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Sunday, 19 June 2016

This is What RBI's Chief Raghuram Rajan Wrote to his Staff

Message to RBI staff from Dr. Raghuram Rajan.

Dear Colleagues,

I took office in September 2013 as the 23rd Governor of the Reserve Bank of India. At that time, the currency was plunging daily, inflation was high, and growth was weak. India was then deemed one of the “Fragile Five”. In my opening statement as Governor, I laid out an agenda for action that I had discussed with you, including a new monetary framework that focused on bringing inflation down, raising of Foreign Currency Non-Resident (B) deposits to bolster our foreign exchange reserves, transparent licensing of new universal and niche banks by committees of unimpeachable integrity, creating new institutions such as the Bharat Bill Payment System and the Trade Receivables Exchange, expanding payments to all via mobile phones, and developing a large loan data base to better map and resolve the extent of system-wide distress. By implementing these measures, I said we would “build a bridge to the future, over the stormy waves produced by global financial markets”.

Today, I feel proud that we at the Reserve Bank have delivered on all these proposals. A new inflation-focused framework is in place that has helped halve inflation and allowed savers to earn positive real interest rates on deposits after a long time. We have also been able to cut interest rates by 150 basis points after raising them initially. This has reduced the nominal interest rate the government has to pay even while lengthening maturities it can issue – the government has been able to issue a 40 year bond for the first time. Finally, the currency stabilized after our actions, and our foreign exchange reserves are at a record high, even after we have fully provided for the outflow of foreign currency deposits we secured in 2013. Today, we are the fastest growing large economy in the world, having long exited the ranks of the Fragile Five.

We have done far more than was laid out in that initial statement, including helping the government reform the process of appointing Public Sector Bank management through the creation of the Bank Board Bureau (based on the recommendation of the RBI-appointed Nayak Committee), creating a whole set of new structures to allow banks to recover payments from failing projects, and forcing timely bank recognition of their unacknowledged bad debts and provisioning under the Asset Quality Review (AQR). We have worked on an enabling framework for National Payments Corporation of India to roll out the Universal Payment Interface, which will soon revolutionize mobile to mobile payments in the country. Internally, the RBI has gone through a restructuring and streamlining, designed and driven by our own senior staff. We are strengthening the specialization and skills of our employees so that they are second to none in the world. In everything we have done, we have been guided by the eminent public citizens on our Board such as Padma Vibhushan Dr. Anil Kakodkar, former Chairman of the Atomic Energy Commission and Padma Bhushan and Magsaysay award winner Ela Bhatt of the Self Employed Women’s Association. The integrity and capability of our people, and the transparency of our actions, is unparalleled, and I am proud to be a part of such a fine organization.

I am an academic and I have always made it clear that my ultimate home is in the realm of ideas. The approaching end of my three year term, and of my leave at the University of Chicago, was therefore a good time to reflect on how much we had accomplished. While all of what we laid out on that first day is done, two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term.

While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016. I will, of course, always be available to serve my country when needed.

Colleagues, we have worked with the government over the last three years to create a platform of macroeconomic and institutional stability. I am sure the work we have done will enable us to ride out imminent sources of market volatility like the threat of Brexit. We have made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event. Morale at the Bank is high because of your accomplishments. I am sure the reforms the government is undertaking, together with what will be done by you and other regulators, will build on this platform and reflect in greater job growth and prosperity for our people in the years to come. I am confident my successor will take us to new heights with your help. I will still be working with you for the next couple of months, but let me thank all of you in the RBI family in advance for your dedicated work and unflinching support. It has been a fantastic journey together!

With gratitude

Yours sincerely

Raghuram G. Rajan

Thursday, 16 June 2016

thingstoknow

Why crude oil prices have started rising again

Sainath Gupta 07:11:00

The collapse of global crude oil prices in 2014 was easily one of the biggest energy stories on the planet. By early 2016, oil had slid to $33 per barrel, a level not seen since 2003. Gasoline was dirt cheap, SUVs were coming back in style, Venezuela was imploding, and the US fracking boom started fizzling. It was a really big deal.

