Wednesday, December 8, 2010

Paid to Click Sites: Viable Source of Extra Income?

Given there are already who had benefited from them despite of their spam-like ability to wind up in our e-mail inboxes, are Paid to Click Sites an economically viable way to earn extra income?

By: Ringo Bones

Aside from those notorious Viagra and Cialis ads and the odd Nigerian prince or two in need of your help, Paid to Click Sites or PTC Sites are probably already well known for supplementing the income of some and the quitting of their day-jobs of the lucky few. Despite their spam-like ability to wind up in your e-mail inboxes – probably their only inconvenient quirk – the messages and adverts are replete with testimonials of early adapters who are now using PTC Sites as a source of extra money / extra income. Some of the lucky few have already quit their day-jobs to work on their work-at-home PTC Sites business schemes full time. But are PTC Sites really an economically viable source of extra cash?

Paid to Click or PTC Sites are companies that pay you for viewing their websites. These companies get paid for showing the pages to their members. Usually, these sites often pay almost 100% of that money to their members. A typical Paid to Click Site work as a method of earning money online by clicking on the “paid” link – i.e. “paid” link is a link sent along with the advertisement which pays the members money or points – which can later be redeemed for their monetary value – by clicking advertisements that are purchased by the program advertisers. The value of money and points that a member earns vary from program to program.

During the early days of PTC Sites, early adapters almost couldn’t believe the amount of money they are earning given the relatively light workload required. As the members / signees of these PTC Sites increased, a point of “diminishing returns” manifested itself to the members via reduced earnings for a given workload or online advertisements being clicked.

Back then, some members / signees even resorted to the use of botnets and related auto-click malware programs / cheating programs to “automate” their click workload and thus increasing their PTC earnings. This form of cheating / online computer fraud worked so well I the early days of PTC Sites where botnet detection programs were still in its infancy. Even today, PTC members / signees still resort to “sophisticated” botnets since they can manage to earn several hundreds, even several thousands of US dollars, before they get caught and their PTC Site accounts are terminated. Though these days, PTC Site operators will sue you for online computer fraud if they caught you resorting to using botnets on their PTC Sites – assuming that you gave them your true home address and home phone number.

Fortunately, you can also boost your PTC Site earnings in a legally acceptable manner. One of the legitimate methods often used to boost one’s PTC Site income and earnings is by visiting the forum sites. Basically, all PTC Sites have forums where you can find precious info, tips and to be able to ask questions. A PTC Site’s forum site is also a way of making sure that the PTC Site you are signing into is legit. Also, don’t forget to make sure to regularly switch your earnings between PTC sites. Withdraw your money / earnings from PTC sites that are not giving you a good earning rate or referral click ratio and send it to better sites to buy more referrals on those instead. Remember PTC Sites based work-at-home business schemes still need the same hard work and dedication as a typical CFD work-at-home business schemes.

Are Rare Earth Metals Mines Still Economically Viable?

Given that they tend to elude accurate valuation by conventional and established mine valuation methods, are rare earth metals mines truly economically viable?

By: Ringo Bones

Even though Mainland China had more or less resumed its import quotas to Japan and the rest of the globe back in November 24, 2010, Beijing’s current unrivaled monopoly of the commercial mining and production of rare earth metals can easily make anyone wonder why the United States or any other nation in the world can’t seem to be able to start their very own economically viable rare earth metals industry. But is the reason just down to economics or do we have to look back why in the previous 20 or so years how America and some other nations managed to make a profit in the commercial mining and production of rare earth metals.

It is no coincidence why America’s very own home-grown rare earth metals mining industry was abruptly shut down 20 years ago – right about the end of the Cold War and the collapse of the then Soviet Union. America’s rare earth metals industry was subsidized by the uranium industry – or more accurately the nuclear fission power generation and the nuclear weapons industry. It is now common knowledge that most uranium ores also contain commercially viable amounts of rare earth metals. Nuclear weapons used to safeguard the United States against the then Soviet Union so the nuclear weapons industry was the primarily subsidizing America’s rare earth metals industry before their closure around 1989 and 1990 since construction of new civilian nuclear fission power plants on American soil was frozen by the US congress after the Three Mile Island nuclear power plant accident of 1979.

Compared to mainland China’s relatively low labor costs, America’s rare earth metals industry looks like a losing proposition when this factor is taken into account in a typical mine valuation calculation. Typically, the ability of a mining property to earn is a measure of its value. Many factors including the natural resources and the plant and the equipment must be taken into account. Consideration must also be given to operating efficiency, labor costs, taxes, and to the critical factors of supply and demand and the purchasing power of money – i.e. the currently prevailing economic conditions. In order to determine the commercial viability of a certain mining operation, the present worth and the prospective possibilities must be determined; the risks must be recognized and evaluated. Such determinations are made to the maximum extent possible on the basis of the factual information that can be assembled as amended and weighed in the judgment and experience of the examining mining engineer.

In the final analysis, every mine valuation is a considered estimate as opposed to an exact appraisal. It would be a rare accident of coincidence if the actual outcome of operations was in accord with the predicted result of prior examination. Despite the certainty that the results of examination will be inaccurate, the greatest possible care must be exercised in making an evaluation in order to measure the degree of risk. The determination of value of a certain mine starts when the examination has been completed to provide ore-reverse data, mining costs and profits, financial requirements, and future prospects, mathematical calculations may be made to establish the present dollar-and-cents value of the ore deposits.

These computations are made on a gross basis so that the result is a single figure. This one sum represents a compounding of the capital required to equip the mine, the realization from sale of product less cost of sales, and amortization of plant as well as interest on invested capital. The remainder is the profit or true value and must be reduced to present worth by giving effect to the time period in which the profit is revealed. A variety of formulas have been developed for use in the valuation of this kind. The present value of the annual dividend to be paid out over the “estimated” 20-year life of a specified mine can be determined by use of one or the other number of mine valuation formulas.

It is somewhat evident that the 20-year lifetime assumed for a typical rare earth metals mine could be changed but a number of factors bear on establishing mining rate. These include the additional proven ore reserves that can be established – which is a little difficult since the difference of the percentage concentration of an economically viable rare earth metals mine and the one that’s not is not that large. Then there are equipment costs which increase with the size of the plant, the mechanical efficiency of the plant, the market for the product – which could be depressed by overproduction – and the security of the investment. Shares of a mine with a long life typically are more preferred by investors.

Given that there are no new nuclear fission power plants being constructed in the US since the 1979 Three Mile Island nuclear fission power plant accident and the most recent Will Lyman narrated science documentary about nuclear fission power plants that mentions dysprosium and holmium nuclear poisons was probably produced between 1992 and 1995, it seems that the civilian nuclear power generation industry and the US DoD’s nuclear weapons program are no longer subsidizing America’s rare earth metals mining industry to make them economically viable enough to continue operating in the austere fiscal environment of a post Cold War world.

And given that the current main use of rare earth metals is in the consumer electronics industry and low carbon energy generation from renewable sources, it seems that the high labor costs and lack of government sourced subsidies spelled the death knell of America’s rare earth metals mining industry in the post Cold War world. Even the profitability of the Mainland China’s rare earth metals mining industry is walking on a thin line indeed when valuated using established mine valuation methods.

Saturday, November 13, 2010

Urban Mining: Economically Viable Source of Rare Earth Metals?

Ever since Mainland China reduced its export quotas of rare earth minerals, will “urban mining” e-wastes soon become an economically viable source of rare earth metals?

