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Is Silicon Valley Being Irrational About Tech Startups?

Reproduced from our original post on LinkedIn (June 1, 2016)
Donald Trump says a lot of things, mostly crass, divisive and slighting. He has spoken once again – this time about a possible tech startup bubble, which is due to pop.
I’m talking about companies that have never made any money, that have a bad concept and that are valued at billions of dollars,so here we go again.

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After The Brexit Referendum

Updated: June 27, 2016

The much speculated Grexit is no more a threat, at least for now. Instead, last Friday, June 23, 2016, the Britons did something unthinkable – the Brexit. A lot happened during the referendum campaingning – arguments, fear mongering, gossiping, and even, false promises. The results have brought in a fresh wave of shock, allegations, disillusionment, and desperation. While all this may not seem to matter now as the deal is sealed, the possibilities (read, fallout) that may become realities still command attention. Some of the notable events so far:

  • UK stands divided on voting lines
  • David Cameron quits
  • Pound tanks to a 31-year low, currently trading at 1.34 per Dollar
  • Approximately, $2 trillion wiped out from world markets
  • UK set to lose its AAA rating: S&P
  • Boris Johnson garners support for his claim to the Prime Minister’s office
  • Post results Bregret sets in
  • Over 300,000 Britons sign up for a fresh Parliamentary debate of Brexit
  • EU asks for exit process to start as early as Tuesday, June 28, 2016
  • Call for a second independence referendum in Scotland has increased; it voted 62% in favor of staying with the EU

Friday’s events not only stumped the experts worldwide, they also brought the judgement of the average English voter into question. It may be hard to imagine how the political ambitions of an unloved former London Mayor (Boris Johnson) and a repeatedly rejected Nigel Farage could blind the public to reason. Farage, the UK Independence Party chief, has a history of losing each of his attempts in the General Elections. “Google Trends” probably holds the answer. It reported a spike of 1024% in searches related to Brexit after the results were formally announced!

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Why Are Startups Losing Valuations?

There has been a barrage of not-so-good news for the startup community, with funds flow ebbing and investors toning down their expectations. Morgan Stanley Institutional Fund Trust Mid Cap Growth Portfolio, Fidelity Rutland Square Trust Strategic Advisers Growth Fund and Valic Company I Mid Cap Strategic Growth Fund have marked down the value of their investments in Flipkart. On the other side, Zomato too was marked down by HSBC. RBI Governor recently remarked, “If the only reason you are getting revenues, not profit, is because you are selling based on 50 per cent discount, it can’t be viable in the long run.”

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Oil Price Trend Update

We published an article, What Is Keeping The Oil Prices Low?  in February that highlighted the reasons behind the current downturn in crude oil prices and its impact. The following is an update on that material.
The June WTI is trading close to $48.35, while the July Brent is at $49.11, implying an improvement by about 49% from our last post. At any point in time, there is a complex dynamics behind crude oil trends that combines the impact of long and short-term factors.

The Supply Side
OPEC has released its May 2016 report and has predicted non-OPEC oil production to come down by 0.74 million barrels per day (mb/d) this year. The OPEC think-tank is exploiting its dominant market position and financial bandwidth to wait out its rivals.

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How is Oil Price Really Determined?

Throughout the history, oil prices have had a roller-coaster ride and the trends do not make sense all the time. The current downturn has once again brought into focus the complex dynamics behind this crucial commodity.
This article covers the very starting point in this story – the determinants of
oil price. The rate of crude oil is impacted by the demand-supply dynamics, but contrary to popular belief, it is primarily set by the derivatives market.


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What Is Keeping The Oil Prices Low?

While the last two years altogether have been a volatile period for oil prices globally, they have been in a free fall since the last quarter of 2015. Benchmark Brent closed at $33.10, while WTI closed at $32.30 on last Wednesday, January 27. The prices have fallen by about 70% from June 2014 peak prices. [May 2016 Update: July Brent is trading at $49.35, while June WTI is at $48.30. Read our update synopsis] Interestingly though, the supply side players do not appear to be relenting anytime sooner. In fact, analysts expect that the production is going to increase in near term, pushing the prices down even further. So, what is really going on with the oil industry?

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Will the Euro Survive the European Crisis?

