Bones Economics

Are Banks Nickel and Diming Their Clients to Death?

2012-01-28T23:09:00.001-08:00

Given that in hard economic times, banks should be incentivizing the populace o save some money, shouldn’t banks avoid at all costs in nickel and diming their clients to death with exorbitant processing fees?

By: Ringo Bones

Since 2010, banks around the world had since increased their service charges on checking accounts on average greater than the intended deposited cash’s interest rates. Since then, minimum balance for savings accounts to earn interest and avoid penalties had been raised 137%. But what should bank clients do to avoid being nickel and dimed to death out of their due savings account interests?

As of late, many a smart saver had been moving to smaller community banks and credit unions because these smaller financial institutions offer better growth on savings accounts. On-line banks too ate gaining new customers because they offer deals that are as good as that of smaller community banks and credit unions with even smaller processing fees because all transactions are done electronically on line.

Even though community banks and credit unions are still the way to go for folks who are not very computer savvy, community banks and credit unions have a very distinct disadvantage of a lack of nearby branches. Transportation costs could become very significant when moving and checking your accounts from one community bank or credit union to another. But then, how much do you have to move around your savings and time deposits given the very attractive interest rates offered by credit unions and smaller rural community banks that they provide to their clients?

Occupy Wall Street: Capitalism Reforming Itself?

2011-10-11T03:06:00.001-07:00

Now entering its third week of protests – and counting – will the Occupy Wall Street protests provide the first step in reforming 21st Century capitalism?

By: Ringo Bones

Now being supported by union groups and spreading to every major financial center across the United States, the Occupy Wall Street protest used to be facing an uphill battle when it started due to the alleged “media blackout” sponsored by major Wall Street financial firms. Not to mention the arrests of hundreds of peaceful protesters who just want an equitable portion of the “American Dream. But will these protests succeed in reforming 21st Century capitalism into something that’s more equitable to the working class?

The sentiments fueling the protests are not just those who’ve lost their jobs during the aftermath of the 2008 global credit crunch, but also those who’ve been recently laid off. Not only that, it seems that the “Calvinism” and the “Protestant Work Ethic” that used to serve as a “moral” cornerstone of the American Dream had been practicing a kind of double standard during the Bush administration of excluding everyone whose ethnicity is outside those of the white-Anglo-Saxon-Protestant sphere from the bountiful financial fruits of the American Dream.

Can 21st Century capitalism really reform itself this time around? Well, if the powers-that-be – i.e. the US Federal Reserve and those elected power-brokers on Capitol Hill – keep on using the working-class American taxpayer (the financially disadvantaged 99% of America) as the bailout of last resort, then there might be something to what Karl Marx said about capitalism’s systemic failure in the real world.

Global Economic Slump: Politician's Fault?

2011-08-22T02:48:00.000-07:00

From Washington, D.C.'s faulty bipartisanship to the EU leaders' inability to tackle the region's looming debt crisis, are our elected officials ruining the global economy?

By: Ringo Bones

Ever since the faulty bipartisanship of Capitol Hill had inadvertently lowered the United States' credit rating for the first time in history since credit rating agencies began setting shop 70 or so years ago. The S&P downgrade of the United States' credit rating due to the "11th Hour" approval of the two parties in the Capitol Hill to raise the US government debt ceiling now made everyone harbor the perception that our elected officials lack the leadership skills to lead us out of the global economic slump. The fallout of the political infighting in Washington, D.C. had made every major stock exchange centers around the world in a free-fall hitherto unseen since the 2008 global subprime credit crunch. The EU leaders' inability to reach a consensus in tackling the looming Eurozone debt crisis also had shaken the confidence of investors around the world. So is the fear and panic stricken global securities markets rather caused by politics?

The US Credit Rating downgrade from Triple-A to Double-A status - from the securities traders' perspective here in South-East Asia - has been perceived as the most damaging of all. The looming EU debt crisis comes in at a distant second. Even the People's Republic of China - now the world's second largest economy - has now been calling for a replacement of the US dollar as the principal global currency in basket of currencies. Will all of this spark a change for the better?

Sony Playstation Network Hacking: Death Knell for E-Commerce?

2011-05-30T02:26:00.000-07:00

After satisfying over 70 million loyal customers over the years, will the recent Sony Playstation Network hacking attacks spell the end for reliable retail-level e-commerce?

By: Ringo Bones

Near the end of April, 2011, Sony’s Global Playstation Entertainment System – that sells not only on-line computer game related upgrades and apps but also Sony-owned media like high-resolution movie and digital music downloads – has been subjected to a malicious hacking attack that had made virtually all of the company’s 77-million loyal customers’ credit card and personal details stolen. On-line security pundits say that this could be the most brazen act of cyber-terrorism of 2011. Sony’s top brass are virtually caught with their pants down during the most audacious cyber-attack that all they can do the weeks after the attacks was warn their clients of possible e-mail phishing scams given their e-mail and other personal details are already stolen by the hackers. Does this high-profile hacking attack the death knell for reliable retail-level e-commerce?

Sadly, the present state – as in year 2011 – internet is still akin to the 19th Century Wild West or large-scale pre Geneva and Hague Convention conflicts conducted during the Victorian Era where there are yet no legal precedents and internationally binding conventions governing cyber-warfare or defining acts of cyber-terrorism. Worse still, as recent as the 2011 Munich On-Line Security Conference, internet security pundits are still complaining on the ambiguity surrounding the internationally accepted legal definition of what constitutes a cyber-attack. It might be just an on-line commercial site that’s being attacked this time, but imagine America and Western Europe’s children’s hospital on-line databases being subjected to a cyber-attack similar to that on the Sony’s Global Playstation Entertainment System Network. Children in dire need of an organ transplant could die because the hospital’s database is compromised by a brazen cyber-attack. And the UN Security Council is already being criticized for not investigating states sponsoring global cyber-terrorism. Are we witnessing the start of a brave new world?

Ring-Fencing: Mitigating Banking Risks?

2011-05-16T03:40:00.000-07:00

Proposed by the UK’s Independent Banking Commission, does the proposed splitting of bank’s investment arm from its retail arm really mitigate the financial risks of banks?

By: Ringo Bones

Ever since the collapse of Lehman Brothers back in September 2008 as the banking crisis went global, everyone of us has found out in a rather nasty way that there is an arm of banking that’s quite different from the one that we often avail the services of our local banks namely saving money and allowing us to write checks – it is called investment banking.

Investment banking is a specialized phase of banking concerned with gathering together the savings of the community for permanent or long-term use by private enterprises and the federal, state and local governments. In the early days, the policy of combining commercial banking with investment banking – although sound in theory – did not prove successful in practice.

Commercial banking affiliates, in their eagerness to participate in the long-term capital market, purchased numerous issues of new securities which later could not be sold to the investing public. To dispose of their frozen inventory of unmarketable securities, the affiliate banks frequently “dumped” them into portfolios of the commercial banks and received payment in cash. In this way, the affiliate banks kept themselves liquid, but the commercial banks frequently became owners of securities which were not of the highest quality – i.e. way below the Triple-A Rating of Standard & Poor’s and other top credit-rating agencies.

The folly of such practice became evident in the US Banking Crisis of 1932-1933 when commercial banks were forced to liquidate their investments in order to meet the demands of panic-stricken depositors. They discovered that many of the securities in their portfolios were completely unmarketable or could be disposed off only at prices below the original cost.

As a result of abuses stemming from the combination of investment and commercial banking under the same roof, reform legislation was quickly enacted to separate the two functions. The Banking Act of 1933 stripped commercial banks of the power to underwrite new security issues. They were permitted, however, to continue to act as wholesalers and retailers of federal, state and municipal bonds.

However, the proposed UK’s Independent Banking Commission definition of “Ring-Fencing” that is separating the retail banking arm from the investment banking arm of "universal banks" like HSBC for example is rather draconian in comparison to the Banking Act of 1933 - as in ring-fencing will end commercial bank’s permission to continue to act as wholesalers and retailers of federal, state, county and municipal bonds. Given that most banks are “Universal Banks” – that is they are virtually composed of a commercial arm and an investment arm – like HSBC for example, will these result in universal banks fleeing the UK’s rather draconian banking regulation? After all, many universal banks have already complained that the practice of ring-fencing could render their daily banking operations rather unprofitable. Will this eventually result in a rather "uncomfortable" revolutionary upheaval in the global banking industry?

Is Europe Running on a Two-Speed Economy?

2011-05-16T03:35:00.001-07:00

Even though Germany recently made export profits it hasn’t seen since the 1950s while Greece and Portugal continues to wallow in debt, is Europe running on a two-speed economy?

By: Ringo Bones

Even when plagued by crushing debt, Greece managed a GDP growth of 0.8% during the first quarter of 2011, while Portugal slips back 0.7%, it was Germany who achieved a rather recent economic miracle by managing a GDP growth of 1.5% during the first quarter of 2011 – a feat only managed after the full benefits of the Marshall Plan took effect during the 1950s. But is this the surest proof that Europe is running on a two-speed economy?

Ever since the Greek debt crisis became headline news, EU markets had since been bracing for a Greek debt restructuring since near the end of 2009 and many a euro-skeptic had been bemoaning for years that the only beneficiary of the single European currency are German industrialists. Could it be that Europe’s two-speed economy is more of a political rather than an economic construct?

IMF Chief Rape Charge: Global Repercussions?

2011-05-16T02:52:00.000-07:00

Even though it is yet too soon to tell whether he's guilty or not, does the rape charge aimed at IMF chief Dominique Strauss-Kahn can eventually result in global repercussions?

By: Ringo Bones

IMF chief Dominique Strauss-Kahn could be facing an uphill legal battle given that the chambermaid of a New York City hotel who accused the IMF chief of rape and unlawful imprisonment is described as a "model employee" of the hotel that the IMF chief stayed in. Dominique Strauss-Kahn was arrested after boarding a plane on his way to a very important meeting with the German chancellor back in Sunday, May 15, 2011.

As one of the worthy contenders for the next French presidency, the rape charges could not only jeopardize his political prospects but also came in a time when it had global repercussions - i.e. the IMF chief and his team are still formulating ways to help the economically ailing members of the Eurozone with their respective sovereign debt problems. Even though it is still too soon to tell how deep in trouble the IMF chief is since the NYPD forensics team are still gathering evidence of the alleged crime. Only time will tell if the incident will complicate the debt relief of ailing Eurozone countries.

Raj Rajaratnam: Guilty of Insider Trading?

2011-05-16T02:48:00.000-07:00

Hailed as the landmark case in a generation that will clean-up Wall Street, was Galleon Group hedge fund chief Raj Rajaratnam really guilty of insider trading?

By: Ringo Bones

Basing on the court evidence that has been made public so far, the odds are really stacked against Galleon Group hedge fund chief Raj Rajaratnam. From an illustrious line up of witnesses like Lloyd Blankfein, CEO of Goldman Sachs, court-authorized wire-taps to the facts surrounding the controversial incident of calling another hedge fund manager just a few minutes after a supposedly confidential boardroom meeting that even a junior trainee knows better not to. Even though the New York court had sentenced Rajaratnam to a 15-year prison sentence, his legal team plans to appeal the guilty verdict. But could the case really prove to be a landmark as the biggest victory in a generation to clean up Wall Street?

Since the days of the Ronald Reagan, Americans always had a love / hate relationship with the rigmaroley high-brow get-rich-quick mystique surrounding Wall Street-based hedge fund trading; after all, getting obscenely rich after prognosticating which stocks will make it can be a very satisfying and rewarding experience, right? Anyway, the sad fact is that there are more people – i.e. novice traders - that had lost their life-savings in Wall Street based hedge fund trading because their hedge fund managers didn’t fully explain to them the risks involved. While those few who made millions more than once are eternally thankful that the US government haven’t managed to fully over-regulate Wall Street. Will the Raj Rajaratnam insider trading case prove the turning point in cleaning up Wall Street?

Has Capitalism Always On The Wrong Side of History?

2011-03-06T07:21:00.001-08:00

From the fall of the Roman Empire to the Revolution 2011 now spreading across the less-than-democratic Gulf and North African states, has capitalism always been on the wrong side of history?

By: Ringo Bones

Ever since mine and my friends’ “pet theory” has been further reassured by world-famous investor, hedge fund manager and philanthropist George Soros during a recent BBC interview on the apparent truism that capitalism in general has always been on the wrong side of history, I now start to wonder whether anti-capitalist anarchist – no matter how fiscally unsound their pet theories are – are right? But has this apparent truism proven time and time again?

As George Soros mused on how crude oil extraction companies that has been established in the Gulf Region and North Africa for over 40 years has been to an extent guilty of underwriting the operation of regional despots had never done anything to make the crude oil wealth trickle down to the common people of the less-than-democratic Arab and North African states. Thus, paving way for the inevitability of the Jasmine Revolution to spread from Tunisia, to Egypt and now to Libya and several other less-than-democratic Arab regions. Worse still, crude oil companies use the flimsiest of justifications to jack up crude oil prices, even the King of Saudi Arabia waking up on the wrong side of the bed is now a justified reason to jack up petrol prices.

The fact is, governments that were recently toppled were pro-Western despots and the exemplars of Western capitalism – i.e. multi-national oil companies - entrenched in these regions for over 40 years had been since recently been too busy propping them up for decades, thus the crude oil prices rising to the flimsiest sign of political instability. Worse still, in Libya in particular, the people primarily involved in the running of wheels of the Libyan national economy are now fleeing to neighbouring states as war refugees. Looks like the truism of capitalism always being on the wrong side of history might be proven yet again after all.

Will Mainland China Make Rare Earths Even Rarer?

2011-01-12T01:21:00.000-08:00

As Beijing decides to secure their own strategic supply of rare earth metals would this result in making rare earths even rarer?

By: Ringo Bones

Even though the literal “rarity” of rare earth metals is a misnomer – the rarest one is only slightly rarer than iodine – recent geopolitical developments in Mainland China and the surrounding region might possibly make the oft-perceived rarity of rare earth metals a “literal” possibility in 2011. As of January 6, 2011, the Beijing government has decided to reduce their rare earth metal export quotas by 35% for the whole of 2011.

Beijing’s decision recently became another concern for Japan’s very rare earth metals dependent high technology manufacturing sector which provides virtually all of the world’s supply of electric motors for hybrid cars, video display panels and other newfangled systems to generate electricity in an environmentally-friendly manner. Beijing’s recent decision to curb rare earth metal export quotas has even spurred on Japan to further step-up their own on-going seabed exploration in the search for commercially viable rare earth metal ores.

Even though Mainland China currently supplies 97% of the world’s rare earth metal needs, their need to secure their own strategic supply of rare earths has recently become an inevitable necessity after recently becoming the world’s number one manufacturer of wind turbines and plans to build scores of nuclear fission power plants in order to reduce their overall greenhouse gas emissions. Looks like other countries with commercially viable rare earth ores in their territories has now got a very good reason to step-up their own rare earth metal mining and processing industry given the People's Republic of China's decision to reduce their 2011 rare earth export quotas by 35%.

