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Monday, December 28, 2009

New year.....2010, what are the resolutions!

Hi all,

What are the new year's resolutions? I know I have a few of them, but tend to keep them close to the vest.

I hope we all have a safe and peaceful new year, all around the world. From Iran to Little Rock Arkansas!

Peace and Love!

Youri

Sunday, December 20, 2009

Christmas is soon here...

I am so glad that Christmas is finally upon us. Now we can all put differences aside, get together with family and enjoy the reason for the season.

I wish for everyone who reads this blog, to have a happy and safe Christmas season.

We can all use a break from the real world.

All the best and see you, well, you probably will see me for the new year... but, in the event that you don't....have a happy new year!

2010 looks fantastic already!

Thursday, December 3, 2009

Will 2010 be a better economic year? PT2

With Particular regard to the causes of this current crisis turned economic recession in 07-08, the issues of a) credit flows and b) deflation due to conditions that can be described as an aggressive bear market, for not only stocks, but also for companies in distress, is also of importance.

The IMF asserts in their WEO that credit has started to flow and spreads have come down. That is somewhat good news, but expectations on lending conditions, as of July this year, are still down considerably.

There has been some movement in the Asian markets with regard to stock activity, but to the level where they were in 2006-07 is still yet to materialize. In fact, it may never rebound.

Deflationary pressure is still a major concern, as it appears as if, while manufacturing has "stablized", purchases are down with output productivity increasing with minor layoffs.

To highlight for a moment of how we got here overall; the chain reaction of bad events started when credit stopped flowing through the banking sector, simultaneously with the decline in private equity activity, due mostly because major investors lost confidence in the system that was corrupted by risky assets- mortgage backed securities and collateralized debt obligations- where the risks were severely under appreciated.

Particularly, the market for housing backed securities, became detrimentally unstable due to the deteriorating economic conditions in America which, among other things, causing homes to be "turned upside down" (the collateral that secured the home loan is worth less than the money owed on it) and equally, adjustable rates for low cost homes that were extreemly very low in order to attract middle to low income families, being raised at a time of considerably high real inflation cost which caused massive defaults- the price of gasoline and processed food, saw record prices in the years between 2004 to 2008, that had risen from $27.00 to $91.00 (USD) for oil and with the weighted average export shares of total food for 2002 to 2009 from 90.2 to 146.9 with the peak in 2008 to 190.9, as reported by the FAO's in their global food price index.

Currently, The Case-Shiller housing price index (HPI) state that home prices are at -13% of what they were last year this time and -50% from their peak in 2006-2007 in the USA. The Financial Times (FT) HPI in the Eurozone is down for past 7 quarters leading up to Q1, 2009, with negative digit decreases steepening from Q1, 2008 to Q1, 2009 to -4.5%.

In another vein, while the Asian housing market was red hot throughout most of the 2000's leading into 2009, the reports for 2009 are allot less stated- which is quite concerning when leading institutions, are touting the Asian led recovery for the global economy. Examining national statistics on the residential market is still red hot in China, with a 17% year over increase in overall household investment and 13% year over increase in residential property and for commercial property there was a 73% rate of sales increase.

Figures throughout Asia are pretty modest compared with China, but one must take into consideration the issue with respect to sovereign national investment in housing in the socialist state, coupled with increased domestic savings and a balance of payment surplus, to asisst with funding the Chinese market during the downturn, in addition to the stimulus plan they introduced in 2008.

Let's all hope Asia does not follow the western model of economic management to a tee. Even though Asian officials have chastised western officials for their management, the fact of the matter is that they learned the tools and templates for economic management from western schools of thought.

The key issue with all said previously, is that the regulatory regime and the way investment banks are allowed to do business, coupled with the issues as they relate to trading and collaterlalized trading, still has not changed.

Not only does this indicate that disaster can strike again, but also if growth is to be led through the virtue of these windows, with lower employment and manufacturing prospects, in conjunction with the still uncertain nature of the very system that collapsed- let alone the uncertainty about impending regulations- there is nothing to suggest that robust growth is to be expected.

Nevertheless, when we factor in the savings rates before the crisis started for Asia, it is not difficult to believe that spending, at least, in the region, will be higher than other continental markets with regard to home prices.

Overall, the major issue with regard to economic growth, globally, is the issue of who, exactly, will there be growth for?

So, the recession is ending for some people. Asia seems to have never had a recession, let alone still in one. But, the recession is certainly not ending for many of us out there.

Emerging and developing markets must take advantage of the permanent jobs losses and continue to develop nationally the traditional way, until they have "caught up" to developed markets- where ever that may end up.

Will 2010 be a better economic year? PT1

The IMF in a recent statement that the crisis is over, the worse is behind us, recovery is seen and the best is yet to come. Quoting the IMF in their World Economic Report in October, 2009 explicitly stated in the first chapter titled "The Global Recession is ending".

That may be true in some instances, but there is still very much to be done and perhaps, sadly, little than can be done to save much.

In light of this, can we expect a better 2010 in The Caribbean and larger developing world, in any event? It all depends on what other larger countries do and how much leeway we have with expanding interests past the traditional positions, if there is the notion of continued dependence on larger economies to lead the charge.

I remember one of my very first articles back at the end of 2008. It stated that the global economy would begin to rebound by Q3 this year. To some extent, I was correct, albeit that the rebound was not as upbeat as one would have read into my analysis and the growth is being led by Asia at large- China and South East Asia to be exact- as opposed to the traditional Triad (EU, USA and Japan).

Let's take a deeper look at some of the issues analysts have been looking at to gauge their outlook: manufacturing, retail sales and consumer confidence.

Led primarily by Asian markets, manufacturing has rebounded with little or no pick up in the USA or in Europe. The US Industrial Activity Report, or the "Biege Book" over the last year has stabilized towards accepting lower level of production and output expectations, to some 20% below that of 2006 and 2007. In Europe, the details are slightly more encouraging, due to the issue that emerging economies in the post soviet bloc's are still developing and commodities such as oil, coal and car manufacturing, are experiencing steady growth.

Coming into the end of the year, as it relates to consumer confidence indexes broadly, analysts are predicting that sales will experience an uptick due to the Christmas season. Retail sales have been coming along slowly, thanks’ to the cash for clunkers exercise in the USA and welfare programs in the USA and Europe; i.e., stimulus checks in the USA and added welfare spending in most of Europe as well as VAT relaxation.

However, are these issues primarily linked to the larger issues with the economy and recovery? Also, will this compendium of criterion, moving forward, be less or more affected by other conditions that impact them all? Should there be any real concern that after the Christmas season, consumer confidence will see comparable seasonal inclines?

To be fair, the USA and Europe are still not producing as much or as fast. Corporate defaults are at an all time high in Europe and are to be at a sustained default level, going into 2011 as well as into 2012 by some of the more dire predictions.

American production is up, but production volume is down. While also, job cuts, having worked to increase productivity levels by 10% to 15%.

For one, the issue of employment prospects and current employment rates is first and foremost.

The US just cut nearly 200 thousand private sector jobs in November, which was stated as the smallest job cut over a month period since 2008.

In Europe, The Employment in Europe report forms the analytical basis for the Joint Employment Report (JER) is slated to be out by December 9th, 2009. But, from the onset of the crisis, over 4 million.

Additionally, due to Europe's fervor for regulation, more private sector jobs are slated to be lost. Particularly with regulation in the financial services sector as well as regulation vis a vis carbon policy.

Reports up to April, 2009 from the International Labor Organization (ILO), also has global employment significantly down at -1.3%. This means that job growth has not only receded, but permanent jobs may have been lost across Europe and America, with modest gains in North Africa/Middle East and in East Asia.

In my estimation, the jobs lost over this recession, will never return to the traditional, real sectors of the developed markets the way it has been in the past in the USA and established Europe.

Higher technology, coupled with the uncertainty of the outlooks which are prompting managers to maintain labor costs, while reaping profits at the margins due to the higher productivity, will see to that.

It is up to, in turn, developing and emerging market countries to create traditional sector jobs to sustain growth into, what I would term, developed market economies “funking out".

The issue of increased investment, particularly led by private equity, is another issue to monitor for signs of progress.

The reason why private equity should be monitored, is because private equity is what drove the market, pre crisis. In 2008, private equity fell by 40% over the previous year, directly correlated with recessionary economic growth, with no signs of increased activity as it relates to mergers and acquisitions, or improved conditions in large firms outside of high technology.

The worst of it with private equity is that as long as asset pricing remains unstable and the issue of market/mark to market evaluation remains uncertain, private equity will remain silent, if all circumstances remain constant over the short to medium term.

Tuesday, December 1, 2009

Coming down the home stretch..

When will the EU and the USA put something in for small and medium businesses?

I think the TARP, and the other stimulus plans for bank's across Europe, were a little flawed in the sense that they forgot that the same market mechanisms that the capital injections were passed through, is what messed the economy up in the first place. And, also, flawed because the same institutions, were still saddled with the same inept and in some cases corrupt individuals.

However, the idea that Central Bank's across the board were willing to support their banking systems, no matter what, staved off larger disaster.

The issue now must be with small businesses. I don't care if it's with green energy or dirty diesel mechanics, just get some relief to small businesses.

Direct par roll subsidies may be a start. Trade financing has to be another idea, especially throughout the USA...support courier and carrier services as well to reduce the cost of transportation- through fuel credits, tax cuts on packaging material and pay roll subsidies.

Are these ideas too far fetched, or are they just what the world needs right now?