Over the last month, however, prices have started to creep back up again, rising to $50 per barrel this week. We're still nowhere near the levels seen before the recent crash, but it’s a noticeable uptick, with potentially important ripple effects around the world. So what’s going on? And will this rally actually last?

Because oil is so easily shipped and traded around the world, prices (mostly) depend on just two things: global supply and global demand. The best place to get a handle on these two factors is the International Energy Agency’s monthly Oil Market Report. The graph below, from the latest edition, tells the tale:

Oil production and consumption noted in millions of barrels per day. (IEA Oil Market Report)

As you can see, between 2014 and 2016 the world was pumping out far more oil than anyone needed, causing prices to crash. Oil production (the green line) was surging, driven in large part by the US fracking boom, Iraq’s postwar recovery, and Saudi Arabia’s decision to keep its own output high.

Meanwhile, oil consumption (the yellow line) was slowing, held back by economic weakness in China and Europe. All that surplus oil was being stored in inventories (in blue) for later.

But as of mid-2016, production and consumption have started coming back into balance, which is putting upward pressure on oil prices. The IEA lists three important factors here:

1) A few key sources of oil have been cut off due to disruptions. The massive wildfires in Fort McMurray, Alberta, have taken more than 700,000 barrels per day of Canadian oil sands production offline. In Nigeria, militants have stepped up their attacks on oil and gas infrastructure. Violence in Libya continues to hinder oil exports there. And Venezuela’s political situation has deteriorated so drastically, the IEA says, that it may soon muck up oil operations.

The US Energy Information Administration notes that "unplanned global oil supply disruptions" are at their highest level since at least 2011. This has even overwhelmed the fact that Iran has lately added 700,000 barrels per day to world markets after the US and EU sanctions lifted sanctions. The net effect is to push prices up:

Note that some of these disruptions are temporary (particularly the fire-related outages in Canada), but others could prove longer-lasting.

2) Global oil demand is growing faster than expected. In part because oil is so cheap, countries are using more of it. The IEA now expects global oil demand to grow by an extra 1.3 million barrels per day in 2016. Partly that’s due to fast-growing developing countries like India. But, surprisingly, US oil demand is expected to surge this year by about 255,000 barrels per day. Americans have been taking advantage of cheap gasoline to drive more miles this year than ever before.

3) Low prices are starting to cramp the US shale boom. What makes crude oil markets so tricky is that prices depend on production — but production also depends on prices.

Back in the early 2010s, when global crude prices were hovering around $100 per barrel, US energy companies decided it would be profitable to go after costly and hard-to-extract sources of crude, using fracking to get at the oil locked away in the shale formations of Texas and North Dakota. The resulting "shale boom" basically doubled US crude oil production and helped precipitate the global price crash.

But now those low prices are forcing US drillers to cut back, laying off thousands of workers and idling their drilling rigs. US field production of oil has finally started falling in 2016, as the chart below shows. And, overall, the IEA expects US shale production to drop by 500,000 barrels per day this year:

US shale drillers have been trying to fend off this day of reckoning by slashing their costs and making their operations more efficient. But at a certain point, economic reality bites down. The shale wells that they’ve already drilled are rapidly becoming depleted (there’s only so much oil a given well can produce), and it will no longer be profitable to drill new wells. (It costs more to extract shale oil than it does for, say, Saudi Arabia or Kuwait or Iraq to pump oil, which is why US production falls first.)

Now here’s where things get really tricky: As US shale producers cut back, global oil production will fall and oil prices will start rising. But at a certain point, if prices rise high enough, those shale drillers will fire up their rigs again and resume drilling. It’s a complicated game of ping-pong.

