Welcome to this edition of the carnival. I hope you are having a good Sunday and here are some great posts to make it better.

Debt

Nate Kragness presents My Free Cash | Debt Consolidation Loans: Should You Pay a Firm to Manage and Eliminate Your Debts? posted at My Free Cash | Your Guide to Money Management, saying, “Credit card consolidation firms offer many ways to help you get out of debt, from consolidation loans to debt negotiations with your creditors. But before you decide to work with a firm to help you manage and eliminate your debts, make sure you read and understand these important steps that you can take yourself, that may ultimately save you interest on you high interest loans.”

Silicon Valley Blogger presents Discover Credit Card Rewards, Sign Up Bonuses and Holiday Promotions posted at The Digerati Life

Economics

anotherjen presents The Recession is Over!… So, Why Don’t Things Feel Better? posted at The Next Rich Girl, saying, “Why the recession doesn’t feel over yet…”

Investments

Ray @ Financial Highway presents Gold Investment posted at Financial Highway, saying, “With increasing Gold Prices, investing in gold has become a hot topic. Although I do not like gold as an investment, here are some reasons why people do invest in gold.”

Tom @ Canadian Finance Blog presents Book Review – Stocks For The Long Run | The Canadian Finance Blog posted at The Canadian Finance Blog, saying, “Stocks For The Long Run, written by Jeremy J. Siegel, is a great book that as the name suggests, promotes the superior return of stocks over an extended period of time.”

ABC presents “Bottoms Up” Investment Method posted at ABCs of Investing, saying, “A short description of “bottom’s up” investing style.”

The Financial Blogger presents 9 Free Websites to Start Investing in Canada posted at The Financial Blogger, saying, “here’s a list of 9 free websites designed for Canadian investors. While they are not all exclusive to the Canadian market, you should bookmark all of them in order to gain a complete view of your investments and all possibilities.”

Jeff Rose presents 2010 Traditional and Roth 401k Contribution Limits posted at Jeff Rose.

Personal Finance

Allan Inocente presents Building Rich Money Habits 101: My personal finance story posted at Rich Money Habits, saying, “The blog post shows how to build rich money habits to achieve financial freedom. It tells about my personal finance story of learning my money habits, getting into credit card debt, being able to pay it up, build an emergency fund and get started in learning how to be financially free!”

Credit Shout presents How Credit Inquiries Affect Your Credit Score posted at CreditShout.

BWL presents 4 ways to spend your money wisely posted at Christian Personal Finance, saying, “Tips to make smarter purchases!”

debt kid presents Open Enrollment: 5 Ways To Save Money On Health Insurance posted at Debt Kid.

Billeater presents Scan Your Way to a Lower Grocery Bill posted at Billeater.

MatthewPaulson presents Money Saving Tips for New Parents posted at Fine-Tuned Finances.

The Amateur Financier presents Book Review: The Automatic Millionaire Homeowner posted at The Amateur Financier, saying, “A review of the book The Automatic Millionaire Homeowner, which attempts to guide readers in how to profit from owning a home.”

David presents Credit Card Offers for Pet Lovers posted at Credit Card Offers IQ, saying, “Care Credit is a personal line of credit that can be used for your pet care and your health care expenses.”

Bucksome presents The Importance of a Living Will posted at Buck$ome Boomer’s Journey to Retirement, saying, “A personal story about a parent on life support without a living will.”

FIRE Getters presents Top 5 Freebie Websites! posted at FIRE Finance.

Madeleine Begun Kane presents Office Party Follies posted at Mad Kane’s Humor Blog.

Matt Mason presents Does Living In a Frugal Way Constitute Vanity? posted at FYMO Personal Finance Blog.

Super Saver presents The Benefit of not Including Bonuses in our Budget posted at My Wealth Builder.

Ray @ Financial Highway presents Best Credit Card posted at Financial Highway, saying, “Credit cards have a bad name in the personal finance world, however using credit cards properly can be a big part of your financial plan. Here are a few tips on how to choose the best credit card.”

Peak Personal Finance presents Lending Money to Friends and Family posted at Peak Personal Finance, saying, “Lending money to friends or family can be stressful to your relationships.”

David presents Credit Card Offers for Young Adults posted at Credit Card Offers IQ, saying, “As a young adult building strong credit and financial history is one of the most important things you can do.”

