $200 billion.
The FDIC's fund currently has about $45 billion, a five-year low. But the agency can make up for any shortfalls by borrowing from the U.S. Treasury and eventually repaying the money by raising the premiums that it charges the healthy banks and S&Ls.
Through the first nine months of the year, 13 banks and S&Ls have been taken over by the FDIC, more than the previous five years combined.
The FDIC may be underestimating, or least not publicly acknowledging, the trouble ahead. As of June 30, the FDIC had 117 insured banks and S&Ls on its problem list. That represented about 1 percent of the nearly 8,500 institutions insured as of June 30. Entering 1991, about 10 percent of the industry -- 1,496 institutions -- was on the FDIC's endangered list.
Although the FDIC doesn't name the institutions it classifies as problems, this year's June 30 list didn't include two huge headaches: Washington Mutual Bank and Wachovia. Combined, WaMu and Wachovia had more than $1 trillion in assets; the assets of the 117 institutions on the FDIC's watch list totaled $78 billion.
Late last month, WaMu became the largest bank failure in U.S. history, with $307 billion in assets, nearly five times more, on an inflation-adjusted basis, than the previous record collapse of Continental Illinois National Bank in 1984. The FDIC doesn't expect WaMu's demise to drain its fund because JP Morgan Chase & Co. agreed to buy the bank's deposits and most of the assets for $1.9 billion.
Regulators dodged another potential bullet by helping to negotiate the sale of Wachovia's banking operations to Citigroup Inc. in a complex deal that could still end up costing the FDIC, depending on the severity of future loan losses. On Friday, a battle of banking giants erupted when Wachovia struck a new deal with Wells Fargo & Co. without government help, and Citigroup demanded that it be called off.
The banking outlook looks even gloomier through the prism of Bauer Financial Inc., which has been relying on data filed with the FDIC to assess the health of federally insured institutions for the past 25 years.
Based on its analysis of the June 30 numbers, Bauer Financial concluded that 426 federally insured institutions are grappling with major problems. That's about 5 percent of all banks and S&Ls.
About 15 percent of the banks on Bauer's cautionary list have more than $1 billion in assets. Not surprisingly, the troubles are concentrated among banks that were the most active in markets where free-flowing mortgages contributed to the rapid run-up in home prices that set the stage for the jarring comedown. By Bauer's reckoning, the largest numbers of troubled banks are in California, Florida, Georgia, Illinois and Minnesota.
"It's important for people to remember that not all these banks are going to fail, just because they are on this list," said Karen Dorway, Bauer Financial's president. "Many of them will recover."
James Barth, who was chief economist of the regulatory agency that oversaw the S&L industry in the 1980s, doubts things will get as bad as they did then.
"It's scary right now, but it's not as scary as a lot of people are making it out to be," said Barth, now a senior fellow at the Milken Institute, a think tank.
Mani Behimehr, a home designer living in Tustin, California, isn't feeling reassured after what happened to WaMu and Wachovia. After he heard the news that WaMu had been seized and sold to JP Morgan, he rushed out to withdraw about $150,000 in savings and opened a new account at Wachovia only to learn about its sale to Citigroup two days later.
"I thought this is the strongest economy in the world; nothing like that happens in this country," said Behimehr, 46, who is originally from Iran.
The tumult is creating expansion opportunities for healthy banks. Industry heavyweights such as JP Morgan, Citigroup and Bank of America Corp. have already rolled the dice on major acquisitions of financially battered institutions in hopes of becoming more powerful than ever.
Smaller players such as Clifton Savings Bank in New Jersey are bragging about their relatively clean balance sheets to lure depositors away from rivals that are wrestling with huge loan losses. The bank, with about $900 million in total assets, says just one of its 2,300 home loans is in foreclosure.
"There is going to be a flight to quality," predicted John Celentano Jr., Clifton Savings' chief executive. "People are going to start putting their money in places that were being run the way things are supposed to be run: the old-fashioned way.
Source:- http://www.cnn.com/2008/US/10/05/shaky.banks.ap/index.html
Wednesday, September 24, 2008
N-deal with India to support 2.5 lakh jobs in US
Washington, September 23: America's premier trade body has projected that the Indo-US nuclear deal could revitalise the US nuclear industry and support 2.5 lakh high-tech jobs in the country, much higher than the estimate of the Bush Administration.
