Traders Tax - Wash Sale Rules for Traders

Generally, the wash sale rule applies to traders the same way it applies to investors. The difference is that traders have a much harder time keeping records relating to wash sales because they engage in so many transactions.

The wash sale rule basically says that if you sell a stock or securities at a loss and buy replacement stock or securities 30-days before, or 30- days after the sale of substantially identical stock or securities, you can’t deduct the loss. This rule does not apply to gains—only to losses. Naturally, the IRS wants to tax all of your gains. The best way to show the impact of the wash sale rule is through an example:

On October 20, 2003 you purchase 1000 shares of Microsoft at $35 a share. On December 15, 2003 you sell the 1000 shares in Microsoft at $15 a share and realize a $20,000 loss. On January 5, 2004 you buy back 1000 shares of Microsoft at $15 a share. Unfortunately, because of the wash sale rules, your $20,000 loss in 2003 is disallowed.

If you wind up with a wash sale, add your disallowed loss to the basis of your replacement security. Your new basis is the purchase price of the replacement, plus the loss you couldn’t take, plus fees related to the security’s purchase. This means your loss is postponed; it’s not gone forever. In the above example, your basis in the Microsoft stock you repurchased on January 5, 2004 would be $35 a share ($15 purchase price + $20 loss on the sale) and not the $15 a share you purchased it at.

The definition of replacement stock is not obvious either. The IRS says it can’t be “substantially identical” to the security you sold. It’s easier to differentiate stocks in different corporations than it is mutual funds, as no stock in one company is substantially identical to the stock of another company, even within the same industry. After all, each company differs from others in numerous ways.

With mutual funds though, replacement purchases get sticky. If two different funds track the same index and share virtually identical performance, they’re considered substantially identical. Eliminate this problem by buying a mutual fund that moves in the same direction as the one you sold, but one that tracks off a different index.

When you sell the replacement security at a profit later, your basis will be higher, so your gain will lower. The end result? Less tax on a smaller gain. If you sell lower than your replacement security basis, your loss will be larger than it would be if based on the repurchase price alone, so you eventually get the recovery. All is not lost; the wash sale rule operates to defer recognition of the loss, not disallow it forever.

When you make a wash sale, your holding period for the replacement stock includes the period you held the stock you sold. This rule prevents you from converting a long-term loss into a short-term loss.

Most investors run into the wash sale rule only occasionally. If you're an active trader, you're likely to have a large number of wash sales each year. All is not lost; there are several ways to avoid having to deal with the wash sale rules that I will cover next.

Two Ways to Avoid Wash Sales

If you make hundreds or thousands of trades each year, it’s nearly impossible to comply with wash sale record keeping rules. But active traders have several ways to eliminate this problem.

The first way to avoid the wash sale rule is to simply wait for 31 days after you sold the stock or option before you buy it back. The second way, which is only available to traders and not investors, is to elect the mark-to-market accounting method. Full details of the mark-to-market election are beyond the scope of this article, but it's worth pointing out that a trader who makes the mark-to-market election isn't subject to the wash sale rule.

There are some other important things you need to know if you're thinking of making this election. If you make the mark-to-market election:

• All your trading gains and losses will be treated as ordinary gain or loss, not capital gain or loss.
• Any stock or other trading asset you hold at the end of the year is "marked to market." This means you report gain or loss as if you sold it at the close of business on the last trading day of the year for its fair market value.
• You're stuck with it. You can revoke your mark-to-market election only with the consent of the IRS.

It's easy to see why the wash sale rule doesn't apply if you make this election. All your gains and losses are reported at the end of the year, whether you sell the stocks or not.
         

There's no point in worrying about whether someone sold the stock and bought it back.

Additional Rules Relating to Wash Sales

Below are several different items you need to consider when you deal with the wash sale rules:

• If you buy identical shares within 30 days, but they’re not replacement shares, it’s not a wash sale.
• You’ll have to follow mechanical rules to handle a situation where you don't buy exactly the same number of shares you sold, or where you buy and sell multiple lots of shares.
• Your loss may be disallowed if a person related to you (or an entity related to you, such as an IRA) buys replacement property.
• If you enter into a contract or option to acquire replacement stock during the wash sale period, it’s considered a wash sale.
• If you don't sell the replacement stock in the same year, your loss will be postponed--possibly to a year when the deduction is of far less value.
• If you die before selling the replacement stock, your heirs will not benefit from the basis adjustment.You can also lose deduction benefits permanently if you sell stock and arrange to have a related person — or your IRA — buy replacement stock.

The wash sale rule is an important issue for all traders and investors. We hope this article is helpful to you in understanding the rule and in keeping it from becoming any more of a problem for you than is absolutely necessary. Look for additional articles from Traders Accounting in the near future that will address other topics of vital interest to traders!

Zen Stories III

We'll See...

There is a Taoist story of an old farmer who had worked his crops for many years. One day his horse ran away. Upon hearing the news, his neighbors came to visit.
"Such bad luck," they said sympathetically.
"We'll see," the farmer replied.
The next morning the horse returned, bringing with it three other wild horses.
"How wonderful," the neighbors exclaimed.
"We'll see," replied the old man.
The following day, his son tried to ride one of the untamed horses, was thrown, and broke his leg. The neighbors again came to offer their sympathy on his misfortune.
"We'll see," answered the farmer.
The day after, military officials came to the village to draft young men into the army. Seeing that the son's leg was broken, they passed him by. The neighbors congratulated the farmer on how well things had turned out.
"We'll see" said the farmer.

