Some of India's Biggest Scams

India's biggest scams.............

1.Ramalinga Raju


The biggest corporate scam in India has come from one of the most respected businessmen.
Satyam founder Byrraju Ramalinga Raju resigned as its chairman after admitting to cooking up the account books.

His efforts to fill the "fictitious assets with real ones" through Maytas acquisition failed, after which he decided to confess the crime.
With a fraud involving about Rs 8,000 crore (Rs 80 billion), Satyam is heading for more trouble in the days ahead.

On Wednesday, India's fourth largest IT company lost a staggering Rs 10,000 crore (Rs 100 billion) in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 on the Bombay Stock Exchange. The NYSE-listed firm could also face regulator action in the US.

"I am now prepared to subject myself to the laws of the land and face consequences thereof," Raju said in a letter to SEBI and the Board of Directors, while giving details of how the profits were inflated over the years and his failed attempts to "fill the fictitious assets with real ones."
Raju said the company's balance sheet as of September 30 carries "inflated (non-existent) cash and bank balances of Rs 5,040 crore (Rs 50.40 billion) as against Rs 5,361 crore (Rs 53.61 billion) reflected in the books."


2.Harshad Mehta

He was known as the 'Big Bull'. However, his bull run did not last too long.
He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments.
Taking advantages of the loopholes in the banking system, Harshad and his associates triggered a securities scam diverting funds to the tune of Rs 4000 crore (Rs 40 billion) from the banks to stockbrokers between April 1991 to May 1992.

Harshad Mehta worked with the New India Assurance Company before he moved ahead to try his luck in the stock markets. Mehta soon mastered the tricks of the trade and set out on dangerous game plan. Mehta has siphoned off huge sums of money from several banks and millions of investors were conned in the process. His scam was exposed, the markets crashed and he was arrested and banned for life from trading in the stock markets.

He was later charged with 72 criminal offences. A Special Court also sentenced Sudhir Mehta, Harshad Mehta's brother, and six others, including four bank officials, to rigorous imprisonment (RI) ranging from 1 year to 10 years on the charge of duping State Bank of India to the tune of Rs 600 crore (Rs 6 billion) in connection with the securities scam that rocked the financial markets in 1992. He died in 2002 with many litigations still pending against him.


3.Ketan Parekh


Ketan Parekh followed Harshad Mehta's footsteps to swindle crores of rupees from banks. A chartered accountant he used to run a family business, NH Securities.

Ketan however had bigger plans in mind. He targetted smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange, and bought shares in fictitious names.

His dealings revolved around shares of ten companies like Himachal Futuristic, Global Tele-Systems, SSI Ltd, DSQ Software, Zee Telefilms, Silverline, Pentamedia Graphics and Satyam Computer (K-10 scrips).
Ketan borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions. Ketan alongwith his associates also managed to get Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank.

According to RBI regulations, a broker is allowed a loan of only Rs 15 crore (Rs 150 million). There was evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.


4. C R Bhansali


The Bhansali scam resulted in a loss of over Rs 1,200 crore (Rs 12 billion).

He first launched the finance company CRB Capital Markets, followed by CRB Mutual Fund and CRB Share Custodial Services. He ruled like a financial wizard 1992 to 1996 collecting money from the public through fixed deposits, bonds and debentures. The money was transferred to companies that never existed.

CRB Capital Markets raised a whopping Rs 176 crore in three years. In 1994 CRB Mutual Funds raised Rs 230 crore and Rs 180 crore came via fixed deposits. Bhansali also succeeded to to raise about Rs 900 crore from the markets.

However, his good days did not last long, after 1995 he received several jolts. Bhansali tried borrowing more money from the market. This led to a financial crisis.

It became difficult for Bhansali to sustain himself. The Reserve Bank of India (RBI) refused banking status to CRB and he was in the dock. SBI was one of the banks to be hit by his huge defaults.

5.Cobbler scam


Sohin Daya, son of a former Sheriff of Mumbai, was the main accused in the multi-crore shoes scam. Daya of Dawood Shoes, Rafique Tejani of Metro Shoes, and Kishore Signapurkar of Milano Shoes were arrested for creating several leather co-operative societies which did not exist.

They availed loans of crores of rupees on behalf of these fictitious societies. The scam was exposed in 1995. The accused created a fictitious cooperative society of cobblers to take advantage of government loans through various schemes.

