Are you feeling financially secure?

The stock markets have doubled over the past nine months. And you must have recovered all of your portfolio losses of the last year. The economy is showing signs of recovery. And you must have felt that relief in seeing lesser number of people around you losing their jobs.

So, things seem to be getting back to normal again you might think.

But is all this making you feel financially safe?

We believe it is not the amount of money you have that makes you feel financially safe. Rather, financial security is about knowing and feeling safe that whatever and whenever disaster arrives, you know you will not have financial trouble.

And to know this, you need to ask yourself if you are prepared for the next recession, or the next financial downturn? You need to ask yourself what will happen to your finances if you lose your job today? And most importantly, you need to ask yourself what will happen to your family if you passed away suddenly?

Of course, these are serious thoughts. But answers to these will define how financially safe you are. You will then also be clear about how much of your surplus money should you risk on speculation and how much on serious, long-term investments.

Your speculative instincts (if you have any) might earn you good returns in the short term. But if this backfires, you will be putting your and your family's financial security to a big risk. On the other hand, sensible long term investing will go a long way in helping you reach you financial goals safely.

01:07 Chart of the day
A blame game is currently on between the developed and developing countries on who is responsible for the global warming spectre that the world faces. Now while the western world (led by the US) maintains a high rate of carbon dioxide (CO2) emission that is the biggest cause of this warming, developing countries led by China are now closing in the gap. China in fact recently became the biggest polluter in the world, contributing to around 22% of global CO2 emissions. While India's share in global emissions has doubled in the last four decades, it still stands at a miniscule 4%, though still higher than Brazil's 1%.



Data Source: BP Statistical Review 2009



The financial meltdown was caused by several factors. Bankers had the wrong reward structure. Banks were too interdependent. Risk was underestimated. Regulators did not do their job properly. Nobel laureate Joseph Stiglitz believes that enough hasn't been done to prevent another crisis. His solution - make banks smaller. Wherever the banks remain large, increase the regulation. Impose special taxes and greater capital adequacy requirements.

In our view, banks are meant to serve the real economy. But given the money and prestige this business involves, bankers innovate to a point where the dangers exceed the intended benefits. The subprime crisis isn't the first time this has happened. As long as the incentives remain, it won't be the last time either.


In what UK bankers are calling a 'poison pill', the British policymakers have levied a 50% tax on bonuses that banks pay to their employees until April 5, 2010. This seems a good move in curbing the predatory tendencies of banking employees who have survived the financial crisis on taxpayers' money.

However, how relevant will the tax be is doubtful. This is considering that many of the large banks have already announced their bonuses that will not be covered under the new tax norm. But then, as per an October report by the Centre for Economics & Business Research Ltd., a London-based research firm, UK financial firms were preparing to set aside as much as 6 bn pounds in bonuses for 2009, 50% more than 2008. The new tax will certainly act as a demoralizer for them!

Are the huge bonus payouts by banks and institutions like Goldman Sachs justified? Share your views



When the crisis started one stark fact that was brought to the fore was the extent to which companies were leveraged. Many companies were saddled with huge amounts of debt and the weak economic environment meant that servicing and paying off this debt was becoming a problem. Now this problem has shifted to a much bigger arena.

This is because various countries themselves are beginning to look over-leveraged as a result of which their sovereign rating are seeing downgrades. Dubai was the first to see its skeletons come out of the closet. The latest to have this dubious distinction is Spain. Ratings agency Standard & Poor's has revised its outlook on Spain to negative and has warned that the country faces a risk of a debt downgrade in two years if the government did not take tough action.

In a bid to bail out battered financial institutions, governments across the world have injected massive doses of liquidity into their respective economies all of which is beginning to take its toll on finances. Cleaning up this massive mess is going to require some herculean effort indeed!



An era in personal mobility will come to an end by the time the next fiscal dawns. Bajaj Auto, the company responsible for putting scooters at virtually every nook and corner of the country has decided to come fully 'in sync' with the latest fashion in the geared two-wheeler industry - motorcycles.

In other words, the company will exit the scooter segment by the end of the fiscal to focus exclusively on motorcycles. It is interesting to note that Bajaj was a little late in recognising motorcycles as the future of the Indian two-wheeler industry. Consequently, it went through some rough patch at the turn of the century when it tried to make the transition. However, now that it has made amends, it does not want to miss out on the enormous opportunity that is staring it in the face in the motorcycles space.

In fact, it has made it amply clear that it wants to be the largest bike player in the world. It may not be easy though. A company called Hero Honda has been dominating the Indian motorcycles scene for quite some time now and may not give up its pedestal so easily.



Despite all the bearishness about the US dollar, someone has been busy stocking up on the greenback over the last two months. And that someone is none other than commodity guru Jim Rogers. Let it be clear though that he himself is extremely bearish on the dollar over the longer term. However, there are too many bears on the dollar right now and that's the reason Rogers feels that the dollar may be set for a near term rebound from its beaten down levels.

However, what's most scary is that the renowned investor expects the longer maturity US government bond yields to reach double digits just like they had in early the 1980s. In 1981, 10 year treasury notes' yield had hit a high of 15.8%. It currently stands at about 3.42%. If yields were to indeed move to double digits, the prices of bonds will take a severe beating. With the US dollar making up such a large part of the forex reserves of so many countries around the world, a large decline in bond prices is sure to have a lot of ugly ramifications.


Indian markets traded amidst high volatility today. While the BSE-Sensex opened the day ion the negative, it was trading higher by around 50 points (0.3%) at the time of writing. Other gainers among the Asian markets included China (up 0.5%) and Korea (up 1.1%). European markets have opened the day on a weak note.

Today's investing mantra "The individual investor should act consistently as an investor and not as a speculator. This means... that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase." - Benjamin Graham