The Nature of Things

Two monks were washing their bowls in the river when they noticed a scorpion that was drowning. One monk immediately scooped it up and set it upon the bank. In the process he was stung. He went back to washing his bowl and again the scorpion fell in. The monk saved the scorpion and was again stung.
The other monk asked him, "Friend, why do you continue to save the scorpion when you know it's nature is to sting?"
"Because," the monk replied, "to save it is my nature."

Working Very Hard

A martial arts student went to his teacher and said earnestly, "I am devoted to studying your martial system. How long will it take me to master it."
The teacher's reply was casual, "Ten years."
Impatiently, the student answered, "But I want to master it faster than that. I will work very hard. I will practice everyday, ten or more hours a day if I have to. How long will it take then?"
The teacher thought for a moment,
"20 years."

The Moon Cannot Be Stolen

A Zen Master lived the simplest kind of life in a little hut at the foot of a mountain. One evening, while he was away, a thief sneaked into the hut only to find there was nothing in it to steal.
The Zen Master returned and found him. "You have come a long way to visit me," he told the prowler, "and you should not return empty handed. Please take my clothes as a gift."
The thief was bewildered, but he took the clothes and ran away.
The Master sat naked, watching the moon. "Poor fellow," he mused, " I wish I could give him this beautiful moon."



Also Read:



Zen Stories I
Zen Stories II

Zen Stories IV 

How To Prepare Your Curriculum Vitae

Your CV  is the first impression your prospective employers get of you.

The goal of your CV is to secure an interview so it should accurately describe yourself and  market yourself to a prospective employer. Use your CV as a tool to secure an interview. A good CV alone won't get you a job. However a bad CV will prevent you from getting an interview. Use short sentences and plain English – KISS – Keep it short and simple. Here are some useful tips.

Presentation
Always type your CV on good quality white paper, avoid using computer graphics. Make your CV professional, business-like style and a focus on key achievements. Check for spelling and grammar. Spelling mistakes can show a lack of attention to detail and create a negative impression .Use short paragraphs include your contributions at each one of your jobs. Dates are important - double check all dates and qualifications. Use small paragraphs and keep it simple. Use bullets, tabs and bold to make it easy to read. Limit your CV to two pages. Jarring colours and overdone designs can take the attention away from the main content.

Personal details
These should include your: Name, address and contact telephone numbers .Date of birth. Nationality.

Education qualifications
Education and career history should be in reverse chronological order – most recent first. Include the dates and grades of your exams. Give details of  all professional qualifications or relevant and recent courses attended. Include school and university/college qualifications, start with the most recent and include grades and dates

Employment history
Allocate the largest amount of space to your most recent job. Include your contributions at each one of your jobs. Keep descriptions of previous roles brief. Don't leave any gaps in your employment history.

Personal interests
Your personal interests are often as important as qualifications and work history so think carefully about what you put, but be honest. Be specific. Your interests can reveal a lot about you. Don't list things for the sake of it! Be prepared to answer questions about your interests. If you like reading books be prepared to answer about the book you have last read.


References
References will be checked before a job offer is made. There is no need to include details of referees on your CV now. Simply write 'references available on request'. Be prepared to give two or three references, if you are selected ,they must not be related to you.

Checking your CV is possibly the most important part of the entire process. A small error, or misleading information, can seriously undermine all your effort. Your resume should speak for itself in terms of credentials. Of course, you can use the interview to elaborate or fill in the blanks on your expertise.

BCG Growth Share Matrix for Strategic Management

Boston Consulting Group developed this BCG Growth Share Matrix which helps you to determine what priorities should be given in your product portfolio of a product. BCG growth share matrix is a strategic management analytical tool. This provides guidance for all resource allocation among the company 
's business units.

BCG matrix has essentially two dimensions - relative market share and market growth rate. It can be used to classify product portfolio in four business types based on four graphic labels including Stars, Cash Cows, Dogs and Question Marks.

Stars: Leaders of the business comes in stars group. Products in this category are in high growth rate & high market share. It generates high cash flow and requires high cash input. Cash flow is flat in this category.

Cash Cows: Foundation of the business (stars of past years). Products in this category are in low growth rate & high market share. They generate high cash flow with low cash input requirements.

Dogs: Drags of the business. Products in this category are in low growth rate & low market share. They must be avoided whenever possible. Liquidate as many as possible.

Question Marks: Ambiguity of the business - Products in this category are in high growth rate & low market share. It requires high cash demand and low returns. Usually new products are comes in question marks. If you keep new products in question marks, you must ensure increase in market share and deliver cash.

Strategies to Pursue BCG Matrix

Build: The product market share needs to be increased to strengthen its position. Short-term earnings and profits are intentionally forfeited because it is hoped that the long-term earnings and profit will be much higher than this. This strategy is suited to Question Marks if they want to become stars.

Hold: The objective is to maintain the current market share position and this strategy is often used for Cash Cows so that they continue to generate large amounts of cash.

Harvest: Company tries to increase short-term cash flows as far as possible even at no profit and no loss. It is a strategy suited to weak Cash Cows or Cash Cows that are in a market with a limited future. Harvesting is also used for Question Marks where there is no possibility of turning them into Stars, and for Dogs.