Lobbying lawmakers to approve the 123 Agreement before the close of the 110th Congress, the world's largest business federation, the US Chamber of Commerce, says that if American companies are allowed to compete in India, even modestly, it could support 2.5 lakh high-tech jobs.
"If US companies are allowed to compete, a modest share of that business could support 250,000 high-tech American jobs," R Bruce Josten Executive Vice President of the apex body representing more than three million businesses, said in a recent letter to the US Congressmen.
With India's 34-year nuclear isolation now history, the opportunity for US companies today is tremendous, with an expected 30,000 to 60,000 MW of new nuclear generating capacity by 2030, representing a potential USD 150 billion of new investment, Josten said.
He emphasised that Congressional nod was essential to compete with French and Russian nuclear firms who are already operating in the Indian market.
At the same time, William J Burns, Under Secretary for Political Affairs, who testified before the Senate Foreign Relations Committee last Friday had given a more modest figure of 3,000-5,000 new direct jobs and about 10,000-15,000 indirect jobs in the US if American firms won two bids for new nuclear plants in India.
Stating that the Indo-US civil nuclear deal enjoyed the support from the US nuclear industry, Burns had pointed out that New Delhi had indicated that it planned to import at least eight new 1,000-megawatt power reactors by 2012, and additional reactors in the years ahead.
"Preliminary private studies suggest that even just two of these reactor contracts for US firms would add 3-5 thousand new direct jobs and about 10-15 thousand indirect jobs in the United States," Burns had said.
Burns had also pointed out that by 2025, India will likely rank among the world's five-largest economies. "It's already among our fastest-growing export markets. It will soon be the world's most populous nation."
He said the bilateral civil-nuclear initiative also advanced the common strategic vision.
Environmentally, the Initiative will help India's population to meet their rapidly rising energy needs.
India is growing at rates of 8 to 9 per cent per year, and to sustain those rates of growth, it must expand its supply of energy exponentially.
Between 1980 and 2001, India's demand increased by a staggering 208 per cent, Burns said.
By contrast, China, so often described as the world's next big energy consumer, saw just a 130 per cent increase -- about half of India's -- over the same period, he pointed out.
India will soon outstrip Japan and Europe as an oil importer, he predicted.
The senior Bush Administration official also drew the attention of the lawmakers that India planned to double its capacity to generate electricity in the next seven years.
However, India relied primarily on domestically-produced coal whose ash content was double that of American coal and emitted far more nitrogen oxide, an element in smog, and carbon monoxide, a poisonous gas.
"This means that India will be one of the world's largest-producers of greenhouse gas emissions. And so its decision to rely, in part, on clean and efficient nuclear energy positively affects our own environmental future, not just India's," Burns had said.
Source:-http://www.expressindia.com/latest-news/ndeal-with-india-to-support-2.5-lakh-jobs-in-us/364946/
Lobbying lawmakers to approve the 123 Agreement before the close of the 110th Congress, the world's largest business federation, the US Chamber of Commerce, says that if American companies are allowed to compete in India, even modestly, it could support 2.5 lakh high-tech jobs.
"If US companies are allowed to compete, a modest share of that business could support 250,000 high-tech American jobs," R Bruce Josten Executive Vice President of the apex body representing more than three million businesses, said in a recent letter to the US Congressmen.
With India's 34-year nuclear isolation now history, the opportunity for US companies today is tremendous, with an expected 30,000 to 60,000 MW of new nuclear generating capacity by 2030, representing a potential USD 150 billion of new investment, Josten said.
He emphasised that Congressional nod was essential to compete with French and Russian nuclear firms who are already operating in the Indian market.
At the same time, William J Burns, Under Secretary for Political Affairs, who testified before the Senate Foreign Relations Committee last Friday had given a more modest figure of 3,000-5,000 new direct jobs and about 10,000-15,000 indirect jobs in the US if American firms won two bids for new nuclear plants in India.