Wednesday, November 18, 2009

UK keeps rate at .5%!!

Well, if credit to households and consumers have not just yet gotten back to normal levels, and the rate is near zero, what is the BOE to do?

They can't be worried about internal inflation? Apparently, they report low inflation for September- CPI of 1.1% and low expectations.

The VAT reversal may have played a part in the inflation rate as it is, but certainly investor and consumer appetite has not been wet as yet. Maybe the X-mas may be better news for businesses!
BOE Report

Monday, November 16, 2009

The FT has a good Monday Ed...

Could not have reported it any other way!


“When the recovery picks up, we will be back to square one,” Mr Diouf told the Financial Times in an interview.

He said the same structural problems behind last year’s spike in food prices were still affecting the market. These included lack of investment, surging demand in Asia and diversion of food commodities into biofuels.

“We have all the elements of the crisis,” he said, adding that a weakening US dollar could exacerbate the upward price pressure in food commodities.

Well, do something about it G-20/G-7/G-2 or what ever number you want to put to a G!

What he should have added is that the frayed financial market mechanisms on derivatives/futures, should be focused on as well....in addition to the Doha Round stalemate!

Japan's economy grew at 4.8% in 4th QT!

They blame it all on the fiscal stimulus FT Report. They would blame everything on the fiscal stimulus. But, it is what they say they want it to be- I guess.

The issue that has me concerned is; how do they, or, "did they", create value out of nothing? For example, they [Japan] ran the same cash for clunkers programme as did the USA. But, it was just to stimulate transactions? Wasn't it?

The trick was to get persons to but new cars at an affordable rate. But, would allowing cars to sit in inventory, rather than being purchased at a low price or at a loss, be a good thing?

I don't think that it would be a good thing and they would [Japanese officials] have to give us another excuse. Because, I don't know of any business that can stay in operation, if it sells its products at a loss or below the market value or real value! That's just me!

The issue to me is with the value of the YEN. As it stands, now, the YEN hovers under 95 YEN per $1 USD. A stronger YEN, means more relative value for Japanese products. Also, it means that the YEN is worth more than the USD and that would have increased speculation over the last few quarters.

Not bad. But, a stronger YEN, with a weaker dollar, may not be a bad thing. The US economy is not as sound as it once was, so if the Japanese have not found other consumers for their exporters, or, show themselves to be less worried about the Euro and other Asian currencies, then they are probably going to under perform- all circumstances considered- in the early part of the next QT.

Especially they would underperform if they depend on fiscal stimulus and cash for clunkers....which may not sound like a bad idea after all, considering that the YEN is stronger and they can create value, relatively, within their own economy!

Friday, November 13, 2009

One of my favourite tunes...

While this blog is about my work and my professional interests, I like to show another side.

We can't all be serious all of the time!! "Tiger Baby" from Militant out of Guyana!

Enjoy!

I posted this notification everywhere...

...aside for on my blog. I had an interview yesterday on a local radio station, Star 106 fm with the host Jeff Lloyd.

It was a pre-recorded show. But, in any event, when I get a taping I would post it to the website.

I talked about allot of things...political economy, economics, the Bahamian economy, diversification of the Bahamian economy, the global economy and some issues as they relate to capital punishment and social justice.

Great interview. Jeff Lloyd over at Star 106 fm did a fantastic job with me.

http://star106fm.com/index.php

Just in case any of you like easy listening in the days...

Monday, November 2, 2009

What in the world?

German businesses are asking for more taxes?

I knew the Germans were weird, but not this weird!

I guess its a socialist type mentality. Perhaps its German exceptionalism rather than US or French exceptionalism.

They tend to think about the macroeconomic picture, rather than for their individual firms. Good for them to be so caring about everyone else.

For me, tax cuts would be welcomed at any time. No idea as to the full reasoning with regard to the bottom line for businesses. But, the business community has said that it fears that the spending that occurred under this crisis, could leave it with a bad reputation for terrible fiscal mismanagement.

So what? Get your tax break and pay some back in if you wish to. Good grief!

Turn your clocks back!

Hope you guys remembered to turn your clocks back one hour. Daylight savings time, in reverse. (I think!)

I always like this time of year. The weather is not so hot and not so cold. Just cool. Even though I normally have bad luck around this time, things always seem to feel great.

Better days ahead...

Thursday, October 29, 2009

US Economy grew...

Reports have it that the US economy grew by 3.5%. FT report.

It's jobless growth for the most part. It has been growing with regard to the cash for clunkers and other durable goods demand, as well as a tax incentive for home buyers.

Some economist's say that there must be, or it is desirable amount of joblessness and unemployment, for inflation's sake. But, to the extent to which there has been unemployment at over 8% in the USA, this is not the type of joblessness economist's are wanting.

Monday, October 26, 2009

What's been happening?

Nothing much but allot of the same thing.

Iran is "hiding" nukes. What else is new?

Banks are facing more pressure, and persons like George Soros want more regulation. Also, persons like Mervyn King of the Bank of England, wants to cut banker pay. Good luck with that, King.

I am of the opinion that if someone wants to pay you for a job and pay you well, you should be paid.

How should regulation look going forward for the financial services sector, however? There has been more talk than actual doing. The average voter has turned their station off of the talk about banking regulations and, if I may say so, they have forgotten about what was at the root of the crisis. Same old same old!

What about growth moving forward? Well, to me, it's growth for who? Seems as if Asia has gotten off of the first start if they were ever really that bad off. The tousism sector in Asia was hardest hit, due to the lack of travel due to the loss or the fear of loss of jobs. The manufacturing sector was also hit, because orders went down as sales dwindled-- it has picked up to some extent, but are there orders to the western European and North American countries, is another mix of confusion that we don't have the answers to.

I don't know why information, critical information is so hidden from investors and the public.

The IMF has forecasted and has tracked which economies are growing. However, they are not so rosy about Europe and North America. Reports have it that Germany and France have gotten back on track....but, we will have to wait and see if it is sustained.

Also, how they have gotten on track is yet another mystery. Manufacturing in Germany is at the lead, but still no idea as to where the orders are placed. The rest of the Euro-zone is still depressed. France was never as hard hit....French Exceptionalism? Perhaps!

Friday, October 23, 2009

China's growth...8.9%!

Compared by the same period last year, the economy grew at 8.9%. This is all hodge podge news, really. For example, is it real growth or simply nominal growth? Or, is the real growth based on factors that are endogenous to China, or dependent on real value to be returned in the long or short term from external partners?

FT Report: "China growth underlines rapid rebound!"

If they are dependent on western consumers, I don't see how they escape the real value trap; i.e., the trap that you may have sold a good at a nominal profit and also at a minor real price profit, but reap valueless returns compared to real price terms on what the good may be worth or in turn. Or, on the other end, the price of a good you purchased at the same pricing differentials, but value would be seeped away in the short term, leaving the buyer with short term debt and liquidity problems- all in the same time, making larger nominal gains, mixed in with minor real gains, valueless in terms of medium term or long term benefits.

For example, a company buys a stock at 20% more its nominal value in the market and actually makes a minor profit of 5% the real value. However, the price drops on that good by 50% in the short term, leaving the buyer strapped for cash and with no idea on how to offload the good to reap his profits back all at a higher nominal price of inflation.

A slight nuance to the value trap, just added the notion of nominal to real value depreciation.
Value Trap Investopedia definition

Monday, October 19, 2009

More terrorist's in the U.S. financial services industry?

What a trip. The FT reports that the Sri Lankan government has reported: " , the New York-based billionaire and hedge fund manager charged in an alleged insider trading scheme on Friday, was funding the Liberation Tigers of Tamil Eelam, which is considered a terrorist group by the US, the Sri Lankan government claimed on Sunday."

Last week it was the U.S. Treasury stating that no one is to do business with financier Bekkay Harrach and put him on a blact list of sorts, by naming him.

I knew the oil hungry barons and futures traders of the west would go ahead and dig a bigger ditch for Americans and people within the west. They all just enjoyed the high price of oil and now, you have wealthy financiers who are hundreds of thousands of dollars richer, who STILL hate the west-- financiers who they helped to make money.

I wonder if more of this name and shame will come about? Not accusing Raj Rajaratnam of anything. But, considering that terrorism is taken death serious nowadays, we have to look at it from a hard angle.

In any event, Raj is not middle eastern, but from south-east Asia. He is no oil baron and nothing to say that he is connected in any way to the middle east, like Harrach is. In addition, the Tamil Tigers are not really an enemy of America the way Al-Quiada is.

We will see...

Sunday, October 18, 2009

Is the global recession ending for 2009 and will 2010 be any better?

The IMF in a recent statement that the crisis is over, the worse is behind us, recovery is seen and the best is yet to come. Quoting the IMF in their World Economic Report in October, 2009 explicitly stated in the first chapter titled "The Global Recession is ending".

That may be true in some instances, but there is still very much to be done and perhaps, sadly, little than can be done to save much.

In light of this, can we expect a better 2010 in The Caribbean and larger developing world, in any event? It all depends on what other larger countries do and how much leeway we have with expanding interests past the traditional positions, if there is the notion of continued dependence on larger economies to lead the charge.

I remember one of my very first articles back at the end of 2008. It stated that the global economy would begin to rebound by Q3 this year. To some extent, I was correct, albeit that the rebound was not as upbeat as one would have read into my analysis and the growth is being led by Asia at large- China and South East Asia to be exact- as opposed to the traditional Triad (EU, USA and Japan).

