Why do we need stock markets?

This article has made it to the front page of digg written by Alec Chrystal. Here is the excerpt:

A key reason for forming a company is that the shareholders of a modern company have "limited liability". This means that a shareholder can lose what they paid for their shares in a company but they are not liable for the debts of the company beyond that. This is not true in, for example, a partnership, where partners are jointly liable for all the debts incurred.

Investing in company shares is thus potentially attractive, as shareholders get a share of the profit of the business but know that the worst that can happen is that they lose the value of the original investment.

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Basic formula for trading in stock market used by Warren Buffet

This formula was given by Benjamin Graham.
You might wonder who Benjamin Graham is. He's the man who taught Warren Buffet, the richest man in the world who earned a lot of his wealth from stock markets around the world.

The formula is: Value= EPS (8.5+2g), where

Value = Value of the stock in rupees (if you are investing in India)
EPS = Earnings Per share in rupees (if you are investing in India)
g = Growth rate in per cent


For instance, assume that a stock like TCS' value as of today is Rs 1,240 and its EPS is Rs 57.65. Now, these two figures can help us arrive at a growth rate in terms of percentage at which the company's profits need to grow to sustain a price of Rs 1,240.
Let us calculate 'g' for TCS by substituting the assumed values in Graham's formula.
1,240 = 57.65 * (8.5 + 2*g)
Therefore, 1,240/57.65 = 8.5 + 2*g
Therefore, 21.5 = 8.5 + 2*g
Therefore, 21.5 � 8.5 = 2*g
Therefore, 13 = 2*g
Therefore, g = 13/2
Therefore, g = 6.5.


Suppose that,Tata Steel needs to grow by a mere 0.2 per cent for next 7-10 years to sustain it's price.
Do you think a huge company like Tata Steel will grow only at a mere 0.2 per cent? Of course not. It is a promising company with a sound management that can propel the company to much higher growth rate than 0.2 per cent.
Normally, a company that is expected to clock higher growth rates than 'g' is considered as a good buy. But this should not be your only tool to identify a stock could increase in value in the future.

Learn how to write threatening letters with microsoft

Dear Members of the Board:

It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement. Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy.

While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement. We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we’ve seen no indication that you have authorized Yahoo! management to negotiate with Microsoft. This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.

During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other Internet-focused companies in particular. At the same time, public indicators suggest that Yahoo!’s search and page view shares have declined. Finally, you have adopted new plans at the company that have made any change of control more costly.

By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects.

Given these developments, we believe now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement on a combination of our companies that will deliver superior value to our respective shareholders, creating a more efficient and competitive company that will provide greater value and service to our customers. If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.

It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo!’s shareholders and employees. We think it is critically important not to let this window of opportunity pass.

Sincerely,

Steven A. Ballmer
Chief Executive Office
Microsoft Corp.

Indian company Videocon eyes Motorola handset biz

Videocon hires top global banker to convey interest in handset biz.

The Videocon group has expressed interest in buying telecom giant Motorola’s struggling mobile handset business, which is being split into a separate company.

“We have hired one of the world’s top three investment bankers who will convey our interest to buy out the mobile handset business of the US company,” Group Chairman Venugopal Dhoot told Business Standard.

Explaining why he was bidding for Motorola’s handset business, Dhoot said his group was ready launch its pan-Indian GSM mobile operations at an investment of Rs 6,000 crore.

Also, it has a consumer durables retail chain under the brand name “Next” with over 1,000 stores across the country that stock mobile phones too.

“The Indian market for mobile phones is around 120 million units a year and we have our own retail chain stories that we can leverage. Also, we can transfer the manufacturing plant to India to leverage cheap labour in the country,” added Dhoot.

Motorola has a handset manufacturing facility in Chennai that makes both CDMA and GSM mobile phones.

Dhoot said the deal will be financed through a combination of around Rs 1,800 crore of cash reserves and long-term loans raised in the global market.

Motorola’s mobile business will be valued at between $3.5 billion and $4 billion. Last year, the company sold over 159 million mobile phones globally.

When contacted, a Motorola India spokesperson said that the company would not be able to comment on speculation.

If Dhoot is able to pull through the deal, he will become the world’s third largest mobile player with around 14.3 per cent market share - just behind Nokia and Samsung.

However, in the fourth quarter of 2007, Motorola registered a 12.3 per cent global share down sharply from 22.4 per cent in Q4 2006.

The failure to replace the popular Razr model has been the main cause of decline.

Motorola’s Indian market share is not available, even though industry experts say it is behind Nokia and Samsung.

On March 26, Motorola decided to split the troubled mobile device business into a separate company due to sustained pressure from one of its key investors Carl Icahn, who wants the business to be sold. The Mobile Devices business will focus on mobile handsets, accessories and software.

Dhoot’s record of global acquisitions has been mixed. It recently failed to acquire Daewoo Electronics, for which it bid $711 million. However, it has successfully bought Thomson SA’s television glass tube business and Electrolux’s Indian operations.

The Videocon Industries scrip rose 2.48 per cent on BSE, closing at Rs 314.55 per share against the previous close of Rs 306.95 per share.

Googler gets in on pre-IPO Facebook

The trend is clear--the best bait for well-fed Googlers, especially ones who joined after the company's 2004 IPO, is another hot pre-IPO company. And Facebook is that company.

The latest Googler to jump to Facebook is Ethan Beard. Formerly director of social media at the search giant, he will become director of business development at the popular social-networking company. The news was first reported by TechCrunch.

The defection comes shortly after Google sales chief Sheryl Sandberg left to go to Facebook. Others who have blazed the trail include Benjamin Ling of Google Checkout, Justin Rosenstein of GDrive, and Gideon Yu, formerly chief financial officer at YouTube who left shortly after Google acquired it in 2006.

However, with the recent downslide of stock markets across the US and the world, I don't think this IPO will be as big as the Google's IPO.

Google profits disappoint market

There were signs of a slowdown at Google after it reported disappointing profits in its most recent quarter.

Google's profits were up 17% to $1.21bn (£608m) for the three months to the end of December.

Some analysts had been hoping for stronger profit growth and its shares fell sharply in after hours trading.

Google's shares have fallen more than 18% so far this year on concerns that the slowing US economy will cause advertisers to cut back on spending.

Investors have become used to Google reporting extremely strong profit growth.

Analysts say the latest quarter shows that even Google is not immune to an economic slowdown in the US.

As the US slowdown fear looms large it is better to do margin trading and book profits to buy stocks for long term when price of stocks reduce further.

Why margin or day trading is best in present scenario

Sensex is hovering around it's life time high. Stocks are being traded at a price you wouldn't have imagined three years ago. Foreign investors are pumping in lot of money. There are rumours that illegal money is fueling this growth. So, it is a disaster waiting to happen that the stock market crashes.
The best option is to make use of the volatility of the stock market and indulge in day trading or margin trading. What is more is that you don't need to have complete money in your bank account to do day trading. There are various products.
example: In one product in order to do day trading you may just need a percentage of the actual value of the stocks. It ranges from 5%-21%.What is more you can do this trading online and you just have bother about it during trading hours.
An average investor can make INR 250 to INR 100000 every trading sessions.
Philosophy of day trading is to buy stocks in lower price and sell it in higher price or vice versa. This can also be called swing trading. Most brokers,however square off before the closing bell ,irrespective of whether you are making profits or loss. so you must make your move before this. Hence, while doing online trading you must ensure that you have a good Internet connection as well as back up.