INDIAN VILLAGE

ALL ABOUT GETTING WEALTHY

This principle of delaying taxes to reduce taxes is why chief executives pay their tax lawyers a hefty fee to develop compensation plans that allow them to delay paying taxes.

Waiting 30 years to cash out allows the money and its unpaid taxes to be invested, covering inflation and loss of buying power over the years, and costing the executive practically nothing while waiting until he or she is in a lower income bracket to withdraw the funds.

Now, here’s the interesting part.

The corollary to this axiom is that, if I pay a tax today that could have been paid in the future, it costs me more because I have less to save or invest or spend.

Well, for over 20 years, we’ve been paying more of at least one brand of tax in the United States than is necessary.

That tax is Social Security.
From 1984 to 2002 the government collected $1.7 trillion more in Social Security taxes than the agency paid out in benefits to retirees, widows and orphans and in disability benefits.

That is enough to double the value of all the 401(k) retirement plans in the country.

That is enough to pay off all the consumer debt in the country at the end of 2001, a burden that has almost tripled in real terms since 1983.

It is an average of $16,000 that each family did not have to spend on improving their lifestyle or on investing for the future.1

As a result, 75% of workers pay more in Social Security taxes than in income taxes.

Remember, too, that the ceiling for the S.S. tax in 2009 is $106,800, though the 6.2% rate hasn’t changed in 20 years. If you’re self-employed, you pay 12.4% but get to deduct half. If you work for someone else, the employer pays the additional 6.2% to bring the total to 12.4%.

It can be argued, however — as a friend of mine in H.R. has noted, and as many economists purport — that the cost of the employer’s share is really an invisible part of the employee’s total compensation package, as are benefits.

What this means is that, for every dollar you earn above $106,800, you get a tax break — taking home 6.2% more (and sparing your employer the same percentage).

Obviously, if you’re in the top 1% of income earners, the Social Security tax is a drop of water in the ocean to your bottom line.

Double-Dipping and Your Financial Health

“It’s a matter of principle.”

This is the argument for eliminating taxes on dividends paid to shareholders. Why? Because they’re taxing the same dollar twice, by gum!

Big whoop.

They tax the same dollar twice when I take my after-tax pay and buy anything in my state (except food) and pay sales tax.

But that’s not why I brought it up.

The same is true for Social Security: It represents a tax applied to wages that are already subject to the personal income tax.

So, how come nobody is outraged at the unfairness of Social Security as a double tax?

The tax-cutting frenzy of the ’80s by both Republicans and Democrats alike prompted quite a bit of turmoil:
• Unemployment reached 10%.
• The federal budget deficit tripled in three years.
• The government was borrowing one dollar for every three it spent. (Hmm, sound familiar?)

In reaction, one year after signing the biggest tax cut in history, President Reagan signed into law a series of “revenue enhancements” (read: “new taxes”).

The income tax was not raised, but excise taxes were (such as a 5-cents-per-gallon gas tax), which the Heritage Foundation acknowledged hit the poor hardest.

But that was just the beginning.

That’s when the increase in Social Security taxes began.

Whether it was a mirage or a real problem, the decision to tax people immediately for a benefit due half a lifetime off meant that people were paying even more in real terms than if taxes were just raised three decades into the future.2

Perhaps the government was being wise. Perhaps it was collecting the taxes in anticipation of the baby boomers getting older and increasing the retirement pool. Perhaps this was a way to invest (or even loan) the money to ensure the future liquidity of Social Security.

Yeah, right.

The money, as we know, was spent on the day-to-day operation of the government.

The Reagan tax cuts lowered the upper income tax rate from 70% to 28%. This drastic loss in revenue prompted the revenue enhancements that hit lower- and middle-class wage earners harder.

In other words, somebody had to make up the taxes that were no longer being paid by the wealthiest citizens.

This trend was slightly corrected under both the first President Bush (1991) and President Clinton (1993), but the revenue derived from personal income tax is nowhere near what it was in the days of higher tax brackets.

And then, in 2001, President Bush signed another law, with half of its $1.3 trillion in “tax relief” going to the donor class (i.e., the richest 1%). Congress didn’t object too much. Maybe it’s because of 44% of our elected representatives are millionaires themselves.

I’ll explain briefly why this is important.

How Social Security Works

Social Security was it was put in place to ensure that each citizen approaching retirement is taken care of in our egalitarian society.

The earner with the smallest income gets a distribution that is disproportionately larger than what they have earned, while those who pay the maximum tax get less.

So, there is a redistribution of wealth because the middle and upper-middle classes subsidize this inequity, while the upper-upper classes get a free ride because of the S.S. cap.

(Remember that the percentage of income paid in Social Security tax for the super-wealthy is negligible, around $6,587.50.)

When we reduce income taxes but increase Social Security taxes, so that cops and teachers and construction workers and engineers are putting a greater percentage of income into Social Security, we are effectively redistributing wealth in the opposite direction.

As I’ve said previously, “How the government sets its tax rates determines both the degree of prosperity and who will prosper.”

When taxes are cut for a specific group, it’s a statement about priorities because it reflects a decision being made to either help that group prosper now or prosper later.

Likewise, a decision to raise taxes decreases a group’s ability to spend now or to save for the future.

For all I know, this class clash may be an eternal struggle, but it’s one anticipated by our founding fathers, who (while mostly members of an aristocratic class themselves) recognized the dangers of such a class becoming too influential, too powerful, too wealthy — and tried to safeguard the country from undue influence by any group.

I contend that we have yet to succeed at that goal.

Your Blueprint For Retirement
Wednesday, December 30, 2009

At no other time since the 1970s has it been so in vogue to be frugal. An entire generation of Americans will leave this decade behind, indelibly imprinted by the trauma caused by their over-spending.

Exercising fiscal caution and self-restraint are no longer the social taboos that they once were in the 1980s, 1990s and ’00s. The good news is that this is the very skill that one needs in order to become rich.

Outside of those with trust-fund-fueled wealth, I’ve never met a rich person who didn’t get there by spending less than what they earned.

Just by changing this one thing in your life will get you on the road to creating a tangible net worth for yourself.

It sounds so simple — almost too simple.

But you know what? Life really isn’t that complicated, and making money isn’t that difficult once you have the basic principles down.

It’s That Simple … and Just as Hard to Get Started

Spending less than you earn is rule No. 1. You’ve got to get this one wrestled to the ground first.

Sadly, most of the Western world’s population will absolutely refuse to do this. And you can’t really blame them because, everywhere you look, you get bombarded with images and programs that promote a utopian world of effortless and consequence-free consumption of luxury goods.

Our first step is to wake up from this media-fueled hypnotic dream. Learn how to channel your desire to spend your hard-earned dollars into fueling your wealth-accumulation goals rather than your wealth-dissipation goals.

That’s easy to say and very difficult to do.

Going against the crowd is always a challenge but, if you don’t do it now, you will be doomed to an old-age fraught with financial terror and humiliation.

You’ve got to find a way to make that real for yourself. Do what you need to do to motivate yourself to make that lasting change to your spending habits.

A Creative Visualization Exercise

Imagine your income as a great river and, instead of pouring those life-giving waters over fertile fields of investments, you simply dump it into the open sea.

That’s exactly what you do when you overspend. You siphon away the future life-giving potential of your income.

Once those dollars are spent, they are never, ever coming back again.

But a dollar invested will come back in the form of investment returns again and again and again. In time, those returns will be greater than your income.

Start Saving Your Savings

Clothes, furniture, vacations, restaurants, fancy cars, timeshares, vacation homes, remodeling projects, alcohol and cigarettes all need to come under the axe. These are areas where you can save a ton of money.

But, you may ask, where’s the joy of living without a bottle of Jack and carton of Marlboros?!

I feel you; I really do. It’s a simple decision called delayed gratification.

The question to ask yourself is, “Do I take a little deprivation now in order to never experience deprivation again in the future? Or do I take no deprivation now and nothing but deprivation in the future?”

It really comes down to those two choices.

I used to read articles like this as a teenager and scoff at the author. “But I make a ton of money” I would think to myself. “Why do I have to be cautious in my spending?”

It wasn’t until a decade later that I learned that what you earn is immaterial if you consistently spend more than you earn!

I call it high-functioning poverty, when any speedbump in your earning ability essentially puts you in the poorhouse.

I’m telling you, friends — it’s no way to live.

Your Roadmap to a Financially Healthy Retirement

The way I see it, there are five keys to wealth-building:

1. Spend less than you earn.

2. Expand your income; work diligently, and continue to get better at what you do. Do more than what you are paid to do and, soon, you will be paid more for what you do. Meanwhile, your saved money/investments will be growing, providing another income source.

3. Get clear as to exactly how much money and the type of lifestyle that you want, and when you want it. Visualize yourself already in possession of that wealth and that lifestyle.

4. Successfully invest your surplus earnings — 12% per year is enough to fund your retirement over a 20-year period; 20% per year will make you rich. Find a safe way to run your money at a high rate of return. (Read more on this below.)

5. Make your wealth last — withdraw no more than 40% of your net annual gains each year to live on after reaching your principal and/or time frame goal. Alternatively you can withdraw 2%-4% of your total account value per year as retirement income.

Remember, saving your money is only part of the recipe; it’s not enough to bake the whole cake. You’ve got to find a way to make your money grow by at least 12% per year and, preferably, by 20%-plus.

Find Your Favorite Ways to Make Money — There are Plenty to Choose From!

There are many ways to do this: mutual funds, stocks, options, Exchange-Traded Funds, real estate, buying and selling collectibles and/or employing an excellent money manager.

You name it; there is always a way to make money.

The key here is not to be afraid to just let your savings sit in a money market account until you’ve become very sure and very confident of how you will grow your money.

Take the time to become an expert in managing your own money.

You’ve got to find a wealth-creating endeavor that speaks to you and your interests. Again, it could be investing in real estate or stocks, or buying and selling vintage Rolexes on eBay.

Turn an Income Stream into a River of Profits

Think about this as one example. If you bought just one income-producing property this year, then another income-producing property every three years after that, you’d have 11 income-producing properties after 30 years.

At year 30, the first house would be paid off and, every three years thereafter, another house would be completely paid off.

