"Unfortunately, on the major issue - too big to fail financial institutions that caused the 2008-09 crisis and that will likely trigger the next meltdown - there is nothing meaningful in the proposed legislation." -Simon Johnson
The bill is 1,336 pages (Reuters)
What? How can there be a Consumer Financial Protection Agency branch where if a systemic collapse were to occur, the Fed would freeze losses onto the investor? Puzzling piece of legislature there.
Notes from the bill:
The Federal Reserve would house the Consumer Financial Protection Agency.
The Fed is responsible for overseeing any financial institution with assets over $50 billion.
The bill calls for a systematic risk council headed by the Treasury Department.
Friday, January 21, 2011
Thursday, January 20, 2011
Unmasking the grin
From Looking Behind the Mug-Shot Grin - Sunday Times, Jan 16, 2011
Jared Loughner clearly has the attention of the American people. I'm no psychiatrist, but I would imagine that Mr. Loughner's grin reveals a sense of satisfaction or pleasure. Pleasure about what? That he's probably going to jail for the rest of his life? Or maybe it is that he finally would be able to construe his ideas to society (albeit in the form of a jury). The instance of being sent to the ER for being intoxicated in class and was crying to the police after being yelled at by his dad. Yes, this stuff happens all the time. But what does it take for a community to act upon the disproportion between psychiatric normalcy in the classroom and someone who, when they walk into a bank people shutter, clearly struggles with reality?
One thing is clear. This guy did not lock himself in a cabin up north and read Mein Kampf (although it was one of his favorites). Jared Loughner obviously put forth an effort to better himself. He:
Additionally, he clearly displayed a call for help. His video tape titled, "Pima Community College School - Genocide/Scam - Free Education - Broken United States Consitition," was clearly a discourse with society. What could correct Jared's thought process and what answers did he receive other than an officer coming to his garage and reading his letter of suspension?
"The more people became shocked and worried about him, the more withdrawn he got." said his friend from junior and senior high school, Breanna Castle.
"I think he feels the people should be able to govern themselves," said Ms. Figuerora, his former girlfriend. "We didn't need a higher authority."
And now he has our attention. He has my attention. I'm spending all morning writing this stuff and why? Because I think this could have been prevented. Rejection should be treated carefully and those around him, although their lives are probably heavily impacted, should still take a look in the mirror. Perhaps I am too harsh on them. Maybe no one could have predicted this but if I were close to him, I would have definitely offered my hand just as he had perpetually done the same.
Jared Loughner clearly has the attention of the American people. I'm no psychiatrist, but I would imagine that Mr. Loughner's grin reveals a sense of satisfaction or pleasure. Pleasure about what? That he's probably going to jail for the rest of his life? Or maybe it is that he finally would be able to construe his ideas to society (albeit in the form of a jury). The instance of being sent to the ER for being intoxicated in class and was crying to the police after being yelled at by his dad. Yes, this stuff happens all the time. But what does it take for a community to act upon the disproportion between psychiatric normalcy in the classroom and someone who, when they walk into a bank people shutter, clearly struggles with reality?
One thing is clear. This guy did not lock himself in a cabin up north and read Mein Kampf (although it was one of his favorites). Jared Loughner obviously put forth an effort to better himself. He:
- Tried at jobs; Peter Piper Pizza, the Mandarin Grill, Eddie Bauer.
- Volunteered at an animal care center
- Applied to join the army
- Enrolled in community college
Additionally, he clearly displayed a call for help. His video tape titled, "Pima Community College School - Genocide/Scam - Free Education - Broken United States Consitition," was clearly a discourse with society. What could correct Jared's thought process and what answers did he receive other than an officer coming to his garage and reading his letter of suspension?
"The more people became shocked and worried about him, the more withdrawn he got." said his friend from junior and senior high school, Breanna Castle.
"I think he feels the people should be able to govern themselves," said Ms. Figuerora, his former girlfriend. "We didn't need a higher authority."
And now he has our attention. He has my attention. I'm spending all morning writing this stuff and why? Because I think this could have been prevented. Rejection should be treated carefully and those around him, although their lives are probably heavily impacted, should still take a look in the mirror. Perhaps I am too harsh on them. Maybe no one could have predicted this but if I were close to him, I would have definitely offered my hand just as he had perpetually done the same.
Tuesday, January 11, 2011
Theory on Localization - The latter Proposal
Ok, we all know that the economic splurge of the mid 2000s was washed away by various market corrections, most notably the housing sector.
Say you have a localized economy. One in which a community maximizes their communicative entities to diminish stock market returns. Here's the theory.
Say you need a wrench. You have two options. One, you can go to Wal-Mart, a master in the economies of scale and a driver of fresh production.
Option 2 is that you can go door to door, ask a neighbor if they have a wrench that you can borrow, pay whatever fees they require and probably save a lot of money.
Today, America is split between two solutions. To go with the former option, one is to help the stock market, transfer real funds to investors and actually place additional macroeconomic debt on the nation (that is because most Americans need debt to survive if they are going to continue shopping at Wal-Mart and supporting the capitalist market).
The latter proposes a very possible solution to every day people who are already in debt. Yet, Wal-Mart has still managed to create a market that instills an illusion of saving, an illusion that devises conservative nationalistic and pro-War principles. Meanwhile, local stores are struggling and Obama is trying to balance the budget...yada yada yada.