Let's take a deeper look at some of the issues analysts have been looking at to gauge their outlook: manufacturing, retail sales and consumer confidence.

Led primarily by Asian markets, manufacturing has rebounded with little or no pick up in the USA or in Europe. The US G.19 Report over the last year has stabilized to lower production and expectations, to some 20% below that of 2006 and 2007. In Europe, the details are slightly more encouraging, due to the issue that emerging economies in the post soviet bloc's are still developing and commodities such as oil, coal and car manufacturing, are experiencing steady growth.

Coming into the end of the year, as it relates to consumer confidence indexes broadly, analysts are predicting that sales will experience an uptick due to the Christmas season. Retail sales have been coming along slowly, thanks’ to the cash for clunkers exercise in the USA and welfare programs in the USA and Europe; i.e., stimulus checks in the USA and added welfare spending in most of Europe as well as VAT relaxation.

However, are these issues primarily linked to the larger issues with the economy and recovery? Also, will this compendium of criterion, moving forward, be less or more affected by other conditions that impact them all? Should there be any real concern that after the Christmas season, consumer confidence will see comparable seasonal inclines?

To be fair, the USA and Europe are still not producing as much or as fast. Corporate defaults are at an all time high in Europe and are to be at a sustained default level, going into 2011 as well as into 2012 by some of the more dire predictions.

American production is up, but production volume is down. While also, job cuts, having worked to increase productivity levels by 10% to 15%.

For one, the issue of employment prospects and current employment rates is first and foremost.

The US just cut nearly 200 thousand private sector jobs in November, which was stated as the smallest job cut over a month period since 2008.

In Europe, The Employment in Europe report forms the analytical basis for the Joint Employment Report (JER) is slated to be out by December 9th, 2009. But, from the onset of the crisis, over 4 million.

Additionally, due to Europe's fervor for regulation, more private sector jobs are slated to be lost. Particularly with regulation in the financial services sector as well as regulation vis a vis carbon policy.

Reports up to April, 2009 from the International Labor Organization (ILO), also has global employment significantly down at -1.3%. This means that job growth has not only receded, but permanent jobs may have been lost across Europe and America, with modest gains in North Africa/Middle East and in East Asia.

In my estimation, the jobs lost over this recession, will never return to the traditional, real sectors of the developed markets the way it has been in the past in the USA and established Europe.

Higher technology, coupled with the uncertainty of the outlooks which are prompting managers to maintain labor costs, while reaping profits at the margins due to the higher productivity, will see to that.

It is up to, in turn, developing and emerging market countries to create traditional sector jobs to sustain growth into, what I would term, developed market economies “funking out".

Secondly, the issue of increased investment, particularly led by private equity is another issue to monitor for progress.

The reason why private equity should be monitored is because private equity is what was driving the market, pre crisis. In 2008, private equity fell by 40% over the previous year, directly correlated with recessionary economic growth, with no signs of increased activity as it relates to mergers and acquisitions, or improved conditions in large firms outside of high technology.

The worst of it with private equity is that as long as asset pricing remains unstable and the issue of market/mark to market evaluation remains uncertain, private equity will remain silent, if all circumstances remain constant over the short to medium term.

More importantly, and particularly with regard to the causes of this current crisis turned economic recession, the issues of a) credit flows and b) deflation due to conditions that can be described as an aggressive bear market, for not only stocks, but also for companies in distress, is also of importance.

The IMF does assert in the WEO that credit has started to flow and spreads have come down. That is somewhat good news, but expectations on lending conditions, as of July this year, are still down considerably.

There has been some movement in the Asian markets with regard to stock activity, but to the level where they were in 2006-07 is still yet to materialize. In fact, may never rebound.

Deflationary pressure is still a major concern, as it appears as if, while manufacturing is stable, purchases are down and output productivity has increased with minor layoffs.

To highlight for a moment of how we got here, the chain reaction of bad events started when credit stopped flowing through the banking sector, simultaneously with the decline in private equity activity, due mostly because major investors lost confidence in the system that was corrupted by risky assets- mortgage backed securities and collateralized debt obligations- where the risks were severely under appreciated.

Particularly, the market for housing backed securities, became detrimentally unstable due to the deteriorating economic conditions in America which, among other things, caused for houses to be "turned upside down" and equally, adjustable rates for low cost homes that were once very low in order to attract middle to low income families, were raised at a time of considerably high real inflation cost which caused massive defaults in mortgages- the price of gasoline and processed food, saw record prices in the years between 2004 to 2008, that had risen from $27.00 to $91.00 (USD) for oil and with the weighted average export shares of total food for 2002 to 2009 from 90.2 to 146.9 with the peak in 2008 to 190.9, as reported by the FAO's in their global food price index.

Currently, The Case-Shiller housing price index (HPI) state that are at -13% of what they were last year this time and -50% from their peak in 2006-2007 in the USA. The Financial Times (FT) HPI in the Eurozone is down for past 7 quarters leading up to Q1, 2009, with negative digit decreases steepening from Q1, 2008 to Q1, 2009 to -4.5%.

The key issue with all said previously, is that the regulatory regime and the way investment banks are allowed to do business, still has not changed. Not only does this indicate that disaster can strike again, but also if growth is to be led through the virtue of these windows, with lower employment and manufacturing prospects, in conjunction with the still uncertain nature of the very system that collapsed- let alone the uncertainty about impending regulations- there is nothing to suggest that robust growth is to be expected.

In another vein, while the Asian housing market was red hot throughout most of the 2000's leading into 2009, the reports for 2009 are allot less stated- which is quite concerning when leading institutions, are touting the Asian led recovery for the global economy. Examining national statistics on the residential market is still red hot in China, with a 17% year over increase in overall household investment and 13% year over increase in residential property and for commercial property there was a 73% rate of sales increase.

Figures throughout Asia are pretty modest compared with China, but one must take into consideration the issue with respect to sovereign national investment in housing in the socialist state, coupled with national savings surpluses and balance of payment surpluses, to fund the Chinese market during the downturn, in addition to the stimulus plan they introduced in 2008.

Let's all hope Asia does not follow the western model of economic management to a tee. Even though Asian officials have chastised western officials for their management, the fact of the matter is that they learned the tools and templates for economic management from western schools of thought.

Nevertheless, when we factor in the savings rates before the crisis started for Asia, it is not difficult to believe that spending, at least, in the region, will be higher than other continental markets with regard to home prices.

Overall, the major issue with regard to economic growth, globally, is who will there be growth for?

So, the recession is ending for some people. Asia seems to have never had a recession, let alone still in one. But, the recession is certainly not ending for many of us out there.

However, emerging and developing markets must take advantage of the permanent jobs losses and continue to develop nationally the traditional way, until they have "caught up" to developed markets- where ever that may end up.

Thursday, October 15, 2009

Treasury Designates Al-QA’IDA Member, Bekkay Harrach!

How much of a serious character you have to be, to be named by the US government as a terrorist and all Americans must cease and desist with any activities as it relates to you?

I normally get mail to my inbox from the US Treasury and other information sources that deal with finance and the economy, but never has one of those news letters, at least as far as I can recall, ever dealt with "naming" a terrorist and asking any of their citizens to cease and desist any activity with said person.

How serious must this "Bekkay Harrach" must be!

Tuesday, October 13, 2009

Vote on health care today...

I don't know what the Senate plans to do today, but it is expected that something will pass out of the committee on health care.

President Obama has held their feet to the fire. No more stalling and we are moving inches and inches closer to a deal, but without a public option.

My God it feels as if we are right there.

Friday, October 9, 2009

President Obama wins Nobel Prize....

Where in the world did this come from? Lose the Olympics, but win the Nobel Peace Prize? I don't get the international community...but, one does not have to do with the other, I guess!

Congrats to President Obama. In fact, the best is yet to come!

Tuesday, October 6, 2009

The notion of a secondary market for SME's in The Caribbean!

Access to capital for Small and Medium Sized Businesses (SME's) has been a consitent challenge for economies. Lack of adequate access to financing can have a serious effect on local businesses. For example, some companies borrow money for payroll. Some companies, borrow money, or, use leverage for various business expansions; e.g., a new warehouse, external trade expenses, upgrading equipment and the like.

What ever the reason, whether a company is large or small, access to capital is a component of doing business and national development. However, SME's, sometimes, find it difficult to secure financing through the formal market mechanisms; commercial banks, insurance companies or, in some cases, credit unions.

Financial institutions in the formal sector tend to ask for up to date financial activity of your company, a general outlook for your business as well as, in some cases and is now increasingly asked for, auditing of your company from an external, unbiased source.

Generally speaking, SME business structures tend to be family owned with the owners being very protective of the money floating around the till. They normally don't like any and everyone in their business, even though these family owned companies are very structured and do have to show some sort of financial fitness, for them to be presentable to lending institutions. Also, because they have "gotten this far without it", tend not to update their management and operational practices to suit rapid changing market trends- this lends to a financier's fear of your company's viability, if you happen not to have a sound succession plan, or if something drastic were to happen, for an extended period of time, to the organisation's chief executive.

In light of this, some companies go to the informal sector to access capital for their businesses; i.e., a multi-billionaire family member or friend who actually cares about your success, the local lotto dealer who happens to have a no strings attached policy, or the neighborhood "pharmacuetical provider", who has been champion on the one end for persons who need a little extra help and a "probable" boon to local authorities, depending on your level of cynicism, on the other.