Divest: This strategy is to rid the organization of the products that are drain on profits and to utilize these resources elsewhere in the business to make greater benefit. This strategy is typically used for Question Marks that will not become Stars and Dogs.

5 tips to be an active listener

Listening is one of the most important skills you can have. How well you listen has a major impact on your job effectiveness, and on the quality of your relationships with others.

Why is it important to become a good listener?

•  We listen to obtain information.
•  We listen to understand.
•  We listen for enjoyment.
•  We listen to learn.

Unfortunately, most of us only remember somewhere between 25-50% of what we hear, which means when we're receiving directions or being presented with information, we probably aren't hearing the whole message.  So, boosting our listening skills is important.  By becoming better listeners, we can avoid conflict and misunderstandings and improve our productivity, as well as our ability to influence, persuade and negotiate.

There are 5 key elements of active listening. They help ensure that you hear the other person, and that the other person knows you are hearing what they are saying.

1.      Pay Attention.
Give the speaker your undivided attention and acknowledge what they're saying. Recognize that what is not said also speaks loudly.

• Look at the speaker directly.
• Shelve distracting thoughts. Don't mentally prepare a rebuttal.
• Avoid being distracted by other things happening around you.
• Listen" to the speaker's facial expressions and body language.
•  Refrain from side conversations (when listening in a group setting).

2.      Show that You're Listening.
Use your own body language and gestures to convey your attention.

• Put away electronic devices. They can often be used as a distraction and a way to tune out.  Using them is disrespectful to the speaker.
•  Nod occasionally, and smile and use other facial expressions.
• Note your posture and make sure it is open and inviting.  Crossed arms or "lazy" posture indicates that you're not engaged.
• Encourage the speaker to continue.  Use small verbal cues, such as "yes," and "uh huh."

3.      Provide Feedback.
Our personal beliefs, assumptions and judgments can distort what we hear. As a listener, your role is to understand what is being said.

• Reflect what has been said by paraphrasing. "What I‚m hearing is," and "Sounds like you are saying" are great ways to reflect back.
• Ask questions to clarify certain points. "What do you mean when you say," and "Is this what you mean?"
• Summarize the speaker's comments periodically.

4.      Defer Judgment.
Interrupting is a waste of time. It frustrates the speaker and limits full understanding of the message.

• Allow the speaker to finish.
• Don't interrupt with counter-arguments.

5.      Respond Appropriately.
Active listening is a model for respect and understanding. You are gaining information and perspective. You add nothing by attacking the speaker or otherwise putting him or her down.

• Be candid, open, and honest in your response.
• Assert your opinions respectfully.
• Treat the other person as he or she would want to be treated.

How can active listening help you in your professional or personal life?  Share your comments.

Zen Stories II

Holy Man

 
Word spread across the countryside about the wise Holy Man who lived in a small house atop the mountain. A man from the village decided to make the long and difficult journey to visit him.
 
When he arrived at the house, he saw an old servant inside who greeting him at the door.
"I would like to see the wise Holy Man," he said to the servant.
 
The servant smiled and led him inside. As they walked through the house, the man from the village looked eagerly around the house, anticipating his encounter with the Holy Man.
Before he knew it, he had been led to the back door and escorted outside. He stopped and turned to the servant,
 
"But I want to see the Holy Man!"
 
"You already have," said the old man. "Everyone you may meet in life, even if they appear plain and insignificant... see each of them as a wise Holy Man. If you do this, then whatever problem you brought here today will be solved."

I Don't Know

 
The emperor, who was a devout Buddhist, invited a great Zen master to the Palace in order to ask him questions about Buddhism.
 
"What is the highest truth of the holy Buddhist doctrine?" the emperor inquired.
 
"Vast emptiness... and not a trace of holiness," the master replied.
 
"If there is no holiness," the emperor said, "then who or what are you?"
 
"I do not know," the master replied.

Is That So?

 
A beautiful girl in the village was pregnant. Her angry parents demanded to know who was the father. At first resistant to confess, the anxious and embarrassed girl finally pointed to Hakuin, the Zen master whom everyone previously revered for living such a pure life. When the outraged parents confronted Hakuin with their daughter's accusation, he simply replied "Is that so?"
 
When the child was born, the parents brought it to the Hakuin, who now was viewed as a pariah by the whole village. They demanded that he take care of the child since it was his responsibility. "Is that so?" Hakuin said calmly as he accepted the child.
 
For many months he took very good care of the child until the daughter could no longer withstand the lie she had told. She confessed that the real father was a young man in the village whom she had tried to protect. The parents immediately went to Hakuin to see if he would return the baby. With profuse apologies they explained what had happened. "Is that so?" Hakuin said as he handed them the child.

Nature's Beauty

 
A priest was in charge of the garden within a famous Zen temple. He had been given the job because he loved the flowers, shrubs, and trees. Next to the temple there was another, smaller temple where there lived a very old Zen master.
 
One day, when the priest was expecting some special guests, he took extra care in tending to the garden. He pulled the weeds, trimmed the shrubs, combed the moss, and spent a long time meticulously raking up and carefully arranging all the dry autumn leaves. As he worked, the old master watched him with interest from across the wall that separated the temples.
 