The latter proposal is necessary for this nation to survive. No longer are average Americans asked to save for the additional Wal-Mart purchase, but they are asked everyday to meet their financial obligations. The latter is what allows Americans to save. If this country has any bright future, it does not come from allocating the average American salary to stock holders. It comes from saving.
Say you have a localized economy. One in which a community maximizes their communicative entities to diminish stock market returns. Here's the theory.
Say you need a wrench. You have two options. One, you can go to Wal-Mart, a master in the economies of scale and a driver of fresh production.
Option 2 is that you can go door to door, ask a neighbor if they have a wrench that you can borrow, pay whatever fees they require and probably save a lot of money.
Today, America is split between two solutions. To go with the former option, one is to help the stock market, transfer real funds to investors and actually place additional macroeconomic debt on the nation (that is because most Americans need debt to survive if they are going to continue shopping at Wal-Mart and supporting the capitalist market).
The latter proposes a very possible solution to every day people who are already in debt. Yet, Wal-Mart has still managed to create a market that instills an illusion of saving, an illusion that devises conservative nationalistic and pro-War principles. Meanwhile, local stores are struggling and Obama is trying to balance the budget...yada yada yada.
The latter proposal is necessary for this nation to survive. No longer are average Americans asked to save for the additional Wal-Mart purchase, but they are asked everyday to meet their financial obligations. The latter is what allows Americans to save. If this country has any bright future, it does not come from allocating the average American salary to stock holders. It comes from saving.
Thursday, January 6, 2011
Wednesday, January 5, 2011
Learn PHP
Might I recommend Larry Ullman to learn PHP.
I'm well on my way to creating a blog just after reading his PHP for the Web 3rd Edition.
I'm well on my way to creating a blog just after reading his PHP for the Web 3rd Edition.
Tuesday, January 4, 2011
Sunday, October 3, 2010
Whoa Flash Crash May 6
From the NY Times:
"Startlingly, as the computers of the high-frequency traders traded contracts back and forth, a "hot potato" effect was created, the report said, as contracts changed hands 27,000 times in 14 seconds, but with eventually only 200 actually being bought or sold."
Reaction:
Ok, so Waddell & Reed entered into a trade in the market, selling 75,000 E-Mini S&P futures contracts, using computer sell algorithms provided by Barclays Capital. However, it was up to Waddell & Reed to decide how to sell those contracts. These futures contracts normally would gradually be sold off in the market over a span of 5 hours. In this case, it took 20 minutes.
With that amount of volume in such a time frame, traders faced a wave of selling pressure. That is, the price of the futures dropped, allowing for traders to arbitrage the opportunity to buy such cheap forward contracts and, in return, sell "cash shares" (to quote from the Times) back on the real-time NYSE. This explains the huge drop and the subsequent rise in trading on the Dow Jones.
Consequentially, the result of this error will expand the monitoring desired by the SEC and the establishment of "circuit breakers" on a growing number of stocks. Mary Schapiro is the chairman of the SEC and Gary Gensler is the chairman of the CFTD.
"Startlingly, as the computers of the high-frequency traders traded contracts back and forth, a "hot potato" effect was created, the report said, as contracts changed hands 27,000 times in 14 seconds, but with eventually only 200 actually being bought or sold."
Reaction:
Ok, so Waddell & Reed entered into a trade in the market, selling 75,000 E-Mini S&P futures contracts, using computer sell algorithms provided by Barclays Capital. However, it was up to Waddell & Reed to decide how to sell those contracts. These futures contracts normally would gradually be sold off in the market over a span of 5 hours. In this case, it took 20 minutes.
With that amount of volume in such a time frame, traders faced a wave of selling pressure. That is, the price of the futures dropped, allowing for traders to arbitrage the opportunity to buy such cheap forward contracts and, in return, sell "cash shares" (to quote from the Times) back on the real-time NYSE. This explains the huge drop and the subsequent rise in trading on the Dow Jones.
Consequentially, the result of this error will expand the monitoring desired by the SEC and the establishment of "circuit breakers" on a growing number of stocks. Mary Schapiro is the chairman of the SEC and Gary Gensler is the chairman of the CFTD.
Thursday, June 10, 2010
The Euro and Invoicing
If Brown Brothers Harriman calls for an interview and asks where I heard of them, say you read a post by Marc Chandler, global head of currency strategy, on Seeking Alpha.
He touches upon the cyclical nature of banks to buy and sell currencies when they are priced appropriately in the market, creating a cyclical wave of buy and sell for banks around the world. The Euro has obviously been heading downward from around $1.19 this past week. Chandler says that banks are actually more prone to act counter-cyclical when diversifying reserves over the course of the next few years. This refers to buying the Euro when it is weak and selling the stronger currencies, such as the Australian and Canadian dollars which posted the strongest first third of the year (3% and 3.5% respectively).
He touches upon the cyclical nature of banks to buy and sell currencies when they are priced appropriately in the market, creating a cyclical wave of buy and sell for banks around the world. The Euro has obviously been heading downward from around $1.19 this past week. Chandler says that banks are actually more prone to act counter-cyclical when diversifying reserves over the course of the next few years. This refers to buying the Euro when it is weak and selling the stronger currencies, such as the Australian and Canadian dollars which posted the strongest first third of the year (3% and 3.5% respectively).