By: Ringo Bones

The People’s Republic of China soon started reducing its export quota of rare earth minerals to the world market and none more so to Japan when a Mainland Chinese trawler captain was arrested by the Japanese navy for illegally fishing in waters both claimed by the two countries in the North China Sea back in September 7, 2010. As a country with a virtual monopoly on the commerce of rare earth metals – it produces over 90% of the worlds rare earth metals supply - Mainland China has since flex its geopolitical muscles by reducing the amount it sells to the global market and Japan. Given that all things that make our modern life possible – mobile phones, laptops, hybrid cars and even wind turbines use rare earth metals, will a shortage of this raw materials soon endanger our modern way of life?

As the country hardest hit by Beijing’s decision to reduce its rare earth export quota, Japan has pioneered a rather novel way of filling their manufacturing industry’s rare earth shortage. Dubbed “Urban Mining”, the scheme involves the reprocessing of e-wastes and obsolete consumer electronic gear to harvest the precious rare earth metals contained in them. Late 1990s era Sega Megadrives, electric typewriters, audiophile grade cassette tape decks, cathode ray tube type computer monitors and even hard disk drives of obsolete computers are recycled and processed for the extraction of the precious rare earth metals.

A Japanese company called Highbridge Computers now makes a profit harvesting rare earth metals from obsolete computer gear and other e-wastes that contain significant amounts of rare earth magnets. As amore long term solution, Kazuhiko Hono of Japan’s National Institute of Material Science have recently experimented with using lasers to dissect rare earth magnets atom-by-atom to analyze their magnetic structure and to explore the possibility of making rare earth magnets that use reduced quantities of precious rare earth metals.

Will urban mining – the recycling of e-wastes and obsolete consumer electronic equipment ever becomes a commercially viable source of rare earth metals? Shigeo Nakamura of Advanced Material Japan Corporation – one of the largest processor of rare earth ores from Mainland China for use in the manufacture of high tech goods – says that Japan’s stockpiles of rare earths are fast dwindling. If Mainland China continues to use its rare earth metal monopoly as a tool for geopolitical hegemony, it will only be a matter of time that recycling e-wastes and obsolete electronic equipment could soon become not only a commercially viable source of rare earth metals due to lesser chemical processes and energy involved in harvesting it from such source, but also a more environmentally-friendly source of rare earth metals as well. At least it is an economically viable way to recycle obsolete electronic and computer gear.

Monday, November 8, 2010

Lithium: Contentious Commodity Du Jour?

As the primary component of those rechargeable lithium ion batteries mainly used in laptop computers and hybrid cars, is lithium now the commodities traders’ contentious commodity du jour?

By: Ringo Bones

Ironically during the height of the Cold War when the only major use for lithium was in H-Bombs and pharmaceuticals for the treatment of manic-depressive disorders, it never became the commodities traders’ commodities trading of contention, not to mention the flood of venture capital investment stocks and penny-stocks vying for us to invest in them. A few decades later where our 21st Century society is currently preoccupied with the pursuit of instant information at one’s fingertips and eco-friendly power and mobility, lithium – as the primary component used in rechargeable lithium ion batteries – has now become one of the commodities of geopolitical primacy. But isn’t there enough lithium to go around?

Even though it is relatively widespread, lithium comprises only 0.0065% of the Earth’s crust. Lithium is primarily obtained from the minerals spodumene – a lithium aluminum silicate; lepidolite – a basic lithium silicate known as lithium mica and amblygonite – a lithium aluminum fluorophosphate. Nearly 50 other minerals and many mineral waters contain varying amounts of lithium and traces of the element have been found in meteorites, soils, sugar beets, tobacco, cereal grains, coffee, seaweed, blood, milk, and even in muscular and lung tissue.

During the height of the Cold War, the world’s leading producer of lithium was the country then known as Rhodesia which - since 1980 - is called Zimbabwe. At present, the world’s strategic supply of lithium can be found in the dry lakes of Bolivia in the form of lithium carbonate. According to Bolivia’s Mining Minister Jose Pimentel, Bolivia is estimated to contain 40% of the world’s commercially viable lithium supply. As one of the poorest countries in South America, the Bolivian government wants a mining deal from multinational firms that would benefit Bolivia’s poor and because of this almost all multinational mining firms are currently reluctant to make a deal with the government of President Evo Morales.

Our current high demand for mobile phones, laptops and batteries for hybrid cars just to mention a few have made lithium into a commodity of strategic importance not seen since the height of the cold war. Like crude oil, commercially viable deposits of it are found in places that have a falling out with globalized capitalism. And since the form we use it requires that the naturally occurring lithium be chemically processed into something useful for the fabrication of rechargeable lithium ion batteries, lithium – like the rare earth metals - might well be our current lucrative commodity that also raises geopolitical contention.

Wednesday, November 3, 2010

The Beijing Rare Earth Embargo: Threat or Menace?

As the only commercial producer of rare earth metals, will Beijing’s decision to reduce export quotas of the valuable materials endanger the global economy?

By: Ringo Bones

It started over a diplomatic row when Chinese fisherman were caught illegally fishing in Japanese territorial waters back in September 2010. In protest, the Beijing government swiftly stopped selling rare earth metals to Japan, endangering the countries ability to manufacture hybrid cars. Thus making the press and the rest of the world take notice back in October 21 2010 the importance of rare earth minerals, but will Beijing’s decision to curb their rare earth metal exports eventually endanger the global economy?

Even though rare earth metals has recently became the commodities traders’ investment (or is it speculation?) hotspot du jour, from the perspective of the International Union of Pure and Applied Chemistry or IUPAC, the elements often referred to as “rare earths” are neither rare nor earths. The rare earth family of elements are in fact composed of soft, malleable metals – and most of them are not at all in short supply. Cerium, the most abundant, is more plentiful than tin or lead – while thulium, the scarcest, is only slightly rarer than iodine. The rare earth misnomer came about because the oxides of the elements – with its earth-like consistency – were at first mistaken for the elements themselves.

All of the 15 rare earth elements have two outer electrons and eight or nine in the second shell in. They only vary in their electron compliment in the third innermost shell. But among the rare earth atomic structure, the third-shell electron difference is very slight indeed, which make the 15 elements belonging to this group a very close-knit family indeed. A typical mineral containing a single rare earth element more often than not also contains all the others.

The rare earth elements are so nearly identical in their chemical properties that separating them can easily involve thousands of steps. Because of this quirk, the individual rare earth elements in their chemically pure form did not become available in commercial quantities until the late 1950s. Nevertheless, the rare earth family in their less than chemically pure form has been used industrially since the early 1900s in the form of their mineralogical mixtures that occur naturally. Purer forms go into the making of powerful ceramic rare earth magnets like the samarium cobalt magnets used in the electric motors of today’s hybrid cars.

For much of the 20th Century, more than a million pounds of rare earth elements I their low purity form still go annually into the production of an alloy called “misch metal” – German for mixed metal. Combined with iron, misch metal products are used in cigarette-lighter flints. But the main use of low purity rare earths is in iron and steel-making where it is used to absorb impurities and improves the steel’s texture and workability.

A mixture of rare earths combined with carbon produces the intense carbon arc lights once used to light up Hollywood before being replaced by more energy efficient light sources. And a large number of rare earth compounds go into the making high-quality glass for computer monitor use by making the glass completely colorless. Or in other applications, by adding deep color depending on the combination used.

When the news of the People’s Republic of China’s decision to reduce its rare earth metal exports reached the press back in October 21, 2010, the global consumer electronics industry and hybrid car makers almost panicked since they are today’s primary users of rare earth metals in the manufacture of their goods. Unmanned drones and smart bombs made indispensable in America’s “War on Terror” can’t function without rare earth metals.