Officials of the Maharashtra State Finance Corporation, Citibank, Bank of Oman, Dena Bank, Development Credit Bank, Saraswat Co-operative Bank, and Bank of Bahrain and Kuwait were also charge sheeted.


6.Dinesh Dalmia


Dinesh Dalmia was the managing director of DSQ Software Limited when the Central Bureau of Investigation arrested him for his involvement in a stocks scam of Rs 595 crore (Rs 5.95 billion).

Dalmia's group included DSQ Holdings Ltd, Hulda Properties and Trades Ltd, and Powerflow Holding and Trading Pvt Ltd. Dalmia resorted to illegal ways to make money through the partly paid shares of DSQ Software Ltd, in the name of New Vision Investment Ltd, UK, and unallotted shares in the name of Dinesh Dalmia Technology Trust.

Investigation showed that 1.30 crore (13 million) shares of DSQ Software Ltd had not been listed on any stock exchange.

7.Abdul Karim Telgi


He paid for his own education at Sarvodaya Vidyalaya by selling fruits and vegetables on trains.
He is today famous (or infamous) for being he man behind one of
The Telgi case is another big scam that rocked India. The fake stamp racket involving Abdul Karim Telgi was exposed in 2000. The loss is estimated to be Rs 171.33 crore (Rs 1.71 billion), it was initially pegged to be Rs 30,000 crore (Rs 300 bilion), which was later clarified by the CBI as an exaggerated figure.

In 1994, Abdul Karim Telgi acquired a stamp paper license from the Indian government and began printing fake stamp papers.Telgi bribed to get into the government security press in Nashik and bought special machines to print fake stamp papers.

Telgi's networked spread across 13 states involving 176 offices, 1,000 employees and 123 bank accounts in 18 cities.

8.Virendra Rastogi


Virendra Rastogi chief executive of RBG Resources was charged with for deceiving banks worldwide of an estimated $1 billion.

He was also involved in the duty-drawback scam to the tune of Rs 43 crore (Rs 430 milion) in India.
The CBI said that five companies, whose directors were the four Rastogi brothers -- Subash, Virender, Ravinde and Narinder -- exported bicycle parts during 1995-96 to Russia and Hong Kong by heavily over invoicing the value of goods for claiming excess duty draw back from customs.


9.The UTI Scam


Former UTI chairman P S Subramanyam and two executive directors -- M M Kapur and S K Basu -- and a stockbroker Rakesh G Mehta, were arrested in connection with the 'UTI scam'.

UTI had purchased 40,000 shares of Cyberspace between September 25, 2000, and September 25, 2000 for about Rs 3.33 crore (Rs 33.3 million) from Rakesh Mehta when there were no buyers for the scrip. The market price was around Rs 830. The CBI said it was the conspiracy of these four people which resulted in the loss of Rs 32 crore (Rs 320 million).

Subramanyam, Kapur and Basu had changed their stance on an investment advice of the equities research cell of UTI. The promoter of Cyberspace Infosys, Arvind Johari was arrested in connection with the case. The officals were paid Rs 50 lakh (Rs 5 million) by Cyberspace to promote its shares.

He also received Rs 1.18 crore (Rs 11.8 million) from the company through a circuitous route for possible rigging the Cyberspace counter.

10.Uday Goyal


Uday Goyal, managing director of Arrow Global Agrotech Ltd, was yet another fraudster who cheated investors promising high returns through plantations.
Goyal conned investors to the tune of over Rs 210 crore (Rs 2.10 billion). He was finally arrested.

The plantation scam was exposed when two investors filed a complaint when they failed to get the promised returns.

Over 43,300 persons had fallen into Goyal's trap. Several criminal complaints were filed with the Economic Offences Wing. The company's directors and their relatives had misused the investors' money to buy properties. The High Court asked the company to sell its properties and repay its investors.


11.Sanjay Agarwal


Home Trade had created waves with celebrity endorsements.
But Sanjay Agarwal's finance portal was just a veil to cover up his shady deals. He swindled a whopping Rs 600 crore (Rs 6 billion) from more than 25 cooperative banks.

The government securities (gilt) scam of 2001 was exposed when the Reserve Bank of India checked the acounts of some cooperative banks following unusual activities in the gilt market.

Co-operative banks and brokers acted in collusion in abid to make easy money at the cost of the hard earned savings of millions of Indians. In this case, even the Public Provident Fund (PPF) was affected.