GLBL presents 10 Small Ways to Save Money That Make a Big Difference posted at Gather Little By Little, saying, “It’s much the same with small savings techniques. Many, seemingly inconsequential savings methods bundled together can significantly grow your nest egg to immense proportions.”

Emily Simmons presents My Journey Towards Financial Freedom posted at Be In Health Now, saying, “The first in my series about achieving financial freedom, this post talks about how I got started on the journey and became much wiser about my finances.”

The Dough Roller presents Does Applying for a Balance Transfer Offer Affect Your Credit Score? posted at The Dough Roller.

David presents Chase Freedom Credit Card 3% Cash Back Bonus posted at Credit Card Offers IQ.

Michal presents Whole Home Audio System that is Energy Star Compliant posted at Energy Saving Gadgets.

That concludes this edition. Submit your blog article to the next edition of Economy and your finances using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

The most interesting thing I read this week was: Do Smart,  hard working people deserve to make more money? by James Kwak at the Baseline Scenario. The title tells you what the post is about, and I recommend that you head there and read it. I felt a strong emotion while I was reading it, and the last I saw, the post had 270 comments, so I wasn’t alone.

Now, on to other great stuff this week.

Articles

How to increase your productivity with the Pomodoro Technique @ Pen Stalker

Ally Bank (GMAC Bank) Review @ The Digerati Life

Balance Transfer Credit Cards @ The Smarter Wallet

How much can you save by doing a balance transfer? by Cash Money Life

Treasury and the blogs @ Baseline Scenario

How to tell if a credit card number is fake? @ Dough Roller

Hindu’s website design at foreign source @ The Tip Guy

Carnivals

Carnivals of Money Hackers # 89

Carnival of Twenty Something Finances Lost Edition

Festival of Stocks

This question popped up in a comment last week, and since I hadn’t thought of it for a long time – I had never written about it. I thought it’d be a good idea to address this question with a quick post.

Before you start reading the post, I should warn you that this is just the opinion of your humble blogger and nothing more than that.

Okay, now on to the question itself.

What should be your time horizon while investing in stocks?

The short answer is:

Very Long

Now, the long answer:

Here are my top three reasons why you should hold stocks for very long.

Companies take time to grow

A stock is an ownership in a company, and for a stock to really take off, — the underlying company needs to grow. Companies don’t quadruple their revenues overnight. They need many years of doing the right thing to achieve some sort of size and stability. If you keep buying stocks thinking of them as little lottery tickets, — you will repent sooner or later. You need to buy companies that you think will gain market share, make great products and keep customers happy for the next ten or twenty years. Only then will their stock grow, and you make money off your investments.

Ability to endure crashes

The longer your time horizon, the greater is your ability to wait out crashes and sell when the market is doing well. If your time horizon is short, then you will have to sell even if the market is not doing too well, and that can be really bad.

Last October, when the market had tanked, I had written a piece about catching falling knives, in which I wrote that the market had gone up and down several times in the last few decades, but in the long run, it slopes upwards. At that time the situation looked really bleak, but one year down the road – we are already seeing signs of recovery.

If you had a short horizon, and didn’t believe stocks were a long term investment, you’d most likely book your losses and exit out of the market. But that would have meant selling off when the market was quite close to the bottom.

An investor with a long term horizon could wait out the crash, and say – I can wait for a few years for this market to recover. You could stop investing any more money if you don’t feel comfortable, but you’d be saved from selling at the bottom of the market.

Short term mentality leads to trading and incurring losses

If you are not a professional trader, — trading in stocks will rarely ever make you money. It will make plenty of money for your stock brokers, but not so much for you. I know this from personal experience and knowing hundreds of people in all age groups, professions, education levels and income level who share the same experience. Unfortunately, this is not something that I or anyone else can explain, you have to experience it yourself to learn the lesson. But I am very confident that your lesson will be the same as mine.

These were my top three reasons to prefer long term investing over anything else. Feel free to add your reasons of why a long horizon works for you, and I’d really enjoy listening to some arguments why I am wrong, and short horizons are the way to go.