Even though the United States’ rare earth metal deposits are as abundant as the ones in the People’s Republic of China, the U.S. had since closed its rare earth mines and related processing facilities since 1990 because these can never economically compete with Mainland China due to stricter Occupational Safety and Health Administration (OSHA) rules. Not to mention tougher Environmental Protection Agency guidelines and unlike Mainland China, U.S. miners won’t work for slave wages. Only Mainland China’s wanton disregard of worker safety and environmental protection had allowed it to produce and sell rare earth metals to the global markets at literally rock-bottom prices and restarting the United States' dormant rare earth metal mining industry is not very economically viable at this time.

Sunday, October 31, 2010

Much Ado About America’s Jobless Recovery

With the DOW Industrial Average now hovering around the 11,000-point mark with the unemployment rate approaching 10%, is the American economy currently experiencing a jobless recovery?

By: Ringo Bones

The DOW Industrial Average is now “safely” entrenched in the 11,000-point mark and yet the current jobless rate in the U.S. has now crept closer to 10% - comparable to the record unemployment rate spikes of the past 30 years. And yet, there are obvious signs that America’s economic health had already recovered since the 2008 global credit crunch – like the slowly creeping price rise of crude oil and other indicators. Given the current economic data, is the U.S. now currently experiencing a jobless economic recovery?

In an October 22, 2010 interview on the Bloomberg channel, Professor Alan Blinder of Princeton University says that basing on current economic data America won’t be experiencing a long-term jobless economic recovery because America’s current jobless rate is a cyclical jobless rate as opposed to a structural jobless rate. That is, America’s current jobless rate – being cyclical in nature – could easily go down once the economy improves, as opposed in a structural jobless rate where the unemployment rate stays at a fixed rate – and at a rather high percentage rate – even if the economy improves.

Most U.S. economists – including Professor Blinder – safely concludes that the current U.S. unemployment data is overwhelmingly cyclical, as opposed to structural, and could return to the previous natural unemployment rate of slightly below 5% once the U.S. economy further improves. Which could spells further good news for the U.S. economy since 70% of the U.S. GDP is due to retail purchases.

But what if the unemployment problem in the U.S. turns out to be a markedly structural jobless rate rather than a cyclical jobless rate? Well, given that the economic nerve centers in the U.S. are now computerized and largely robotic, America could well experience a true jobless recovery with a structural unemployment rate framing the backdrop of an economic prosperity with a 10% or more jobless rate.

Worse still, in an economic climate marked by structural jobless rates, the U.S. economy might become too dependent on the markedly dubious wealth manipulation industry in the murky world of investment banking. Like superfast high-frequency trading which – from time to time – is still prone to market meltdown and market crashes like the recent one that happened back in May 6, 2010.

Thursday, October 7, 2010

Is Currency Intervention Legal?

Even though countries fortunate enough not to resort to one often look down at countries that do in order to get out of a bind, is the act of currency intervention even legal?

By: Ringo Bones

So far there’s still no legal precedent of any country subjected to punitive UN Security Council sanctions whenever they resort to high-level currency intervention in order to get out of a current economic bind. The world’s leading economists recently criticized the wisdom and sustainability of the Bank of Japan’s latest attempt at currency intervention, primarily done in order to lower the value of their super-strong yen in order to make Japanese exports globally competitive again. To those still unfamiliar with currency intervention, it goes as follows.

Currency intervention is the action taken by of one or more governments, central banks, or currency speculators for the purpose of increasing or reducing the value of a particular currency against another currency. Most economists have a consensus view that currency intervention – more often than not – fizzle out quite quickly since the funds used to make a particular currency artificially low or high in value is ultimately limited in comparison to the level of international trade that floats it as its true arbiter of value.

The value of the yen recently became too strong for its own good because many speculators and some governments – like the Peoples Republic of China – has used it as a safe haven investment. The Bank of Japan’s funds being used to reduce the value of the yen back to just make Japanese export products competitive is ultimately limited in comparison to the war-chest of the various global currency speculators and the Beijing government; Making the Bank of Japan’s first currency intervention since March 2004 ultimately an exercise in economic futility.

The Mainland Chinese currency – the yuan – has a value ultimately determined by the country’s volume of trade with the international market, as do most floating currencies these days. While the US government - especially US Treasury Secretary Timothy Geithner - is still irked by the Beijing government’s “suspected” subsidizing of the yuan in order to keep its value artificially low in order to make China’s exports unfairly competitive.

As the US government is already in the process of legislating laws to charge punitive tariffs against Chinese goods imported into the US if Beijing doesn’t intervene to strengthen the value of the yuan. Even though this move reeks of protectionism, the legal gray area that currency intervention has carved itself a niche into is by no means free of moral hazards.

George Soros, the most famous billionaire who single-handedly performed his own successfully executed currency intervention back Black Wednesday of 1992 never spent a time in jail despite of famously known for “breaking the Bank of England”. With an estimated current net worth of around 11-billion US dollars, Soros is ranked by Forbes as the 29th richest person in the world - and probably the most notorious single-proprietorship currency speculator.

With such wealth and influence, Soros can for all intents and purposes practically make up his own “moral sensibilities” as he goes. In 1997, he managed to bring the economy of South-East Asia to its knees by performing his “one-man” currency speculation that triggered the Asian financial crisis of 1997 just because Soros is pissed when the Association of South-East Asian Nations or ASEAN welcomed Myanmar – and the country’s despotic regime - as a member.

So is currency intervention legal? I’m afraid so, but within the legal gray area of a niche that it has managed to carve itself into I just hope that central banks, currency speculators and eccentric billionaires that use it consider the moral hazards that inevitably and inextricably come with it. After all, an overwhelming majority of us still resort to crummy jobs just to earn money.

Monday, October 4, 2010

Is Basel III A Financially Sensible Bankruptcy Protection For Banks?

As the latest incarnation of the Basel Accord, does Basel III really provide the most financially sensible way to provide protection against a repeat of the 2008 global credit crisis?

By: Ringo Bones

Born out of the governments in the industrialized West experiencing first-hand the shock of the global credit crunch, the latest incarnation of the Basel Accord – the Base III Agreement – was seen as a saviour of governments now weary of using taxpayers’ money to prop-up ailing banks. This “New Deal” for central bankers aims to reduce risks of future financial crisis through proposed Core Tier I Capital requirement reforms – in other words increasing the banks capital reserve. But is this a sensible solution against a future financial crisis?

As it was the Bank of International Settlements being one of the first to warn against the looming 2008 global credit crunch months before it actually happened, the Basel III Agreement was readily agreed with open arms (or was it via political clout?) by central bankers and senior regulators. With required aims to triple the size of banks’ capital reserve in comparison to previous Basel Accords in order to protect against another banking crisis, plus the proviso of cutting bonuses of bank executives if they can’t maintain the newly agreed capital ratio. With such stringent capital requirements, one could wonder if Basel III will ever have universal appeal.

As of late, bankers have warned a regional regulation race that could result once Basel III is finally implemented. Not only that, the stringent capital requirements also means less money available for banks to be made available to be borrowed, thus lowering their “potential” earnings - which could eventually hurt fledgling small to medium business firms seeking to borrow funds for capital expansion. Although the new rules are yet to be submitted to the upcoming G-20 meeting in South Korea, it is very doubtful if there is another bankruptcy protection scheme that can provide a better compromise between a bank’s profit earning potential and the risk of a worst-case scenario where a large number of borrowers default on their debts. Like what happened during the subprime mortgage crisis of 2008.

Monday, September 27, 2010

Should Local Communities Manage Their Own Microfinance Funds?

Given that they themselves are the primary beneficiaries of this shared financial resource, are local communities at a better position to manage their own microfinance funds?