Monday, March 1, 2010
Rent/Ownership Ratio
CNN's Shawn Tully says that a good measure of housing derives from the ratio between what people pay in rent and what owners spend on the same property. Historically, people do not spend too much more to own a property over paying in rent. During a housing boom, renting becomes cheaper. The Deutsche Bank REIT research team first came up with a "normal" ratio of rents to ownership costs, or ATMP, after-tax mortgage payment for 53 US cities. In 1999, renters paid about 87% the cost of ownership on properties, indicating a small premium for ownership. Mid-2006 brought sub-60% levels.
In Las Vegas, Phoenix and Miami, homeowners were paying twice as much as renters, and in San Francisco and Orange Country, owners' monthly payments were triple those of their neighbors with leases instead of mortgages.
Overall, CNN predicts a 5% decline in housing prices nationwide. The drop could come in steeper if rents continue to decline.
In another 14 cities, a list encompassing Boston, San Jose, and Chicago, the cost of owning exceeds that of renting by 6% or less. In the remaining 24 markets, housing is still moderately to extremely overpriced. The biggest problem areas are Baltimore, Long Island, and Seattle, where the ratio is still between 24% and 32% above the 1999 benchmark.
In Las Vegas, Phoenix and Miami, homeowners were paying twice as much as renters, and in San Francisco and Orange Country, owners' monthly payments were triple those of their neighbors with leases instead of mortgages.
Overall, CNN predicts a 5% decline in housing prices nationwide. The drop could come in steeper if rents continue to decline.
In another 14 cities, a list encompassing Boston, San Jose, and Chicago, the cost of owning exceeds that of renting by 6% or less. In the remaining 24 markets, housing is still moderately to extremely overpriced. The biggest problem areas are Baltimore, Long Island, and Seattle, where the ratio is still between 24% and 32% above the 1999 benchmark.
Tuesday, February 9, 2010
Deficit facts
Douglas Elmendorf of the Congressional Budget Office,
…. accumulating deficits will push federal debt held by the public to significantly higher levels. At the end of 2009, debt held by the public was $7.5 trillion, or 53 percent of GDP; by the end of 2020, debt is projected to climb to $15 trillion, or 67 percent of GDP.
USA: 53%
UK: ~100%
Japan: approaching 180%
…. accumulating deficits will push federal debt held by the public to significantly higher levels. At the end of 2009, debt held by the public was $7.5 trillion, or 53 percent of GDP; by the end of 2020, debt is projected to climb to $15 trillion, or 67 percent of GDP.
USA: 53%
UK: ~100%
Japan: approaching 180%
Saturday, February 6, 2010
Confidence in America
Still, by next year things could be worse: Japan’s public debt is expected to hit $9.4 trillion, or 181 percent of its gross domestic product. By that measure, Washington still looks good, if only by comparison.
One thing about public debt, it requires public confidence. Japan's AA rating on public debt was downgraded to "negative" from "stable" by Standard & Poor's last week. The 10-year JGB climbed to 1.380% on Thursday, its highest level since Nov. 12. This concerns the government because if the confidence isn't there, speculation may turn into reality. Japan currently has the highest debt of any industrialized nation and, unlike the confidence that keeps US interest rates fairly grounded, would raise the cost of servicing the debt to the Japanese government. In these situations the government needs to step in. Quantitative easing perhaps but this tactic has provided very little support in combating deflation.
This picture provides a warning to the US. Without growth in two key areas, consumer confidence and exports, the deflation will remain a burden to Japan's economy. Exports provide a keystone for fabricating the turnaround and much of this will ultimately depend on the US, the biggest consumers in the world. If this were a level playing ground, the US would be in the same boat. The US faced mild deflation the past year and a half and yet everyone I've talked to has been forecasting inflation in the near future. Why? Because the economy is in a recession and the wave of job growth, innovation, technological leadership, and consumer confidence will allow for interest rates to rise. This may be seen as speculative but it is the only the reason the dollar hasn't officially collapsed yet. Why would anyone be holding onto US dollars if they knew a recovery was unlikely? Perhaps the psychological acceptance of the US dollar still holds stronger than the speculative dismay of the US economy.
One thing about public debt, it requires public confidence. Japan's AA rating on public debt was downgraded to "negative" from "stable" by Standard & Poor's last week. The 10-year JGB climbed to 1.380% on Thursday, its highest level since Nov. 12. This concerns the government because if the confidence isn't there, speculation may turn into reality. Japan currently has the highest debt of any industrialized nation and, unlike the confidence that keeps US interest rates fairly grounded, would raise the cost of servicing the debt to the Japanese government. In these situations the government needs to step in. Quantitative easing perhaps but this tactic has provided very little support in combating deflation.
This picture provides a warning to the US. Without growth in two key areas, consumer confidence and exports, the deflation will remain a burden to Japan's economy. Exports provide a keystone for fabricating the turnaround and much of this will ultimately depend on the US, the biggest consumers in the world. If this were a level playing ground, the US would be in the same boat. The US faced mild deflation the past year and a half and yet everyone I've talked to has been forecasting inflation in the near future. Why? Because the economy is in a recession and the wave of job growth, innovation, technological leadership, and consumer confidence will allow for interest rates to rise. This may be seen as speculative but it is the only the reason the dollar hasn't officially collapsed yet. Why would anyone be holding onto US dollars if they knew a recovery was unlikely? Perhaps the psychological acceptance of the US dollar still holds stronger than the speculative dismay of the US economy.
