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apputtu no 1

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About apputtu no 1

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  1. Why is our resident tax and law expert Rachman, not commenting on this one. This should be his domain. We eagerly await his comments.
  2. Thanks for the explanation, Biriyani. But I think this is pumping of money into the economy by the BoE as this will definitely end up in the economy, as the BoE is going to pay interest on this extra balances.
  3. May I request that this topic is moved to the economics forum, please. Thanks.
  4. What a great thread!! Thanks to all especially Magpie and all those that induced his/her posts!! Magpie, can you please post the link to the above article if you can. Thanks. Govts can always confiscate the gold and ultimately shaft the savers. But will the western world have all the gold to buy all of the developing world, say china, india, etc.? Webmasters, Fubra people We need to preserve the interesting threads from disappearing and to do that, we need to be able to search through the forum and at least be able to order the topics by the date in which the topic is started, or the person who started and also we need to be able to select posts by a particular person. People like Magpie, spilne, spoon, Dr.Bubb, zzg... and FreeTrader provide insightfull posts and we need to be able to reach / access / see their posts quickly instead of wasting time going to thousands of pages of posts on the forum. Can you please consider this as part of you enhancement to the site? Thanks
  5. From http://www.financialsense.com/editorials/f.../2006/0504.html BULL IN BEAR'S SKIN? by Antal E. Fekete, Professor Emeritus, Memorial University of Newfoundland May 4, 2006 Dear Mr. Northwest: Thank you for asking the provocative question whether the current bull market in gold is stage-produced by the powers-that-be in order to divert attention from the deliberate devaluation of all currencies. Your letter has given me an opportunity to sort out my own thoughts on the subject. Here is the result. Supply and demand My analysis of the gold and silver market is very different from the conventional. I am a monetary scientist. Supply and demand equilibrium analysis means nothing to me. For a monetary metal both supply and demand are undefinable. There is no way to quantify speculative supply, still less demand. Yet without it the gold market is like Hamlet without the prince, to borrow a phrase from Samuelson. Speculators can jump back and forth between the long and the short side of the market at a moment’s notice, and in case of monetary disturbances they do. If you insist on using these concepts, the most you can say is that both the supply of and the demand for the monetary metal or its paper substitutes are infinite. Therefore the price can approach any conceivable figure, including infinity for the metal, zero for the paper substitutes. Of course, the banks and the government want to maintain the myth that futures markets provide a reliable link between the two. The fact remains, however, that this link is tenuous and illusory. It follows that any scientific analysis of the gold market must sidestep concepts such as supply, demand, equilibrium price and replace them with concepts such as asked price, bid price, spread, basis, contango, backwardation. Corner and short squeeze The literature on corners is scanty. Yet it is the possibility of corners and short squeezes that must be analyzed if we want to understand the present situation. The facts are as follows. While short squeezes are common, true corners are exceedingly rare. So much so that some authors flatly deny that successful corners are possible save under siege or blockade. By a corner I mean the attempt of longs in a commodity exchange to prevent the shorts from making good on their contractual obligations by forestalling supply. However, the shorts are going to move heaven and earth to get supplies to the market in time for delivery. The higher the longs have bid the price, the greater the incentive for the shorts to deliver. If we examine the historical corners in the Chicago wheat pit we shall see that every one of them was a short squeeze that fell short of being a successful corner. The shorts used every available means of conveyance from dinghies to triremes, from barrows to lorries to move supplies from distant places to the appointed elevators in time. Contrary to popular beliefs, the shorts are not stupid. Nor are they suicidal. They are responsible businessmen well able to calculate, including calculation of the cost of transportation by the fastest conveyances available such as supersonic aircraft if need be to carry supplies half-way around the globe. Whenever they sell short, they are not acting on impulse. They act on cold facts. They know full well that the futures markets fail to be symmetric. They know that there is a built-in bias favoring the longs at the expense of the bears: the risk shouldered by the former is limited (as the price cannot fall below zero) while that shouldered by the latter is unlimited (as the price can theoretically go to infinity). Whereas an individual short seller might miscalculate, it is virtually impossible that the shorts collectively would. Are the shorts really