It was in 1999 that 17 member nations from the European Union came together to form a powerful economic alliance, known as the Eurozone. The Maastricht Treaty of 1992 laid down stringent criteria to gain a membership in the alliance. Euro became the face of this congregation, standing in direct competition with the strongest currencies, US Dollar and British Pound. Today, years of rampant violation of the fundamental philosophy of the Eurozone and glaring financial realities threaten the very existence of this economic force.

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EURO Remains Strong on Expectations of Positive News from Greece

Updated October 15, 2012

On Monday, EURUSD closed at 1.2949, 0.03% lower than Friday. Euro continues the uptrend from its support level of around 1.2100 in late July. Greek 10-year yields touched a new low since its last debt restructuring in March this year, falling 47 basis points to 17.58%. The good news is that Greece may not fall through the cracks after all. The latest reassurance comes from the German Finance Minister Wolfgang Schaeuble, who categorically said, “I think, it will not happen that there will be a state bankrupt in Greece.”

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The Earthquake In Japan Brings A Tsunami Of Troubles

On March 11, 2011, Japan was torn in, what may be termed as one of the worst earthquakes of all times. The following 10-meter high tsunami flattened the entire Pacific cost of the country, sweeping away ships, vehicles, people, and homes alike. Though the early warning systems did prevent some loss of life, the death toll has already crossed 10,000, thousands are still missing, and millions have lost their homes. The earthquake, measuring 8.9 on the Richter scale, has shifted the landmass by almost 8 feet and is believed to have affected the earth’s axis. Read about the likely financial impact here.

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What Does the Egypt Crisis Mean to the World Economy?

The anti-Mubarak stir in Egypt has proved to be more potential that previously imagined. With Mubarak finally reeling under the pressure to step down after a prolonged state of denial and no definite Government system yet in place, the fate of Egypt has become somewhat more precarious than before. At the heart of the protests was the rampant corruption under the 30-year old Hosni Mubarak regime, which pushed the nation back in terms of economic prosperity.

Where does Egypt stand?

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CWG 2010 Scam: A Time for Answers

Now, that the Commonwealth Games 2010 are over and the results pouring in, the regulators and investigation have started their probe into what can turn out to be one of India’s largest financial scams so far. The original budget for the Games was set at Rs. 3,800 crore. However, on the basis of the Joint Parliamentary Committee’s (JPC) findings, the opposition has alleged that the actual expenditure in hosting the games was to the tune of Rs. 70,000 crore! The Government has declared an expenditure of Rs. 30,000 crore, squarely blaming the escalation on ‘rising’ prices. This is especially interesting in the light of the fact that Beijing concluded the entire Olympic Games within Rs. 28,000 crore barely two years ago.

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Economic Update 2009: Bulls vs Bears

After touching a dangerous high of 364 basis points late last year, the benchmark LIBOR-OIS spread reached to a level of 25 basis points on August 3, 2009. In layman terms, it indicates the extent of credit market rotations. The current levels are indicative of easing credit markets, which almost froze after the collapse of Lehman Brothers, and other major players on the Wall Street.

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Indian Measures to Counter Economic Recession

Ever since, the first signs of the recession began showing in India, the Government has come up with various incentives, apart from measures by RBI. The Central Bank has took some steps, such as reducing the benchmark lending rate; lowering cash reserve ratio (CRR); and easing lending norms for commercial banks to provide boost to the housing sector lending. To provide a stimulus to the export sector, RBI has enhanced the credit period for exporters from 6 to 9 months. (more…)

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Subprime Crisis In A Nutshell

The US Subprime crisis (over USD 5 trillion in losses) began to reveal itself somewhere in the last quarter of 2006. It’s full impact was still anyone’s guess. However, soon it began gripping the global economy, toppling financial markets; setting off a long recession; and pushing marginal countries, like Iceland, on the verge of bankruptcy. The crisis was more a result of blind enthusiasm riding on the back of a decade long rally in the U.S. housing market from mid-1990s to 2006, and utter disregard for the fundamental business cycles.

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Impact Of Recession On Developing Countries

The recent tidings in the global market has put a question mark on the decoupling theory, which claims that a nation’s economy is not impacted by the state of other economies. The subprime crisis concerned primarily the US, but had a ripple effect on almost all of the other nations due to the interdependence and interlinking of individual economies. The Emerging Economies, though, have been robust in terms of fundamentals, were severely affected by the global meltdown. Developing nations like India, China and other Southeast Asian countries have the potential to pull out the World out of the recession, but it is expected to take longer than previously thought.

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