Tuesday, February 2, 2010
For the record
The central bank last year purchased $300 billion in U.S. government debt and is on track to buy $1.25 trillion in mortgage-backed securities plus $175 billion in debt from government-backed mortgage companies by the end of March.
American International Group (AIG) has received $43.2 billion from the Treasury's TARP program. The Obama administration's budget proposal, released Monday, announced that AIG will receive an additional $69.8 billion from TARP through 2010.
$27 billion was allocated to foreclosure prevention and an additional $48.8 billion may be on its way.
One of Obama's proposals is to cut companies' abilities to place their earning in overseas bank accounts, which enjoy tax-free havens.
Large business taxes would raise $468 billion over the next ten years, according to the fiscal 2011 budget plan. One pattern is that taxes concentrate around demand. Rental property, on a whole, has experienced increased demand naturally as unemployment has forced many families to migrate out of their newly foreclosed homes and into more affordable, temporary solutions.
Others who would face tax increases if the budget plan is passed by Congress:
US oil, gas, and coal producers
Producers of cellulosic ethanol made from paper byproducts
Employers who pay unemployment taxes
Owners of rental property
Companies that rely on independent contractors
Overview of Business Tax Highlights
The Bush tax cuts for lower and middle income American expire this year. It is still unclear whether the Obama administration will extend or terminate them.
American International Group (AIG) has received $43.2 billion from the Treasury's TARP program. The Obama administration's budget proposal, released Monday, announced that AIG will receive an additional $69.8 billion from TARP through 2010.
$27 billion was allocated to foreclosure prevention and an additional $48.8 billion may be on its way.
One of Obama's proposals is to cut companies' abilities to place their earning in overseas bank accounts, which enjoy tax-free havens.
Large business taxes would raise $468 billion over the next ten years, according to the fiscal 2011 budget plan. One pattern is that taxes concentrate around demand. Rental property, on a whole, has experienced increased demand naturally as unemployment has forced many families to migrate out of their newly foreclosed homes and into more affordable, temporary solutions.
Others who would face tax increases if the budget plan is passed by Congress:
US oil, gas, and coal producers
Producers of cellulosic ethanol made from paper byproducts
Employers who pay unemployment taxes
Owners of rental property
Companies that rely on independent contractors
Overview of Business Tax Highlights
The Bush tax cuts for lower and middle income American expire this year. It is still unclear whether the Obama administration will extend or terminate them.
Saturday, January 30, 2010
Systematic Risk
“We simply cannot accept a system in which hedge funds and private equity firms insider banks can place huge risky bets that are subsidized by taxpayers,’’ Obama said at the news conference this week announcing his proposal.
Bank of America-Merrill Lynch, the private-equity firm of the nation's largest commercial bank, owns 25% of the health care company, HCA.
Merrill made the investment when HCA was taken private in a $33 billion leveraged buy out in 2006. Since then, HCA has reduced its debt load, boosted revenue and, as Deal Journal wrote about earlier, is paying a fat $1.75 billion cash fourth quarter dividend to its investors.
White House officials have said the Volcker rule would likely allow commercial banks to make investments on behalf of clients, but not with the bank’s own money. Whether a Volcker rule would affect BofA’s HCA investment remains unclear.
Obama said in his State of the Union address that he would veto any reform legislation that fails to reduce systematic risk.
Systematic risk is essentially the correlation of losses of market participants. There are two main ways to measure systemic risk: Too big To fail (TBTF) and Too interconnected to fail (TICTF).
TBTF compares an institution's size relative to
the national and international marketplace, market share concentration, and competitive barriers to entry or how easily a product can be substituted.
The national insurance marketplace, for example, simply requires capital input to become a player and therefore one homeowner's insurance policy can easily be replaced by another.
a state residual market provider, with limits on the underwriting fluidity primarily stemming from state-by-state regulatory impediments, such as limits on pricing and capital mobility. There are arguably either no or extremely few insurers that are TBTF in the U.S. marketplace.
TICTF, on the other hand, measures the impact and likelihood medium-term impact of the larger economy if the institution were to fail.
The impact is measured not just on the institution's products and activities, but also the economic multiplier of all other commercial activities dependent specifically on that institution. It is also dependent on how correlated an institution's business is with other systemic risk.
Regulation, such as the bank regulation that Obama is proposing, cannot be the means to an end of systematic risk. Other sectors, such as insurance companies & private equity, would be in a position to take over the former risks of banks and the systematic risk would be maintained.
Bank of America-Merrill Lynch, the private-equity firm of the nation's largest commercial bank, owns 25% of the health care company, HCA.
Merrill made the investment when HCA was taken private in a $33 billion leveraged buy out in 2006. Since then, HCA has reduced its debt load, boosted revenue and, as Deal Journal wrote about earlier, is paying a fat $1.75 billion cash fourth quarter dividend to its investors.
White House officials have said the Volcker rule would likely allow commercial banks to make investments on behalf of clients, but not with the bank’s own money. Whether a Volcker rule would affect BofA’s HCA investment remains unclear.