naked? It is a fatal mistake to underestimate your opponents, in this case the short sellers in precious metals, arguably the smartest lot on earth. They know how to do what Aristotle and latter-day economists have said was impossible: to make gold beget gold. I don’t for a moment give credence to the fable that the commercials are selling short naked. Most of their short position is hedged most of the time, if not directly by metal in their possession, then certainly indirectly by metal in the possession of the principals, i.e., for whom they act as a man of straw. The commercials are agents. They act on behalf of their customers, be they wealthy individuals who want to sell call options or futures on their gold hoard anonymously, or banks and governments that do not want you to find out what they are up to. The fact is that selling covered calls and puts is a more efficient way for a bull to husband his resources than buying gold and sitting on it. Consider the hypothetical scenario that the government of Israel wants unobtrusively accumulate gold. Or, to furnish an example of a more populous country, let’s assume that the government of China wants unobtrusively to accumulate silver in any conceivable amounts. The task is cut out for both countries. They have respectable hoards to begin with. Gold is the most portable form of wealth and the most frequently mentioned word in the Bible after God. China has been on a silver standard since time immemorial and did not participate in the silver-demonetization farce of the 19th century. The best course of action for a government wanting to accumulate gold or silver is to mislead the market by fomenting the bearish case. The net short position in gold represents its stake that it is willing to risk in an effort to get more gold and silver through market manipulation. In other words, the net short position is only apparent, a red herring to throw gold bugs off the scent. It is the tip of the iceberg that you can see and touch. What you don’t see and can’t touch is the bulk of the iceberg submerged: the huge physical gold and silver hoards that the owner wants to increase further by hook or crook. It can be done by hiring agents in the commodity pits. The commercials sell the metals short in excess of visible supplies, acting on behalf of their faceless principals. They sell more gold than the future output of the mines going out five years. They sell more silver than the total inventory held in exchange warehouses. The longs take the bait eagerly. They buy and hold in the hope that the shorts are overextended and will not be able to deliver. The point is that this is exactly what the shorts want them to believe. It is easy to predict what will happen in such a situation. The longs are sitting ducks and the shorts keep preying on them. They raid them periodically so that, after the shake-out, they can pick up gold and silver dropped by weak hands. Not only do they buy back what they have sold short as bait; they pick up a lot more. It is a wolf in sheep’s skin or, if you like, a bull in bear’s skin. The name of the game is to mislead the public and induce it to give up monetary metals for a pottage of lentils. I am not putting this forth as a thesis. It can never be proved or disproved. It is merely a hypothesis more plausible than the one suggesting that the shorts are as stupid as they are suicidal. Ted Butler believes that mountains of surplus silver, remnants of silver demonetization six score years and fifteen ago, that were still around in 1945, have long since been dissipated and “consumed”. Of course, the shorts welcome such beliefs and help foster them by all means. Aided by this myth they accumulate still more silver by fleecing the naive and overconfident longs who are cocksure that they are facing naked shorts in the pit. Meanwhile the watchdog agencies know that physical silver exists and can be delivered if necessary. One should not be so sardonic as to think that he was the only one to discover that silver was dirt cheap at $3. The “wolf pack” has also discovered it and started accumulating, albeit very, very quietly. Theirs is quite different from Butler’s “buy and sit” strategy. They are not waiting for the miracle of silver in four digits to happen. They do something in order to start drawing benefits from their investment immediately. From their vantage point the longer the price rise is stretched out, the better. Why? Because they know something that Butler apparently doesn’t: how to make silver yield an income provided that you can hide it under a bushel. There is no need to cry “foul play”. It will do nicely if you credit the shorts with more wits than you assign to the longs. Short covering and profit taking Granted that the shorts are bluffing to tease, taunt, and bait the bulls, it is clear that at one point short selling must become counter-productive. Large bait tickles small fish. When it does, the shorts pull in their nets. They cover. But the fact stands out that it is they, the shorts who call the shots even though their paper losses appear to be staggering, not the longs. Unknown to the public, these losses are far surpassed by gains on physical gold that the shorts have been amassing clandestinely at the expense of the longs for half a century. When the shorts pull the plug and cover their position, the