A sum of about Rs 92 crore (Rs 920 million) was missing from the Seamen's Provident Fund. Sanjay Agarwal, Ketan Sheth (a broker), Nandkishore Trivedi and Baluchan Rai (a Hong Kong-based Non-Resident Indian) were behind the Home Trade scam.

'Insider trading' acquires a new meaning in Sebi

If the Satyam-Maytas imbroglio had the entire investor community question the very concept of corporate governance, the latest one involving the Securities and Exchange Board of India has shaken the very confidence of the investor community in the Indian capital markets.

In a bizarre turn of events -- straight from Ripley's Believe It or Not -- that would stun the entire world of finance, Indian market regulator Sebi finds itself in the eye of an unprecedented storm.

What is interesting as well as appalling to note is that the needle of suspicion at this time points out that manipulations seem to have taken place right inside Sebi's office in Mumbai.

Consider the sequence: The chairman and managing director of Pyramid Saimira, P S Saminathan, announces his intention to acquire approximately 25 per cent stake in the company from two other co-promoters. (See: Letter forged, says Sebi)

Technically called as inter-se transfer of shares, this application was pending with the Sebi since the first week of October 2008.

On the evening of December 20, the company in question is inundated with calls about a Sebi order on the above-mentioned application by the media. Without a copy of the order the company refuses to comment on the same.

The purported Sebi order directs Saminathan to make an open offer for acquiring 20 per cent shares within 14 days for a price not less than Rs 250 per share. This order is to be seen in the light of the fact that the prevailing market price of the company's share is about Rs 70 per share.

One morning, the company gets a courier containing a Sebi order. It is indeed strange that Sebi, that usually faxes its communications, chose to courier the same on the evening of December 19.

But what follows is even weirder.

Apparently, it seems that the courier company in question has produced documentary evidence to suggest that the consignor, i.e. Sebi itself, had specifically instructed the courier company to deliver the notice on December 22 morning instead of on December 20.

Meanwhile, having been in receipt of the information and completely oblivious of the fraud played on it, the media takes up this story in right earnest. Consequently, Sebi order becomes the lead story on December 21 and 22. In fact, trades were carried out in the stock markets of the country on the entire 22nd based on this spurious order.

On 23rd morning, ostensibly disturbed by the press reports and noticing market gyrations in the Pyramid counter on a non-existent order, Sebi calls up Pyramid and seeks clarification as to whether Pyramid had indeed received such orders.

Subsequently, Sebi announces through the press that it has not issued any advisory either to the company or to its director.

This is where the fraud comes to light. The entire financial market is astounded to know as to how a well-orchestrated fraud has been committed on the market players using the (forged?) stationery of the market regulator.

Intriguingly, the original application to acquire shares from his co-promoters is pending with Sebi even as on date.

In the entire process the confidence on the market regulator by market players has been dented like never before.

Some inconvenient questions
The reader by now would be completely flummoxed by the turn of events. How could someone forge a letter using Sebi's letterhead, forge a Sebi's official signature and possibly use the Sebi administrative machinery to send a courier with appropriate instructions?

It is suspected that someone within Sebi was involved in this fraud.

What makes this fraud more sinister is the fact that all the documents were forged. In the process it lent an air of credibility to the advisory, albeit only for a day. The net consequence was that the share price of Pyramid gyrated for the entire day, i.e. on December 22.

Yet Sebi, which expects corporates to act within minutes of taking key decisions that could possibly impact its share prices, chose to act in such casual manner and remained silent for a whole day.

No wonder, those who compare various regulations postulated by Sebi, (not the least being the one on insider trading) and the contrasting lackadaisical manner in which it itself has acted in this episode, has left most observers befuddled.

This delay of over 24 hours by Sebi is the most intriguing portion of the drama.

In contrast, let us assume that the boot is on the other foot. If only a resentful employee of a company had sent some bogus information to Sebi, the manner in which Sebi would have proceeded against the company and its management needs no elaboration here. Yet when it comes to itself, Sebi has a different yardstick.

By now, it should be obvious that those who had certain positions leading to these events were the ultimate beneficiaries of the entire mischief. That someone within Sebi played ball is disquieting. And that the entire Sebi machinery possibly could have been abused in the process is bewildering to say the least.

Equally baffling is the fact that while the letter was being couriered, 'someone' was actively passing on the forged copy of the advisory through some agency to the media.

Whatever it may be, that the office of Sebi has such lax controls and could be easily penetrated is indeed making many sleepless. If the advisory was indeed couriered from within Sebi's premises (as is alleged in some quarters), the fraud would be akin to, say, the Reserve Bank of India allowing its own offices to distribute fake currency.

