IT Resources (Outsource or Insource) Essay Example | Topics and Well Written Essays - 750 words

IT Resources (Outsource or Insource) - Essay Example Outsourcing and Insourcing have merits and demerits as far as an IT organization is concerned. This paper briefly compares the merits and demerits of outsourcing and insourcing. Outsourcing helps IT companies to exploit the cheap and efficient labour market of the foreign countries. For example, India is a country in which lot of IT professionals are searching for jobs whereas America is a country which searches for IT professionals. In other words, insourcing would be a costly affair in America compared to outsourcing. The IT job which may cost $ 10000 in America can be completed from India for around $ 5000. In short outsourcing is cost effective compared to insourcing. Tax benefits are another advantage enjoyed by the IT companies as far as outsourcing is concerned. Outsourcing jobs were exempted from heavy taxes since it is completed in another country. Outsourcing increases the capabilities of an IT company as far as their production capacity is concerned. For example, a company cannot take large volume of works or works beyond its capacity if it is strictly adhere to insourcing. On the other hand, there is no limit for an It company for taking orders if it opt for outsourcing. In fact, software developers are the larger segment of an IT organization as far as total employees of an IT organization are concerned. Outsourcing will help an organization to keep only the required staff permanently and there is no need for that organization to keep more production staff even at off seasons. Outsourcing helps the IT companies pay only for the services they receive. In other words, nonproductive costs will be considerably reduced if a company opts for outsourcing. Thus, Operational control is more in insorcing than in outsourcing. For example, an IT company can speed up the production processes if it is going on in the same country whereas it is difficult to speed up the production processes if it is going on in a foreign country. Communication problems may not be there if the production processes are done domestically whereas in outsourcing communication problems between the outsourcer and outsourcee can take place. Increased competitive power is another advantage of outsourcing. â€Å"Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business† (The Advantages and Disadvantages of Outsourcing, 2009). Outsourcing will help an IT organization to undertake jobs beyond their expertise. For example, if a particular software expert is not available with an IT organization, it can opt for outsourcing for getting that job done. Thus the organization can take jobs even beyond the areas of its expertise and thereby it can increase its competitive power. The possibility of exploitation of better technologies is another advantage of outsourcing. It is not necessary that IT functions developed equally in two different countries. For example, African countries are techn ologically weaker countries. It is possible for these countries to access better technologies from other countries with the help of outsourcing. Better managerial control is the major advantage of insourcing over outsourcing. When a job is performed domestically, the managers can ensure that it meets all the requirements. On the other hand the managers will get the taste of the finished product only after the completion of the

Evaluate the classical theistic concept of God with particular Essay

Evaluate the classical theistic concept of God with particular reference to Thomas Aquinas - Essay Example It is no surprise that Classical theistic concepts of God fundamentally propose the existence of God. But how exactly? Aristotle perceived God as the first principle, the unmoved mover, the ‘primary essence’ (Metaphysics 12.8; 1074a36-39). Thomas Aquinas depicts ‘one first immovable Being, a primary cause, necessarily existing, not created; existing the most widely, good, even the best possible; the first ruler through the intellect, and the ultimate end of all things’ (Aquinas 1270, art.III). One can begin here to see the entirety with which classical theists tend to view the extent of the existence of God. It appears primarily elusive, but it seems that this very elusiveness fuels its rigorous withstanding against criticisms. But can one capture a more specific concept of omnipotence, of the deeper concept of the existence of God? Omnipotence, being the central concept of God’s existence, requires a more thorough definition in order to evaluate its resilience (or failing) against alternative theories. While one recognises that the task at hand is not to merely describe how Aquinas depicts the existence of God, and which arguments he refers to in order to strengthen his theory, it is also valuable in understanding further his theory. For, in order to criticise a theory, one must attempt to understand, and thus analyse it in all of its splendour. One cannot deny that Aquinas does indeed adopt an interesting stance; he expresses what God is not, and in doing so, provides a beautifully crafted set of attributes, of which God is. Concerning his main work on the issue, Summa Theologica, one grasps the strength with which he approaches and then deals with the difficult issue of plausibly testifying to the existence of God. But by predicting criticisms and answering them thus, he not only testifies to the existence of God, but builds a fortress of reason around it, preventing immediate weakening attacks from critics. Omnipotence is maximal

A review of Risk Assessment Methodologies Essay

A review of Risk Assessment Methodologies - Essay Example Furthermore, a risk-management process will help you prioritize these issues should you lack the resources necessary to address them all immediately. 1. Establish the risk assessment team. The team is formed to collect, analyze and report the assessments to the management. It is important that all aspects of the activity work flow be represented on the team, including human resources, administrative processes, automated systems, and physical security. The reason is to plan things before hand so that it becomes easy to go by. The team members on the other hand will have to attend and participate in the meetings, they will have to take the responsibility of achieving goals and objectives. The team members will also have to work hard for effective teamwork and communications, share responsibility for all team decisions and share knowledge and expertise with the team. The team members would themselves have to provide leadership where appropriate and last but not the least, will have to participate in training sessions where required. 2. Set the scope of the project. ... should identify at the outset the objective of the assessment project, department, or functional area to be assessed, the responsibilities of the members of the team, the personnel to be interviewed, the standards to be used, documentation to be reviewed, and operations to be observed. When the scope of a project is discussed, the output is in terms of time and cost. Scope is important because experience team members would know how changes in scope cause an issue. As the things proceed scopes do change, as the team members are not aware of the actual outcomes of things. 3. Identify assets covered by the assessment. Assets may include, but are not limited to, personnel, hardware, software, data (including classification of sensitivity and criticality), facilities, and current controls that safeguard those assets. It is key to identify all assets associated with the assessment project determined in the scope. 4. Categorize potential losses. Identify the losses that could result from any type of damage to an asset. Losses may result from physical damage, denial of service, modification, unauthorized access, or disclosure. Losses may be intangible, such as the loss of the organizations' credibility. It is only after knowing these losses can the team think of threats that may occur. More than one individual gathers the potential loss or anything concerning this. Everyone can give his or her own comments. The more different possibilities are taken out, the more prepared a team becomes incase of an event. 5. Identify threats and vulnerabilities. A threat is an event, process, activity, or action that exploits a vulnerability to attack an asset. Include natural threats, accidental threats, human accidental threats, and human malicious threats. These could include power

Coca Cola and Pepsi Profitability Analysis Essay Example for Free

Coca Cola and Pepsi Profitability Analysis Essay Gross profit margin(2013) = 100 Ãâ€" 28,433/46,854 = 60.68% Gross profit margin(2012) = 100 x 28,964/ 48,017=60.32% Gross profit margin(2011) = 100 x 28,326 = 60.86% Source: PepsiCo Inc. Annual Reports Gross profit margin (2013) = 100 x 35,172/66,415 = 52.96% Gross profit margin (2012) = 100 x 34,201/65,492 = 52.22% Gross profit margin (2011) = 100 x 34,911/66,504 = 52.49% Gross profit margin is a resource for paying extra expenses and future cutbacks. Coca-Cola Co. gross profit margin declined from 2011 to 2012 but then inclined from 2012 to 2013. However, it did not reach the level of 2011. PepsiCo Inc.s gross profit margin, on the other hand, decreased from 2011 to 2012 however it improved from 2012 to 2013 go over 2011’s level. Comparing the two companies, Coca-Cola Co. has a higher gross profit margin which shows superior fraction of revenue existing to coat operating and other costs. Net Profit Margin (USD $ in Millions) Coca-Cola Co. 2013 2012 2011 Net Income Before Minority Share of Earnings, Equity Income, and Nonrecurring items 8,584 9,019 8,572 Net Sales 46,854 48,017 46,542 Net Profit Margin 18.32 % 18.78 % 18.42 % Source: Coca-Cola Co. Annual Reports Net Profit Margin (2013) = 100 x 8,584/ 46,854 = 18.32% Net Profit Margin (2012) = 100 x 9,019/48,017 = 18.78% Net Profit Margin (2011) = 100 x 8,572/46,542 = 18.42% PepsiCo 2013 2012 2011 Net Income Before Minority Share of Earnings, Equity Income, and Nonrecurring Items 6,740 6,178 6,443 Net Sales 66,415 65,492 66,504 Net profit margin 10.15 % 9.43 % 9.69 % Source: PepsiCo Inc. Annual Reports Net Profit Margin(2013) = 100 x 6,740/66,415 = 10.15% Net Profit Margin(2012) = 100 x 6,178/65,492 = 9.43% Net Profit Margin(2011) = 100 x 6,443/66,504 = 9.690% Net profit margin is an indicator of profitability, computed as net income divided by revenue. It measures how much out of every dollar of sales a company actually keeps in earnings.