CHRIST UNIVERSITY

FEBRUARY 2012 EDITION
MUDRA
DEPARTMENT OF COMMERCE
DEPARTMENT OF COMMERCE
CHRIST
UNIVERSITY
A COMMERCE CLUB INITIATIVE
CONTENTS
EDITORIAL Team
02
1)
NATIONAL NEWS CHECK
03
2)
SOVERIGN WEALTH FUNDS
04
3)
AMG‟S CORPORATE STRATEGY
06
4)
A MORE EQUAL WORLD
09
5)
SUPER REGULATOR
10
6)
WHO CAN SAVE GREECE????
12
7)
BONFIRE OF VANITIES
14
8)
ENRON
16
9)
BUSINESS CROSSWORD PUZZLE
17
10) FUN FACTS
1
18
EDITORIAL TEAM
DEPARTMENT CO-ORDINATORS
Mrs. Nithila Vincent and Mrs. Anuradha P.S
FACULTY IN CHARGE
Mr. Shinil Sebastian and Mrs. Bindu Nair
STUDENT COMMITTEE
Editor: Abhith Pallegar,
II B.Com (Hons) ‘J’
Co Editor: Neethi D’cunha,
II B.Com ‘A’
STUDENT CO COMMITTEE
Neha Sharma,
III B.Com ‘A’
Pradyumna .V,
II B.Com (Hons) ‘J’
Mohit Bhalani,
III B.Com ‘A’
Darshana Nair,
III B.Com ‘C’
Martina J,
III B.Com ‘D’
Mohammed Sinan,
I B.Com (Hons) ‘J’
2
NATIONAL NEWS CHECK
 India's economic growth sags to 6.1%
 Oil worries check fall in Indian bond yields
 Cabinet nod for PSU buyback fails to ignite markets
 ONGC auction disappoints, gets bids for Rs 8500 cr worth shares
 Microsoft releases consumer preview Windows 8
 Cabinet nod for PSU buyback fails to ignite markets
 Tata communications Says it’s in talks regarding offer for C&W
Worldwide
 Govt cuts subsidy on key fertilizer
 Vedanta offers Rs 16000 cr for HZL, Balco stakes
 Sensex falls on profit-taking; ICICI, ONGC and L&T drop
 FDI will cross $30 b in current fiscal year
 Car sales in February pick up
 Indian auto makers post higher sales on diesel vehicle demand
Madhu Kumar
II B.Com ‘D’
3
A mob job on global crude
Creating funds to manage government wealth is not a new phenomenon. The
International Monetary Fund (IMF) estimated in September 2007 that sovereign wealth
funds, or SWFs, control as much as $3 trillion, and that this tally could jump to $12
trillion by 2012. Sovereign wealth funds are government investment funds, funded by
foreign currency reserves but managed separately from official currency reserves.
Basically, they are pools of money, governments invest for profit. Often this money is
used to invest in foreign companies. For instance, China's SWF purchased stakes in the
U.S. financial firms Morgan Stanley and the Blackstone Group in late 2007. Dubai's
SWF has bought up shares of several Asian companies, including Sony. Shrouded with
complexity it has no official super technical regulation.
A rapid rise in the price of major commodities between 2000 and 2008 greatly
increased the cash holdings of some exporting countries whose wealth masquerading in
US dollars, enabling them to seek new ways to diversify their wealth. The Economist
said in May 2007 that oil-producing countries at the time accounted for two-thirds of
the total wealth of global SWFs sitting on mountains of free cash pumped into
companies for capital appreciation.
4
The picture shows the average value of SWFs around the world
In a state of perpetual disbelief, ridiculously generous extension of runway credit by
SWFs to the institutional investors with really short due diligence process, acting in a
game of ivy drug dealers and hemophilia.
In 2008, it all went ludicrously wrong with crude oil traded as high as $147 a barrel
due to futures contracts entered into contracting parties of large proportions, marking a
dramatic rise from prices of just over $10 per barrel in the late 1990s. During much of
the 2000s, the falling dollar added another incentive for exporters to sell their currency
reserves, given that oil is priced in U.S. dollars. A December 2007 report by Setser and
Ziemba, published by RGE Monitor, said, "With oil at or above $90, the future size
and market impact of the large gulf funds is hard to overstate."This trend was reversed,
however, in late 2008 and early 2009, eventually disciplined by logic as oil prices fell
sharply, hitting lows below $40 a barrel.