Forget the origins of the courier for a moment; the delay of well over 24 hours by Sebi in intervening and responding in the matter is creating consternation amongst observers, analysts and market watchers. In the test of alacrity, so crucial in the working of markets, the market regulator has definitely failed.

But who is accountable?
Needless to emphasise, one crucial question remains: who in Sebi is responsible for this? It takes no seer to predict that finally a junior temporary dispatch clerk in Sebi might get the stick. That is, if the courier had been sent through Sebi. Perhaps, the courier company may also have its contract terminated.

Further, with much fanfare, a few brokers may get show cause notices. But given Sebi's track record of being unable to tackle errant players in the markets, brokers may well ignore these notices and continue with their machinations.

Readers may recall that in certain high profile cases it has been our experience that Sebi was able to do precious little, even when it came to enforcing its own regulations.

The recent judgment on Goldman Sachs pertaining to the May 2004 market crash is a classic case in point where Sebi could not walk its own talk

Even if it did on rare occasions (as it did in UBS case or in another case involving Goldman Sachs, both relating to the power of Sebi to call for information and explanations) higher courts -- especially the Securities Appellate Tribunal (SAT) -- had struck down such decisions by Sebi. This has happened much too often, especially on high profile cases.

No wonder then that Sebi plans to introduce a Samadhan scheme (and thereby willingly lose its deterrent powers) with such errant players. By seeking to smoke the peace pipe, it at least hopes to fill its coffers by collecting fines rather than eternally ending up second best in its fight with market players.

In the worst of cases, one can literally commit murder in the future and Sebi could at best be negotiating imposition of fines with the errant players. Consequently, Sebi is seen today more as an irritant than a powerful regulator.

As events bear out, Sebi might have become bureaucratic and thus insensitive over the years. And it is ineffective while dealing with the constantly evolving market situations, especially when the market players are highly dexterous, powerful and have deep pockets.

The entire Pyramid Saimira episode reveals another important fact -- corporate battles are now spinning out of control. Interestingly, regulators instead of controlling them are innocently or otherwise becoming part of these corporate wars. What a fall!

Surely, the time for introspection for Sebi is right now. The lessons from affair Pyramid are compelling for Sebi. It comprehensively exposes the workings within Sebi and its organisational weakness. It quickly needs to puts its house in order.

Obviously, a thorough probe is required, a few heads need to roll, appropriate lessons learnt and order quickly restored. Crucially, the culprits need to be nabbed and punished. Otherwise, Sebi could lose its relevance. And if that happens, it would be the proverbial last straw on the already beleaguered Indian capital market's back.

Source :
http://www.rediff.com/money/2009/jan/07sebi-insider-trading-acquires-a-new-meaning-in-sebi.htm

L&T stakes claim, says it has a plan to save Satyam

Engineering major Larsen & Toubro (L&T) continues to be interested in acquiring Satyam Computer Services. L&T’s Chairman told in a news interview hat L&T, which is one of the largest shareholders of Satyam, is not interested in being a spectator in the ongoing saga.

Mr Naik also expressed his opposition to any IT company taking over the troubled Hyderabad-based company, citing conflict of interest.

The company, which owns 4% in Satyam, is believed to have approached top government officials saying it has an action plan to save the software-maker.

Persons familiar with the matter said Mr Naik has sought an appointment with Prime Minister Manmohan Singh to drive home the point that the engineering company is best suited to take over Satyam, provided the government took care of Satyam’s liabilities.

But, with the board planning to appoint investment bankers, who will examine the option of inducting a strategic partner, it is unclear if the government will directly interfere in the process. Any potential buyer, including L&T, may have to participate in the formal process conducted by the board.

When contacted by ET, Mr Naik denied that L&T has approached the government to take control of Satyam. But, he made it clear that his company doesn’t want to be a passive spectator in the Satyam saga. “I don’t want to be a mute spectator to Satyam’s value being eroded. If we can’t play an active role, we wouldn’t want to take board position,” he said.

L&T is worried that Satyam’s rivals are working overtime to win over its top notch customers and clients. “Unless something is done now, it may be too late for Satyam,” he added.

With elections likely by April this year, the L&T chief fears that the government may slacken in its efforts to salvage Satyam. “My biggest worry is that nothing is going to happen over the next three months, and Satyam will be dead by then,” Mr Naik said. He added, “The need of the hour is to save Satyam from disintegration. For shareholders, it is important that its value is not eroded any further. We are more than ready to help if we are approached by the government agencies,” Mr Naik said.