Stating that the Indo-US civil nuclear deal enjoyed the support from the US nuclear industry, Burns had pointed out that New Delhi had indicated that it planned to import at least eight new 1,000-megawatt power reactors by 2012, and additional reactors in the years ahead.
"Preliminary private studies suggest that even just two of these reactor contracts for US firms would add 3-5 thousand new direct jobs and about 10-15 thousand indirect jobs in the United States," Burns had said.
Burns had also pointed out that by 2025, India will likely rank among the world's five-largest economies. "It's already among our fastest-growing export markets. It will soon be the world's most populous nation."
He said the bilateral civil-nuclear initiative also advanced the common strategic vision.
Environmentally, the Initiative will help India's population to meet their rapidly rising energy needs.
India is growing at rates of 8 to 9 per cent per year, and to sustain those rates of growth, it must expand its supply of energy exponentially.
Between 1980 and 2001, India's demand increased by a staggering 208 per cent, Burns said.
By contrast, China, so often described as the world's next big energy consumer, saw just a 130 per cent increase -- about half of India's -- over the same period, he pointed out.
India will soon outstrip Japan and Europe as an oil importer, he predicted.
The senior Bush Administration official also drew the attention of the lawmakers that India planned to double its capacity to generate electricity in the next seven years.
However, India relied primarily on domestically-produced coal whose ash content was double that of American coal and emitted far more nitrogen oxide, an element in smog, and carbon monoxide, a poisonous gas.
"This means that India will be one of the world's largest-producers of greenhouse gas emissions. And so its decision to rely, in part, on clean and efficient nuclear energy positively affects our own environmental future, not just India's," Burns had said.
Source:-http://www.expressindia.com/latest-news/ndeal-with-india-to-support-2.5-lakh-jobs-in-us/364946/
Monday, September 22, 2008
.S. stocks end sharply lower on bailout uncertainty, oil
Stocks fell sharply on Monday, giving back all of their sharp gains from Friday, amid uncertainty over a $700 billion plan to take the bad assets off of ailing financial firms' balance sheets to stem the year-long credit crisis. Adding to the market's woes, crude oil futures saw a surprise jump of nearly $25 to briefly trade at $130 a barrel, shortly before closing at $120.92, up $16.37 on the New York Mercantile Exchange. The Dow Jones Industrial Average ($INDU:11,015.69, -372.75, -3.3%) fell 373 points, or 3.3%, to end at 11,015. The S&P 500 index ($SPX:1,207.09, -47.99, -3.8%) lost 48 points, or 3.8%, to close at 1,207, while the Nasdaq Composite (COMP:2,178.98, -94.92, -4.2%) fell 94 points, or 4.2%, to end at 2,178.
---- Market Watch
---- Market Watch
Monday, September 15, 2008
Find the holdings of Lehman group in indian stocks which are in risk
GPIL 413832 ,
EMKAY 982134 ,
GTC- 300000,
IOLN -- 400000 ,
KPIT CUMMINS -- 862823,
ORBIT -1750000,
Anant Raj -- 5362500,
DCB --5300000,
SPIC MOBILE - 3289774,
CCL-- 503000,
Prithvi-- 476160,
West Coast paper- 2500000,
Kalpataru Power--350000,
IVRCL-1600000,
Pioneee Emb- 394356,
Eidelweiss-- 1350000,
SPice Tele-- 9203000,
Philips Carbon- 1000000,
PSL-980408,
TULIP-811004,
IOLN-585000,
Moser Bear -2252000,
Ruchi Soya--2270000,
Mastek-1423406,
Fedders LLyod-1505918,
Dhampur Sugar- 2277272,
NorthGate Tech- 1454904,
Triveni Eng-5873053,
NIIT- 2117926,
United phos-2489609,
CAIRNSOFT-3427000,
AMTEK AUTO--2947000,
KPIT CUMMINS-5700000,
PLEX--455625,
GATI--1112000
EMKAY 982134 ,
GTC- 300000,
IOLN -- 400000 ,
KPIT CUMMINS -- 862823,
ORBIT -1750000,
Anant Raj -- 5362500,
DCB --5300000,
SPIC MOBILE - 3289774,
CCL-- 503000,
Prithvi-- 476160,
West Coast paper- 2500000,
Kalpataru Power--350000,
IVRCL-1600000,
Pioneee Emb- 394356,
Eidelweiss-- 1350000,
SPice Tele-- 9203000,
Philips Carbon- 1000000,
PSL-980408,
TULIP-811004,
IOLN-585000,
Moser Bear -2252000,
Ruchi Soya--2270000,
Mastek-1423406,
Fedders LLyod-1505918,
Dhampur Sugar- 2277272,
NorthGate Tech- 1454904,
Triveni Eng-5873053,
NIIT- 2117926,
United phos-2489609,