When he had finished, the priest stood back to admire his work. "Isn't it beautiful," he called out to the old master. "Yes," replied the old man, "but there is something missing. Help me over this wall and I'll put it right for you."
 
After hesitating, the priest lifted the old fellow over and set him down. Slowly, the master walked to the tree near the center of the garden, grabbed it by the trunk, and shook it. Leaves showered down all over the garden. "There," said the old man, "you can put me back now."




Also Read:


Zen Stories I

Zen Stories III
Zen Stories IV 

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1.03.01

Price Deflator / GDP Deflator

What is a price deflator ?



A deflator is used to convert data compiled over a period into prices prevailing at an earlier point in time.for example,the current price of a television can be deflated to what it would cost say three years ago.Essentially,a deflator removes the effect of inflation from data,making it comparable across periods.


What is the role of price deflator in GDP calculations ?


Prices are always in a state of flux,but generally move upwards over time.Therefore,a change in prices can give the impression of an increase in the gross domestic product (GDP -- a measure of national income) even without an increase in the quantity of goods and services produced by an economy.The impact of prices has to be removed to arrive at a true measure of economic growth.A deflator is used to restate output estimates at current prices into what they would be if calculated with reference to prices in an earlier year.This will give an idea of the real growth in the economy,minus the price effect.


Why is GDP deflator considered a good measure of inflation ?


The ratio between the GDP at current prices and GDP at constant prices gives an idea of the increase in prices of all goods and services with reference to the base year.In that sense it is a more comprehensive measure of inflation than price indices,which are based only on a limited basket of goods collected from select centres.However,the deflator comes with a lag,which limits its usefulness.


How is it used in India ?


In India a combination of WPI and CPI is used as deflator.The usage is dependent on the particular estimate we are trying to deflate.There will be different deflators for private consumption and government consumption.There is a difference in the value of quarterly and year-end deflators.This is due to the fact that prices are not constant.At the year-end we have an overall measure of WPI/CPI,which is used appropriately.This is why year-end estimates of GDP are more reliable than quarterly estimates.

Best Speech ever

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1.03.01

Effective Body Language

It begins even before you say your first word.

As the client or prospect walks toward you to shake hands, an opinion is already being formed.

And as you sit waiting to "sell" what you have to say, you are already being judged by your appearance, posture, smile or your nervous look.

We all want to appear confident and successful, but often forget how much body language affects how others perceive us.  It's important to raise our self-awareness and understand the nonverbal signals we send.  Often it's not what we say that influences others, but rather what we do not say.  The clues we send nonverbally suggest attitude, understanding, empathy, and ethics.

Janine Driver, in her book You Say More Than You Think: A 7-Day Plan for Using the New Body Language, cites the "7%-38%-55% Rule," coined by psychologists who claim that the impact we make on others depends on what we say (7%), how we say it (38%), and most importantly, by our body language (55%).

Whether sitting, standing, or making eye contact, we are always communicating nonverbally. If you've spoken to a group or participated in a meeting lately, you've undoubtedly noticed body language at play.  Here are 5 nonverbal messages to be aware of - for both speakers and participants.

As a speaker

Strong and effective body language can help establish an immediate rapport with an audience, signaling confidence in your message.

• Vocal expression.  Does your voice project warmth, confidence and enthusiasm, or is it flat, strained and blocked?  A voice that has a lot of variety in tone, pitch, rate of speech, and expression is the opposite of a monotone, which quickly becomes boring.  A moderate rate, punctuated by appropriate pauses is also important. Mastering just these 2 aspects of the voice will infuse your delivery with a level of power and energy that will engage participants.
• Posture.  If you are standing, certain positions can be viewed as aggressive. Arms crossed over chest may be viewed as defensive, and hands on hips translate to "You can't tell ME what to do." Keeping your hands stiffly by your side or stuck in your pockets can give the impression that you're insecure whether you are or not.  Stand in a comfortable body position that is not slouching in order to convey confidence and openness. Use slight hand gestures while speaking to suggest energy and emphasis.
• Eye contact.  It's important to build rapport with your audience by looking at them. If it's a fairly small group (20 or fewer), you should try for contact with each person. In a large group, take in small groups. Aim for 3-5 seconds per contact.  If you don't look people in the eye, they may feel that you are insecure or aren't being truthful.
• Movement.  Great speakers move around the room, pointing to a slide instead of reading from it, placing their hands on someone's shoulders instead of keeping their distance. Don't animate your slides - animate your body!  Standing in one spot makes you seem stiff and uninteresting.  Pacing back and forth shows your nervousness and insecurity.  Moving around comfortably conveys confidence and a sense of ease
• Use your hands.  When you're speaking, let your hands support your message. Positive hand gestures convey confidence and strength.  Great speakers use hand gestures more than average. Watch charismatic speakers like Bill Clinton, Colin Powell, or Barack Obama. You'll notice that they punctuate nearly every sentence with a hand gesture. To support messages about things that are spiritual or uplifting, raise your hands shoulder level or above (note how a church minister will raise his hands in blessing).  Regular messages are supported by gestures at the middle level of your body, and gestures below the waist support unpleasant or less than desirable messages.

To get a sense of strong, positive body language, look back at memorable speakers you've heard. Which ones stand out? The ones who were more animated and entertaining, or the ones who just gave out information?