Can a Universal Global Currency Prevent a Global Currency War?

2011-01-12T00:41:00.000-08:00

As the leading network news providers talk of the looming global currency war, will the implementation of a universal global currency prevent such inevitability?

By: Ringo Bones

As the world’s leading and emerging economies scramble to position themselves to gain an advantageous foothold in the global export market, many resort to the under-handed and somewhat illegal means of currency manipulation in order to make their export goods become competitively priced. Leading economists then started to ponder whether such moves will inevitably result in a global currency war that can certainly make us – the globalized capitalist consumers – the unfortunate casualty. But does a purpose-built universal global currency provide the best solution to prevent such a global currency war from ever happening that could certainly devastate the world’s already heavily globalized economy?

Back in 2009, the 1999 Nobel Economics prize Laureate and euro “inventor” Robert Mundell proposed a universal global currency that is a Special Drawing Rights-based currency immune from fluctuations unlike the speculator-plagued US dollar. This proposed universal global currency would be administered by a “global bank” modelled after the European Central Bank. Though Mundell’s proposal back in 2009 was aimed at preventing the global credit crunch from ever happening again, will such a universal global currency also work in preventing a global currency war?

Since the Bretton Woods Agreement, the US dollar was often perceived as a universal global currency based on gold, but ever since US President Richard M. Nixon took the US dollar off the Gold Standard back in August 15, 1971, many other countries followed suit. Despite being taken off the Gold Standard, the US dollar was still being perceived by almost everyone in the whole world as the world’s most dominant currency since the end of World War II. Unfortunately, the events of September 15, 2008 that led to the collapse of the Lehman Brothers that also almost brought our global economy to the brink had more-or-less tarnished the global perception of the US dollar as the world’s most dominant currency.

Despite of this, the US dollar and the euro are still widely accepted as the world’s two leading currencies based on their use by the world’s various central banks as a reserve currency to prevent external shocks against their own currencies. Believe it or not, exchange rate volatility was the main cause of the Asian Banking Crisis of 1997 primarily due to the lack of a global reserve – i.e. a universal reserve currency.

Many countries around the world still peg their various currencies with the US dollar. Unfortunately, geopolitical reality has woefully failed to keep up with global economic reality. The massive property booms and the cheap loans being offered by various banks like they are going out of fashion since 1998 was the primary instigator of the questionable economic risk taking that led up to the US economic meltdown of September 15, 2008.

From the economist’s perspective, the US dollar is merely seen as something that has filled a vacuum as the world’s de facto global reserve currency in the absence of a purpose-built, true-blue universal global currency. Many economists cite this as the reason for the encouragement of risky economic behaviour in the US that led up to the Lehman Brothers’ collapse of September 15, 2008. Worse still, an overwhelming majority of Americans hasn’t saved enough money in their own banks.

Despite of such an apparently dismal economic position of the US dollar, the People’s Republic of China still holds 2 Trillion US dollars in reserve. If and when the US dollar devalues even further, this would result in a bank run that would ruin the Mainland Chinese economy for a very long period of time. And despite of the world’s somewhat “shaky” confidence of the US dollar, America’s relatively stable government and a relatively resilient economy is all the world needs to pledge their economic allegiance to the US dollar. But will a purpose-built universal global currency be a better choice?

Believe it or not, the Beijing government is in favour of a Special Drawing Rights-based universal currency whose value is based on a basket of currencies instead of just the US dollar and the euro – at least back in 2009 before Beijing’s and every central bank governor around the world started waging currency wars in order to make their export products globally competitive. At present, Special Drawing Rights only involves the world’s top 4 currencies – i.e. the US dollar, the euro, the UK pound and the Japanese yen.

At present, the Mainland Chinese RMB or the yuan is not included in the Special Drawing Rights or SDR even though Mainland China is already the second largest economy in the world. But the number one challenge facing the implementation of a purpose-built universal global currency is the inevitable “global scale” of the monetary policy involved which inevitably results in a global-scale red tape. And despite of the difficulty of implementation, it is probably the best alternative yet devised in halting a global currency war.

Paid to Click Sites: Viable Source of Extra Income?

2010-12-08T00:55:00.000-08:00

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?

2010-12-08T00:38:00.000-08:00

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.

Urban Mining: Economically Viable Source of Rare Earth Metals?

2010-11-13T05:57:00.001-08:00

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.

Lithium: Contentious Commodity Du Jour?

2010-11-08T00:34:00.000-08:00

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.

The Beijing Rare Earth Embargo: Threat or Menace?

2010-11-03T01:28:00.000-07:00

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.

Much Ado About America’s Jobless Recovery

2010-10-31T02:19:00.000-07:00

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.

Is Currency Intervention Legal?

2010-10-07T01:27:00.000-07:00

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.

Is Basel III A Financially Sensible Bankruptcy Protection For Banks?

2010-10-04T02:01:00.000-07:00

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.

Should Local Communities Manage Their Own Microfinance Funds?

2010-09-27T07:19:00.000-07:00

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.

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

2010-08-16T02:39:00.000-07:00

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?

2010-08-16T02:29:00.000-07:00

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.

Cacao: Lucrative Commodity Du Jour?

2010-07-31T07:21:00.000-07:00

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?

EU Banks’ Stress Tests: Redundancy in Accountancy?

2010-07-28T18:24:00.000-07:00

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.

Of Testosterone and Risk Taking

2010-06-24T18:43:00.000-07:00

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?

2010-06-24T18:31:00.000-07:00

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.

The Piece of the Pie Paradox

2010-06-17T18:33:00.000-07:00

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?

2010-06-17T18:23:00.000-07:00

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.

Credit Rating Agencies: Too Powerful For Their Own Good?

2010-06-04T05:19:00.000-07:00

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.

Can the Euro Be Saved?

2010-05-19T04:58:00.000-07:00

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?

Computer Trading Errors: Undermining Investor Confidence?

2010-05-07T02:18:00.000-07:00

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?

2010-05-07T01:59:00.000-07:00

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.

Vulture Funds: Threat to an Egalitarian Globalization?

2010-04-19T04:49:00.000-07:00

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.

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

2010-02-22T04:20:00.000-08:00

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.

Blue Chip Renewable Energy Stocks

2010-01-21T03:34:00.000-08:00

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.

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

2010-01-14T02:28:00.000-08:00

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.

In Search of Risk Free Banking

2009-12-21T02:21:00.000-08:00

As the linchpin of the global financial system, can banks be ever run in a risk free manner?

By: Ringo Bones

Maybe it was the sage advice of Robert “Bob” Diamond, chief executive of Barclays Capital, on a BBC September 15, 2009 interview that there is no such thing as banking without risk. It readily cast a worm of doubt over governments’ frantic but somewhat futile attempts to formulate ways to prevent another global credit crunch from ever happening again. And the world’s leading economist still has a consensus that risks are an inherent part of a typical banking institution’s business structure. Given the somewhat inevitable status quo, can we even at least minimize banking risk down to as close to zero as humanly possible?

Our current version of the Basel Accord, in which a thoroughly studied financial research allows banking regulators to establish the right amount of minimum capital requirements to minimize inherent banking risks. Was set up to achieve a goal of globally interconnected banks whose inherent risk is as close to zero given our current financial systems know-how. Unfortunately, the accord’s current incarnation was set-up a few years before the US credit crunch went global and we’ll before we knew the root causes of. Thus making it likely that the current Basel Accord could be overhauled before the end of 2010 to make way for quantitative easing schemes and monetary policy guidelines that will prevent our current global recession from ever happening again. In other words, a better way to minimize overall financial risks of banks deemed to big to fail. But are there other ways to further minimize banking risks?

After consulting with the world’s leading economists, financial regulators had recently proposed the establishing of a “living will” for banks so that in case of a bank failure / bankruptcy, banks can be easily broken up – liquidated if you will – so that their assets can be more efficiently used elsewhere. Especially during the event of a major financial crisis like that event that brought down Lehman Brothers back in September 2008. A bank’s “living will” could be set up in advance to facilitate the fiscally expedient liquidation process of failed banks, so that there assets could be effectively used for keeping a major financial crisis from going out of control. A well-structured breaking up process of a failed bank when it files for bankruptcy could be a big help to governments during times of a widespread economic crisis. Where the speedy formulation of fiscally sensible quantitative easing and monetary policy schemes are needed to keep a major economic crisis at bay.

The Dubai Debt Crisis: Undermining Investor Confidence?

2009-11-29T23:57:00.000-08:00

As a more upscale version of the American subprime mortgage crisis that started in 2007, will the Dubai debt crisis not only undermine investor confidence but of the ongoing global economic recovery as well?

By: Ringo Bones

To all of us who still care about the overall health of our global economy, the Dubai debt crisis – like the US subprime mortgage crisis before it – unsurprisingly managed to go global by undermining overall investor confidence. Like the subprime mortgage crisis, the Dubai debt crisis can also trace its beginnings in the intervening years. Unfortunately, both had been already proven to readily spread to the world’s shares markets as fear and panic are the primary motivators of market speculators. Dubai’s decision to delay paying debts – i.e. refinancing – for 6 months not only made Moody’s downgrade Dubai’s credit rating but it also started to spook the global shares markets as soon as the press got word of it. Given the supposed financial risk involved, does the Dubai debt crisis create shares markets chaos largely disproportionate to the actual scale of the actual problem involved?

The Dubai debt crisis largely stems – according to financial experts – from its inflated portfolio of luxury properties plagued by cost overruns in their development that resulted in Dubai’s leading property developers to defer their debt obligations for 6 months. Thus making Moody’s – one of the world’s top credit rating agencies – to recently downgrade Dubai’s credit rating.

One of the surest investment options in Dubai is the property developer Nakheel. Famous for making the world’s largest man-made island – the Palm Jumeirah – a reality, Nakheel also boasts as the only property developer with its own in-house environmental assessment team. Nakheel’s apparent fiscal sensibility was shaken to its core after miscalculating the final cost by a significant margin of the development of the Palm Jumeirah island and its scores of 6-Star hotels. Delays in the return of investments / profits due to the still recovering global economy is the main reason why Dubai is currently experiencing their own version of the US subprime mortgage crisis.

Just over a year ago – back in November 20, 2008 – the lavish opening festivities / inauguration of Atlantis Hotel Dubai where the venerable global song and dance sensation Kylie Minogue got top billing would make it seem that Dubai’s current debt crisis seems like a fiscal and economic impossibility. State-owned Dubai World – the firm that made Hotel Atlantis Dubai and the lavish Palm Dubai inauguration party a reality was rumored to have spent 35 billion US dollars to make it possible. Ironically, a year or so later, the property development firm is asking for a government sponsored financial bailout.

The actual development cost oversight that led to the raising of additional capital which Nakheel has never commented publicly is probably one of the reasons why most of Dubai’s top businesses to elect debt payment deferment. Even at the cost of credit rating downgrade. Unfortunately, Dubai’s credit rating downgrade due to its debt obligation problems had resulted in a shares markets slowdown in the US and in Asia. Even Dubai's brother Emirate Abu Dhabi had even offered debt payment assistance to Dubai in order to minimize the chaos to the world’s shares markets Dubai’s debt crisis could create. With total debts at around 60 billion US dollars, Dubai’s current debt crisis is bound to create a significant chaos in the world’s shares markets. Let’s just hope that this is just a minor slump so that the world economy can fully recover soon, hopefully maybe in 2010.

Mutual Distrust: Very Good for the Global Economy?

2009-11-20T00:37:00.000-08:00

From marital infidelity being the bread and butter of the private investigation industry to the Eurofighter selling like hotcakes at the recent 2009 Dubai Air Show, is mutual distrust very good for the global economy?

By: Ringo Bones

Pioneering game theorist John Von Neumann was smart enough to foresee that an all-out nuclear exchange between the US and the then Soviet Union would certainly wipe out the global economy as we know it. But did he also foresee that low-level mutual distrust – i.e. the so-called “Cold War” – eventually paid very good financial dividends? Maybe the movie Wall Street only got it half right, greed may be good, but mutual distrust is better - especially when it comes to money making.

Overall, the commercial civilian aviation side of the aerospace industry may be down thanks to the global credit crisis and might take another 6 months to fully recover. Not so with the defense side of the aerospace industry when the Eurofighter Typhoon is currently selling like hotcakes at the 2009 Dubai Air Show’s first two days. By the way, the 2009 Dubai Air Show was scheduled for November 15 to 19. With Saudi Arabia as the main customer of this “value-for-money” air defense weapons system, it does seem like the world’s crude oil industry is here to stay for yet another century.

On a more “grassroots level”, the private investigation industry is one of the few businesses that managed to buck the trend of the past few months’ worldwide recession. Corporate espionage may constitute the few “prestige cases” of a fortunate few private investigation agencies, but their main bread-and-butter is still the marital infidelity investigation and verification biz. To most of us working folks, paying our hard-earned money to hire a private investigator to make sure of our significant other’s marital fidelity is probably the closest thing we’ll ever manage of buying our very own squadrons of high-performance fighter jets. As part of the Reagan Doctrine, “trust but verify” is still the cornerstone of our post Cold War capitalist society.

The Nobel Prize for Economics: A Nobel Prize for Mathematics in Disguise?

2009-11-20T00:02:00.000-08:00

Certainly it was not a part of Alfred Nobel’s original will, but is the Nobel Prize for Economic Sciences really just a thinly veiled attempt at a Nobel Prize for Mathematics?

By: Ringo Bones

To anyone who still cares about the annual Nobel Prize festivities, it is probably common knowledge to them that there is not – and probably will never will be – a Nobel Prize for Mathematics. But given that the Nobel Prize for Economics – also officially known as the Nobel Memorial Prize in Economic Sciences – is not part of Alfred Nobel's original will bequeathing his fortune for an annual prize for those deemed worthy enough by his estate. And given that economics is something of a mathematics intensive scientific endeavor, does this mean that the Nobel Prize for Economics is nothing more that a thinly veiled Nobel Prize for Mathematics established to appease those generations of “angry” mathematicians left out by Alfred Nobel’s prestigious will?

The Nobel Memorial Prize in Economic Sciences – commonly referred to as the Nobel Prize in Economics – is an award reserved for outstanding contributions to the science of economics and is generally considered as one of the most prestigious awards for that science. But as everyone knows by now, it is not part of the original set of awards in Alfred Nobel’s will – i.e. 1) Medicine and Physiology, 2) Literature, 3) Physics, 4) Chemistry and 5) Peace.

The Prize in Economics, as it is referred to by the Nobel Foundation, was established and endowed by Sveriges Riksbank – Sweden’s main bank – during 1968 on the bank’s 300th Anniversary in memory of Alfred Nobel’s 1895 will. Like the Nobel Laureates in Chemistry and Physics, the Royal Swedish Academy of Sciences does the selecting of the Laureates in Economics. It was first awarded during 1969 to Dutch and Norwegian economists Jan Tinbergen and Ragnar Frisch for having developed and applied dynamic models for the analysis of economic processes. Given how math intensive the science of economics is, rumors start to spread that the Nobel Committee finally caved in to the demands of mathematicians around the world to have their very own Nobel prize. But why is it that Alfred Nobel has such a miserly of praise to mathematicians everywhere?