To combat this, and to simultaneously develop national stock exchanges, some countries have moved towards putting in place a specialised capital market for SME's. The reason for constructing a secondary market - also called a Junior Market or an Alternative Market- is very straight forward; increase the avenues and access to financing for SME's

Some notable secondary markets in the world are The Alternative Market (Alt-M) in the United Kingdom, which has been in operation since 1995 and The American Stock Exchange, which has evolved over the years to find its niche in providing services to smaller capitalised (cap) and mid-cap companies.

However, recent developments in Jamaica give us some idea of how far the idea and the promotion of specialised markets for SME's has come. While the junior market on the Jamaican Stock Exchange (JSE) was "officially" launched in April of 2009 and several SME's have expressed interest being listed, none have yet do so.

This raises one critical issue with staring a secondary market; that being the overall actual interest in having one.

As said prior, there has been some reluctance on the part of SME's in Jamaica to want to be listed on the jr. market, for what ever reason- in addition to what was stated as their general structure earlier- even though an amount of SME's have initially expressed interest and worked with the JSE's steering committee on the matter. Considering, even relatively, SME's and micro-enterprises are a staple of developing, small markets, this does not neccesarily mean, however, that their CEO's have small and least developing outlooks on the economy or finance- even though they may not have the will to act promptly.

In order bypass this bottleneck, there must be, as a pre-requisite, pre existing arrangements with companies that not only indicate that they are ready to list on secondary market, but also made to pre-committ to being listed and steps taken to ensure that they are, operationally, ready to roll and understand the risks involved in relation to the overall standards any local stock exchange requires of them, when countries are looking forward starting a secondary market.

Basically, not only must the leg work with regard to the market research be done, but also provisions made for the agreements to be signed, in principle, with what the initiative is and what is expected from both parties and work towards this in the meantime before a secondary market is initialised.

Another issue is if whether or not there is any benefit from local investors who wish to buy shares in a small or mid-cap company, enough to expend resources on brokerage fees and manpower, to actually buy-in?

This can be easily mitigated if there is liberalisation in the financial services sector, which increases the amount of brokers in the industry that able to provide service and perhaps, tied into the formal sector providers already providing financial services in some form or fashion. There can be criteria for prospective brokers who wish to only buy small or big or both, respectively. With this regard, patient capital must be required as well as encouraged and the insurance backed plans and specialised vehicles, for investors, must and as a consequnece, be a product in play.

In addition, and dove-tailing off of broker/dealer expansion, a specialised secondary market must be relaxed with regard to the stringeny of the prospectus companies wishing to participate must put forth to the stock exchange, as well as sensitive to company ownership who wish to keep their company, predominatly, family owned and away from any hostile takeover.

Simply limmiting the amount of shares SME's are allowed to offer in their public offerings (IPO's) as a percentage of their market cap, would solve this issue- depending on the risk both investor and owner wish to take in their exchange, under other forms of specialised arrangements.

While there are other operational and developmental concerns, I have discovered that those mentioned in this article are foremost.

The benefits, overall, are evident and irrefutable. For starters, companies will have a reason and incentive to upgrade, especially if the local stock exchange offers, as a service, management consultancy services. The capital market would have a chance to expand and develop more sophisticated products. Wealth will be increased through returns to investors and through more efficient and accountable companies that learn to squeeze profit margings. And, more importantly, a greater amount of persons will, automatically, become more educated about financial services and matters.

Everyone wins-- or something to that effect!

Saturday, September 26, 2009

Iran and their nukes!

The world turns so rapidly, sometimes. This time, it took G-20 leaders to find out that Iran was hiding their nuclear weapons programme.

President Obama said in a statement, flanked by Gordon Brown and Nicholas Sarkozy, of Britain and France respectively, stating that they have evidence of a site where Iran is hiding their nuclear weapons programme.

This, is after Iranian President, Ahmed-dinijad (sic) went on a tirade about the Holocaust and denying the claims that there ever was a Holocaust. Talk about being made incredible.

I don't think Iran ever wanted to "really" hide their weapons programme.It's just that the major European and American leaders, decided to break the news now.

What will happen? I know what should happen!

It's past sanctions, its to the point where we have to destroy the nuclear arsenal.

I don't think the Iranians know how close they are to being nuked themselves. Obama said as much on the campaign stump.

2010 will be a very eventful year. I can feel it. If Iran does not stop the nuclear programme, they will be attacked.

Take heed!

Wednesday, September 23, 2009

Rates remain constant out of G-20!

Well, The Bank and the Fed decided to keep rates as they were. I guess you really can't go lower than low. It's already at .5% for the BOE and the Fed will stay between 0 to .25%.

The thing is, there is no job creation. Unemployment crept up in the US for a dramatic July and in England, the job numbers have been eerily silent. But, my folks over there say that it's not any better.....

BOE MPC minutes

FED FOMC Press Release

Monday, September 21, 2009

No people of colour work at the FT?

Hasn't anybody noticed that there is not one black person, or a non white person, working for the Financial Times as a writer?

Seems odd, no?
http://www.ft.com/comment/ftcolumnists

Friday, September 18, 2009

Interesting take on Japanese politics...

Washington Post article, from Yukio Okamoto.

Healthy politics in Japan is good and the author and I agree on that. But, The USA or Japan, neither, wants to align themselves with China in a G-2 with regard to the US-Sino or an Asia-2, with Japan and China.

China is the competitor. For both of them. Japanese economic disparities with production and exports with the USA can be worked out, due to the fact that they have a warmer relationship--with Japan being the one that normally complies with the wishes of the US.

China, however, is a different kettle of fish. They are not a remnant of the post world war two era and never was a major combatant. They never had US rule imposed on them, even though they were colonised by the British in the late 19th century.

The Japanese realize this. If anything, however, Japan has the most to gain from being liberated from US imperialism. For one, they can start a real army-- if they want to. Second, as with an issue that happened in the 80's where Voluntary Export Restraints were imposed by Japanese regulators on car exports, by the request of US policy makers, they wouldn't have the obligation to comply if they were asked by the US again for such VER's.

Take a look at the trade war now being on the brink between the US and China. This will not end well. The first issue which I feel that is important to mention, is that the response was swift by China. The issue seems to be all for nothing, but a pay of pitch to the car makers...when we think of auto-bail out, cash for clunkers, new car tech on the horizon and the green energy push, what did we expect would be the next step?

Obama is pushing the envelope and I said it before, as Jagdish Bhagwati sounded the alarm of the Obama administration's intention to turn way left on international trade, he is going to go hard left past the multi-lateral trading system and simply break America's commitment.

Little does Obama know, or care, is that he is hurting the people he's supposed to be helping......also, there are more competitors in the auto-part, "tyre industry" than is China. There's Brazil and Indonesia, right off of the bat.

But, back to Japan, the politics have changed and it may, well, WILL, be a positive factor for the Japanese. Hopefully they can change some of the players on the economic field who have grown accustomed to the one way political street.

News have been pouring out about the re-adjustments of the Japan Central Bank and other companies, Sony in particular, who have decided to do spectacular things in light of these factors.

So, things are changing to suit a more balanced political economy in Japan.

I love their spirit....

Sally and Erixon in their piece in the Wall St. Journal.
Be mindful of the new protectionism.

And, because of the issues with respect to the new protectionism, there must be greater international coordination.

I get it. While it is a far off goal, its better to say it than to not say it.

Thursday, September 10, 2009

BOE keeps rates still at 0.5%!

BOE Rate report.

No questions about it from me.

Wednesday, September 9, 2009

Blankenfield says "curb bank pay"..

..or something like that. Goldoman Sachs chief, Lloyd Blankenfield [sic] says that it is long overdue to curb bank, more clearly, investment banker incentives and bonuses.

He says that these investment bankers serve no social purpose and thus, they don't need all of that money heaped up on them.

You want to know something? He is sort of right!

Take for example the catalyst that started the banking crisis and hence the economic crisis? Derivatives that were collateralized into debt obligations (CDO's) which had no true value, outside of the mortgages they stood for.

These products were hollow to a large extent. But, their values were raised, based on the risk they represented and the returns they could make if in the event the CDO lost value (chiefly mortgage backed securities).

To me, it is one big shell game. Could even be a Ponzi scheme. It held no true benefit for the shareholder, especially if bonuses were paid to investment bankers to the tune of millions out of the "returns" they created.

So....to the end with them, until investment bankers learn how to appreciate what they have.

The other side of it is is that the government and the average person, does not understand to the extent to which these products are and how they are supposed to work for profit.

Seeing this, not only should investment banker incentives be cut as a way to curb the enthusiasm towards getting into such a "seemingly" corrupt career, but also the products which they create should be supervised with the same enthusiasm and a cap on such activities be placed into the regulatory system, post haste!

Monday, September 7, 2009

Capital buffers for banks? Call from the G-20!

FT Article.

Don't know what this is supposed to mean. But, the Fed has done a good job with stepping in to add additional capital. Nothing is wrong with balance sheets aside from having some toxic assets on them and a few others have gone out of business. That's the nature of the business.

What this sounds like IS socialism. But, banks do need certain capital requirements to operate as lending institutions. So, the issue is more than capital buffers-- but investment and expansion criteria as it relates to capital on bank's balance sheets.

Essentially; how do banks assess making risky investments to what they have as cash on hand and is that enough to absord loss due to certain variables and exposure.

Thursday, September 3, 2009

What do you know or care about American Health care?

I have to be totally honest; I didn't know a thing about American Health care, or the issues surrounding it, until this debate came about and just seemingly won't die down.