As a meeting participant or listener
You may only be listening, but your nonverbal signals can speak volumes.

• Posture.  Sitting in a straight but relaxed position in a chair during a meeting signals that you're open and attentive, and leaning forward slightly indicates that you're interested and engaged with what's happening.  This quickly changes if you slouch in your chair or lean back with your hands behind your head.  Suddenly you're expressing disinterest, boredom or superiority.  Cross your arms in front of your chest and you may be expressing insecurity or a defensive position.
• Eye contact.  Rolling the eyes, checking your watch, not focusing on a speaker or not making eye contact can all be viewed as workplace body language that says "I'd rather be doing something else," and expresses disinterest.
• Active listening.  Smiling and nodding are appropriate workplace body language when talking with others. They are a form of active listening that says, "I get you, and I agree with you." (When you don't agree with someone it's usually not appropriate workplace body language to smile and nod, and it will seem like a contradiction.) Leaning forward or in more closely to a speaker also shows interest.
• Don't fidget. There is nothing worse than people playing with their hair or jewelry, tugging at their clothes, clicking pen tops, tapping feet or unconsciously touching parts of the body.  This type of body language can express insecurity, boredom and disinterest, and immaturity.  Offer your speaker respect and don't distract others by fidgeting.
• Put away the electronic devices.  Yes, we're a tech savvy world.  But tech devices have their place and it's not in a meeting.  Checking email and banging away on a laptop is disrespectful to the speaker and sends the signal that you're bored, not interested, or not fully engaged in the meeting.  If you must reply to an urgent email, do so at break or politely excuse yourself.

What types of body language have you observed, or what nonverbal signals do you want to work on?  Post your comments.

Thornton's 3-C Leadership Model

Numerous theories have been put forth about the many aspects of leadership such as motivation, alignment, and empowerment. However, it is not obvious how these pieces fit together into a coherent model, if they do at all. As such, leadership has a reputation of being an art that is practiced by the lucky few who possess certain talents.

In his 1999 book, Be The Leader, Make The Difference, consultant Paul B. Thornton proposed an integrating framework that takes these various leadership ideas and transforms them into a model that quickly can be studied, understood, and implemented by managers in order to develop an effective leadership style and better lead their organizations. The model is based on the premise that leaders exist because individuals need guidance, without which they do not always know what they can accomplish, what they should accomplish, or how to accomplish it. To this end, leaders can provide challenge, confidence, and coaching. Thornton calls this framework the 3-C Leadership Model and depicted it as shown below.

This three vertex diagram illustrates the balanced relationship among the three 3-Cs of leadership: presenting a challenge, building confidence, and providing coaching.

Present a Challenge

Of the 3 aspects of leadership, challenge is the one that is practiced most widely by managers as they ask their employee's to set increasingly higher goals. Human nature is such that most people do not want to leave their comfort zone and therefore are inclined to suggest small, incremental improvements in their objectives. In today's competitive environment, such small improvements often are insufficient. Improvements of 30%, 50%, or even several hundred percent sometimes are required. There are many ways in which leaders can challenge their employees. They can:

• Share their vision, inspiring them to believe that more is possible.
• Set very high goals, forcing people to leave their comfort zones to find ways to achieve them.
• Ask challenging questions that lead people to reconsider their assumptions about what is possible.
• Use benchmarking to reveal the best practices of others and use these as a challenge.
• Provide a wide variety of assignments. Many firms make it a policy to expose their employees to a wide range of aspects of the firm. Each new position is a new challenge that develops the employee further.

Once success is achieved, it is important continue raising the bar in order to fight the temptation to rest on one's laurels.

Build Confidence

A challenge brings people out of their comfort zones, often resulting in a drop in their confidence level. Without confidence, the challenging goals that caused the drop in confidence in the first place become even more difficult to reach. Therefore, a major responsibility of a leader is to build confidence in his or her employees so that they will believe in their ability to reach their objectives.

Many motivation experts make the case for positive thinking and self-affirmation as a means of building confidence. Paul Thornton argues that simply thinking something does not make it reality, and that a person achieves genuine self-confidence not by repeating affirmations but by actually working and achieving something. In the process of achievement we expand our abilities, and these expanded abilities create a more genuine, lasting confidence.

With this philosophy in mind, leaders can instill real confidence in their employees by:

• Recognizing and rewarding positive accomplishments rather than focusing on deficiencies.
• Providing professional development in order to build confidence through competence.
• Empowering them by providing both responsibility and authority, thereby expressing confidence in them.
• Verbally expressing confidence in them.
• Reminding them of past successes that may have faded from their consciousness in the face of new challenges.

Provide Coaching

Coaching is the process of advising people in a way that facilitates their success. It may take various forms, from training to offering a broader perspective. Coaching can help employees to better understand how their efforts fit into the larger strategy, thereby allowing them to make better decisions.

Leaders may coach employees by:

• Providing feedback immediately after the employee performs some important task such as meeting with a client or delivering a presentation.
• Showing them the best practices of others as examples of how tasks can be accomplished.
• Posing carefully formulated questions designed to improve their understanding by leading them to think through the situation.
• Setting an example, especially one of continual self-improvement.

Overcoaching should be avoided as it can create dependent employees, reduce their initiative, and cause them to feel micro-managed.