(Wintner Tardif, 2006, p349)Coca-Cola Co. net profit margin improved as of 2011 to 2012 although decreased drastically starting 2012 to 2013.PepsiCo Inc. net profit margin go down beginning of year 2011 to year 2012 but after that recovered from 2012 to 2013 going beyond the level of 2011. The figures above indicate that Coca-Cola Co. has a elevated profit margin compare to PepsiCo Inc., which indicates more cost-effective corporation which better control its costs compared to Coca-Cola Inc. Total Asset Turnover (USD $ in Millions) Source: Coca-Cola Co. Annual Reports Total assets turnover(2013) = 46854/90055 = 0.52 Total assets turnover(2012) = 48017/86174 = 0.56 Total assets turnover(2011) = 46542/79974 = 0.58 PepsiCo Inc. 2013 2012 Net revenue 66415 65492 Total assets 77478 74638 Total assets turnover 0.85 0.87 Source: PepsiCo Inc. Annual Reports Total assets turnover (2013) = 66415/77478 = 0.85 Total assets turnover (2012) = 65492/74638 = 0.87 Coca-Cola Co.s net profit margin enhanced from 2011 to 2012 nevertheless go  down considerably as of 2012 toward 2013. PepsiCo Inc.s net profit margin, on the other hand, worsens since 2011 to year 2012 but raised the following year exceeding the level of 2011. The figures above indicate that PepsiCo Inc. has a higher Total Assets Turnover comparing to Coca-Cola Co. which shows that PepsiCo turns its assets faster into sales. Asset Turnover is connected to Return on Assets (ROA) through Du Pont formula. DuPont Return on Assets (ROA) (USD $ in Millions) Coca-Cola Co. 2013 2012 2011 Net Profit Margin 18.32% 18.78% 18.42% Asset Turnover 0.52 0.56 0.58 Return on Assets(ROA) 9.52 10.51 10.68 Source: Coca-Cola Co. Annual Reports ROA(2013) = 18.32% x 0.52 = 9.52 ROA(2012) = 18.78% x 0.55 = 10.51 ROA(2011) = 18.42% x 0.58 = 10.68 PepsiCo Inc. 2013 2012 Net Profit Margin 10.15% 9.43% Asset Turnover 0.85 0.87 Return on Assets (ROA) 8.62 8.20 Source: PepsiCo Inc. Annual Reports ROA(2013) = 10.15% x 0.85 = 8.62 ROA(2012) = 9.43% x 0.87 = 8.20 The ROA numbers provides investors with an overview of how efficiently the business is converting the investment into net income. (Gibson, 2009) Coca-Cola Co. ROA decreased starting of 2011 to 2012 as well as as of 2012 towards 2013. PepsiCo Inc. ROA, on the other hand, declined from year 2011 to 2012’s level however later inclined since 2012 towards 2013, however it did not reach the level of 201l. Nevertheless, Coca-Cola has a higher the ROA numbers compare to PepsiCo. which shows that the business earns more capital on a smaller amount of investment. DuPont Return on Equity(ROE) (USD $ in Millions) Coca-Cola Co. 2013 2012 2011 Net Income 8,584 9,019 8,584 Total Shareholder Equity 33,173 32,790 31,635 Return on Equity (ROE) 25.87% 27.50% 27.13% Source: Coca-Cola Co. Annual Reports ROE(2013) =100 x 8,584/33,173 = 25.87% ROE(2012) = 100 x 9,019/32,790 = 27.50% ROE(2011) = 100 x 8,584/31,635 = 27.13% PepsiCo Inc. 2013 2012 2011 Net Income 6,740 6,178 6,443 Total Shareholder Equity 24,279 22,294 20,588 Return on Equity(ROE) 27.76 % 27.71 % 31.29 % Source: PepsiCo Inc. Annual Reports ROE (2013) = 100 x 6,740/24,279 = 27.76% ROE(2012) = 100x 6,178/ 22,294 = 27.71% ROE(2011) = 100 x 6,443/20,588 = 31.29% Return on Equity (ROE) determines how sound a company makes use of reinvested earnings to make more earnings. ROE is utilized as a common hint of the business effectiveness. In other words, what amount of revenue the business is capable to generate with the resources provided by its stockholders. (Gibson,2009) Coca-Cola Co.s ROE increased as of 2011 towards 2012 except that later declined considerably from 2012 to 2013.PepsiCo Inc.s ROE, on the other hand, decreased starting year 2011 to 2012 but then slightly rise  up from 2012 to 2013. Based on the numbers above, we can conclude that PepsiCo Inc. has a competitive advantage over Coca-Cola Co. because it has a higher ROE, which means that is growing profits without pouring new capitals into business. References Wintner, S., Tardif, M. (2006)Financial Management for Design Professionals: The Path to Profitability. MA: Kaplan AEC Education. Retrived from: http://finance.yahoo.com/news/abercrombie-fitch-no-profits-just-225850116.html?session-id=7b3af266ae1a387aaf0cfe6dca24ba10 Gibson, C. (2009)Financial Reporting Analysis. Using Financial Accounting Information (11the Ed) MA: South-Western Cengage Learning, Mason,OH

Concepts of Belonging in Urban Development

Concepts of Belonging in Urban Development In this contemporary era where everything changes rapidly, people no longer relate themselves to just one discipline, but are cross-disciplinary. In the process of transition, the exchange of culture as well as information, the experience that one has and the knowledge that one gains is almost an instant experience. Often these instant experience and knowledge that one absorbs are incomplete due to the cutting short of information and over-emphasizing on the main point which subsequently result in a losing gap in between the original information to what we received. One might feel a sense of lost in time, history, memories and the lost in a sense of attachment, consistency, thus question our belonging; where is our home? How do we define belonging then? Can our belonging be fixed? In chapter 1 of the paper, I will discuss home as a metaphor of belonging; an anchor point. However, in this contemporary era, to name a place as the home that we belong can be superficial as the place that we belong are often not fixed. What give us the sense of belonging then? To discuss about belonging, unavoidably we associate it to a space. This Dissertation paper discusses two kinds of space the tangible space and the intangible space. Often, Space as an abstract notion seems boundless; we think of space as just air between one object and the other.[1] Space speaks more than just air molecules. Space with boundaries can be seen as a form or a thing. Space as an idea can be regarding individual perceptions which can be both conceptual and physical. These individual perceptions can be seen as the collective memory through ones experience. How do spaces give us a sense of belonging if our sense of space are often relate to the sense of place which are often unfixed. Despite of the uncertainty of our sense of place, what might give us a sense of continuity is probably the memory that were collected in the space which thus give us a sense of belonging. Memories exists in the past, present and future which thus creating a sense of continuity in a human existence timeline. Moving on from individual home to a nation, Chapter 2 addresses the lost of memory in city due to the urban development in Singapore. It will look into a brief history of Singapore Urban housing and city development, the significant of building as a time-marker that give us the sense of belonging and how the constant construction and destruction of building and places resulted in the lost of fixed identity. Is the lost of memory a lost of our belonging and identity or has it build a unique belonging and identity for Singaporean? As often been said, our belonging and identity are often been cultivate through arts and culture. In that sense, our local museum thus holds an important role in cultivating, preserving and passing on histories and cultural values to the masses. As much as we perceive the knowledge and history in the museum as a fact passing through from generation to generation, can the museum display and exhibition not be political constructed? Hence, even though Singapore government tried to preserve our â€Å"local identity† if we have ever or belonging through the form of arts and culture, the belonging that we perceive is still a constructed identity. Hence, a paradox and it seems like our identity is always in a confusion. Where do we belong? Chapter 1:- Belonging; Memory Belonging has been expounded as a possession, a member of a group such as a family, a school and a nation, ultimately belonging is about the relation of human being. Through the relation with peoples group, spaces and structure, human being thus creates their own identity. The sense of belonging and identity will also suggest a sense of security and stability. Hence, this sense of belonging becomes crucial in human life. Often, the sense of belonging has its relation associated with rooted-ness a sense of attachment towards a space; an attachment to our home. ‘For our house is our corner of the world. As has often been said, it is our first universe, a real cosmos in every sense of the world†¦[2] Author Gaston Bachelard explained in his book The Poetics of Space that the notion of home is a space where one is born and lives permanently. Home has often been idealized as an utopia space where there is a sense of continuity, security and perfection. Permanence is an important element in the idea of home as it suggests rooted-ness and a sense of immortality. In Space and Place the perspective of experience, Yi-Fu Tuan argued that home is the centre of the world; home is the focal point of a cosmic structure[3]. Both author explained home as the centre of ones world and it makes sense to say that our belonging is very much about our attachment to our roots; our home. The word centre will means origin which carries the meaning of beginning which is what Bachelard mentioned as the first universe; the centre of ones world. When and how do one has a sense of home then? Often the notion of home is blurred with the notion of house. ‘Here space is everything, for time ceases to quicken memory Memories are motionless, and the more securely they are fixed in space, the sounder they are.[4] Home as an abstract notion can be boundless. In the quotes above, Bachelard explained that what is being housed in the space (home) is the memories that has been created in the space. Home is a space where we root ourselves at and the most important element that gives us that sense of rooted-ness or attachment to a home is memory. Memory would also mean knowledge, history and memories; memory is an attempt to remember, recall or to record events, objects or even emotion. It is through these collective memories of a space that give us that sense of attachment and a kind of certainty toward oneself. As such, I would draw a boundaries that home is an emotional-mental state of belonging. Memory exists in the past, present and future which create a sense of continuity or immortality. Memory thus gives us a sense of security and certainty. As what Yi-Fu Tuan had mentioned in his writing, the value of a place is the experience that one created in that space. It is through the intimate human relationship and the familiarity of a space that one created a sense of attachment towards a space. Belonging, like memories should be fixed so as to attain a sense of stability. Memory is an abstract notion that requires to be objectified in order to be seen or understand and house plays the role in objectifying these abstract memories, it is a place that helps giving the meaning and value to home. House on the other hand, is a shelter that one goes to when sick, where intimate activities happen; a place or location that helps us to relate our past history and event. House in this case is a physical state of belonging. In a lot of ways, objects can be seen as spaces with boundaries and is malleable.[5] Objects in a house are like footages that give a trace and history of the inhabitant that once presence. The following images are a series of photograph by Singapore photographer, Ho Hui May. This series of artwork entitled Domestic Dystopia, 2007 presents a purview interior of an abandon house. [6] Domestic Dystopia Ho Hui May Photography series, 2007 In this series of photograph, Ho presented abandon objects of the domestic space after the inhabitants had move on. Those abandon objects suggests the lifestyle or characteristic of the inhabitants, almost like a 3-dimentional narrative of the past. For example the forest wall paper at the bottom right side represents 2 layers of nature. One layer of the wall paper can be seen as a natural ongoing process of ageing and decaying due to elements such as sunlight, water, oxygen and other natural substances and is peeling, fading and tearing off from the wall. Another layer of the wall paper presents an image of the forest which can also be read as the owners desire to have a piece of nature while living in a city. Hence, objects such as the wall paper gives clues of the life of the inhabitants. Objects inhabit space, and when attention is directed to an object, it is also directed to the space it occupies.[7] The function of the house thus is also a place to keep and collect object. The se functions can be seen as the collection and re-collection of memories. Objects in our life thus give us a sense of home and belonging. However, objects are originally neutral and meaningless. It is through the experience and relation of objects and people in that space, we insert our emotion and meaning to it and hence creating sentimental values to the object. Therefore, the question now is to what extend are those objects valuable when the meaning of it are constructed? Our house is also an object that is physically constructed and can be politically constructed as well. In that sense, how can we have a true sense of home and belonging if the memory and experience that we perceive are constructed? In Hos series of photograph; objects in the image are discarded. House in this case is also an object that has been discarded. If the objects in life are significant in provoking or capturing memories, why do people still abandon objects? Choosing objects to be abandoned and objects to be brought along are essential in the cities. Chapter 2: Urban development: abandon and constructive memory The city is a place of large settlement; a community of houses and buildings. Walking from one end to the other end, we can easily recognize the features in the cities. There is a sense of familiarity in the city that we lived in. Familiarity is to recognize, to remember or to recall things. It is through that sense of familiarity; the personal memories and the cultural history that we collected in the city that gives us a sense of belonging. The city that we lived in and return to eventually thus is our hometown; the centre of our world. Our hometown is a place where we rooted ourselves in. Unlike home which is built upon the individual experiences and personal memories, the city herself has an image to portray, the city that we lived in is being shape politically and economically so as to achieve economic growth and progression especially that of urban cities. In this chapter, I will like to take Singapore urban development as a case study and local artists responses to the issue of urban development and housing to discuss about the lost of memories and thus the lost of a fixed belonging to the Singaporean. Tracing back from the early days of Singapore Independency till today, she had boosted rapidly into a developed country. In the early days, the fundamental objective of Singapore housing development is to provide a shelter for every citizen. With the problem of housing shortage in the beginning of Singapore Independency, the Housing and Development Board (HDB) was established to provide the citizen with adequate standard of living, the local architect also strike for freedom to promote culture to the mass through national building.