Blue chips

Blue chips are stocks of well known companies that are internationally recognized. These sell widely and are financially stable. Usually blue chips companies sell high quality, widely used and sold products or services. They are generally more volatile that other stocks and have less risk at failure; they demonstrate the ability to pay dividends in both good and bad times. Generally, all Dow Jones stocks are considered blue chips.

The name blue chip comes from the game of poker, where the blue chips have the highest value. Similarly, blue chip stocks are considered to be more valuable.

The BSE SENSEX

The BSE SENSEX is a value-weighted index composed of 30 stocks and was started on January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets in India. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalization of the BSE. The base value of the Sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79. As of 5 April 2011, market capitalisation of Sensex was just under $600 billion.

Portugal; Economic crisis, Educational crisis

These days, one of the large problems in Europe is Portugal. The poorest country in Western Europe is on the brink of an international bailout, which would be the third in the euro zone after Greece and Ireland.

To this, adds the fact that Portugal’s Prime Minister José Socrates resigned on Wednesday after the parliament rejected his plan for spending cuts and tax increases.

Supposedly, Portugal is going to run out of money this year and will need an international bailout. Portugal’s main problem has been huge amounts of debt that the country could no longer hold. This year, the government debt will reach 90% of the GDP.

One of the most important problem in Portugal is the human capital. It is the least educated country in Western Europe, with just 28% of its population (25 to 64 years) with a high school degree. There is a 37.1% high school drop-out, which is way higher than the average 20% and Germany’s 2.8%. This has emerged as a huge problem in Portugal now. As Portugal has large debts that it needs to pay off with long-term growth,  an unskilled work force makes this very hard.

The issue about education is not one that can be solved quickly. The cuts that come in relation with a bailout and that are necessary for the recovery only make this task harder. It is, however, on the top of the list of the reforms needed to fix the economy and Mr. Sócrates made it clear that investing in education was a priority for the country.

The real cost of nuclear energy

We’ve all heard about the tragic events in Japan in the last weeks. First of all, I would like to express my grief and also encourage anyone to try to help the people affected by the events.

The events in Japan have brought on heavy discussions about the ethics of nuclear energy and what threats it supposes. It is not the first time that incidents like these happen, everyone remembers Chernobyl well enough.

Clearly, the nuclear energy market has gone down heavily these days. After the first incident with the nuclear station at Fukushima the shares related to any nuclear energy has experienced steep losses. In response to these events, a  rise of stocks for renewable, clean energy has also been seen. 

So, what is clear is that many people are not prepared to accept the risk of this "relatively" cheap energy.

Global increase in cotton prices

For the last months, we have been experiencing a heavy rise in cotton prices, which have already hit a 140-year high.

The main reasons for this global shortfall that has pushed the prices up so much are a string of bad harvests and the high demand for this commodity from fast developing countries like China and India.

This sudden and unexpected rise in prices has alarmed many retailers and manufacturers in the apparel industry who are worrying about being forced to push prices up in times of weary consumers due to higher production costs.

Another concern that is talked about due to this rise in cotton prices is the dollar. The “paper” bills are actually made up to 75% of cotton (and 25% linen). Money printers all over the world are therefore facing higher production costs as the cotton prices have been rising for the last year. In 2010, the production costs of the dollar bills leaped to 50% from 2008 (currently at 9.6 cents)

This even comes to the point where there is talk about producing $1 dollar coins, which would be more durable and do not need to be replaced as often. 

Agflation

Agflation is the inflation by agricultural commodity prices, i.e. by food.

For some time now, we have been experiencing a rise in food prices and food shortages. The food prices are currently at an all time height and production is slowest since the Green Revolution. Still, farmers produce more than twice the minimum needs for most people on the world.

Why does the price of food rise?

Normally, the main reasons for a rise in food prices are that not all food is in right place available for everyone, that many people can’t afford food, that a significant part of produced food is used for biofuels and government mandates.

The food prices are usually set by the amount of food relative to the population and the change in supply and demand over time.

What is said to have caused the current agflation are supply shocks. These include natural disasters like drought and large scale fires like in Russia, China and Australia and floods like in Canada and Pakistan. Food supplies have been affected severely by these disasters, nevertheless they are not the only supply shocks. Factors outside agriculture like a fall in the dollar have made it cheaper to buy from other countries. Panic buying and trade bans have also contributed to the supply shocks in the food market that is causing agflation over the world.


This increase in food prices supposes greater problems for those people living in the developing world who might face starvation due to food shortages and high food prices. 

Unrest in Egipt, unrest in the oil price

In the last weeks we have seen many disruptions and anti-government protests in Egypt. This has had many consequences on the world's economy. However, I feel it is important to point out that it would be frivolous  to go about this topic looking only at the economic impact.

The events occurring in Egypt at the moment are of a huge political and social impact. It is, in my opinion, highly remarkable how the use of the internet and social networks has aided in these disruptions in the government policies and has gathered people to fight for their freadom.

Going back to the economic part of this conflict, we can see its effect  mainly on the oil prices. The oil price has risen twice above $100, hitting a two-year high. The slowing down of the transport on the Suez Canal and the risk of this even closing are of an immense importance to the economy and our everyday lives. Every day, about 2.5 million barrels of oil pass through the Canal, and the fear about this has caused a downturn in the oil market.

On a more local aspect, the Egyptian stock market went down 10 % - the largest one-day drop in some years. Some rating agencies have also downgraded Egypt, showing again the fear that is raised by these disruptions in the economy.