In their January 2009 paper, Setser and Ziemba argue that with oil at $50 a barrel,
GCC sovereign wealth funds are unlikely to expand, and that lower oil prices might
force them to sell foreign assets and contracts as their luck with huge tactical
advantage may run out and deemed too risky to own which has nothing to do with
wisdom of owning
Abhith Pallegar
B.Com(hons) „J‟
5
‘S Corporate
Strategy
Mercedes-AMG GmbH
Aufrecht Melcher Großaspach (AMG)
Mercedes-AMG GmbH, commonly known as AMG, is a subsidiary of the MercedesBenz car company specializing in high-performance luxury cars.
AMG models typically have more aggressive looks, higher performances, better
handling and better stability, and more extensive use of carbon fiber than their regular
Mercedes counterparts. AMG models are typically the most expensive and highestperformance of each Mercedes series.
AMG was founded as a racing engine forge in 1967 under the name AMG Motorenbau
und EntwicklungsgesellschaftmbH (AMG Engine Production and Development, Ltd.),
by former Mercedes engineers Hans Werner Aufrecht and Erhard Melcher in
Burgstallan der Murr, near Stuttgart. AMG started off by designing and testing racing
engines. It expanded its business into building custom road cars based upon standard
Mercedes cars. AMG offered a variety of engine performance packages, alloy wheels
and styling products. Typical AMG performance enhancements, which could all be
custom ordered by the buyer, included increased engine displacements, performance
top ends which included port and polished heads/intake, lightened valve train and more
aggressive cams. The genuine AMG wheels were often coupled with an AMG
performance suspension package which included uprated/lowered springs and revalved
shock absorbers. Another popular cosmetic upgrade was the AMG body kits. These
ranged from subtle front spoilers, to an aggressive Wide Body kits. Other options
included Recaro seats, smaller diameter steering wheels, instrument clusters, chrome
delete option, refrigerators, shift knobs, hi-fi stereo systems, custom upholstery and
enhanced interior wood packages.
Mercedes-AMG has a considerably different philosophy than BMW M. MercedesAMG has created high-performance versions of many of its nameplates, including
flagship sedans and SUVs, while BMW M has emphasized tuning only vehicles with
"Lateral agility" (which has long been only been 3 Series, 5 Series, and roadsters)
AMG also provides engines for the PaganiZondasupercar. The engines used are
variants of the M120 7,291cc displacement V12 engine originally used in the SL73
6
AMG. The M120 is the largest displacement naturally aspirated engine provided by
AMG and is now exclusively used by Pagani.
All AMG engines are hand built, using a "one man, one engine" philosophy at the
current AMG plant in Affalterbach, Germany. To signify this, each AMG engine
builder stamps the engines they produce with an engraved plaque depicting their
signature. As part of the official Mercedes product line, the AMG models are sold sideby-side with regular production models, unlike those offered by other Mercedes tuning
firms such as Brabus.
The AMG Performance Studio located in Affalterbach is responsible for the upgrades
which make an AMG into an AMG Black Series model. The Black Series treatment is
only available on 2 door vehicles, which includes weight reduction, bucket seats and
exterior alterations.




SLK 55 AMG Black Series
CLK 63 AMG Black Series
SL 65 AMG Black Series
C 63 AMG Black Series
AMG‟s specialty engines are of very high capacity, give extraordinary torque and top
speed. They are available in both V8 and V12 versions and are capable of turning any
7
car into a sports car be it a small compact sedan like the Mercedes C-Class or the huge
2.25 ton Mercedes S-Class. BMW “M” and Audi RS are the competitors of AMG.
AMG‟s specialty engines are of very high capacity, give extraordinary torque and top
speed. They are available in both V8 and V12 versions and are capable of turning any
car into a sports car be it a small compact sedan like the Mercedes C-Class or the huge
2.25 ton Mercedes S-Class. BMW “M” and Audi RS are the competitors of AMG.