If you check out the official sanctioned Alfred Nobel’s estate site or the Nobel Prize Committee sites on the Internet. The Nobel estate’s “official” explanation on why Alfred Nobel didn’t include mathematics as being worthy enough to receive any of his famed prizes is that “officially” Alfred Nobel thought that mathematicians hasn’t contributed enough progress to humanity to warrant being honored with one of his prizes. In other words, Alfred Nobel thinks that mathematics doesn’t contribute one iota to the betterment of humanity as a whole.

Unofficially – according to the “supposed rumors” being spread by Ivy League mathematics professors in America. The reason Alfred Nobel haven’t establish a Nobel Prize for mathematics is that during the brief period in his life when he managed to socialized the woman of his dreams – i.e. those rare times when Alfred Nobel wasn’t too engrossed with his work. He unfortunately lost the woman of his dreams to a more “romantically skilled” mathematician. Given that those were still “Victorian Times”, it wasn’t as tawdry as a contemporary Hollywood love story.

Given that most higher concepts of economics also use higher mathematics that were formerly the reserve of the “thorny task” of seamlessly unifying Albert Einstein’s General Relativity with quantum mechanics. It is somewhat easy to forgive anyone who thinks that the Nobel Prize for Economics is a thinly veiled version of a Nobel Prize for Mathematics. Unfortunately, Alfred Nobel passed away before the full impact of mathematics became self-evident. Alfred Nobel would have thought differently of mathematics if he only knew that this day and age, science and even national security has mathematics as its bulwark. Given what we knew of his resolve for mathematics, I even wonder if Alfred Nobel would give the green light in giving one of his prizes to the science of economics if he was still alive in 1968.

Gold: Still a Good Investment?

2009-11-13T06:30:00.000-08:00

Spurred on by the recent purchase of India of 200 tons of IMF gold, does the current sky-high price still make gold a reliable long-term investment?

By: Ringo Bones

As the price of gold now teeters ever closer to the 1,200 US dollars per troy ounce mark, many investors are now probably wondering whether is it still feasible to join the bandwagon of investing in gold or whether this is an investment bubble that’s long overdue to burst? Fortunately for some, we are probably still a long way for such a bubble to reach critical mass for a number of reasons.

From most novice investors’ perspective, the recent purchase by India of 200 tons of gold worth about 6.7 billion US dollars from the International Monetary Fund may just seem as just a way for India to satisfy its somewhat large demand for gold jewelry. After all, it is a custom in India – even by the very poor – to purchase gold jewelry at least once a year - especially during auspicious occasions. But India is not just satisfying the needs of citizenry at the retail level given that it has been one of the world’s top ten leading gold jewelry retailers in her own domestic market for a long time now. The Indian government’s decision to bolster their gold reserves by buying the precious commodity from the IMF - even at these elevated price levels still makes sense to invest in gold for a number of reasons.

Even though the US economy is supposedly already “safely” out of the subprime credit crisis of its own creation, the “relatively high” jobless figures in America still make some seasoned investors cautious when it comes to using the US dollar as a long-term investment tool. And given its good track record as an investment asset to hedge against inflation, gold and related precious metals, still deserves its claim to fame as a prime safe haven investment tool. Not to mention every nation's monetary policy decisions in the immediate future.

At currently near the 1,200 US dollars per troy ounce mark, gold may have reached a record high in the 21st Century, but it still needs to be at least twice its current price taking account of inflation – to equal its all-time high back in January to February 1980. And given that it takes around 500 US dollars worth of energy to process a troy ounce of gold to 99.99% purity – i.e. bullion-grade purity – it is very unlikely for gold to return to its all-time low price of 200 US dollars per troy ounce back in 1999.

And a gold bubble is somewhat unlikely because due to the yearly rise in the demand of electronic goods, gold purchases for use in corrosion-resistant connectors will create a stable demand - unlike that of the seasonal demand of gold jewelry. Given that we will be more likely to be sending robotic spacecraft – as opposed to living and breathing astronauts – for space exploration in our immediate future, a steady and constant demand for gold in the aerospace sector will make the prospects of a gold bubble less likely to occur now compared back in 1980.

Death of the US Dollar: Greatly Exaggerated?

2009-10-31T07:04:00.000-07:00

Given that it is as strong as the government that backed it, will the US dollar slowly fade away given that the 21st Century will be less likely ruled by American geopolitics?

By: Ringo Bones

Despite of the rumors about it’s death, it is still safe to assume that for the foreseeable future that the US dollar will still be a “financially fashionable” item and investment tool. The reason why the US dollar has hung on for far to long than rationally justifiable is that there has never been a credible and viable replacement and / or alternative. Whether you base your financial decisions via political jingoism or cold hard facts, the dollar is still a good way to hedge your capital gains given that it is still a good source of value. But what started the rumors surrounding the death of the US dollar?

Primarily due to the collapse of the Lehman Brothers back in September 2008. Where somewhat panicky investors who are more driven by fashion trends than by long-term profits had been moving away from the US dollar – probably after sniffing the signs of an impending subprime mortgage crisis near the end of July 2007 – and into more flavor-of-the-month safe haven investments like gold. And even to the Japanese yen. Also a Republican-run America can only convince Wall Street to be greedy and indifferent only up to a certain point to prop-up their version of economic prosperity as in the Reagan days. Add to that the Bush-Cheney Consortium that borrowed trillions from China to buy Arab crude oil while prosecuting their “War on Terror” in a malfeasant manner could make everyone wonder just what it would take to destroy the US dollar?

Back in 1944 during the Bretton Woods Conference where every nation allied to the US reached a consensus of pegging world currencies against the US dollar and America being a victor nation of World War II gained enough clout to make it so. Then August 1971 came when then US President Richard Nixon removed the US dollar from the gold standard, which engendered the multi-billion dollar global foreign exchange industry. It did made the value of the US dollar fluctuate periodically but it made the US dollar stronger nonetheless - but only (and it’s a big one) when the global economy retains a semblance of stability. With the status of the American economy still somewhat uncertain despite of the DOW recently returning to the over 10,000-point mark, could this be the beginning of the US dollar losing its global dominance?

Even if China looks unfavorably at America’s debt, it won’t be the death knell of the US dollar because a lot of Chinese bond holders will be left high and dry if they’ll do something that undermines the value of the US dollar. You would never do something to undermine someone who borrows money from you his or her ability to pay you back, right? Despite some economists calling for a viable replacement for the US dollar to improve global crude oil price stability, a truly viable alternative is yet to be found. Even the basket of various currencies used by the IMF and World Bank, as Special Drawing Rights are still too dependent to the US dollar. The euro seems promising, but at a little over a decade old, it still yet has a lot to prove. Looks like the US dollar will be hanging around longer and much louder - like a drunken fraternity brother.

Can Islamic Finance Improve the Western Financial System?

2009-09-22T18:14:00.000-07:00

With the proposed Tobin Tax and looming draconian clampdowns on risky financial practices, will the Western financial system model itself after the Islamic financial system to avert future crises?

By: Ringo Bones

As of late it looks like French president Nicolas Sarkozy is trying his best to push through his Tobin Tax proposal – a tax to penalize unnecessarily risky behavior in the financial trading world – to the Western financial centers. Quite odd, given the French President’s disdain against Islamic headscarves that he finally allowed legislation of a law against the wearing of such “overt religious symbols” in French government institutions now that he is now planning a financial reform that would transform the Western financial system into something that is closely modeled to the Islamic financial system. The question now is how closely – if ever – will the Western financial system be modeled after a financial system that was developed and established in the financial world?

Given that the Islamic world have always viewed gambling or “Maisir” as “Haram” or forbidden under religious grounds, established modern Islamic finance that resembles that of the established modern Western system has always been characterized by a somewhat low-risk trading schemes. Quite a contrast to it’s high-rolling Western counterpart that during the time when Ronald Reagan ruled the free world, Wall Street and other major Western financial trading centers could almost be mistaken as a gambling casino due to the risk and speculation that the traders routinely practiced. Not surprisingly, it seems that sizable financial crises are always around the corner waiting to strike at the expense of the “financially unwary”.

Western insurance companies – especially those dealing in subprime mortgage securitization and credit derivatives – are viewed as the worst offenders. Especially in the light of the subprime credit crisis of 2008 that eventually broke the back of Lehman Brothers on the 15th of September of that year. Even Persian Gulf region financial institutions were exposed to this subprime mortgage debacle to some extent - Which is quite a contrast to the Islamic finance’s Takaful scheme which is based on social solidarity, cooperation, and mutual indemnification of the losses of members. This is “probably” the history’s first multi-billion dollar cultural misunderstanding.

With the upcoming reforms and revisions of the Basel Accord – i.e. the minimum reserve capital requirements of major banks and other financial institutions. Not to mention the proposed clampdown on the “bonus culture” that rewards high-risk behavior and adventurism in the Western financial world (as long as they make tons of money?), will Western financial institutions be modeling themselves to that of the Islamic financial system? And does the West’s future prosperity dependent on it doing so?

Back in August 16, 2009, the credit rating agency Moody’s Investor Service became concerned about unused surplus liquidity being a risk factor for Islamic finance. Does this mean that Islamic finance is Basel Accord compliant if proposed revisions require an increase in minimum capital requirements? Maybe, but I don’t see it as a “risk factor”. Maybe it is the never-ending quest to avoid “Gharar” or uncertainty that makes Islamic finance to have it’s very own distinct “flavor” that is radically different in comparison to the Western financial system. The Islamic world had saved the Western finance back in the past via the zero to nine digits of the Hindu-Arabic numeral system, maybe it is time for another “bailout” this time around.

Will Joblessness Stifle Global Economic Recovery?

2009-09-07T17:41:00.000-07:00

With the unemployment rates of the under 25s steadily on the up-rise, will the “green shoots” of global economic recovery going to just wither and die?

By: Ringo Bones

When the term “green shoots” became a buzzword in the American economic community back in April 2009, everybody and their dog thought that the much-anticipated global economic recovery is just around the corner. Even though whether or not the data of the economic fundamentals indicate the supposed glimmers of an economic spring is an another thing entirely. But after a series of quantitative easing and bank stress tests, why is it that the endemic problem that points to the fact that the global economy is still not well and good – namely unemployment – still remains unsolved?

Many tenured economic analysts point out that unemployment rate reports – more often than not – tend to lag behind the economic data that indicates the soundness of the fundamentals that point to economic recovery. Though this explanation is quite encouraging, it still not restored investor confidence to pre-subprime mortgage crisis levels. Add to that it seldom – if ever – addresses the on-going problem of rising unemployment and laid-off workers.

Economist held in retainer by big corporations should start to realize that a well-paid workforce is a valuable asset – rather than a liability – when it comes to keeping the wheels of the economic system rolling. I mean to whom does the production sector sell their products? - Certainly not to a vacuum. Governments around the world should start bailing out their workforces, as opposed to just the major banks and other big financial institutions because without a well-paid workforce, a country’s economic system could easily grind to a halt. Destroying any chance for a global economic recovery.

Is American Capitalism a Religious Construct?

2009-07-21T17:36:00.000-07:00

As a country that preaches the political doctrine of the separation of church and state, is American-style capitalism for all intents and purposes nothing more than a religious construct?

By: Ringo Bones

Maybe this debate started back when then President Nixon took America off the Gold Standard, and the line “In God We Trust” on the greenback means that the value of America’s money is backed by the nation’s ability to wage war at a moments notice. Or did the debate started with the extensive news coverage of American über-Tele-Evangelists. Especially their material excesses during the latter days of the Reagan Administration that gave non-Americans – especially adherents of Liberation Theology – that American-style capitalism and it’s unbridled pursuit of material wealth is for all intents and purposes a religious construct that took the Protestant Work Ethic to it’s logical greedy end. Which is the mother of all ironies indeed, given that America’s Founding Fathers insisted in a strict separation of church and state as stipulated by the nation’s constitution.

How American capitalism got to this point could be blamed on the scores of Republican presidents that came long after Abraham Lincoln. By this time, the Republican Party doctrine was used by their elected presidents – either by accident or intent – to subtly shape established canonical Christian doctrine to fulfill their ideological aims. The most recent case in point is the Bush Administration’s unlawful – under International Law – invasion of the sovereign country of Iraq in search of non-existent weapons of mass destruction. But can the Republican Party’s obsession of a God-construct they already manipulated for decades to suit their ideological and material goals be blamed for America’s current economic crisis? Maybe, but first, let’s examine the faith-based origins of the Protestant Work Ethic - which seems for all intents and purposes the “Rock” in which American-style capitalism is based.

Many scholars and historians cite John Calvin as the father of Western – make that American-style – capitalism using the doctrine of the Protestant Work Ethic as its cornerstone. Calvinism – the ideology founded by John Calvin as it is later known – also made possible the establishment of an independent Dutch state in the late 16th Century. Even though the Dutch nation – then and now – never fully embraced John Calvin’s somewhat stoic religious ideology. As some Dutch settlers decided to move to America, most of them probably embraced capitalism hook line and sinker when they established their business interests in Manhattan, thus laying the foundation of a Protestant work Ethic that would later drive Wall Street as it is famously known today. With the doctrine that preaches that idle hands are the devil’s own playground; an individual’s productive employment became part of the established Christian canonical definition of morality and of God’s Grace.

In this day and age, the University of Geneva purportedly became the current heir of Calvinism – albeit only in an academic capacity – according to the more recent subsequent scores of dean emeritus. Given the way Calvinism blended itself seamlessly with canonical concepts of Christian piety, how come it haven’t “exactly” gained undisputed global universal appeal?

Probably due to the European “Empire Builders” who trailed Christopher Columbus and Ferdinand Magellan failing to established a pan-global Papist / Anglo-Saxon Protestant monoculture during the crucial periods of the Golden Age of Exploration. Add to that the increasing acceptance of moral constructs that developed independently from the Christian West, thus relegating Calvinism as a quaint antiquated moralist ideology in an increasingly egalitarian global community.

Calvinism’s current holdout in corporate America could be seen as a fluke, given that a lot has happened since the Civil Rights movement of the 1960s. People of non-White ethnicity need not “necessary” – albeit in more enlightened workplaces – emulate their White Anglo-Saxon Protestant overlords to gain upward mobility in corporate America. Unfortunately, some still backward thinking parts of America still think that successful capitalism should be ruled by precepts established by John Calvin and the Anglo-Saxon Protestant construct of Jesus Christ.

The Michael Jackson Incorporated

2009-06-28T18:44:00.000-07:00

Though many of his adoring fans were shocked and saddened by his untimely passing, but how will this “ultimate career move” affect our still struggling global economy?