No one knows for sure how high prices have to rise to convince US shale companies to start drilling again. Is it $50 per barrel? $60 per barrel? Some companies may feel burned by last year’s short-lived price rally and are wary about jumping back in to drill only to then lose money when prices consequently fall. Others may decide to open up the thousands wells that they’ve already drilled but haven’t yet tapped. And if companies dostart increasing production, how far do prices fall again? Where is the equilibrium?

So if you want to figure out where oil prices will go next, you have to take this all into account. Some of the factors pushing up oil prices right now, such as Canada’s wildfires, are only fleeting. Others, like violence in Libya and the deterioration of Venezuela, seem more likely to stick around for a while. And then there’s the ever-tricky question of how the US oil industry responds to prices. Plus the fact that the world still has some 3 billion barrels of oil tucked away in storage. No wonder oil prices are always so tough to predict.

Wednesday, 15 June 2016

thingstoknow

How to Do Industry Analysis?

Sainath Gupta 22:48:00

The industry analysis report sheds light on the economic health of the company, underlining the understanding whether it will be beneficial for the stakeholders to invest in such a company and offering recommendations and/or corrective actions to take in case of any untoward developments in the company.

As an equity research analyst, you might work on industries like Oil and Gas, Metal, Information Technology, Automobile, Financial Services, Infrastructure, Pharmaceuticals and Consumer durables.

In some companies, there is a dedicated industry analyst who will work on the assigned industry and provide the analysis.

However, as an analyst you should be aware of industry dynamics and hence, it is important to know how to do industry analysis.

How to do Industry Analysis?

An industry analysis is a complicated and time consuming process. If any of the dimensions are missed, the whole analysis becomes faulty. Therefore, in this section, I have highlighted all the necessary steps telling you how to do industry analysis. Use these steps and apply it in your analysis.

What are the steps? Here you go:

1. Review available reports

Read all the available but relevant industry reports and statistics to see whether it makes sense to dig deeper.

Some of the reports you will find already contain in-depth information that the need for new industry analysis is eliminated.

However, it is unwise to depend on existing industry analysis reports as the market is always volatile and industry factors change constantly.

Therefore, pick up a current report and envisage its relevancy in the current market.

2. Approach the correct industry

An industry has sub-parts. For example, if you look at the chemical industry, you will find sub-industries like Fertilizers, Pesticides, Paints and Varnishes, Organic chemicals.

Therefore, it is important to focus on the relevant industry. Without this, it will be impossible to draw an accurate industry analysis report. So, take up an industry and find out the sub-industries. Select the one which suits the company’s purpose. Moreover, it is worthwhile to look at the different market segments in a particular industry.

3. Demand & supply scenario

As any economist will know, demand and supply are the primary factors governing any market. Hence, it becomes relevant to look into the demand-supply scenario for a particular product or industry by studying its past trends and forecasting future outlook.

You can do comparative analysis with other companyies competing in the same manner to find out the economic health of the company under consideration.

Future demand and supply forecasting helps investors understand the viability of future investments in terms of profits and losses.

4. Competitive scenario

This is the most important step of any industry analysis. In this, you need to study the competitive scenario using Porter’s Five Forces Model.

The model acts as the framework of industry analysis. Michael Porter, a famous strategist and author, first came up with this model. In this model, five parameters are analyzed to see the competitive landscape.

They are:

Barriers to Entry
Supplier Power
Threat of Substitutes
Buyer Power
Degree of Rivalry

The Porter’s model is extensively used while analyzing any industry.

5. Recent developments

Any industry analysis report isn’t just about studying the particular industry on a micro-level.

The analyst needs to incorporate influencing factors at the macro-level. These macro-level factors include recent industrial developments, innovation in your industry analysis report, sector valuations and global comparative valuation.

6. Focus on industry dynamics

The industry analysis should be specific to a particular industry and thus, it is important to focus and understand the industry dynamics. Your industry analysis should be in-depth and to-the-point.

For example, if you are tracking the aluminum industry, you should know the per capita consumption in the country.