[8] With the increase of standard of living and income of the citizen, they no longer just desire for basic amenities but desire for a higher standard of living which result in a constant construction and destruction of buildings in Singapore. Shifting and relocating thus become common. In a lot of ways, our sense of place or location gives us the sense of identity, belonging and pride to the city that we lived in. Building of different time thus stands an important role in marking history of a city; they are almost like artefacts that connect us to our past; a reminder of historical event that once took place, the political and personal experience that once present. Two of the remarkable buildings in Singapore is the City Hall and Old Supreme court. over the years, Singaporean had witnessed many political events such as the japanese surrender, the national day and many more and the building together with the old Supreme court is currently preserved as a Singapore heritage building. Though building is being preserved but the function is not there anymore. (explain)It becomes a trademark of history, an attraction for tourist but no longer function as how it should be. What is the point of preserving when the function is no longer there? Singapore is a country that has been lost and found, found and lost again. (Quoted from Ho Tzu yen film) Many of our local artists have responded to the rapid urban transition with their art. One of our local film/ documentaries maker Tan Pin Pin has responded these issues in her documentaries such as the Invisible City and Moving House. Moving house speaks about the lost of tradition in the midst of Singapore land development. The documentary focuses on the Chews family who went to pay a visit to their parent at their tomb. That visit to the tomb was the last as they would have to dig out the bodies as the government had decided to develop that piece of land. â€Å"We should have a permanent cemetery so that the tradition can continuedtradition had die off.† quoted from Mr Chew. As of a tradition, it is necessary for dead bodies to be buried underground as a respect for the death. Each year during special occasion such as the Qing Ming festival, the Chew family will visit their parents tomb, almost like a picnic as Mr Chew mentioned. The bones of their parent were then cremate. What is lost is not just the lost of tradition but also the joy of gathering that they used to have. Singapore land development can be endless. Reason being that more public housing is required to cover population needs. There is no limit to our desire for space. After development is re-development, moving is re-moving whether or not it is voluntary, is no longer important. Moving house had highlighted our endless desire for space and better standard of living and in the mean time, highlighting our yearns for the past to be continue, a contradicting feeling in the midst of progressing into a world class society. Hence, the transforming of cityscape had also result in a lost of history. It somehow prompts us the question that in order to progress, do we have to discard the past? Are we ready to do that? Is it necessary to abandon/ disregards our past to pursue a ‘better future? How much can we give up actually? Over the years, we slowly identify the issue of urban development through the local artwork. Many lost memories were represented again as a form of art. Not having a fixed memory and belonging had affected artist in many way. Many had approach it in a sentimental manner, sometime in quite a negative way. Many of them chose to have our local HDB flats or construction sites as their subject matter. Interesting, the following photographer that I am going to introduce does not took the usual gigantic boxes as his subject matter instead, ‘junk that he collected as his subject. Chua Chye Tecks wonderland, 2007 is a series of photograph of junk, unwanted, abandon objects that he collected, to date this series consists of 500 pieces of images. Through these images, there are two main opponents that we have to take notes on; the idea of collecting and the idea of abandon in relation to the city. The idea of collecting plays an important part in this work as a way of indicating our social stature, professional affiliation, value system and personal taste. Another thing to consider is the objects being abandon; the ownership of physical object that hints our loftiest longings and deepest anxieties. With each purchase, we throw something away; by existing, we throw; because we move on, we throw. Also to note is that Chua does not keep any of this object as well. With each that he had collect and photograph, he abandoned it as well. Lastly, we consider the methods of presenting it first, objects are placed individually on a clean turquoise background, almost like lifting the value of the junk, giving it a new life. Every object or set of objects, here was no less exquisitely cared for and to read the image as objects existing inside a camera frame almost as preserved memories. As much as we are reluctant to give up on what is valuable to us, we still ought to do so in order to progress†¦ is this voice of the citizen or the voice of government? Chuas work is interesting as it reflects on how much we had abandon in the process of urbanization and to collect it again is to recollect memory, thus memory being lost and found. As compared to Pin Pins film, it reflects how one has to give up in the the process of urbanization despite of ones resistant to change. In the process of change, one long for a sense of permanency, a fixed belonging. What image is Singapore trying to portray at the end of the day when its limited history are slowly faded away over the years? Whether or not Singapore has a rich history and culture are not important as compared to economic growth. This prompt the question of whether the progression and development into a better yet ever-changing rapid lifestyle changes our view of what is to be casted off and what is to be collected in the process? Has Singapore come to realize the lost of memory in the city To question about what has been lost, what do we discard in the process of progression, what we yearn and what we desire to retain goes down to the question of choice and it was clear that we had chosen for economic growth than having the history that give us a fixed belonging. These choices might not be make by the citizen but the government. The government has probably realise the crucial needs to cultivate our national identity; our belonging. As much as our short history had been constantly being buried underneath with the rapid urban development, Singapore in the mean time is trying to construct identity. As often been said, where we belong are often cultivate through the arts and culture that we belong to. Thus, one essential ways to input these lost of history or memory is through local art. What is the role of arts and culture in cultivating our national identity then? Chapter 3: The paradox What is singapore culture? Multi- culture. Mixture of east and west. Rojak. Anything and everything becomes our culture. The Renaissance city plan[9] is a proposal that the government come out every five year and the recent plan will be to go all out to developed the image of an global art city. With this proposal, lots of funding were put into art spaces, schools and institution such as LaSalle college of the Arts, Nanyang Academy of Fine Arts(NAFA), the Singapore Arts Museum(SAM), Asian Civilian Museum(ACM), the National history museum as well as the National art gallery that is opening this year. The aims of this proposal is nevertheless to be an global art city, however what is contradicting is that as much as Singapore aims to go global, it still want to retain the sense of local through event such as Singapore art show. So what is Singapore aiming at the end of the day? She wants an image of everything and anything. She is trying to give encouragement for art yet maintaining tight restrictions on arts and culture. Through inclusion of artwork in public spaces and the incorporation of tasteful design and landscaping in the neighbourhood, we can widen peoples exposure to and appreciation of arts and its relevance in everyday life. (esplanade for cultural activities, government funding for art institution BUT still maintaining tight restrictions on art and cultural work) (wanting to go global and in the mean time wanting to stay localwhat is local?) However, can we really perceive the memory that we collected in the museum as our belonging when the exhibition can be politically constructed or frame? In that sense, what we perceive as our belonging; our home is constructed. Hence, how the city is shaped somehow shape that we are as an individual being. Lynn C. Robertson, Space, objects, minds, and brains (New York, N.Y. : Psychology Press, 2004), 1. Gaston Bachelard, The poetics of space, trans. Maria Jolas (Boston, Mass. : Beacon Press, 1994), 4. Yi fu tuan 149 Ibid, 9. Robertson, 3. Domestic Dystopia provides an insight into six interiors of dilapidated houses in Singapore. Each photograph reveals the traces of footsteps and impressions left behind by previous occupants, encapsulating these moments in their personal histories in a snapshot of time. Most of these houses have been abandoned and are left in a state of disrepair. By becoming a translator, Ho takes on the task of translating the deep sense of loss and nostalgia she feels when she is inside these houses onto a series of photographs. Picture credit: Curating lab: 100 remix workshop organised by the National University of Singapore museum partnership with National Art Council of Singapore Robertson, From building dream- tan pin pin explain

Analysis of Momentum in Indian Stock Markets