From what I understand, the insurance companies are getting away with murder, charging folks with high premiums and no oversight as to what they price. The insurance companies, as I understand it, feel as if the American government wants to kill the private insurance industry.

Hospitals are denying care to folks without health coverage, but are mandated to see you, if whether or not they do have health insurance, once the person is in dire need of life threatening medical assistance.

The vaunted public option, is for the government to provide a health care insurance option, for anyone who wishes to be a part. There are estimated to be anywhere from over 40 to 60 million Americans that are uninsured.

The private insurance companies don't want the competition from government in the form of a public option. For obvious reasons, the government would crowd out competitive insurance organizations. However, the insurance industry is an oligopoly of sorts, ran by the large insurance firms.

Hispanics are more than likely to not have insurance, even over black Americans as pointed out in a recent survey. Also, women are 10 times more likely to be insured than men.

Americans, especially some elderly, don't want Medicare cuts. I know very little about Medicare and Medicaid, but apparently one is medical insurance for the elderly (Medicare) ran by the federal government. And, Medicaid, is a state run social insurance medical program for low income families, that fit a means based test.

My issue is; why can't the federal government add funding to Medicaid? It would be expensive, but you would get a smoother run to it than the negotiations you have going on now?

Cut spending in defense spending and put it to Medicaid. Revise the means test to let in a greater proportion in the scenario and then we may have something that we can work with.

America is going to end up spending allot of money on this health care revision in the first place. So, may as well fix the ones you have now and then worry about the price tag later.

Also, perhaps you should offer government bonds to insurance companies as a way to differ the price of insurance to a later date. Another way is to expand corporate bonds to cover health care as well as have that government backed.

Government backed corporate bonds to cover the cost of health care.

Monday, August 31, 2009

DPJ wins...

Well, the Japanese elections are over. The opposition won. A new era for the Japanese people. Over 40 plus years of the other guys have gotten the better of them.

Congrats!

Youri

Sunday, August 23, 2009

The red invasion- China's Caribbean and Latin American policy!

China is on a fast march towards the Caribbean and Latin America. As China emerges as a global leader and lender, the Caribbean and Latin American region can benefit significantly from Chinese investments.

Neglecting the geo-political manoeuvring over Taiwan and gaining votes in the U.N., the main and direct issue for the Caribbean and Latin America, being within the USA's sphere of interest and with culturally engrained social and left leaning tendencies in South America, at least, is that China may be seen as a catalyst that would encourage communist revolution, to the extent to which it will make the Bolivarian dream seem as a mere afterthought. But, is this train of thought applicable and does China want, itself, to trade with more communist like countries?

For the most part, a stark issue for consideration is how in fact China reconciles outward investment from the underpinning of a national communist infrastructure. It seems paradoxical to suggest that a communist state can, in turn, make capitalist type investments in organizations and countries. But, such has China done.

Also, as China emerges as an economic power house- with growth slated over 8% currently- it most obviously understands that that economic engine is not powered by communism, as much as the political directorate in China seems to be tethered to its ideology.

In saying that, China's actions towards its partners with regard to adhering to western style rules and regulations with respect to market access and competition, has been most capitalistic and in fact, nothing seems communist about it at all aside from the issue that it's national corporations are monopolies run by the communist government.

With regard to the World Trade Organization and other Asian regional trade bloc's, like their participation with the Association of Southeast Asian Nations (ASEAN) and their membership in the Asia-Pacific Economic Cooperation (APEC), China has effectively circumvented its commonly understood national economic policy, to now become integrated into the global arena, where communism, for the most part, is certainly not a normal practice with its trading partners. In fact, China's largest trading partner and one in which they seek the most value, by far, is the USA.

In any event, for the Caribbean and Latin America, the Chinese government has produced a policy paper, directed at providing the region with China's strategic plan for partnerships and investments. The plan - as with most foreign policy directives- hinges on investment and social support as well as providing additional lending.

Sebastian Castaneda, Research Fellow at the Council of Hemispheric Affairs (COHA) in a commentary released on the Caribbean Net News, made mention of an initial investment of $350 million USD made by China to the Inter-American Development Bank. Additionally in his report, he stated that China has already facilitated a currency swap with Argentina to the tune of $9 billion USD. In a separate report by the Financial Times of London, China has inked a $1 billion dollar oil deal with Ecuador.

The policy is clear, to the extent that we see an investment focus for China's domestic consumption and offering a credit option to Caribbean and Latin American partners. But, what about the social support and development through shared cultural values? The social development aspect is always the most important and the least focused on dynamic when it relates to partnerships between entities.

This brings up a critical issue as it relates to China's track record with respect to the social development of its own country, let alone its partners.

In fact, China has not only been confronted their "human rights" record within China, but also on their investment policy and strategy within resource rich Africa, to the extent to which certain established Euro-centric organizations have felt the need to address their concerns for their own respective development initiatives within the African region, to that of China's involvement and how that may impact or negatively alter the significant work conducted on behalf of Africa, especially on Sub-Saharan African development- political, economic and social.

With the former, as much as it may be painful to witness these issues play themselves out, by some who may or may not be over-reacting to the birth pangs of a rapidly growing China, to the extent that they are birth pangs and are the normal manifestations of a power struggle in the middle of a balance of power political mainframe, is something that China must and will undergo- as all countries do- under a currently changing market economic model, which does and will continually influence the decisions of the political directorate, towards more equitable and stable solutions.

With regard to the latter, the main thrust of the claim has been that China has neglected every obligation for reform within Africa and has gone at engagement from a purely cost/benefit approach towards achieving a certain result and bottom line. With the weak democratic institutions in Africa, for the most part, we can appreciate the need for a coordinated strategy from all sides as to not disrupt the progress being made by external government's, non-governmental agencies and African government's themselves.

The issues with Chinese-African-Euro relationships may or may not be a true concern to that of the Caribbean and Latin America. For the most part in South America, at least, left leaning government's or left leaning supporters, are larger in numbers than that in the Caribbean. Secondly, while this may indicate that there is fertile ground to foment a communist uprising in Latin America, to the extent to which this is a Chinese directive for it to be a catalyst for that uprising, hasn't been proven or even thoroughly analyzed to show in any way that this is an intended outcome- especially with China's stance to it's regional partners and more importantly to their forays in Sub-Saharan Africa.

Also, the progress to which Latin America has made with respect to building democratic institutions, even in Venezuela and with minor exception for Cuba- with even the latter taking small steps towards reforming the current state structures- there is little notion that there will be massive communist regimes building at the USA's back door.

On all sides, the benefits from democracy and capitalism as they relate to providing freedoms to individuals and building prosperity, is evident.

China, as far as their track record is concerned, is as much interested in spurring governmental attitude changes through exporting social values at the same time as they attempt to strengthen social safety nets through communist principles they employ at home, as we are with China's policies as it relates to anything else but lending and investment facilities for the region.

Thursday, August 20, 2009

Afghanistan is not Japan!

So says David Pilling of the FT.

He says that democracy in Afghanistan, would not work the way it did in Japan after the war, because of a few issues for consideration. The most of which is that Afghanistan does not have a unifying force, while it's population is ethnically divided.

I find it funny he wrote about Japan the day after I posted my Japanese article, which stated that Japan's problems are our problems.

While these issues for consideration by Pilling are believable, the issue with regard to the war and the need for post war reconstruction is. Same problem, but we need different solutions and gleaning from the Japanese post war era, we can see how and why it worked as to why not.

Good article I may add as well by Pilling!

Bombs in Baghdad!

Bombs in Baghdad are falling. 100 people dead thus far. The bloodiest since the war was declared over by president Bush two years ago. I wonder if Al-Queada has this planned where every time a national issue pops up in the USA, like health-care, they plan a massive attack?

I feel for the victims of this blast. I could not live in a country that is in chaos the way Iraq seems to be.

The media has quieted the issue. But, if Bush was still in office, this would be blasted and over-reported for weeks.

Such is life...

Wednesday, August 19, 2009

Japan's problems are our problems!

Persons have asked me about my articles. They have foremost asked about my content and where I find the information. That's a trade secret, I always say. But, others have expressed concerns over the content, to the extent that say that it may not apply to their situation. I always say; yes it does!

As you can imagine, countries, companies and individuals all over the world, experience the same types of issues and national conundrums. Their solutions vary from entity to entity, but the issue remains that we can all glean from examples, strategies and best practices from other companies and countries that have gone through the same issues.

Take for example what's been happening in Japan. Japan is an extreme case of a government- or a cabal for that matter- that as been in power for too long, which has led to private sector under performance from the added standpoint that there is an understanding and obeisance to external commitments over national development priorities, on top of the added pressures of internationalized monopolies which are in lock step with the political directorate. In addition to this, on the other hand, Japan is also prone to the selective proliferation of good and rosy economic information, just prior to national elections-- this proliferation of all good news at the cusp of a general election, is endemic world wide. Being keen on what's truly good news, must be taken into account.

To the last point first, because it's easier and quicker; if there ever was a good enough time for the ruling Liberal Democratic Party (LDP) in Japan to deliver some good news, it's now. National elections are slated for August 30th and the LDP, a party that has held power for the greater part of the last century, are behind in the polls.

Preliminary data released on Monday, as reported by the Financial Times (FT), showed gross domestic product expanded to a seasonally adjusted 0.9 per cent quarter on quarter between April and June, its first rise since the first quarter of 2008 and the equivalent of 3.7 per cent growth on an annualised basis.