In India, the per capita consumption of aluminum is 1 Kg, in USA, it is 25 to 30 Kgs, in Japan, it is 15 Kgs and in Taiwan, it is 10 Kgs. Apart from the consumption, you should also know the production of aluminum worldwide.

The above six steps are important and you, as an analyst, should follow them.

The analysts in private equity, investments banks, equity research firms, investment research firms need this skill and if you know how to do industry analysis, you are ahead of 80% of the aspirants as this will not only impress your interviewer, but also add immense value to you and the company hiring you.

How to Write an Industry Analysis?

In the last section, we learned how to do industry analysis and in this, we will see how to write one.

Writing is also a required skill as you need to present all the findings within a written report in a concise and clear manner.

Begin by writing a concise overview of the industry.

Mention historical data and the nature of the industry, including its growth potential.

State the influencing economical factors and most importantly, don’t forget mentioning the purpose of your industry analysis.

The concise overview of the industry should include its competitors and their operations.

You can write this in the next section. Write about similar products and services.

Now, with the overview aside, move on the detailed analytical presentation of the specific industry.

Highlight factors like geographical growth, consumer base, price fluctuations, past performances and income projections.

Use existing financial data and industry understanding to forecast industry growth for the next five or ten years. You can use statistical graph in this section.

The next sections should be about using Porter’s Five Forces model and a detailed write-up about its five factors, its use and repercussions in the industry. Don’t forget mentioning governmental regulations relevant to the industry.

Lastly, give long-term and short-term valuations impacting the industry such as any foreseeable problems impacting the business in a negative fashion and potential corrective measures. Wind up the industry analysis report with a very three or four line summarization.

Endnote

Have you ever thought of learning the skill of industry analysis and want to know how to write an industry report?

Share your thoughts and experience here.

thingstoknow

How to Predict Company Earnings?

Sainath Gupta 22:46:00

How to begin with to predict company earnings?

Considering oneself to be in the shoes of an Investor, for instance, it is obvious to face the dilemma of choosing the right stock that are easy to predict and forecast so it can meet your investment objectives and generate good contribution. The question arises as to how would you make the choice from among thousands of companies?

The quickest ways being relying on the consensus view initially and studying the past trends of the company. Consensus estimates of leading analysts are readily available on major financial blogs and websites.

Many would argue that these are the best ways to choose the right stock for forecasting while many would be against it.

My opinion says that relying on the past or the people are not the worst decisions especially for an investor seeking forecast closer to the current time period (this year or the next year).

It may not be suitable for longer period estimates because past analysis involves various adjustments against sales and hence growth rates calculated might vary from period to period.

Also, the choice of method to calculate the growth rate can influence the calculations, for example, geometric average, arithmetic average or complex techniques like time-series model.

Similarly, consensus though is better informed if there are more number of analysts in the market, however, a large number of analysts influencing the consensus can also lead to the ‘Risk of Herding’.

Analysts usually base their forecasts on the guidance from the company’s management, and the management follows the practice of under-estimating so as to beat the consensus and witness a rise in stock price, than to miss estimates and witness a price decline. So in a way following the consensus is not a wise decision for longer period forecasts.

Moving away from the consensus or the past trends, another investment barometer would be to use metrics and reasonably calculate the probable earnings for long-term forecasting. For this, it is required to gather factual data and applying analytical tools based upon your earning driven rationale. Also, as an analyst, you should understand that forecasts act as a guide and can only fall within a reasonable range of precision. Hence, it is advised to always calculate optimistic, moderate as well as pessimistic estimates.

Well, coming back to the point of predicting the earnings. I would like to give you a real-life example of two Indian-listed companies, Titan Industries, and Unitech Ltd.

What are company earnings?

What is the earnings figure we are considering here? It is Earnings Per Share or EPS.

Let’s look at the following table and see which company’s EPS is easy to predict.

Which one do you think is easy to predict?