By: Ringo Bones

Maybe it was the works on concepts of management and governance of shared or common resources of the 2009 Nobel Economics laureates Elinor Ostrom and Oliver Williamson that got me thinking that local communities are in a better position – in comparison to the central government – in managing their own microfinance funds. After all, as the primary beneficiaries, they are way better in deciding their own best interest when it comes to their own common resource usage than representatives from the central government, right?

When it comes to governing and managing common or shared resources, systems that combine central government and local community governance and management are currently the system that does the best. Good governance – with a nuanced approach – always has been the best method in identifying where markets and firms are most efficient, especially when it comes to fiscally important financial transactions. It may not be immediately self-evident, but when it comes to managing shared resources, it is best to think locally – and act globally.

Monday, August 16, 2010

Super-Strong Yen in 2010: Bane for Japanese Exporters?

As one of the primary investment safe-havens, are currency speculators inadvertently creating a super-strong yen at the expense of high-quality Japanese exports?

By: Ringo Bones

The world’s currency speculators and hedge fund managers had been as of late using yet again the Japanese yen as a safe-haven investment, a move that could ultimately make the currency super-strong. Add to that the Mainland Chinese financial firms in a current buying frenzy of 5 billion US dollars worth of Japanese sovereign debt and one could wonder if this could spell a death knell to Japanese exporters – especially one specializing in the manufacture of premium-quality specialist products.

In the Far East, even though Mainland China have already matched – even exceeded - the production capabilities of Japanese export firms, China is still several years away from equalling Japan in quality terms. When it comes to manufacturing premium specialist products – as in scientific and precision engineering gear, even hi-fi - is still a skill that China has yet to climb a steep learning curve to match the Japanese and American and even German competition.

Never mind the American and German expertise in this field because in the ASEAN region, Japanese specialist products have already carved themselves a niche when it comes to reasonably-priced alternatives to American and German products of comparable quality. A super-strong yen also places most export firms at a disadvantage. Making their high-quality but reasonably priced products less competitive overseas when competing with cheap and wonky Mainland Chinese produced goods. A lower profit margin resting from a super-strong yen could drive a significant number of Japanese exporting firms into bankruptcy.

Will There Be A Double-Dip Recession in 2010?

Despite the pessimistic – but logical – economic outlook harbored by the US FED Chairman and US Treasury Secretary, will there be a double-dip recession in the second half of 2010?

By: Ringo Bones

Our global financial markets are indeed confidence driven. Look no further than the recent pessimistic – but logical – economic outlook of US Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Timothy Geithner has recently sent various stock markets across the globe in an unprecedented sell-off. Maybe it might just be the current dismal jobs market in the US is somewhat hard to overlook, but still – like a celebrity diagnosed with a manic-depressive disorder – our still recovering global financial market still needs constant reassurance just to maintain its bottom line. But a more pressing concern is that will there be a double-dip recession in the US and elsewhere around the world during the second half of 2010?

Despite the pessimistic outlook of the United States’ financial top brass, most of the world’s leading economists are still confident that the occurrence of a global double-dip recession in the second half of 2010 is still very unlikely. A prolonged economic recovery slowdown perhaps, but still, there are already historic precedents that a global double-dip recession might not happen at all during the second half of 2010. And the following is the oft used explanation cited by leading economists.

Even though our current global financial woes was primarily caused by the subprime mortgage crisis that started in the US near the end of July 2007 that was inadvertently allowed to spread around the world, we already have a handle on how to deal with such “financial emergency”. Though now only of academic interest to economists, the “mini recession” or “growth recession” of 1966-1967 exposed the American people to a credit crunch that curtailed housing prices and shaved 20% off stock prices. Many economists see our slowed global recovery as a mere growth recession it follows the textbook definition of such.

As in when the production output and employment growth for half a year or more are significantly less than the average trend or rate of growth – as what is happening right now in America – an economy is said to be in a growth recession, even if the actual growth rates never turn negative. But is it yet too early to panic?

The signs that seem to point to the inevitability of a double-dip recession in 2010 – the lagging jobs creation and dismal manufacturing growth in the US – can be hard to deny. Worse still, a lack of “organic growth” instead of just the “artificial” growth due to the economic stimulus packages could inevitably lead to the fragile global economic recovery back into recession.

While America’s middle class has recently become the country’s nouveau poor due to mortgage foreclosures that drove a growing number of them into bankruptcy and the UK government becoming too obsessed with balancing between economic growth and recession, Germany had recently experienced its greatest quarterly GDP growth rate yet since the 1991 reunification. An economic growth that made the Eurozone countries outpaced the United States and strengthened the euro once again.

Another reason why almost all economists are still optimistic enough to predict that a double-dip recession will probably never happen for the rest of 2010 because the financial reforms already in place to make sure the global credit crunch of 2008 will not happen again. And yet almost all of them say that a bullish economic recovery is still far off into the future.

Given that the global economy is very much confidence driven and can be compared to a manic-depressive celebrity that needs constant reassurance just to function socially. Then it is still safe to say that a double-dip recession is still and has always been just around the corner. If not in 2010, there’s always next year to worry about.

Saturday, July 31, 2010

Cacao: Lucrative Commodity Du Jour?

While the reading economic powers around the world are busy searching “creative” ways to stimulate our post credit crunch economy, has cacao unexpectedly become the speculative commodity du jour?

By: Ringo Bones

With the world’s leading economic powers are now busily printing money like there’s no tomorrow in order to lower the cost of borrowing money to stimulate our post credit crunch global economy. Seasoned investors have now resorted to commodities speculation as a hedge against the resulting inflation brought about by the widespread availability of cheap money. But is cacao – the raw material for chocolate making that had recently reached a 32-year price high the lucrative commodity du jour?

Though the moral hazards of commodities speculation has been around since there had been commodities speculation, there is also that risk of generating a hyper-inflated commodities bubble – as in a chocolate bubble. Anthony Ward, CEO of primo Mayfair street chocolate maker Armajaro has not just only recently earned the moniker “Choc Finger” but also been dubbed by the press as a real-life Willy Wonka when he used his company to single-handedly cornered the global chocolate market by spending 600 million dollars to buy a significant portion (7%) of the world’s “strategic” supply of cacao – the raw material for making cocoa and chocolate. Reminiscent of what the Hunt Brothers did during the late 1970s of cornering the silver market, Ward almost single-handedly managed to send the price of cacao on a 32-year price high. But is this “speculative” move economically viable in the long run?

At present – i.e. July 2010 – commodities are still a very attractive investment because they provide a very reliable hedge against the inevitable inflation resulting from the stimulus packages initiated by most governments around the world – i.e. lowering the cost of borrowing money. Unfortunately, commodities on our present austere fiscal environment of a post credit crunch world would make them a relatively thin market for the “foreseeable present”. The international commodities speculators –assumed that Anthony Ward had recently discovered a sort of commodities speculators’ “gold mine” at cacao attempted to mirror his move. Unfortunately this caused the chocolate bubble to burst – cacao commodities prices diving a precipitous 7% during the week of July 19 to July 23, 2010. Will cacao prices go any lower?

Wednesday, July 28, 2010

EU Banks’ Stress Tests: Redundancy in Accountancy?

Despite of being labeled as “too soft” by leading economists, are the recent EU banks’ stress tests really capture the big picture of the Eurozone’s current economic health?

By: Ringo Bones

The recent EU banks’ stress tests, which are conducted by independent auditors – which publicized its findings last July 23, 2010 – showed that of the 91 major Eurozone banks evaluated, only 7 had failed the stress tests. Germany’s Hypo Real Estate failed, which is not surprising given the bank’s exposure to bad credit at the height of the 2008 global credit crunch. Also, one Greek bank failed, while 5 of Spain’s banks under evaluation had failed to pass muster on their survivability of an economic downturn scenario that was deemed “too soft” by leading economists. But does the recent EU banks’ stress tests really tell the true economic picture of the whole Eurozone?