Mercedes-Benz makes huge profits each year through its exclusive AMG Models in
each class. AMG Models are expensive compared to the range and cost more than
double or sometimes triple the price of the basic model in the class. For those who
have a large wallet and a fetish for monstrous sportiness combined with ultimate
luxury in the same set of four wheels- A. Mercedes-Benz AMG is for you!
Mirza Kazim Raza
B.Com (Hons) „J‟
8
A MORE EQUAL WORLD
In the book “The World is Flat”, Friedman recounts a journey to Bangalore, India,
when he realized globalization has changed core economic concepts. In his opinion,
this flattening is a product of a convergence of personal computer with fiber-optic
micro cable with the rise of work flow software. He termed this period as Globalization
3.0, differentiating this period from the previous Globalization 1.0 (in which countries
and governments were the main protagonists) and the Globalization 2.0 (in which
multinational companies led the way in driving global integration).
Friedman recounts many examples of companies based in India and China that, by
providing labor from typists and call center operators to accountants and computer
programmers, have become integral parts of complex global supply chains for
companies such as Dell, AOL, and Microsoft. Friedman's Dell Theory of Conflict
Prevention is discussed in the book's penultimate chapter.
Friedman repeatedly uses lists as an organizational device to communicate key
concepts, usually numbered, and often with a provocative label. Two example lists are
the ten forces that flattened the world, and three points of convergence.
Friedman defines ten some of the flatteners that he sees as leveling the global playing
field:
#: Uploading: Communities uploading and collaborating on online projects. Examples
include open source software, blogs, and Wikipedia. Friedman considers the
phenomenon "the most disruptive force of all."
#: Outsourcing: Friedman argues that outsourcing has allowed companies to split
service and manufacturing activities into components which can be subcontracted and
performed in the most efficient, cost-effective way. This process became easier with
the mass distribution of fiber optic cables during the introduction of the World Wide
Web.
Lokesh Venkatesh
II B.Com „A‟
9
``````````SUPER REGULATOR```````
Opinion, sermons and suspicions
It‟s been a decade since the LTCM blew up, john Meriwether and his 4 protégés Eric
Rosenfeld, Larry Hilibrand, Greg Hawkins, victor Haghani almost brought the world‟s
financial system to its knee, other nothing like them, physically unintimidating, their
bodies mere life support systems for their brains, which were in turn extensions of their
computers, these leaders of high finance deciding what‟s good for us and often called
the „lords of creation‟ in the house of „blood brains and money‟.
There are many examples in the world where the regulators themselves were incapable
of handling the situation effectively .The 1997 Asian crash, in which IMF‟s role is
severely criticized as country after country fell into crisis, many local businesses and
governments that had taken out loans in US dollars, which suddenly became much
more expensive relative to the local currency which formed their earned income, found
themselves unable to pay their creditors.
India has its own set of reasons with the recent power struggle over regulation between
SEBI (Securities and Exchange Board of India) and IRDA (Insurance Regulatory and
Development Authority) over ulips, an insurance product in which a bulk of the
premiums is invested in equities and bonds.
While considering the role of a regulator, it is incontrovertible that such an institution
is bound to make mistakes when no other able authority to check its power, much like
the security council outside the jurisdiction of the international court of justice or
headstrong bankers arousing terror in minds of the populous and finally prompting a
political campaign to cure their hyper trophied influence.
Or the recent the financial crisis of 2007–2010 which is considered by many
economists to be the worst financial crisis since the Great Depression of the 1930s.
Triggered by a liquidity shortfall in the United States banking system, and has resulted
in the collapse of large financial institutions, the bailout of banks by national
governments, and downturns in the stock markets around the world .
10
With regulators for their place in the cosmos insinuated into the power structure of
many countries, endowed with broad significance in terms of foreign policy is indeed
very impressive, as though they are given a priceless talisman wrapped up in a million
dollar accident insurance policy. This haphazard hit or miss operation should not turn
the prudent man rule on its head or drunken casino to play a game of Russian roulette.