I’ve just finished reading: Too Big to Fail by Andress Ross Sorkin, and I really enjoyed it. It reads like a novel and takes you through the events, people and stories around the financial panic last year. It starts off with JP Morgan agreeing to buy Bear Sterns and ends after the government decides to inject billions of dollars in the top financial institutions last October.

The book is entertaining, and I found it hard to keep it down once I started reading it. It is easy to read and focuses on the people, their stories and emotions, rather than delve deep on the technical matters related to the crisis. It is written for everyone, and is not just for people interested in Wall Street or finances in general.

Andrew Ross Sorkin has recreated a lot of conversations, and that makes the book really great. It makes you feel you are going through the events yourself, and adds real flavor to the whole thing.

Conversations were something I wasn’t expecting from the book, and as far as I am concerned, that’s the thing that makes the book great.

These conversations and stories are recreated from the author’s interviews with top officials and a lot of these stories have appeared for the first time anywhere.

These are things like secret Paulson – Goldman meeting, Warren Buffet sending a 4 page letter to Treasury to outline a plan of how they could buy toxic assets to improve the situation, or just innocuous little things like Geithner’s preference for the “F” word.

I don’t think I have read such stories anywhere else, and all of them come together to make a very enthralling sequence of events, which is put together quite nicely.

I really enjoyed the book, and as I said before, it took all my spare time the last couple of weeks. If you have time for a 600 page book, and are interested in this kind of stuff, you should give it a try too.

I have no complaints about the book, but this post contains affiliate links (more about that at the bottom of this page), so if you plan to buy it, I suggest you read some bad reviews of the book too.

IMF had announced its intention to sell 400 metric tons of gold a few months ago. They wanted to raise money to lend to weaker nations by selling some of their gold. At that time, — China, Russia and India had evinced interest in buying IMF’s gold.

India finally bought half or — 200 tons of gold from IMF in the last two of weeks of October. The price tag was 6.8 billion dollars, which valued one ounce of gold at 1,045 USD. The transaction was done in hard cash, which I think means that India paid IMF in USD.

A lot of other countries (most notably China) have increased their gold holdings in the last year, so this is no surprise. China’s government holdings of gold increased to 1,045 tons this year from 400 tons in 2003. But, the deal was certainly big enough to push gold to all time highs yesterday.

After last year’s crisis, many countries are looking to diversifying their reserves and reduce their exposure to the US dollar. India had a relatively smaller percentage of gold in its reserves and RBI’s data for October 23^rd 2009 shows that the percentage is still below 4%. After October 30^th, when the gold purchase is complete, the percentage should have risen to 6%.

This makes RBI’s gold holdings the tenth largest among central banks. India is of course the world’s biggest gold importer, and like almost everything else, China is the biggest producer of gold. So it remains to be seen if China will lap up the remaining IMF gold up for sale, and shore up its gold reserves even more.

I have mixed feelings about this, — on one hand, it is good to diversify away from paper currencies and have some presence in hard assets like gold, but on the other hand, India is buying gold at the top of the market. Buying anything at the peak rarely gives great returns, but this is more about safety than returns.

At some point in the future, these reserves should be put in use, and invested in assets that produce returns, rather than things, which are simply a store of value.

It has been about two decades since India saw its reserves dwindle to just about a couple of weeks of imports, but that memory is still fresh in some ways. It pushes the central bank to look for safe havens and not go through the nightmare of going to the IMF for funds. Much of India’s liberalization is also marked by the same cautious and measured approach, which helped a great deal last year when none of the Indian banks faced any problems and the country fared through the recession a lot better than most other countries.

I think the approach will change and India will become more aggressive when it comes to its reserves. That will take time though, and it is probably best for stability that it does take time before the country becomes really aggressive on this and other fronts.

Growth Enterprise Market (GEM) is the brand new stock exchange of China. It is a NASDAQ style stock exchange aimed at providing finance to smaller companies.

It started trading last Friday, and on the first day of trading — created 13 paper billionaires. 28 companies listed on the GEM, aka ChiNext, and they rose between 76% and 210% in the first day of trading.

It’s another thing that 25 out of these 28 companies fell on the second day, and many of them fell by as much as 10% (which was the lower limit).