Company Earnings Estimates

You are right! It is Titan Industries which is giving strong EPS and that too in upward trend. No doubt, the share price reached Rs. 4000 in 2010 from Rs.40 in 2001 (100times growth).

What propelled this growth? Many factors. More on this, later.

The point I want to make here is, go for companies that are easy to predict and then do the forecasting. There is no dearth of such companies in the market and as a security analyst, your job is to find such gems.

Having seen how one should go for companies with steadily growing EPS, it is important to know that you can conjugate the concept of Stock Charts with P/E Ratios to estimate the earnings of a company.

A Stock Chart shows the graphical mapping of stock prices over a defined period, say for a quarter or a year.

Let us assume a stock of which you want to know the estimated earnings for the last quarter (Q4). The stock chart depicts stock prices of Rs.400, Rs.450, and Rs.600 for Q1, Q2 and Q3 respectively and it seems that the price is moving to Rs.750 in Q4.

Past data shows the following Price Earnings:

Averaging out the P/E of last three-quarters.

Average P/E = (40 + 32.5 + 17.5) times / 3

= 30(times).

The maximum limit (since prices are showing an increasing trend) for Earnings per share in Q4 will be:

EPS in Q4 = Estimated stock price in Q4 / Average Price Earnings

= Rs.750 / 30(times)

= Rs.25

Linking company’s operating data to its Future Earnings

Professors in the field of forecasting company earnings often have conflicting views regarding whether or not the company’s operating details impact its future ability to earn. In support of

In support of sustainable growth, I would highlight how Reinvestment and quality of re-investment result in the future growth of earnings.

Expected growth in Earnings per share can be viewed as a function of the following:

Re-investment Rate * Projected Return on Equity

(Re-investment Rate means the proportion of after-tax operating income that is retained and re-invested into new assets for future growth.)

Assuming a Re-investment Rate of 25% and projected Return on Equity of 30%, one can expect growth in EPS of 7.5%.

This way of estimating earnings based upon growth rate not only highlights that growth is not costless, but also defines the difference between growth that creates value vs. Growth that destroys value.

Applying Business Fundamentals to estimate Earnings

The very simple way to predict a company earnings apart from financial fundamentals like EPS, Current Ration, Growth ratio, etc. we can also look forwards to other areas through which we can predict the earning of the company that could be the external business factor that effects the earnings of the company indirectly.

Local government support in building infrastructure – the more is the focus of the government in promoting the industry and building the infrastructure you are to be rest assured that it is going to give a good earning to the company since the cost of manufacturing will be reduced because of the support of infrastructure facilities like electricity, water, ports, highways, dams, etc. With the reduction in cost of production, your earnings are sure to go high.

Future tenders or contracts received by the company – Another important aspect of predicting a company earnings is by analyzing the tenders and contracts which the company is due to execute in future, through which one can predict the earnings of the company, further if there is any foreign exchange contract then the fluctuation in currency can also be analyzed to predict the earnings of the company.

Analyzing the investment of companies in other company – Many a time companies tend to park few of their funds with other companies, you can analyze and find out the financial and growth of those companies to predict the earnings in the form of capital gain for the investee company.

To conclude, what ever be the process chosen to estimate the earnings of the company it is futuristic and the probability of achieving the future earning prediction cannot be 100%, analyst always try to figure out how to reduce the gap and try to reach the 100% probability and keep on finding / developing new ways to predict the earnings. But one thing is for sure since the future is not ascertained neither can be the earnings of the company we can always forecast based on the past happenings and future possibilities.

Tuesday, 7 June 2016

thingstoknow

VidyaLakshmi – A single window platform for Education Loan

Sainath Gupta 21:08:00

VidyaLakshmi – A single window platform for Education Loan, Educational Loan has been a major help for those students who are financially back warded but ambitious to continue their studies. Students who can not afford for higher education due to financial constraints can avail this loan and repay as per the terms and conditions laid by the bank at a nominal rate of interest.