The income from 11 houses plus 30 years of accumulated equity will fund your retirement for the rest of your life, and it will do so with dignity. You’ll be filthy rich with a great big fat monthly income.

Real estate investing offers one of the most-accessible ways to create a massive ongoing income stream as well as large net wealth.

But its not going to just happen for you without a ton of work. And that’s the ugly truth of it.

(To learn more about real estate investing, Tycoon’s resident real estate expert Ethan Roberts has a ton of great information for you on our Web site. Click here to access his article archives.)

Anticipating Your Heart’s Desires Can Pay off in Spades

It takes effort to get rich — lots of effort, inconvenience and self-sacrifice.

But once you’ve put your work in, you reach a point where the income from your wealth-producing efforts begins to eclipse the income from your job. And this fuels you to do more as your dreams starts to become a reality.

You find yourself infused with more energy than you ever thought you could experience. You become possessed by an overriding determination and will to win.

It’s a truly glorious feeling!

So there you have it; my New Year’s gift to you — a blueprint for wealth-creation and a dignified retirement.

But remember, don’t beat yourself up if you don’t have it in you to do what it takes to get rich; not many people do. It takes focus, self-sacrifice and a STRONG VISION to get and stay rich.

When you are ready to make that change, the opportunity will still be there … just don’t take too long! The quicker you start, the quicker you’ll be able to kick back and enjoy the fruits of your labor.

How to Get Rich in 10-15 Years
Wednesday, December 23, 2009

The modern-day yardstick of wealth is an illusion perpetuated and encouraged by the marketing departments of the world’s luxury-good makers.

The luxury brands have done a remarkably good job at convincing poor people to act like rich people by buying their products. The thing is, though, truly rich people fuel their consumption from their investment income.

In other words, they would never dream of tapping into their principal wealth to fund their lifestyle.

So I will tell you here and now, I don’t care how much money you make — and I know some readers of The Tycoon Report make a lot of money — if your investments are not throwing off cash flow that is equivalent to at least your current expenses, then you are poor. You are just one flip of the coin away from living on the street.

What Does it Mean to be Wealthy?

Being wealthy has nothing to do with a set dollar amount or what car you drive or which labels you sport.

If the income and/or returns of your investments are more than twice the amount of your annual living costs, then you, my friend, are wealthy.

If you own a business and make millions of dollars, but the business will fail if you are not in it, then all you have is a very highly paid job.

Real wealth is about securing a stream of income for yourself that consistently throws off returns that are at least double your annual living expenses.

A Big Salary Doesn’t Automatically Make You Rich

Getting rich takes a lot more than just securing a big income. Many who aspire to be multimillionaires stumble at this point.

They work hard, get promoted or build their businesses and start earning large amounts of money. but these “would-be” millionaires fail to fulfill their true wealth-building potential at this point.

You see, they get seduced by the illusions of wealth as portrayed by the aforementioned luxury-goods marketing machine that they see in magazines and on television.

Don’t get me wrong; if you have a large income, you have a huge leg up over the person earning an average income. But if the odds hold true, then you are could blow that big advantage by overspending.

Are You an Aspirational Spender?

Aspirational spenders are above-average-income earners who yearn to possess the lifestyle of the truly wealthy but do not earn enough money to do so.

Instead, they employ credit card and home equity loan debt to acquire the trappings of wealth — fancy cars, vacation homes, designer purses, designer suits etc.. They actively pretend (self-delude is a better word) that they are rich. This becomes an all-consuming pantomime of self-delusion, as more and more money is required to fuel this facade of wealth.

The aspirational spender typically earns between $100,000 and $150,000 per year. This is 2 1/2 to 4 times greater than the national average income.

In fact, it is more than enough of an income to get wealthy on within a 10-15 year period.

But these people never do develop real wealth.

Their incomes continue to grow, and they make terrific employees and are usually very good at their jobs, but their desires are always one step ahead of their income.

The Key to Developing Real Wealth

Many years ago, I read a book titled “The Richest Man in Babylon” by George S. Clason. In that book, I learned that I would never be able to satiate every single material desire that I have.

So, instead of trying to fulfill as many of my “wants” as possible, I started getting very picky about which “wants” I chose to indulge … which “wants” I chose to postpone and which “wants” I chose to abandon.

Once I fully accepted that I’ll never have every single thing that I may wish to possess, it was like a great weight was lifted off my shoulders; it was very freeing. It also allowed me to better appreciate what I already possessed.

But the most important thing it did was get me off the spending carousel and onto the road to living beneath my means … and start saving and investing, which is the real route to obtaining large-scale sustainable wealth.

Your Desired Future is Just a Decade Away

Wealth can be created from any starting level; it is not income-dependent. However, in this article I want to highlight how much easier it is to get rich if you already have a large income.

It really doesn’t matter which vehicle you use to create your wealth — whether it be real estate, stocks, commodities, options or your own business. Any success that you find in any investment endeavor will be meaningless if you continue to spend more than you earn.

It is only when you start living beneath your means that you will truly be on the road to real wealth-creation.

If you earn over $150,000 a year, you have absolutely no excuse for not being rich!

What’s the secret? All you have to do is live on 30% of your gross income and invest the rest.

Your 15-Year Plan to a Lifetime of Riches

At $150,000, assuming a 35% tax rate, your take-home pay would be a shade under $100,000.

If you want to get rich, start by simply living on $50,000 and investing the other $50,000. Do that for 10-15 years and you will be rich, period.

If you can average just a 12% compounded annual growth rate over 10 years, you’ll have a shade under a million dollars.

Over 15 years, you’ll have over $2 million — two million dollars that is growing at 12% per year is more than enough money to last a lifetime.

That’s it; pretty simple right?

Are You Ready to Sacrifice What You Want Now for What You’ll Need Later?

So, what is the real way to measure personal wealth? The yardstick is whether our investment income covers our living expenses.

If it does, then you are well-off. If your investment income is 2x or more greater than your annual income, then you are well and truly rich!

I know I have now lost 99% of you. The thought of the relative deprivation that such living would require is probably too difficult for many of you to face squarely.

And that’s OK; not everyone possesses the necessary discipline that it takes to acquire true wealth.

Don’t beat yourself up about it. But, by the same token, don’t fool yourself into thinking that you are rich just because you have a big salary, a shiny Benz and a nice sprawling McMansion.

We both know you are one pink slip away from financial Armageddon.

I’m here to tell you that you don’t have to live that way anymore.

Downsizing is only painful when you are not emotionally prepared for it. Once you make the decision to be “for real” rich instead of “pretend” rich, the decision to downsize instead of “super-size” will be an easy one.

Downsizing Your Spending = Super-Sizing Your Wealth

Don’t squander the opportunity that you’ve been given by being blessed with the ability to earn a large income. You have a huge edge over every other person earning less than you. You blow that edge when you over-spend and under-save.

Remember — even if you win the lottery or increase your income dramatically, but refuse to spend less than you earn and refuse to save and invest surplus capital — you will never be rich.

You will never experience true financial freedom, and you will always be at the mercy of your spending habits, your employer and the economy.

It’s always a good time to re-evaluate your financial plan, but especially with the dawn of a new decade just around the corner, there’s no time like the present to plan to become a millionaire. You’ll thank yourself in 2020!

Source The Tycoon Report

The Secret of Most Successful Traders

The Secret of Most Successful Traders (Hint: It May Surprise You)
Wednesday, December 9, 2009

In the stock market, perception — whether faulty or not — is the only reality that matters.

Sometimes those perceptions create tangible new economic realities. If we all believe that a recovery — even if it’s in the form of a “Santa Claus rally” — is in the offing, for example, will we spend more, will we travel more and will we be willing to be more optimistic about our futures?

Optimistic people spend money; optimistic business owners don’t fire people. So, yes, it’s reasonable to assume that a persistently adhered-to, faulty optimistic perception can alter economic reality.

Avoid the Perception Trap (Yours)

The key here is to stay with the market perception until it changes. Too many traders have lost too much money trying to “tell” the market what to do.

At some point, the perception will shift again, and so will the market. It’s moving with this perception shift that is one of the hallmarks of a great trader.

Trading the market in front of you vs. trading the market you think it should be is a great struggle for many investors. All too often, market participants get stuck in a perception trap and they steadfastly refuse to budge from it.

Mental flexibility is one of those things that’s easy to talk about but can be tricky to implement. The stock market is truly impersonal, but how many traders out there secretly believe that the market is “out to get” them?

The truth is, the only person out to get you is you. Our trading experiences are the sum result of what we give ourselves permission to experience.

Wealth Acquisition is a Mental Journey as Well as a Physical One

Being able to see yourself experiencing great trading success and manifesting great trading success go hand-in-hand. How can you aspire to greatness if you cannot first imagine yourself achieving greatness?

Your trading future is solely in your hands. The level of success that you experience is directly related to your own beliefs about how much success you can imagine for yourself.

Creative visualization has its place in all great human endeavors. This topic is rarely covered because, among other things, it’s difficult to quantify. But I guarantee you that every great trader, and every self-made man and woman have seen their success in their mind first.

Having a clear vision of what you want, even if it seems ridiculous given your present circumstances, does work. When I was 16 years old, I earned $3.75 an hour working for a burger and chicken joint called Roy Rogers. At the time, the idea of working on Wall Street at a prestigious firm and making millions of dollars was preposterous.

But it didn’t stop me from visualizing what I wanted. I had a clear picture of what I wanted to do and how much money I wanted to make.

Two years later, I went from working on a loading dock in Brooklyn to working for Lehman Brothers. How does that happen? I believe that if we can get a clear enough idea about what we want and believe that it is possible, we can manifest it.

This is the “secret” ingredient that most successful people will never share. No one wants to come off as some new-age kook, and unfortunately that’s the stigma attached to visualization.

But whether we are aware of it or not, we are constantly feeding our mind with visual images. Very few of us, however, make a conscious decision to channel those images into a coherent vision of our desired future.

It’s Time to Aim High

I was not able to build my first million-dollar business until I could first “see” myself doing it. It was only after I had started really believing that it was possible that it actually happened. I have never been able to manifest an outcome that was beyond my current belief system.