L&T has been sending feelers to the government that it is not in Satyam’s interest that it is taken over by an IT major, persons in the know said. “There could be a conflict of interest there, and that may not help Satyam retain its top clients. Besides, Satyam’s employees also feel threatened by these big companies, and we need to take note of that,” Mr Naik said.

L&T, which picked up 4% in Satyam before the scandal — dubbed by many as India’s Enron — broke out earlier this month, is sitting on mark-to-market losses of over Rs 400 crore due to a slide in Satyam’s share prices.

Satyam’s six-member board, which includes Deepak Parekh, Kiran Karnik, C Achuthan, TN Manoharan, Tarun Das and S Balakrishnan, is currently in talks with banks and financial institutions to secure the cash it needs to pay salaries to over 50,000 employees by the end of this month and meet other operational expenses.

Also on top of the board agenda is the appointment of a top management team, including a chief executive and a chief financial officer.

L&T was earlier looking to form a strategic alliance with Satyam before the scam broke out, to give a boost to its own IT firm, L&T Infotech. It also wanted to raise its stake to 15% in the troubled software company from the current 4%. “In the past too I had made my intentions clear to raise L&Ts stake to 15%,” Mr Naik said.

Bank fixed deposits regained their lost glory during the hardening of interest rates.

So much so that they even scored over government saving schemes.

Although taking a cue from the government’s recent policies, banks have now started slashing the deposit rates, term deposit schemes still look attractive, particularly in the light of the current financial crisis as well as the market meltdown.

Check out the latest rates banks are offering:

Interest rates by SBI for domestic term deposits below Rs 1 crore:

7 days to 14 days: 3.50%
15 days to 30 days: 4.25%
31 days to 45 days: 4.50%
46 days to 90 days: 6.00%
91 days to 180 days: 6.25%
181 days to 270 days: 6.75%
271 days to less than 1 year: 7.25%
One Year & above: 7.50%

Interest rates from BOI for deposits less than Rs15 lakh :

Maturity: Revised Rates w.e.f. 19.01.2009

07 days to 14 days: 3.25%
15 days to 30 days: 4.25%
31 days to 45 days: 4.50%
46 days to 90 days: 6.00%
91 days to 179 days: 6.25%
180 days to 269 days: 7.25%
270 days to 364 days: 7.50%
1 year to less than 2 years: 8.00%
2 years to less than 3 years: 8.25%
3 years to less than 5 years: 8.25%
5 years and above: 8.25%

Interest rates for deposits Rs 15 lakh and above but less than Rs1 crore:

Maturity: Revised Rates w.e.f. 19.01.2009

07 days to 14 days: 3.25%
15 days to 30 days: 4.25%
31 days to 45 days: 4.50%
46 days to 90 days: 6.00%
91 days to 179 days: 6.25%
180 days to 269 days: 7.25%
270 days to 364 days: 7.50%
1 year to less than 2 years: 8.00%
2 years to less than 3 years: 8.25%
3 years to less than 5 years: 8.25%
5 years and above: 8.25%

Interest rates from HDFC Bank for regular fixed deposits below Rs 15 lakh:

Maturity Period: Revised Rates w.e.f. 12.01.2009

15 - 29 days: 3.50%
30 - 45 days: 4.00%
46 - 60 days: 4.50%
61 - 90 days: 5.00%
91 – 180 days: 5.50%
6 months 1 day - 6 months 15 days: 7.00%
1 year 17 days - 2 years: 8.00%
2 years 17 days - 3 years: 8.00%
3 years 1 day - 5 years: 8.00%
5 years 1 day - 8 years: 8.00%

Interest rates from ICICI Bank for domestic term deposits

Maturity Period: Deposit of less than Rs 15 lakh w.e.f. 19.01.2009

7 days to 14 days: N.A.
15 days to 29 days: 3.75%
30 days to 45 days: 4.00%
46 days to 60 days: 4.00%
61 days to 89 days: 4.00%
90 days: 5.75%
91 days to 180 days: 6.25%
190 days: 7.75%
191 days to 269 days: 7.25%
270 days to less than 1 year: 8.00%
1 year to 389 days: 8.25%
390 days: 8.75%
391 days to 589 days: 8.25%
890 days: 9.00%
891 days upto 10 years: 8.25%