Relationship Among the 3-Cs

The triangle diagram is particularly appropriate for depicting the 3-C Leadership Model because there is no single "correct" order and because balance among the three vertices is important.

The 3-Cs do not need to occur in any specific order. For example, the leader may choose first to present a challenge, then to build the confidence needed to meet the challenge, followed by coaching. Alternatively, the leader first may build the team's confidence, then present the grand challenge.

A proper balance among the 3-Cs is important. Consider the balance between confidence and challenge. A significant challenge without enough confidence likely would result in failure. Conversely, high confidence with little challenge would result in under-utilization of one's abilities and boredom. In the case of insufficient confidence, coaching can be used to improve the employee's skills and thus build confidence. In the case of insufficient challenge, the employee may need to be offered an assignment that better utilizes his or her capabilities.

When the right balance is achieved, employees will experience a higher degree of effectiveness and satisfaction in their work.

National Income Accounting/GDP Calculation

GROSS DOMESTIC PRODUCT: The gross domestic product (GDP) is the aggregate monetary value of all goods and services produced in the country during a period of time. The word domestic here assumes special importance as it highlights the fact that only goods & services produced within the confines of the country would be taken into account while calculating the GDP.


CALCULATING GDP: There are 3 ways for calculating a countrys GDP:
1 SUPPLY/PRODUCTION SIDE: The whole economy is divided into distinct water-tight segments-Agri,industry & services. The total value of output of goods and services & the value of inputs of raw materials & services used for production is estimated for each of these. The value added for each sector is arrived at by deducting from the total value of output the value of inputs of raw materials and services is attained.
2 DEMAND/EXPENDITURE SIDE: The income generated at production stage is finally spent on purchase of goods & services or is invested. GDP can, therefore, be also estimated from the expenditure by different segments namely government,private sector and investments. Private final consumption expenditure would include all household expenditure on goods and services except on land and buildings. GFCE would include the amount the government pays to its employees. The remaining part of expenditure would be classified under gross fixed capital formation, which would include various kinds of investments.Adding all three of the expen-ditures would give us a third estimate of GDP.
3 INCOME SIDE: Income generated during the production of goods & services is distributed between two factor inputs,labour & capital. Income is distributed among people who own the capital & those put in their labour.Through this exercise we get a second estimate of GDP.


Difference in the three sets of numbers: The differences arise due to the following reasons. We have a number of taxes/subsidies on various products.This should explain the differnces between the supply and demand estimates of GDP. Various estimation methods are used under different approaches,which also caused discrepancy in data.


Supply side widely followed: The supply side estimation of GDP is taken to be more accurate. The baseline figure for GDP growth put out by the CSO is based on the one derived from the supply/production side. Any revision in the expenditure side of the equation is therefore does not affect the headline. GDP The two sets of numbers helps policymakers/analysts to understand the current position of the industries and the overall demand picture.

How to turn an Interview into a Job

Instructions

1. CALL the day before your interview to confirm the appointment (time, location) and ask if there is anything you need to bring with you. This helps you stand out from the other candidates, shows interest and preparation.
2. Do RESEARCH on the company you are interviewing with, this will build your comfort level, will assist you in answering a few key questions and again will show your interest in the position.
3. BODY LANGUAGE is huge in an interview! Have an open posture such as slight forward lean, uncrossed legs and arms. Mirror their gestures to help build rapport by sitting in a similar manner, similar hand movements, facial expressions. Of course your not copying every move, just slightly mirroring.
4. So, do YOU have any QUESTIONS ? Always say YES to this and have a few questions prepared, have at least 6 ready since some of your pre prepared questions may have been answered during the interview. Speak as if you already work with the company, ex. instead of asking What are your goals for....? say What are our goals for....?

Your interview IS OVER *whew, give them a nice firm handshake (as you did when you arrived), thank them for their time and always, always follow up with a thank you phone call or email. When doing this, again, mention a point or two

The secret of happiness

A certain shopkeeper sent his son to learn about the secret of happiness from the wisest man in the world. The lad wandered through the desert for 40 days, and finally came upon a beautiful castle, high atop a mountain. It was there that the wise man lived.

Rather than finding a saintly man, though, our hero, on entering the main room of the castle, saw a hive of activity: tradesmen came and went, people were conversing in the corners, a small orchestra was playing soft music, and there was a table covered with platters of the most delicious food in that part of the world. The wise man conversed with everyone, and the boy had to wait for two hours before it was his turn to be given the man's attention.

The wise man listened attentively to the boy's explanation of why he had come, but told him that he didn't have time just then to explain the secret of happiness. He suggested that the boy look around the palace and return in two hours.

"Meanwhile, I want to ask you to do something", said the wise man, handing the boy a teaspoon that held two drops of oil. "As you wander around, carry this spoon with you without allowing the oil to spill".

The boy began climbing and descending the many stairways of the palace, keeping his eyes fixed on the spoon. After two hours, he returned to the room where the wise man was.

"Well", asked the wise man, "Did you see the Persian tapestries that are hanging in my dining hall? Did you see the garden that it took the master gardener ten years to create? Did you notice the beautiful parchments in my library?"

The boy was embarrassed, and confessed that he had observed nothing. His only concern had been not to spill the oil that the wise man had entrusted to him.

"Then go back and observe the marvels of my world", said the wise man. "You cannot trust a man if you don't know his house".