Or could it be that the problem is not economic or even fiscal in nature, but of the way the ailing Eurozone countries make concessions with their left-leaning trade and labor unions during the past 40 years? Unfortunately, from outsiders’ perspective, the Costa-Gavras’ Z has been taken, by most people, as a factual historical “documentary” of post World War II Greek society. That is incumbent governments’ buying the loyalty of their local left-leaning labor and trade unions’ loyalties using concession that endanger their countries long-term sovereign economic viability.

Most of Spain’s Caja banks that have just barely passed the recent EU banks stress test are also on the verge of bankruptcy because of Spain’s “past sins”. Various Spanish administrations since the Franco dictatorship had been making overly generous concessions with Spain's left-leaning trade and labor unions with scant regard to existing economic conditions. It is now very expensive to lay-off a worker in Spain then paying the required benefits.

Bank stress tests and quanititative easings had neither addressed the problems of Eurozone’s socialist model of employment benefits nor reformed them over the years to make them congruent with prevailing economic conditions. In the end, the annual EU banks stress tests may not only be seen by the world’s leading economists as too soft and not designed to cope with another 2008-era credit crunch, but also just another redundancy in accountability. Independent auditors have other and better things to do by the way.

Thursday, June 24, 2010

Of Testosterone and Risk Taking

Many a commodities traders made very risky decisions during the peak of the Bull Market, but how risky is too risky and most of all does testosterone play a role?

By: Ringo Bones

As the alleged “rogue trader” of Société Générale named Jérôme Kerviel faced charges in a Paris court back in June 8, 2010 over his risky trading decisions that cost his company billions. And Kerviel was even described by former Société Générale chief executive Daniel Bouton as a terrorist. But does the extremely risky trading decisions made by the former securities trader for Société Générale explained away by chemistry – as in testosterone?

John Coates – research fellow of University of Cambridge – explains his recent findings on the role of testosterone in crucial financial trading decisions. Traders – especially men – tend to take more risks when their testosterone levels are on the high side. It has been recently found out that the more money a male trader makes the more their testosterone levels rise due to the “reward effect”. Does this explain the very risky decisions made during the peak of the Bull Market?

The testosterone to reward link can be a very vicious cycle in the profit-driven environment of securities trading, especially when risky decisions – if one is lucky – gets overgenerous rewards while disregarding the long-term effects of excessive financial risk taking. In situations like these, financial risks should be analyzed by the logical aspect of the trader’s brain – as opposed to getting off on a short-term reward high of a pheromone-addled brain. The “sex-appeal” of ungodly amounts of easy-money acquired in high-risk securities trading or even CFD trading in a highly charged environment can usually increase male testosterone levels. Thus skewing ones perception of the true long-term profitability of most issued securities. Moral hazards don’t even get a look-in anymore.

Crude Oil Industry: Still Economically Viable?

With a somewhat costly cleanup and huge compensation costs slated to be paid out by BP due to the Gulf of Mexico oil spill, is the crude oil extraction industry still economically viable?

By: Ringo Bones

With the Gulf of Mexico oil spill now on its 65th day - and counting, add to that calls for a boycott of BP products (like if that’s even possible), many now wonder whether the crude oil extraction industry is still economically viable. Oil industry experts say that it will probably take a hundred BP Gulf of Mexico sized oil spills occurring per year before safety concerns about offshore oil drilling get serious budgetary reconsideration in order to maintain profits - precipitous drop in share prices notwithstanding.

BP’s competitors – i.e. other oil companies – had accused BP of operating outside the industry’s norms when it comes to their safety budget. Case in point is the 1998 memo from London to their US subsidiaries ordering a 25% operation cost cutting measures that eventually compromised their operational safety. Unfortunately leading to the disastrous BP refinery explosion in Texas City back in March 23, 2005. Recent Capitol Hill grilling of BP had even uncovered safety concerns of a former Deep Horizon rig worker named Tyrone Benton being disregarded due to the company’s cost cutting measures.

When it comes to boycotting multi-national corporations who don’t know the meaning of corporate social responsibility – like BP – just skip filling up your car in BP affiliated gas stations. But when it comes to your where your pension fund is invested, it can be a bit harder because unless you have a very gifted hedge fund manager, it is very likely that your pension fund is invested in crude oil ETFs to maximize its rate of return. You know those crude oil companies that had been suspected for sometime of assassinating local environmentalists who are not very friendly with “big oil”. Economically viable or not, the true cost of oil extraction companies usually shows up on their impact to the environment and of the social stability in their sphere of operation – especially when other complications are now in the picture like former 9 / 11 victims relief fund chief David Feinberg now overseeing the 20 billion dollar BP Gulf of Mexico oil spill compensation fund.

Thursday, June 17, 2010

The Piece of the Pie Paradox

In our still fragile post global credit crunch fiscal environment, do our decision makers still know the difference between wealth creation and wealth manipulation?

By: Ringo Bones

The concept of wealth creation can be a paradox in itself. Everyone is clamoring for his or her own piece of the pie, unfortunately, someone has to make it – and believe me, most “everyone” is not cut out to be able to make a good pie. Thus bringing us back to the paradox behind wealth creation, that is we cannot share the wealth until someone – and there’s not a lot of them just lying around – creates the wealth. In short industrial production of quality products produced under safe and environmentally sound working conditions were the workers are well cared for has been – and always will be – the surest way for a sovereign country and / or economic entity to create real wealth and prosperity.

Even the folks who initiated the Bolshevik Revolution back in 1917 understand the concept behind wealth creation that enabled the supposedly “capitalism clueless” Soviet Empire to last a little over seven decades. I mean have you ever seen those Soviet-era posters extolling the virtues of industrial production? Well, just about everyone got this down to a science. Without which Wall Street and other centers of the global stock market would be nothing more that over-glorified centers of wealth manipulation. One that relies on hedge funds, naked short-selling and overly complex derivatives to manipulate the redistribution of vanishingly small amounts of wealth – especially if the primary means of wealth production, as in the manufacturing industry, happens to go awry.

Back in 2008, it was those same over-glorified wealth manipulators that sent our global economy to the brink of collapse. Unscrupulous manipulators that blew smoke up our asses in their “successful” attempt to convince everyone about cheaper-priced goods are better. And product quality is a ting of the past and is now rendered irrelevant. Unfortunately, their marketing spin managed to convince almost everyone that cheaper goods are indeed better and that quality products belong to the distant past and are thus irrelevant - thus endangering the livelihoods of skilled manufacturers, especially in the United States and Germany, former centers of high quality goods manufacturing. In short, our insatiable demand for cheap products produced under slave-wage and dangerous conditions have endangered the wealth creation capability and / or potential of every established and emerging economic entity around the world.

Austerity Now, Poverty Sooner?

It might seem like a very logical way to rein in on one’s runaway sovereign debt, but will draconian austerity measures eventually result in widespread poverty?

By: Ringo Bones

From my perspective, it does seem appear to be the most logical step a sovereign country can take in order to rein in on runaway sovereign debt, but will it result in initiating an even deeper recession or perhaps a full-blown economic depression? Tenured economists even think that this could initiate that dreaded double-dip recession that the global economy is desperately trying to avoid in our still fragile post-credit crunch global economy. Sooner, rather than later, the EU will be facing the problem of how to make sound fiscal decisions with ever-dwindling tax revenue brought about by those draconian austerity measures.