I read a few articles about ChiNext or GEM, and there were several things that caught my eye:

1. Volatility: The first thing that I noticed was volatility. Anyone following the Chinese IPO market will not be surprised by it, but it’s hard to not take notice of. China’s IPO market is the biggest in the world right now, and the IPO market is really hot there. Given this backdrop, regulators were expecting volatility, and it seems they have created some rules to curb speculation, and have warned investors that they will crack down on aggressive speculation.
2. Spur Innovation: GEM is created to provide an exchange to start ups and smaller companies to list — create wealth for their founders, and fund future growth. GEM is much smaller than the Shanghai or Hong Kong Stock Exchange, but regulators hope that it will eventually compete with NASDAQ. Only 28 companies have listed so far, but many smaller companies are lined up to list on GEM and raise funds. GEM is made for smaller, technology oriented companies.
3. Dominate something other than low cost manufacturing: A stock exchange of this kind looks to support smaller companies that are more nimble in nature, and are looking to make money by being more innovative, rather than being cheaper. This looks like a strategic thrust towards growing companies that can not only dominate low cost manufacturing, but also deliver high end technological breakthroughs.
4. Correct Structural Imbalance: The Shanghai stock exchange is dominated by government enterprises and there are fewer opportunities for smaller and younger companies to list there. A lot of these companies end up listing in Hong Kong or overseas to raise money. By setting up a domestic stock exchange with the ostensible purpose of facilitating funding for smaller companies, — China is looking to bring a little balance to its stock exchange structure.
5. Bold Action: While the rest of the world is busy worrying about double dip recessions, auctioning spectrum, declining exports or generally being gloomy, China is taking bold action. You would think that setting up a stock exchange just after such a bad bust would be difficult, — and yet, that is exactly what the Chinese have done.

It will be interesting to see how this stock exchange grows, and if it does well, it will certainly be a good model for a lot of other emerging countries to follow.

Price Band and Dates of Astec IPO

The IPO is priced between Rs. 77 to Rs. 82. It opened on October 29^th 2009, and will close on November 4^th 2009.

IPO Grading

ASTEC Lifesciences has been graded 2 out 5 by CARE, which denotes below average fundamentals.

Business of ASTEC

Astec is engaged in the following two segments:

1. Agrochemicals
2. Pharmaceuticals

The agrochemicals segment involves manufacture of active ingredients, intermediates and formulations. The company is involved in manufacturing products that are used in crop protection and anti fungal agents.

The Triazole fungicide — its main product — is used in the agrochemical segment, and contributed 65.81% to sales. Dicap, its key product in the pharmaceutical segment contributed 14.14% of sales during FY 2008 – 09. So, you can see that the major chunk of revenue come from the agrochemical sector.

It has two plants – one in Mahad, Maharastra and the other in Dombivili, Maharashtra. The company is coming out with the IPO primarily to raise funds for expansion of the manufacturing facility of the Mahad plant and expanding the R&D facility of the Dombivili plant.

Financials of Astec

The company had net sales of Rs. 8,441.46 lakhs in 2008 – 09, up from 6,120.78 lakhs in 2007 – 08. The corresponding net profit for the two years was Rs. 1072.98 lakhs and Rs. 793.64 lakhs.

The company had an EPS of Rs.11.37 for the last year, and the P/E ratio comes out between 6.77 and 7.21 on the higher and lower band based on the earnings. BL states that much larger companies such as Hikal, Meghmani Organics and Sabero Organics command multiples of just 5 – 6 times.

Risk Factors

There are several criminal and civil legal proceedings against the company, its directors and promoters. Any decision against them will impact the future of the business.

Astec operates in the agrochemical industry and is vulnerable to seasonal and weather fluctuations.

The company is subject to product liability claims in relation to the quality of and use of its products. This means that if someone is harmed by the use of its products, the company can be liable to pay claims. This exposes it to potential legal costs.

Conclusion

These were some key factors that you should keep in mind while thinking of investing in the Astec IPO. The grading, earning comparison, and industry that the company is in are all important factors to keep in mind while deciding whether you should invest in the company or not.

I finally wrapped up: Too Big To Fail. The book was great, and was more like a fiction novel rather than something that really happened.

Reading that book took a lot of my spare time this week too, and I didn’t get a chance to look at many posts. So, here is a relatively short list of interesting reads this week.