Relieved, the boy picked up the spoon and returned to his exploration of the palace, this time observing all of the works of art on the ceilings and the walls. He saw the gardens, the mountains all around him, the beauty of the flowers, and the taste with which everything had been selected. Upon returning to the wise man, he related in detail everything he had seen.

"But where are the drops of oil I entrusted to you?" asked the wise man. Looking down at the spoon he held, the boy saw that the oil was gone.

"Well, there is only one piece of advice I can give you", said the wisest of wise men. "The secret of happiness is to see all the marvels of the world and never to forget the drops of oil on the spoon".

Author: Paul Coelho in "The Alchemist"

Zen Stories

When Tired

A student once asked his teacher,

"Master, what is enlightenment?"

The master replied,

"When hungry, eat. When tired, sleep."

Empty Your Cup

A university professor went to visit a famous Zen master. While the master quietly served tea, the professor talked about Zen. The master poured the visitor's cup to the brim, and then kept pouring.

The professor watched the overflowing cup until he could no longer restrain himself.
"It's overfull! No more will go in!" the professor blurted.

"You are like this cup," the master replied, "How can I show you Zen unless you first empty your cup."

Moving Mind

Two men were arguing about a flag flapping in the wind.

"It's the wind that is really moving," stated the first one.
"No, it is the flag that is moving," contended the second.

A Zen master, who happened to be walking by, overheard the debate and interrupted them.
"Neither the flag nor the wind is moving," he said, "It is MIND that moves."

It Will Pass

A student went to his meditation teacher and said, "My meditation is horrible! I feel so distracted, or my legs ache, or I'm constantly falling asleep. It's just horrible!" "It will pass," the teacher said matter-of-factly.

A week later, the student came back to his teacher. "My meditation is wonderful! I feel so aware, so peaceful, so alive! It's just wonderful!'

"It will pass,"
the teacher replied matter-of-factly.

Also Read:

Zen StoriesII
Zen Stories  III
Zen StoriesIV

Porter’s Five Forces

Understanding the dynamics of competitors within an industry is critical for several reasons. First, it can help to assess the potential opportunities for your venture, particularly important if you are entering this industry as a new player. It can also be a critical step to better differentiate yourself from others that offer similar products and services.

One of the most respected models to assist with this analysis is Porter’s Five Forces Model. This model, created by Michael E. Porter and described in the book “Competitive Strategy: Techniques for Analyzing Industries and Competitors,” has proven to be a useful tool for both business and marketing-based planning.

Background
The pure competition model does not present a viable tool to assess an industry. Porter’s Five Forces attempts to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry. This model may be used as a tool to better develop a strategic advantage over competing firms within an industry in a competitive and healthy environment. It identifies five forces that determine the long-run profitability of a market or market segment.

• Suppliers
• Buyers
• Entry/Exit Barriers
• Substitutes
• Rivalry

Supplier power

• Supplier concentration
• Importance of volume to supplier
• Differentiation of inputs
• Impact of inputs on cost or differentiation
• Switching costs of firms in the industry
• Presence of substitute inputs
• Threat of forward integration
• Cost relative to total purchases in industry

Buyer power

• Bargaining leverage
• Buyer volume
• Buyer information
• Brand identity
• Price sensitivity
• Threat of backward integration
• Product differentiation
• Buyer concentration vs. industry
• Substitutes available
•  Buyers’ incentives

Entry/exit barriers

• Absolute cost advantages
• Proprietary learning curve
• Access to inputs
• Government or other binding policy
• Economies of scale
• Capital requirements
• Brand identity
• Switching costs
• Access to distribution
• Expected retaliation
• Proprietary products

Substitutes

• Switching costs
• Buyer inclination to find alternatives
• Price-performance
• Trade-off of the available substitute products or services

Rivalry

• Exit barriers
• Industry concentration
• Fixed costs
• Perceived value add
• Industry growth
• Overcapacity status
• Product differences
• Switching costs
• Brand identity
• Diversity of rivals
• Corporate stakes 

Service
•    Level of service compared to others
•    Added value perceptions
•    Dynamics with other attributes




Power of suppliers
An industry that produces goods requires raw materials. This leads to buyer-supplier relationships between the industry and the firms that provide the raw materials. Depending on where the power lies, suppliers may be able to exert an influence on the producing industry. They may be able to dictate price and influence availability. A segment is unattractive when an organization’s suppliers have the ability to:

• Increase prices without suffering from a decrease in volume
• Reduce the quantity supplied
• Organize in a formal or informal manner
• Compete in an environment with relatively few substitutes
• Provide a product/material that is a critical part of the end product or service
• Impose switching costs on their customers when they depart
• Integrate downstream by purchasing or controlling the distribution channels.

One example of this is DeBeers’ ability to wield influence within the diamond industry. DeBeers’ high level of control over some of the most productive diamond mines in the world gives them extreme power within the industry.

The best defense in mitigating the power of suppliers is to build win–win relationships with suppliers or arrange to use multiple suppliers.

Power of buyers
The power of buyers describes the impact customers have on an industry. When buyer power is strong, the relationship to the producing industry becomes closer to what economists term a monopsony. A Monopsony is a market where there are many suppliers and one buyer. Under these market conditions, the buyer has the most influence in determining the price. Few pure monopsonies actually exist, but there is often a connection between an industry and buyers that determines where power lies.