longs are jubilant amidst cries of “cornered rats”. Yet all the longs can show for their effort is paper gold, while the shorts control an increasing slice of physical pie. The price of paper gold is destined to go to zero; that of physical to infinity. Who is fooling whom? The shorts realize that in any bull market there is bound to be periodic profit-taking. They don’t have to induce one. It will happen on its own accord. It is spontaneous and unpredictable. While it scares the daylight out of the longs; it is picnic for the shorts. It provides a reliable steady income for them, one that the longs sorely miss. Moreover, the shorts tend to sell into strength and buy into weakness. This is their strength. The longs typically buy into strength and sell into weakness. This is their weakness. Backwardation and basis Instead of the COT reports Butler should concentrate on such direct indicators as backwardation and basis. Backwardation is the market phenomenon whereby nearby futures are selling at a premium over the more distant. The normal condition for monetary metals is the opposite, contango, indicating that supply is plentiful. Backwardation in monetary metals is a foolproof indicator that supplies are getting tight. Basis is the name for the spread between the nearby futures price and the spot price. Its shrinking reveals that short selling is becoming counter-productive so that the shorts may be getting ready to cover. Conversely, the widening of the basis tells you that shortages may soon end the shorts are likely to start selling once more. Butler will write a hundred pages about the COT reports while writing half a sentence about backwardation. As far as I can tell, he has never written even a quarter of a sentence about the basis, in spite of a challenge I issued to him privately two years ago. Perhaps he has never got around to take a refresher course, so busy he was poring over reams of COT reports. Be that as it may, the basis is a most sensitive market indicator. When negative, it is a red-hot alarm indicating that offers to sell gold are drying up fast, and may be withdrawn at any time. Please don’t take me wrong. I am not against studying COT reports. All information is useful if you know how to interpret it intelligently. But it is not a very intelligent construction to put on the COT reports to assume that the bulk of the short position of the big commercials is naked. Having said this, I must credit Butler for advocating the ownership of metal fully paid for as against futures positions or ownership of unallocated metal in public warehouses. He also admits the possibility that the “wolf-pack” may engineer another sell-off even after having suffered horrendous paper losses during the latest run-up of the price. Can depression be averted? Where does all this leave us? The short-covering and profit-taking charade will continue, possibly for several years to come. There will be no disorderly cut-and-run by the shorts and no meteoric rise in the price. Spectacular rises, yes. But they will be followed by equally spectacular and sometimes protracted corrections testing the stamina, staying power, and intestinal fortitude of the longs. Volatility will increase faster than the moving averages. Exchange rules may be changed unilaterally favoring the shorts, prejudicial to the longs. Obituaries of the dollar are a bit premature. We cannot rule out the possibility that policy-makers favor a controlled devaluation of the dollar in terms of gold. By now they must realize that bilateral devaluations against selected currencies will never work. They would provoke trade wars and competitive currency devaluations. By contrast, a 1979-80 style devaluation of all currencies against gold should be acceptable to all governments, even though the outcome would be the same. The dollar would be devalued against other currencies at various rates, higher for the yen, less for the euro, and least for the renminbi. The trading partners of the U.S. would tolerate that without retaliating with discriminating tariffs and quotas. You see, my position is close to your own. Yes, as you say, there is an iceberg of gold and silver which is unseen that never enters the market. Yes, the watchdog agencies know this (as well as the identity of the principals of the short sellers who fool the market in posing and parading naked while in full armor, in a reversal of Andersen’s amusing tale) but they are sworn to secrecy. And yes, it is not impossible that this bull market in gold is stage-produced in order to devalue all currencies deliberately without the policy-makers making a scape-goat of themselves. The purpose of the exercise? Why, it is to get rid of the debt-incubus short of deflation, defaults, and depression. Come to think of it, a measured devaluation of all currencies against gold is the only hope to avoid an enormously destructive and protracted depression of the world economy that would be triggered by the sudden toppling of the Debt Tower of Babel. A planned melt-down, well-entombed inside of a golden sarcophagus, is the preferred way to go. What if I am wrong and policy-makers are getting more band-aid out of the medicine cabinet to patch up the disintegrating international monetary system? In that case may God help us survive the coming Armageddon. Yours, etc. A. E. F. May 4, 2006.
