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All you want to know about the US debt crisis
Although it might be a bit early to predict with certainty the future implications of the debt crisis facing the US today, the situation is fluid enough to raise an alarm for the US government as well as foreign investors. Because of the recent financial crisis and the ongoing war on terror, the tax revenues of the US government shrunk while its expenditure increased. Consequently, there was a substantial increase in the government's deficit. In May 2011, the US government reached the legal limit of its ability to borrow money. Through initiatives like postponing payments in pension schemes, which were not immediately required to be paid to the beneficiaries and better tax receipt, the American treasury managed to find some money for the government's expenditure. This money is, however, expected to run out in the first week of August. After this, the American government will have no money to spend while it is also not allowed to borrow more money, hence the crisis.
Why can't the US Government borrow more money?
In America, the government faces a limit on the total amount of debt it can accumulate. The debt ceiling or the legal limit on government borrowing is set by a statute and hence can only be raised by Congress. The system was introduced during the First World War. Prior to 1917, the year when the US entered the war, every government borrowing was required to be approved by Congress. To allow more flexibility in the system, it was decided that a maximum limit of the government's gross debt would be fixed and the government could borrow money without Congressional approval if the total debt was within this limit. Over the years, the ceiling has been raised several times and at present it is fixed at $14.3 trillion, which the American government has already reached.
Why is Congress not raising the ceiling?
Over the years, the ceiling has witnessed several raises and the people who are opposing any further increase argue that the present situation, where the national debt has reached its highest point in 50 years, is the outcome of these hikes. A large proportion of the current debt has been accumulated over the past 30 years, starting with the Reagan regime. There is also an ideological debate on the methods of repayment of the debt. The conservative Republicans are arguing for reducing government expenditure by discontinuing certain schemes. The liberal Democrats, on the other hand, want to continue the welfare policies and raise the money through increased taxes. Considering the upcoming presidential elections, none of the parties can afford to displease their vote banks. It is however assumed that a consensus will be reached and the US government will not actually default from paying its bills.
What will happen if the ceiling is not raised?
Unlike Greece and other European countries which recently witnessed a debt crisis, the US has not seen any significant increase in its borrowing costs. Naturally, the world is willing to lend money to the US and hence the Obama government can ignore the ceiling. But in that case he might face impeachment, as this would be illegal. If he doesn't ignore the ceiling, Obama's government will have to default from paying its bills and repaying the debt. In that case, apart from non-payment to its creditors the government will also have difficulties in paying for its welfare schemes, salaries of its employees and soldiers and the money committed for various infrastructure projects. This might trigger a slowdown as people will not have money to buy goods and services. A default on treasury debt which is raised by selling treasury bills might also result in a financial crisis. These bills are bought by individuals, corporations, banks, insurance firms, local and foreign governments. Non-payment might create a situation similar to the crisis created after the collapse of companies like Lehman Brothers.
SOURCE : www.timesofindia.indiatimes.com
Support & Resistance Levels - Concepts
What are Support & Resistance levels?
Support and Resistance levels are exactly what their names imply.
Support is the price level through which a stock is not expected to fall. Resistance, on the other hand, is the price level that a stock is expected to surpass. To put this differently, the price level which, historically, a stock has had difficulty falling below. Thus this is a level at which a lot of buyers tend to enter the stock which in turn creates a demand for the stock and pushes the price of the stock up. This is often referred to as support level.
Resistance is a price level which a stock finds it difficult to break through. To put this differently, the price at which a stock or market can trade, but not exceed, for a certain period of time. The stock or market stops rising because sellers will increase more than the number of buyers which in turn will increase the supply in the market and thus pulls the price of the stock down. This is often referred to as resistance level.
Testing the support & resistance levels:
If the price of a stock falls towards a support level it is a test for the stock. The support will either be reconfirmed or wiped out. It will be reconfirmed if a lot of buyers move into the stock, causing it to rise and move upwards from the support level. It will be wiped out if buyers will not enter the stock and the stock falls below the support.