By: Ringo Bones

One of the few benefits of being older is being fortunate enough to appreciate Michael Jackson’s music and showmanship without the burden of that unfortunate child molestation issue haunting your conscience. But there is no denying the fact that Michael Jackson is the number one money making machine in the global music business. Even as far back as 1984, Time magazine dubbed Michael Jackson as the savior of the music industry. Which is kind of strange, given that the 1980s were the Golden Years of the global music industry in terms of profit earnings. Though a few others had registered on Fortune 500’s RADAR – like Guns N Roses or Bon Jovi – but taken as a whole, they’re on average only one-tenth the average money-making potential of Michael Jackson in terms of record / CD sales, concert tour earnings, merchandising, etc.

As a businessman, Michael Jackson’s shrewdest move was the purchase of The Beatles back catalogue of ATV Music publishing back in 1985 which allowed him to live a lavish lifestyle most of us can only dream of. Although this was overshadowed by his purchases of curio that are more a liability than an asset. Add to that his reckless behavior and lifestyle choice that cost him millions to “get out of jail”. It is estimated that Michael Jackson owes about half a billion dollars from various creditors, despite of selling three quarters of a billion dollars worth of records and CDs.

His announcement to embark on a tour – dubbed as the “This Is It” tour – and was planned to kick-off in the O2 Arena in London was supposed to have reduced Jackson’s outstanding debts significantly. The tour’s promoter, Randy Phillips CEO of AEG Live was confident of Michael Jackson being able to meet the commitments of this “grueling” tour after witnessing Jackson passing his physical exam with flying colors. Sadly, the King of Pop passed away unexpectedly last June 25, 2009.

Even though concert promoter AEG Live managed to purchase insurance from Lloyds for Michael Jackson’s This Is It Tour, doubts have emerged whether the insurance money is enough to cover the cost of refunds to ticket holders. Not to mention the canceled contracts to FOH sound engineers, stage lighting, pyrotechnic personnel, and even the legions of catering crews. Had the tour went underway, it would have earned at least 115 million US dollars in the slated 50 dates in London alone. While a 3-year world tour would have at least earned 500 million US dollars. Enough to put Michael Jackson’s financial problems on hold and could have been enough to stimulate our ailing global economy. Not to mention the employment opportunities a massive concert tour like this would have provided. The world indeed mourns Michael Jackson’s passing in more ways than one. Well, at least my curiously shaped Michael Jackson vinyl – i.e. picture discs – collection will probably be as valuable as my Billie Holiday 78 RPM shellac of Strange Fruit.

Microfinance: The World Economy’s MRE?

2009-06-28T18:18:00.000-07:00

Given that the world economy is still in survival mode, will the various micro finance schemes alleviate the world’s burgeoning poverty and unemployment problem?

By: Ringo Bones

Even though the criticisms against the Dr. Muhammad Yunus-inspired micro finance schemes is centered around the easily obtained money for drug and alcohol abuse by signing up for a microcredit loan under false pretenses - i.e. the microcredit / microfinance liar-loan, it is hard to argue against the overwhelming number of success stories. Though it is proven that there are those who are unscrupulously taking advantage of the program for easy money to fuel their various vices and addictions. The scheme is at least transparent enough – particularly in my neck of the woods – to see first-hand how the money that you’ve invested in your local microfinance scheme is being used. Especially when it comes to the small businesses that are more often than not are not more than 300 meters away from the local micro finance financier's headquarters.

As of late, U.S. President Barack Obama has been busy laying the groundwork for an improved regulation of the U.S. financial system so that the corporate excesses that lead into the near-catastrophic collapse of the global economy will never happen again. But in the meantime, those people being laid-off – and are definitely now unemployed - due to the post-credit crisis austerity could need a vital safety net to get them through the tough times. Especially here in the Far East where the recent economic slowdown in Hong Kong, Singapore, and even Japan had sent thousands of overseas workers back to their homelands without any prospect of financial security before they can find new jobs again. Plus, unlike in the United States, almost all of the countries in this region don’t have a comparable unemployment compensation scheme.

Most laid-off workers in the South-East Asian region – especially those former employees of the construction boom-gone-bust of mainland China, Hong Kong, Macau, and Singapore of the past few years. Are now applying for a microcredit / micro finance loan in order to become self-employed using the skills they learned when they were growing up. Like fishing and organic farming of exotic vegetables for the fast-growing slow food sector and herbal medicine market, which for all intents and purposes allows this laid-off workers to make their ancestral wisdom a part of their daily bread-winning scheme. Although the new trade – more often than not – earns only a fraction of the money they used to when working overseas, but without the availability and easy access to microcredit, these people for all intents and purposes will be in dire straits. And it also keeps the money moving around a bit – as opposed to a complete standstill – in a full-blown global depression like the one that started in Wall Street back in 1929.

Is War Good For the Economy?

2009-04-21T18:50:00.000-07:00

Given that different stock exchange markets around the world were originally established to fund wars, is war therefore a vital part of the economy?

By: Ringo Bones

For better or for worse it was primarily the constant search by various governments throughout history of various means to conduct wars – especially when it comes to raising funds – that engendered our contemporary economic systems. Though the financially disastrous “Moral Adventurism” of the Bush Administration’s invasion of Iraq back in March 2003 – which former World Bank president Paul Wolfowitz was the primary architect – would certainly serve as a bad example. No one can deny that throughout history, wars are the primarily effective economic stimulus packages.

Our various stock exchange markets can easily trace their origins in medieval times in many European countries. As governments became increasingly reliant on public loans for the capital need for conducting wars and other operations – though mostly in conducting wars – issues of stocks and bonds multiplied, thus making more and more elaborate financial machinery in the form of financial instruments necessary for the maintenance of a ready market in the various type of paper certificate issue. Out of this need, the stock exchange – as we know them today – was born.

The establishment of stock markets in London and New York during the second half of the 18th Century was primarily driven by war. Probably one of the oldest continuously run stock exchanges in the world was the one established in London. It started when several dealers in bills of exchange – that is, short-term credits – also dealt occasionally in government funds, started to look for buyers for those wishing to sell and vice versa.

As time went on, these dealers took to meeting regularly at a particular coffee house in London. Which at the time financial business of most kinds were often transacted in such establishments, by 1773, this place became known as the Stock Exchange Coffee House. By 1802 the amount of business conducted there, stimulated by the continuous raising of funds required to fight the Napoleonic Wars, had reached to such proportions that a new building – to be used exclusively for these business transactions was constructed. This building occupied part of the site of the present London Stock Exchange.

While the New York Stock Exchange - which now handles more business than any other stock exchange in the world - can trace its origins to the same point in time. Especially to the particular stimulus of the American Revolution in raising funds to defend the then fledgling country from continued British attacks, which the New York Stock Exchange has been in continuous operation since 1792. The American Revolution – like the Napoleonic Wars – made necessary the mobilization of considerable sums of money. Furthermore, the myriad securities issued by the separate states soon produced the need for market facilities.

The then fledgling New York market began with just 24 dealers who formed the habit of meeting for a short while each day under a large buttonwood tree quite close to the present site of Wall Street. These men dealt in securities issued by government banks, insurance companies, and canal builders. It wasn’t too long before business expanded to the point where a special building was required – together with a set of rules – by which the market was organized and controlled.

Even the first incident of short selling can be defined as a war time incident. It happened back in 1609 when Dutch trader Isaac Le Maire, a big shareholder of the Vereenige Oostindische Compagne or VOC. In 1602, Le Maire invested about 85,000 guilders in VOC. By 1609 the VOC still was not paying dividends and Le Maire’s ships on their Baltic routes were under constant threat of attack by the British Royal Navy. Primarily due to trading conflicts between the British and the VOC. Le Maire decided to sell his shares and sold even more than he had. The stock market notables at the time became outraged over this act and this particular incident led to the first real stock exchange regulations: a ban on short selling. The ban was eventually revoked a couple of years later.

Maybe it was the Keynesian dictum of crisis measures having a habit of lasting much longer than the crisis itself or the World War II-era Bretton Woods Conference that largely shaped our present financial system that most of us will note the inexplicable link between war and economic activity. Or is it that we in the Western Civilization had gotten war down to a science that we can easily profit from it provided that the rules that are in place that keep or dear Western Civilization from being destroyed are enforced. If this is the case, then maybe Wall Street insiders should brush up on their game theory knowledge to find out what they did wrong during the Bush Administration that created our present global economic crisis. Maybe there is something about that Sun Tsu’s Art of War being recommended by many as a required reading for aspiring business titans.

The London G20: A New Start or Business as Usual?

2009-04-07T02:09:00.000-07:00

Touted as the most important economic summit since World War II, but does the proposed reforms of the London G20 really save our ailing global economy?

By: Ringo Bones

Even though US President Barack Obama is probably the most influential policymaker of the London G20 economic summit because the US together with the UK and Japan managed to put forth their proposals of spending more money in order to save our ailing global economy. Never mind President Obama’s powers of “Diplomatic Persuasion” during the London G20 summit. Although France and Germany’s call for tighter regulation of the global economy was eventually approved, it seems like every sensible proposal – make that “conventional proposals” - to save our current global economic crisis was eventually embraced by everyone. The question now is will all these measures that we’ve taken really save our ailing global economy?

Throwing money at the problem was readily approved, given that it had saved Japan’s economy during her “Lost Decade” even though the policymakers haven’t dealt with the bad banks / zombie banks fast enough. Thus the plan to spend 1 trillion dollars to rehabilitate the global economy was given the green light. 750 billion dollars of which will serve as an extra resource for the IMF to help countries on the verge of financial collapse, most of which are Eastern European states. While 250 billion is promised as trade credit overdraft for cash strapped countries, in other words, a kind of export insurance for the global trade to make protectionism less profitable.

The call for tighter regulations on financial institutions was also given a green light. Especially those pertaining to key players like hedge funds, credit derivatives, and credit rating agencies. Plus stricter compliance of capital requirements; especially when it comes to capital risk requirements; like Basel Accord / Basel II implementation compliance; a crackdown on tax havens and a call to end arcane bank secrecy laws as an institution. And finally the creation of an early warning system to prevent the repeat of the July 2007 subprime mortgage crisis from spreading out of control. Even though every key players of the London G20 eventually reached a somewhat concise consensus, but does all of these proposals really work in practice?

Brazil’s president Luis Inàcio “Lula” da Silva said that the financial sector should be congruent with the production sector in order to avoid a repeat of our current economic crisis, or to avoid our current one from becoming worse. Has he got it all figured out? Given that investment banking had been making money out of thin air in an unsustainable manner, Brazil’s president could be on to something. Though his suggestion will never ever be taken seriously or do most of the ones proposed during the London G20.

For the very reason that the global capital markets had already grown into a powerful economic entity since Ronald Reagan ruled the free world and it is very unlikely to be influenced by the various heads of state’s consensus made during the London G20. This is where the “business as usual” part of the global economy trumps the altruism of the London G20 consensus. It looks like “leave it alone” capitalism is a dead end because it tends to go into excesses. In short, it can’t reform itself.

But there are very good reasons for everyone to be optimistic of the consensus reached during the London G20 summit. The proposals put forth by the various NGO’s to aid the world’s poor during times of crisis were eventually given the green light. Even the rock star and anti-poverty activist Bob Geldof was very optimistic about the consensus reached during London G20 summit. The London G20 could be capitalism’s make-or-break moment to reform itself.

The Geithner Plan: A 21st Century New Deal?

2009-03-30T05:27:00.000-07:00

Is US Treasury Secretary Timothy Geithner’s plan to heal the ailing US economy by rescuing US banks this century’s New Deal or, as his critics attests, a road to hell?

By: Ringo Bones

It is now official, US Treasury Secretary Timothy Geithner’s plan to heal the ailing US economy by detoxifying American banks of their toxic assets is already underway. The plan primarily involves a public and private sector team-up investment program to buy toxic assets / financial products, the primary cause of the subprime mortgage crisis. The scheme will initially funded by the US Government with 500 billion dollars worth of funds to buy the toxic assets with the potential to expand to 1 trillion dollars - if needed - over time. While the US Federal Reserve and the FDIC will assist investors in buying assets, the private sector will share the risk with the US taxpayers. Though the creation of the “equitable” market price of these assets needs really diligent oversight, which could be a problem.

Now the downside, the overall risk exposure of the American taxpayer is still not well established by the “Geithner Plan”. Which is not exactly easy because most American banks are still vilified for their risky behavior that instigated the subprime mortgage crisis. Plus, there is that issue whether capital restrictions govern the pricing of the assets. In short, the “equitable” value of the toxic assets still needs evaluation. Worse still, the scheme can easily privatize the corporate gains while the losses are socialized – i.e. the American-taxpayer-as-investor can easily be left holding the bag if the scheme turns sour.

In spite of the plan’s caveats, world markets reacted positively to the Geithner Plan. The day after the plan’s inception, stock markets rallied. Not just in Wall Street but also in other parts of the world as well, especially in Asia. Although the Czech Prime Minister Mirek Topolanek – who is also currently the EU president under it’s rotating 6-month term - criticized the “Geithner Plan” as the “road to hell” for the global financial system. Maybe quantitative easing is too complex to be policed properly from PM Topolanek’s point of view?

The good thing about the “Geithner Plan” is that it renewed the sense of urgency to regulate financial companies who provide complex and exotic financial services and instruments. Like hedge funds and credit default swaps just to name a few. Plus, the renewed assessment of financial companies’ practice of keeping adequate credit reserves to back up their inherent operational risks (a localized Basel Accord?). The question now is whether governments around the world will become too obsessed with quantitative easing that they’ll forget there are other things to take care of during times of economic crisis like maintaining employment opportunities, the environment and other social concerns.

AIG: A Billion-Dollar Financial Black Hole?

2009-03-23T08:20:00.000-07:00

Taking note of the TARP fund misappropriation via exorbitant executive bonuses, is the insurance and financial corporation AIG really too big to fail?

By: Ringo Bones

Many considered it as the battle that needs to be lost in order for the greater war against the on-going global economic downturn to be won. While others considered the company as too big to fail, but has the US Government made the right decision in spending their not-so-limitless billions of the Troubled Assets Relief Program or TARP funds on AIG? Or is AIG nothing more than an obsolete financial institution trapped in the REAGANOMICS euphoria of the 1980’s?

American Insurance Group Incorporated or AIG managed to get the ultimate PR free-ride during the Clinton Administration when the company’s frequent and highly visible adverts about their environmental coverage and their underwriting ability for environmental risks. During this period of “think locally, act globally” environmentalism of the 1990’s, AIG practically invented corporate social responsibility years before the term became popular in American Ivy league business-oriented colleges. Whether the company practiced corporate social responsibility at the time is another thing entirely, but it did bring them an aura of a corporate entity that’s accountable for the planet.

That was then, but in the era of Bush Administration-era tax cuts in with the promise of prosperity, AIG got too greedy for their own good. After being swept up in the subprime mortgage frenzy, the financial arm of AIG lost it’s better judgement after succumbing to the promise of fat profits of loaning money to persons who can’t afford to pat them back. Many financial pundits had now blamed the company as the ground zero of the global subprime mortgage crisis. When the toxic assets of the subprime mortgage debacle came in contact with their arcane credit derivatives of their credit insurance arm, this created a “perfect storm” that instigated our on-going global financial crisis.

