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Paul Krugman is simultaneously one of the most respected and controversial economists in the world.  Named by The Economist as “the most celebrated economist of his generation,” Krugman’s provocative opinion pieces in the New York Times often set the tone of political debates that appear across the cable/network television and talk radio wire.  It’s not uncommon for Meet The Press’s Tim Russert to relentlessly grill Presidential candidates on Krugman’s latest “op-ed”, so it’s clear that he does project quite a lot of political influence whether you agree with his analyses or not.  In this video, which you can view by clicking on the image above, you’ll watch Paul Krugman’s recent presentation at Google Headquarters.  Enjoy the video.  I look forward to hearing your perspective.

Ryan Rode
Interactive Services Manager
Ashworth University       

       Thanks to Jocelyn Matthewes for permission to use this Photo.

It can be quite discouraging for investors when debacles like auditing scandals or Enron bankruptcy happen. They wonder if the risk they are taking by investing in stocks is worth it. These apprehensions stem from some common myths about investing stocks. Investors need to have a realistic idea of the stock market before they take the plunge. Five of the most common myths are discussed below.

1) Stock Market Investment is akin to gambling.

This misconception would sound very ridiculous for stock market experts. This is one of the primary reasons why most people shy away from stock market investments. For these people, shares are like a trading vehicle. They forget the fact that buying shares is buying a part-ownership of a company. Whenever a company generates profits, the holder of the shares is entitled to receive a part of it. It also entitles him to a claim on the assets of the company. Stock prices fluctuate when investors constantly attempt to assess the profits left over for shareholders. Moreover, a company’s outlook and its future earnings always keep changing. These fluctuations are quite natural.

Gambling creates no value in a transaction. It is like taking money from one person to give to another. Investing, on the other hand, leads to growth of the economy. As the economy grows, there is greater competition amongst companies leading to an increase in productivity. As a result, they manufacture products that better our lives. (more…)

Cleantech - the new buzz word which is cut across industries and geographies has always had a mystical presence in the minds of a neophyte.

So what is all the euphoria about cleantech? As the Cleantech Indices simplify cleantech as “Clean is more than green”. Clean technology, or “cleantech”, should not be confused with the terms environmental technology or green technology popularized in the 1970’s and 80’s. Cleantech is new technology and related business models offering competitive returns for investors and customers while providing solutions to global challenges. (more…)

I’m about 200 pages into Alan Greenspan’s book, “The Age of Turbulence:  Adventures in a New World,” and it’s shaping up to be pretty decent.  Not exactly a page-turner, but it hasn’t yet been consigned to the fate of most of the books I check out from the library, gathering dust under my desk, envying the inordinate attention I give to my computer and especially FreeCell.  It’s a rather intimidating volume at 509 pages, and is a little light on economics (which is probably a good thing).  The book is thus far composed mostly of anecdotes about his working relationship with various and sundry government officials over his 19 years as Fed chairman.  He apparently had an antagonistic relationship with the first President Bush, who blamed him for losing his reelection, and was on very good terms with Clinton, who he claims was very engaged in economic affairs and boldly tried to implement a deficit reduction plan that ultimately got watered down and compromised to the point of ineffectualness.  I’m just starting the second President Bush years, but already the author has foreshadowed the troubled waters ahead with some ominous language:

“I looked forward to at least four years of working collegially with many of government’s best and brightest, men with whom I had shared many memorable experiences.  And on a personal basis, that is how it worked out.  But on policy matters, I was soon to see my old friends veer off in unexpected directions.  People’s ideas–and sometimes their ideals–change over the years.  I was a different person than I had been when first exposed to the glitter of the White House a quarter of a century before.  So were my old friends:  not in personality or character, but in opinions about how the world works and, therefore, what is important.”  page 212

Greenspan keeps the tone of the book even, with only occasional divergences into the fine points of managing a national economy.  He made a few sweeping generalizations (if anyone is in a position do so and not sound glib, it would be him).  He states that recessions are caused by two factors:  either by an buildup of inventory exceeding aggregate consumer demand, which leads to a contraction in productive activity by businesses until the inventories are sold off; or by a collapse in demand for a product, as happened to travel and tourism in the wake of 9/11.  Knowing which was the cause was important to the Fed in determining how to respond.

The jury’s still out until I finish it, but so far I’d recommend this book to anyone who has an interest in economics and wants some authoritative commentary, as opposed to pedantic technobabble.

John Ash
Ashworth University 

Everyone nowadays is gung-ho about emerging markets. And why not? Emerging markets are currently the world’s fastest growing economies. Hence, it is of not much surprise that more and more money has been finding its way into these markets. The largest markets for FII inflows are India and China.  India for one has been a recipient of huge inflows owing to the fact that the Indian economy is one of the fastest growing economies of the world clocking a 9.3% GDP growth rate in 2006-2007. This growth has been witnessed since 1991, when the Indian Government decided to liberalize the economy. 

The closing figure for the benchmark Sensex on October 16, 2007 was 19, 051. The mountainous rise from 18,000 to 19,000 took as little as 4 days to surmount. The corresponding figure for the Sensex barely 2 years ago in 1995 was around 6000. The year to date net FII inflows as on October 16, 2007 is around $9.5 billion. Out of this $7.2 billion have been invested in the month of September alone. 

It has been an interesting climb all this way. What is intriguing is the fact that the rise has been predominantly continuous, whereas western markets have been staggering. The rise was initially pretty much broad based across market capitalizations. However, presently, there have been some companies leading the pack, while there are a number of companies that are yet to touch the all time highs created before the carnage of May 22, 2006 when the market had corrected 1100 points. Across sectors it has also been quite broad based barring a few sectors, such as Auto, IT and pharma that have been reeling under the pressure of the beleaguering dollar vis-à-vis the rising rupee. 

              Thanks to Sash Jose for permission to use this Photo.

Historically such periods of exuberance have been followed by what is called a “Graveyard market”, where investors who invest at higher levels get entrapped and others refrain from investments. With the market at hereto unseen levels, it prompts us to question, is this rally going to continue? And for how long? After all, witnessing the Sensex reaching new highs everyday in the absence of significant triggers seems unjustifiable. It is currently trading at a 12 month multiple of around 25 times earnings. On comparison with the accepted level of around 20 times earnings, it does seem overvalued. However, on examining trends from other emerging markets such as the Chinese Markets that currently trade at a 12 month multiple of 50 times earning, the Sensex may not seem all that expensive. 

At the same time, both India and China seem insulated from the weakness exhibited in the west. The Sensex continues to march ahead flaunting buoyancy and ignoring Global cues signaling weakness from the sub prime crisis and the declining dollar. With research agencies such as CLSA predicting long term levels such as 40000 for the Sensex, it seems like a wise choice not to stay as a spectator on the periphery, but join the race whilst the bulls have their way.

To conclude today’s discussion, I encourage you to check out the following video analysis of emerging markets with industry expert Mark Mobius.  Talk to you again soon…

Chad J. Lapa
President of BlueEyeDesign 
Creator of 22Dollars.com
Ashworth University  Contributing Blogger

*Chad J. Lapa is the founder of BlueEye Design, one of the fastest growing  premier web design and web hosting companies in the nation.  Mr. Lapa has been very generous in offering to share his “insider” perspectives with the AU student community and we would like to sincerely thank him for his commitment to teaching others through his experiences.  To learn more about Chad Lapa’s life and work, visit his 22Dollars.com finance/investing blog and BlueEyeDesign website.  Thanks Chad!