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Thursday, November 6, 2008

Economic News & Global Crisis - Results Updates

Positive economic news:

1. GAIL India may be nominated as the sole agency to sell natural gas from Reliance Industries' KG-D6 block to fertilizer units.

2. Reliance Industries denied a report that it had shut five polyester plants due to lower demand.

3. Bank of India cut lending rates by 75 basis points. Private sector banks will soon follow.

4. Brokerage firm ICICI Securities entered into Oman to cater to the needs of Gulf investors. More than 5 lakh Indians are living in Oman. ICICI Direct has 1.7 million overseas Indian customers in 100 countries.

5. Barack Obama will aggressively promote renewable energy industry. He will introduce new bill by the end of 2009 to promote solar energy and wind energy. Obama win is good news for natural gas industry but bad news for oil and coal industries. Fall in oil prices is good news for consumers.

Negative financial news:

1. Tata Motors will stop Commercial vehicle production for 3 days due to lack of demand. Ashok Leyland will soon follow Tata Motors.

2. Kingfisher Airlines defaulted on payments of lease rentals to GE Commercial Aviation.

3. Orissa steel industry asked Government for a bailout package.

4. Banks will go tough on lending to real estate firms despite increase in liquidity and rate cuts.

5. Google withdrew from Yahoo advertising deal. Will Yahoo be a soft target for Microsoft?

Global economic crisis updates:

1. Job Losses: Companies in the United States cut an estimated 157,000 jobs in October, the most in almost six years. Unemployment rate rose to 6.3% and is expected to touch 8% in the next few months. Pharma Company GSK will lay off 1,000 jobs in America. Obama has no magic wand to create jobs immediately unless he took severe steps on outsourcing. America will continue to lose around 2,00,000 jobs in the next few months.

2. Steel: Arcelor Mittal cuts production by 35% due to weak global demand. Company announced disappointing results.

3. USA: Services industry retracted at fastest space in October due to slowdown in sales. Non-manufacturing index (ISM Index) dropped to the lowest level since records began in 1997. Americans are rapidly cutting their consumption and economy is slipping quickly into contraction due to job losses and fall in real estate prices which are taking huge toll on the consumer confidence which is vital for any country to grow. Consumer spending accounts for 70% of US economy. If it contracts by biggest margin since 1980, what will happen? UK is reporting slump in services industry growth.

4. US: American mortgage application demand slumped by 30% and touched 8-year low.

5. Software: Google which recorded 120% growth in hiring in the last 2 years has unofficially stopped recruiting.

6. Banking: European banks UBS and RBS warned of further deterioration in the economy in the next quarter. Both banks warned that the outlook for the rest of the year was gloomy. RBS will post its first full year loss.

7. European Union: Retail sales fell across 15 nations in Euro Zone. Spain is the worst sufferer. European Central Bank will cut interest rates by tomorrow to improve consumer spending. Diagnosis is right but treatment is wrong.

Quarterly results analysis:

1. Diamond Power Infrastructure: Good results. Company reported 90% increase in both sales and net profit.

Decent results: Jayshree Chemicals, Sandur Manganese and Manappuram General Finance.

Poor results: Mercator Lines, Bilcare, Stone India, Aegis Logistics, Radico Khaitan, Rayban Sun Optics,

Good articles:

1. Must read article on American credit crisis.


Note about IKF: According to readers' comments, many blog readers seem to be betting on IKF Technologies. I invested in that stock as an "experiment" but not as a "pure investment". Investors should think twice before investing in such a small company like IKF. I invested less than 1% of portfolio in that stock. That is my small contribution to the young management of the Company. If they succeed in fund raising and execution, I will become a crorepati. If not, I will lose all my investment in the stock. If you are prepared to take such high risks, allot 1-2% of your money to such stocks.

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