Posts

Announcing Astute Actions Inc @ Money Ning

Economic growth is up, what now? @ The Digerati Life

Baseline Scenario October 30th 2009 @ Baseline Scenario (This one is a must read)

Dear Motley Fool: Please stop spamming Yahoo Finance @ The Reformed Broker (Very funny)

GMAC: Bottomless pit watch @ Rolfe Winkler

Some people are better than others @ Seth Godin

Chase blueprint payment program review @ Bargaineering

Looking back at Indira Gandhi @ Ajay Shah

Small business financing: How to fund your venture @ The Smarter Wallet

Carnivals

Twenty Something Finances

Money Hacks Carnival

Although I’d like to live a simple and uncomplicated life, I have accepted the fact that modern day life is increasingly complex and involves donning many different hats at the same time.

This is a post about a few ways in which I try to get more done and multi task efficiently.

1. Eliminate distractions: Everyone knows that you should stay away from email and Twitter if you are working, but there are plenty of innocuous little things that are subtle distractions. In my case, search terms in my Google taskbar in the browser are a distraction when I write. I need the browser to search and look for information, so I can’t really close it, but before beginning to write – I clear out anything from the Google bar that I had previously searched for.If I don’t do that, then at some point, I would just go off searching for that term, and break concentration. Identifying such subtle distractions helps you stay focused. 

2. Plan meticulously: Spending a few minutes every morning thinking of what needs to be done, and then spending a few minutes after lunch helps me greatly in getting things done.

3. Prepare lists: If I don’t have a ready list or reference of what needs to be done, I float from one thing to the other and in the end nothing gets done. I don’t use lists a lot, but when I use them – I see that I get a lot more done. It is a habit that I am cultivating.

4. Have mini goals: I have certain mini goals for each day, half day and weekends. These mini goals supplement my plans and lists, keep me focused, and generally help a great deal. For example, one of my goals is to finish the book I am reading within the next ten days. With that in mind, a mini goal is to put in at least 20 minutes of reading before going to bed every night. It is very doable and just stating that goal, helps in getting that done immensely.

5. Make commitments: This works for me but may not work for everyone, I commit to people before actually getting something done. This puts pressure on me to finish that task and I almost always get it done. This may not work for everyone, and you could end up with broken promises if it doesn’t turn out well for you. In my case I have noticed that losing face is a strong motivator in getting things done.

6. You don’t have to do everything: I have never read more than one book at a time. More than anything else, I read for entertainment, and normally I don’t feel the need to read more than one book at a time for that. It usually means that I have to finish one before moving to another, but it is worth it. There is no point of adding complication when there is nothing to be gained from it. Ultimately doing things concurrently lowers efficiency somewhat, so I try to avoid multi tasking wherever possible.

These were some simple things that help me getting focused and get more done out of less. Most of them are really obvious and all of them are worth giving a try. If they don’t help you, you can always go back to the old ways, so there is not much to lose.

But getting more done with less time is a challenge that all of us face, and we should actively look for ways that help us in accomplishing this.

Photo Credit: Stuck in customs

Before you start reading about this card, you should know that it is only available to existing members. If you don’t already have this credit card, then you’ll be wasting your time reading this piece.

This is a cash back credit card from HDFC bank that lets you get up to 5% cash back on some of your purchases.

“Up to” is the key here though, the 5% cash back is only applicable if you make purchases from railways, hospitals and medical stores.

• If you spent your money on grocery, departmental stores, supermarkets or restaurants, then you will get just 1.5% cash back.

That is not really bad in itself, but there is an additional condition which states that the cash back on this credit card will be credited to your account only if the balance due is more than Rs.10,000. That is going to be a major dampener for people like me who don’t spend that much on a credit card every month.

There is one more final condition in getting the cash back – you can’t get more than Rs.500 back per month.

Here are the some of the fee of this card. To take a look at the detailed fee structure, visit this link.

• Annual Fee: Rs 700
• Interest: 3.25% per month or 39% annually
• Cash advance charges: 2.5% of amount withdrawn or Rs 300 (whichever is higher)

These were some interesting things I found about the HDFC Value Plus cash back credit card. I haven’t looked at many cash back credit cards to get a sense of where this one stands vis-a-vis others, but having the reward structure laid out clearly should help you in getting a fair idea of how useful it is to you.