  6. Hi All, With so much bearish comments on beebs, Can we say with some confidence that we have moved from the 'Denial' phase to the 'Fear' phase? Regards,
  7. Hi All, I found this article below in the economic times, an indian newspaper. Please note that there is a huge stock / housing boom (or is it another bubble) going on there. Bombay stock exchange sensex is > 9000 and people say it will go beyond 10000 points. Similarly apartments in places like chennai, bangalore etc are scaling about Rs.40 lakhs (Rs.4 Million) or so. Could this article explain the reason? The writer is not clear in his thought process in some places but still good enough to stir a thought. Here it is: Please review it: Recycling dollars on a treadmill SWAMINATHAN S ANKLESARIA AIYAR [ WEDNESDAY, DECEMBER 21, 2005 12:10:24 AM] An astonishing global recycling of dollars is occurring. Asian countries, faced with a huge inflow of dollars, are recycling these dollars out by buying US treasury bonds. But foreign institutional investors (FIIs) are recycling those dollars right back into Asian equity markets. The net result is that Asian countries are becoming ever-bigger owners of US treasuries, while foreign portfolio investors are becoming ever-bigger owners of Asian equities. Both trends spell danger. Asian ownership of US treasuries is still a tiny fraction of the total. But foreign institutional investors (FIIs) are rapidly becoming majority shareholders in top companies across Asia. This has the potential to create a serious nationalist backlash. Possibly three-quarters of the fast-rising forex reserves of Asian countries are held in dollars. China has $769 billion of forex reserves, Taiwan $252 billion, Korea $207 billion, India $138 billion, Hong Kong $122 billion, others have billions more. But these add up to only a small fraction of total outstanding US treasuries of over $8 trillion. By contrast, FIIs own majority stakes in top companies across Asia. They own 50-74% of Infosys, Satyam Computers, ICICI Bank, HDFC Bank and many others. Brokers say loosely that FIIs now own the sensex, but that is not quite true: many Indian promoters have majority stakes. But foreign ownership is rising daily. In South Korea, an estimated 60% of the shares of top companies are now owned by FIIs (including 64% of Samsung and 70% of POSCO). FII ownership is rising fast in other emerging markets too. After being burned by the Asian financial crisis, Asian countries have run large current account surpluses. This, combined with inflows of foreign direct and portfolio investment, means that dollars have flooded in unprecedented amounts into Asia. If unchecked, this would have caused Asian currencies to appreciate, and dented their export prospects. To prevent this, the RBI and other Asian central banks have bought billions of dollars from the market and parked them abroad in western treasury bonds. Central banks are non-commercial: their mandate is to minimise risk, not maximise returns. So they invest only in the safest international instruments (bonds of rich-country governments) regardless of low yields. Massive Asian buying has driven down 10-year treasury yields in the US to 4.5%, barely above the current inflation rate, and barely above the short-term rate of 4.25%. Asian central bank buying has driven long-term yields down to non-commercial levels. Wall Street managers may get fired for poor returns, but no central banker ever got fired for buying US treasuries, no matter how low the yield. But this has had commercial consequences. Asian central banks have crowded western investors out of western bond markets. Western investors have switched billions out of US treasuries into alternatives, such as equities, derivatives and junk bonds. The switched billions have already made US equities and corporate bonds look overvalued. So, many western investors are heading for emerging markets, from Latin America to Asia. India alone looks like receiving $10 billion in 2005, on top of $8.5 million the previous year. The RBI is trying to recycle the dollar inflow out of the country. Alas, foreign investors are recycling the dollars right back into India. This is recycling on a treadmill. What are the consequences? First, there is a huge deadweight loss: recycling