Analysis of Momentum in Indian Stock Markets LITERATURE REVIEW The first study on momentum based investment strategy was documented way back in 1967. Levi (1967) claims the success of trading strategy based on buying stock with current price significantly higher than the average of last 27 weeks generate significant positive abnormal returns. However Jensen Bennington (1970) argues that the trading rule based on relative strength proposed by Levi was the one out of sixty eight trading strategies he tested and while tested for out of the sample test period it did not outperformed the buy hold strategy and hence was attributable to selection bias. Test of contrarian investment strategies was stealing the show fund managers were found busy picking stocks based on relative strength in US market. Majority of mutual funds examined by Grinblatt Titman (1989) note the tendency of fund managers to buy the stocks that have seen price increase in last quarter. Apart from that Value Line rankings of mutual funds that were largely based on relative strength also enjoyed high predictive power. The success of mutual funds investing on the basis of relative strength and high predictive power of value line rankings (Copeland Myres (1982)) provide some evidence of success of investment strategies based on relative strength. The academic literature suggests contrarian returns generate abnormal returns whereas value line rankings and mutual funds generating abnormal returns based on relative strength strategy are in stark contrast of each other. A seminal study by Jegadeesh Titman (1993) solves the puzzle by providing an explanation based on different of investment horizons considered by mutual funds using momentum strategies and contrarian strategies advocated by academic literature in late eighties and early nineties. Jegadeesh and Titman (1993) using US market data from 1965-1989 found not only the evidence of long term success of contrarian investment strategy but also found that momentum strategies generate significant positive returns in medium run over 3-12-month holding periods. They documented the reversal of momentum after about nine months. Their study suggests that in short run for about 3-12 months holding period momentum strategy generate significantly positive returns while in long run for the holding period of 1-3 years contrarian strategy generates significantly positive returns. Conrad and Kaul (1993) also find evidence from US market that the contrarian strategy is profitable for short-term (weekly, monthly) and long-term (2-5 years, or longer) intervals, while the momentum strategy is profitable for medium-term (3-12-month). As mentioned earlier the results of Jegadeesh and Titman (1993) had thrown a new light on seminal study of De Bondt Thaler (1985, 1987) and found evidence of short term momentum precedes long term reversal. Although all the results provided strong evidence of market inefficiency, different studies documented different explanations for such returns. Fama French (1996) presents result based on multifactor CAPM using size and MV/BV ratio to explain various anomalies in asset prices including momentum as well as contrarian returns and claim that market efficiency is intact. However the study failed to explain the presence of short term momentum using the multifactor model and hence short term momentum anomaly remains unexplained. Several behavioural explanations were found and presented to jointly explain the short-run cross-sectional momentum in stock returns documented by Jegadeesh and Titman (1993) and the long-run cross-sectional reversal in stock returns documented by DeBondt and Thaler (1985). Daniel, Hirshleifer, and Subrahmanyam (1998) (DHS hereafter) assume that investors are overconfident about their private information and overreact to it. If these investors also have a self-attribution bias, then investors attribute success to their own skills more than they should and attribute failures to external noise more than they should. The consequence of this behaviour is that investors overconfidence increases following the arrival of confirming news. The increase in overconfidence furthers the initial overreaction and generates return momentum. The overreaction in prices will eventually be corrected in the long-run as investors observe future news and realize their errors. Hence, increased overconfidenc e results in short-run momentum and long-run reversal. As against the above cited behavioral explanation to short term momentum and long term reversal, some scholars argue that the returns from these strategies are just compensation for taking additional risk or may be the product of the data mining. Most noteworthy of all Conard and Kaul (1998) argue that the profitability of momentum strategies may be the result of data-mining and momentum portfolio shows positive returns in any post ranking period is true irrespective of the length of test period. Thus Conard and Kaul (1998) suggest that there is no case of long term reversal. This is diagonally opposite to what the behavioral models suggests where after short term momentum prices will reverse to more fundamental levels. In fact, the criticism of Conard and Kaul (1998) led to another study by Jegadeesh and Titman (2001) where they used out of the sample test by using data from 1991 to 1998 an overlapping test period compared to their 1993 study where they used data form 1965-89. Their study also eliminated small firms from the study to check whether the earlier momentum returns were actually dominated by small, high-risk and illiquid stock or otherwise. Though they focus on short term momentum in their study choosing two year holding period post formation but they also tested post holding period returns from the period of two to five years after formation. They present some very interesting results. The momentum profits of Jegadeesh and Titman (1993) continued in 2001 also with almost same magnitude for same holding period that actually has proved that the earlier momentum profits were not the result of data-mining. It also suggests that unlike small firm effect where after the published research on superior returns on small firms compared to their large counterparts, superior returns on small firms disappeared in subsequent studies using data from the periods after the small firm effect from earlier studies got published, that means market has learnt quickly and hence such superior returns disappeared however momentum returns were still present with the same magnitude in 2001 as they were in 1993 study suggest that momentum returns are not just the temporary anomaly but it may have to do with some systemic cognitive bias which sustains for a long time. It also proves that momentum profit is just not the result of some small, illiquid and risky stocks and most noteworthy the reversal found in their post holding period cumulative returns, which render support to the explanations of behavioral theorists and provides evidence against the Conard and Kaul hypothesis. As far as studies in Asian markets are concerned Chang (1995) found abnormal profits of contrarian strategies in the Japanese markets. Chui (2000) found significant positive abnormal returns with contrarian investment strategy in Japanese and Korean markets. Hameed Ting (2000) found evidence of market overreaction hypothesis (contrarian strategy) in Malaysia. Kang (2002) found significant short term positive returns with contrarian strategy in Chinese markets. On the other end, Hameed Kusandi (2002) found no evidence of contrarian profits in six Pacific Basin markets. While Rouwenhorst (1998) and Griffin Martin (2005) found existence of momentum in many non-US countries, the quantum of momentum returns in non-US countries was small, and in the case of Asia, insignificant. For example, Griffin (2005) estimates average monthly returns of 0.78%, 0.77% and 0.40% for the Americas (excluding the US), Europe and Asia respectively. End of the Beginning or Beginning of the End†¦ The big bull has fallen down, investors have lost their vision, and experts knowledge went futile with the downturn of the global economies. When the markets were on peak, the funds across the world have flooded in the global economies. Policy makers had lot of confidence on the market, that it will help the economy to grow at faster pace. The market excelled 21000 points which was more ahead then the growth of the economy of India. But that does not seem true for the world economies, as the crisis had hit badly in USA and other parts of world which insisted FIIs and other investors to withdraw their money and markets crashed, went to 7000 points, where investor lost everything and policies could not work to take them up to the level. What was the reason of the crash? What will be the result of the market? Is this the end of the beginning or beginning of the end? Indian market is the strong base of determining the financial system of the country. Majority of the financial decisions are dependent on the stock market other financial market. Indian stock market serves a link to banking and other financial policies which provides impetus to the industry. Indian stock markets heavily based on the sentiments of the clients (market players) also of the market makers. The crash or boom (in a period/ year) determines the structure of the Indian capital system. The boom in the market (year till 2008) has brought many changes in the performance of mutual funds, insurance (ULIPS), investment products which led the country into the inflow of the money supply in the market. Till 2007-08 the market was running at its best, touched the heights, but the global crash in the market became a typhoon took away major players organizations into the quick sand of the recession. The insights from the market were not showing positive sign in anyways, so whether this was a new platform or just a time (economic) cycle. Prologue to decline†¦ Earth provides enough to satisfy mans need, but not greed. -M.K.Gandhi The market crash started with the fall of big financial organizations in the USA in the world like Lehman Brothers, AIG, Freddie and Fannie and many more. The failures were primarily due to exposure into Subprime loans Credit default swaps issued to insure these loans the issuers devolved resulted into bank failures steep reduction in the price of equities worldwide. The economic crisis led many world markets to suspend the trade due to fall in price. On October 8, 2008 Indonesian stock market halted trading, after a 10 % drop in one day. The crash of 2008 was around 21% which was little less than 1987 (Times of London). Beginning of October month was Black in the world market. The Dow Jones volumes were low and the industrial average fell over 1874 points which was worst weekly decline. The Icelandic stock market was into pitiable situation where the markets had been suspended for 3 days i.e. 9, 10 13 October. On October 24 many of the worlds stock market experienced the worst decline, with around 10% drop in the indices. Source: http://en.wikipedia.org/wiki/File:OMX_Iceland_15_SEP-OCT_2008.png The above graph shows the steep and the worst decline a market could ever witness. The Iceland stock market crashed up to unpredictable level. The trading had been suspended for 3 days because of the crash in the market. This situation was visible in all global stock markets, because of financial crisis in USA. Hence, the worst was yet to be experienced by the global markets market players. The Indian stock markets were also badly hit the confidence of people was shattered. The markets were not showing the positive sign in any of the context people had no clue about the next jump or next level of the market. Market experts were expecting the markets will be into recuperation at the earliest, but things were not going the way it had been desired. Source: Hindubusinessline.com Indian market which has shown strong performance till 2007, but from January it plummeted more than 3000 points on all the stock prices by October 2008, it had touched the 7000 (BSE) line. The continuous unpredictable scenarios in the stock market led many investors and institutional investors to withdraw their money because of negative performance of the markets. The above shown graph is depicting the dream turned into nightmare for global domestic investors. The Beehive capitalism†¦ Everything that goes up without base falls steeply with great force. The same situation has happened with the world economies. The supreme economy of the world has become the devil for the small economies, leading major big companies to file for the bankruptcy. The global meltdown is the result of Financial Hybrids Innovations, which has been actively traded all across the world markets. The investment bankers, banks, financial institutions were actively relied on these new and innovative models, which has yet to gain the acceptance across the world. The main accused element for collapse is â€Å"Credit crisis†, in which the US banks got the regulations to lend money to the people having no sufficient background to get the loans. These kind of loans were termed as NINJA loans (NO INCOME, NO JOBS, NO ASSETS), given in abundance by the US banks. Emerging economies like India, China and other big economies were initially considered to be the places which will remain unaffected from the distortion of crisis. But despite of the strong fundamentals Indian economy dipped into the crisis. The stock market had lost more than 50% of its value (source: economic