Obama said in his State of the Union address that he would veto any reform legislation that fails to reduce systematic risk.
Systematic risk is essentially the correlation of losses of market participants. There are two main ways to measure systemic risk: Too big To fail (TBTF) and Too interconnected to fail (TICTF).
TBTF compares an institution's size relative to
the national and international marketplace, market share concentration, and competitive barriers to entry or how easily a product can be substituted.
The national insurance marketplace, for example, simply requires capital input to become a player and therefore one homeowner's insurance policy can easily be replaced by another.
a state residual market provider, with limits on the underwriting fluidity primarily stemming from state-by-state regulatory impediments, such as limits on pricing and capital mobility. There are arguably either no or extremely few insurers that are TBTF in the U.S. marketplace.
TICTF, on the other hand, measures the impact and likelihood medium-term impact of the larger economy if the institution were to fail.
The impact is measured not just on the institution's products and activities, but also the economic multiplier of all other commercial activities dependent specifically on that institution. It is also dependent on how correlated an institution's business is with other systemic risk.
Regulation, such as the bank regulation that Obama is proposing, cannot be the means to an end of systematic risk. Other sectors, such as insurance companies & private equity, would be in a position to take over the former risks of banks and the systematic risk would be maintained.
Thursday, January 28, 2010
A Green Battle
"The world has absolutely no hope of making any substantial impact on global warming without major scientific breakthroughs, almost all which will come from United States' innovation," said Robert Nelsen, co-founder and managing director of Arch Venture Partners.
An estimated $150 billion invested globally last year was only about half what is required annually by 2015 to avoid dangerous climate change, the International Energy Agency estimates.
The question comes down to this: will China's highly capitalized command-and-control economy trump laissez-faire in a low-carbon shift that is widely portrayed as the next industrial revolution?
The failure in Copenhagen to agree to replace the Kyoto Protocol with a new global climate treaty when it expires in 2012 has thrown the focus on national measures. And by almost all accounts, the Chinese are coming on strong.
Beijing's top leaders have made clear their intention to have their nation dominate this new industry, up and down the value ladder. And in their quest for the prize, they are not burdened by concerns facing their Western counterparts -- such as the impact of wind turbines on landscapes, higher energy prices for consumers, or investor returns.
China is leapfrogging global wind power rankings with a combination of aggressive growth targets and domestic support. It has doubled its entire installed capacity each year since 2005, according to the Global Wind Energy Council (GWEC).
As he and other investors see it, British policymakers have to make a choice: either create bigger incentives for investors to underwrite offshore wind power or impose additional taxes on fossil fuels, which would make carbon-based energy less profitable.
Very, very interesting. Since Copenhagen failed, the focus has split from a global effort to a national effort, and the war has begun. China's top-down approach will combat Europe's 2020 20% goal. The business incentives also appear to line up nicely for China. Another note is that shareholder rights need to be a part of the process. If preferred shares are utilized to direct conventional oil companies to invest in greener technologies, investors can come to the rescue.
Furthermore, Western businesses are worried China is freezing them out of this lucrative market, preferring to nurture its own nascent industries without subjecting them to competition.
"The state-owned energy company sets up its development arm and they then go to a state-owned bank to get the funding, and they go to a state-owned grid company to make sure they can get a grid connection, and then lo and behold! If there's a bidding process, the state-owned turbine manufacturers happen to win the contracts," said McNamara.
This may have its downsides, as some Western analysts say that ultimately, a free-market approach will provide the competitive means for innovation in contrast to China's state-controlled, efficient financing approach. Also at stake is a grid to support the added electricity.
An estimated $150 billion invested globally last year was only about half what is required annually by 2015 to avoid dangerous climate change, the International Energy Agency estimates.
The question comes down to this: will China's highly capitalized command-and-control economy trump laissez-faire in a low-carbon shift that is widely portrayed as the next industrial revolution?
The failure in Copenhagen to agree to replace the Kyoto Protocol with a new global climate treaty when it expires in 2012 has thrown the focus on national measures. And by almost all accounts, the Chinese are coming on strong.
Beijing's top leaders have made clear their intention to have their nation dominate this new industry, up and down the value ladder. And in their quest for the prize, they are not burdened by concerns facing their Western counterparts -- such as the impact of wind turbines on landscapes, higher energy prices for consumers, or investor returns.
China is leapfrogging global wind power rankings with a combination of aggressive growth targets and domestic support. It has doubled its entire installed capacity each year since 2005, according to the Global Wind Energy Council (GWEC).
As he and other investors see it, British policymakers have to make a choice: either create bigger incentives for investors to underwrite offshore wind power or impose additional taxes on fossil fuels, which would make carbon-based energy less profitable.
Very, very interesting. Since Copenhagen failed, the focus has split from a global effort to a national effort, and the war has begun. China's top-down approach will combat Europe's 2020 20% goal. The business incentives also appear to line up nicely for China. Another note is that shareholder rights need to be a part of the process. If preferred shares are utilized to direct conventional oil companies to invest in greener technologies, investors can come to the rescue.
Furthermore, Western businesses are worried China is freezing them out of this lucrative market, preferring to nurture its own nascent industries without subjecting them to competition.