Given that the proverbial Road to Hell is always paved with good intentions, the US Government got hoodwinked into giving AIG a few billion – 170 billion dollars more or less – of the somewhat limited TARP money. All in the hopes of propping up the company that’s supposedly too big to fail. A few months later, AIG misappropriated those billions by giving each of their top executives 165 million dollars in bonuses, which AIG CEO Edward Liddy says to the press fundamental mistakes were made in handling of the TARP funds – an excuse by any other name?

The corporate excesses of AIG drove Treasury Secretary Timothy Geithner to explain himself to the press claiming that he is at fault. While President Barack Obama created another first as the first incumbent president to appear on the Tonight Show With Jay Leno in order to explain to the American people the on-going debacle at AIG. But whatever shenanigans AIG is doing, the US Government already had the upper hand. Since as majority shareholder of AIG, Uncle Sam can simply “claw back” those ill gotten millions of dollars misappropriated as executive bonuses by legislating tax laws aimed at AIG executives, which they are currently doing right now. If Uncle Sam can’t or won’t control AIG, it could become the financial black hole that will swallow Wall Street.

Is Our Financial and Economic System a Joke?

2009-03-23T08:07:00.000-07:00

After the high-profile feud between Jim Cramer and Jon Stewart made the problems faced by our global economy “interesting” to primetime TV viewers, is our financial system nothing but a joke?

By: Ringo Bones

This probably all started when Jon Stewart of The Daily Show with Jon Stewart made a joke about Rick Santelli. A Wall Street pundit and staunchest critic of President Obama’s plan to bailout ailing American companies, calling the president’s action as socialism. The joke was even enhanced to us in the know by Rick Santelli’s inability to delineate a proper line across the sand between socialism and capitalism (or unbridled greed?). From this perspective, Jon Stewart’s indictment of CNBC’s Mad Money with Jim Cramer seems incidental. Until when the TV ratings between the two got affected.

Even though an overwhelming majority of people around the world would consider Jon Stewart in criticizing CNBC’s financial-themed programs like Jim Cramer’s Mad Money because they didn’t do their part of disclaiming the true extent of the risks involved in investing in the stock market. The feud between the two even ballooned to cartoonish proportions when Jon Stewart’s ratings shoot up while the ratings of CNBC’s financial-themed shows slightly slipped down. Even Jim Cramer resorted to appearing to the TV show of securities fraud ex-convict Martha Stewart – i.e. Better Living with Martha Stewart to plead his case - Irony of ironies indeed.

Even though the feud between Jim Cramer and Jon Stewart were now diffused after Jim Cramer appeared in Jon Stewart’s show. Looking beyond the debacle in terms of TV ratings cost and benefit, looks like the feud between the two finally brought into the spotlight the eternal struggle faced in maintaining the overly complex organism that we call the global economy.

When compared to other investment companies that provide service for the novice investor, the CNBC focus groups deciscion to chose to use “In Cramer We Trust” as the de facto legal and risk disclaimer for Mad Money with Jim Cramer. The show for all intents and purposes undoubtedly opens itself to all manner of ridicule. As a marketing and promotional ploy to make Mad Money with Jim Cramer appeal to middle-school aged demographic, the idea seems dubious to me.

When Jim Cramer first promoted Mad Money on The Tonight Show with Jay Leno a few years ago, the idea of persuading novice investors to invest in high-yield but riskier funds as a component to diversify their own portfolio is somewhat suspect. Given that majority of older viewers who have enough money to indulge in Jim Cramer’s financial adventurism are somewhat squeamish to invest in something riskier than bond funds and equity income funds, the showmanship behind Mad Money should concentrate more on investment risk disclaimers. Rather than the novelty bells and whistles that are de rigeur of the show. Remember when Jim Cramer told everyone to invest in Bear Stearns back in 2008, and a few months later the company had major financial troubles?

For those of us who had benefited from our money funds during the 1990’s and had now diversified our investment portfolios into something higher-yielding – but a little riskier – bond funds and equity income funds, Mad Money with Jim Cramer will always be viewed somewhat of a joke from our perspective. Prudence will always be a guiding force every time we invest our hard-earned money. It will surely take more than a TV showman armed with oversized novelty bells and whistles and other props that belong in Pee Wee’s Playhouse to convince us that investing in aggressive growth but high-risk derivative funds and specialist funds is the best thing for us since free money. Our investment portfolios probably can’t afford such jokes during these times of a worldwide economic downturn.

Managing Credit Card Debt

2009-03-13T07:56:00.000-07:00

If the convenience of credit cards has got the better of your spending avarice necessitating the services of a debt counselor, is it still possible to manage one’s credit card debt?

By: Ringo Bones

Admit it, most of us has come to the point of availing ourselves the services provided by credit card companies after an acquaintance of ours started touting the life saving convenience of credit cards. Not to mention that obligatory first-hand testimonial of a harrowing life-saving payment usually involving a stay in the emergency room. Nonetheless, every one of us should remember that once and for all credit cards are not the best thing since free money they are touted to be.

Ask every financial consultant worth his or her own salt and they will more often than not tell you that high-interest credit cards can be the most expensive form of money you can have in your budget. Time and time again they will recommend that the most cost-effective way to use your own credit card is to pay off the balance each month. At the very least, protect your credit standing or your very own credit rating of the card-issuing bank that you signed-up with - which can “easily” done by making sure you don’t let the level of your outstanding balance run away with you by your monthly payments. Even though these are just your unseemly basic debt management procedures, they can be a beneficial guide for the frequent credit card user.

Another method of keeping high-interest credit card debt at bay – as recommended by most financial advisers – which is also works in avoiding lingering credit card debt is by converting the balance into a personal loan. Personal loans usually have a lower interest rate, but it will only work if you have the fiscal discipline to avoid running your credit card debt again. This can be relatively easy if you take the necessary steps in reviewing your pattern of expenses to get to the root of why you had incurred such high credit card debt in the first place. At least it is way less costly than asking for debt advice from a debt counselor paid by your very own money.

Credit Cards: Our Best Friends?

2009-03-13T07:42:00.000-07:00

Given their convenience and pro-consumer advantages, are credit cards really the “Devil Incarnate” they are touted to be?

By: Ringo Bones

Despite of the latest high-level exposé of the predatory lending practices of some credit card companies, from a legal standpoint, majority of credit card company’s by-laws are actually pro-consumer. Even though – through varying degrees of factuality – all credit card use (spending?) problems can be “conveniently” blamed on cardholder’s inability to curb spending avarice. While the truth lies somewhere between your credit card being the closest thing of your money acting as your very own consumer advocate and credit rating agency, or just the best thing since free money.

If you are strong enough to resist the temptation of using cash on items that can be purchased by a credit card – in spite of the shopkeeper’s promise of an attractive discount via cash purchase – then be prepared to enjoy the penultimate benefit of using credit cards to buy stuff. The main – if not the overriding – advantage of paying with your credit card is that if you don’t receive what you were promised – very useful in mail order and on-line transactions – you, the customer, can always dispute the charge with the credit card company. All credit card companies have the legal right to temporarily withhold payment while it conducts its own investigation.

Although credit card companies usually protect you – their valued client – if you don’t get what you pay for, but not if you merely change your mind about a purchase. Credit card companies has the advantage of having the legal authority of doing this type of caveat emptor for you. Just be sure to pay your monthly obligations on time to keep interest rates of your charges low and please never forget to curb your spending avarice. Other than that, your credit card – as promised by your credit card company – could really open new doors of purchasing opportunity for you.

Microcredit Versus the Global Recession

2009-03-03T17:01:00.000-08:00

As various financial institutions fall by the wayside, will Dr. Muhammad Yunus’ microcredit program hold its own against the onslaught of the on-going global economic turmoil?

By: Ringo Bones

Even though Dr. Muhammad Yunus’ Grameen Bank and the microcredit / microfinance program that it fostered could trace its beginnings back in 1982, it is only after Dr. Yunus won the 2006 Nobel Peace Prize that his poverty elimination scheme gained worldwide fame. He even gained fame as the “Banker to the Poor”. The underlying success of Grameen Bank’s microcredit / microfinance program has been – according to Dr. Yunus’ own words is that: “poor people can, and do, repay loans”. As a poverty elimination scheme that is congruent with the long established global financial system, Dr. Yunus is largely credited with making microfinance / microcredit a socially responsible and viable business model.

When the global credit crunch went full steam during the last quarter of 2008, many have wondered whether Dr. Muhammad Yunus’ novel poverty elimination “financial company” could become insolvent. After all, he conscientiously made his microfinance / microcredit program’s business model congruent with the established global financial system. But the program’s 98% payment / payback rate has been it’s saving grace during increasingly tough economic times. Even the fledgling Grameen Bank America that started serving the “financially depressed” parts of New York City back in January 2008 seems to be holding its own, despite of scores of banks teetering on the brink just a stone’s throw away from Grameen Bank America’s offices.

As the global credit market seems to be currently grinding to a halt, an overwhelming majority of microfinance / microcredit schemes modeled after the ones established by Dr. Yunus seem to be holding their own, which is very fortunate for the rest of us because financial companies that provide microfinance / microcredit loans are very vital in developing countries as they are – more often than not – the only source of small business loans and start-up capital loans. Surprisingly, it works even better than the dysfunctional foreign aid system whose own rigmarole is powerless against white-collar corruption. In the long-term, microfinance / microcredit schemes could be a more economically viable way out of poverty - even foreign aid dependency – in developing nations.

Dr. Muhammad Yunus’ Grameen Bank has even been wholeheartedly welcomed in the Islamic World due to its adherence of Sharia Banking Laws – i.e. the use of tangible / concrete assets as collateral. Plus, the money provided by these microfinance / microcredit schemes are used in bricks and mortar business establishments like fish and vegetable markets – even if the bricks and mortar more often than not are just twigs and thatched straws. Nonetheless, these are far more tangible than those overly complex credit derivatives designed by financial engineers in leading American Ivy League institutions.

Recession v. Super Bowl XLIII

2009-02-02T16:51:00.000-08:00

For many years, the NFL Super Bowl Sunday has been an American institution in more ways than one. Will the current economic recession be its downfall?

By: Ringo Bones

More than just an end-of-season finale for the NFL, the American Super Bowl Sunday has for years been a magnet for multi-million dollar 30-second advertising slots. But the slow inexorable creep of the on-going global recession began to manifest itself in America in a dramatic way during the second half of 2008 via layoffs and stock market free-fall. Will this inevitably ruin the 2009 Super Bowl XLIII?

Big-time sports advertising in America has always been about profits and ease of moneymaking. When the crude oil tycoon J. Paul Getty started the cable-based sports channel ESPN, you can be sure that he’s not doing it for humanitarian reasons. Given that the “R” word – that is recession – has already behaving like Frankenstein’s monster set loose on an unsuspecting public, will it eventually take down one of the most hallowed American of institutions – that is the Super Bowl Sunday?

The on-going global economic downturn has finally make itself felt on American soil when a week before Super Bowl Sunday – the 2009 Super Bowl XLIII in Tampa, Florida. According to NBC there are still four 30-second advertising slots that remained vacant. Whereas in the past, 30-second advertising slots – despite costing millions of dollars – are snapped up by interested parties as soon as they are made available. Does the vacant advertising slots point out – especially during the Super Bowl – that America is now indeed in a deep recession?

In spite of all the doom and gloom, the hallowed institution of the American Super Bowl Sunday still managed to provide a refuge for die hard fans to forget, just for a moment at least, the on-going global economic downturn. If Americans still manage to have a good time in spite of a “relatively austere” Super Bowl – in advertising terms at least. Then, the Super Bowl, together with the die-hard fans, can safely manage to hold on for things to get better – even though it means spending more money.

Minting Pennies and Nickels: Not Economically Viable?

2009-01-19T16:43:00.000-08:00

Due to the rapid rise of commodity prices – especially metals - during the start of 2008, the cost of minting American pennies and nickels is now twice their actual face value. Weird economics at work?

By: Ringo Bones

When the global economic downturn instigated by the subprime mortgage crisis of the summer of 2007 started to be noticed on American soil during the first quarter of 2008. The US Mint or The Bureau of the Mint also started to notice that it’s now worth twice as much to “make” pennies and nickels than their face value – i.e. the coin’s buying power - due to the increasing prices of “coinage” metals like copper and zinc.

Noting that it now costs 2 US cents to make an American penny (a US 1 cent piece) and a nickel (a US 5 cent piece) now cost a dime or 10 US cents to make. It would only be a matter of time that the US Treasury Department will tell The Bureau of the Mint in Washington, D.C. to stop minting coins because they’ll be losing money - weird economics has finally arrived. Given that a typical American “Honest Abe” penny is 98% zinc while an American nickel is 25% nickel and 75% copper. The three metals – namely zinc, nickel and copper - whose trading values went through the roof during the first part of 2008 makes it easy to see why that minting coins using these traditional coinage metals is now more expensive compared to a generation ago.

Most countries around the world has since abandoned using gold and silver as coinage metals since making them costs way more than the coin’s intended face value, looks like copper, zinc and nickel will now be deemed too expensive for coinage use. Some countries have even resorted to using steel and aluminum to keep the cost of minting coins down. Especially during the early 1990’s when Sumitomo attempted to unlawfully manipulate copper prices in the London Metals Exchange by hoarding large stocks of copper for six years.

In the US, grassroots movements like Americans for Common Cents has been busy campaigning for the US Government to keep minting coins because if Uncle Sam ever decides to stop minting pennies and nickels, the penniless could literally become penniless. Like when merchants start rounding-off prices of goods to the nearest dime – given that if the US 10 cent piece or dime becomes the smallest American currency denomination – could cost American consumers 600 million dollars a year in retail expenses.

As we celebrate the 200th anniversary of Abraham Lincoln’s birth and the 100th anniversary of the “Honest Abe” penny in 2009, has the American penny and nickel become an archaic time-wasting transaction of our modern credit-based economy? In my opinion, coins of small denominations – like the American penny and nickel – are still relevant in today’s economic transaction, especially at the retail level. Plus, given that coins are more difficult to counterfeit when compared to paper currency and are less tempting to steal in comparison to credit card data, American pennies and nickels still serve an indispensable part of the American – if not of the global – economy.

US Treasury Bonds and Securities: A Bubble that’s About to Burst?

2009-01-07T06:52:00.000-08:00

With a budget deficit that could reach 1 trillion dollars in order to save it’s own economy, are US Treasury bonds and securities still a sound investment choice in 2009?

By: Ringo Bones

With the critics of incoming US president Barack Obama’s supposedly socialist-leaning economic policies now segueing into the background like their empty rhetoric, the question still remains whether US treasury bonds and securities are still the safe-haven investments that they are touted to be. Or are they the latest speculative bubble just waiting to burst?