times), which shattered the hopes of the Indians. There was continuous monitoring by the Central Bank (Reserve Bank of India) on the market trend. The tornado of crisis had destroyed most of the stock markets, banks and financial institutions after soaring to the new heights of investment. The below mentioned graph depicts the movement of BSE Sensex SP CNX Nifty Source: SEBI Bulletin November 2008. BSE Sensex closed at 9788 on October 31, 2008 as against 12680 on September 30, 2008, a fall of 3072 points (almost 24%).The month of October 2008 had been the most volatile month, where Sensex recorded a high of 13055.67 on October 1, 2008 low of 8509.56 on October 27. Nifty closed 2886 on October 31 against 3921 against 30 September 2008. By the end of a month Nifty registered the fall of 1035 points (almost 27%). The market had shown unpredictability of the base stability level, dissuading more and more investors to take exit from the market. The Financial crisis: A Sub-prime loan is a type of mortgage loan made to borrowers who have at least one of the following characteristics: (1) Low credit scores; (2) The inability to post the traditional 20 percent down-payment for a home; and/or (3) The inability to fully document their income. The subprime crisis is not the result of recent financial innovations and developments, but it is the outcome of lax capitalism policies which had been developed by the US government. In the fifties American government passed a legislation to delink the commercial banking investment banking. The legislation stated implied that a commercial bank cannot open an investment bank. In 70s European American economies faced slowdown, due to which these banks were finding difficult to invest their investible surplus. This time the East Asian economies were liberalizing their economies, due to which the capital from western economies started moving to these economies. After the huge influx of capital into these economies, Asian bubble gets burst, forcing the western economies to introduce new financial measures to invest into the markets. These circumstances and the need of new financial avenues led the US European economies to trade into the new financial products, by liberalizing the norms for Commercial Investment Banks. The liberalization in the regulations led to the introduction of the Mortgaged products (a prime cause of crisis). In the late 90s US mortgage lender began offering the mortgage products to would be â€Å"home buyers† who could not qualify for a mortgage loans. Millions of Americans Europeans, who previously could not afford to buy home, were obtaining these mortgages, due to which great Demand of home (boom) took place leading to shoot of real estate prices. The above diagram shows how the base of subprime crisis took place in the global markets. The downfall in the economies is considered to be as the Dominoes Effect. The lax screening of borrowers, large capital accumulation capitalized market structure created a bubble which could not be ceased from getting expand. The whole cycle got mitigated with the introduction of new instruments in the financial markets. The sub prime crisis is about the collapse of the unregulated, $3 trillion over-the-counter market for complex structured assets, some of which happen to contain sub prime residential mortgages. The semiannual global financial stability report by IMF said that declining US housing prices and rising delinquencies on the residential mortgage market could lead to losses of $565 billion. When combining these factors with other market factors, it puts potential losses at about $945 billion which is almost 25% of the $24trillion global credit market. Financial innovations were brought into the market to make the products work in the market. The Mortgage products started to conflagrate the US European markets, where such loans started becoming the pool of assets (Risky) and been traded in the market. Hence, due to this many other factors got the impetus ultimately resulted into the uncontrollable bubble of mortgage, which gets burst and deepened the world economies into the recession. The subprime crisis has affected the global economies resulting into the fall of big financial corporation like Lehman Brothers, Bear sterns, AIG, Freddie Fannie, and many more big organizations of whom one cannot think to get fail. The sizes of the organization (exposure) were in plethora that it was not possible for the US European government to revive these financial institutions. AIG, one of the largest insurance companies (Private) became government undertaking due to the impacts of financial crisis. SUB PRIME OVERVIEW: Source: The India Economic Review 2008. (Dec 08) The whole system works in three stages, Stage First consist of Borrowers lenders; Second stage consists of the creation of SpecialPurpose Vehicle (SPV) with the inclusion of legal intermediaries. The last (third) stage consists of investors those who had invested their money into the riskier assets including the investment banks. In stage first agent enters between borrowers and lenders, accepting the collateral and also factoring the future price rise. The agents accept the loans, who previously could not even qualify for the approval, now getting loans from the banks other lenders. The housing price bubble allowed many borrowers to get loans easily because of the high house prices. The loans were mortgaged on a larger scale by creating the pool of similar group of mortgage assets through Special Purpose Vehicle (SPV) given the risk involved on the pool of assets. In second stage, SPVs were created all the liabilities were transferred into bankruptcy remote securitization trust or SPV. Underwriters were used to issue market the MBS (mortgage backed securities). These securities were divided into different tranches, which were of similar securities. The rating agencies were to give rating to these tranches of securities. The ratings were given to the tranches based on the risk, priority of payment of the funds. Higher ratings were given to those tranches benefiting from the credit enhancements the MBS generates or credit insurance purchased from third party bond insurer. In third stage, Institutional or individual investors such as hedge funds or managers of Collateralized Debt Obligations (CDOs), purchase the securities and then re-securitize the MBS, along with other assets, into a CDO. The Commercial Papers (CP) generated in the initial years was all sold and there was demand for more. Consequently the SPVs started producing more CPs or MBS. The sale of the same only meant that the SPVs were flush with funds. These funds were to be invested somewhere so, the agents were pressed to bring in more borrowers. The lending norms were further diluted to accommodate lesser and lesser deserving borrowers in order to deploy the huge funds available. The consequent spiral that got generated only led to the continued dilution of the Capital Adequacy and Prudence norms. The system went burst once the housing prices turned negative turning the very foundation of subprime lending upside down. The turmoil of subprime has been expected of more than $ 3 trillion, which is too big for any country to even imagine of recuperating. The impact on Indian market was slow but had been proved acute on the stock market due to the constant humongous withdrawal of FIIs loss of confidence in the consumers (investors). Mortgage: Huge pack of cards†¦ The magnanimous crisis which all started with lax policies of US government, provided impetus for the Fed Reserve to implement new structures in the economy. The capitalist policy was looking very attractive to the market players, but the policy was hollow from the fundamentals. It all started with the Alan Greenspans reformative structures models in the financial markets, led to turmoil in the global economies. The US Fed Bank Clinton government in 1999 passed Gramm-Leach-Bliley Act (GLBA) which had abjured the old Glass-Steagall Act which had regulated the Investment Banks, Banks Insurance industries. The new legislation has unregulated the Wall Street Investment Banks and commercial banks. This deregulation has enlarged the gamut of activities in the financial activities of the commercial banks other financial institutions. The deregulation had been further reintroduced by legalizing gambling activities into financial sector, a prohibition that had been in place after 1907 financial crisis. The steps towards deregulation of the US markets had converted the US markets into a big casino. Securities Exchange Commission (SEC) in 2004 took a step towards the deregulation on the financial activities by removing the ceiling on risk that the largest American investment banks could take on Securitized loans. By this time, no one would have thought that the deregulation will result into large speculation create a bubble in the market. Lastly, the Securities and Exchange Commission took the last step toward deregulating financial markets when in the month of July 2007, weeks before the onset of the subprime crisis; it removed the â€Å"uptick† rule for short selling any security. The housing bubble was fed by extraordinarily low interest rates low lending standards (norms) for mortgages. The excessive monetary liquidity short term interest rates fell to 1%, which led to high borrowing of loans from the banks, resulted into the big bubble of mismanagement of financial activities. After the tech bubble burst in 2001 the recession, the Fed (Greenspan) aggressively lowered the Federal funds rate from 6.5 percent to 1 percent in 2004, the lowest since 1958. The lowered interest rates reduced lending standards made the banks to lend the money known as ‘ Predatory Lending to the borrowers who did not have capabilities to qualify for the loans, but with the mortgage lending, excessive loans were provided to these lenders as they (banks) were getting big bonuses for bearing risk on these loans. Non-traditional home loans were advanced to borrowers who had no documented incomes. Some loans were interest only loans with down payments of 5% or less . Some were Adjustable Rate loans (ARMs), with low interest rates for one or two years to be reset later at much higher rates. In 2006 around 25% of American mortgages were subprime and close to 20% were ARMs. Mortgage lenders and Home buyers presumed that home prices were not going to fall on a national basis. THE NEW ALCHEMY OF FINANCE The subprime crisis is the result of new financial products in the market the deregulation of the financial activities for the FIs. The main reason of such lending was the facility with which subprime lenders could sell their risky mortgages upstream to bigger players, investments banks for example, which undertook to buy them, pool them into mortgage bonds and re-channel them into new financial instruments through a process of aggressive securitization. The Structured Investment Vehicles (SIVs) which fall into the large class of derivative products came under various names such as Collateral Debt Obligations (CDOs). They had the characteristics of short term asset based commercial paper that were backed by the underlying income producing mortgage assets downstream and were graded according to a certain risk of default. More than 1 trillion half dollars of these asset backed financial products were sold in all over the world. Another new financial instrument that made matters much worse and led directly to the crisis: the Credit Default Swaps. Due to lack of government regulation, this product has become a weapon of mass destruction. In order to protect against the risk of default on the new asset-backed securities (ABS), some insurance companies but also some investment banks themselves began to issue bilateral â€Å"insurance† contracts against the newly created ABS. These were called Credit Default Swaps (CDS), which were supposed to protect the investment instruments against the default on asset based securities. The issuer of ABS could buy the protection against the default by paying a premium. This was a financial innovation, the so-called â€Å"insurance against default†, that opened the floodgates of money to be invested in the new financial instruments. Indeed, it allowed investors such as pension funds and other institutions which have a fiduciary obligation to buy only