entails significant transactions costs. Second, the RBI aim of a safe haven for forex reserves is jeopardised. The inexorable rise of US foreign debt increases the risk of a dollar collapse, which in turn will mean a collapse of Asian forex reserves held in “safe” US treasuries. If the US tries to check the dollar’s fall by raising interest rates, that will depress treasury prices, leaving Asian central banks with huge losses regardless. Third, I believe that recycling means huge losses for Asian countries and huge gains for FIIs, since the return on US treasuries will be far less than the return on Asian equities. Some marketmen will disagree; past booms in emerging markets have ended in tears. But I would argue that the current recycling is a new phenomenon, and that Asian economies today are infinitely safer than they were in the past. Certainly the actual experience in the last two years is that FIIs have made a fortune in emerging markets, while Asian central banks have obtained low returns on forex reserves. Fourth, there are sterilisation losses. When the RBI buys dollars, it releases additional rupees into the markets that could cause inflation. To prevent this, it mops up excess rupees by selling Indian treasuries (technically called sterilisation). But the Indian treasuries that it sells have a higher yield than the dollar securities it later buys, so it suffers a huge loss. Fifth, foreign ownership of Asian companies is rising fast. I have argued in the past that this is a favourable trend: FIIs have catalysed major stock reforms that have greatly improved transparency and shareholder value. But beyond a limit, foreign acquisitions will cause a nationalist backlash. Some of this is familiar ground to those who have debated exchange rate policy over the years. But the debate needs to take note of a new factor: outward recycling by the RBI is being foiled by inward recycling by FIIs. I earlier called this recycling on a treadmill, but that is not quite the case. A treadmill represents a status quo, but the current recycling means that Asians own ever more US treasuries, and FIIs own ever more Asian equities. Had the pace of this change been modest, it would have signified healthy global integration. But at the galloping pace we see today, there is danger. What will happen if the recycling stops even temporarily? The lack of Asian money will send US bonds crashing, and the lack of FII inflows will send Asian markets crashing. Gird your loins, ladies and gentlemen, for turbulent days ahead.
  8. Hi All, I have recently opened an ICICI HiSave Account and is having a good experience so far. In my experience, the web site is reasonably fast. transfer requests are carried out in 2 days time. This may be because I ensure that I ask for the transfer to happen only on Mondays to Wednesdays so taht there is no weekend in between when your bank pays you nothing but still enjoys your money. So far faced no need to call their call centre in india. The only problem I have ICICI HiSave account is that they will not send any paper statements at all. According to their agreement (small print), you must trust their servers only for any disputes that may arise in future and also you just download a text file from their website and call it the statement for your ICICI account. I dont know if UK laws allow this as an e-commerce transaction and whether it would be valid in a court of law in UK. Also what is the guaranttee that ICICI will not question / call your downloaded statement had been tampered / doctored with, so that they can avoid paying your money back. I would be happy with a paper statement with a letter head / logo at the top saying that is a legal paper from ICICI. Anyway so far so good. Keep up the good work, guys. Please post here any other good savings rates as we need to keep constant vigil. Regards, Apputtu
  9. Hi guys, I always thought there is another bubble going on in emerging markets' stock markets. Feel free to comment on this. Look at the following article from a leading economist from India in the economic times newspaper. He thinks the current stock boom is created by chinese savings and this will endure the business cycles. What he doesnt talk about is the Fed's plans to increase interest rates.