"The state-owned energy company sets up its development arm and they then go to a state-owned bank to get the funding, and they go to a state-owned grid company to make sure they can get a grid connection, and then lo and behold! If there's a bidding process, the state-owned turbine manufacturers happen to win the contracts," said McNamara.
This may have its downsides, as some Western analysts say that ultimately, a free-market approach will provide the competitive means for innovation in contrast to China's state-controlled, efficient financing approach. Also at stake is a grid to support the added electricity.
Awaiting US trade negotiations with Colombia, Panama, and South Korea
From Reuters
Democrats complain Colombia has not done enough to stop violence against trade unionist and they want changes in Panama's tax haven laws and labor regime.
Midwestern lawmakers, including some Republicans, are unhappy with auto provisions of the Korean agreement they say fail to tear down barriers that keep American cars out.
U.S. trade officials also met recently with Ford Motor Co (F.N) President Alan Mulally, whose company is the loudest industry opponent of the Korean pact.
U.S. Wheat farmers -- reliant on exports for half their sales -- said they were anxious for the Colombia pact to pass, noting Canada will soon ratify a similar deal, which would give it a leg up in that market.
Obama said in his State of the Union Address that he wants to double U.S. exports in 5 years, supposedly supporting some 2 million jobs within the U.S. Trade pacts with Colombia, Panama, and South Korea have historically been blocked by Democratic party opposition. Obama's remarks are meant to real in Republican interests to help support other Obama initiatives such as health care reform.
But Daniel Price, a lawyer at Sidley Austin and former White House adviser to George W. Bush, said many would be "puzzled" by Obama's failure to explicitly urge approval of the deals and instead only call for stronger trade ties.
If Obama were to actually push these deals through Congress, he would risk dividing the Democratic party, many of whom have been against such negotiations since they began during the Bush administration. These Democrats blame the North American Free Trade Agreement (NAFTA) of the early 1990s and China's entry into the World Trade Organization in 2001 for the loss of millions of US manufacturing jobs.
Democrats complain Colombia has not done enough to stop violence against trade unionist and they want changes in Panama's tax haven laws and labor regime.
Midwestern lawmakers, including some Republicans, are unhappy with auto provisions of the Korean agreement they say fail to tear down barriers that keep American cars out.
U.S. trade officials also met recently with Ford Motor Co (F.N) President Alan Mulally, whose company is the loudest industry opponent of the Korean pact.
U.S. Wheat farmers -- reliant on exports for half their sales -- said they were anxious for the Colombia pact to pass, noting Canada will soon ratify a similar deal, which would give it a leg up in that market.
Obama said in his State of the Union Address that he wants to double U.S. exports in 5 years, supposedly supporting some 2 million jobs within the U.S. Trade pacts with Colombia, Panama, and South Korea have historically been blocked by Democratic party opposition. Obama's remarks are meant to real in Republican interests to help support other Obama initiatives such as health care reform.
But Daniel Price, a lawyer at Sidley Austin and former White House adviser to George W. Bush, said many would be "puzzled" by Obama's failure to explicitly urge approval of the deals and instead only call for stronger trade ties.
If Obama were to actually push these deals through Congress, he would risk dividing the Democratic party, many of whom have been against such negotiations since they began during the Bush administration. These Democrats blame the North American Free Trade Agreement (NAFTA) of the early 1990s and China's entry into the World Trade Organization in 2001 for the loss of millions of US manufacturing jobs.
Monday, January 25, 2010
Housing Update
"We have shamelessly borrowed from our children. And we used it, we didn't invest it. That's the picture we're in," said Ben Verwaayen, Chief Executive of Alcatel-Lucent.
FT.com reports
The Obama administration agreed just before Christmas to offer an unlimited credit extension to Fannie Mae (FNM) and Freddie Mac (FRE) for the next three years, lifting a cap that was at $200 billion for each company.
The $8,000 credit tax reward for purchases of new homes will end in April, after it was already set to expire in November.
The argument for the extension of government stimulus in the housing sector is the growing pressures of defaults on mortgages due to the 10% unemployment rate. There are concerns that foreclosures could top the 2009 level of 2.8 million. The 2009 levels were 21% greater than 2008. These figures would have been worse without the aid of Obama's Home Affordable Modification Program.
Repossessed homes, however, were up only 1.1% from 2008, driven primarily by short-term factors such as trial loan modifications, state legislation extending the foreclosure process, and an overwhelming inventory volume, reports James Saccacio CEO of RealtyTrac.
It is unclear whether these modifications have only forestalled the inevitable foreclosures to come while filings peaked in July of 2009 and declined the following 4 months.
The Fed has been buying up mortgage-backed securities, which reduces mortgage rates by 25 to 75 basis points. 30-year mortgages are at 4.98% for the week ended Jan. 28, the lowest rate in decades. Mortgage rates are also linked to yields on Treasuries and MBOs.
Most of the loan modifications are temporary which leaves economists pessimistic about the future of the housing market.
The four states with the most foreclosure filings -- California, Florida, Arizona and Illinois -- accounted for a full 50% of the nation's properties receiving notices.
Most forecasts predict price declines in 2010, from 3% up.
Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.
The stabilization of home prices, which started in October 2009, can be attributed to the low mortgage interest rates and the first-time homebuyers tax credit.