high-qualit y securities, to legally buy artificially highly rated (but risky) ABS securities, or to invest in hedge funds which specialized in leverage trading in derivative products. But the problem was that the issuance and use of such financial â€Å"insurance† contracts were not regulated by any government agency, because the word â€Å"insurance† was not used; instead, they were considered as simply a protection against the â€Å"default† of payment on a financial security. And thats where the gambling part enters the picture: only ten percent of CDS are genuine insurance contracts held by investors who really own asset-backed securities (these are covered CDS); 90 percent of them are rather held by speculators who trade CDS, while not owning any asset-backed securities to be protected (these are naked CDS). Economy as Casino: The gamut of gambling that US government Fed has created was even unimaginable, allowed big participation into these new investment instruments. Credit Default Swaps (CDS) can be bought and sold by speculators who are not directly involved in the mortgage business. Because of the 2000 Commodity Futures Modernization Act passed by Congress, no state has the power to regulate this new form of sophisticated gambling. The result is astounding: it is estimated that the notional value of credit default swaps outstanding today is about $ 62 trillion (four times the size of the US economy). This is an indication of popularity of the â€Å"naked† CDS innovation was as a way to bet on the collapse of the entire asset-backed securities construction. This was also a clear sign that, in a crisis, it would be all but financially impossible for the issuers of CDS to meet their obligations. In other words, disaster was just around the corner. This is an event that any regulatory agency should have seen coming. When housing prices hit the expected top of their cycle, in the 2005, and began falling, especially in 2006, the price for CDS s was still relatively low. So, some astute speculators undertook to buy CDSs and simultaneously began selling short the ABS that had been issued by investment banks, such as Lehman Brothers, in the correct expectation that mortgage-backed securities were bound to lose value with the expected rise in home foreclosures and mortgage defaults. This is how unimaginable spiral got created by the steps undertaken by Fed Reserve US government which ultimately result into the great burst ever faced in the history globally. GRAMM-LEACH- BILLEY ACT 1999 The Gramm Leach Billey Act 1999 (GLBA) passed by US government in the year 1999 with a view of security data integrity in the market. The GLBA repealed the part Glass Steagall act of 1933, which had opened the market among the banking companies, securities companies insurance companies. The GSA had prohibited any one institution from acting as any combination of an investment bank, a commercial bank and or an insurance company. But the GLBA allowed commercial banks, investment banks, securities firms, insurance companies to consolidate. The act was announced in the 1993 finalized in 1994, allowing many big corporations to merge to enhance their range of activities take the benefit of the deregulation. The law was passed to legalize these mergers on a permanent basis. The law has not fully deregulated the previous act, but they had relaxed the norms and allowed the FIs to have non financial assets. GLBA was amended with some part of the Bank Holding Company act of 1956. The crucial aspect of the GLBA stated that no merger can go ahead until the financial holding institutions, or affiliates receives a â€Å"less than satisfactory (SIC) rating at its most recent CRA exam†. GLBA compliance was mandatory; whether a financial institution discloses non public information or not, there must be a policy in place to protect the information from prospective threats in security data integrity. The law was segregated into three main aspects: FINANCIAL PRIVACY RULE: This rule requires FIs to provide each consumer with a privacy notice at the time the consumer relationship is established and annually afterwards. The notice must explain the information collected about the consumer, where that information is shared, how that information is used and how that information about the consumer is protected. The consumer must be notified give consent about any change at any point of time. Each time the privacy notice is reestablished the consumer has the right to opt it again. SAFEGUARDS RULE: The safeguards rule requires FIs to develop a written information security plan that describes how the company is prepared for, and plans to continue to protect clients non public personal information. This plan must include the following; Denoting at least one employee to manage the safeguards. Constructing a thorough on each department handling the non public information. Develop, monitor test a program to secure the information. Change the safeguards as needed. The Safeguards Rule forces financial institutions to take a closer look at how they manage private data and to do a risk analysis on their current processes. PRETEXTING PROTECTION: The GLBA encourages the organizations covered by GLBA to implement safeguards against pre texting. Pre texting means when someone tries to access the personal nonpublic information without proper authority approval. Thus the institutions having covered under the GLBA, needs to have control safeguard the information of their client, to prevent the details from any misuse. CRITICISM AND DEFENSE: There Analysis of Momentum in Indian Stock Markets Analysis of Momentum in Indian Stock Markets LITERATURE REVIEW The first study on momentum based investment strategy was documented way back in 1967. Levi (1967) claims the success of trading strategy based on buying stock with current price significantly higher than the average of last 27 weeks generate significant positive abnormal returns. However Jensen Bennington (1970) argues that the trading rule based on relative strength proposed by Levi was the one out of sixty eight trading strategies he tested and while tested for out of the sample test period it did not outperformed the buy hold strategy and hence was attributable to selection bias. Test of contrarian investment strategies was stealing the show fund managers were found busy picking stocks based on relative strength in US market. Majority of mutual funds examined by Grinblatt Titman (1989) note the tendency of fund managers to buy the stocks that have seen price increase in last quarter. Apart from that Value Line rankings of mutual funds that were largely based on relative strength also enjoyed high predictive power. The success of mutual funds investing on the basis of relative strength and high predictive power of value line rankings (Copeland Myres (1982)) provide some evidence of success of investment strategies based on relative strength. The academic literature suggests contrarian returns generate abnormal returns whereas value line rankings and mutual funds generating abnormal returns based on relative strength strategy are in stark contrast of each other. A seminal study by Jegadeesh Titman (1993) solves the puzzle by providing an explanation based on different of investment horizons considered by mutual funds using momentum strategies and contrarian strategies advocated by academic literature in late eighties and early nineties. Jegadeesh and Titman (1993) using US market data from 1965-1989 found not only the evidence of long term success of contrarian investment strategy but also found that momentum strategies generate significant positive returns in medium run over 3-12-month holding periods. They documented the reversal of momentum after about nine months. Their study suggests that in short run for about 3-12 months holding period momentum strategy generate significantly positive returns while in long run for the holding period of 1-3 years contrarian strategy generates significantly positive returns. Conrad and Kaul (1993) also find evidence from US market that the contrarian strategy is profitable for short-term (weekly, monthly) and long-term (2-5 years, or longer) intervals, while the momentum strategy is profitable for medium-term (3-12-month). As mentioned earlier the results of Jegadeesh and Titman (1993) had thrown a new light on seminal study of De Bondt Thaler (1985, 1987) and found evidence of short term momentum precedes long term reversal. Although all the results provided strong evidence of market inefficiency, different studies documented different explanations for such returns. Fama French (1996) presents result based on multifactor CAPM using size and MV/BV ratio to explain various anomalies in asset prices including momentum as well as contrarian returns and claim that market efficiency is intact. However the study failed to explain the presence of short term momentum using the multifactor model and hence short term momentum anomaly remains unexplained. Several behavioural explanations were found and presented to jointly explain the short-run cross-sectional momentum in stock returns documented by Jegadeesh and Titman (1993) and the long-run cross-sectional reversal in stock returns documented by DeBondt and Thaler (1985). Daniel, Hirshleifer, and Subrahmanyam (1998) (DHS hereafter) assume that investors are overconfident about their private information and overreact to it. If these investors also have a self-attribution bias, then investors attribute success to their own skills more than they should and attribute failures to external noise more than they should. The consequence of this behaviour is that investors overconfidence increases following the arrival of confirming news. The increase in overconfidence furthers the initial overreaction and generates return momentum. The overreaction in prices will eventually be corrected in the long-run as investors observe future news and realize their errors. Hence, increased overconfidenc e results in short-run momentum and long-run reversal. As against the above cited behavioral explanation to short term momentum and long term reversal, some scholars argue that the returns from these strategies are just compensation for taking additional risk or may be the product of the data mining. Most noteworthy of all Conard and Kaul (1998) argue that the profitability of momentum strategies may be the result of data-mining and momentum portfolio shows positive returns in any post ranking period is true irrespective of the length of test period. Thus Conard and Kaul (1998) suggest that there is no case of long term reversal. This is diagonally opposite to what the behavioral models suggests where after short term momentum prices will reverse to more fundamental levels. In fact, the criticism of Conard and Kaul (1998) led to another study by Jegadeesh and Titman (2001) where they used out of the sample test by using data from 1991 to 1998 an overlapping test period compared to their 1993 study where they used data form 1965-89. Their study also eliminated small firms from the study to check whether the earlier momentum returns were actually dominated by small, high-risk and illiquid stock or otherwise. Though they focus on short term momentum in their study choosing two year holding period post formation but they also tested post holding period returns from the period of two to five years after formation. They present some very interesting results. The momentum profits of Jegadeesh and Titman (1993) continued in 2001 also with almost same magnitude for same holding period that actually has proved that the earlier momentum profits were not the result of data-mining. It also suggests that unlike small firm effect where after the published research on superior returns on small firms compared to their large counterparts, superior returns on small firms disappeared in subsequent studies using data from the periods after the small firm effect from earlier studies got published, that means market has learnt quickly and hence such superior returns disappeared however momentum returns were still present with the same magnitude in 2001 as they were in 1993 study suggest that momentum returns are not just the temporary anomaly but it may have to do with some systemic cognitive bias which sustains for a long time. It also proves that momentum profit is