The data or the FT didn't report all of what were the drivers for this growth, but have attributed the stimulus package implemented by current Prime Minister Taro Aso, as a likely source as additional public spending has increased by 8 percent, in a attempt to spur consumption. The issues of whether or not the stimulus package worked with regard to real private sector investment, is another issue.

Riding the wave of obvious economic discontent in Japan is Yukio Hatoyama, the new leader in the forefront for the opposition Democratic Party (DP). The DP is slated to all out win or change the dynamics of the upper and lower chambers in Japan, where change the next time around- through a quick early election after August 30th or whenever- a change will happen.

Some attribute the fall from favour with the ruling party to the bad economy. Others claim it's time for a change from a party that has been in power for the last 40 years. It may be a mix of both.

Including Prime Minister Aso, there were three prime minister's that served post Junchiro Koizume in 2006. This has been seen by many as a lack of unity in the LDP and especially through the reluctance for anyone to take the helm and keep it, amidst the challenges Japan faced and still face.

Japan's problems didn't start three years ago. In fact, Japan, while it is one of the top five largest economies, have had economic challenges in the past and never really sorted out the discrepancies and inefficiencies in their much globalized economy. The least of which is the balance of power in Asia.

With the increase in diminishing returns on Japanese goods in electronics to China and Singapore, to now, cars in India- in addition to their traditionally strongest competitors in Taiwan and South Korea- there just isn't a large enough international market, let alone a regional market, to peddle their wares aside from the United States, their major trading partner by taste and preference since the post war reconstruction and more certainly since the "Lost decade" in Japan in the 1990's.

These issues have added to a major collapse in the 1990's and the structural deficiencies were never truly fixed, as it appears. Also, their major export good, automobiles, were hit with voluntary export restraints by the USA in the 1980's, which certainly increased price of automobiles, but also put a damper on productivity and innovation. This lead to a surge in regional competitors as well as an over-reliance on other aspects of their national economy, which were not as viable as the automobile industry compared to the competitors in the region they allowed standing market access into Japan.

At this point, Japan is facing the same crisis that led to the asset price collapse that erased the gains they made financially, before the early 90's.

Due to Japan's compulsion to promote nominal prices over that of real market value prices as a way to spur domestic consumption during this current downturn, as it similarly happened prior to and during the 1990's by another mode, also at this time as I have aserted, Japan has also made external commitments with regard to international market access rules and most favoured national principles, simultaneously, which were deepened with and by the General Agreement on Tariffs and Trade (GATT) 1994, which too is also leading to another round of decreasing value on the Japanese way of life, stocks and their economic engine.

This complex web of economic mis-alignment has most certainly exacerbated the displeasure in the populace with the current ruling party as well as with the prime ministerial musical chair's game.

Just to give a most stark and recent comparison, currently the USA has been compared now to the Japan of the 1990's during that lost decade, where asset prices are having the same effect. Regardless of super-star status, the economy is and will further drag on the popularity of President Obama-- with the health care debate and Middle East wars, considered.

But more to the point and from a parallax position in relation to the economic issues with Japan, asset prices in the USA were overvalued due to the reliance on false nominal valuations in the market in the attempt to increase then current gains. Unfortunately this bubble popped, spurring deflationary pressure with no solution, other than through natural economic adjustments, with or without Federal Reserve/government intervention.

While the market sophistication in the developing world no where compares to what we have in the developed, the overall issue is that we all want to develop our lot in life. The overwhelming evidence for a best practice case of the value and way of life in developed countries, from health care to social amenities and infrastructure, is evident. If this requires that developing countries mimic certain aspects of success, I am most certainly for it.

If this also means avoiding, by all intents and purposes, mistakes others have made in the past, whether it was with inflated bubbles in real estate or company stocks, a lack of synergies with banking and private sector or the infrastructure that protects capital markets, then by all means let's all work for better solutions.

Saturday, August 15, 2009

In a dead news cycle...

Well, there are some issues out there to report. I have not been posting as much, bit part due to laziness and another due to a little boredom with what's been going on. But, some things out there bear some mention.

For one, my condolences to the people in China for being hurled out of their homes and injured during the Typhoon that hit last week. Over 1 million people have been displaced as rough estimates have it. At least things are getting better. A typhoon in Asia, 20 years ago, would have had 1 million people dead--not merely displaced. While we can't diminish the act of mother nature, we can only thank God that it was not worse.

The health care debate in the USA rages on. The need for reform is simple to me-- the majority of the people who are un-insured are between lower and lower middle class persons. Who are in the majority of the persons in the lower to lower middle class demographic? African Americans and Hispanics. Do you really expect an African American president to not attempt health care reform, seriously?

The major issue of contention is that some folks feel that they would lose their benefits. I don't think that's a real issue. Too bad politics has gotten in the middle of this debate. Grassroots and mid-term election politics at that. I say no more as I will allow the reader to connect the dots....

China lost it's case in the WTO over foreign media rights and control. Will they adhere to the ruling, is another issue. But, with the amount of piracy and controlled content on a multi-billion dollar industry in the West, media and film, China, cannot be allowed to control the goods market and control how much money is earned from their populace with regard to Western culture.

Tis all for now....

Wednesday, August 12, 2009

A tale of two countries, French Exceptionalism vs. German Stability!

The Organization for Economic Cooperation and Development (OECD) reports that the German economy is and will be going through tremendous difficulties over the next year. In their flagship economic outlook report for June, 2009, they report that in Germany the annual decline in GDP growth is projected to amount to around 6% this year.

France, in the same report, on the other hand, the group reports that Real GDP is projected to fall by about 3% in 2009, with the pace of contraction gradually diminishing through the year. The recovery in 2010 is likely to be slow, with output growing below potential rates throughout the year.

Why is France, a socialist democracy as widely understood (as much of an oxymoron as that sounds), further ahead in this crisis than that of Germany, an economic machine? Also, why is Germany, the third (or fourth depending on the organization reporting) largest economy in the world by country comparison and the largest, by far, in the EU, doing so poorly throughout this crisis?

Is this a case of French exceptionalism? Also, shouldn't the larger economy of that of Germany, suggest that they have more of a capitalist engine, especially when we factor in their population by size and comparison to their GDP?

Hardly is it exceptionalism some may argue on the French part. But, for argument's sake let's say that it is; does this so called exceptionalism actually mean full recovery from the financial crisis?

We can't answer that because we probably have the wrong question with the wrong premise. The question folks should ask is; was France as bad off as the other countries at the same time now and then in this crisis? The answer is no. France was the last European country show a decline in real GDP at the mid-way of the crisis. In fact, they were the only country as of late 2008 to have positive real GDP figures at 1.2%, aside from Germany who has of the start of 2009, began to drop like a stone with regard to productivity and employment.

While France boasts of having rolled out more of its fiscal stimulus- about 26 billion Euros- does this mean that the recovery will be higher than other countries? Perhaps not? Perhaps maybe!

The fact is that France is a heavy welfare state. But, on the other hand, they have responsive labour relations to employment than any other country- including the Nordic countries.

While other social democracies in the Northern Europe are have heavy welfare spending programs as is France, France also has a very vibrant private sector with a high amount of outward capital investment by nationals to compliment their state run benefits.

In fact, aside from the U.S., France, has one of the highest investor classes in the world with regard to outward foreign capital investment by nationals. As reported by the OECD by 2003, French companies invested 57.3 billion USD outside of France, ranking France as the second most important outward direct investor in the OECD, behind the United States (173.8 billion USD of outward FDI), but ahead of the United Kingdom (55.3 billion USD of outward FDI), Japan (28.8 billion USD of outward FDI), or Germany (2.6 billion USD of outward FDI).

While this also should indicate that France should have external variable exposure, to the extent that France has had its financial services sector exposed to US sub-prime debt is something France has not had to worry about. In fact, French firms have been insulated, much like Canada, away from sub-prime and US debt exposure. While, yes, Societe & General has had its issues with a rouge trader, this was an internal anomaly and the trader in question, was working outside of the general financial services protocol within his organization and, for that matter, normal French financial services regulations. When on the other hand, all countries that experienced extreme spillover effects from the US economic crisis were involved in the process as a matter of business as usual and nothing was seen as deleterious to the system when the collapse happened.

In the case of Germany with regard to financial exposure, their coordinated market economic model facilitates greater participation with unions and employee's as well as the social sector, which makes the consumer debt market not as lucrative as it is in other markets. While this too limited the exposure Germany had to external financial markets, this also means too that they don't have the structural capacity to expend and avenue's to absorb fiscal stimulus. Hence, the argument for German Chancellor Angela Merkel was that the fiscal stimulus from the European Central Bank was grossly lopsided within the Euro-zone because other countries had the ability to absorb and utilize the fiscal stimulus, while Germany had challenges with regard to the market net for financing and the facilities to put such fiscal stimulus to proper use.

Another important thing to note is that France can also feed itself. This is crucial. This means that they are not price takers and are not sending their hard earned money overseas, to purchase food items and don't have to at any time. Also, they are the price givers, meaning that they have a very wealthy European block as well as a middle east and Northern African block, which they supply.

France also has diversified its energy portfolio, having nuclear and other forms of energy aside form fossil fuels. While on the other side with Germany, they have shutting down civil nuclear power plants since 2000. This increases the demand on fossil fuels and due to the volatile nature of the oil market, this has worked against the German economy with the alternative energy sector still a non starter.

The French model has placed France as the best bet for coming out of this crisis faster and better, but probably not as fast as the USA and probably better than a heavily indebted Britain. While they will probably never have substantial real GDP growth comparable to the US in the long term, they will fair better than many and be sound in the short and long run.