Fortunately at present, EU style draconian austerity measures adopted by heavily indebted Euro zone member countries had not yet become in vogue in the United States. Every economist worth his or her salt perceives that austerity measures seems to run counter with what we’ve learned about Keynesian Economics that had bailed the global economy from the Great Depression of the 1930s.

There is this somewhat strange and not-so-old adage that goes: “Before any of us can cut out pieces of the pie, somebody has to make it.” Or that oh-so-true share-the-wealth paradox that goes: “We can’t share the wealth until we create the wealth.” I’ve first heard these “jingoism” during the transition phase of President George H.W. Bush to President Bill Clinton back in 1992 – unfortunately, it still holds true today. Euro zone policymakers should concentrate more on reforming their inefficient taxation system that allows the extremely rich to get away scot-free when it comes to paying their fair share of taxes.

Will EU austerity measures eventually compromise the wealth generating aspect of their economy – i.e. manufacturing – and instead turn the Euro zone into a wealth manipulation based economy of bankruptcy remediation where the ever shrinking wealth are yet again redistributed in vanishingly small quantities? When the wealth creation side of a typical sovereign nation suffers, this usually results in lower tax revenues – thus endangering a sovereign government’s ability to serve its citizens. Let’s just hope that EU style austerity measures never become a global phenomena or that Eurozone countries realize their folly before every country Europe starts saving their way into economic stagnation. Present austerity measures – like the recently approved quantitative easing measures – had mainly affected the Euro zone’s working class.

Friday, June 4, 2010

Credit Rating Agencies: Too Powerful For Their Own Good?

Under fire for losing their objectivity when it comes to assessing the true credit worthiness of issued securities and sovereign governments, have credit rating agencies become too powerful for their own good?

By: Ringo Bones

For anyone watching the blow-by-blow account of the Financial Crisis Inquiry Commission (FCIC) hearing back in June 2, 2010, it seems like the preconceptions since harbored by everyone critical of credit rating agencies since the few preceding years before the start of the 2007 subprime mortgage crisis has been proven right yet again. Credit rating agencies had truly become too powerful for their own good for two main reasons. One, they are not exactly unbiased when it comes to assigning the true credit worthiness or credit rating of issued securities and sovereign governments under their purview and two, they don’t do their share of due diligence – as in legwork - to assess the true credit worthiness or credit rating of financial instruments issued by securities issuers and sovereign governments under their purview.

Financial Crisis Commission Chairman Phil Angelides had recently grilled the two prime “instigators” of the 2007 subprime mortgage crisis. Namely, the famed investment guru and Berkshire Hathaway CEO Warren Buffett and Moody’s CEO Raymond McDaniel over the loss of credibility of credit rating agencies in the June 2 FCIC hearing under full press fanfare. Also on the agenda is the credit rating agencies’ inability to warn institutional investors against the impending subprime mortgage crisis that started near the end of July 2007 that nearly brought our global financial system o the brink of collapse. And yet Buffett and McDaniel – in their defense – have reiterated yet again what every seasoned investor already knew about the preexisting systemic faults that plague credit rating agencies.

According to Moody’s CEO Raymond McDaniel, it is very difficult to avoid potential conflicts of interest inherent in a typical credit rating agencies’ assessment of the credit worthiness of a typical sovereign government and / or typical issued securities. Inevitable considering that a lion’s share of the salaries of credit rating agencies’ analysts came from the securities issuers and the sovereign governments under their purview. McDaniel’s reassurance that Moody’s are on top of valuations and possess enhanced analytical integrity seems sacrosanct to anyone who had experienced the global financial crisis first hand. But McDaniel managed to shift blame to the Bush administration era financial watchdogs for initiating a sudden tightening of credit in s softening housing market, which made hell to everyone wanting to restructure their mortgages.

While Warren Buffett’s “behavior” prior to the start to the subprime mortgage crisis does seem suspicious – i.e. he dumped his Fannie Mae and Freddie Mac shares from his investment portfolio just before the housing bubble burst citing its focus on enhanced earnings. Buffett also did the still trendy thing to do during the June 2, 2010 FCIC hearing – blame credit default swaps and related derivatives as the primary instigators of the subprime mortgage crisis. Buffett says that credit default swaps are the financial world’s equivalent of weapons of mass destruction because they provide so much unfair leverage, also citing that their improper use posed system-wide problems that led to the subprime mortgage crisis.

Securities issuers and sovereign governments – more often than not – usually resort to do what most unscrupulous restaurant owners do in order to drum up business – pay exorbitant sums to an A-List restaurant critic to make his or her restaurant appear better to potential diners and patrons than it actually is. Seasoned investors have caught on this “dirty trick” since the credit rating agencies has first set up shop, thus making them view credit rating agencies with suspicion and often take their assessments – in the form of credit worthiness reports – with a grain of salt. Maybe credit rating agencies had truly become too powerful for everyone’s good, especially when moral hazard concerns are often lost in the relentless pursuit of profits.

Wednesday, May 19, 2010

Can the Euro Be Saved?

Since its introduction back in January 1999 to its near destruction by the Greek debt crisis, is the European common currency of the euro still worth saving?

By: Ringo Bones

From its origins dating back to the late 1960s to its eventual introduction in January 1999 with the help of the US Federal Reserve and the German Bundesbank. The common European currency – called the euro – supposed raison d’être was to provide Eurozone economies with a currency equipped with built-in price stability and hopefully apolitical-flavored neutrality. The euro nearly died back in December 1999 when its value tumbled below that of the US dollar. But the common European currency did wonders to Europe’s capital markets as its value dropped by triggering a mergers-and acquisition boom that allowed the European corporate bond market – then worth 2.3-trillion US dollars – to grow almost threefold.

Despite of its “miraculous” first twelve months of life, euro-skeptics were not so shy in voicing their opinions. Like the now-defunct British pop band called the Spice Girls -whose members can’t even tell a mathematical equation describing a typical credit derivative from one describing the ballistic coefficient of a 155-mm projectile. And who can forget former British P.M. Tony Blair who said during the 1998 EU summit that the UK would not be using the euro before 2002.

Even though I harbor the perception that the German propensity to over-engineer their creations, it seems to have done wonders to the euro’s apparent resilience despite of the current debt crisis affecting Greece that is also threatening other Eurozone economies like Portugal, Spain, Italy and Ireland. And maybe it is no wonder why Germany has exerted the most in trying to save the euro because, historically, it seems like it is their pride-child.

Wim Duisenberg was serving as the first European Central Bank president when the euro was launched back in 1999, and the then Finance Minister of Germany – Oskar Lafontaine – used the euro as a platform to reduce Europe’s unemployment rate at that time. Not to mention Hans Tietmeyer’s announcement back then on the Bundesbank deciding to join an Eurozone wide interest rate cut with a tragic result to many mortgage holders at the start of 1999. Nonetheless, then German Chancellor Gerhard Schröder together with then French President Jacques Chirac’s well-panned rhetoric of using the euro as a platform for economic growth.

Over-engineered supercurrency or not, it seems like the only solution for economic stability in Europe – and the rest of the world for that matter – is probably something like a Bretton Woods version 2.0 overhaul of the global financial system. The euro might survive even if an economic crisis rivaling that of the 2008 global credit crunch occurs with regularity every five years, but I doubt if typical Europeans and other working-class people around the world can survive such economic onslaught.

As of late, EU finance ministers have been meeting to put forth proposals that would save the euro after it plunged to an 18-month low of just below US$ 1.25 back in May 14, 2010. There has been a consensus in favor of more regulation of hedge fund trading on European soil in order to curb risky behavior by fund managers and its current fight against currency speculators that could irreversibly harm the euro. But as usual, UK opposed such a deal primarily because it handles 80% of Europe’s hedge fund market. A stricter regulation on hedge funds could put pension funds at a disadvantage because they are inherently tied down to hedge funds. It seems that in saving the euro, working-class folks are put into a disadvantage yet again – just like back in 1999. Isn’t quantitative easing such a fierce and fickle mistress?