My beliefs about what was possible for me had to change before I was able to change what I was manifesting. So, when you put on your trades, ask yourself what image you are holding of yourself and the trade.

Visual imagery won’t make a bad trade good, though, and you’ll still need to employ your stop-losses and other sound money-management practices. But what conscious visual imagery will do is act as an invisible hand that gently guides you in the right direction.

I know that might sound like hogwash, but I’ve experienced it and I am willing to bet many of you have too in various areas of your life. You must pay attention to what you focus on because what you focus on is invariably what you create.

Dream Bigger, Live Larger

How do you see yourself and your abilities as an investor? Are you envisioning yourself winning big, or simply hoping that you don’t lose?

Hoping to not lose is a form of focusing on losing. Always put your mind on what you want — not what you don’t want.

Re-read that last sentence; it could change your life forever.

Investing can be the ultimate wealth-creation vehicle. In fact, I know of no other way to parlay a small amount of money as quickly or as dramatically as one can in financial markets.

Go Toward, and With, Your ‘Flow’

If the financial markets are what you want to use to manifest great wealth in your life, then start seeing that for yourself. As you do so, you will automatically expand your wealth-creation efforts exponentially, and new mental faculties will be made available to you.

You will automatically take your investment game to another level, and it will be effortless.

The vision you hold of yourself will propel you to take different actions, and you will do so without conscious effort on your part.

You’ll experience that magical state called “flow.” Many athletes have experienced this state where they just “know” that they are going to make the shot, catch the ball, hit the ball, etc. All of us have experienced being “in the flow” at some point in our lives.

Visualizing the best outcome for yourself is a method of consciously entering this state of mind we call “being in the flow.” First, you have to let the prospect of prosperity into your mind. And, of course, you have to do the work (i.e., make the trades and manage them well).

And once you learn to envision banking profit after profit, actual profits will follow with more frequency.

“Ask and ye shall receive” is a universal spiritual truth. We “ask” by only seeing and focusing on the outcomes that we desire. The more we do this, the more we put that “unseen hand” to work for us.

In a market like this, we need all the help we can get, so picture yourself profiting, starting today!

Revealed: How the System Favors the Wealthy

Revealed: How the System Favors the Wealthy
Thursday, December 3, 2009

“The U.S. tax code is the most political law in the world.”
– Jonathan Blattmacher, tax lawyer to the super-wealthy

“Taxes are what we pay for civilized society.”
– Oliver Wendell Holmes

Executive pay has been in the news a lot lately. We all know that Kenneth Feinberg of the Treasury Department has imposed sharp limits on the compensation of execs within the seven firms that received the biggest portion of the federal bailout.

In alphabetical order, those were AIG, Bank of America, Chrysler, Chrysler Financial, Citigroup, General Motors and GMAC. These seven companies received almost $240 billion in TARP funds.

Now the Federal Reserve has said it will evaluate executive compensation levels as part of its sound-management assessment of the 6,000 banks it regulates. Excessive risk-taking in the upper echelons of financial institutions, it seems, is on the way out.

What I’d like to focus on, in a new series of articles here in The Tycoon Report, is the greed that brought us to the brink of financial ruin and threatens the fabric of checks and balances that keeps any one group from wielding too much influence in the governing of this beloved country.

A Necessary Evil or a Citizen’s Duty?

Oliver Wendell Holmes (along with the founding fathers) knew that without an equitable, representative system of taxation, there would be no — could be no — widespread wealth in the United States.

Compare us to Afghanistan or Honduras, which have no real tax systems in place. There, wealth is quite concentrated and no “middle” class exists.

Taxes are necessary to provide for what the Constitution calls “the commons” — interstate highways, public forests, police and fire departments, public education, and the lot.

As reported recently in BusinessWeek, the federal income tax rate for businesses is 35 percent, but few companies pay that much: “After factoring in deductions, loopholes and special incentives, large businesses on average paid less than 27 percent. Goldman Sachs, which recently reported a record $3 billion profit, paid an effective tax rate of 0.6 percent last year.”

(For more about Goldman Sachs and their manipulation of market bubbles, see my previous articles).

Whenever someone escapes paying their rightful share of the tax burden, every other American has to make up for the uncollected taxes.

In other words, like the last one left at the Olive Garden for the family reunion, we’re picking up the tab.

Not since 1929 has the wealth of the USA been concentrated in the top 1%. They own approximately 50% of the financial assets in the country. And the richest 15% own nearly all of them.

Now the IRS tracks wages religiously. They are less-disciplined when it comes to income derived from anything other than wages.

It may surprise you (as it did me) to discover that the IRS no longer audits people whose reported income appears insufficient to support their lifestyle. This, you may remember, was how they caught Al Capone.

This provision was excised in a 1997 law purported to be a middle-class family’s dream of a tax cut. This was also the law that generously reduced the tax rate on long-term capital gains, the source of 2/3 of the incomes of America’s wealthiest 400. (Long-term capital gains were again slashed to their current rate of 15% in 2003.)

The National Bureau of Economic Research is a nonprofit that officially decides whether or not we are in a recession or an expansion. (It was, as you may remember, in the news quite a lot about a year ago.)

Its president, Martin Feldstein, was chief economic adviser under Ronald Reagan, and is a proponent of supply-side economics.

A 2002 paper commissioned by the bureau offers some interesting facts, since its authors took a fine-toothed comb to detailed income and wealth data from 1917 to the year 2000. They focused on the very richest of the rich.

The chart and graphic below, which illustrate part of their findings, speak for themselves.

(Click the images to view them full-size)

While the bottom 90% of us lost ground, those in the 95%-100% brackets did pretty well, with each successive group close to doubling the previous group’s share percentage.

The most-telling figures of all are in the next-to-the-last column, where 0.09% of households increased their holdings by 227%, and the last column, where 13,360 households (0.01%) had a whopping 412% increase in their slice of the economic pie.

Let’s look closer at the breakdown.

That $2,710 increase in income for the bottom 99% represents an increase of 0.08% over 30 years, while the top 1/100 of 1% saw their income increase over 658% for the same period.

And remember — the graphic doesn’t do the comparison justice, considering the comment at the top of the right column.

How Taxes Work (or, How They’re Supposed To)

How the government sets its tax rates determines both the degree of prosperity and who will prosper.

Under President Dwight D. Eisenhower, the top tax rate was 90%. That administration effectively decided to limit the accumulation of wealth from earnings.

On the other hand, we now tax the first dollar of wages earned (including Social Security and Medicare), effectively restricting or removing the ability of people at the lowest extreme of income to save money and to get ahead.

Wage earners also operate under harsher tax rules than, for example, business owners, investors and landlords. The wage earner must report every dollar of income. Look at this:

YEAR TOP TAX BRACKET MAXIMUM SOCIAL SECURITY TAX
1970 70% $327
Current 35% $4,724

Remember, Social Security taxes are collected only on the first $76,200 of wages (as of 2000), so the burden is carried mostly by the middle- and upper-middle classes.

YEAR CAPITAL GAINS TAX
1987 28%
1998 20%
2003 15%

As corporate execs’ salaries rose, the demand for corporate tax shelters rose as well. The tax burden shifted off capital and onto labor. Under Eisenhower, the portion of federal revenue derived from corporate taxes was 33 1/3%. By 2002, it was 10%.

Playing Politics with the Market

The elimination of one simple rule by our representatives in Washington was the precipitating event that opened the door for the scandals at Adelphia, Global Crossing and Enron, among many others.

The significance of this rule was hotly debated and discussed in academic journals and corporate publications. But you probably never read a word about it, since the news media largely ignored it.

The legal principle wiped out by our esteemed lawmakers was the policy that each partner in an accounting or law firm is liable for the acts of any partner in the firm.

By removing such accountability, Congress wiped out the most-powerful incentive for accountants and lawyers to behave with integrity.

In closing, let me say that an active pursuit of self-interest is itself a necessary element of a healthy democracy. The government is designed to work through compromise and informed debate, to settle the ever-present tension between self-interest and the common good.

But an uninformed electorate cannot act in its own best self-interest. And when people stop acting in their own best self-interest, the power and influence of the political donor class grows.

It’s natural to want to escape paying as much tax as legally possible. Problems arise when, in an effort to curtail the spirit of the law, tax specialists propose a strict adherence to what is delineated in the tax law, thereby requiring every new law added to be spelled out in detail — resulting in a massive, complicated and burdensome compendium of regulations that few understand.

But the few who do charge a hefty fee for their knowledge, and those who can afford to pay it, are awarded with benefits that are unattainable by the rest of us, thereby bestowing on the wealthy an unfair and undemocratic advantage.

Stay tuned for part two of this article series where, next week, we’ll talk about a “top executive’s hidden hoard.”

Bob De Dea
Guest Contributor
The Tycoon Report

Source: History.com http://tycoonreport.tycoonresearch.com/

Securing Wi-Fi Access Network

Securing Customer Premises Wi-Fi Access Network

The Department of Telecommunications (DoT), Govt. of India, has recently issued a directive dated 23-02-09 to ensure secured use of WiFi based Internet access. Under this directive, all home Internet subscribers are required to ensure that their WiFi networks are secured and cannot be misused. Subscribers are required to register their status with their Internet Service Provider.

There are four methods for securing the access to your Wi-Fi Network. They are briefly given below. More details can be obtained from the Manual of the device and the Manufacturer of the device.

1. Enable WEP/WPA encryption:

This option allows the user to enable the encryption of the data with a key phrase or secret key. Unless the client also has the same keys, the client will not be able to connect with the Wireless Router. Further, since it is generated by the user and chances of any intruder accessing the router will be very remote. Use of WPA is recommended for added security. Use a strong password that is at least eight characters long and is a combination of alphanumeric and special characters.

2. Enabling MAC authentication:

MAC Authentication or MAC binding allows the user to input the MAC address of the PC/Laptop/PDA in the wireless router, for which the access is to be allowed. Router verifies the MAC address of the PC/Laptop/PDA while giving the permission to access the router. This further secures the access to the acess to the router.

3. Does no use Common SSID / Disable SSID broadcast:

Use a Wi-Fi network name (SSID) that does not reveal private information (e.g., your identity or location) or You may disable the SSID broadcast.