CAIRNSOFT-3427000,
AMTEK AUTO--2947000,
KPIT CUMMINS-5700000,
PLEX--455625,
GATI--1112000
Wednesday, August 20, 2008
NSE to start live trading in currency futures
THE National Stock Exchange (NSE) has announced the launch of trading in currency futures from August 29. For the first time in India, it would be now possible to trade on the currency futures on a stock exchange platform. Currency futures are standardised foreign exchange contracts traded on a recognised stock exchange to buy or sell one currency against another on a specified future data, at a price specified on the purchase or sale data. Currently, RBI has approved only USD-INR currency futures to be traded on the approved exchanges. The size of the contract would be $1,000 and the contracts would expire on the last business day of any month at 12 noon. The contracts will be quoted and settled in rupees and the settlement price of the contract would be RBI's reference rate on the last trading day. This is expected to benefit participants such as corporates and individual investors, and also banks that are allowed to become members of this segment. However, at the moment foreign institutional investors (FIIs) and non-resident Indians (NRIs) would not be permitted to trade on the segment. The NSE is the first exchange to have received an inprinciple approval from Sebi to set up a currency futures segment. All trades done on the exchange would be cleared, settled and risk-managed by National Securities Clearing Corporation (NSCCL), which is set up as a separate and independent entity. In India, there is an active OTC market for forwards with an average daily turnover of $34 billion. World over, exchange-traded currency derivatives are also available and around 334 million contracts get traded annually.
Core projects
"Education is the most important element for growth and prosperity of a nation. India is in the process of transforming itself into a developed nation by 2020. Yet CORE has have 350 million people who need literacy and many more who have to acquire employable skills to suit the emerging modern India and the globe. "- Dr. APJ Abdul Kalam
CPTL is well positioned in the IT-Education spaceCPTL is a IT Product and services solution provider, mainly focused on education,logistics and ERP verticals, having presence in US, UK, Africa, Middle-East andIndia. CPTL has acquired 6 companies which have a presence in the ITEducationspace. Its subsidiaries like KCMG, Aarman, Emacs and ECS offerssuperior value to its entire business space. CPTL has good positioning inschool management system, accountability systems, assessment systemsand IT infrastructure systems which is considered to be a backbone to alleducation operations like data management systems and data analytical andreporting systems. The only segment in education space where currently CPTLdoesn't have presence is curriculum management which is considered to be apremium segment in education space. But CPTL is likely to fill up this businesssegment through tie ups or inorganic route in near future.Education presents a huge market opportunity in IndiaIndian economy has been growing at accelerated rate of 8-9% over past fewyears. The Indian government is taking steps to ensure that there is a sustainablewidespread economic growth that is inclusive in the future. This requires largeinvestment in education and also ensuring a uniform high-quality of education.This year, the Union Budget's allocation for school education went up 35% fromRs 171.3bn to Rs 231.4bn. It also announced that it intends to appoint 200,000more teachers and construct 500,000 more class rooms. This will increasefunds flowing into IT deployment in schools. The government is also targettingto raise the public spending on education from 3.7% of GDP to 6% of GDP in aphased manner. This clearly represents a huge growing market pie. 1)The company is expected to set up 40 IGNOU centers by FY09 and another 100 by FY10.It also plans to set up another 100 IGNOU centers every year for next 5 years.Core projects is expected to earn Rs 3 crore as one-time income for installation per centre and Rs 2.8 crore per year per centre as recurring income depending on the usage per hour.The development should catapult core projects into a unique league post 2009.