With the US government now printing money at an unprecedented scale and the government spending deficit that is predicted to reach over a trillion dollars just to save the American economy, financial analysts around the world are now casting their doubts over the long-term profitability of US treasury bonds and securities. Because if you choose to invest in US treasury bonds now, there’s no telling of it’s actual value when it matures. Looks like when one invests in US treasury bonds he or she will be primarily driven by patriotism rather than for profit. If he or she is willing to overlook the inherent disadvantages of financial and / or speculative bubbles.

Since US treasury bonds and securities was no longer the safe-haven investment vehicle that it once was, what are our options? In my opinion, investing in gold is a better bet right now because gold is not backed by credit – i.e. it has inherent value of it’s own. But if the patriotism issue is really nagging you, here’s my view on this: Does investing in a less desirable financial instrument in order to “help keep our fellow Americans employed and off welfare” both economic common sense and patriotic?

My answer to this is a really big fat no. Investing your hard-earned money in a less desirable financial instrument in order to “help keep our fellow Americans gainfully employed and off welfare” does not really make economic common sense or is really patriotic, it is just thinly veiled charity. A charity that most of us succumb into every time we use “liberal guilt” as a defense mechanism every time we are emotionally blackmailed into buying something we don’t really need. And by the way, when it comes to good business practices, emotional blackmail is still illegal.

But if you are like me – and many others - who still believes that America under the helm of President Obama, miracles – especially economic miracles – can still happen. Then by all means invest in US treasury bonds and securities as your patriotic duty to help keep the American economy strong. But beware and be very aware that the current state of the US economy still resembles some rickety contraption being held by bailing wire and the good intentions of a czarist-era mad Russian. Which is my latest assessment given the aftermath of the Bernard L. Madoff fraud that could put Charles Ponzi and his start-up pyramid scheme to shame.

The Lowdown on Commodities

2009-01-03T07:27:00.000-08:00

The current low price of commodities – especially that of crude oil - had lessened the impact of the global financial crisis to most sectors of the economy even though it will be very bad in the long run. A good time to cry wolf?

By: Ringo Bones

The world’s leading economist had already reached a consensus and had been warning us for sometime that the low prices of economies resulting in the lack of demand due to the global economic downturn. Will be bad in the long run – even if the global economy recovers sometime in the future – because producers are not making the necessary investments to expand current production to meet possible future demands. The proverbial “ticking time bombs” in the commodities market are copper and crude oil whose prices could skyrocket way pass their 2008 peak once the global economy recovers causing an increase in demand.

Violent price rises will be the norm – rather than the exception – when it comes to commodities prices when the global economy recovers around 2010 or so. Due to lack of current investment to expand production, demand for copper and crude oil in 2010 might not be met fast enough - which could be a headache to commodities trading. Especially when it comes to the demands of emerging economies in Asia like India and China whose economies are not as badly affected as those in the United States and Europe despite of the tragic job loss figures. Plus the increased affluence of consumers in Asia could also send prices of wheat, corn, and soybean skyrocketing past their 2008 levels due to these food crops being diverted into meat production as animal feed.

The world’s policymakers better start consulting their economic advisory team on how to plan ahead to avert disastrous and violent commodity price volatility in the near future. Even if the global economy eventually recovers, it could derive our poorer brethren of their daily bread if the recovery plan is ill conceived. Making that “dramatic” percentage-point rises in the global stock market a rather Pyrrhic victory for stock market traders.

The Global Credit Crunch: Benefiting House Buyers?

2008-12-19T07:13:00.000-08:00

Despite the groans of Wall Street insiders over the housing slump, will the ongoing credit crunch be a good thing for prospective house buyers since real estate agents are now forced to slash prices just to make a sale?

By: Ringo Bones

Even though it is a sure sign of our ever-deepening global credit crisis when real estate agents and property developers start to aggressively slash their prices just to make a sale. They are even staring to reduce the prices of their “Root of all Gentrification” luxury-themed gated communities. Fire sale prices without the fire?

The bad news (or good news depending on which side of the transaction you lie) is that prospective buyers are still harboring a wait-and-see attitude. Understandably so given that property prices will certainly be slashed further in the near future. The better deal that’s still at hand in the near future can be too tempting to pass up. Worse still, the housing market could initiate a runaway deflation caused by delayed spending of the wait and see attitude of prospective house buyers.

No matter what side of the transaction you lie, sometimes you’ll wonder if this is just a simple by-product of the global economic downturn or a much-feared anti-gentrification backlash. Given that the new generation can now safely afford to be “noveau-poor” due to the new income opportunity paradigm provided by the Internet, they might be practicing a new form of Socialism for all intents and purposes. And since the “nuclear” family had fallen out of fashion for over 30 years now, real estate agents and property developers better start tweaking their antiquated business models if they chose to survive in our current climate of fiscal and consumer austerity.

The US Economic Downturn: A Boon for Indian Law Firms?

2008-12-19T07:07:00.000-08:00

Rumored to have the world’s largest population of underutilized professionals, will the current US economic downturn be a good thing for Indian law firms?

By: Ringo Bones

Ever since globalization created the outsourcing market, low cost services – no matter how far away – has always been too tempting for the richest countries to ignore despite of quasi-protectionism legislation. And while the world markets waited with baited breath whether the US economic downturn will get much worse, the American economic hardship had inadvertently become a good thing to a service sector half a world away – namely Indian law firms.

Basing on the increased visibility of Indian law firms advertising on the Internet like the Singhania & Co. LLP Advocates and Solicitors for example, offering arbitration and all types of business assistance. And given that as a business model, outsourcing has proven to be very economically viable, it is inevitable that Indian law firms will soon be benefiting from the misfortunes of corporate America’s woes.

Outsourcing has since outgrown from the fledgling phoning in of DVD player queries. The evaluation of legal documents via legal outsourcing has recently reduced the cost overheads of US financial lawsuits and other corporate legalese and rigmarole. Given that corporate legal procedures are seldom cheap – especially when it involves filing for bankruptcy – every method of cost reduction, like legal outsourcing, had recently been in vogue. Looks like corporate America’s loss will be every Indian law firm’s gain. Looks like the US economic crisis might wind up helping others before it disappears.

Pyramid Scheme Killed the Hedge Fund Star?

2008-12-13T07:22:00.000-08:00

Dubbed by Wall Street insiders as a scandal bigger than ENRON, will the Bernard L. Madoff hedge fund scandal forever undermine investor confidence?

By: Vanessa Uy

When the 70 year old former NASDAQ chairman Bernard L. Madoff was arrested a few days ago as the result of an on-going investigation over might be one of the largest fraud case of the 21st Century. He is suspected of being responsible for creating a pyramid / Ponzi scheme disguised as a hedge fund firm that dates back to the 1960 which resulted in the defrauding of his investors by 50 billion US dollars.

Bernard L. Madoff started a hedge fund firm called Bernard L. Madoff Securities LLC was even regarded by many Wall Street insiders as “the birthplace of modern Wall Street” due to it’s pioneering business model. Bernard L. Madoff’s business model was deemed to tempting – even to seasoned investors due to his promise of relatively high return of investment when compared to the norm despite of the risks involved or the obvious lack of transparency. During its heyday, Madoff’s hedge fund firm was trading on average of 50 million shares a day. And even during October 2008, when the global financial crisis was already in full steam, his firm was still the 23rd largest market maker on NASDAQ.

What became of Bernard L. Madoff’s undoing is by running his hedge fund firm like a pyramid or Ponzi scheme, where money is being exchanged despite of the lack of trade in goods or services being provided – the primary reason that made it illegal. First tier investors were comfortably living off from the investment funds of latter entrants of their shaky pyramid scheme, which miraculously, only recently collapsed despite dating from the 1960’s. Bernard L. Madoff’s fraudulent dealings even predated mortgage backed securities and other complex credit derivatives which are primarily blamed for the ongoing global financial crisis.

Will Bernard L. Madoff’s stunt forever undermine investor confidence? Well, given that the start of 2008 saw the audacious rogue trading antics of Société Générale junior trader Jérôme Kerviel, lack of investor confidence will be the norm – rather than the aberrant exception – which will probably worsen our ongoing global financial crisis. Those new “green technologies” being peddled by newly elected US President Barack Obama will never get of the ground due to lack of investment. The pyramid scheme did indeed killed one of NASDAQ’s leading hedge fund “stars” by sending its greedy CEO to the slammer.

IMF and World Bank: Obsolete Financial Institutions?

2008-11-17T07:11:00.000-08:00

Born out of the Articles of Agreement drawn up during the Bretton Woods Conference of July 1944. Are the IMF and the World Bank still relevant financial institutions in the 21st Century?

By: Ringo Bones

As the scheduled G20 Summit of the November 14, 2008 weekend at Washington, D.C. attempts to solve our current global financial crisis. Many leading academics of the financial world now wonder if there is a need to drastically overhaul the workings of the International Monetary Fund (IMF) and the World Bank since these institutions seem powerless in reversing the tide of current the global financial crisis whose worse is yet to come. Plus the criticisms of an overwhelming majority about the two institutions’ development programs which seems to entrap poor countries into an endless cycle of debt. Barring radical policy changes does the IMF and the World Bank still relevant in the 21st Century economic globalization that’s fuelled by credit and it’s derivatives?

Back in July 1944 at the Bretton Woods Conference - which was held in Bretton Woods, New Hampshire as a post World War II reconstruction and global development plan. The soon to be victorious Allied Nations were already planning their post World War II economic development in which Adolph Hitler was even powerless to utter the phrase “Are you already measuring the drapes?” in protest to this conference. The historic conference led to the establishment of The International Bank for Reconstruction and Development – also known as the World Bank – together with the International Monetary Fund or IMF under the Articles of Agreement. Among the main objectives of the former were stabilization of the foreign exchanges and improvement of foreign economic relations. Since the US dollar was then the form of currency in greatest demand, contributions to the Fund by the United States were to be an important ingredient in worldwide stabilization. The Bank’s headquarters are in Washington, D.C.

Presently, after many years of change, the consensus reached at the Bretton Woods Conference – were its used to be that various currencies were pegged against the US dollar and backed by gold as a means of global financial stability – no longer holds true. There are other countries that had managed to transform themselves into a formidable economic superpower rivaling that of the United States. Like China for example, with the country’s large currency reserves and strong economy has the ability to undervalue her own currency. Thus gaining an unfair advantage when it comes to the pricing of export products. But is our present global economic structure that’s modeled after the consensus reached in the Bretton Woods Conference of July 1944 is now having trouble keeping up with its commitment of promoting development of poor countries without entrapping them to an endless cycle of debt? The inability to efficiently adapt to recent financial trends, not to mention in tackling our current ever deepening global financial crisis.

Recently the G20 Summit in Washington with the official banner of “ Summit for Financial Markets and the World Economy” was beginning to be seen by many as “Bretton Woods Part II” or “Bretton Woods Version 2.0”. This is so because it has set some pretty lofty goals – in the staunchly conservative financial world it does pass muster as lofty - to end our deepening current global financial crisis. The world leaders in the G20 summit had very much reached a consensus to promote free market capitalism or free trade and the rejection of wholesale protectionism. Other notable reforms of the 10-page long G20 declaration include new regulations to curb risky practices of banks and other financial institutions. Credit Default Swaps – those extremely sexy financial instruments that instigated the current global financial crisis – are now targeted for stricter regulation by allowing them to be processed on a centralized clearinghouse for better monitoring.

The existing practices that make “common folks” bedevil the world’s two leading financial institutions, IMF and World Bank, were not tackled. Like measures to end free trade distorting trade subsidies and “debt entrapment” of poor nations. Though the powers-that-be say that the latest G20 Summit is only a part of a series of high-level meetings aimed at resolving our present financial crisis, I just hope that they will to their part to end our existing global financial woes. After all, this recovery process requires the involvement of everyone of us. I mean, isn't the G20's "Global Economic Crisis Action Plan" granting a bigger role for developing nations just a euphemism for "we need everyone's help"?

Should the US Government Bailout Heritage Companies?

2008-11-13T07:02:00.000-08:00

As the US financial crisis grows inevitably deeper, should the US Government bail out “heritage companies” via the American taxpayer’s money?

By: Ringo Bones

America’s “big three” automakers, namely: GM, Chrysler, and Ford had been in the headlines lately but not for the good reasons. The US top three automakers had been hard hit by the ongoing economic crisis, which if left alone the three leading car manufacturers would go bankrupt. But the question now is, should the US Government do what it can to save heritage companies – which America’s three leading carmakers surely does qualify as such – even to the extent of using the taxpayer’s money?

Throughout the developed world, heritage companies had always been perceived as an integral part of the country that they originate. The German government even legislated laws that only allow overseas Sovereign Wealth Funds extremely limited investments in their own heritage companies despite howls of protectionism accusations.

Ever since the global financial crisis became too big to ignore, the US Government acted upon several schemes to save ailing companies, which are perceived as heritage companies by many. Like the two leading equity loan providers of America: Fannie Mae and Freddie Mac, which if allowed to go bankrupt could make millions of American families homeless. Thus qualifying them as the most indispensable of the American heritage companies.

Though cars can be considered a luxury when compared to a secure roof over your head, America’s “top three” automakers are thus nevertheless very important heritage companies. Due to their historical significance and they also employ thousands of workers across the country. America would never be the same without them. But should the US Government save them? After all President-elect Obama’s economic recovery plan has a heavy emphasis on fiscal discipline.

To me at least, a financial bailout by the US Government on ailing heritage companies do make fiscal sense. And since the breakdown of the preexisting American free market capitalism is due to too much laissez-faire when it comes to government regulation. The switch over to state capitalism would be smoother and could serve as one of the conditions of a government funded bailout package. Which would make the economic recovery process more efficient since the companies can now be tailored to be in sync with the government’s economic recovery process.

Mortgage Backed Securities: A Serious Reaganomics Oversight?

2008-11-13T06:56:00.000-08:00

The impact of unregulated Mortgage Backed Securities only reared its ugly head during the second half of 2007, turning the subprime mortgage crisis global. Human greed at it’s worst?

By: Ringo Bones

Well known for his staunchly laissez-faire economic policies, the former US president Ronald Reagan and his administration will forever be remembered for defending the underlying principles of American free enterprise. And also of promoting the Protestant Work Ethic as one of the leading principles that made the American economy what it was which made it outlast the former Soviet Union. But despite of the Reagan Administration’s sweeping economic reforms – affectionately nicknamed “Reaganomics” – that made the “Go-Go 80’s” possible. One of its serious oversights will forever mark the 1980’s as the “Decade of Greed”. Sadder still, the problem that drove our current global economy to the brink originated during this time period.