4. Change the Administrator’s Password:

Change the default administrator’s password on your Wi-Fi router.If all the above features are enabled in the Wi-Fi device,then the access to the Wi-Fi Device is more secure andintruders will not be able to misuse the Internet.

Change the default administrator’s password on your Wi-Fi router. If all the above features are enabled in the Wi-Fi device,then the access to the Wi-Fi Device is more secure and intruders will not be able to misuse the Internet.

Above article does’nt gurantee 100% full proof security, Avail expert services to secure wi fi network.

Tax exemptions for NGO

Income Tax for NGOs

Background:

Generally Non Profit Organizations (NPOs) are exempt from the income tax. This has been done mainly to encourage the charities in the country. NPOs are also being considered as more effective and efficient in promoting welfare of society. As charitable organizations get exemptions from income tax, many other organizations would also seek to get classified as charitable entities. In order to prevent this practice, there are strict norms and procedures laid down by Income Tax Act 1961.

No Tax for Charities:

Under the Income Tax Act 1961 (I T Act), charitable organizations (whether trust, society and section 25 of the company) in India are not liable to any income tax, provided certain conditions required under law are fulfilled. As per the section 11(1) (a) to (c) as well as 10(23C) of I T Act the term NPO includes religious organizations such as temples, churches, mosques etc and charitable organizations such as educational institutes, hospitals, NGOs etc. Organization may qualify for tax – exempt status if the following conditions are met:
A. At least 85% of the income derived from property held under trust, should be applied to charitable or religious purposes in the relevant previous financial year in order to claim full tax exemption. Property of the trust also includes a business undertaking held under trust. U/s 10 (23C) (iv) or (v) The application for exemption has to be made by charitable and religious organization in the prescribed form No 56
B. Surplus income for which an application has to be made in Form No. 10 may be accumulated for specific projects for a period ranging from 1 to 5 years;
C. The property should be held under trust wholly for charitable or religious purposes.
D. No part of the income or property of the organization may be used or applied directly or indirectly for the benefit of the founder, trustee, relative of the founder or trustee or a person who has contributed in excess of Rs. 50,000 to the organization in respective financial year;
E. The organization must timely file its annual income return, immediately after the expiry of each financial year.
F. The income must be applied or accumulated in India. However, trust income may be applied outside India to promote international causes in which India has an interest, without being subject to income tax.
G. Income from such property should be applied to charitable or religious purposes. (Exemption is available to the extent of such application)
H. The assessee is to apply for registration in Form No. 10A in duplicate before the expiry of 1 year from the creation of trust.
I. The funds of the organization must be deposited as specified in section 11(5) of the income tax Act
Note:
Charitable institutions investing their funds in forms and modes other than those prescribed u/s 11 (5) lose exemption u/s 11 and 12 of the Income Tax Act and, as such, the relevant income is taxed at the rates as applicable to Association of Persons (AOP) as provided in section 164 (2) of the Income Tax Act As per the Circular no. 387 dated 06/07/1984 , Ref – (http://law.incometaxindia.gov.in/TaxmannDit/DisplayPage/dpage1.aspx?md=1) though not very clear, supports the view that the income earned on investments infringing section 11 (5) alone should be taxed and not the total income for the accounting year.
Tax structure from the financial year 2008-2009:
Tax structure for Association of Persons (AOP) and Body of Individuals (BOI) is as follows.
Income Limit Percentage of tax payable
Up to Rs. 1,50,000 Nil
From Rs. 1,50,000 to Rs. 3,00,000 10 %
From Rs. 3,00,000 to Rs. 5,00,000 20 %
Above Rs. 5,00,000 30 %
• Rate applicable to AOP is also applicable for trusts, societies, NGOs etc.
• For the companies formed u/s 25 rate of tax is flat @ 30% on their income.
Following is the table which explains the limits of the tax payable to Income Tax Department under section 11.
Section Nature of income Extent to which exemption allowed
11(1)(a) Income derived from property held under trust wholly for charitable or religious purposes To the extent income applied to such charitable or religious purposes in India.
Whereas accumulated or set apart for such application, to the extent of 15% of the income from such property.
11(1)(c) Income derived from property held under trust for a charitable purpose, which tends to promote international welfare in which India is interested To the extent income is applied to such charitable or religious purposes outside India.
Exemption is available only if the Board has directed such exemption.
11(1)(d) Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. 100% exemption
In computing the 15% of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in Section 12 shall be deemed to be part of the income
Exemptions not allowed u/s 11
Section Nature & extent of income not exempt under Section11
13(1)(a) Income of private religious trust not used for public benefit.
13(1)(b) Income of charitable trust created for benefit for particular religious community
13(1)(c)
Income/ property of charitable or religious trust applied for direct or indirect benefit of person referred in 13(3)
13(1)(d)
Any income, is taxable if
If any funds are invested other than in 11(5)
Any funds invested earlier than 1983 remain invested thereafter;
Shares and company are held after 1983.
11(4A)
Income from business which is not incidental to the attainment of the objectives of the trust, or in respect of which separate books of accounts have not been maintained.
12(2)
Value of medial/ education services provided to specified persons by trust running hospital and educational institution shall be income of trust and will be chargeable in the year in which services are provided and chargeable to tax, despite section 11(1).

Exemptions not allowed u/s 13:

In any financial year, if any part of income or the property held by the trust or institution is used or applied, directly or indirectly, for the benefit of any person referred to in sub section 3 of the section (13) of the Income Tax Act, 1961, the trust or institution would lose its exemption u/s 11

Section 161-164 www.incometaxindia.gov.in deals with liability in special cases i.e. of representative assessee, which includes taxation of private discretionary trusts
Voluntary Contributions
The voluntary contributions received by a charitable or religious trust are to be treated as follows:
(1) Any voluntary contribution received by a trust or institution is exempt if (a) the trust is created wholly for charitable purposes.
(2) Corpus Donations
Voluntary contributions made to a charitable or religious trust with a specific direction that they shall form part of the corpus of the trust i.e. corpus donations do not form part of the total income of the trust as per Section 11(1) (d).
(3) Contributions other than corpus donations
Section 12(1) states that any voluntary contributions (not being corpus donations) received by a charitable or religious trust shall be deemed to be the income derived from property held under trust wholly for charitable or religious purposes. Such voluntary contributions would therefore be eligible for exemption under Section 11(1) provided the trust satisfies the conditions as prescribed under Section 11 and 13.

(4) Business Income

Under amendments to Section 11(4A) of the Income Tax Act 1961, Non Profit Organization is not taxed on income from a business that it operates that is incidental to the attainment of the objects of the organization provided the entity maintains separate books and accounts with respect to the business. Furthermore, certain activities resulting in profit, such as renting out auditoriums, are not treated as income from a business.
(5) Anonymous Donations
Anonymous donations of the following entities shall be included in the total income u/sec 115 BBC and taxed at the rate of 30%.
• Any trust or institution referred to in section 11
• Any university or other educational institution referred to in section 10(23C) (iiiad) and (VI) i.e. its annual receipts is less than or more than Rs. 1 crore;
• Any hospital or other institution referred to in section 10(23C) (iii a e) and (vi a) i.e. its annual receipts is less than or more than Rs. 1 crore;
• Any fund or institution referred to in section 10(23C)(iv); (established for charitable purpose)
• Any trust or institution referred to in section 10(23C)(v). (established for public religious purposes or public religious & charitable purposes )
(7) Anonymous donations not covered under section 115BBC
The following anonymous donations shall, however, be not be covered under section 115BBC:
(a) Donations received by any trust or institution created or established wholly for religious purposes.
(b) Donations received by any trust or institution created or established for both religious as well as charitable purposes (other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution.)
Disqualification from Exemption
Following groups are ineligible for tax exemption: all private religious trusts; and charitable trusts or organizations created after April 1, 1962, and established for the benefit of any particular religious community or caste. But note that a trust or organization established for the benefit of “Scheduled Castes, backward classes, Scheduled Tribes or women and children” is an exception; such a trust or organization is not disqualified, and its income is exempt from taxation.
In order to attract voluntary contributions, the trust or society needs to be registered under section 80(G) and section 35 (AC) of the income tax act which provides exemption for the donors. Following are the terms and conditions applicable for above both sections.
Exemption u/s 80 (G):
A donor (whether an individual, association, company, etc) is entitled to a deduction (in computing his total income) if he makes a donation to a charitable organization enjoying exemption u/s 80G of the Income Tax Act. The amount donated, however, should not exceed 10 % of the donor’s gross total income as reduced by the deductions (other than the deductions u/s 80G).
In order to qualify for exemption u/s 80G, the charitable organization should be eligible for exemption u/s 11 and 12 or 10(22) or 10(22A) or 10(23) or 10(23AA) or 10(23C) of the Income Tax Act and should not be for the benefit of any particular religious community or caste.
The application for approval of any institution or fund under clause (iv) of sub-section (5) of section 80G shall be in form no. 10G and shall be made in triplicate.
The application shall be accompanied by the following documents namely:
1. Copy of registration granted under section 12A or copy of notification issued under section 10(23) or 10(23C)
2. Notes on activities of institution or fund since its inception or during the last three years, whichever is less
3. Copies of accounts of the institution or fund since its inception or during the last three year, whichever is less.
Donations made to charitable organizations exempt u/s 80G (5) of the Income Tax Act qualify for only 50% tax exemption. Most of the organizations enjoy exemption under section 80G (5)
Exemption under section 35AC of the Income Tax Act:
Contributions made to a project/scheme notified as an eligible project or scheme for the purpose of section 35AC of the Income Tax Act, would entitle the donor to a 100% deduction of the amount of such contribution. Unlike the certificate granted u/s 80G, the certificate u/s 35AC is not given to any organization as a whole, but only to an eligible and approved projects. If general donation is made to a large multi-purpose trust, the donor would not be entitled to the 100% deduction unless he specifies that the amount has been given towards the project or scheme notified as an eligible project or scheme for the purpose of section 35AC of the Income Tax Act.
Eligible projects and the schemes for exemption u/s 35AC include one or more of the following:
1. Construction and maintenance of drinking water projects in rural areas and in urban slums, including installation of pump-sets, digging of wells, tube-wells and lying of pipes for supply of drinking water
2. Construction of dwelling units for the economically weaker sections
3. Construction of school buildings, preliminary for children belonging to the economically weaker sections of the society
4. Establishment and running of non-conventional and renewable source of energy systems
5. Construction and maintenance of bridges, public highways and other roads
6. Pollution control projects
7. Promotion of sports
8. Any other programmes for uplift of the rural poor or the urban slum communities as the national committee may consider fit to support. Amendments:

According to Section 2(15), ‘charitable purpose’, includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility
In the recent Amendment of 2009-10 in the Finance Act 2008, following Provision has been added:-
“Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or any business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity”
Impact of the amendment on NGO sector:
NGOs which have any business like activates or charge any fees or consideration from others, would not get tax exemption from the year 2008-09. This would even cover cases where NGO publishes a magazine and charges subscription fees and accepts advertisement in magazines.
This change will not affect schools, hospitals, organizations which work for the relief of the poor.
This change may affect the following kind of organizations
1. Training organizations
2. Research organizations
3. Human rights organizations
4. Micro-credit organizations
5. Environment Organizations
6. Advocacy Organizations’
7. Resource organizations
8. Chamber of Commerce
9. Professional associations
10. Fund raising organizations
11. Networking organizations
If the amendment gets in to effect, there will be two options before the organizations such as:
• Stop the activities which can be seen as trade, business or commercial OR
• Demonstrate that they are only working for relief of poor or they are running schools or hospitals.
If they do not follow these rules and conditions, they need to bare the burdone of Income Tax from the year 2008-09. (Ref: www.accountaid.org )

The Black Swan

The Black Swan: Quotes & Warnings that the Imbeciles Chose to Ignore

Nassim Nicholas Taleb: The Black Swan: The Impact of the Highly Improbable (April 2007)

For the last 12 years, I have been telling anyone who would listen to me that we are taking huge risks and massive exposure to rare events. I isolated some areas in which people make bogus claims –epistemologically unsound. The Black Swan is a philosophy book (epistemology, philosophy of history & philosophy of science), but I used banks as a particularly worrisome case of epistemic arrogance –and the use of “science” to measure the risk of rare events, making society dependent on very spurious measurements. To me a banking crisis –worse than what we have ever seen — was unavoidable and NOT A BLACK SWAN, just as a drunk and incompetent pilot would eventually crash the plane. And I kept receiving insults for 12 years!

Quotes From the Black Swan (written b. 2003-2006) that the IMBECILES did not want to hear

Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks – when one fails, they all fall. The increased concentration among banks seems to have the effect of making financial crises less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur ….I shiver at the thought.

Banks hire dull people and train them to be even more dull. If they look conservative, it’s only because their loans go bust on rare, very rare occasions. But (…)bankers are not conservative at all. They are just phenomenally skilled at self-deception by burying the possibility of a large, devastating loss under the rug.
The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deemed these events “unlikely”.

There is no way to gauge the effectiveness of their lending activity by observing it over a day, a week, a month, or . . . even a century!
(…) the real- estate collapse of the early 1990s in which the now defunct savings and loan industry required a taxpayer-funded bailout of more than half a trillion dollars. The Federal Reserve bank protected them at our expense: when “conservative” bankers make profits, they get the benefits; when they are hurt, we pay the costs.
Once again, recall the story of banks hiding explosive risks in their portfolios. It is not a good idea to trust corporations with matters such as rare events because the performance of these executives is not observable on a short-term basis, and they will game the system by showing good performance so they can get their yearly bonus. The Achilles’ heel of capitalism is that if you make corporations compete, it is sometimes the one that is most exposed to the negative Black Swan that will appear to be the most fit for survival.
As if we did not have enough problems, banks are now more vulnerable to the Black Swan and the ludic fallacy than ever before with “scientists” among their staff taking care of exposures. The giant firm J. P. Morgan put the entire world at risk by introducing in the nineties RiskMetrics, a phony method aiming at managing people’s risks, causing the generalized use of the ludic fallacy, and bringing Dr. Johns into power in place of the skeptical Fat Tonys. (A related method called “Value-at-Risk,” which relies on the quantitative measurement of risk, has been spreading.)

Please, don’t drive a school bus blindfolded.

Owing to [...] misunderstanding of the causal chains between policy and actions, we can easily trigger Black Swans thanks to aggressive ignorance—like a child playing with a chemistry kit.

Ten principles for a Black Swan-proof worldBy Nassim Nicholas Taleb
Published: April 7 2009 20:02 | Last updated: April 7 2009 20:02

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in    economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.
2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.
4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be“conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.
5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.
6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.
7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.
8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.
9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).
10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

In other words, a place more resistant to black swans.

The writer is a veteran trader, a distinguished professor at New York University’s Polytechnic