2)Real estate plays had a dream run post 2005 and players like unitech and several others made fortune for lot of people.At that point of time we had few listed scrips and that fuelled the rally.At some point of time i expect the same to happen in these educational plays.Hardly 4-5 companies available with stunning growth prospects.Core projects is one of the great plays which i feel everyone should opt in their core portfolio.
3)The company has also tied-up with IL&FS–ETS to offer comprehensive IT solutions in the education programmes under space.The JV is targeted at state governments that are initiating various education SSA.The JV expects to earn approximately Rs 1,000 per year/child as a typical state has about 8 million students.Hence, the project could result in potential revenue of Rs 800 crore each year for the next 5 years.The JV could earn a fat 120crs revenue per year.
4)IT spend in the education sector is expected to increase to US $62 billion by 2010. An end-to-end solution provider with three recent acquisitions,The company is becoming a major player in the global IT education space.The company currently has more than 30 products in the education space with clients in the US, UK, Africa and Nigeria.
Conclusion:-The company is expected to become a 1000crs company these year with NP expected to be around 165crs.Core projects is moving up the value chain from a pure IT player to an ITeducation-infrastructure company.Core projects is quoting at less than 10 times its fy09 earnings.The company is all set to get rerated in the bourses.I expect the counter to outperform markets in a major way. · During the financial year 2007-08, CORE has set about consolidating and strengthening their foundation in the endeavor to emerge as the most formidable player in the Global Education space. · Today, Core Projects and Technologies has a resource base of more than 650 people across 5 countries with offices spread across the globe in India, US, UK, UAE and Africa.· During the year, the Company reported Net Sales of Rs. 4,459 million , a growth of 130% over the previous year. The Net Profit too witnessed a growth of 153% at Rs. 845 million. · The Education space, in line with their strategy holds the centre stage in terms of year on year growth and its contribution to their topline. For the year under review, it represents 62% of the total revenue-pie. · The US and the UK markets have thus far been their key markets, where CORE has established significant presence over the year. It is a matter of pride that CORE has associated with various state governments and central governments across regions.· The thrust on education in these developed nations remains high priority. The key focus areas of the education policy there, encompasses raising the bar for the coursework to make it more advanced, encouraging teachers to enhance the performance of the underperforming schools and providing financial assistance to parents regarding the educational needs of their children. · Core Projects and Technologies has emerged as a global service provider in this space, equipped with a robust product portfolio, which offers end-to-end solutions across the Education Chain. This includes the following key areas - Assessment and Achievement, Accountability, Grants and Financial, Maintenance and Operations, Safety Student Information/Child Tracking, Communication, Professional Development and Consulting, Curriculum. Examination Management System and Teacher's Training are two of their key activities and CORE has see tremendous scope for these in India. · Their strategy is two pronged in these markets. One is grow organically by client additions by understanding the needs of the markets in which CORE has are operating and provide optimal solutions. The second is the inorganic route to growth. Their Company has a track record of successful acquisitions, and more importantly, the ability to integrate the same into their business. This year too, CORE has made significant inroads into the international markets by acquiring companies in UK and USA.· CORE has now seek to leverage their successful overseas model to expand their foothold in the domestic market. CORE is in active dialogue with approximately 9-10 states. CORE has believe their partnerships with IL&FS, IBM, CHL & IGNOU will provide significant momentum to their efforts in India. · India's flagship education programme, Sarva Shiksha Abhiyan has been provided Rs.131, 000 million in the Union Budget 2008-09. The focus is now shifting from access and infrastructure at the primary level to enhancing retention and improving quality of learning. The Secondary Education segment has been allocated Rs.45,540 million and the Union Budget has also announced a Model School programme, with the aim of establishing 6,000 high quality model schools with a proposed allocation of Rs. 6,500 million for the new scheme. · CORE has believe that- their experience in the international markets fortified by a product portfolio catering to the entire gamut of education domain has laid a strong foundation for their domestic growth prospects. The Public Private 'artnership (PPP) is a mix of qualitative and quantitative resources resulting into public and private players assuming different roles of varying dimensions resulting in numerous Models of PPP. CORE has, at Core Projects strongly endorse this theory. It is their constant endeavor to partner with the Government using innovative models and spread their wings across the education segment. · Another major growth driver for us going forward will be their tie up with NASA's Center of Higher Learning, USA, (CHL). They will work exclusively with Core Projects and Technologies in the Asia Pacific region and train a large group of their Engineers in the latest technologies related to Immersive Visualisation. · Their Company has also signed a MOU with Indira Gandhi National Open University (IGNOU) for setting up Visualization· Learning Centres at all IGNOU centres in India. This project will mark the beginning of a new era in instructional technology and significantly improve the efficacy of learning materials. Resultantly, it will raise the quality of education across the board. This unique initiative by the Company is a significant landmark as it highlights their commitment to set global standards in the education space in India.· The ERP and Logistics/ITES, segments provided stable growth during the year led by new client additions, geographical expansion and the launch of new products. They now represent 38% of the total revenue pie.