Back in 1977, Salomon Brothers and Bank of America jointly introduced the world’s first ever Mortgage Backed Securities or MBS. A college dropout initially hired to work in Salomon Brother’s mailroom, Lewis Ranieri, was assigned the task of selling these somewhat untested securities / bonds. Before the extensive Reagan Administration era lobbying in Capitol Hill made it available throughout America, Mortgage Backed Securities used to be legal in only 15 US states. Lewis Ranieri was then known to have a trader’s nerve and a salesman’s persuasiveness won lobbying battles in Washington that eventually removed legal and tax barriers against MBS. Ranieri then headed up a Salomon Brothers’ team that developed Collaterized Mortgage Obligations. Collaterized Mortgage Obligations are 2-year, 5-year, and 10-year Mortgage Backed Securities that are packaged to appeal to a variety of low, medium, and high-risk investors. Thus paving the way for the subprime mortgage crisis.

Though it is worth noting that the preexisting ideological climate of the Reagan Administration frequently confuses the Protestant Work Ethic with massive corporate earnings thus causing them to turn a blind eye when it comes to financial regulation. After all, it something earns money, then it must be good - right?

But everyone back then was too blind to see that Mortgage Backed Securities for all intents and purposes were high-risk bonds. As financial instruments, they are backed by more speculative or subprime mortgages, loans made out to high-risk borrowers. Which made them yield more interest than low-risk bonds. For 30 years or so, it was a veritable source of easy money until it triggered a subprime mortgage crisis that even hedge funds can’t even smooth out.

The incoming Obama Administration will now be facing a monumental task of solving a financial mess that can trace it’s roots back 30 or so years ago. It took 30 years of regulatory oversight to create our current financial crisis that is now sweeping across the entire world. Even the “greedy” people who caused this problem in the first place are no longer as rich as they used to be. And they used to claim that greed is good.

Is Obamanomics Socialism?

2008-11-10T07:06:00.000-08:00

President-elect Barack Obama’s plan to save the US economic system has always been referred to by his detractors as socialism. But is “Obamanomics” merely just a system for spreading the wealth like it’s detractors claim it to be?

By: Ringo Bones

Our current global economic crisis can trace its pedigree back to the days of Reaganomics – i.e. the former US president Ronald Reagan’s view on economics that the Federal Government hinders rather than helps the US economic system. “Big Government” is bad for business and should get out of the way. Although right in many respects, I do find Reaganomics - as it was then affectionally called - somewhat hypocritical given that then president Reagan is staunchly against Marxist-Leninist Socialism / Communism. Yet he gave Wall Street overlords tax breaks and too much power.

It is a well-known fact that in the financial world – especially in the US – the existing financial power structure preclude their client’s opinions and views from ever becoming a factor in directing a financial company’s fiscal decisions. Thus the clients (this means every investing US taxpayer, including those government powers-that-be) must trust the financial company’s “top brass” – the Wall Street “ruling elite” to make the correct decisions for them. Using former president Ronald Reagan’s dictum “Trust but verify”, this makes the belief in an all wise and ever caring Wall Street a veritable twofold lie. A twofold lie because this assumes that the "ruling elite” at Wall Street knows what they are doing coupled with the assumption that the Wall Street “ruling elite” cares about the clients they are supposed to serve. But since socialism rests on the idea that one person can make a decision for another person without a working system of checks and balances, does this make the laissez-faire nature of President Reagan style economics / Reaganomics really just socialism in disguise?

I’m also one of those people who was never been able to have warmed up to the concept of trickle down economics – giving the ultra rich tax breaks to foster economic growth and working class prosperity. I’ve always viewed it like the way primitive cultures conduct human sacrifices to appease the gods. I mean if giving incentives to the very rich in the form of tax breaks really did benefit them, two things could have happened. Either they – the Wall Street ruling elite - would have been building mansions on the Moon by now thus generating an employment bonanza by hiring maintenance crews or have manage the economy so efficiently since the Reagan Administration that our current global financial crisis would not have happened. Ronald Reagan’s greatest oversight is probably the US financial system deregulation given that the root cause of the subprime mortgage crisis – namely mortgaged backed securities – had been busy making inroads into Wall Street since 1977.

Ever since the days of the Great Depression, successful schemes designed to fix the US economy always involved spreading the wealth. Each time the US Government creates roads, dams, and other infrastructure, it tends to spread the wealth around in the form of jobs. This scheme differs itself from Marxist-Leninist Socialism because it is governed by checks and balances that keeps corruption and malfeasance to the absolute minimum. But President-elect Obama better act fast on his plans to fix the American economy via infrastructure rehabilitation before the obstructionist policies of the opposing party can take hold. President-elect Obama should take advantage of this once in a lifetime chance of a party majority in the legislature to test out his Obamanomics to prove that there is hope yet for the long ailing US economy.

Credit Rating Agencies Overhaul: A Way Forward for the US Economy?

2008-10-23T07:53:00.000-07:00

Blamed by everyone in the financial world as the instigators of the global credit crunch. Will a credit rating agency reform revive the ailing US economy and possibly the rest of the world?

By: Ringo Bones

As of October 22, 2008, America’s three leading credit rating agencies – namely Moody’s, S&P, Fitch – had their respective CEO s testifying on Capitol Hill on the future stake of the credit rating industry. Credit rating agencies came under fire recently due to their dubiously unsound – and sometimes – illegal practices in order to gain competitive edge on their dealings. While forgetting what their respective companies are there for in the first place – managing financial risks.

As the US Congress’ House Oversight Committee grill the respective CEO s of the three leading credit rating agencies after the state of Connecticut sued them for illegal practices and credit rating abuse. The lawsuit was put forth by Connecticut Attorney General Richard Blumenthal after the US Securities and Exchange Commission (SEC) failed to pursue legal action against the three leading credit rating agencies during the last few years citing lack of resources for the failure to better regulate the credit rating industry.

Various credit rating “sins” scrutinized by the Congressional House Oversight Committee include the practice of notching on rating subprime mortgage backed securities citing the non-competitive nature of such a practice. The quality versus quantity nature of credit ratings – which companies pay on a per-deal approval basis – has come under fire. Especially on how the SEC, investors, the US banking industry and the major players of the global financial system’s perception of such practices as of late. Credit rating agencies are about managing financial risks, not overpaying executives for approving deals. Plus the long-term effects of such dubious practices by the three leading US-based credit rating agencies on accurate financial risk assessment. Will better government regulation of the credit rating industry be the best solution?

Wall Street insiders had been wary about the unsound credit rating practices of Moody’s, S&P, and Fitch in the few years leading up to the global credit crunch. The three leading credit rating agencies dubious practices had colored their credit rating judgement. Some financial insiders even accuse Moody’s of “drinking the Kool Aid” thus endangering millions of dollars circulating in the credit market system.

It’s about time that the US Government reign-in on the excesses and the unsound noncompetitive rating practices of credit rating agencies – especially on notching - because the current financial crisis has banks increasingly de-leveraging – i.e. lending less money to other banks. A practice that could spell financial disaster to our modern credit based economy if allowed to go on for too long. Maybe this overhaul of the credit rating industry will create a thaw on the global credit market to speed up the global economy which as of late is dangerously slowing down into a deep economic recession. For the sake not only of Wall Street but also of Main street as well.

On Bank Executives’ Extent of Accountability

2008-10-20T08:13:00.000-07:00

The powers-that-be, the media and everyone had been demanding banking executives to be more accountable in their day-to-day dealings, but does this really work in practice?

By: Ringo Bones

Despite the powers-that-be and the media demanding bank executives to be more accountable of their financial / fiscal decisions and actions, we – the average investor – seems not to have any say on the matter. Why? , Because first and foremost bank executives are not placed in their positions by us citizens / voters. A case in point is what if Société Générale clients knew in advance of this year’s most famous rogue trader – Jérôme Kerviel’s intent. Can Société Générale clients threaten the banking board that if they won’t fire Mr. Kerviel, they will take their business – namely their cash deposits, portfolios and other investment instruments – elsewhere? Most likely it is a question of can’t rather than won’t. Like the recent shenanigans at Wall Street that lead to the downfall of Lehman Brothers and the US Government bailout of America's two largest equity loans provider - namely Fannie Mae and Freddie Mac.

Shouldn’t bank executives’ track records – from their C.V. s to their fiscal hits and misses - be made available for public scrutiny so that potential bank clients, investors and depositors can have a semblance of an informed choice – let alone arbitrage - on who will be handling their investment portfolios? Unless you belong to the top echelons of the Saudi Royal Household or if you happen to own a multi-million dollar portfolio forget about it. If it hardly works on our politicians running for public office, then one must try to reacquaint his or herself with the meaning of the words caveat emptor if they ever hope to maintain the economic viability of their respective portfolios during this hard economic times. Because in the real world, accountability ultimately starts and ends with you, the potential client.

Command Socialist Economy: Wall Street Reinvented?

2008-10-20T08:04:00.000-07:00

Will the Bush Administration’s 700 billion US dollar bailout plan forever change the US economy from a free market economy to a tightly government controlled command socialist economy?

By: Ringo Bones

Ever since the eventual approval by the US Congress of the 700 billion dollar economic bail out plan to shore up America’s ailing economy in the wake of the failure of the country’s two largest equity loans provider – namely Fannie Mae and Freddie Mac. Many an opinion of the US Government’s 700 billion dollar economic rescue plan range from comparisons to the Bush Administration’s March 2003 invasion of Iraq - which could eventually result in a “Financial Abu Ghraib”. To the very radical transformation of the fundamental sociological / religious / ideological underpinnings of Wall Street’s perception of what free market capitalism should be.

Ever since Wall Street became a global financial powerhouse, the values that made it work are grounded not only in economist Adam Smith’s idealized version of capitalism. Capitalism that is not only centered on the fundamentals of a free market or laissez-faire economy, but also of the Protestant Work Ethic in which many a filthy-rich American patriot ascribes to the reason why the United States defeated the Soviet Union during the Cold War.

The bad news about free market / laissez-faire capitalism is that unlike Friedrich Nietzsche’s “warrior-poets with enlightened self-interests” of yore - who happen to be very good at self-policing / self-regulating. A laissez-faire economy appears to be unable to regulate itself. That’s why every economist from John Maynard Keynes onwards adopted a policy of government involvement in regulating the fundamentals of the free market economy to avoid it from cycling between the extremes of financial / economic bubbles that will eventually lead into a deep economic depression.

But regulation can also be taken so far. Like the idea of the Socialist Command Economy where only a few people – especially political party cronies – can get very rich. A case in point is one economist visiting the post March 2003 invasion of Iraq had labeled the country’s Saddam Hussein-era economy as a Socialist Command Economy, which – according to him - should be retooled as soon as possible for the good of the country. Though I wonder why Iraq’s crude oil rich neighbor Kuwait had lend 300 billion dollars to Saddam Hussein to fund their war with Iran during the 1980’s given that Socialist Command Economies tend to be given a low credit rating by the world’s leading credit rating agencies.

But isn’t the lack of regulation the root cause of our global financial crisis? Sadly the answer is yes because banks and other financial institutions are prone to adventurism when it comes to making money – i.e. the least effort for the greatest amount of profit. Which eventually is an anathema to the Protestant Work Ethic that everyone at Wall Street embraced in the first place. The easy money in which those who bought in early on credit default swaps, collaterized debt obligations, mortgage backed securities and other very complex financial instruments’ speculative bubble. Financial instruments whose sheer complexity supposedly will generously generate profits on it’s own accord (?), now increasingly looks like a multi-billion dollar pyramid scheme that ran our fragile global economy to the ground. Looks like we now badly need government leadership with the wisdom to distinguish between John Maynard Keynes and Karl Marx.

Exchange Traded Funds: The Ideal Investment Vehicle?

2008-09-20T07:40:00.000-07:00

Ever since it’s ad hoc genesis in 1989, exchange-traded funds or ETF s has been seen by many as the most innovative investment vehicle of the last two decades. But are ETF s too good to be true in the face of our current global economic slowdown?

By: Ringo Bones

Recently hailed by a number of investment savvy as one of the methods that made them profit from the sky-is-the-limit crude oil prices of July 2008, crude oil ETF s really paid their investors rich dividends. But is this just a case of Emperor Nero fiddling away while Rome burned to the ground thus forever reinforcing the notion that our current global financial system can only thrive in an environment of extreme financial disparity? To find out if ETF s truly deserving of this reputation, let us first examine what makes them tick.

An exchange-traded fund or ETF is an investment vehicle traded on the world’s stock exchanges, much like stocks or bonds. A typical ETF holds assets such as stocks or bonds by trading them at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Majority of ETF s are valued by pegging or tracking at an index, such as the DOW Jones Industrial Average or the S&P 500. An ETF is seen by many as attractive investments because of its low costs, tax efficiency, and stock-like features.

An ETF combines the valuation feature of existing mutual funds or unit investment trusts, which can be purchased or redeemed at the end of each trading day for its net asset value. Close-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange. In general, ETF s will not require a lot of micro-management. You can simply set them up and forget them and then rake in the dividends. In fact, some investors take this to the extreme by building so-called “lazy portfolios”.

A poll was conducted on a group of investment professionals in March 2008. 67% of those polled say that ETF s are the most innovative investment vehicle developed during the last two decades, while 60% reported that ETF s have fundamentally changed the way investment professionals constructed investment portfolios.

ETF s had their ad hoc origins in 1989 with Index Participation Shares, which - for all intents and purposes - was an S&P 500 proxy that traded on the American Stock Exchange and the Philadelphia Stock Exchange. This product, however, was short-lived after a lawsuit by the Chicago Mercantile Exchange was successful in halting the sales of ETF s in the United States. A similar product, Toronto Index Participation Shares started trading on the Toronto Stock Exchange in 1990. The shares, which pegged the TSE 35 and later the TSE 100 stocks, proved to be so popular. The popularity of these products led the American Stock Exchange to try to develop something that would comply with Securities and Exchange Commission or SEC regulation to be sold on US soil.

ETF s had been available in the US since 1993 and in Europe in 1999. Exchange traded funds have traditionally been classified as index funds. But in 2008, the US Securities and Exchange Commission started to authorize the creation of actively-managed ETF s. Usually investors only buy and sell ETF s in market transactions. But institutional investors can redeem large blocks of shares of the ETF – known as creation units – for a “basket” of the underlying assets or alternatively, exchange the underlying assets for creation units. This creation and redemption of shares enables institutions to engage in arbitrage that causes the value of the ETF to approximate the net asset value of the underlying assets.

Exchange-traded funds offer public investors’ undivided interests in a pool of securities and other assets and thus are similar in many ways to traditional mutual funds. Except shares in an ETF can be bought and sold throughout the trading day like stocks on a securities exchange through a broker-dealer. Unlike traditional mutual funds, ETF s does not sell or redeem their individual shares at net asset value (NAV). Instead, financial institutions purchase and redeem ETF shares directly from the ETF. But only in large blocks that vary in size from 25,000 to 200,000 shares called “creation units”. Purchase and redemption of creation units are generally in kind. With the institutional investor contributing or receiving a basket of securities of the same type and proportion held by the ETF. Although some ETF s may require or allow purchasing or redeeming shareholders to substitute cash for some - or all - of the securities in the basket of assets.