So, while we bash France on its socialist tendencies, they really have a better- although not as transparent as we would like- system of governance, which has really evolved into a great state over the last century.

Sunday, August 9, 2009

Consumer Credit still down...

Lastest G.19 Consumer credit data from the Fed. I guess growth does not have to be consumer credit driven. Well, we need to see trade figues for that....jobs are back up, or less than reported than the month of April. So, I guess we have a claim that things are moving back in the right direction.

But, if we want folks to spend to get the economy back in shape, shouldn't there be consumer credit growth as well?

http://www.federalreserve.gov/releases/g19/Current/

Thursday, August 6, 2009

Can Craw-fishermen learn from OPEC?

Agriculture in the Bahamas, as a percentage, is roughly 2% of GDP. Within the agricultural sector, the fisheries sub-sector has been playing a particularly dynamic role, consistently accounting for more than 75% of total agricultural output and with the craw fish industry, yielding anywhere from $60 to $100 million dollars (USD) per year- or on average of about 85% of the value of all fisheries output. For a country with less than 400 thousand people and for a sector that employs less than 10 thousand, country wide, that's a considerable amount of wealth for persons in the fisheries sector.

To show you how important this industry is, the Economic Partnership Agreement (EPA) with the African-Caribbean and Pacific (ACP) countries and the European Union (EU), with regard to the base importance for the Bahamas, was focused on protecting the crawfish industry, among other issues.

Fish-houses and major exporters wanted an EPA for the express purpose of greater market access into the EU. Hence, they lobbied vigorously for the provisions that the EPA provided with regard market access. Pretty academic stuff, when we factor in that if the Bahamas didn't, they would be hit with import tariffs into the EU and our competition, would not. The actual benefit, overall, of the EPA is another discussion that can take up another page and one that will be argued at a later date.

Who generates the most wealth from the fishies sector however, is another story. You can make a pretty fair assumption that the processors and exporters make the most profit, as is the general rule with any agricultural production chain- the producers sell low and the processors and exporters, sell high.

But, regardless, fisher-folk can and should make a healthy, or, perhaps, make a mint, if they choose work together to combat the issues surrounding the current world economy and distortions surrounding their market.

Through speaking with local fisher-folk, they have indicated to me that they were receiving up to $14 per pound in 2006-2007 for crawfish. In 2008, they got, if possible, just about $7 per pound and this year, they started off at just about $6 per pound. That's a huge drop. With considerably high living standards in the Bahamas, fisher-folk have to now adopt and maintain practices they employ in the off season to ease their burden like; construction related work, various service related jobs that have no relation to the fisheries sector; i.e., clerking, transportation and leisure services... etc.

The best and most relative thing that could happen within the fisheries sector, with regard to the individual crawfisher folk, is for them to adopt a policy used by the cartel of oil producing countries, OPEC, and that is cut the supply of crawfish to artificially raise the price.

While this may sound weird to some, if we take into consideration the success of OPEC with controlling output, it may not sound so far fetched.

For one reason to cut prodcution, why would anyone go out to harvest the same amounts, with the same work load, with relatively high fuel prices and last year's equipment, to get less for their share of the work? Also, can you sustain the same harvest levels you had in 2006 today, in any event? So, if they were to harvest less and alternatively spend time perfecting the services they did in the off season, it would have an un-intended consequence of a stronger cross-training of fisher folk.

Secondly, when you cut the supply of any commodity- like oil or crawfish- the price automatically rises, if demand stays constant, because there is less to go around for a larger market. Even at current demand, if we were to cut the supply, for the same amount of people, all tastes considered, you can make a larger profit per catch and manpower. To be fair, crawfish will not go out of style and there will, by all intents and purposes, be a market for food, especially delicacies like lobster/crawfish.

To go even further, if an individual fisherman was harvesting over 150 lbs of craw-fish, at $14 per lb in 2006, and now he is harvesting the same amount for $6 per lb in 2009, then if he was to cut the supply to about $50 per lb, in a successful attempt to raise the price of his catch to $8 per lb, he still wins because the profit margin per lb has increased for less effort. Considering the fact that he uses less fuel and manpower to harvest and considering the effect of less crawfish to go around, he would have made a larger profit rather than going all out on expenses to get less for his effort.

Of course, this depends on crawfisher folk, coming together to agree on a base price. In fact, depends on crawfisher folk coming together, nation wide, all together. This also means that if they were to come together, the likelihood of someone circumventing the effort by going out to sell his catch for less than the agreed upon price, is bound to occur.

For the former, if a meeting of all fisher-folk were to be held to address this, then you have a case and a base to work from on some of the common challenges, like the decrease in value of crawfish per lb.

Also, for the latter, if an individual fisherman, were to go out of his way to circumvent the groups agreed upon price, it is solely up to him to want a lower price for more work. But, yet still, that one individual would not be in a position to affect the overall market price, if all of the other producers are in agreement on a set price and a set harvest and shared storage mechanism.

In addition, the relevant fisheries stake-holders should look into expanding their market base. Take for example the effect China and India has on global demand for energy. Since the emergence, of at least China, oil prices have risen and will stay beyond $40 per barrel just to adjust, permanently, to China's growing energy demand.

Before the emergence of these two emerging economies, oil could have very easily remained at $40 or less per barrel.

If fisher folk were to expand their markets, with perhaps the assistance of the exporters- which may not happen, but it is worth mentioning- they can decrease their supply by adding to the list, two to possibly, three, new customers, aside from the EU and the USA.

There are other issues, not based on reflections on the oil markets, fisher folk in the Bahamas and Caribbean wide can glean examples from. But, coming together to make better this terrible economic situation, is the first step. Meaningful dialogue to induce positive action on the bottom line for their families, is the other.

Who knows, perhaps there can be a Caribbean wide crawfish association, started right out of the Bahamas? One can only imagine!

Now that I’ve done my part, the next fisherman who reads this page, can contact me to pick up my kit of fish for my troubles.

Europe is so predictable!

The BOE and the ECB kept its rates steady today. Most likely in sync with inflationary expectations held by Bernanke over at the US Fed. This seems like coordinated international cooperation, indeed. Perhaps the only form we will see at this time...well, maybe the only type we really need or want, considering how competitive these three jurisdictions are.

The BOE is also expanding their Asset Purchase program, from 50 billion pounds to 175 billion pounds. I would like to see under what premise are they expanding this program and still have the nerve to keep rates as they are. They have added a provisional note to their notice, but this note only explains how they are going to do what they are doing and not enough of what is the reason behind it?

Well, the reason given is that bank's balance sheets still need repairing and they want to take off as many bad debt as they can from private banks, so that they can lend again. I am wondering however, if this is just for mortgage backed securities or has the BOE made a general sweep on what would be determined bad debt and given banks a free pass to clear their sheets--with an ongoing economic crisis, where not on mortgage related debt's are delinquent, but even regular consumer loans as well?

We need more clarification. The ECB is another issue and I am not quite sure what their policy is directed to. They have a bigger market and, perhaps, they are shotting in the dark. We will only have to wait and see.

The economy in the UK and the Euro-zone is in still a pretty sad state. The rates are pretty low at 1.5% for the BOE and 1% for the ECB. There has been no sign of uncontrollable inflation or inflation at all....housing is still weak and the construction sector, is still hampered by a lower than usual commercial real estate market.

Monday, August 3, 2009

Internet is down people...

Hi all,

I have been down for the last three days, due to technical difficulties. I'm on a remote PC, so still not up at home yet.

Just thought I would put up a FYI....

Read the archives.

Best,

Youri

Thursday, July 30, 2009

I so hate this.....

UK regulator summons oil market players. FT article!

The UK regulator (FSA- Financial Services Authority) has consistently maintained that the surge in oil prices to record levels close to $150 a barrel last year was due to fundamental supply and demand factors and not to speculative flows.
It pains me to even listen to this be broken down into a dog and pony show.

Why would we listen to the FSA, the financial services watchdog--the watchdog that allowed the collapse in the first place with respect to the credit crunch and the economic meltdown spurred by Wall St. and London City-- to tell us that they don't feel that there is a problem with the speculation causing all of the fluctuations in the oil market?

What do you expect them to say? Say that they were not doing a good enough job?

Listen, the fear of the economic fundamentals collapsing from political and commercial intangibles, which spurred speculators to spot the price of oil on those broad assumptions.

Don't tell me either than speculation had nothing to do with it at all. Yes, I do agree, fundamentals played a role but a bit role. But, economic fundamentals did not and do not set the price. The speculators do in the futures market.

They price according to WHAT THEY FEEL is the right price. And, they further price on the premise of what production would be in the future and to how much people would be willing to pay.

Quit all of the God dammned lies.

Wednesday, July 29, 2009

I need pictures!

I was just added by a guy called Scott, who has a blog about politics...
POLITICS: By Scott/... and I noticed he had a picture up with every blog.

I need an upgrade with the colour as well. The colour is a little too dark. That and pics, should have folks reading.

The content is good. But, presentation, can go allot further.

Sunday, July 26, 2009

Ease the tension!

How do you put toothpaste back into its tube? Ask Chairman of the United States Federal Reserve, Ben Bernanke. He has a plan to tame inflation, after the U.S. banking system and the economy, on the whole, received massive dollops of capital heaped onto it. Good luck, Uncle Ben!

But, what tools does he have, truly, if any, to tame inflation in the short term and long term? In order to answer that question, we don't have to look back at the beginning of the credit crisis, but only at the response and its intended impact.

