- Crude price movement in 2009 & Average crude basket price in India
- Pricing components of Petrol price in India
- Comparison of pricing components in India with pricing components in US
- Gross Refining Margins of OMC’s
- Profit/Loss of Govt owned Oil Marketing Companies(OMC’s) which control a 80%+ market share
- Govt policy- Administered Pricing Mechanism(APM)/De-regulation of oil industry
Ø Market credibility and reputation impacted
Ø Downgrades by Financial analyst and possibly industry analysts as well
Ø Loss of customer confidence leading to existing customers/prospects moving away in the near to medium term. I am positive that no new customers will want to do business with Satyam.
Ø They will definitely lose some business in the next few quarters probably pushing Satyam into negative growth which again will have an impact on their share price/market cap
Ø Loss of investor confidence due to credibility loss of the management/board & failure of corporate governance
Ø Their stock has been hammered down and it has fallen more than 40% to around $7.8/share. Their market cap at the current price is $2.64B. They are an attractive acquisition target with considering that they have around $1B in cash reserves. I wouldn't be too surprised if someone mounts an hostile takeover bid for Satyam.
Ø In the current market conditions some of the above factors can have a significant impact and may even lead to the fall of Satyam
2008 will go down as a record year in the history. Most analysts and economists were predicting a slowdown in the economy and a soft landing earlier this year. However no one was even in the ballpark w.r.to the actual events. The complete world was taken by shock with the magnitude of the financial mess and global recession/slow down. There was unprecedented volatility in global stock markets, commodities like oil, Gold etc, Currencies, interest rates and a whole bunch of key economic fundamentals. This is expected to be the worst recession (some are even calling it depression) since the great depression in 1929. Almost all developed countries and key emerging/developing countries like China, Russia, Brazil, India etc are impacted in this global crisis.
Some of the key highlights/statistics from an economic perspective are listed below
ü All major stock markets down from their record highs in Oct 2007
o Dow is down almost 40-45% from its peak
o NASDAQ is down by around 45%
o S&P 500 is down by 40%
o BSE Sensex is down 55-60%
ü S&P 500 market has lost $6.17 trillion dollars in Market cap in the last year
ü S&P broad market index which has around 11,000 stocks in developed and emerging markets has lost around $17.7 trillion YTD
ü The entire Investment banks segment has been wiped out – Bear Sterns & Lehmann doesn’t exist anymore, Merrill Lynch has been acquired by BoA, Morgan Stanley and Goldman Sachs have converted into commercial banks
ü After Lehmann collapse the entire global credit market was frozen and there were massive money injections from multiple governments (US itself is investing over a trillion dollars this year to re-energize the market)
ü Several large & reputable US financial institutions have failed – Wachovia, Washington Mutual , Fannie Mae, Freddie Mac, AIG etc.
ü 25 US banks have failed so far this year and has been acquired by FDIC
ü US Federal Reserve interest rate is at a 50yr low of 0.25% with today’s cut
ü Oil started our 2008 at little under $100/barrel and reached a peak of $147/barrel in July and dropped to $40/barrel in Dec
ü In the last 15 months Gold which is typically the most stable asset went from <$700/ounce to a peak of $1020/ounce and is now back to $800/ounce
ü US Dollar has bucked a multi-year trend of weakening against global currencies and has appreciated against major global currencies by almost 15-20%
ü The US auto industry is in Doldrums and giants like GM, Ford and Chrysler are on the verge of going bankrupt
o GM’s stock is at a 80 yr low
ü US unemployment rate has gone up to 6.7% and number of unemployed people has increased by around 2.7 million during this year
ü All major global economies are either in recession or in the verge of getting into recession
o Ireland, New Zealand, France, UK, Germany, USA, Japan, Italy, Singapore, Spain to name a few
o China growth is expected to slow to 7.5 – 8 %. This is its lowest since 1990.
o India growth rate is expected to slow to 7.5% (from the 5yr average of close to 9%)
After reading the above the first question that comes to mind is have we seen the worst of this crisis?
I think we are in the middle of this crisis what we have seen so far is the first half of the crisis. There is more of financial crisis that is yet to come, Lay-offs are just starting out and has accelerated in the last 3 months and it will continue thru most part of 2009. There will be budget and spending cuts leading to reduction in customer spending and consequently impacting a wide range of industries etc. To cut to the chase the current scenario will continue thru the first half of 2009 and should start flattening out as we go thru the year. I expect the stock market to be volatile and fluctuate within a band during most of 2009 and start the climb up in 2010.
Is this shake out/recession good for us?
At the outset some of the news we hear and what we see in news would seem scary. However this is part of the economic cycle. The best part of open markets/economy is the self-correction. Companies start becoming inefficient and add lot of fluff over the years. These economic downturns are the times when some of the weak players are eliminated and strong players become more efficient and focused. While we go thru lot of pain in the near term it is good from a longer term perspective. Stock valuations, real estate valuations etc are very attractive now and while there is a little down side to it in the near term over the medium to long term they will start climbing up and this is a good time to start investing.
Stop worrying & start investing!!!
During this trip we stayed at the Excalibur resort in Vegas. I didn't do much gambling this time. I and Anu did some slot machines in a few casinos and overall i lost around $50 to $60 bucks. We spent a lot of time going around major casinos and seeing some shows etc. The highlight of the trip is the thrill rides that Anu went on top of Stratosphere. In fact this was one of the main reasons we visited Vegas. Anu really enjoyed these rides. I didn't join her as i didn't want to strain my back. Last time I went on a roller-coaster few months back i hurt my back and was on bed for close to a week. We spent a good half day at Stratosphere. The view of the city from the top of Stratosphere was amazing.
Las vegas has always amused me. I am at awe the way a barren desert has been developed into a sprawling metropolis and the gambling/night life capital of US within a short span of less than a century. Here are some of the snaps from my recent trip there.
The best place about this place is that it was not much crowded unlike GC south rim. The landscape and the canyon view was very good. You dont get the wide vistas like you get in south rim however it was still very good. We had under estimated the time we will need there. You can spend a good day here. There are quite a few sight seeing points. The Skywalk was very good. Its a little scary to get onto the glass floor looking down at the ground however once you get a hang of it this is that scary.
We went to the Skywalk/Eagle ridge and Guano point. We also met some native indians - Hualapai tribe and we saw a dance performance by them. It was impressive and a good cultural experience. Not too often do you get to see native indians in their traditional costumes and performing their traditional dances. There is a Hualapai ranch there which is also supposed to be good. However we didnt have time and i had to turn back. I had to drive the unpaved road while it was dark. We spent around 4 hrs there at the RIM it was dark by the time we turned back.There were a bunch of cars that was leaving with me so it was not that bad. Once we came back to the paved road the darkness was very impressive. The night was absolutely pitch dark. It was the 3rd or 4th day after new moon so there was not much light coming from the Moon. This place would make an amazing stargazing location. Overall I was very impressed with this place and would definitely go back there given a chance.
Pls see below some of the snaps we had taken during this trip.
With this i have hiked all the key trails in GC. Last year i did the rim to rim day hike along south kaibab & north kaibab trail, This trip i did the bright angel trial, I have done parts of the Rim trail, Hermit trail and Grand view trail during some of my earlier trips. The view from inside the canyon is very different from the view from the top. The rim-rim day hike that i did last year was my toughest hike to date.
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