Credit Repair

I was breaking my head, reading blogs to come up with one brilliant idea that i can use to set up my business (though I have no idea of what a brilliant idea is!), when this thought crossed my mind. How about helping the average American deal with the credit crunch in these tough times! As we all know - financial literacy across the world is a little uncommon, and riding this wave of bankruptcies, coming out unscathed is never going to be easy without some basic understanding of how credit works.
My idea is to start an online consultancy that helps people to restructure their portfolios. To make it clearer, I’d call it credit repair (as the problem is for those burdened with costly credit). It just sounded superb (at least to my earsJ) – a flawless business idea. What else can sell better?
Then I type in “creditrepair.com” into my browser and hit enter, to check the availability o the domain name. Believe me; I had no idea of this! There exists a web already – creditrepair.com, which offers the following services:
· How to manage you debt efficiently
· Buying a home with poor credit
· What you need to know about bankruptcy
· Getting rid of high interest credit cards
· How to recover from Identity theft, Innocent errors
· And many more....
I felt shocked and at the same time embarrassed about my ignorance of not expecting the world capital in finance not to come up with such idea for so long. But it was goo to know of such a service, though I don’t have the slightest idea of how successful this site has been in helping innocent borrowers come out of their financial problems.
Now I think again; what’s wrong in having a similar service for us – the Indians? Yes; there are big differences in the way credit is disbursed here and the non-existence of the concept of credit score. But so what? We can make an attempt at bringing an order to the whole credit system.
I envision a day when I walk into a bank and give my id (could be my PAN) and request a loan; and the teller can immediately tell me if I’m eligible for such an amount of loan for such a purpose, without asking for sureties, or asking me to make another round to the bank saying that the manager isn’t around and so on.
The point is that credit in India is available in pockets and accessible to people with contacts (it’s not necessary that these people have a great credit position). There is huge need to make credit superfluous, as long as the borrower has decent rating against his name. I believe that is the day business will happen at the speed of light.

OTC derivatives buck the trend - good news for I-Banks?

There are a number of reasons that people have come up with, for the current financial crisis. The most talked about of all these – structured products a.k.a. OTC (Over The Counter) derivative instruments. OTC derivatives are, unlike exchange traded ones customizable and generally transacted between institutional investors. It is the customizable part of these instruments that brings in a lot of innovation into them. It’s a legend in itself how this industry shaped up to reach the size and supremacy that it attained today.
Now, the whole purpose of me beating around the OTC derivatives is a piece of news that I came across today. JP Morgan, probably the only surviving investment bank among the big 10, posted a profit of $ 5 Billion in the worst financial year in the history of wall street. When I read this news my immediate reaction was – oh my god! I got this thing completely wrong! I forgot to tell you, I was (aha, I am still) a firm believer in the theory that it was the innovation in OTC market that led to the worst meltdown that we’ve been witnessing in the markets. In fact, this was the reason I started off writing this.
But as I started to type, a thought crossed my mind. Is it possible that the investment bank that mediates the deals be profitable in transaction where both parties lost? May be! But then will it be a reason to celebrate for the I-bank? I don’t think so. At least, not in the long run. As My gut feel is this is the beginning of the end of another giant I-bank. May be I am being too pessimistic. Or may be it’s my ignorance. Time will tell!

Cuts in excise duty and service tax-anyone benefiting out there?

Yesterday the government came out with its reaction to the criticism over the disappointing interim budget. The 2% cuts in both excise duty and service tax, touted as the "final stimulus package" comes in at a time when the Obama government is rolling out the USD 780 Billion package. Comparing the two may not be the right thing to do, but then the kind of effort put in by the US government in these times is aimed at creating more credit flow to the struggling industries. The Indian government's reaction to the credit crunch ( certainly not as severe as in the US) isn't really optimal. Indian firms even today (despite cuts in interest rates by the RBI) are struggling to raise funds at reasonable rates(under 15%).

Coming back to the 2% cuts, they certainly do not translate to an increase in demand or a significant reduction in the costs. From all this, one thing is very clear. The India's fiscal deficit is not only large, but is getting wider. The S&P's downgrade of Indian economy only strengthens the point. Whoever is going to win the election, not only has a huge task of pushing the economy into a revival mode, but also look for additional sources of revenue to bridge the fiscal gap. And it is a huge challenge given the already wide deficit, because the coming government cannot go on a spending spree, say on infra or other areas.

So what if inflation touches 3.92%

Yesterday evening we got the inflation numbers for this week. The number is 3.92%. I heard experts confident that it's going to touch 3% by next week, and 2% by next month. Sounds pretty good? Not really.

Take a look around and see for youself how much of this reduction in inflation is helping you go back smiling after you shop for your household. I'm not for a moment saying that these numbers don't mean anything. But then for an average consumer why can't we have an indicator that is more in line with his spending?

Welcome to Finman's corner

Hi!
Welcome to you! You might be wondering what is the need for this blog now.
I'll explain. i had this urge for a long time to run my blog. And what better time to start a blog on finance than this recession (or depression?). Don't jump the gun yet. I'm not going to write about the subprime or the bailouts. This blog is an attempt to eradicate financial illiteracy, develop a sense of financial responsibility, and most importantly to learn finance myself. One more thing. I'm not a specialist in any field (including finance) and the ideas and thoughts shared in this blog would not necessarily be my own. I would certainly add my touch to whatever I write here.
Wish me all the best!
Happy reading!