If the price of the stock rises towards the resistance level, it is a test for the stocks resistance. The resistance will either be reconfirmed or breached. It will be reconfirmed if lots of sellers place sell orders at that level, causing the price of the stock to come down from the resistance level. It will be breached out if sellers will not enter the stock and the stock raises above the resistance.
Role Reversal
Once a resistance or support level is broken, its role is reversed. If the price falls below a support level, that level may become resistance. If the price rises above a resistance level, it may often become support. As the price moves past a level of support or resistance, it is thought that supply and demand has shifted, causing the breached level to reverse its role. For a true reversal to occur, however, it is important that the price make a strong move through either the support or resistance
In almost every case, a stock will have both a level of support and a level of resistance and will trade in this range as it bounces between these levels
Importance of support & resistance levels:
These support and resistance levels are seen as important in terms of market psychology and supply and demand. Support and resistance levels are the levels at which a lot of traders are willing to buy the stock (in the case of a support) or sell it (in the case of resistance). When these trend lines are broken, the supply and demand and the psychology behind the stock's movements is thought to have shifted, in which case new levels of support and resistance will likely be established.
Support and resistance analysis is an important part of trends because it can be used to make trading decisions and identify when a trend is reversing. For example, if a trader identifies an important level of resistance that has been tested several times but never broken, he or she may decide to take profits as the security moves toward this point because it is unlikely that it will move past this level.
Support and resistance levels both test and confirm trends and need to be monitored by anyone who uses technical analysis. As long as the price of the share remains between these levels of support and resistance, the trend is likely to continue.
It is important to note, however, that a break beyond a level of support or resistance does not always have to be a reversal. For example, if a price moves above the resistance levels of an upward trending channel, the trend has accelerated, not reversed. This means that the price appreciation is expected to be faster than it was in the channel.
Being aware of these important support and resistance points should affect the way that the trader trades a stock. Traders should avoid placing orders at these major points, as the area around them is usually marked by a lot of volatility. If the trader feels confident about making a trade near a support or resistance level, it is important that he/she follow this simple rule: do not place orders directly at the support or resistance level. This is because in many cases, the price never actually reaches the whole number, but flirts with it instead.
So if you're bullish on a stock that is moving toward an important support level, do not place the trade at the support level. Instead, place it above the support level, but within a few points. On the other hand, if you are placing stops or short selling, set up your trade price at or below the level of support.
How to calculate support & resistance levels of stocks?
There are many ways to calculate levels of support and resistance (Pivot point method, Moving averages, Fibonacci numbers etc). One of the most common is to use a series of formulas to calculate "pivot points", described herein
· Calculate the pivot point as follows, using the previous day’s high, low, and close:
Pivot or P = (High + Low + Close) / 3
· Calculate the first support point: S1 = (P x 2) – H
· Calculate the second support point: S2 = P - (High - Low)
· Calculate the first resistance point: R1 = (P x 2) – Low
· Calculate the second resistance point: R2 = P + (High - Low)
Adjusted Pivots
Many traders adjust their value for P as follows:
O = Today's Opening Price
P = O + (H + L + C) / 4 (where H, L & C are from the previous day’s stock details)
Pivot points are short-term indicators, and ultimately it is the trader's responsibility to use them wisely, in conjunction with other confirming indicators. However, a set of pivot points must be recalculated each day.
Three principle factors determine the strength of support and resistance levels:
· The longer the period of time a price trades in a specific area of support or resistance the greater the significance of the level.
· Volume is another way to gauge the importance of a level - the more volume of trading that takes place the more significant the level.
· The more recent the activity the more significant the level - the reason being that the level is influenced by the positions of traders currently in the market
Conclusion
Determining future levels of support can drastically improve the returns of a short-term investing strategy because it gives traders an accurate picture of what price levels should prop up the price of a given security in the event of a correction. Conversely, foreseeing a level of resistance can be advantageous because this is a price level that could potentially harm a long position because it signifies an area where investors have a high willingness to sell the security. As mentioned above, there are several different methods to choose when looking to identify support/resistance, but regardless of the method, the interpretation remains the same - it prevents the price of an underlying from moving in a certain direction.