Interest rates from HSBC Bank for domestic / Non-Resident Ordinary Rupee (NRO) term deposit accounts:

FD Period: Interest rates effective from January 7, 2009

15 days: 3.50%
30 days: 4.25%
60 days: 5.25%
90 days: 5.25%
180 days: 5.50%
270 days: 8.00%
1 year: 8.00%
400 days: 8.50%
4 years: 7.50%
5 years: 7.50%

Interest rates from Axis Bank for domestic deposits:

Period:Interest rate on deposits below Rs 15 lakh effective January 9

15 Days to 29 Days: 3.00%
30 days to 45 days: 4.00%
46 days to 60 days: 5.00%
61 days to less than 3 months: 5.00%
3 months to less than 6 months: 6.00%
6 months to less than 9 months: 7.00%
9 months to less than 1 year: 8.00%
1 year to less than 2 years: 8.90%
2 years to less than 3 years: 8.50%
3 years to less than 5 years: 8.00%
5 years upto 10 years: 8.00%

The interest rates from Corporation Bank on domestic term deposits with effect from January 12, 2009:

Duration: Interest rate on less than Rs 15 lakh

15 days to 29 days: 4.75%
30 days to 45 days:5.00
46 Days to 60 Days: 5.50%
61 Days to 90 Days: 6.00%
91 days to less than 6 months: 7.50%
6 months to less than 9 months: 7.75%
9 Months to less than 12 Months: 8.25%
12 months to Less than 2 Years: 8.75%
2 Years to less than 3 Years: 9.00%
3 Years to less than 5 Years: 8.75%
5 Years and above: 8.75%

Duration: Interest rate on 15 lakh upto Rs 1 cr

15 days to 29 days: 4.75%
30 days to 45 days: 5.00%
46 Days to 60 Days: 5.75%
61 Days to 90 Days: 6.25%
91 days to less than 6 months: 7.25%
6 months to less than 9 months: 7.50%
9 Months to less than 12 Months: 8.00%
12 months to Less than 2 Years: 8.75%
2 Years to less than 3 Years: 9.00%
3 Years to less than 5 Years: 8.75%
5 Years and above: 8.75%

10 Investment Tips given by Warren Buffet

Here are the Top 10 Investment Tips given by Warren Buffet in year 2008 Annual Shareholderes' meeting of Berkshire Hathaway, the investment company he has headed since 1965.

1. When you know you're the best, you can afford to tell it like it is. Buffett says: "Our insurance business had an excellent year... that party is over. It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008. So be prepared for lower insurance
earnings during the next few years."

2. Only four things really count when making an investment (or buying whole companies if, like Buffett, you have $141bn to spend) - "a business you understand, favourable long-term economics, able and trustworthy management, and a sensible price tag". That's investment, everything else is speculation.

3. Invest this way and you don't need to constantly look for the next "new" thing, with all the risk that necessarily entails.

Buffett's biggest investments (companies he doesn't own in their entirety) include American Express, Wells Fargo, Procter & Gamble and Coca-Cola.

These four businesses, he notes, were founded in 1850, 1852, 1837 and 1886 respectively. "Start-ups are not our game".

4. Businesses are run by people and the best people are not necessarily the ones with the flashiest CVs. Buffett singles out Susan Jacques, chief executive of his jewellery retailer Borsheims. "Susan came to Borsheims 25 years ago as a $4-an-hour saleswoman. She's smart, she loves the business and she loves her associates. That beats having an MBA degree any time."

5. Even for a super-long-term investor like Buffett, there's always a time to sell. Berkshire Hathaway bought 1.3pc of PetroChina in 2002 and 2003 for $488m, valuing the Chinese oil company at $37bn when Buffett thought it was probably worth $100bn.

When the China share bubble took its value to $275bn last year, way above its fundamental value, Buffett cashed in his holding for $4bn, an eightfold rise in five years.

6. Buffett believes incentivisation of managers on the basis of earnings per share encourages disingenuous, if not downright dishonest, behaviour.

Take the assumptions about future investment returns in corporate pension schemes. The average in America is 8pc, despite the fact that a quarter of pension funds are in bonds and cash (for which a 5pc return would be a reasonable expectation) and the rest in equities, which rose by just 5.3pc a year on average over the 20th century as a whole (a remarkable period of
growth for the US economy).

Managers don't really believe they'll get 8pc, but pretending they will means they can contribute less and so boost their reported profits. "If they are wrong, the chickens won't come home to roost until long after they retire."

