Category: Finance
My take on Financial Markets & The Great Recession of 2007-12
It comes to a surprise that Dutch East India Company was the first Company in the world that was traded regularly on a stock market. When people in Holland in 1602, when that company was first launched, when they discovered that they could trade the stock every day and watch its price go up and down, it developed a sense of excitement and possibility in their lives, and it led to the financing of many more corporations. Here came a point in time where the evolution of financial markets started. To get the insights I analysed the period of 2006 to 2012 very keenly and we were in a period of economic crisis. It’s been called the Great Recession. It was the biggest world recession since the Great Depression(Will talk about this later!) of the 1930s. Among the events which triggered the Great Recession was the 2007 sub-prime crisis in the United States, the 2008 Lehman Brothers crisis, the failure of an investment bank, Lehman Brothers. And then in 2009 and into 2010 and beyond, the European sovereign debt crisis which originated in Greece and rapidly spread to Spain, Portugal, Italy, and other places. These were the crises that launched the Great Recession. And these crises caused great dismay or you can even say anxiety because the, the Great Recession caused millions of people to lose their jobs, or lose their homes, and, and, and find that their career prospects were derailed. And fingers were pointed at the financial community. That’s the problem. It seemed like the financial community was the cause of our most serious problems, but I found myself thinking, yes, this is a problem, and I don’t mean to minimize it. But what about all of the strength that has developed this, preceding this crisis.
It portrayed “The strength of our economies”.
There were firms like the insurance company AIG(American International Group) which were bailed out for whopping $182 Billion by the US of A. This shows the might’s of the economies and also portrays that we always had the ability to make out of this stress.
This also boldly tells that professionals in financial industry must possess some work ethics which would make the industry more trust worthy(Let’s not go much deep into this aspect!!).
The world is going through an amazing revolution. we saw the development of financial capitalism all over the world. That development is real and important, and it has its ups and downs, it has crises, but those crises are manageable if one understands finance. My impulse was to plunge into some of the technology of knowing Finance. I wanted to, get right into, what I think is the core model underlying finance. It’s something that’s called the Capital asset Pricing Model (CAPM). And this model is the model that helps us understand how risk is spread and diversified and managed, and it helps us understand the really important concept of leverage, which tells us how risk can be magnified or reduced in very simple terms.
It also helps us understand our own individual investing decisions. What does it mean to invest well? How important is diversification? And what does it mean really to diversify anyway?
Welcome on-board the journey of Finance with me! I am sure you’ll will enjoy this one!
Finance for Freshers and Non-Commerce Individuals
Seeing the growing fascination towards Finance by the students from non-commerce backgrounds I see an urge to make the student community familiar about the know how’s of Finance. So to start with, Accounts forms the base of any Finance stream.
One must know how to read and analyse the financial statements even if they don’t know how to pass the journal entries. This forms the basic understanding for any stream that you aim to go in whichever the field may be like equity research, investment banking, trading in derivatives or risk analysis. Accounting seems like a nightmare for engineers and non-commerce background students ohh! but please wait it won’t be that difficult because you people have gone through those rigorous 4 years of engineering (or may be of any other stream)where you have churned out the whole textbook in that available short time period during examinations. So have faith and get on board for the journey with me.
Accounting is a system for recording information about business transactions to provide summary statements of a company’s financial position and performance to users who require such information. Ohohohoh!!! wait in to tell you’ll simple words Accounting is a process where each and every financial transaction is recorded for some or the other use in the future which you’ll come to know as we go further. Accounting is done in various aspects like for Tax, Costing, Managerial and for various Financial reasons here we are going to discuss the financial accounting as the main prospect. In India, public companies as well as individuals must comply to some set of standards issued by the Govt. of India in accordance with Institute of Chartered Accountants of India(ICAI) and Securities and Exchange Board of India(SEBI). These set of standards are known as Accounting standards, the reason to follow this is that while comparing between various companies we can have them at par with each other without any technical shortcomings and to check for fraudulent measures in accounting methods or tax calculations by the tax authorities. In US, Companies comply to rules set down by Securities and Exchange Commission(SEC) in accordance with Generally Accepted Accounting Principles (US GAAP) which are in turn delegated to FASB(Financial Accounting Standards Board). Slowly the whole world including India and the US are moving towards a more evolved financial accounting system set down by the IASB know as the IFRS(International Financial Reporting Standards). This will help both the companies and the investor community to have a broader view of the scenario taking the companies in the whole world at par with each other. Hence trying to reduce the ambiguity and differences between the systems for the betterment of the investors. In this journey we will go through each and every aspect of Accounting from the perspective of a naive reader who is a newbie in Finance.
I will be posting a series of articles on this topic in the coming time. Stay tuned.
Welcome onboard!!!