SOURCE :www.caclubindia.com
Difference between GDP and GNP
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POINTS IN CHANAKYA NEETI
2)Those parents are worst enemies of their own children; who do not teach them letters and educate them. Because an uneducated person is spurned in the assembly of learned people. He is total misfit as a crane in the flock of the stately swans.
3)If you were to choose between evil person and snake to keep company with, opt for the snake. Because a snake will bite only in self-defence but an evil person can put a bite for any reason and any time or always.
4)A man must quit the religion that does not preach love and kindness, a man must leave a teacher who has little knowledge, a man must leave a woman who has foul temper and a man must break off with kith and kin who has no love for him.
5)Infatuation is the most sickening disease. Greed is the worse enemy. Anger is the worst fire. Knowledge is the most comforting possesion.
6)You can win over; a greedy by offering money, a proud person by covering before him, a fool by agreeing with him and a scholar by speaking the truth.
7)Do not be too simple and too straight. Go to the jungle to see how the smooth and the straight trees have been cut down mercilesssly but the crooked ones stand unharmed.
8)A great dynasty is no great if it is bereft of educated members. If a person of low birth gains learning and wisdom, he would be honourable for nobles even.
9)Do not wake up; The King, serpant, tiger, pig, child, other's dog and a fool. Leave them asleep.
10)Poets can imagine anything. Women can do anything. A drunkard can say anything. And a crow can eat anything.
11)A person who maintains silence for one year, opening his mouth only to eat, he gets all the honours of the heaven for ten million years.
12)Drop by drop a pitcher gets filled. Similarly, a little by little collection of money, learning and good acts become great treasures.
13)Strange is the character of noble souls. They don't give much weight to the importance of riches yet when riches comes to them the weight of the money bends them down into the more humility.
14)O man! If you want to win this world with just one act, then don't let your tongue speak ill of any other person. That is it.
15)A man loses woman, friends, relatives and servants when he loses the money. When the money is regained they all come back. Hence, the money is man's real relative.
16)This world is a tree that bears different kinds of evil and bitter fruits. It produces only two sweet fruits, polite words and the company of the saintly people.
17)A snake's venom is in its fang. A bee's poison is in its sting. A scorpion's poison is in its tail. But there is poison in every part of the body of an evil person.
Seven Habits of highly effective people by STEPHEN COVEY
Take initiative
Manage change
Respond proactively
Keep commitments
Take responsibility and have accountability
Have a positive influence on results
HABIT TWO : Begin with the End in Mind
Define vision and values
Create a mission statement
Set measurable team and personal goals
Start project successfully
Align goals to priorities
Focus on desired outcomes
HABIT THREE : Put Things First Execute strategy
Apply effective delegation skills.
Focus on important activities
Apply effective planning and prioritization skills
Balance key priorities
Eliminate low priorities and time wasters
Use planning tools effectively
Use effective time-management skills
HABIT FOUR : Think Win-Win
Build high-trust relationships
Build effective teams
Apply successful negotiation skills
Use effective collaboration
Build productive business relationships
HABIT FIVE : Seek First to Understand, Then to be Understood
Apply effective interpersonal communication.
Overcome communication pitfalls
Apply effective listening skills
Understand others
Reach mutual understanding
Communicate viewpoints effectively
Apply productive input and feedback
Apply effective persuation techniques
HABIT SIX : Synergize
Leveraging diversity
Apply effective problem solving
Apply collobarative decision making
Value differences
Build on divergent strengths
Leverage creative colloboration
Embrace and leverage innovation
HABIT SEVEN : Sharpen the Saw
Achieve life balance
Apply continuous improvement
Seek continuous learning