7. Between 2002 and 2007, Buffett notes, the euro appreciated from 95 cents to $1.37, yet the US's trade deficit with Germany widened from $36bn to $45bn, the reverse of what should have happened.

As long as these imbalances continue, foreigners will continue to buy up America on the cheap. "This is our doing, not some nefarious plot by foreign governments."

8. Buffett has not lost his eye for witty one-liners which, as usual, make his letters a joy to read. Here he quotes John Stumpf, chief executive of Wells Fargo, on the behaviour of lenders: "It is interesting that the industry has invented new ways to lose money when the old ways seemed to
work just fine."

9. He can see the joke, but Buffett also knows that there is something profoundly wrong at the heart of corporate America.

"As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out - and what we are witnessing at some of our largest financial institutions is an ugly sight."

10. Investors should be realists but the best are optimists too. Buffett has taken premiums worth $4.5bn from investors buying insurance from him against four major stock markets being lower in 15 to 20 years than they are today.

He's confident he'll hold on to those premiums and in the meantime he'll use the cash to make another small fortune. What a man.

Six Lessons for Investors

Six Lessons for Investors Be diversified and don't assume past performance
will continue

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By JOHN C. BOGLE<http://online.wsj.com/search/search_center.html?KEYWORDS=JOHN+C.+BOGL...>

There is almost no limit to the ability of investors to ignore the lessons
of the past. This cost them dearly last year. Here are six of the most
important of these lessons:

1) *Beware of market forecasts, even by experts.* As 2008 began, strategists from Wall Street's 12 major firms forecast the end-of-the-year closing level and earnings of the Standard and Poor's 500 Stock Index. On average, the forecast was for a year-end price of 1,640 and earnings of $97. There was remarkably little disparity of opinion among these sages.

Reality: the S&P closed the year at 903, with reported earnings estimated at $50.

Strategists aren't always wrong. But they have been consistent, betting year after year that the market will rise, usually by about 10%. Thus, they got it about right in 2004, 2006 and 2007, but also totally missed the market declines in 2000, 2001 and 2002, and vastly underestimated the resurgence in 2003.

Ignore the forecasts of inevitably bullish strategists. Bearish strategists
on Wall Street's payroll don't survive for long.

2) *Never underrate the importance of asset allocation. *Investing is not
about owning only common stocks. Nor are historical stock returns a sound
guide to future returns. Virtually all investors should keep some "dry
powder" in their portfolios in the form of high-grade short- and
intermediate-term bonds. Investors who failed to learn that lesson fell on
especially hard times in 2008.

How much in bonds? A good place to start is a bond percentage that equals
your age. Although I don't slavishly adhere to that rule, my bond position
accounted for about 65% of my personal portfolio in early 2000. Because
returns on my bond funds since then have totaled 50% and returns on my stock
funds were negative 25%, bonds are now about 75% of my portfolio, still
close to my advancing age.

With all the focus on historical returns that greatly favor stocks, don't
ignore bonds. Consider not only the probabilities of future returns on
stocks, but the consequences if you are wrong.

3) *Mutual funds with superior performance records often falter.* Last year
was an extreme example. With the S&P 500 off 37% for the year, Legg Mason
Value Trust fell by 55%. Fidelity Magellan Fund, after a good 2007, was off
49%. Funds managed by proven long-term pros felt the pain -- Dodge and Cox
Stock down 43%; Third Avenue Value down 46%; CGM Focus down 48%; Clipper
down 50%; Longleaf Partners down 51%. (Full disclosure: Four of Vanguard's
actively-managed equity funds also lagged the market by wide margins.)

Only time will tell whether the disappointing shortfalls experienced by
these and other funds will be recovered in the future, whether the skills of
their managers have atrophied, or whether their luck has run out. Whatever
the case, chasing past performance is all too often a loser's game. Managers
of funds seeking market-beating returns should make it clear to investors
that they must be prepared to trail the market -- perhaps substantially --
in at least one year of every three.

4) *Owning the market remains the strategy of choice.* Such a strategy
guarantees a return that lags the market return by a minuscule amount, and
exceeds the return captured by active equity-fund managers as a group by a
substantial amount. Why? Because the heavy costs incurred by investors in
actively managed equity funds can easily amount to 2% to 3% annually.
Typical expense ratios run from 1% to 1.5%; the hidden costs of portfolio
turnover often come to 0.5% to 1.0%; a 5% front-end sales load, amortized
over a holding period of five to 10 years, adds another 0.5% to 1.0% per
year in costs.