Apart from educational Loan another instrument of help to the financially back warded students is scholarship. There are numerous scheme of scholarships sponsored by government as well as private sector enterprises and trusts & charitable associations. Many students found it very difficult to get the technical and administrative support for these schemes.

VidyaLakshmi – A single window platform for Education Loan

Government of India – Ministry of finance has proposed in his budget speech of 2015-16, to set up a completely IT based administrative authority to look after all these needs. This has been names as Pradhan Mantri Vidya Lakshmi Karyakram (PMVLK).

Objective:

Solving the difficulties faced by the students in obtaining educational loans and scholarships is the main purpose of this program. This program enables the students to get themselves registered and avail the services in very user friendly interface. We will ensure that no student misses out on higher education for lack of funds. The IT based mechanism under the Pradhan Mantri Vidya Lakshmi Karyakram is expected to provide to students a single window electronic platform for Scholarships and Educational Loans , said Mr finance minister.

Features:

Students can easily access the following information and services:

Complete details of educational loans & schemes offered by various banks
Educational loan application from.
Enables to apply for various educational loans of multiple banks.
Facilitate to check the loan processing status.
Facility to email the grievances related to the educational loans.
Comprehensive information about various government scholarships.

How:

First of all Students have to register in this portal to avail the services of this program. After completion of user registration one can easily download common educational loan application form which has been approved by the Indian banks Association. This form helps in applying for student loans of multiple banks.

Based on their requirement students can search various loans and select it & fill the form and apply to the banks the status of which can be checked in the portal after some days. Student can contact the banks for any queries and grievances related to loans.

Registered banks:

Right now there are 23 Banks offering 44 loan schemes registered in this portal. Students can avail educational loans from these banks by following the above said procedure.

Benefits:

This portal acts as a single window for getting students loans so it saves lot of time.
Procedure to apply is very easy and user friendly so no need to worry about roaming around the banks.
Status of loan application is uploaded by the banks into this portal .Hence it saves the students from personally visiting the banks again and again at various stages of loan processing.
For the students who want to study abroad can get their loan application processed within a short span of time than in case of traditional way of loan sanction.

Saturday, 9 April 2016

thingstoknow

1.4 Million Farmers in K’taka Are Selling Their Produce Online – without Worrying about Middlemen

Sainath Gupta 14:18:00

In villages of Karnataka, farmers have become internet-savvy. They sell their produce online, browse through prices quoted by traders, accept the one that suits them the best, and get paid online.

The farmers in Karnataka have taken their business online, all thanks to the Unified Marketing Platform (UMP), an initiative by the state government. Launched in 2014 by the Rashtriya e-Market Services (ReMS), it facilitates interaction between traders and farmers.

For farmers, middlemen have always been a hindrance. They eat up almost 75% of the final price, leaving very little for the farmers. An Agricultural Produce Market Committee (APMC), established by state governments, often has the disadvantage of middlemen deciding the price of the produce.

But the UMP has managed to eliminate middlemen from the equation all together. Traders can quote product prices online, which the farmers then have a right to reject if it isn’t satisfactory.

This ensures that farmers also have a wider reach.

Besides this, traders often delay payments, sometimes up to weeks or months. Through UMP, farmers now receive SMS alerts from their banks when transactions have been confirmed. The payment is almost immediate.

Currently, almost 103 APMCs have been integrated into the UMP system, out of 157. According to the ReMS, the rest of the APMCs would also be integrated in a year.

About 1.4 million farmers have been registered with the system. For those who are still new to the idea, the ReMS provides training through members of the APMC. With an aim of training at least 200 farmers from every village, the outreach could be tremendous.

Talking about the success of the UMP, R. Manoj, managing director of the Rashtriya e-Marketing Service (ReMS) said to Deccan Chronicle, “The success of this new online marketing system has created ripples and will revolutionise the agricultural sector in the country, greatly benefiting poor farmers and other stakeholders in agricultural markets.”