  10. Found the following article on the same page on margon stanley website where the alan greenspan transition article appears. I am a bit intrigued by the statement that "gold should be trading at US$930/- if it was a good hedge against inflation". Yesterday also I noticed from the hong kong web site saying gold could go up as much as up to US$1000/- per ounce. Please comment. Thanks. A Currencies: G7: Gold as a Reserve Currency for Asian Central Banks? Stephen L Jen (Brussels) Should Asian Central Banks Consider Holding Gold? Gold is a rather attractive reserve asset for Asian central banks, in light of the structural long-term risk to the US dollar, and other considerations. I even suspect the latest surge in gold prices may be due to new purchases of gold by several Asian central banks. Basic Facts on Gold 1. Stocks overwhelm flows. What sets gold apart from other commodities, besides being ‘non-destructible’ and ‘homogeneous’, is the above-ground stocks are massive (153,000 tonnes as of 2004), relative to the annual newly mined supply (2,464 tonnes in 2004). This means the holders, not the producers, of gold have market power. 2. Gold has not been a good inflation hedge. The real price of gold has declined by 50% since 1983. To keep pace with inflation since 1983, gold should be trading at US$930 an ounce — about twice the current market price. 3. Gold has a low to negative correlation with stock prices, and low general correlation with the business cycle. Gold as a Hedge against Currency Risk Gold is not really a good inflation hedge, but a decent hedge against the business cycle. We argue gold is a good hedge, or, more precisely a ‘neutraliser’, against currency risk. This favours central banks holding more gold in their reserves to dilute their exposure to foreign currencies. First, the USD could falter and thus erode the USD value of the Asian central banks’ foreign reserve holdings. Second, the Asian currencies could appreciate leading to a valuation loss on official reserves. Gold holdings could partly ‘neutralise’ or dilute the first risk but can do little about the latter, especially if the country in question has low gold holdings. For the same reasons, petrodollar holders should also consider buying gold. The sensitivity (θ) of the price of gold in the base currency to a change in its exchange rate against all other currencies can be calculated. If θ is close to 1, we have a country with monopolistic power in gold. If θ is zero, we have countries with no market power in gold. We estimated θ’s 0.01 for GBP, 0.38 for EUR, 0.26 for USD, 0.02 for JPY, and 0.02 for CNY. As far as a country like China is concerned, one that holds USD, EUR, JPY, and GBP in its reserves, the following conclusions can be made: Gold is a very good hedge against JPY and GBP, because international gold prices are not a function of these two currencies (with the θ’s close to zero). For EUR and USD, gold is not as good a hedge as for the other two currencies, but is still a pretty good hedge (with the θ’s low). Specifically, if the USD unilaterally depreciates, the USD value of China’s gold holdings will rise by 1-θUSD = 1 - 0.3 = 0.7 of the depreciation in the USD, thereby providing some neutralising/diversifying effects. Gold holdings do not at all provide any hedging against unilateral CNY (or AXJ) appreciation. If CNY unilaterally appreciates against all currencies, international gold prices should not be affected (with China’s θ close to zero). The value of gold should also decline, in terms of CNY, as much as USD would. Gold is also a good neutraliser against valuation losses from a back-up in USD bond yields. If capital flight from the US triggers a sell-off in bonds, Asian central banks could suffer valuation losses on their long-term bond holdings. Gold does not neutralise that risk, but gold has no yield, either. Official Holdings of Gold About 20% of above-ground gold stocks are held by official entities, with the EMU the largest gold holder (US$177 billion worth), followed by the US (US$122 billion). The Asian central banks with the four largest foreign reserve holdings (Japan, China, Korea, and Taiwan) have little more than 1 percent of their reserves held in gold; the global average is 8.7%. If these four central banks raised their gold holdings to 5%, it would be an additional US$109 billion worth of gold purchases, (about three years of global newly mined supply). This would have meaningful effects on global gold prices. Bottom Line Gold is a good hedge against currency risk, not inflation. This is important for the Asian central banks, which have large holdings of reserves. Gold is an excellent hedge against GBP and JPY variability, and a pretty good hedge against USD and EUR. But the big four Asian central banks have only a little more than 1% of their reserves in gold. Any increase in their gold holdings would have significant implications for world gold prices.