11
The 20 March deadline, when Greece needs to pay back €14bn of government debt, is
looming on the horizon. So far, the Greeks have agreed with the troika to cut public
spending in return for the funds needed. Also, the Institute of International Finance has
agreed to take a 70% 'haircut' on its holdings. Well, now Greek resistance to reductions
in pensions means that it needs to come up with another €325m-worth of cuts by next
week.
The cuts to public spending have created a huge amount of public anger in Greece.
Greece‟s two largest unions have declared a national strike. While this won‟t directly
stop the deal, it can make life very difficult for the government. For instance, strikes by
tax collectors, which took place several times last year, would make it impossible to
bring the deficit under control.
12
Another major hurdle is getting the agreement of enough
bondholders. Although the Institute of International Finance represents firms holding
roughly 65% of Greek debt, 95% need to agree. The European Stability Fund could
always try to bypass this requirement by buying the bonds from the bondholders, then
swapping them for the new debt with the Greek government. However, if a blocking
minority refused to sell then they would be forced to increase the price.
Even if the deal works out, the results could be just as bad for the EU. Already people
in Portugal, Italy and Ireland are looking for a similar deal - and it‟s not hard to see
their point. After all, why should the Italians have to slog through austerity - or Ireland
through 15% unemployment - if Greece can get help from both bondholders and
Europe? A cynic might therefore believe that Merkel - and others - might secretly hope
for the deal to collapse, to keep the other peripheral countries in line. Events are
moving so fast that it‟s tricky to say what is going to happen. However, even if the deal
is agreed next week there is a strong chance it could collapse.
Jubal George
B.Com (hons) „J‟
13
BONFIRE OF VANITIES
THE INCLUENCE OF POLITICS ON THE WTO AND MAJOR EVENTS THAT
LED TO ITS CREATION
Formation of the WTO in 1995 was a momentous event; the creation of an
international trade organization (ITO) was a dream that evaded the trade negotiators of
the post war era for almost 50 years. Changing imperatives and negotiation processes
in the formation of the WTO, one caveat is worth bearing in mind, negotiation
processes and the resulting grand bargain were related very closely to the GATT even
though the WTO as an international organization may superficially resemble the ITO
project. Legally the WTO came into existence on 1st Jan 1995.
Belonging to the developing world is at least as much a product of self designation by
the countries concerned and recognition by the other members of the group as it is of
any objective criteria applied by outsiders. In keeping with this, China which was
tagged as a developing country by itself also enjoys some of the incentives in the form
of subsidies, countervailing duties and anti-dumping duties.
GATT a bilateral agreement between two contracting parties which had been a
standard for over 50 years was replaced by a multilateral trade organization. Persistent
GATT practices in the everyday workings of the WTO have had critical influence on
its nature and evolution as an international organization. Creation of the multilateral
trade organization was not on the agenda when Uruguay round was launched. But
dissatisfaction with the GATT had been brooding with different quarters, non tariff
barriers had been proliferated in the 1970s. The changing comparative advantage of
developed countries led by the US demanded that the GATT had to expand new issues
of services, intellectual property rights and investment measures if it wanted to keep
the major traders aboard.
Developing countries were faced with new imperatives. The economics downturn in
the 1980s led many of the countries to consider the East-Asian model of export
14
oriented growth and an attempt to counter their widening through the expansion of
world trade. To implement such a growth strategy to reap the benefits of liberalization,
to protect them from increasing non tariff barriers, new issues were included in a
manner and a trade-off that supported their interests, had to go to the negotiating table.
Shifting the economic conversation, First formal paper for the establishment of such an
organization came from the EU in June 1990. EU and Canada subsequently produced
several detailed proposals together for the creation and the running of the ITO. But
many countries still had to be convinced about the idea. The suspicion of developing
countries towards the idea of a multilateral trade organization was countered by the
incorporation of the WTO into the grand bargain. New organization of the WTO and
its strengthened dispute settlement mechanism, developing countries were granted the
inclusion of agriculture, textiles and also special and differential treatment for longer
time periods in implementing some of the new agreements.