The UMP has been held in high regard for its transparency and efficiency. It also helped simplify procedures for procuring licenses. Seeing how this model works wonders for farmers, many other states have called for replicating the system. In Andhra Pradesh, 10 of its major markets have implemented the model.

Tuesday, 5 April 2016

thingstoknow

A legal way of doing illegal - Panama Papers

Sainath Gupta 15:42:00

What is Tax Haven?

A tax haven is a country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment. Tax havens also provide little or no financial information to foreign tax authorities. Individuals and businesses that do not reside a tax haven can take advantage of these countries' tax regimes to avoid paying taxes in their home countries.

The Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Belize, Luxembourg, Hong Kong, the Isle of Man, Mauritius, Monaco, Panama, Switzerland are all considered tax havens.

So, What is wrong with it?

Suppose, If a company makes one million, but spends 500,000 on investing in new technology or infrastructure for their product or something like that, they're only taxed from the remaining 500,000 because that's all of their "profit.

Companies could "invest" million of dollars and then it wouldn't be taxed, because according to legal documents it isn't profit, it's an "investment," which is untaxable, and then they would get their money back from the fake business.

Once the money is disguised as the assets of this enterprise—which would typically be set up by a trusted lawyer or crony in an offshore secrecy haven to further obscure ownership—you can spend it or use it for new nefarious purposes. This is the very definition of money laundering—taking dirty money and making it clean—and shell companies make it possible.

The offshore system relies on a sprawling global industry of bankers, lawyers, accountants and other middlemen who work together to protect their clients’ secrets. These secrecy experts use anonymous companies, trusts and other paper entities to create complex structures that can be used to disguise the origins of dirty money.

Role of Mossack Fonseca in #Panamapapers

Mossack Fonseca is a Panama-based law firm whose services include incorporating companies in offshore jurisdictions such as the British Virgin Islands. It administers offshore firms for a yearly fee. Other services include wealth management.

Over a year ago, an anonymous source contacted the Süddeutsche Zeitung (German Newspaper) and submitted encrypted internal documents from Mossack Fonseca.

Who said Investigative Journalism doesn't exist

11 million documents (2.6 terabytes of data) held by the Mossack Fonseca have been leaked to Suddeutsche Zeitung, which then shared them with the International Consortium of Investigative Journalists (ICIJ), consisting 107 media organisations in 78 countries.

An extensive investigation follows and the result is surprising. They show how the company has helped clients launder money, dodge sanctions and evade tax through 2,14,000 shell companies. From Politicians to Corporates to Celebrities to Beuraucrats, the who and who of many countries are involved in this legal scam.

#‎panamapapers‬ explained succinctly to 6 year old.

Reddit, user DanGliesack gave one of the best explanations yet:

When you get a quarter you put it in the piggy bank. The piggy bank is on a shelf in your closet. Your mom knows this and she checks on it every once in a while, so she knows when you put more money in or spend it.

Now one day, you might decide "I don't want mom to look at my money." So you go over to Johnny's house with an extra piggy bank that you're going to keep in his room. You write your name on it and put it in his closet.

Johnny's mom is always very busy, so she never has time to check on his piggy bank.

So you can keep yours there and it will stay a secret.

Now all the kids in the neighborhood think this is a good idea, and everyone goes to Johnny's house with extra piggy banks.
Now Johnny's closet is full of piggy banks from everyone in the neighborhood.
One day, Johnny's mom comes home and sees all the piggy banks. She gets very mad and calls everyone's parents to let them know.
Now not everyone did this for a bad reason.
Eric's older brother always steals from his piggy bank, so he just wanted a better hiding spot. Timmy wanted to save up to buy his mom a birthday present without her knowing.
Sammy just did it because he thought it was fun.
But many kids did do it for a bad reason.
Jacob was stealing people's lunch money and didn't want his parents to figure it out.

Michael was stealing money from his mom's purse. Bobby's parents put him on a diet, and he didn't want them to figure out when he was buying candy.