clients CORE has managed successful projects in the following locations:·
United States of America –· Georgia · Michigan · North Carolina · Maine · Illinois · Oklahoma · California · Minnesota · South Carolina · Tennessee · Texas · Massachusetts · Ohio · CECAS: North Carolina Department of Public Instruction · MEDMS: Maine Department of Education · Chicago Public Schools · Bright from the Start: Georgia Department of Early Care & Learning · Trussville City Schools · Metropolitan School District of Warren Township · United Kingdom – · Royal Institute of Public Health · Royal College of Surgeons · Royal College of Physicians · University of London · British Red Cross · Fire Services Exam Board · Royal Air Force Benevolent Fund (NFP) · Allied Irish Bank · AXA Guardian Insurance · Barclays Bank · Birmingham City Council · Bradford & Bingley · Department of Health (DoH) · Department of Trade and Industry (DTI) · European Commission · Fleming Premier Bank · Foreign & Commonwealth Office · Home Office · Hull City Council · Kent County Council · London Borough of Havering · London Underground · Metronet Rail · Metropolitan Police · Ministry of Defence (MoD) · National Health Service (NHS) · NHS Logistics Authority · National Offenders Management Service (NOMS) · National Policing Improvement Agency (NPIA) · National Probation Directorate · Nottingham City Council · Office of Government Commerce (OGC) · Preston City Council · Royal Bank of Scotland · Royal College of Nursing · Scottish Fisheries Protection Agency · Scottish Natural Heritage · Scottish Executive · Tube Lines · West Yorkshire Police · India –· State of Jharkhand
Others·
Department of Examinations, Sri Lanka · Ministry of Education, Zambia · Ministry of Education, Rwanda · Ministry of Education, Ghana · Ministry of Education, Uganda · Ministry of Education, Ethiopia · Ministry of Education, Kenya · Ministry of Education, Mozambique · Ministry of Education, Lesotho · Ministry of Education, Bahamas · Ministry of Education, Cayman Islands · Ministry of Education, Jamaica · Ministry of Education, Caribbean Council Clients - Logistics· Reliance Industries Limited, India · Balmer Lawrie & Co. Ltd., India · Benediction, India · Bafna Motors, India · Bafna Consultancy Services (P) Ltd., India Clients - ERP· Applied Materials · Verizon · Cascade Communications · Windriver Technologies · Sony · Indira Gandhi Open University (IGNOU)
Source: Newsletter
CPTL is well positioned in the IT-Education spaceCPTL is a IT Product and services solution provider, mainly focused on education,logistics and ERP verticals, having presence in US, UK, Africa, Middle-East andIndia. CPTL has acquired 6 companies which have a presence in the ITEducationspace. Its subsidiaries like KCMG, Aarman, Emacs and ECS offerssuperior value to its entire business space. CPTL has good positioning inschool management system, accountability systems, assessment systemsand IT infrastructure systems which is considered to be a backbone to alleducation operations like data management systems and data analytical andreporting systems. The only segment in education space where currently CPTLdoesn't have presence is curriculum management which is considered to be apremium segment in education space. But CPTL is likely to fill up this businesssegment through tie ups or inorganic route in near future.Education presents a huge market opportunity in IndiaIndian economy has been growing at accelerated rate of 8-9% over past fewyears. The Indian government is taking steps to ensure that there is a sustainablewidespread economic growth that is inclusive in the future. This requires largeinvestment in education and also ensuring a uniform high-quality of education.This year, the Union Budget's allocation for school education went up 35% fromRs 171.3bn to Rs 231.4bn. It also announced that it intends to appoint 200,000more teachers and construct 500,000 more class rooms. This will increasefunds flowing into IT deployment in schools. The government is also targettingto raise the public spending on education from 3.7% of GDP to 6% of GDP in aphased manner. This clearly represents a huge growing market pie. 1)The company is expected to set up 40 IGNOU centers by FY09 and another 100 by FY10.It also plans to set up another 100 IGNOU centers every year for next 5 years.Core projects is expected to earn Rs 3 crore as one-time income for installation per centre and Rs 2.8 crore per year per centre as recurring income depending on the usage per hour.The development should catapult core projects into a unique league post 2009.