The bargaining power of buyers increases when they have the ability to:

• Be “organized” in some form with others providing similar products and services
• Purchase a product that represents a significant fraction of the buyer’s costs
• Buy a product that is undifferentiated
• Incur low switching costs when they change vendors
• Be price sensitive, with other options available
• Integrate upstream, to purchase the providers of the goods.

To mitigate the power of buyers, sellers can seek to select buyers with less power to negotiate, switch suppliers, or develop superior offers that strong buyers cannot refuse.

Barriers to entry/exit
The possibility of new firms entering the industry impacts competition. A key is to assess how easy it is for a new player to enter an industry. The most attractive segment has high entry barriers and low exit barriers. Although any firm should be able to enter and exit a market, each industry often presents varying levels of difficulty, commonly driven by economics. Manufacturing-based industries are more difficult to enter than many service-based industries. The definable characteristics of each industry protect profitable areas for firms and inhibit additional rivals from entering the market. These inhibitive characteristics are referred to as barriers to entry.

Barriers to entry are more than the expected ebb and flow that markets typically experience. For example, when industry profits increase, one would expect firms to enter the market to take advantage of the high profit levels, which will eventually result in reducing profits.

Conversely, when profits decrease, we would expect some firms to exit. Other factors that will deter new entrants are falling prices, actions that keep prices artificially low, expectations that future prices will fall, large or unpredictable start-up expenditures, and other extreme uncertainties.

Barriers to entry are unique characteristics to each industry. They reduce the rate of entry of new firms and, therefore, maintain a level of profits for current industry competitors. Barriers to entry can be created or exploited to enhance a firm’s competitive advantage.


Barriers to entry arise from several sources:

• Patents and proprietary knowledge
• Asset specificity – (Specialized technology or infrastructure)
• Economies of scale
• Government.

Barriers to exit work similarly to barriers to entry. Exit barriers limit the ability of a firm to leave the market and can exacerbate rivalry – unable to leave the industry, a firm must compete. Some of an industry’s entry and exit barriers can be summarized as follows: Profitability potential is high when both entry and exit barriers are high. In this situation, firms do face more risk because poorer-performing ones tend to continue to produce regardless of profitability and, therefore, continue to add to the supply.

Substitute products
Porter’s Five Forces model refers to “substitute products” as those products that are available in other industries that meet an identical or similar need for the end user. As more substitutes become available and affordable, the demand becomes more elastic since customers have more alternatives. Substitute products may limit the ability of firms within an industry to raise prices and improve margins.

For example, the price of aluminum cans is constrained by the price of glass bottles, steel cans, and plastic containers. These containers are substitutes, yet they are not rivals in the same industries.

The treat of substitutes often impacts price-based competition. There are other concerns in assessing the threat of substitutes relating to technology. New technologies contribute to competition though substitute products and services. Think of the impact wireless technologies have had on traditional telephone service. Except in remote areas it is unlikely that cable TV could compete with free broadcast TV from an antenna without the greater diversity of entertainment that it affords the customer.

Again, a segment is unattractive when there are actual or potential substitutes for a product.

Rivalry
Firms strive to secure a competitive advantage over their rivals. The intensity of rivalry varies within each industry and these differences can be important in the development of strategy.

Industries that are “concentrated,” versus “fragmented,” often display the highest level of rivalry. Many,  recognize industry concentration and measure it by the “concentration ratio” (CR). A high concentration ratio indicates that a majority of market share is controlled by the largest firms. If a few firms hold a large market share, the competitive landscape is less competitive as it nears that of a monopoly. A low CR indicates that the industry has many rivals, none with significant market share. These fragmented markets are said to be competitive.

In pursuing an advantage over its rivals, a firm can choose from several competitive moves:

• Changing prices
• Improving product differentiation
• Creatively using channels of distribution
• Exploiting relationships with suppliers.

For example, the intensity of rivalry is increased by the following industry characteristics:

• Numerous competitors that are particularly strong or aggressive that are competing for the same customers and resources
• Declining sales revenues and volumes resulting in slow market growth, creating the need to actively fight for market share
• High fixed costs result in an economy of scale effect
• High storage costs or highly perishable products
• Plant capacity is being added, over and above what is needed to meet demand
• Low switching costs for buyers
• Low levels of product differentiation
• Strategic stakes are high when a firm is losing market position or has potential for great gains
• High exit barriers place a significant cost on abandoning the product
• A diversity of rivals with different cultures, histories, and philosophies
• An industry shakeout
• When a rival acts in a way that elicits a counter-response by other firms
• Competitors have high stakes – economic and other – and will battle to remain as a player within the segment.

These conditions will make competing within the industry more challenging, commonly leading to frequent price wars, advertising battles, and the addition of new products.

Service
Service can also play a part in the industry’s dynamics. Those competitors that provide superior service may bring an advantage to their competitive position if the industry/customer places value on this attribute. This is another point of differentiation and can be a key strategic element to consider. If a competitor has a service component that is difficult to replicate, it will prove to offer a strategic advantage.

The result
We can look at several industries and see how Porter’s Five Forces would depict them; the entertainment industry is in flux, telecommunications companies are volatile, computer firms are merging, utility industries are down, the housing market is up. Porter’s Five Forces can assist us to better understand these dynamics in a more objective manner and hopefully make better strategic decisions as a result.