DEPARTMENT OF COMMERCE

MUDRA

DEPARTMENT OF COMMERCE

CHRIST UNIVERSITY

FEBRUARY 2012 EDITION

A COMMERCE CLUB INITIATIVE

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CONTENTS

02 EDITORIAL Team

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 18

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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’

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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’

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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.

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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‟

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‘S Corporate Strategy

Mercedes-AMG GmbH

Aufrecht Melcher Großaspach (AMG)

Mercedes-AMG GmbH, commonly known as AMG, is a subsidiary of the Mercedes-

Benz 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 highest-

performance 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. Mercedes-

AMG 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

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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 side-

by-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

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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‟

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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‟

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``````````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 .

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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.

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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.

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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‟

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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

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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‟

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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‟

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Business & Finance Crossword Puzzle

Sindhu Priya B

IV B.Com D

N.B. There are no spaces between words.

Across Down

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

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

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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‟