The three primary reasons why home prices are expected to fall once again are:
1. The second wave of home foreclosures
2. Rising interest rates
3. The end of the tax credits
Strategic defaults are also expected to rise as the value of home prices fall and people will walk away realizing that the value of the home dips below the value they owe.
Peter Schiff, president of Euro Pacific Capital, says that home prices (now down 29% from their peak) are only half way to the bottom.
FT.com reports
The Obama administration agreed just before Christmas to offer an unlimited credit extension to Fannie Mae (FNM) and Freddie Mac (FRE) for the next three years, lifting a cap that was at $200 billion for each company.
The $8,000 credit tax reward for purchases of new homes will end in April, after it was already set to expire in November.
The argument for the extension of government stimulus in the housing sector is the growing pressures of defaults on mortgages due to the 10% unemployment rate. There are concerns that foreclosures could top the 2009 level of 2.8 million. The 2009 levels were 21% greater than 2008. These figures would have been worse without the aid of Obama's Home Affordable Modification Program.
Repossessed homes, however, were up only 1.1% from 2008, driven primarily by short-term factors such as trial loan modifications, state legislation extending the foreclosure process, and an overwhelming inventory volume, reports James Saccacio CEO of RealtyTrac.
It is unclear whether these modifications have only forestalled the inevitable foreclosures to come while filings peaked in July of 2009 and declined the following 4 months.
The Fed has been buying up mortgage-backed securities, which reduces mortgage rates by 25 to 75 basis points. 30-year mortgages are at 4.98% for the week ended Jan. 28, the lowest rate in decades. Mortgage rates are also linked to yields on Treasuries and MBOs.
Most of the loan modifications are temporary which leaves economists pessimistic about the future of the housing market.
The four states with the most foreclosure filings -- California, Florida, Arizona and Illinois -- accounted for a full 50% of the nation's properties receiving notices.
Most forecasts predict price declines in 2010, from 3% up.
Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.
The stabilization of home prices, which started in October 2009, can be attributed to the low mortgage interest rates and the first-time homebuyers tax credit.
The three primary reasons why home prices are expected to fall once again are:
1. The second wave of home foreclosures
2. Rising interest rates
3. The end of the tax credits
Strategic defaults are also expected to rise as the value of home prices fall and people will walk away realizing that the value of the home dips below the value they owe.
Peter Schiff, president of Euro Pacific Capital, says that home prices (now down 29% from their peak) are only half way to the bottom.
Wednesday, December 30, 2009
Little overview of quantitative easing
SO I can't remember where I got this material so don't sue me. I will Italics it for whoever came out with the ideas.
Quantitative Easing: used to increase the money supply by buying government securities or other securities from the market. [Investopedia]
Q: What will happen to the government securities once rates increas? Once the economy recovers and stocks increase?
Quantitative easing will flood financial institutions with capital in an effort to promote increased lending and liquidity. Central banks tend to use quantitative easing when interest rates have already been lowered to near 0% levels and have failed to produce the desired effect.
The major risk of quantitative easing is that although more money is floating around, there is still a fixed amount of goods for sale. This will eventually lead to higher prices or inflation.
So this expansionary monetary policy that is happening in key global economies of the US, China, Japan, and Europe will place increased pressure on the output gap (Actual output - potential output). BUY! is the message that central banks are stating worldwide, yet the only to-do shopping lists seem to be focused around commodities, bonds, stocks, and emerging market economies. INVESTMENTS have recovered but not the fundamental consumer piece that fuels the economy. Gilts, for example, are bonds issued by the governments of the UK, South Africa, or Ireland. 2/3 of gilts are held by insurance companies and pension funds.
In 2009, large quantities of filts have been purchased by the Bank of England under its policy of quantitative easing.
In essense, this represents a benign facade of investor enthusiasm in the markets, fueled by taxpayers (government securities bought by the government!?) and insurance. Insurance, on an industry outlook worldwide view, will experience very healthy returns some of the biggest players lost over 100 million euros due to record defaults this past year. Healthy premiums and a heightened need for security will raise revenues and defaults will be stagnant for the next few years. So they are in a stable position to purchase these securities without taking on additional debt.
Quantitative Easing: used to increase the money supply by buying government securities or other securities from the market. [Investopedia]
Q: What will happen to the government securities once rates increas? Once the economy recovers and stocks increase?
Quantitative easing will flood financial institutions with capital in an effort to promote increased lending and liquidity. Central banks tend to use quantitative easing when interest rates have already been lowered to near 0% levels and have failed to produce the desired effect.
The major risk of quantitative easing is that although more money is floating around, there is still a fixed amount of goods for sale. This will eventually lead to higher prices or inflation.
So this expansionary monetary policy that is happening in key global economies of the US, China, Japan, and Europe will place increased pressure on the output gap (Actual output - potential output). BUY! is the message that central banks are stating worldwide, yet the only to-do shopping lists seem to be focused around commodities, bonds, stocks, and emerging market economies. INVESTMENTS have recovered but not the fundamental consumer piece that fuels the economy. Gilts, for example, are bonds issued by the governments of the UK, South Africa, or Ireland. 2/3 of gilts are held by insurance companies and pension funds.
In 2009, large quantities of filts have been purchased by the Bank of England under its policy of quantitative easing.