Now in real life, many very important people were just caught hiding their piggy banks at Johnny's house in Panama.

Today their moms all found out. Pretty soon, we'll know more about which of these important people were doing it for bad reasons and which were doing it for good reasons.

But almost everyone is in trouble regardless, because it's against the rules to keep piggy banks secret, no matter what!

Want to know the crux of panama papers more then click here

Monday, 4 April 2016

thingstoknow

All you need to know About Panama Papers

Sainath Gupta 18:30:00

A huge leak of documents has lifted the lid onhow the rich and powerful use tax havens to hide their wealth. The files were leaked from one of the world's most secretive companies, a Panamanian law firm called Mossack Fonseca.

What are the Panama Papers?

The files show how Mossack Fonseca clients were able to launder money, dodge sanctions and avoid tax.

In one case, the company offered an American millionaire fake ownership records to hide money from the authorities. This is in direct breach of international regulations designed to stop money laundering and tax evasion.

Who is in the papers?

There are links to 12 current or former heads of state in the data, including dictators accused of looting their own countries.

More than 60 relatives and associates of heads of state and other politicians are also implicated.

The files also reveal a suspected billion-dollar money laundering ring involving close associates of Russia's President, Vladimir Putin.

Also mentioned are the brother-in-law of China's President Xi Jinping; Ukraine President Petro Poroshenko; Argentina President Mauricio Macri; the late father of UK Prime Minister David Cameron and three of the four children of Pakistan's Prime Minister Nawaz Sharif.

The documents show that Iceland's Prime Minister, Sigmundur Gunnlaugsson, had an undeclared interest linked to his wife's wealth. He is now facing calls for his resignation.

The scandal also touches football's world governing body, Fifa.

Part of the documents suggest that a key member of Fifa's ethics committee,Uruguayan lawyer Juan Pedro Damiani, and his firm provided legal assistance for at least seven offshore companies linked to a former Fifa vice-president arrested last May as part of the US inquiry into football corruption.

How do tax havens work?

Aerial view of the Panama City bay taken on March 23, 2015 — Image captionPanama is one of a number of popular tax havens in the Caribbean

Although there are legitimate ways of using tax havens, most of what has been going on is about hiding the true owners of money, the origin of the money and avoiding paying tax on the money.

Some of the main allegations centre on the creation of shell companies, that have the outward appearance of being legitimate businesses, but are just empty shells. They do nothing but manage money, while hiding who owns it.

What do those involved have to say?

Mossack Fonseca says it has operated beyond reproach for 40 years and never been accused or charged with criminal wrong-doing.

Mr Putin's spokesman Dmitry Peskov said the reports were down to "journalists and members of other organisations actively trying to discredit Putin and this country's leadership".

In an interview with a Swedish television channel, Mr Gunnlaugsson said his business affairs were above board and broke off the interview.

Fifa said it is now investigating Mr Damiani, who told Reuters on Sunday that he broke off relations with the Fifa member under investigation as soon as the latter had been accused of corruption.

Who leaked the Panama Papers?

The 11.5m documents were obtained by the German newspaper Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ).

The ICIJ then worked with journalists from 109 media organisations in 76 countries, including UK newspaper the Guardian, to analyse the documents over a year.

The BBC does not know the identity of the source.

It is the biggest leak in history, dwarfing the size of those released by the Wikileaks organisation. In all, the details of 214,000 entities, including companies, trusts and foundations, were leaked.

The information in the documents dates back to 1977, and goes up to December last year. Emails make up the largest type of document leaked, but images of contracts and passports were also released.

With Some inputs from BBC .

Sunday, 19 June 2016

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How to do Industry Analysis?

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3. Demand & supply scenario

4. Competitive scenario

5. Recent developments

6. Focus on industry dynamics

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Linking company’s operating data to its Future Earnings

Applying Business Fundamentals to estimate Earnings

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VidyaLakshmi – A single window platform for Education Loan

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Who leaked the Panama Papers?

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