2)Real estate plays had a dream run post 2005 and players like unitech and several others made fortune for lot of people.At that point of time we had few listed scrips and that fuelled the rally.At some point of time i expect the same to happen in these educational plays.Hardly 4-5 companies available with stunning growth prospects.Core projects is one of the great plays which i feel everyone should opt in their core portfolio.
3)The company has also tied-up with IL&FS–ETS to offer comprehensive IT solutions in the education programmes under space.The JV is targeted at state governments that are initiating various education SSA.The JV expects to earn approximately Rs 1,000 per year/child as a typical state has about 8 million students.Hence, the project could result in potential revenue of Rs 800 crore each year for the next 5 years.The JV could earn a fat 120crs revenue per year.
4)IT spend in the education sector is expected to increase to US $62 billion by 2010. An end-to-end solution provider with three recent acquisitions,The company is becoming a major player in the global IT education space.The company currently has more than 30 products in the education space with clients in the US, UK, Africa and Nigeria.
Conclusion:-The company is expected to become a 1000crs company these year with NP expected to be around 165crs.Core projects is moving up the value chain from a pure IT player to an ITeducation-infrastructure company.Core projects is quoting at less than 10 times its fy09 earnings.The company is all set to get rerated in the bourses.I expect the counter to outperform markets in a major way. · During the financial year 2007-08, CORE has set about consolidating and strengthening their foundation in the endeavor to emerge as the most formidable player in the Global Education space. · Today, Core Projects and Technologies has a resource base of more than 650 people across 5 countries with offices spread across the globe in India, US, UK, UAE and Africa.· During the year, the Company reported Net Sales of Rs. 4,459 million , a growth of 130% over the previous year. The Net Profit too witnessed a growth of 153% at Rs. 845 million. · The Education space, in line with their strategy holds the centre stage in terms of year on year growth and its contribution to their topline. For the year under review, it represents 62% of the total revenue-pie. · The US and the UK markets have thus far been their key markets, where CORE has established significant presence over the year. It is a matter of pride that CORE has associated with various state governments and central governments across regions.· The thrust on education in these developed nations remains high priority. The key focus areas of the education policy there, encompasses raising the bar for the coursework to make it more advanced, encouraging teachers to enhance the performance of the underperforming schools and providing financial assistance to parents regarding the educational needs of their children. · Core Projects and Technologies has emerged as a global service provider in this space, equipped with a robust product portfolio, which offers end-to-end solutions across the Education Chain. This includes the following key areas - Assessment and Achievement, Accountability, Grants and Financial, Maintenance and Operations, Safety Student Information/Child Tracking, Communication, Professional Development and Consulting, Curriculum. Examination Management System and Teacher's Training are two of their key activities and CORE has see tremendous scope for these in India. · Their strategy is two pronged in these markets. One is grow organically by client additions by understanding the needs of the markets in which CORE has are operating and provide optimal solutions. The second is the inorganic route to growth. Their Company has a track record of successful acquisitions, and more importantly, the ability to integrate the same into their business. This year too, CORE has made significant inroads into the international markets by acquiring companies in UK and USA.