  11. Sorry for being naive: It seems banks are highly powerful to lend 11.5 pounds for every pound of deposit they have. Does only UK and US follow this "fractional reserve banking" or are there other countries too? Regards, A
  12. The following article from the economic times discusses the effect of the bubble on the emerging markets. Will emergin markets bubble up? excerpts: ... "Interest in emerging markets has never been higher, with global investors increasingly buying into the thesis that the forces of “economic catch up” have been unleashed by globalisation in the developing world and emerging market assets offer the maximum return potential."... "But for how long will this party roll on? " "Equally strong arguments can be made on whether the rally in emerging markets has further to run or if a peak is imminent. Valuations in most emerging markets are at the higher end of their recent trading range but, in general, well below those levels that prevailed in 1994 and 2000 — the last major turning points in emerging market bull phases. " While sentiment among the foreign investor community is too ebullient for comfort, domestic participants in several emerging markets have largely missed the current rally and remain sceptical of its longevity. ... "Well, that could quite easily be stretched to include all emerging markets. In fact, emerging markets outside of Asia have generated even more spectacular returns, with markets from Brazil to Egypt up 200% to 1,000% over the past three years. " Historically, the most important precondition for the formation of a bubble in the second half of a decade is that the US economy remains in an expansionary mode. Even with regard to the current cycle, it is important to remember that while macroeconomic fundamentals in the developing world have been improving consistently since the Asian and Russian financial crises in 1997-98, emerging markets only started to zip ahead from March 2003, when the US-led global economic recovery began in earnest. Over the past two years, every time the ideal Goldilocks scenario for the US economy has been threatened either by fears of a Fed tightening — as in the second quarter of 2004 or an economic slowdown — like in April-May this year — emerging markets have faced selling pressure. To be sure, as those threats have receded, emerging markets have come roaring back to hit new record highs. Still, those stormy spells have been a reminder that the US economy’s path remains a terribly important factor for emerging market performance. "So, if the US economy does finally wilt under the burden of much talked about financial imbalances, such as the housing bubble or the current account deficit, emerging markets would struggle to generate any positive returns. " Comments: The writer seem to be confusing hsitory and reality. Not sure if "the US-led global economic recovery" aka easy money policy started only in march 2003. is this not right after 9/11? Regards, Apputtu
  13. Not sure if anyone has seen this news item. Indian bank wants UK savers Indian bank wants UK savers By Paul Lewis BBC Radio 4's Money Box Indian bank ICICI is following in the steps of Dutch bank ING Savers in the UK are being offered a market-leading 5.4% rate on their savings, by India's largest private bank ICICI. Its HiSave account has to be opened and run through the internet. It pays the 5.4% rate from the first pound and has no restrictions on how much money can be put in or taken out. ICICI UK Chief Executive Sonjoy Chaterjee told BBC Radio 4's Money Box he would promise a good rate for two and half years but could not guarantee it would stay at 5.4%. "We are carrying a guarantee of 25 basis points [0.25%] over the base rate up to 31 December, 2007," he said. "That would be 5% as it stands now. "We will hold onto 5.4% for a while. I would not like to put a date to it. "We would not put it just for a month or so. We would hold on to it for at least six months." Top 10 ICICI UK has set a target of winning £500 million savings from UK customers this year. But Sonjoy Chatterjee denied that if they achieved that, the interest rate paid would start drifting down. Unlike a lot of other overseas bank operations here, we are not a branch Mr Chaterjee, ICICI "We haven't given thought to that so I can't comment yet," he said. "But we will need to look at the whole balance sheet and the savings side of the balance sheet and take a call on the interest rate, whether we move it up or down." Mr Chatterjee said he can pay this rate because his bank is big and cheap to run. It claims to have 10 million internet customers, putting it in the top 10 internet banks in the world. Security HiSave accounts in the UK would be processed using the same low-cost platform in Bangalore. "It is this cost [saving] we are transferring to our customers in the form of this high rate." He also stressed that the money was safe: "Unlike a lot of other overseas bank operations here, we are not a branch," he said. "ICICI UK Ltd is a locally incorporated bank under the Financial Services Authority and carries its deposit guarantee scheme. "That works out roughly about £30,000. And that is why we did it this way instead of a branch." The Financial Services Compensation Scheme guarantees the first £2000 deposited in a UK based bank, and 90% of the next £33,000 meaning that the maximum compensation is £31,700. Mainstream product With a market-leading rate on savings, demand for the new account could be very high. Asked if the bank could cope with a lot of applications at once, Mr Chaterjee said: To process and service and be up to speed with this customer segment is paramount Mr Chaterjee "It's our desire to take the first steps towards being a global bank and this is our first mainstream product to that end. "So to process and service and be up to speed with this customer segment is paramount. "These customers are coming to this bank for the first time so we will pull out all the stops to do that." Although regulated by the FSA and protected by the Financial Services Compensation Scheme, ICICI UK has not yet joined the Banking Code. The BBC has learned that an application has now been made and is being considered by the Banking Code Standards Board. BBC Radio 4's Money Box was broadcast on Saturday, 9 July, 2005 at 1204 BST. The programme was repeated on Sunday, 10 July, 2005, at 2102 BST.
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