Friday, May 7, 2010

Computer Trading Errors: Undermining Investor Confidence?

Will the latest NYSE computer trading error that resulted in a thousand-point drop of the DOW in Thursday’s trading eventually undermine investor confidence in our post credit crunch world?

By: Ringo Bones

The incident is somewhat reminiscent of the Black Monday Stock Market Crash of October 19, 1987. The NYSE computer trading error that resulted in a thousand-point plunge of the DOW in Thursday’s trading that eventually resulted in the global stock sellout rout even though the global markets has since stabilized after that unfortunate May 6, 2010 trading fluke. Given that there is that on-going Greek debt crisis that threatens the euro, is this latest computer trading error looking more like the financial equivalent of the Cuban Missile Crisis of October 27, 1962?

Some old timers who have much at stake in this latest stock market crash probably have memories of being rudely awakened at 2 A.M. in to be prepped up for pre-breathing pure oxygen at 2 p.s.i. in order to purge excess nitrogen from their blood as they hurriedly slip on into their partial-pressure suit came flooding in. With the on-going Greek debt crisis being labeled as a “Contagion” by leading financial pundits, it is no wonder that the NYSE computer trading error can now be safely compared as the financial equivalent of the Cuban Missile Crisis of 1962. Even though the Greek debt crisis having very little – if nothing – to do with the latest NYSE stock market crash.

Unfortunately, the resulting stock price plunge had resulted in a panicky knee-jerk reaction in the global markets. Imagine Exxon Mobil stocks suddenly plunging from 66 US dollars a share to 58, or Procter and Gamble suddenly falling from 62 US dollars a share to 39, while Accenture PLC was probably the worst affected after their shares priced at 42 US dollars each suddenly becoming into penny stocks. When a Blue Chip-priced stocks suddenly turning into penny stocks in a single trading session managed to raise alarms that there in something terribly wrong – as in a major computer trading error.

Preliminary investigations have revealed that a certain overworked sleep-deprived trader manning a certain computer workstation at the NYSE has been blamed for mistakenly typing in a “B” for billion instead of an “M” for million. The resulting pricing error had made a trillion dollars worth of funds virtually disappear into thin air. Looks like humans are still the be-all-end-all link of our contemporary heavily computerized global stock markets. But will this weak link undermine investor confidence in our post global credit crunch world?

Goldman Sachs: Capitol Hill’s Financial Scapegoat Du Jour?

With the US government and the American public desperately seeking the financial reform of Wall Street, has Goldman Sachs just become another scapegoat of the 2008 financial crisis?

By: Ringo Bones

After surviving relatively unscathed from the 2008 global financial crisis, Goldman Sachs was once again put under the US Securities and Exchange Commission’s microscope. Most likely due to the financial firm’s publicly revealed promise to pay exorbitant executive bonuses after profiting a little over 3-billion-dollars during the first three months of 2010 that revealed anomalies in the financial firm’s proprietary trading of derivatives. After the SEC filed fraud charges, the UK financial watchdog immediately followed suit to investigate Goldman Sachs’ affiliates on British soil. Despite of the financial firm’s somewhat questionable reputation when it comes to shady dealings of derivatives like CDOs, has Goldman Sachs just became Capitol Hill’s latest financial crisis scapegoat?

The primary reason why Goldman Sachs got further SEC scrutiny is probably due to the Obama Administration’s proposed Wall Street reform on financial regulations. The gist of which includes: 1) Consumer protection for stock investors, 2) More SEC oversight on derivatives trading and 3) Set up a fund to lessen the of a large-scale financial meltdown in case it happens again. Will this proposed White House financial reform of Wall Street nothing more than biting the hand that feeds then albeit gently? After all, it is primarily the capital gains tax collected from Wall Street financial firms – and contributions come presidential election time - that made the periodic titanic political battle between the Democratic Party and Republican Party a possibility.

The Capitol Hill versus Goldman Sachs saga just went into another unexpected plot twist when the firm’s CEO, Lloyd Blankfein, was summoned before the Capitol Hill’s investigative committee after allegedly placing the financial firm’s profits before their clients. Senator Carl Levin (D-Michigan), Governmental Affairs Subcommittee on Investigations chairman, managed to add color to the proceedings after his expletive-laden grilling of Goldman Sachs’ executives over the e-mails pertaining to the “Shitty Timberwolf Deal”. Ironically, Senator Levin could be blamed for the current Goldman debacle because he further enabled the laissez-faire policy of the US government when it comes to a genuine Wall Street financial regulation reform after he fully endorsed the Gram-Leach-Bliley Act back in November 4, 1999. Passing the Gram-Leach-Bliley Act more than likely made Goldman Sachs the “evil” financial firm that it is today.

Monday, April 19, 2010

Vulture Funds: Threat to an Egalitarian Globalization?

The clarion call of globalization preaches that every nation deserves economic prosperity, will vulture funds ruin this egalitarian economic idealism?

By: Ringo Bones

In a perfect world, any country wishing to embrace globalization is guaranteed economic prosperity. In the real world, through the rigmarole-like machinations of a globalization-based economy, poor countries often get the bad end of a business contract. Vulture funds had gained the attention of the mainstream press when poor countries in Africa – first Zambia then Liberia – wind up using their international aid money to service debts they don’t even know that they have. Sadly, the financial misery was hatched up by unscrupulous Wall Street types during the turbulent “nation building” phase of a number of poor African countries during the 1970s and the 1980s.

When these poor African countries where still under the stranglehold of their respective megalomaniac dictators, they racked up massive debt via their respective military built-up programs. When the dictators got deposed, Wall Street speculators managed to pick up almost worthless debt bonds that enabled these unscrupulous entrepreneurs via the rigmarole of gray area business contracts to later collect the sovereign debt of these starving African countries. And these unscrupulous Wall Street types do intend to collect their debt – even via international development aid money – at the expense of those poor countries’ starving citizens.

Recently, Number 10 Downing Street had initiated an international ban on the trade of vulture funds. But a Wall Street based financial firm trading in vulture funds called F.H. International fell under investigation when its CEO Eric Hermann had taken advantage of Liberia’s international debt reduction program. Through the Hamsah Fund transfer, Mr. Hermann supposedly made a Vulture Fund on Liberian sovereign debt seem official. Before the vulture fund debacle was uncovered, a significant portion of international aid money destined for the rehabilitation of post civil war Liberia was diverted to service vulture funds. Globalization was supposed to help poor countries attain economic prosperity, instead it had a legal loophole that made vulture funds a reality. Making vulture funds probably the most unethical and the most socially irresponsible way to make money. Vulture funds could probably turn out to be very useful to repressive regimes, just imagine what it could do if the Beijing governments communist party functionaries would use it against the Uyghur uprising, the Free Tibet Movement, or organizations spreading awareness of the June 4, 1989 Tiananmen Square Massacre, Google, etc.

Monday, February 22, 2010

The Big Fat Greek Debt Crisis: An Epic Financial Saga?

Even though the country’s sovereign debt problems only started to threaten the stability of the euro in 2010, is the sovereign debt crisis that affected Greece long in the making?