The World According to Nassim Taleb
Nassim Taleb combines broad theoretical knowledge with practical experience. Although he is fiercely outspoken, he delivers his challenges to conventional wisdom with a gentle delivery that carries a trace of a French accent. He is one of the world’s leading quantitative traders, who has held senior options trading positions at Union Bank of Switzerland, Bankers Trust, Banque Indosuez and CS First Boston. His most recent job in the dealer community was head of global options at CIBC Wood Gundy. In 1991 he suddenly left Wall Street to spend two years as a local on the floor of the Chicago exchanges. Taleb reads classical literature, speaks seven languages and holds a Wharton MBA. He is a PhD candidate at the University Paris-Dauphiné, where he will soon defend his dissertation on option pricing. He is also the author of the book Dynamic Hedging: Managing Vanilla and Exotic Options (Wiley, 1996). Taleb was interviewed in November by editor Joe Kolman.
Derivatives Strategy: What problems do you have with financial engineering?
Nassim Taleb: I disagree with such an approach in financial risk management. Some people looked at the literature and saw differential equations and said, “Gee, it’s like engineering.”
Engineering relies on models because you can capture the relationships in the physical world very well. Models in the social sciences serve a different purpose. They make strong assumptions. Economists have known for a long time that math in their profession has a different meaning. It’s just a tool, a way to express yourself.
DS: So real engineering could lead to a bridge that you could reliably drive cars across. But modeling in financial engineering isn’t certain enough to run a portfolio …
NT: Exactly. In finance, you are not as confident about the parameters. The more you expand your model by adding parameters, the more you become trapped in an inextricable apparatus of relationships. It is called overfitting.
DS: What do you think of value-at-risk?
NT: VAR has made us replace about 2,500 years of market experience with a co-variance matrix that is still in its infancy. We made a tabula rasa of years of market lore that was picked up from trader to trader and crammed everything into a co-variance matrix. Why? So a management consultant or an unemployed electrical engineer can understand financial market risks.
To me, VAR is charlatanism because it tries to estimate something that is not scientifically possible to estimate, namely the risks of rare events. It gives people misleading precision that could lead to the buildup of positions by hedgers. It lulls people to sleep. All that because there are financial stakes involved.
To know the VAR you need the probabilities of events. To get the probabilities right you need to forecast volatility and correlations. I spent close to a decade and a half trying to guess volatility, the volatility of volatility, and correlations, and I sometimes shiver at the mere remembrance of my past miscalculations. Wounds from correlation matrices are still sore.
DS: Proponents of VAR will argue that it has its shortcomings but it’s better than what you had before.
NT: That’s completely wrong. It’s not better than what you had because you are relying on something with false confidence and running larger positions than you would have otherwise. You’re worse off relying on misleading information than on not having any information at all. If you give a pilot an altimeter that is sometimes defective he will crash the plane. Give him nothing and he will look out the window. Technology is only safe if it is flawless.
A lot of people reduce their anxiety when they see numbers. They want a triple-digit delta or gamma, for example, not taking into account that it is foolish to be precise with deltas when you don’t even know the parameters.
Before VAR, we looked at positions and understood them using what I call a nonparametric method. After VAR, all we see is numbers, numbers that depend on strong assumptions. I’d much rather see the details of the position itself rather than some numbers that are supposed to reflect its risks.
Clearing firms understood that very well. Ironically, the stock market crash coincided with the discovery of this so-called parametric system used to run the risks of option traders. In the old days the clearing firms looked at how many calls you were short and how many you were long, and if you sold a lot of calls they would get nervous and call you up and ask you to liquidate some of them. After they went to parametric monitoring of option positions using second-rate statistical methods, the options traders started building up massive short put positions that, along with portfolio insurance, helped to accelerate the crash. Now they’re coming back to square one with their nonparametric methods, particularly with the puts.
DS: Do you think the whole idea of trying to use statistics to model a particular distribution is fraudulent? Or is it possible to come up with something approximating the truth?
NT: The problem we have with statistics is that although we know something about distributions, we know very little about processes. A process is a distribution that has time in it, and things change with time. People look at fat tails and say, “We can simulate distributions with fat tails.” But the reason distributions have fat tails may be because these distributions don’t have stable properties over time.
DS: VAR proponents will also admit that VAR doesn’t work as well on something with an asymmetric payoff.
NT: Yes, but any dynamic trading strategy by a leveraged investor that has a stop loss in it has an asymmetric payoff and needs to be treated like an option. If I trade deutsche mark or bond futures with a stop loss, the frequency of my losses will be greater than the frequency of my profits but the magnitude of my losses will be smaller to compensate. It will look like a payoff of an option, and that’s not captured by VAR. The VAR assumes than traders are stuffed animals between two reports.
DS: Are you saying VAR can’t be used to measure risks on a trading desk?
NT: The risks of common events perhaps, those that do not matter, but not the risks of rare events. Moreover traders will find the smallest crack in the VAR models and try to find a way to take the largest position they can while showing the smallest amount of risk. Traders have incentives to go for the maximum bang because of the free option they’re granted.
DS: What free option is that?
NT: Most institutional traders don’t pay for their losses. If you make a dollar you get paid 10 cents. If you lose a dollar you pay zero. That obviously looks like an option payoff.
So let’s say your trader trades two bonds of slightly different maturities. They’re very close but because they have deceptively close maturities the position will not produce a big VAR number. Sometimes they are treated as the same bond. The position, however, could easily bankrupt the company because of the sheer size that was built on it. An institution just last month lost bundles because a trader built up massive positions in Bunds against German swaps; their system, otherwise sophisticated, did not differentiate between them.
DS: What’s going to happen if everybody in the financial system starts using VAR?
NT: VAR players are all dynamic hedgers and need to revise their portfolios at different levels. As such they can make very uncorrelated markets become very correlated. Those who refuse to learn from the portfolio insurance debacle do not belong in risk management.
In 1993 hedge funds were long seemingly independent markets. The first margin call in the bonds led them to liquidate their positions in the Italian, French and German bond markets. Markets therefore became correlated.
VAR is a school for sitting ducks. Find me a dynamic hedger who is a reluctant liquidator and I will front-run him to near-bankruptcy.
DS: So one problem with VAR models is that they don’t account for the fact that the market corrects for the models that trades are based on?
NT: Bingo. Even more: Our perception of what’s going on in the real world can hurt us simply because we have to realize that we are the major players ourselves and we act according to our perceptions. In physics it’s called the Heisenberg uncertainty principle. In the social sciences its even more pronounced.
When people ask me what alternative to VAR I have to offer, my answer is smaller leverage, less naïve diversification, less reliance on dynamic hedging.
DS: Are all correlations suspect?
NT: You can find a relationship between any two items if you look hard enough. It may be entirely spurious and have no predictive power, but you will find one. To give you an idea, you’ll always find what we call data miners who will show you that there is a 100 percent correlation between his great aunt’s blood pressure and the back-month Nikkei volatility. When you’re a trader you get a lot of calls from people who found relationships that can produce a 10 Sharpe ratio. That means it’s almost impossible to lose money on the trade. Sure enough, when you start trading you realize that the relationship was not there. Trading has fewer biases than statistics.
DS: What are the most common mistakes you see traders and risk managers making?
NT: As a trader, my job is to understand biases and trade on them. There are all kinds of biases. The most common is the small sample bias. Let’s say you have 1:1,000 odds you will come home every day with a dollar and once in a while you lose $1,000. Many traders show very steady incomes but they could be fooling themselves because they don’t have a long enough period to chart their performance. Their Sharpe ratio will not be indicative.
In option trading there is a similar bias. Short premium option traders, typically those who sell out-of-the-money options, are more likely to make money on a daily basis and then blow up. Likewise the yield hogs, those traders who would take any risk for a few basis points. You can fool yourself with your Sharpe ratios, and you can fool all of the financial engineers, but you can’t fool an old Chicago trader who went bankrupt twice.
Another bias is what I call the size bias. If you have 20,000 traders in the market, sure enough you’ll have someone who’s been up every day for the past few years and will show you a beautiful P&L. If you put enough monkeys on typewriters, one of the monkeys will write the Iliad in ancient Greek. But would you bet any money that he’s going to write the Odyssey next? You know that because of the sheer size of the sample, you’re likely to find a lucky monkey once in a while. But the same applies to traders.
A third bias is the survival bias. Everybody will tell you that stock investing is a great idea because it’s been back-tested by some serious guru and if you had bought one share of some stock during the Revolution you would now own the GNP of some banana republic. But you forget that your back-testing is only on stocks that are alive today and does not cover stocks in imperial Russia that a rational investor would have bought at the beginning of the century. Many continental stocks were recycled into wallpaper. When you look at markets you are only looking at the remnants, the parts that have survived. Or take real estate. People always say it goes up. But that works only if you always bought in places that became fancy.
DS: So essentially, you’d like to replace statistical valuation that’s at the center of most derivatives trading with valuation that’s more based on experience.
NT: You learn a lot about valuation from trading with other traders, by seeing what others give you and what they take away from you. What they give is generally worth less, and what they take is worth more. It’s sort of like cars that are lemons. When you buy a lemon, only the seller knows it’s a lemon. You need to drive it for a while to know its a lemon. It’s the same with options. You don’t know an option is a lemon, but you have to assume if someone is selling it you, you have a high probability of it being a lemon. Very often you won’t know the option’s value until you actually manage it for a while. Some options hedge very well and some don’t.
DS: Can you give me an example?
NT: Sure, take upside calls on the S&P. Retail investors tend to sell a lot of higher-strike calls in equity markets and buy a lot of lower-strike puts. You look at the distributions and you assume you’re being compensated with the volatility differential, buying higher-strike calls and selling lower-strike puts. But once you start running it, you will notice that some undetectable behavior makes you lose money on the trade. And your back-testing cannot fully detect that.
It’s more intricate than it seems. It’s not just the volatility of the upside or the downside, it’s the volatility around a particular strike that has a large open interest. We call these “sticky strikes.” The markets tend to compress in variation around these strikes. Good traders can sense that.
Also when you buy a stock warrant on an illiquid stock, you need to take into account that your own dynamic hedging, added to that of other dynamic hedgers, will reduce the volatility and stabilize the stock.
DS: You left a job as the senior options at the Union Bank of Switzerland to go to Chicago and become a floor trader. Why did you leave Wall Street? What did you think you were missing by trading from a screen in New York?
NT: I left Wall Street for the first time in 1991. I was obsessed with price formation. I couldn’t understand from the screen how prices were determined. It took me six months to be able to read prices in the pit. Locals basically read information from the order flow and squeezed the weak party. There’s always a pack of five or six dominating locals who abruptly change the prices, who bid a lot higher than the previous offer and have the guts to do it, and the rest of them follow.
DS: How did that knowledge change the way you trade when you went back to trading from a screen?
NT: It is the most enriching experience for a trader. I learned more about market dynamics in my second six months than from years on a desk. I learned that traders’ income is not the bid-offer spread, but the micro-squeezes that take place. Markets move from squeezes to squeezes. Traders make money on stop losses and other free options. It made me interested with information economics.
DS: You’re not ready to give up on all quantitative techniques. You were trained as an econometrician. You don’t make wild speculative bets and I assume you try to hire traders who have some kind of quantitative skills.
NT: I have the following problem. Anytime I take a street-smart kid with a strong Brooklyn accent and train him or her in quant methods, I develop a wonderful quant trader who knows how to squeeze the sitting ducks. When you take extremely quantitative trainees, particularly from the physical sciences, and try to make them arbitrage traders, they freak out and become pure gamblers. They can’t see the edge, and they become the sitting ducks. The world has too much texture, more than they can squeeze into the framework they’re used to. I see a huge incidence of pure speculative gambling on the part of these people who are hired on the strength of their knowledge of quantitative methods.
DS: How about risk managers? What do you look for in risk managers that you hire?
NT: I try to probe their minds to see what makes them tick. And I start quizzing them quite unfairly about market history. I ask them about what happened to the correlation between bonds and mortgages on the day when the stock market crashed. I quiz them about the gold rally in the early 1980s. I test to see if they intuitively understand squeezes. If they don’t show any interest in data, in any true market history, I stop the interview and send them home. To me it is extremely dangerous to have in such positions people who only trust equations. You can’t get the edge if you learn just from your own mistakes. You need to learn from other people’s mistakes as well and these are public information.
DS: Where do you think research in the financial markets is heading? What’s valuable and what’s not?
NT: Financial economics has been extremely successful at melding the math with economic insight. This is providing traders with better understanding of derivatives pricing. My motto is that the markets follow the path that hurts the highest number of dynamic hedgers. It was exciting to read a mathematical proof of it by Grossman and Zhou in the latest Journal of Finance. We are having less success with the frenetic financial engineering efforts, which have a lot of mathematical acrobatics but a hollow ring.

What’s Involved In Getting a Ph.D. In Finance?

This seems to be take your readers to work week — in my last few pieces, I’ve discussed the teaching and research sides of a finance professor’s job and where data for research projects comes from. So, this time, I thought I’d take a step back and talk about what is involved in getting a Ph.D. in finance.

The biggest misconception is that the Ph.D. is something akin to a “super MBA”. In reality, the MBA and Ph.D. programs are almost totally different animals. The MBA is geared towards practitioners. In contrast, the Ph.D. is primarily intended as training to be a researcher. So, the natures of the programs (and therefore their approaches) are distinctly different from each other.

Some doctoral programs require an MBA before entry, but quite a few don’t (like the Unknown Alma Mater). In fact, the best preparation for getting a finance Ph.D. isn’t an MBA – an MS in Finance, an MS in Econ, or a masters in math, engineering, or physics (there’s a LOT of math involved at this level) would probably prepare you better.

In terms of admittance standards, you’ll need a GMAT score in the mid-to-upper 700s to be even considered for admittance at top schools, and even lower ranked schools will probably look for a GMAT well above 600. As a benchmark, I went to a solid “2nd tier” program, and my classmates all had GMATs of between 700 and 760. Of the two component parts of the GMAT, the math score is the more important than the verbal one, and most schools look for someone at the 90th percentile (for lower ranked schools) or better. At top schools, almost everyone has GMAT math scores in the top 1 or 2%.

Probably the best way to describe a Ph.D. level curriculum is to start at the end and work backwards. The final step in getting a Ph.D. is to write a dissertation, which is an original piece of research. In finance, dissertations usually run between 65 pages (the shortest I’ve seen) and 150 pages. The dissertation is supervised by one person (called the chair of the dissertation committee), and must also be approved by a committee of 3-4 other faculty members. There’s a love-hate relationship between Ph.D. students and their dissertation chairs, because a good chair constantly asks the student for “more” – more analysis, better writing, more literature review, etc… Because of this, the dissertation is probably the most exhaustingly thorough piece of research most Ph.D.s will do in their lifes.

Working backwards, to be able to do original research in a dissertation, you must be familiar with what’s already been done on the research question you’re asking. The main way a student gets this familiarity is through “seminars”, which are the backbone of a doctoral program. Seminars are much more self-directed that a typical textbook/instructional class. In a seminar, you may read anywhere between 25 and 100 journal articles during the course of the semester (one of my professors covered almost 120 articles in a 10 week quarter, which was a brutal pace). For example, in a typical 3 hour seminar week, you typically cover anywhere from 3-8 articles. If the article is a theory piece, it will have a good deal of math (calculus, partial differential equations, real analysis, or linear algebra), and if it’s an empirical piece, there will be a good deal of statistics (more math).

