Historically, September is the worst month for the stock market, averaging a loss of almost 1% in the month over the last 40 years, so one easy way to make money could be to short the entire market using an ETF for the S&P 500, Russell 2000, or another broad index.  It’s simple, would be profitable based on historical data, and offers protection against the weakening economy.

On the more positive side, you could look for stocks or sectors that historically perform well in September.  Since the market is usually down for the month, there aren’t many options here, but the best performing sectors in this month are utilities and consumer staples, so a high yielding stock in one of these sectors or an ETF covering the entire sector could be a good choice.

Another option is to look forward to what performs well in the fourth quarter of the year and buy it on dips in the market so you are in at a good price and ready to profit in the future.  The best performing sectors in the last quarter of the year are the materials and energy sectors, so getting into them when the opportunity presents itself could be a good decision.

Finally, if you don’t feel comfortable making your own stock picks but still want to invest, you can follow suggestions from professional investors like Timothy Sykes, and buy their best stock picks.

Investing in the stock market is a path to long term wealth, and knowing when you should buy and when you should sell can add thousands to your portfolio over time.  As always, invest carefully and wisely, and only with money that you could afford to lose if the worst happens.

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Winning on a global scale in finance and in movies has some common features : it involves raw materials like human capital, top end computer technology, freedom of speech, openness to other cultures, a large home market, the natural opportunities of connecting up with the disapora, and Schumpeterian creative destruction.

With all these in place, Bombay’s movie industry is nicely globalising itself. Finance requires all these – and that bodes well for BIFC. But finance requires a few more things. It requires sophisticated financial regulation, and a sound macroeconomic policy framework. It requires that the government get out of producing financial services just as the government does not produce movies. India has a tonne of work to do on these.

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HAWALA BANKING TRANSACTIONS

There are a few archetypical transactions that most hawala transactions will resemble. The first is the most common; remittances. For example: a person from very poor country X is working in country Y. He sends home $100 USD of purchasing power to his family twice a month. The cost to bank wire this amount is $10 USD or more and costs him a large percentage of his minimal remittance amount. It is difficult to save up and send larger sums on a less frequent basis because banking is unreliable at best in country X and large amounts of cash are not safe to store with his elderly parents, wife and children who are living alone. An exchange through two hawaladars will efficiently facilitate such a transaction on a regular basis at a much lower cost.

The second situation is that of the transactional broker. For example, I want to buy options on a certain stock but I do not have enough money in my trading account to meet the margin or liquidity requirements. My good friend is planning on purchasing options on the same stock so I give him some money and he buys a few extra options which he will pay me for when I want to cash out. My friend has acted like a hawaladar for the exchange.

A third situation is that of the repatriation or expatriation of wealth. Real estate is a good example because, regardless of legal restrictions, you cannot take real estate away from or add it to a country, with the exception of Iraq, California which is going to fall into the ocean and Dubai whose palm tree shaped coastline is not a natural phenomenon. If you own real estate in country A but live in country B you cannot simply tuck it into your pocket like a gold coin and repatriate that wealth. You will need to find a buyer of that property to convert the wealth into mobile wealth that can be taken out of country A and brought into country B. Once the wealth is more liquid then it can be transferred to someone acting like a hawaladar for the transaction.

HOW ACCOUNTS ARE SETTLED

The main characteristic of a hawala transaction is that they are informal exchanges made relying on the trust of the parties and generally outside of a structured banking system. In each of these scenarios there must be some settlement made for the transactions. The remitting and receiving hawaladars will maintain a tally of the total amount owed between them and settle their account at a later date. Almost all hawaladars destroy the records of the individual transactions once they are completed.  They can then wire the money all at once, or they may simply offset the balance against another account between the two.

What if the debtor on the tally sheet does not have cash to pay the debt? Because this is a private transaction, they may settle the debt using any value they wish. The hawaladars remitting and receiving money might both have sufficient wealth in both countries and will be able to settle their debts with each other through the intra-national exchange of the amount in cash. In addition they might choose not to settle in cash.  The hawaladar in poor country X may accept payment in chickens or vampire squids rather than in cash. The friend who bought the option for you might settle what he owes by buying gold for you or a nice steak dinner. The real estate purchaser may not have the cash for the property but gives you his sailboat which is at a slip near your home.

HOW DO I FIND A HAWALADAR?

These situations and a combination of them are representative of most hawala transactions. Now remains the biggest question that I recieve about hawala banking:  how do I find a hawaladar?

For a person who is not already part of the culture where hawala banking takes place, finding hawala services is not easy but here are a few suggestions.

BECOME A PART OF THE RIGHT COMMUNITY

The main use of hawala is to remit money to the home country of an immigrant worker.  Thus you can find where these people are, befriend them and ask to be connected to a hawaladar.

Remember that hawala is the formal name given to an informal system so they might not even know what the word hawala means.  Simply look for someone offering the kinds of services you want.  Some good communities to look for would be people from Mexico, which receives more money in remittances from the United States than any other country. Middle Eastern countries, East African countries, and South and South Central Asian countries have a long history of hawala practices.

I have had rather good discussions with one person in particular about the cultural barriers to interacting with these kinds of communities.  If direct interaction is out of the question, you may need to hire a private courier or messenger to be the intermediary for your search for a hawaladar.  My new friend came up with a great idea of hiring a bellhop or a taxi driver because they can move easily in and out of the complex social structures.  Another suggestion for those living in a foreign country would be to find a westerner who has a local spouse.  The local spouse will likely have more access to these kinds of communities than westerners.

SEARCH ADVERTISEMENTS

Sometimes hawaladars will advertise their services in the local ethnic newspaper.    Of course if you do not speak the language of the paper, you may want to hire a translator.  A website like Craigslist or other discussion forums might even list some of these kinds of services.  It is probably a good idea to look for the exact services you want rather than the word hawala or hawaladar.

UTILIZE YOUR NETWORK

Ask people you know.  Given the financial incentives that may come with the transaction, many people are willing to use their network of friends to engage in these kinds of transactions, especially if it is to help another friend or family member.   I have used this method numerous times for all kinds of transactions.  A good person to ask might be a friend with a liquid cash position such as a pawn shop owner or a rich uncle.

CONCLUSION

There are significant benefits to hawala banking in many kinds of transactions. Although for many westerners finding hawala services from hawladars on demand may be difficult, the need may become more acute because of the exacerbation of current currency controls and it is likely that these kinds of hawala services will become much more commonplace. In the meantime, it is good to be prepared and have access to those services.