By: Ringo Bones

It can only be described as somewhat shocking news to anyone with a vested interest to the monolithic European super-currency – not to mention countless Greeks with nary a financial safety net – but the sovereign debt crisis affecting Greece which recently became newsworthy seems to have started as far back as 2001. It had been revealed to the mainstream financial news providers in February 19, 2010 that Greece made a currency deal / currency swap with Goldman Sachs back in 2001 in order to cover-up the country’s budget deficit. Though perfectly legal under the EU rules back then, many financial experts had now blamed this move as the root of the big fat Greek sovereign debt crisis that now threatens the value and long-term stability of the euro. With this fiasco, could the role of banks in financial crises such as these put them under scrutiny once again?

The current Greek administration insists that the practice was above board. Even Prime Minister George Papandreou keeps reiterating that Greece needs financial aid – not financial bailout. Given I’m somewhat perplexed of this arcane financial maneuver I started asking the financial experts in our neighborhood. All of them say that the sheer complexity and rigmarole of such over the counter instruments deals – like a typical currency deal / currency swap can be a very effective way of covering up a typical budget deficit problems suffered by a typical country. Of countries and individual persons, it can also be a very effective credit rating booster in the short-term, akin to someone sporting a 2,000 US dollar Armani suit even though they earn less that 25,000 US dollars a year.

As a recently designated member of the PIIGS countries – i.e. the poorest performing economies in Europe as in Portugal, Ireland, Italy, Greece and Spain – Greece has been forced to take extremely draconian actions in order to pay its sovereign debt. Like a proposed pay-freeze on public sector workers that made many Greek government employees threatening to go on a strike. Such unpopular austerity measures will probably only anger your typical working-class Greek who view the “institutionalized corruption” - described by most working class Greeks as the "Octopus" - in some sectors of the government as the root cause of the sovereign debt crisis. Not to mention the unprovoked shooting of a young demonstrator by the Greek police is still fresh on everyone’s minds.

And if this goes on any longer, the longer will Greece improve their sovereign credit rating from near-junk status as the world’s leading credit rating agencies downgraded the country’s credit rating since the crisis came to light. Remember back in 2008 when many highly paid non-American entertainers doing their shows in the US insisted on being paid in euro since the US dollar’s value kept on plunging? Now it’s the almighty euro that’s in trouble.

Thursday, January 21, 2010

Blue Chip Renewable Energy Stocks

In our increasingly environmentally conscious global economy, will blue chip renewable energy stocks be economically viable to be issued in the near future?

By: Ringo Bones

After seeing Gordon Johnson of Hapolim Securities discussing on Bloomberg TV back in January 17, 2010 about why solar stocks are still hot, I start to wonder if renewable energy stocks will ever become blue chip stocks. With the discussion centered on Germany’s shift from wind turbines to various solar photo-voltaic cell power generation due to the continually declining costs of manufacture. I’m probably not alone in starting to wonder if renewable energy stocks – like wind, solar thermal and solar photo-voltaic and other forms of carbon-neutral power generation – will ever become blue chip stocks in the near future.

Even though they are environmentally friendly because they never give off a single gram of carbon dioxide and other greenhouse gases as they generate electricity, renewable energy has always faced an uphill battle against coal fired power plants when it comes to the financial side of things. But with the increasing concerns of global warming wrecking havoc to our planet’s fragile climate system, various experts from the financial and power generating field are beginning to wonder if the apparent cheapness of coal as a source of electricity is a mere illusion. It makes no sense to keep on building cheap coal-fired power plants knowing that it could bankrupt a lot of insurance companies 50 to 100 years from now due to climate change catastrophe related pay-outs.

Stop-gap measures of cleaning up the energy production of coal-fired power plants, like carbon capture and sequestration are still “trapped” in the experimental phase due to every government’s foot-dragging when it comes to legislating environmentally equitable tax on excess greenhouse gas emissions. Polluters are not taxed high enough to start installing systems that remove excess carbon dioxide from their coal-fired power plants to be stored where they don’t cause global warming. Coal and other fossil fuel lobbyists on Capitol Hill may still have the upper hand for now. But if the global warming situation gets worse – i.e. when climate change refugees that number over a hundred million, other 190 countries around the world threatening the US will an all-out nuclear strike if it doesn’t clean up its act. The fat cats at Wall Street might find it more economically viable to start issuing blue chip renewable energy stocks within the next 5 years than to face the wrath of growing geopolitical pressure 50 to 100 years from now. Change must start somewhere you know.

Renewable energy related blue chip stocks will probably first gain popularity in the United States after President Obama announced that he will create "green jobs" in the US that cannot be outsourced. Unfortunately, President Obama faces an uphill battle against seasoned Capitol Hill crude oil / coal / fossil fuel lobbyists for renewable energy blue chip stocks to become an economically viable trading tool anytime soon.

As the prerequisite for every existing blue chip stock is public confidence and stability, it seems that as of late renewable energy schemes are being shot down by powerful Capitol Hill – and in every major Western industrialized country - lobbyists with fossil fuel interest who are unwilling to relinquish their hold on the energy market. Add to the that the public’s lingering doubt over slickly commercialized green power generating technologies because of the green washing issue; especially when it comes to energy firms that are founded on the fossil fuel boom of the 20th Century pretending to prop-up some semblance of corporate social responsibility by supposedly being environmentally responsible despite of evidence proving the contrary. And there is also the lack of political will to legislate a tax system on excess greenhouse gas emissions that is more equitable to the environment and is congruent to the laws of physics. Blue chip renewable energy stocks thus still face an uphill battle before it can replace crude oil stocks.

Thursday, January 14, 2010

Will Google Move Out of the People’s Republic of China?

Famous for its company slogan “We don’t do evil”, will the Internet portal / search engine giant Google move out of the People’s Republic of China because doing business there just got too “Orwellian”?

By: Ringo Bones

Maybe the coordinated cyber-attacks by homegrown mercenary hackers hired by top Beijing communist party functionaries to disrupt its day to day online operations might have been easily shrugged off. But the overtly Orwellian snooping of top human rights activists’ G-mail accounts did prove the last straw that got the Internet portal / search engine giant Google to consider ending their corporate operations in the People’s Republic of China. Given that Mainland China is now the world’s largest and fastest growing Internet market, would Google eventually ending their corporate operations there due to the Beijing government's individual privacy rights violations that can make your typical ACLU lawyer squirm?

Criticized for betraying the idealism first put forth by Karl Marx and Friedrich Engels, the materialistic and power mad excesses of Beijing’s communist party functionaries has fueled a growing culture of political dissention since the brutal suppression of the Tiananmen Square protest rally back in June 4, 1989. With the Internet becoming a runaway global phenomenon for over a decade now, human rights activists in the People’s Republic of China were one of the first ones to reach out to the world and tell everyone. Especially the truth about the socialist idyll that the Beijing communist party functionaries portray their country to be is nothing more than a big fat propaganda. Given Google’s worldwide reach – especially in the socially conscious and principled societies of America and Western Europe – its no mystery that the Beijing government got Orwellian on the Internet portal’s online infrastructure. But will Google continue to keep their decade or so old reputation as an exemplar of ethical business governance by simply looking the other way as its online infrastructure in the People’s Republic of China is used to suppress the civil liberties of the general population?

Cyber attacks or not, everyone’s growing consciousness over corporate social responsibility was probably the main driving force behind Google’s decision to ditch the potentially profitable online business of Mainland China. With increasing censorship by the Beijing government over the search engine company’s operation and state sponsored snooping of the G-mail accounts of prominent human rights activists. It is probably prudent for Google to consider ending their corporate operations in the People’s Republic of China even if homegrown Internet portal rival Baidu think that its hypocritical for Google to do so. After all, the idealism of the Haight-Ashbury Flower Power Revolution of the late 1960s is still fresh in the minds of Google’s founders and bondholders. Google should set an example in the corporate world that principles are more important than profits.