In an undergrad or MBA course, the professor usually presents the material. However, in a doctoral seminar, the papers get presented by the students. Each week, one or more students walks the rest of the group through the article (or articles) to be covered, and the professor asks questions (usually from the sidelines). In many of the seminars, you’re also expected to produce a small research piece as part of the seminar. In addition to giving you hands-on experience doing research, one of these small seminar research projects often becomes the basis for an eventual dissertation.

There are a number of different ways to organize the seminar sequence, but typical seminar topics might include Finance Theory, Corporate Finance, Investments, Derivatives, Markets and Institutions, and Empirical Methods.

Most students don’t have the skill set necessary to handle the seminars right off the bat, so the first year (or in my program, about the first 1 1/2 years) is devoted to “foundational” classes. In the case of the program I attended, this involved classes in microeconomic theory (much of finance is nothing more than applied microeconomics), statistics, linear algebra, real analysis, and econometrics.

Since I worked you through the sequence backwards, here’s how it looks going forward (with approximate time ranges). Again, this is based on my program, and others might differ:

* Foundational classes – 1-1/2 years
* Seminars – 1-2 years
* Dissertation – variable, but usually 1-2 years.

Adding it up, the typical time to complete the doctorate is about 4-5 years. The fastest I’ve seen it done at my school was a little over 3 years, and the slowest is about 8 years.

Note: If you’re new to Financial Rounds , welcome. I hope you look around a bit — if you want to find out more about the blog, check out the Frequently Asked Questions (FAQ) page http://financialrounds.blogspot.com/2006/08/financial-rounds-faq.html. And if your want to subscribe to our RSS feed, there are links on the sidebar.

Source http://financialrounds.blogspot.com/2006/07/whats-involved-in-getting-phd-in.html

BSE NSE Stock up and down

मैनेजिंग डायेरक्टर, जियोजित फाइनेंशियल सर्विसेज

बैंकों और वित्तीय संस्थानों के दिवालिया होने और उन्हें राहत पैकेज मुहैया कराने के इन दिनों में जिस अर्थशास्त्री कींस की सबसे ज्यादा बात हो रही है उन्होंने एक बार कहा था, ‘आपके वित्तीय रूप से सक्षम रहने के मुकाबले कहीं ज्यादा दिन तक बाजार असंतुलित रह सकते हैं।’ यह सिद्धांत यूं तो मंदडि़यों और तेजडि़यों, दोनों पर लागू होता है, लेकिन इसके तहत जो संदेशा छिपा है, वह स्पष्ट है जिसके बारे में किसी को कोई संदेह नहीं हो सकता। इसके मुताबिक बुद्धिमान निवेशक अगर बाजार के उतार-चढ़ाव से दूर रहने में सफल होता है तो उसका कामयाब होना तय है।

क्या एसेट श्रेणी के तौर पर इक्विटी में निवेश करना चाहिए, इस बात का फैसला शेयर बाजार में उस वक्त जारी गतिविधियों पर निर्भर करना चाहिए। छोटे निवेशक को किसी शेयर विशेष में निवेश करने या उससे बाहर निकलने के लिए सही वक्त का अंदाजा लगाने की कोशिश नहीं करनी चाहिए, लेकिन यह भी कहा जा सकता है कि हर निवेशक इक्विटी बाजारों में दाखिल होने या फिर बाहर निकलने का अंदाजा लगा सकता है।

ऐतिहासिक रूप से शेयर बाजार उस वक्त चरम पर पहुंचते हैं जब ब्याज दरें काफी ऊंचाई पर हों या फिर जरूरत से ज्यादा विश्वास के बूते बाजार संबंधी क्रेडिट के लिए ज्यादा मांग की वजह से उस स्तर पर पहुंचने की संभावनाएं रखती हो। इक्विटी बाजारों के बारे में ज्यादा जानकारी न रखने वाला मेरा एक मित्र है, जो ब्याज दरों के चढ़ने पर इक्विटी में अपना सारा निवेश बेचकर सावधि जमा और इनकम फंड जैसे पारंपरिक निवेश उत्पादों की राह पकड़ता है। इस निवेशक ने इस दशक की शुरुआत में फिक्स्ड इनकम निवेश से इक्विटी का रास्ता पकड़ना शुरू किया था, जब ब्याज दरें काफी निचले स्तरों पर थीं।

इसी निवेशक ने 2008 मध्य में इक्विटी से एफडी की ओर मुड़ना शुरू किया हालांकि वह जनवरी 2008 के दौरान बाजार की ऊंचाइयों का फायदा उठाने में नाकाम रहा। आज फिर यह रक्षात्मक अनुशासित निवेशक मुस्करा रहा है और दलील दे रहा है कि उसे अर्थव्यवस्था की कोई खास जानकारी नहीं है। जिन चीजों ने उसे सही वक्त पर सही फैसले करने के लिए प्रोत्साहित किया है, वह है सामान्य ज्ञान और भावनाओं पर सख्त नियंत्रण।

बाजार में गुजारे 25 साल में मैंने कई बार ब्याज दरों और बाजार के चढ़ने या उतरने के बीच इस रिश्ते पर गौर किया है। मुझे इस निवेशक के पक्ष में खड़ा होने में कोई हिचकिचाहट नहीं है जिसने मार्केट की चाल समझने के लिए बाजार से जुड़ी जानकारी कम और सामान्य ज्ञान का ज्यादा इस्तेमाल किया। और वह भी ऐसे वक्त जब हर निवेशक पर बाजार ‘जानकारी’ की अभूतपूर्व आपूर्ति की बमबारी हो रही थी। अगर ब्याज से होने वाली आमदनी उत्पाद के साथ जुड़े कम जोखिम से ज्यादा है तो निवेशक की जोखिम सहने की क्षमता के आधार इक्विटी से उसकी ओर जाने के अवसर होते हैं।

इसके उलट, मेरा एक खूब पढ़ा-लिखा मित्र भी है जो 10 साल पहले 150 रुपए के स्तर पर होने के वक्त एक बेहतरीन शेयर को पहचानने में कामयाब रहा। 2007 में जब वह 1,500 रुपए तक चढ़ा तो उसने बिकवाली कर मुनाफा वसूली करने की सलाह मिलने के बावजूद भी इंतजार करने का फैसला किया। 2008 में मंदी ने बाजार को घेरा तो यह शेयर नीचे आने लगा और मंदी के बाजार में एक साल से ज्यादा वक्त तक इंतजार करने के बाद इस दोस्त ने थक-हारकर यह शेयर 200 रुपए में बेचा और दावा किया कि वह कम से कम अपनी पूंजी बचाने में कामयाब रहा। यह गलती कई लोग करते हैं। ऐसे निवेशक ज्यादातर बार बढि़या मुनाफे पर बाहर निकलने में नाकाम रहते हैं और शेयर विशेष से भावनात्मक रूप से बंध जाते हैं।

अनुशासित रवैया अपनाकर बाजार चक्र की जानकारी बटोरना काफी आसान है लेकिन अविश्वसनीय जानकारी की जरूरत से ज्यादा सप्लाई की वजह से एक शेयर विशेष चुनना निवेशक के लिए काफी मुश्किल हो जाता है। कई शातिर सट्टेबाज बाजार में गैरकानूनी रूप से फायदा उठाने के लिए जानकारी का गलत फायदा उठाते हैं जिनके जाल में निवेशक आसानी से फंस जाते हैं।

छोटी या मझोली कंपनियों में निवेश को लेकर काफी सावधानी बरतनी चाहिए। ऐसी कंपनियों की बाजार में उपलब्ध जानकारी आमतौर पर गलत या भ्रामक होती हैं। छोटे निवेशकों को इस ग्रुप की केवल उन्हीं कंपनियों में निवेश करना चाहिए जिनके बारे में उन्हें पुख्ता जानकारी है। बहुत से निवेशक लक्ष्यों और अनुशासन के साथ इक्विटी बाजार में प्रवेश तो करते हैं लेकिन बाद में अक्सर वे सट्टेबाजों की तरह ट्रेडिंग करने लगते हैं। एक बात याद रखें कि इक्विटी बाजार में तभी सफलता मिलती है जब आप लालच को छोड़कर सही जानकारी और समय पर निवेश करते हैं।
Source Economictimes

कैसे जानें बाजार में तेजी शुरू हुई या नहीं?

बाजार में तेजड़ियों की दिवाली दोबारा कब शुरू होगी ? और उनके जैसे छोटे निवेशक इस बात का पता कैसे लगाएंगे कि दलाल स्ट्रीट पर तेजी के प्रतीक बुल ने दौड़ना शुरू कर दिया है या नहीं। सवाल काफी आसान लगता है लेकिन कई सवाल भी खड़े करता है। वह यह कि बाजार में स्थिति पलटने के शुरुआती संकेत कौन से होते हैं। इस अहम सवाल का जवाब तलाशने में आपकी मदद करने के लिए यह लेख आपको उन तमाम बिंदुओं से रूबरू कराएगा जिनके जरिए आप यह पता लगा सकते हैं कि बाजार में नई तेजी के बीज कहां बोए जा रहे हैं।
रैली की प्रकृति

निवेशक होने के नाते आपकी पहली प्राथमिकता प्रक्रिया के दौरान ही बाजार की रैली की प्रकृति के बारे में जानने की होनी चाहिए। आपको इस बात की जानकारी जुटानी चाहिए कि बाजार की रैली व्यापक है या फिर सेक्टर केंद्रित। आईसीआईसीआई डायरेक्ट के अनूप बागची ने कहा , ‘ आपको यह बात याद रखनी चाहिए कि सेक्टर आधारित रैलियां तेजड़ियों की पकड़ में नहीं बदलतीं , जैसा कि हमने 1992 और 2001 में देखा। दोनों बार बाजार की तेजी क्रमश : पुरानी अर्थव्यवस्था और टेक सेक्टरों पर केंद्रित थी। ‘