In essense, this represents a benign facade of investor enthusiasm in the markets, fueled by taxpayers (government securities bought by the government!?) and insurance. Insurance, on an industry outlook worldwide view, will experience very healthy returns some of the biggest players lost over 100 million euros due to record defaults this past year. Healthy premiums and a heightened need for security will raise revenues and defaults will be stagnant for the next few years. So they are in a stable position to purchase these securities without taking on additional debt.
Don't cut corners with your supplier
Another excerpt from John Wiley Spiers' "How Small Business Trades Worldwide" (2001)
Another way suppliers can cut corners to make up the loss of revenue is to ship you defective goods. Normally, if your order is for, say, 2,000 pieces, they would make 2,200 pieces, sort out the defectives, and ship you 2,000 excellent items. (The other 200 pieces they can sell to some poor fool who comes from the United States and says, "do you have something cool I can sell and make a killing?") But if you squeeze the supplier on price, they might make you 2,000 pieces, ship you 2,000 pieces, and you can pay the freight, taxes (duty) on the defectives and have to sort them out yourself.
The bottom line is that you must never deny the supplier just compensation for his efforts.
Another way suppliers can cut corners to make up the loss of revenue is to ship you defective goods. Normally, if your order is for, say, 2,000 pieces, they would make 2,200 pieces, sort out the defectives, and ship you 2,000 excellent items. (The other 200 pieces they can sell to some poor fool who comes from the United States and says, "do you have something cool I can sell and make a killing?") But if you squeeze the supplier on price, they might make you 2,000 pieces, ship you 2,000 pieces, and you can pay the freight, taxes (duty) on the defectives and have to sort them out yourself.
The bottom line is that you must never deny the supplier just compensation for his efforts.
Business meeting at Dinner
More stuff from John Wiley Spiers' "How Small Business Trades Worldwide" (2001).
Quick Lesson: Organize around the opportunity, not a resource.
So say you find an overseas supplier and they wish to meet with you in your homeland.
If "the feel" is right, move into the bar after dinner to discuss the business, and if appropriate, hammer out agreements on the ten points mentioned next.
As the waitroid is seating you and your guest(s) at a table in the bar excuse yourself and say you will join them in a minute. When your guests are out of earshot, instruct the bartender that whenever you order a gin and tonic, the bartender is to pour you only the tonic. And whatever your guests order, the bartender is to make them doubles. Then return to your guests, order drinks, and get down to the serious business of hammering out some solid business agreements. (This is precisely what they will do to you overseas).
Quick Lesson: Organize around the opportunity, not a resource.
So say you find an overseas supplier and they wish to meet with you in your homeland.
If "the feel" is right, move into the bar after dinner to discuss the business, and if appropriate, hammer out agreements on the ten points mentioned next.
As the waitroid is seating you and your guest(s) at a table in the bar excuse yourself and say you will join them in a minute. When your guests are out of earshot, instruct the bartender that whenever you order a gin and tonic, the bartender is to pour you only the tonic. And whatever your guests order, the bartender is to make them doubles. Then return to your guests, order drinks, and get down to the serious business of hammering out some solid business agreements. (This is precisely what they will do to you overseas).
The Innovator/conservator paradigm.
Here are some interesting excerpts from John Wiley Spiers' "How Small Business Trades Worldwide" (2001).
The Innovator/conservator paradigm.
In 1976, Apple introduced the personal computer to the marketplace. Jobs and Wozniak, Apple's founders, have a letter from executives turning their idea down when they offered it to Hewlett Packard. IBM certainly had the capital and technological resources to introduce a personal computer that year if they had wanted to do so. But in 1976 there was no interest, and [Peter F.] Drucker explains why: no mainstream conservator company is going to risk his 9-5, weekends free, country club membership, good salary, health insurance and pension plan on a risky venture.
After innovation such as a personal computer does gain popularity, the the conservators step in, as IBM did, with their version of the PC [1981]. And when they moved in, they took the lion's share of the PC market. But this is a very important point to remember: IBM did not introduce the PC until 1981. As fiercely competitive as the computer business is, Apple was virtually alone in the market for five years!
After IBM stole the lion's share of the PC market, the then-new Macintosh line assured the survival of Apple Computer.
Never bother "protecting" your ideas as an innovator. Worry about the customer's needs.
The Innovator/conservator paradigm.
In 1976, Apple introduced the personal computer to the marketplace. Jobs and Wozniak, Apple's founders, have a letter from executives turning their idea down when they offered it to Hewlett Packard. IBM certainly had the capital and technological resources to introduce a personal computer that year if they had wanted to do so. But in 1976 there was no interest, and [Peter F.] Drucker explains why: no mainstream conservator company is going to risk his 9-5, weekends free, country club membership, good salary, health insurance and pension plan on a risky venture.
After innovation such as a personal computer does gain popularity, the the conservators step in, as IBM did, with their version of the PC [1981]. And when they moved in, they took the lion's share of the PC market. But this is a very important point to remember: IBM did not introduce the PC until 1981. As fiercely competitive as the computer business is, Apple was virtually alone in the market for five years!
After IBM stole the lion's share of the PC market, the then-new Macintosh line assured the survival of Apple Computer.
Never bother "protecting" your ideas as an innovator. Worry about the customer's needs.
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