Crisis of confidence

The old-fashioned financial system was like Old Maid, a parlour game once beloved of small children. The banks were like players, dealt hands from a pack of cards, which they swapped among each other. At the end, one player was left holding a lonely queen—a bad debt, if you will—and lost. Over the past few decades the game has changed. Securitisation has snipped the old maid into pieces; new faces, such as hedge funds, have joined the party, enabling the banks to distribute those pieces among a larger number of players. When the game is over, lots of players are left holding small losses instead of one player holding a big one.
During two exceedingly prosperous decades, that theory seemed to work just fine. But the swings in almost all financial markets this month have made dispersed risk suddenly morph into dispersed mistrust. The uncertainty has been magnified .Meanwhile, collateralised-debt obligations (CDOs), made up of clumps of those securities and laced with leverage, have become almost impossible to trade. So none of the players really knows how much he has lost. While this uncertainty lasts, investors are taking it out on the banks that peddled the securities by dumping their shares; and the banks are taking it out on those they sold them to by demanding more collateral on their loans. The banks have even grown cagey about lending to each other.
The doubts burst into the open on August 9th when central banks were forced to inject liquidity into the overnight money markets because banks were charging punitive rates to lend to each other. At first, the problems appeared more serious among European banks. The pain in America was concentrated in the largest hedge funds, including those run by Wall Street’s biggest name, Goldman Sachs. Increasingly, however, analysts worry about the exposure of American, Canadian and Asian banks.
On Wednesday August 15th shares in Countrywide Financial, a large American mortgage lender, fell 13% after an analyst gave warning of possible funding difficulties. Despite liquidity injections by the Federal Reserve on August 15th, the S&P 500 index fell 1.4%. The heavy selling spread to Asian and European stocks on August 16th.
Every crisis begets finger-pointing, and the blame now is falling on the rating agencies that helped structure these exotic instruments. Currently, they are guided by a voluntary code that aims to tackle potential conflicts of interest. The biggest is that the agencies are paid by the firms they rate. Rating CDOs was a profitable business.
If these securities are now downgraded, banks could be forced to offload lots of illiquid instruments into a falling market—one of the fastest ways to lose money yet devised. But if there are no buyers, banks may have to sell something else to shore up their balance sheets.
Something like this indiscriminate selling has been affecting hedge funds over the past couple of weeks. Faced with more demanding standards from their banks and investors, some have been forced to unwind positions in order to realise cash. That has led to unusual movements in debt and equity markets, which have only got some funds deeper into trouble. Quantitative funds have been hardest hit, as investment models that had made money for ages briefly proved worse than useless.
Since banks lend to hedge funds, any problems there quickly become their concern. On top of this, both Bear Stearns and Goldman Sachs have found that when funds bearing their name get into trouble the desire to preserve their reputations soon leads to a rescue. Sometimes risk is not as far away from the banks as it seems.
At the end of Old Maid as banks used to play it, the loser would take a big write-off and then everyone could start playing again. In the new version, the use of leverage means the game is being played with hundreds of packs of cards and by thousands of different players. Working out who has won and who has lost in this round will take a long time.

Economist

Gulf emerging as big market for Indian medical tourism

India's growing reputation as a major medical tourism destination is attracting more and more visitors from Gulf countries. And many travel agents are now offering packages combining treatment with a vacation. The Gulf is one of the most important markets for India's tourism industry. In the last two years, there has been a significant growth in the number of visitors from this region going to India for medical tourism.

He said that though the West has been the traditional medical tourism destination for Gulf citizens, the trend changed after the 9/11 terror attacks and with the Indian government launching the Incredible India campaign, the total concept of India in the region has changed.. They have also realised that top hospitals in India like Apollo, Max or the J J Hospital in Mumbai can carry out major operations at a fraction of the cost in the West.

While a heart surgery costs $30,000 in the US, it can be done for just around $6,000 in India.
A bone marrow transplantation comes for just $26,000 in India compared to $250,000 in the US. Replacement of a heart valve in India costs less than half of what it costs in the West.

In fact, travel agents here are making innovative packages combining medical treatment and pleasure trips. Such packages usually include flights, transfers, hotels, medical treatment followed by a post-operative vacation.

Though exact figures were not available to show the rise in the number of visitors to India from here for medical tourism, the overall figures show a growing trend in the number of tourists from the Gulf to India. In 2007, the Indian missions in the UAE issued a total of 60,814 visas compared to 50,076 in 2006. Similarly, the Indian embassy in Oman issued 21,843 visas in 2007 as against 18,476 the previous year.

Overall, Indian missions in 12 Gulf and Middle East nations issued 172,689 visas in 2007 compared to 149,568 in 2006, a rise of 16 percent. While Arab tourists like going to Mumbai, Goa and the golden triangle of north India - Delhi-Agra-Jaipur - a majority of expatriate Indians in the region go to south Indian tourist destinations.A large chunk of the 5.5 million-strong expatriate Indian community in the Gulf come from south India.
To exploit the full potential of the Gulf market, India's tourism authorities are now stepping up the Incredible India campaign in this region.