just not the result of some small, illiquid and risky stocks and most noteworthy the reversal found in their post holding period cumulative returns, which render support to the explanations of behavioral theorists and provides evidence against the Conard and Kaul hypothesis. As far as studies in Asian markets are concerned Chang (1995) found abnormal profits of contrarian strategies in the Japanese markets. Chui (2000) found significant positive abnormal returns with contrarian investment strategy in Japanese and Korean markets. Hameed Ting (2000) found evidence of market overreaction hypothesis (contrarian strategy) in Malaysia. Kang (2002) found significant short term positive returns with contrarian strategy in Chinese markets. On the other end, Hameed Kusandi (2002) found no evidence of contrarian profits in six Pacific Basin markets. While Rouwenhorst (1998) and Griffin Martin (2005) found existence of momentum in many non-US countries, the quantum of momentum returns in non-US countries was small, and in the case of Asia, insignificant. For example, Griffin (2005) estimates average monthly returns of 0.78%, 0.77% and 0.40% for the Americas (excluding the US), Europe and Asia respectively. End of the Beginning or Beginning of the End†¦ The big bull has fallen down, investors have lost their vision, and experts knowledge went futile with the downturn of the global economies. When the markets were on peak, the funds across the world have flooded in the global economies. Policy makers had lot of confidence on the market, that it will help the economy to grow at faster pace. The market excelled 21000 points which was more ahead then the growth of the economy of India. But that does not seem true for the world economies, as the crisis had hit badly in USA and other parts of world which insisted FIIs and other investors to withdraw their money and markets crashed, went to 7000 points, where investor lost everything and policies could not work to take them up to the level. What was the reason of the crash? What will be the result of the market? Is this the end of the beginning or beginning of the end? Indian market is the strong base of determining the financial system of the country. Majority of the financial decisions are dependent on the stock market other financial market. Indian stock market serves a link to banking and other financial policies which provides impetus to the industry. Indian stock markets heavily based on the sentiments of the clients (market players) also of the market makers. The crash or boom (in a period/ year) determines the structure of the Indian capital system. The boom in the market (year till 2008) has brought many changes in the performance of mutual funds, insurance (ULIPS), investment products which led the country into the inflow of the money supply in the market. Till 2007-08 the market was running at its best, touched the heights, but the global crash in the market became a typhoon took away major players organizations into the quick sand of the recession. The insights from the market were not showing positive sign in anyways, so whether this was a new platform or just a time (economic) cycle. Prologue to decline†¦ Earth provides enough to satisfy mans need, but not greed. -M.K.Gandhi The market crash started with the fall of big financial organizations in the USA in the world like Lehman Brothers, AIG, Freddie and Fannie and many more. The failures were primarily due to exposure into Subprime loans Credit default swaps issued to insure these loans the issuers devolved resulted into bank failures steep reduction in the price of equities worldwide. The economic crisis led many world markets to suspend the trade due to fall in price. On October 8, 2008 Indonesian stock market halted trading, after a 10 % drop in one day. The crash of 2008 was around 21% which was little less than 1987 (Times of London). Beginning of October month was Black in the world market. The Dow Jones volumes were low and the industrial average fell over 1874 points which was worst weekly decline. The Icelandic stock market was into pitiable situation where the markets had been suspended for 3 days i.e. 9, 10 13 October. On October 24 many of the worlds stock market experienced the worst decline, with around 10% drop in the indices. Source: http://en.wikipedia.org/wiki/File:OMX_Iceland_15_SEP-OCT_2008.png The above graph shows the steep and the worst decline a market could ever witness. The Iceland stock market crashed up to unpredictable level. The trading had been suspended for 3 days because of the crash in the market. This situation was visible in all global stock markets, because of financial crisis in USA. Hence, the worst was yet to be experienced by the global markets market players. The Indian stock markets were also badly hit the confidence of people was shattered. The markets were not showing the positive sign in any of the context people had no clue about the next jump or next level of the market. Market experts were expecting the markets will be into recuperation at the earliest, but things were not going the way it had been desired. Source: Hindubusinessline.com Indian market which has shown strong performance till 2007, but from January it plummeted more than 3000 points on all the stock prices by October 2008, it had touched the 7000 (BSE) line. The continuous unpredictable scenarios in the stock market led many investors and institutional investors to withdraw their money because of negative performance of the markets. The above shown graph is depicting the dream turned into nightmare for global domestic investors. The Beehive capitalism†¦ Everything that goes up without base falls steeply with great force. The same situation has happened with the world economies. The supreme economy of the world has become the devil for the small economies, leading major big companies to file for the bankruptcy. The global meltdown is the result of Financial Hybrids Innovations, which has been actively traded all across the world markets. The investment bankers, banks, financial institutions were actively relied on these new and innovative models, which has yet to gain the acceptance across the world. The main accused element for collapse is â€Å"Credit crisis†, in which the US banks got the regulations to lend money to the people having no sufficient background to get the loans. These kind of loans were termed as NINJA loans (NO INCOME, NO JOBS, NO ASSETS), given in abundance by the US banks. Emerging economies like India, China and other big economies were initially considered to be the places which will remain unaffected from the distortion of crisis. But despite of the strong fundamentals Indian economy dipped into the crisis. The stock market had lost more than 50% of its value (source: economic times), which shattered the hopes of the Indians. There was continuous monitoring by the Central Bank (Reserve Bank of India) on the market trend. The tornado of crisis had destroyed most of the stock markets, banks and financial institutions after soaring to the new heights of investment. The below mentioned graph depicts the movement of BSE Sensex SP CNX Nifty Source: SEBI Bulletin November 2008. BSE Sensex closed at 9788 on October 31, 2008 as against 12680 on September 30, 2008, a fall of 3072 points (almost 24%).The month of October 2008 had been the most volatile month, where Sensex recorded a high of 13055.67 on October 1, 2008 low of 8509.56 on October 27. Nifty closed 2886 on October 31 against 3921 against 30 September 2008. By the end of a month Nifty registered the fall of 1035 points (almost 27%). The market had shown unpredictability of the base stability level, dissuading more and more investors to take exit from the market. The Financial crisis: A Sub-prime loan is a type of mortgage loan made to borrowers who have at least one of the following characteristics: (1) Low credit scores; (2) The inability to post the traditional 20 percent down-payment for a home; and/or (3) The inability to fully document their income. The subprime crisis is not the result of recent financial innovations and developments, but it is the outcome of lax capitalism policies which had been developed by the US government. In the fifties American government passed a legislation to delink the commercial banking investment banking. The legislation stated implied that a commercial bank cannot open an investment bank. In 70s European American economies faced slowdown, due to which these banks were finding difficult to invest their investible surplus. This time the East Asian economies were liberalizing their economies, due to which the capital from western economies started moving to these economies. After the huge influx of capital into these economies, Asian bubble gets burst, forcing the western economies to introduce new financial measures to invest into the markets. These circumstances and the need of new financial avenues led the US European economies to trade into the new financial products, by liberalizing the norms for Commercial Investment Banks. The liberalization in the regulations led to the introduction of the Mortgaged products (a prime cause of crisis). In the late 90s US mortgage lender began offering the mortgage products to would be â€Å"home buyers† who could not qualify for a mortgage loans. Millions of Americans Europeans, who previously could not afford to buy home, were obtaining these mortgages, due to which great Demand of home (boom) took place leading to shoot of real estate prices. The above diagram shows how the base of subprime crisis took place in the global markets. The downfall in the economies is considered to be as the Dominoes Effect. The lax screening of borrowers, large capital accumulation capitalized market structure created a bubble which could not be ceased from getting expand. The whole cycle got mitigated with the introduction of new instruments in the financial markets. The sub prime crisis is about the collapse of the unregulated, $3 trillion over-the-counter market for complex structured assets, some of which happen to contain sub prime residential mortgages. The semiannual global financial stability report by IMF said that declining US housing prices and rising delinquencies on the residential mortgage market could lead to losses of $565 billion. When combining these factors with other market factors, it puts potential losses at about $945 billion which is almost 25% of the $24trillion global credit market. Financial innovations were brought into the market to make the products work in the market. The Mortgage products started to conflagrate the US European markets, where such loans started becoming the pool of assets (Risky) and been traded in the market. Hence, due to this many other factors got the impetus ultimately resulted into the uncontrollable bubble of mortgage, which gets burst and deepened the world economies into the recession. The subprime crisis has affected the global economies resulting into the fall of big financial corporation like Lehman Brothers, Bear sterns, AIG, Freddie Fannie, and many more big organizations of whom one cannot think to get fail. The sizes of the organization (exposure) were in plethora that it was not possible for the US European government to revive these financial institutions. AIG, one of the largest insurance companies (Private) became government undertaking due to the impacts of financial crisis. SUB PRIME OVERVIEW: Source: The India Economic Review 2008. (Dec 08) The whole system works in three stages, Stage First consist of Borrowers lenders; Second stage consists of the creation of SpecialPurpose Vehicle (SPV) with the inclusion of legal intermediaries. The last (third) stage consists of investors those who had invested their money into the riskier assets including the investment banks. In stage first agent enters between borrowers and lenders, accepting the collateral and also factoring the future price rise. The agents accept the loans, who previously could not even qualify for the approval, now getting loans from the banks other lenders. The housing price bubble allowed many borrowers to get loans easily because of the high house prices. The loans were mortgaged on a larger scale by creating the pool of similar group of mortgage assets through Special Purpose Vehicle (SPV) given the risk involved