The inclusion of developing countries further strengthened the need for a multilateral
trade organization
The US resistances to the organization under discussion was the longest lasting, and
finally gave up its opposition in 1993 in return for an EU concession on computer
chips and changes in the name of the organization from MTO (multilateral trade
organization) to world trade organization (WTO). And let‟s not forget some
sanctimonious back door diplomacy held on the sidelines. The time period between the
proposed paper for the establishment and the creation of the organization favored the
developing countries, bureau3333cratic feuding between the US and EU gave the
incentive for the EU and Canada to include as many countries as possible including
several developing countries and addressing their needs and concerns against the
arbitrary arm twisting by the more powerful countries.
Naveen S N
IV B.Com „D‟
15
An American energy company and commodities company valued around 70 billion
dollars which won the Fortune magazine‟s "America's Most Innovative Company" for
six consecutive years was known for its ambitious leaders and managers acquiring
corner offices, blinded by the money, and couldn‟t see they were sinking their own life
boat. Using the “mark to market” accounting standards made huge sums of money by
pumping up the stock price (compensation was based on stock prices)
Charting the futures of energy and power, high above each were the private staircase
Ken Lay (chairman) and Jeff Skilling (CEO) where they had built their own
staterooms, they were known as the smartest guys in the room, captains of a ship too
powerful to ever go down. Lay was a postal for deregulation, way ahead of the curve
on this, thinking about energy markets that would be deregulated and pushed
aggressively to change all of that. In Washington lay became a part of a new crusade to
liberate businessmen from the rules and regulation of the government.
To get the government out of the energy business. George Bush, Sr helped secure
billions in government subsidies to Enron International and helped promote Lay as
deregulation ambassador at large, always wrapped him in the cloak of moral rectitude.
However later lawyers testified that the top management had diverted company profits
to personal accounts.
To know what kind of gorilla was loose up there, to fix Enron, to make money for
Enron he needed a man with a big idea and that was jiff skilling, a visionary to lead the
future of oil and Gas industry, the man with the biggest idea to became the largest
buyer and seller of natural gas in the world. With the “Mark To Market” accounting
enabled Enron to book potential future profits on the very day it was signed no matter
how little cash came in the door, to the outside world-Enron‟s profits could be
whatever Enron said they would be, this left it open to manipulation –we are going to
sell power out of this power plant in 10 yrs. for $x per kilowatt and there was nobody
to prove they could do it. Led to the creation of HFV-hypothetical future value
accounting.
Jeff skilling had a very Darvinian view of the world and known for saying money is
the only thing that motivates people, his notions on how world should work really
trickled down and effected everything and how Enron did its business.
Pradyumna V
B.Com (Hons) „J‟
16
Business & Finance Crossword Puzzle
N.B. There are no spaces between words.
Across
1. rate and efficiency of work
4. ask the bank to advance money
6. money paid for a loan
10. wealth of person or business
12. promise to repair or replace
13. amalgamation of two companies
14. legal agreement
16. total sales of a company
17. share of profits paid to shareholders
Down
2. proof of payment
3. put money into a company or business
5. money paid to owner of copyright or patent
7. part of the capital of a company
8. where shares are bought and sold
9. money lent
11. amount of money spent
14. neither cheque nor credit card
15. money returned
Sindhu Priya B
IV B.Com D
17
Fun Facts
* The first owner of the Marlboro Company died of lung cancer.
* Dell Computers was started by a 19 year old with only $1,000.
* In most advertisements, the time displayed on a watch or clock
is usually 10:10.
* The founder of McDonald's has a Bachelor degree in
Hamburgerology.
* Steve Jobs' annual salary was $1, just enough to keep
company health benefits.
* All 3 founders of Apple worked at Atari before forming
Apple.
* Dell's first advertisement was made on the back of a pizza box.
* Yahoo! was originally called 'Jerry's Guide to the World Wide
Web'.
* Walt Disney World generates about 120,000 pounds of
garbage every day.
* There is no tipping at restaurants in Japan.
* The most productive day of the workweek is Tuesday.
* The creator of the NIKE Swoosh symbol was paid only $35
for the design.
* The average company saves over $7,000 for each employee
suggestion that is enacted!
Josy Abraham
III B.Com „B‟
18