निवेशकों को सलाह दी जाती है कि वह रैली के व्यापक चलन पर निगाह डालें ताकि यह पहचान सकें कि सेंसेक्स में उछाल का मतलब वास्तव में यह है भी कि तेजडि़यों की भूमिका बाजार में फिर अहम बन रही है। बागची के मुताबिक कई ऐसे सेक्टर होते हैं जो प्रदर्शन के मामले हर दूसरे क्षेत्र को पीछे छोड़ देते हैं लेकिन इस बेहतरीन प्रदर्शन को बाजार की तेजी नहीं कहा जा सकता और न ही यह लंबे वक्त के लिए जारी रहती है। सेक्टर केंद्रित रैलियां , सामान्य तौर पर सेक्टर रोटेशन के बड़े अंश से पहचानी जा सकती हैं।

वोलैटिलिटी इंडेक्स

इसके बाद वोलैटिलिटी इंडेक्स ( वीआईएक्स ) होता है जिसे फियर इंडेक्स के नाम से भी जाना जाता है। शुरुआत करने वाले निवेशकों को यह जानकारी होनी चाहिए कि यह इंडेक्स बाजार की उथल – पुथल का हाल बताता है। यह इस बात की जानकारी देता है कि अमुक इंडेक्स आने वाले 30 दिनों में कितनी उठापटक दर्ज कर सकता है। मिसाल के तौर पर वीआईएक्स , नेशनल स्टॉक एक्सचेंज ( एनएसई ) अगर 40 के स्तर पर है तो इससे यह संकेत मिलता है कि इक्विटी बाजार अगले एक महीने के दौरान 40 फीसदी तक उछाल या गिरावट दर्ज कर सकते हैं।

स्थिर बाजार में वीआईएक्स सामान्य तौर पर 10 से नीचे रहता है। अगर वीआईएक्स ऊंचे स्तर पर है तो इससे यह संकेत मिलता है कि निवेशकों में खौफ बढ़ गया है। बाजार में तेजी लौटने के पहले संकेत के तौर पर आप इस शानदार टूल का इस्तेमाल कर सकते हैं। अगर वोलैटिलिटी 20 से नीचे चली जाएगी तो आपका निवेश काफी हद तक सुरक्षित हो जाएगा।

एमकैप – जीडीपी अनुपात

मार्केट कैपिटलाइजेशन – सकल घरेलू उत्पाद ( जीडीपी ) अनुपात यह पता लगाने का लोकप्रिय अनुमान है कि बाजार बॉटम आउट ( अत्यंत निचला स्तर छू लिया है या नहीं ) हो गए हैं या नहीं। सिद्धांत रूप से यह माना जाता है कि जब एमकैप – जीडीपी अनुपात एक से ऊपर चला जाता है तो इक्विटी बाजार में वैल्यूएशन आकर्षक हो जाता है।
डेली मूविंग एवरेज
बाजार में तेजी लौट आई या नहीं , इसके निष्कर्ष पर पहुंचने से पहले आप एक और पैमाने पर गौर कर सकते हैं और वह है डेली मूविंग एवरेज ( डीएमए ) । तेजी के बाजार में इंडेक्स अपनी 200 सिम्पल मूविंग एवरेज से ऊपर होगा और स्टॉक की वैल्यू ( कम से कम निफ्टी के प्रमुख शेयर ) 200 डीएमए से ऊपर होगी।

जियोजित फाइनेंशियल सर्विसेज में हेड ऑफ रिसर्च एलेक्स मैथ्यू ने कहा , ‘ जब तक सेंसेक्स / निफ्टी / शेयर उसकी 50 , 100 , 200 डीएमए से नीचे होते हैं तो बाजार को मंदडि़यों के कब्जे में बताया जाता है। अगर बाजार में सुस्ती की वजह से इंडेक्स 50 डीएमए से नीचे चला जाएगा तो वह वापसी करना शुरू करेगा जिसके चलते निफ्टी / सेंसेक्स / स्टॉक को उसकी 50 , 100 या 200 डीएमए तक ले जाएगा। ‘

इस स्थिति को तफ्सील से समझाने के लिए मैथ्यू ने एक उदाहरण दिया जिसमें हाजिर निफ्टी 2934 , निफ्टी 50 डीएमए 2864 , 100 डीएमए 3100 और 200 डीएमए 3822 पर है। उन्होंने कहा , ‘ मंदी के बाजार में क्योंकि निफ्टी अपने 50 डीएमए से ऊपर है इसलिए वह 3100 की 100 डीएमए या कई बार 3822 की 200 डीएमए को टेस्ट कर सकता है। सेंसेक्स में इस तरह के उछाल को मंदी के बाजार की रैलियां कहा जाता है। ‘ उनके मुताबिक ज्यादा कारोबार और कम इम्पैक्ट कॉस्ट बाजार में तेजी लौटने की मुख्य विशेषताएं हैं।

दूसरे सुराग

उपरोक्त पैमानों के अलावा ऐसे कुछ और भी सुराग हैं जिन पर निगाह रखकर आप बाजार की तेजी की शिनाख्त कर सकते हैं। विश्लेषकों का कहना है कि आम तौर पर इक्विटी बाजारों में रफ्तार उस वक्त आती है जब महंगाई दर कम हो , ब्याज दरें निचले स्तर पर हों , प्राइस टू बुक वैल्यू अनुपात , नरम मौद्रिक नीति , तंत्र में अधिक नकदी , बायबैक , नए आईपीओ का अभाव तथा कमजोर हाथ बनाम मजबूत हाथ ( अत्यधिक निराशावाद से घिरे छोटे निवेशक मजबूत संस्थागत निवेशकों को भारी बिकवाली करें ) की स्थिति हो। प्राइस टू बुक वैल्यू अनुपात के मामले में पुराने आंकड़ों पर नजर डालने की सलाह दी जाती है कि मल्टीपल्स में कैसे विस्तार आया या कॉन्टैक्ट हुए।

हालांकि कुछ ऐसी चीजें हैं जिन्हें दिमाग में रखने की जरूरत है। मोतीलाल ओसवाल सिक्योरिटी में फंड मैनेजर मनीष सोंथालिया ने कहा , ‘ पहला , बाजार अर्थव्यवस्था से कहीं पहले बॉटम आउट हो जाते हैं और इसका आकलन कंपनियों के तिमाही नतीजों के आधार पर किया जा सकता है। आम तौर पर अर्थव्यवस्था की स्थिति पलटने से दो तिमाही पहले बाजार में इसका अक्स दिखने लगता है।

दूसरा , बाजार में तेजी , मंदी और सुस्ती की अधिकता से पैदा होती है या ठीक इसके उलट भी होता है। यह एक चक्र है क्योंकि वक्त बदलता रहता है और कुछ भी अनंत काल तक नहीं रहता। तीसरा , बाजार में सुस्ती 18 से 24 महीने तक जारी रहती है। हम बाजार की मौजूदा मंदी के 14 वें महीने में हैं और मार्केट में तेजी लौटने में बस कुछ ही वक्त बाकी है। ‘
कैसे उठाएं फायदा
तमाम बातें एक तरफ हैं। बाजार में तेजी के बीज पड़ने के वक्त आपकी रणनीति ज्यादा से ज्यादा फायदा बनाने की होनी चाहिए। आप ऐसा मिड कैप और स्मॉल कैप शेयरों के बजाय बुनियादी रूप से मजबूत लार्ज कैप शेयर खरीदकर कर सकते हैं। ऐतिहासिक चलन इस बात का सबूत है कि लार्ज कैप शेयरों ने हमेशा से तेजी के बाजार की अगुवाई की है। स्मॉल कैप और मिड कैप शेयर , तेजी आने पर सबसे धीमी गति से रफ्तार पकड़ने वाले स्टॉक में शामिल होते हैं। सोंथालिया ने कहा , ‘ विडंबना यह है कि छोटे निवेशक ठीक इसके उलट कदम उठाते हैं। ‘

उनके मुताबिक सेक्टर के आधार पर बैंकिंग और ऑटो सेक्टर सबसे पहले चढ़ते हैं। ऐसा इसलिए है क्योंकि अर्थव्यवस्था पर इनका सीधा असर होता है। अगर इन कंपनियों के शेयरों की कीमतें चढ़नी शुरू होती है और ऊंचे स्तरों पर बरकरार रहती हैं तो यह निश्चित संकेत माना जा सकता है कि अर्थव्यवस्था एक बार फिर गति पकड़ रही है और बाजार में तेजी शुरू हो चुकी है।

सोंथालिया ने कहा , ‘ यह बिक्री की संख्या और इन सेक्टरों की कंपनियों की ओर से घोषित किए जाने वाले मुनाफे से और पुख्ता होता है। अगर आप जल्द कदम उठाते हैं और चक्र की शुरुआत में इन सेक्टरों के शेयर खरीदते हैं तो यह आपको भारी मुनाफा दे सकता है। ‘ उन्होंने टाटा मोटर्स ( उस वक्त टेल्को ) का उदाहरण दिया जिसका शेयर 2002 में 60 रुपए से बढ़कर बीते पांच साल में बढ़कर 900 रुपए के पार पहुंच गया था। हालांकि , एक बार फिर इसमें भारी गिरावट आई है।

विश्लेषकों का मानना है कि इस बात के संकेत हमारे सामने हैं जो इस बात की तस्दीक करते हैं कि बाजार की मौजूदा सुस्ती जल्द ही खत्म हो सकती है। निवेश करने के लिए रकम तैयार है और अमेरिका में कुछ स्थिरता आने के संकेत मिलते ही भारतीय बाजार उड़ान भरना शुरू करेंगे। जैसा कि वॉल स्ट्रीट पर पुरानी कहावत है। कोई भी बड़ी हस्ती तेजी के चरम पर और मंदी के निम्नतम स्तर पर घंटी नहीं बजाना चाहती। आपको अपने फैसले खुद करने होते हैं और निवेश के अपने स्टाइल को लेकर प्रतिबद्ध रहना होता है।
मंदी के बाजार के संकेत
- एनएसई वोलैटिलिटी इंडेक्स 40 फीसदी के ऊपर रहे

- कारोबार कम हो

- कई शेयर 52 सप्ताह के निम्न स्तर पर या उससे नीचे कारोबार कर रहे हों

- बाजार में लगातार उछाल की उम्मीद न हो
Source Economictimes.com