on the pool of assets. In second stage, SPVs were created all the liabilities were transferred into bankruptcy remote securitization trust or SPV. Underwriters were used to issue market the MBS (mortgage backed securities). These securities were divided into different tranches, which were of similar securities. The rating agencies were to give rating to these tranches of securities. The ratings were given to the tranches based on the risk, priority of payment of the funds. Higher ratings were given to those tranches benefiting from the credit enhancements the MBS generates or credit insurance purchased from third party bond insurer. In third stage, Institutional or individual investors such as hedge funds or managers of Collateralized Debt Obligations (CDOs), purchase the securities and then re-securitize the MBS, along with other assets, into a CDO. The Commercial Papers (CP) generated in the initial years was all sold and there was demand for more. Consequently the SPVs started producing more CPs or MBS. The sale of the same only meant that the SPVs were flush with funds. These funds were to be invested somewhere so, the agents were pressed to bring in more borrowers. The lending norms were further diluted to accommodate lesser and lesser deserving borrowers in order to deploy the huge funds available. The consequent spiral that got generated only led to the continued dilution of the Capital Adequacy and Prudence norms. The system went burst once the housing prices turned negative turning the very foundation of subprime lending upside down. The turmoil of subprime has been expected of more than $ 3 trillion, which is too big for any country to even imagine of recuperating. The impact on Indian market was slow but had been proved acute on the stock market due to the constant humongous withdrawal of FIIs loss of confidence in the consumers (investors). Mortgage: Huge pack of cards†¦ The magnanimous crisis which all started with lax policies of US government, provided impetus for the Fed Reserve to implement new structures in the economy. The capitalist policy was looking very attractive to the market players, but the policy was hollow from the fundamentals. It all started with the Alan Greenspans reformative structures models in the financial markets, led to turmoil in the global economies. The US Fed Bank Clinton government in 1999 passed Gramm-Leach-Bliley Act (GLBA) which had abjured the old Glass-Steagall Act which had regulated the Investment Banks, Banks Insurance industries. The new legislation has unregulated the Wall Street Investment Banks and commercial banks. This deregulation has enlarged the gamut of activities in the financial activities of the commercial banks other financial institutions. The deregulation had been further reintroduced by legalizing gambling activities into financial sector, a prohibition that had been in place after 1907 financial crisis. The steps towards deregulation of the US markets had converted the US markets into a big casino. Securities Exchange Commission (SEC) in 2004 took a step towards the deregulation on the financial activities by removing the ceiling on risk that the largest American investment banks could take on Securitized loans. By this time, no one would have thought that the deregulation will result into large speculation create a bubble in the market. Lastly, the Securities and Exchange Commission took the last step toward deregulating financial markets when in the month of July 2007, weeks before the onset of the subprime crisis; it removed the â€Å"uptick† rule for short selling any security. The housing bubble was fed by extraordinarily low interest rates low lending standards (norms) for mortgages. The excessive monetary liquidity short term interest rates fell to 1%, which led to high borrowing of loans from the banks, resulted into the big bubble of mismanagement of financial activities. After the tech bubble burst in 2001 the recession, the Fed (Greenspan) aggressively lowered the Federal funds rate from 6.5 percent to 1 percent in 2004, the lowest since 1958. The lowered interest rates reduced lending standards made the banks to lend the money known as ‘ Predatory Lending to the borrowers who did not have capabilities to qualify for the loans, but with the mortgage lending, excessive loans were provided to these lenders as they (banks) were getting big bonuses for bearing risk on these loans. Non-traditional home loans were advanced to borrowers who had no documented incomes. Some loans were interest only loans with down payments of 5% or less . Some were Adjustable Rate loans (ARMs), with low interest rates for one or two years to be reset later at much higher rates. In 2006 around 25% of American mortgages were subprime and close to 20% were ARMs. Mortgage lenders and Home buyers presumed that home prices were not going to fall on a national basis. THE NEW ALCHEMY OF FINANCE The subprime crisis is the result of new financial products in the market the deregulation of the financial activities for the FIs. The main reason of such lending was the facility with which subprime lenders could sell their risky mortgages upstream to bigger players, investments banks for example, which undertook to buy them, pool them into mortgage bonds and re-channel them into new financial instruments through a process of aggressive securitization. The Structured Investment Vehicles (SIVs) which fall into the large class of derivative products came under various names such as Collateral Debt Obligations (CDOs). They had the characteristics of short term asset based commercial paper that were backed by the underlying income producing mortgage assets downstream and were graded according to a certain risk of default. More than 1 trillion half dollars of these asset backed financial products were sold in all over the world. Another new financial instrument that made matters much worse and led directly to the crisis: the Credit Default Swaps. Due to lack of government regulation, this product has become a weapon of mass destruction. In order to protect against the risk of default on the new asset-backed securities (ABS), some insurance companies but also some investment banks themselves began to issue bilateral â€Å"insurance† contracts against the newly created ABS. These were called Credit Default Swaps (CDS), which were supposed to protect the investment instruments against the default on asset based securities. The issuer of ABS could buy the protection against the default by paying a premium. This was a financial innovation, the so-called â€Å"insurance against default†, that opened the floodgates of money to be invested in the new financial instruments. Indeed, it allowed investors such as pension funds and other institutions which have a fiduciary obligation to buy only high-qualit y securities, to legally buy artificially highly rated (but risky) ABS securities, or to invest in hedge funds which specialized in leverage trading in derivative products. But the problem was that the issuance and use of such financial â€Å"insurance† contracts were not regulated by any government agency, because the word â€Å"insurance† was not used; instead, they were considered as simply a protection against the â€Å"default† of payment on a financial security. And thats where the gambling part enters the picture: only ten percent of CDS are genuine insurance contracts held by investors who really own asset-backed securities (these are covered CDS); 90 percent of them are rather held by speculators who trade CDS, while not owning any asset-backed securities to be protected (these are naked CDS). Economy as Casino: The gamut of gambling that US government Fed has created was even unimaginable, allowed big participation into these new investment instruments. Credit Default Swaps (CDS) can be bought and sold by speculators who are not directly involved in the mortgage business. Because of the 2000 Commodity Futures Modernization Act passed by Congress, no state has the power to regulate this new form of sophisticated gambling. The result is astounding: it is estimated that the notional value of credit default swaps outstanding today is about $ 62 trillion (four times the size of the US economy). This is an indication of popularity of the â€Å"naked† CDS innovation was as a way to bet on the collapse of the entire asset-backed securities construction. This was also a clear sign that, in a crisis, it would be all but financially impossible for the issuers of CDS to meet their obligations. In other words, disaster was just around the corner. This is an event that any regulatory agency should have seen coming. When housing prices hit the expected top of their cycle, in the 2005, and began falling, especially in 2006, the price for CDS s was still relatively low. So, some astute speculators undertook to buy CDSs and simultaneously began selling short the ABS that had been issued by investment banks, such as Lehman Brothers, in the correct expectation that mortgage-backed securities were bound to lose value with the expected rise in home foreclosures and mortgage defaults. This is how unimaginable spiral got created by the steps undertaken by Fed Reserve US government which ultimately result into the great burst ever faced in the history globally. GRAMM-LEACH- BILLEY ACT 1999 The Gramm Leach Billey Act 1999 (GLBA) passed by US government in the year 1999 with a view of security data integrity in the market. The GLBA repealed the part Glass Steagall act of 1933, which had opened the market among the banking companies, securities companies insurance companies. The GSA had prohibited any one institution from acting as any combination of an investment bank, a commercial bank and or an insurance company. But the GLBA allowed commercial banks, investment banks, securities firms, insurance companies to consolidate. The act was announced in the 1993 finalized in 1994, allowing many big corporations to merge to enhance their range of activities take the benefit of the deregulation. The law was passed to legalize these mergers on a permanent basis. The law has not fully deregulated the previous act, but they had relaxed the norms and allowed the FIs to have non financial assets. GLBA was amended with some part of the Bank Holding Company act of 1956. The crucial aspect of the GLBA stated that no merger can go ahead until the financial holding institutions, or affiliates receives a â€Å"less than satisfactory (SIC) rating at its most recent CRA exam†. GLBA compliance was mandatory; whether a financial institution discloses non public information or not, there must be a policy in place to protect the information from prospective threats in security data integrity. The law was segregated into three main aspects: FINANCIAL PRIVACY RULE: This rule requires FIs to provide each consumer with a privacy notice at the time the consumer relationship is established and annually afterwards. The notice must explain the information collected about the consumer, where that information is shared, how that information is used and how that information about the consumer is protected. The consumer must be notified give consent about any change at any point of time. Each time the privacy notice is reestablished the consumer has the right to opt it again. SAFEGUARDS RULE: The safeguards rule requires FIs to develop a written information security plan that describes how the company is prepared for, and plans to continue to protect clients non public personal information. This plan must include the following; Denoting at least one employee to manage the safeguards. Constructing a thorough on each department handling the non public information. Develop, monitor test a program to secure the information. Change the safeguards as needed. The Safeguards Rule forces financial institutions to take a closer look at how they manage private data and to do a risk analysis on their current processes. PRETEXTING PROTECTION: The GLBA encourages the organizations covered by GLBA to implement safeguards against pre texting. Pre texting means when someone tries to access the personal nonpublic information without proper authority approval. Thus the institutions having covered under the GLBA, needs to have control safeguard the information of their client, to prevent the details from any misuse. CRITICISM AND DEFENSE: There