As a group, investors are by definition indexers. (That is, they own the
entire market.) So indexing wins, not because markets are efficient
(sometimes they are, sometimes they are not), but because its all-in annual
costs amount to as little as 0.1% to 0.2%.

Indexing won in 2008 by an especially wide margin. Low-cost, low-turnover,
no-load S&P 500 index funds outpaced nearly 70% of all equity funds, and
(admittedly a fairer comparison) more than 60% of all funds focused on
large-cap U.S. stocks. This continues the pattern -- with some variations --
that goes back to the start of the first index fund 33 years ago. The bond
index fund did even better. Its return of 5% for 2008 outpaced more than 80%
of all taxable bond funds.

In sum, active management strategies as a group lose because they are
expensive. Passive indexing strategies win because they are cheap.

5) *Look before you leap into alternative asset classes.* During 2006-07,
equity mutual funds focused on developed international markets and emerging
markets provided strong relative returns to U.S. stocks. During that period,
U.S. investors made net purchases of $285 billion in mutual funds investing
in non-U.S. stocks, and liquidated on balance some $35 billion from funds
focused on U.S. stocks.

This extreme example of "performance chasing" at its worst is hardly
defensible. But, disingenuously, it was touted by fund marketers as adding
"non-correlated assets," or "reducing volatility risk." In 2008 -- with
non-U.S. developed market funds falling by 45% and emerging market funds
tumbling by 55%, we learned once again that, just when we need it the most,
international diversification lets us down.

Commodities were no different. As the global recession developed, commodity
funds sank, the largest such fund tumbled 50%. Always keep in mind: When the
investment grass looks greener on the other side of the fence, look twice
before you leap.

6) *Beware of financial innovation. *Why? Because most of it is designed to
enrich the innovators, not investors. Just think of the multiple layers of
fees to the salespersons, servicers, banks, underwriters and brokers selling mortgage-backed debt obligations. These new products (credit default swaps are another example) enriched their marketers during 2005-07, only to impoverish the clients who held them in 2008.

Our financial system is driven by a giant marketing machine in which the
interests of sellers directly conflict with the interests of buyers. The
sellers, having (as ever) the information advantage, nearly always win.

We can't say that we haven't been warned about the perils of ignoring the
past. More than 2,000 years ago, the Roman orator Cato noted that, "there
must be a vast fund of stupidity in human nature, or else men would not be
caught as they are, a thousand times over, by the same snares . . . while
they yet remember their past misfortunes, they go on to court and encourage
the causes to what they were owing, and which will again produce them."

While the events of 2008 reinforced that message, perhaps these stern and
oft-repeated lessons of experience will help investors avoid similar
mistakes in 2009 and beyond.

*Mr. Bogle is the founder and former chief executive of the Vanguard Group
of Mutual Funds. His newest book, "Enough. True Measures of Money, Business, and Life," was published by Wiley in November.*

Satyam Computer leads the fall, Sensex down by 749 pts

The benchmark Sensex came down by a whopping 749 points on concerns over corporate governance after India's fourth-largest IT company by sales Satyam Computer Services admitted that its accounts were manipulated.

Panic selling was seen across the board as all sectoral indices ended in the red with an average fall of 2.08 per cent to 16.95 per cent.

Satyam Computer plunged into a deep crisis, as Chairman B Ramalinga Raju resigned after admitting to major financial wrong-doing, which might keep foreign investors away for the time being.

His brother and the Managing Director of the Company, B Rama Raju, also resigned. The promoters' share in Satyam has now dipped to just over 3 per cent, and that too is pledged with lenders.

The market regulator SEBI also said that it would take all necessary steps under the law. The counter was at the receiving end and slumped by 77.69 per cent at the end.

The Bombay Stock Exchange 30-share Sensex initially touched a high of 10,469.72, up by nearly 134 points, but it collapsed like a pack of cards after news of Satyam Computer filtered in.

It tumbled to close at 9,586.88, a net loss of 749.05 points, never seen since October 24, 2008, or 7.25 per cent over the previous close. The Sensex ended first in negative terrotory after January 1.

The broader 50-share Nifty of the National Stock Exchange also plunged 192.40 points or 6.18 per cent to 2,920.40 from the previous close.

Counters of realty, refinery and banking stocks also suffered a sharp setback and contributed to the fall.