The first and foremost thing should be to undo what you did, if there really is a huge concern. But, things have changed since the state intervention. Least of which, is that a few banks and credit institutions, went out of business. Also, more importantly, producers and businesses also have scaled back production or have gone out of business as well. In addition, no one is quite sure-- well some of us are sure-- which way the U.S. stimulus package would create a bubble, or if whether or not international markets, for particularly oil and gold, would create a situation where trying to tamp inflation would be ineffective, coupled with the idea that it may, at this time, do more damage to growth.

Forget about your inflation target range and, perhaps, put on your output gap caps! The U.S is in for the third phase of this crisis. The first being the actual credit squeeze, the other in combating deflationary pressure and the other, now, managing inflationary expectations.

Due to the reality of 2008, with regard to blocked credit markets, the Federal Reserve, with the acceptance of the U.S. Treasury under both president's Bush and Obama, implemented two plans: The Target Asset Relief Program (TARP) and a strategic monetary tool, Quantitative Easing (QE).

TARP was supposed to, by all intents and purposes, inject credit back into the market, through the Fed. purchasing troubled assets that, under then present circumstances, could not have been sold. In addition, this was also supposed to induce banks to lend to businesses and home owners again, once the risk of writing down or the loss of those troubled assets, mostly home securities and collateralised debt obligations (CDO's), were removed from balance sheets.

The critical issue of contention are the warrants- stock options- the US government took in companies that sold their troubled assets to the government. These warrants are essentially equity the US government bought into banks in exchange for expunging the current market value of the troubled asset from the bank sheets.

The premise for this policy, with regard to spurring banking activity while creating stability and security within the market, with the aid of a sub-program, the public private investment program (P-PIP), was for the government to be able to make a profit on these assets, when the market gets back to normal as well as for the private investors, who participated in the program.

Herein lay the major issue. Banks don't want to buy back those troubled assets, or, in other terms, recoup their warrants from the Fed.. They are more than willing to allow the government to own these assets, and resume banking activity under a new slate- even though the US government, in essence of those warrants, owns stakes in those companies. So, the Fed is stuck with these assets for a time, which it will have to sell at below what ever the future the market value is, even though they should make a profit with all things considered, but at the same time rewarding the banks that failed by absolving their losses.

This may be a good thing. For one, the US government does not have to inject as much credit, at a time that is of their choosing if they wish to do so, and over-inflate the US economy. The second issue is that, through this mechanism, the government can control the price of those assets and ease them back into the market, while still making a considerable profit for the tax payers, for it to go back into useful public projects. The only concern is if traditional investors hold out for a lower than fair market price for the assets and create a bottom market, only to over-heat on the real market when the government winds up TARP.

The second policy response, as said, has been with QE.

QE, quite simply, allows central banks to increase the amount of credit into an economy, by purchasing government bonds in the open markets, and in effect, increasing liquidity to private banks.

The U.S. Fed, in this case, created money to purchase these government securities held by private banks, in order to free up credit markets after traditional policy responses, interest rate cuts, were proven ineffective.

Princeton University Professor, Paul Krugman, suggests that the U.S. is in a liquidity trap of sorts, where it does not matter if whether or not QE or the interest rate remain at or cut below 0%. His premise rests on the then obvious fact that the rate cuts didn't work and, hence, QE was made an additional tool. But, while that may be true and while confidence has crept back into the markets, the issue now; is if whether or not it worked too well for the private sector?

I say this, under the premise that the Fed. bought these government bonds at a time when the market was looking for credit, and the Fed. bought their securities at a nearly rock bottom market price and interest rate. The plan would be to, now, implement a reverse repurchase agreement with the banks that sold government bonds to the Fed., which may or may not be bought back by banks at a relatively high rate. Leaving the Fed. with assets on its own balance sheet, which it may find difficult to sell at a higher price, which would absolutely sop credit out of the market if welcomed by the banks, while at the same time, leaving banks with the capital the Fed. injected, with no guarantee, unless we were to have lending restrictions through the U.S. Treasury- which may be counter-productive to the recovery effort- in order to stave off inflation.

The good and bad thing about the amount of liquidity through QE, is that the U.S. dollar is weak compared to other currencies. This may encourage, seeing that the worst is over, international investors to buy the dollar in hopes of making an appreciable profit. This would mean dollars would exit the U.S. market, to, let's say, China.

While no plan is fool proof and having no plan at all, can, in some cases, be better than a bad plan. Any plan for inflation however, should take into consideration some of the things that have been done to increase inflation as aforementioned in this article. Don't assume that the interventions are 180 degree undoable either.

Thursday, July 23, 2009

What type of Economic system does the Bahamas have?

I normally don't comment on Bahamian concerns as a matter for focus, or, for that matter, want to convey the idea that I'm a dues ex-machina of sorts, drifting down from the rafters with solutions to any of today’s problems. However, my bias to my country has gotten the better of me on this lap. While it will be from an external and totally unprejudiced concept, the issues can be related to that of the system we have today and I must ask the reader, to allow me to find the range, so to speak, to deliver a message that isn’t path breaking by any means, but needs to be reiterated in any event.

What type of economic system does the Bahamas have? To quote a statement made recently about the Bahamian society in general; we have a "buck-up" society [economic system]. To attempt to put it more diplomatically, we have an open economic system, which is not entirely economically focused on efficiency. While that sounds laissez faire at its utmost, the idea that we have more law than we need is also relevant.

For the benefit of the general public, there are several systems and many different ideologies that back that system up with intellectual arguments. The most popular of these are either or, two main types- the market economic system and the command system. The former is a system based on supply and demand and the latter, is, quite directly, a communist style system where the government has control over production.

To be fair, no single economy is or was either of the extreme. For example, many developed countries have a system where the supply and demand for, let's say, energy, is set by obvious supply and demand forces. You need energy, so you have to buy oil or oil bi-products, at least. So, an economy supplies the public with oil for energy to consume. But, with regard to the capital market structure and those ever pesky derivatives placed on commodities, the price may not be set by simple supply and demand. But, placed on whether or not the price of a good may be more or less expensive in the future. So, you are paying for the future price, which may not be set by the current demand for oil.

That is not supply and demand in the purest sense. But, this is the price of the supply being commanded by what forecasters think a good is worth in the future.

On the other hand, the former Soviet Union was a command economy in almost the strictest sense. But, the misconception of the former SU was that the government controlled, wholly and solely, the means of production. This wasn’t quite the case before Perestroika in the 1980's and certainly not after. The truth lay in the fact that the former Soviet Union, had government control, but the means of production was set between powerful oligarchs that controlled the means of production on behalf of the state. The government, in turn, had the power to- as does every country through the strictest form of eminent domain- "own" the entity, but not in control of the forces that made the goods produced valuable or needed. I guess you can imagine the corruption at the highest level.


The logic of the matter however, is that a state or entity, can only, or, will only, be able to produce the goods that people need or want. Aside from necessities like food and water, if the entity owns the means of production, there is no guarantee, unless the consumer is forced to pay for something unwanted, that anyone at anytime would purchase anything.


This leaves the case open for the second misconception about the SU; the issue that it did not have any competing industries in the same sector. The fact of the matter is, particularly with oil and gas, the SU had several competing government agencies responsible for the market share. The notion that, yes, the government owned the entities was true. However, the same entities were not operating without competition.

With both extremes, market economies and command economies, the Bahamas lies in between neither. For example, we have wholly owned state entities. They are not subject to competition, which is true. The state does not own everything, however.

The Bahamas, from all verbal intent and crude attempt, seems to be patterned after the Anglo-Saxon (AS) economic model. This is a model which proposes the capitalist version of the market economic system, which is then tethered by the Westminster System of governance from the position of parliamentary democracy from the fasciations of ethnic sameness and religion.

This is evident in the predominance of the religious cultural state of being in the Bahamas, with the back drop of US and British influence, the latter having least of which, the political system and the former, with the premium placed on the USA's free market, capitalist ideology.

This isn't to say that this is the best for the Bahamas. Or, for that matter, that we have the capacity to follow this fluid economic model to a tee. In fact, many have supported the idea of drastic measures- most important of which is the defenestration of the AS model and all institutions that subscribe to it. However, the argument that it speaks directly to our cultural experience, from premise that it relates to the origin on our Commonwealth's existence and that of its indigenous people, is something that is obviously incongruent to what the experience is on the ground.

One large fact is that the common law protection for property rights, which underpins the AS model, when we are now in the era of increasing formality of a purposefully pervasive opaque legal structure, on top of the issue that less and less Bahamians have access to real property due to sky-rocketing prices triple to what they were 20 years ago under this current ideological system--in addition to the exposure to what the complexities of intellectual property-which global economy has placed a significant premium- means to Bahamian entrepreneurial ideas and the weak institutional protection for those ideas, signifies to this author, as I assume that it does for allot of Bahamian people, that this system is way beyond inefficient. In fact, it is, perhaps, regressive and at worst, oppressive.

One important point I wish to impart in the idea of fairness, is that the AS model is fluid. But, it has not been maximized by former colonies. For what ever reason, changes still rests on the progenitor and their acknowledgement of what changes former colonies wish to work within that geographical framework. From this aspect, the salience of what is deemed as important macro-economic principles are very strong.

The AS model isn't the only working game or variant in town. While my preference for a Coordinated Market Economy (CME) style is up for another discussion, the extent to which reality of economic adjustment will be continuous, planned or not, whether it is led by a new social order, a new political pecking order or the new economic order, itself, is not.