· CORE has now seek to leverage their successful overseas model to expand their foothold in the domestic market. CORE is in active dialogue with approximately 9-10 states. CORE has believe their partnerships with IL&FS, IBM, CHL & IGNOU will provide significant momentum to their efforts in India. · India's flagship education programme, Sarva Shiksha Abhiyan has been provided Rs.131, 000 million in the Union Budget 2008-09. The focus is now shifting from access and infrastructure at the primary level to enhancing retention and improving quality of learning. The Secondary Education segment has been allocated Rs.45,540 million and the Union Budget has also announced a Model School programme, with the aim of establishing 6,000 high quality model schools with a proposed allocation of Rs. 6,500 million for the new scheme. · CORE has believe that- their experience in the international markets fortified by a product portfolio catering to the entire gamut of education domain has laid a strong foundation for their domestic growth prospects. The Public Private 'artnership (PPP) is a mix of qualitative and quantitative resources resulting into public and private players assuming different roles of varying dimensions resulting in numerous Models of PPP. CORE has, at Core Projects strongly endorse this theory. It is their constant endeavor to partner with the Government using innovative models and spread their wings across the education segment. · Another major growth driver for us going forward will be their tie up with NASA's Center of Higher Learning, USA, (CHL). They will work exclusively with Core Projects and Technologies in the Asia Pacific region and train a large group of their Engineers in the latest technologies related to Immersive Visualisation. · Their Company has also signed a MOU with Indira Gandhi National Open University (IGNOU) for setting up Visualization· Learning Centres at all IGNOU centres in India. This project will mark the beginning of a new era in instructional technology and significantly improve the efficacy of learning materials. Resultantly, it will raise the quality of education across the board. This unique initiative by the Company is a significant landmark as it highlights their commitment to set global standards in the education space in India.· The ERP and Logistics/ITES, segments provided stable growth during the year led by new client additions, geographical expansion and the launch of new products. They now represent 38% of the total revenue pie.
clients CORE has managed successful projects in the following locations:·
United States of America –· Georgia · Michigan · North Carolina · Maine · Illinois · Oklahoma · California · Minnesota · South Carolina · Tennessee · Texas · Massachusetts · Ohio · CECAS: North Carolina Department of Public Instruction · MEDMS: Maine Department of Education · Chicago Public Schools · Bright from the Start: Georgia Department of Early Care & Learning · Trussville City Schools · Metropolitan School District of Warren Township · United Kingdom – · Royal Institute of Public Health · Royal College of Surgeons · Royal College of Physicians · University of London · British Red Cross · Fire Services Exam Board · Royal Air Force Benevolent Fund (NFP) · Allied Irish Bank · AXA Guardian Insurance · Barclays Bank · Birmingham City Council · Bradford & Bingley · Department of Health (DoH) · Department of Trade and Industry (DTI) · European Commission · Fleming Premier Bank · Foreign & Commonwealth Office · Home Office · Hull City Council · Kent County Council · London Borough of Havering · London Underground · Metronet Rail · Metropolitan Police · Ministry of Defence (MoD) · National Health Service (NHS) · NHS Logistics Authority · National Offenders Management Service (NOMS) · National Policing Improvement Agency (NPIA) · National Probation Directorate · Nottingham City Council · Office of Government Commerce (OGC) · Preston City Council · Royal Bank of Scotland · Royal College of Nursing · Scottish Fisheries Protection Agency · Scottish Natural Heritage · Scottish Executive · Tube Lines · West Yorkshire Police · India –· State of Jharkhand
Others·
Department of Examinations, Sri Lanka · Ministry of Education, Zambia · Ministry of Education, Rwanda · Ministry of Education, Ghana · Ministry of Education, Uganda · Ministry of Education, Ethiopia · Ministry of Education, Kenya · Ministry of Education, Mozambique · Ministry of Education, Lesotho · Ministry of Education, Bahamas · Ministry of Education, Cayman Islands · Ministry of Education, Jamaica · Ministry of Education, Caribbean Council Clients - Logistics· Reliance Industries Limited, India · Balmer Lawrie & Co. Ltd., India · Benediction, India · Bafna Motors, India · Bafna Consultancy Services (P) Ltd., India Clients - ERP· Applied Materials · Verizon · Cascade Communications · Windriver Technologies · Sony · Indira Gandhi Open University (IGNOU)
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