The ability to purchase and redeem creation units gave ETF s an arbitrage mechanism intended to minimize the potential deviation between the market price and the net asset value of ETF shares. Existing ETF s have transparent portfolios, so institutional investors will know exactly what portfolio assets they must assemble if they wish to purchase a creation unit. And the exchange disseminates the updated net asset value of the shares throughout the trading day, typically at 15-second intervals.

In practice, many experts have viewed exchange-traded funds with mixed feelings. John C. Bogle, founder of The Vanguard Group, which is a leading issuer of index funds and – since Bogle’s retirement – of ETF s. Bogle has argued that ETF s are nothing more than a representation of short-term speculation because their trading expenses decrease returns to investors. And also, ETF s provides insufficient diversification. But Bogle later concedes that a broadly diversified ETF that is held over time can be a good investment.

But major investing institutions, like The Vanguard Group or Fidelity Investments for example, already control billions of shares. It is easy for them to create an ETF by simply peeling a few million shares off the top of the pile. Then putting together a basket of stocks to represent the appropriate index, say the NASDAQ composite or the TBOPP index made up for the start-up article. Does this serve as proof that patience and prudence together with a good perspective on the marketplace is still the cornerstone of a good and profitable business model then?

Crude Oil-Based Economics: Still Economically Viable?

2008-08-20T04:31:00.000-07:00

After the high energy prices of July 2008 has done it’s worst to our fragile global economy still reeling from the credit crunch, will the present under 115 dollar-per-barrel crude oil prices be a viable long-term solution?

By: Vanessa Uy

Now that the furor over high-energy prices has (hopefully?) died down, does this mean the worse of the energy crisis is now far behind us? Well, not exactly. The crude oil prices which are steadily declining (hopefully)on a weekly basis is by no means immune from the Machiavellian-like machinations of commodities speculators, less than democratic nation-states, and most of all OPEC.

Throughout of its 47-year history, the Organization of the Petroleum Exporting Countries or OPEC has been a cartel in name only. Given that the people who still care about OPEC’s historical track-record probably experienced first hand back in the time when gasoline was still sold at 10 US cents or 25 US cents per gallon, probably compares it to some post-Pablo Escobar narcotics cartel. Forever endangering the democratically elected governments of Latin American countries by financing local terror groups. The question now is, is OPEC really like a narcotics cartel devoid of any semblance of Corporate Social Responsibility?

Sadly, this was proven back in the March 2008 OPEC meeting in Vienna. OPEC member oil companies declined to increase their production quotas despite fairly legitimate reasons to do so. At this time, crude oil prices were teetering just above 100 US dollars a barrel. Plus, the United States is either near or already in an economic recession with much of the rest of the world feeling the knock-on effects. OPEC ministers were nonchalant despite of the dire situation of our global economy back then. The OPEC ministers even choose to a consensus of reducing overall production because the inevitable global economic slowdown will probably reduce crude oil demand anyway. Is there something wrong with this picture?

What is wrong is that a fall in crude oil prices is one of – if not the main – mechanisms in which an economic recession or retail slowdown corrects itself. As crude oil prices now a mere shadow, relatively speaking, of its almost 150 US dollar a barrel peak back in July 2008, the US economy did got a little better. Despite the housing market still at a slowdown, everyone at the US Federal Reserve must had patted themselves in the back for formulating a monetary policy that saved the US economy – i.e. it strengthened back the US dollar. But the question now is, can we keep crude oil prices under 100 US dollars a barrel until the year 2050 were economically viable alternatives to crude oil fueled systems will be invented?

The problem with this scenario is that replacement technologies for our crude oil incumbent industry will never be invented if the economic incentives for doing so are not there. Despite the environmental harm, not to mention the political instability plus the cost in human lives of our young people in their prime dying in some senseless war just to keep crude oil prices artificially low. Our Quixotic search for cheap crude oil is one of the main stumbling blocks for the development and implementation of environmentally renewable energy technologies like solar photovoltaic cells and wind turbines. Imagine if Halliburton and their ilk were around back during the days of the Amistad Case. The whole world would probably still be engaged in the Transatlantic slave trade and using whale blubber to run our cars, heat our homes, and generate electricity.

For the sake of the global economy, America – the world’s last true superpower – must take the lead in developing new technologies to free the whole world being shackled to a crude oil incumbent economy. Or are the policymakers on Capitol Hill too blind to see that America's addiction to foreign (especially OPEC’s) crude oil has made the US economy a virtual mendicant to every other country’s Sovereign Wealth Funds. Plus, the present US Government can’t even provide justice to the genocide victims in Darfur, Sudan because the US Government borrows money from one of the perpetrators – i.e. Beijing Government – just to buy America’s present crude oil needs from OPEC.

Hedging for Crude Oil: An Unfair Leverage?

2008-07-25T07:45:00.000-07:00

Even though the latest peak price for crude oil is still a tad under $150 before retreating a bit, this wild price swing has already done its damage to the global economy. The question now is; is the blame – like the crude – still plentiful to go around?

By: Vanessa Uy

Many factors are supposedly blamed for our current middle of 2008 high price of crude oil. From simple supply depletion (we are using up our “known” oil reserves at a rate of 8% annually at our current rate of consumption), to the “supposedly” increased demand from newly emerging economic powerhouses like China and India. Add to that the perennial issue of Geopolitical Instability thus making all of us eternally gullible to the excuses of the crude oil conglomerates’ reasons for jacking-up their prices once again. As of late, economists around the world seem to have reached a consensus that at least 60% of our current price of crude oil is due to unregulated futures speculation by hedge funds, banks, and other financial institutions. Which Capitol Hill counters yet again with a counter blame pointed squarely at OPEC and our present “Geopolitical Instability” - courtesy of the Bush Administrations’ Neo-Conservatives, Halliburton, and their ilk.

Speculation of commodities’ prices – especially crude oil – is not new. It’s been around since Wall Street opened for business. But it is always viewed by many with suspicion because it’s as far removed as a self-policing corporate entity with enlightened self-interests as it can get. Hedge funds are used in unregulated futures speculation by banks and other financial institutions using the London International Commodities Exchange (ICE) Futures and the New York Mercantile Exchange (NYMEX) futures exchanges. Add to that the uncontrolled inter-bank or “Over – the - Counter” trading to avoid regulatory scrutiny. Thus making the US margin rules of the government’s Commodity Futures Trading Commission that allows speculators – via a regulatory loophole – to buy a crude oil futures contract on the NYMEX by just having to pay 6% of the value of the contract. The “somewhat questionable” margin rules had recently fed the skyrocketing crude oil price frenzy, especially if you consider the unfair 16 –to- 1 leverage, which left us – the average consumer – holding the bag. Sadly, government regulators around the world are powerless to address the “apparent” injustice.

Luckily, this extremely large leverage of 16-to-1 that had driven our current crude oil prices to wildly unrealistic levels have been a “Godsend” to various petroleum companies and various financial institutions whether these firms admit it or not. As of late, high crude oil prices had become a valuable tool for these firms to offset financial losses incurred since the September 11, 2001 terrorist attacks and the more recent sub-prime mortgage debacle. Given the mainstream perception that “market forces” are inherently good and self-policing, does this mean that there is a “method” to this skyrocketing crude oil price “madness”? Meaning who among us in their right mind would easily assume that the multinational petroleum conglomerates would be inclined to practice corporate social responsibility every time these conglomerates’ profit margins go through the roof? - Definitely not me.

One “perceptual construct” of the GOP and oil lobbyists -run policymakers of Washington DC and also of the phobophobic mammon peddlers running Wall Street frequently used to justify our skyrocketing crude oil prices is the this “Hoax of Peak Oil”. The “Hoax of Peak Oil” is this perceptual construct of scant proof citing crude oil production has reached a point when more than half of all our global reserves have been used up. Thus forming a conclusion with no proof whatsoever that the world is already on the wrong side of the “Bell Curve” when it comes to plentiful and cheap crude. Not only is this idea been used to swindle the average consumer from our hard-earned cash but also sacrificed countless young men and women around the world in the prime of their lives in the name of “crude oil supply security”.

Many economists around the globe have now questioned the Industrial World’s inability to transition away from “petroleum incumbency”. More than half of them, are now weary that the recent speculative bubble in crude oil – which has gone asymptotic since January 2008 – is about to go pop. Sadly, crude oil might have to reach the $500 per barrel price before this bubble will burst or the “Industrialized West” embraces alternative energy – whichever comes first. Probably because of unscrupulous speculators and futures’ traders paroxysm (i.e. sudden violent emotion or action) against the increasingly rave reports on Fortune and The Economist about renewable energy – like wind and solar – receiving big time venture capital investments since 2005.

History has told us since the Exxon Valdez disaster of 1989 and the August 1990 invasion of Kuwait by Iraqi strongman Saddam Hussein that we must move on from our unsustainable “Petroleum Incumbent” transportation and energy systems with ever increasing urgency. Our crude oil addiction is just simply unsustainable. Not just in terms of preserving a healthy environment, a dynamic and equitable economy, but also of the high cost in human lives as well that the global crude oil conglomerates seem to continue to overlook.

Socially Responsible Tourism Anyone?

2008-06-30T07:46:00.000-07:00

If we follow the “money trail” of our current tourism industry, chances are the locals living in our lucrative travel destinations receive very little – if at all – of the dollars that we shell out. Is it high time for something better?

By: Vanessa Uy

“Take only photographs and leave only footprints.” This enlightened adage which became increasingly popular during the 1990’s was meant as a guide in preserving our ecotourism sites for the next generation. But as ecotourism grew into a full blown lucrative industry a few years on, it seems as if everyone forgot to inject the concept of fiscal sensibility in managing this upstart form of tourism. After all, the “dollar value” of our ecotourism destinations can only be maintained if it’s ecological balance is preserved, and this won’t come for free. Especially if what we are trying to preserve is for all intents and purposes a tradable commodity.

But still there is often overlooked problem – the locals. Over the years, steps are already taken to preserve a typical ecotourism site’s biodiversity. Yet the locals are denied the benefits of the revenue generated by their local community. Some are even forcibly evicted from their ancestral lands every time a rich land owner buys large tracks of pristine wilderness to be developed into an ecotourism site which – sad to say – winds up looking like the Checkpoint on the 38th Parallel of the North-South Korean border. Some parts of the world, the ecotourism industry is for all intents and purposes still unregulated. Like here in the Philippines with the example I cited before where the facilities ending up like a hardened military base made to withstand a multi-megaton nuclear explosion rather than an inviting ecotourism site.

Though there are some schemes already existing where governments oversee that the money generated by ecotourism are appropriately allotted so that the locals can benefit from it. Like scholarships and training for those who want to serve as tourist guides and park rangers. Providing environmentally friendly cottage industry concessions for the locals like developing their own herbal and folk medicine / apothecary. And also for adequately budgeted scientific studies to accurately measure the impact of ecotourism. So that adequate measures for protecting the sites can be legislated. Sadly though, enlightened measures like these are the exception -–rather than the rule when it comes to the ecotourism industry.

Subprime Mortgage Loans: No Money, No Credit Rating, No Problem Service?

2008-05-05T04:50:00.000-07:00

Ever since the subprime mortgage debacle became headline news in the latter part of 2007 that resulted to a massive slowdown of our credit driven global economy, economists are now formulating cures and future preventives. Will it work?

By: Vanessa Uy

Ever since President John F. Kennedy’s speech about sending a man to the Moon, political rhetoric has become the latest selling point of the American industry. If sending man to the Moon made the US Military-Industrial Complex rich beyond their wildest dreams, shouldn’t other political rhetoric – if exploited right – could – in theory - benefit other industries as well? Like the proverbial “American Dream” of home ownership. One of the latest proponents of the home ownership rhetoric is the current American President George W. Bush whose speech about fulfilling every working-class American’s dream of homeownership was even caught on TV. Given the less than stellar records when it comes to corporate social responsibility and ethical business governance of American financial institutions (the Savings & Loan scandal of the 1980’s is an excellent example), are these financial institutions up to task in fulfilling every working-class American’s aspiration of home ownership? To fully understand our current subprime mortgage debacle, lets examine first the history of equity loan providers in America and their stance about Civil Rights.

Back in the 1960’s when an overwhelming majority of the American financial institutions thought that the concept of corporate social responsibility, ethical business governance and fiscal transparency – which are now the most overused selling points of financial institutions - were mere ideological musings of Marx and Lenin back then. These financial institutions were even engaged in a practice that would be deemed unacceptable by Civil Rights groups today, and they called it “Red Lining”. “Red Lining” is a very controversial practice adopted by equity home providers’ back in the 1960’s. Equity loan and other financial service providers literally draw a red line around neighborhoods whose populations are overwhelmingly African-American, Hispanics or other cultural minorities as no go zones when it comes to giving these people access to home ownership loans. Thus forever denying these people the proverbial “American Dream” of home ownership.

When the Republican / GOP neo-conservatives gained congressional power during the Clinton Administration of the 1990’s. The American financial institutions were literally given a carte blanche to make money by any means necessary. The concept of “Reverse Red Lining” first gained its first tentative steps. By providing risky or subprime mortgage loans to cultural minorities or to anyone with subprime or shaky credit ratings, equity loan providers could now actually pretend on how caring they are by providing these very high interest loans. The loan providers could easily feign corporate social responsibility sine they are providing loans to a group of people whose loan application were denied or rejected by other equity loan providers. These subprime mortgage loan providers even went public by raising money via IPO s or initial public offerings. Almost everyone, Wall Street even bought into it lock stock and barrel. Even including investors outside America joined the subprime bandwagon. A remote town in Iceland even bought into this “subprime loan gold rush” by investing a sizeable part of their town’s fiscal reserves. Lucrative loans with inherently high risks gained as much allure as casino gambling. Thus explaining why when the subprime bubble collapsed, its effects were felt throughout the entire world.

When the painful pinch of reality set in, it’s the ones with marginal financial resources i.e. the subprime mortgages target customers – namely African-Americans, Hispanics and other minorities – who suffered the most. Refinancing companies are doing a very poor job of consolidating the debts of homeowners affected by the subprime mortgage crisis. Some financial analysts even questioned the wisdom of debt consolidation in alleviating the affected homeowner’s problems.

Many are now starting to question whether the subprime mortgage’s original core mission is to recoup the profits lost by American financial institutions. Is it to recoup lost profits due to the Savings & Loan scandal of the 1980’s, the “dot com” bubble of the late 1990’s and the interest rates in which the former Federal Reserve chairman Alan Greenspan decided to set for far to low for far too long. With the questionable wisdom of predatory lending’s ability to kick-start the ailing American economy is a matter of lengthy conjecture. Shouldn’t all of us gain some form of wisdom by avoiding as much as possible very risky investment strategies or maybe we should stop treating our houses as mere financial instruments / tradable commodities and more as homes were our heart truly belongs.

Hedge Funds: Financial Cloak and Dagger?

2008-05-05T04:45:00.000-07:00

First made famous as a financial instrument that made spectacular hostile takeovers possible during the 1980’s “Decade of Greed”. Now used by speculators to drive up oil and food prices, will stricter regulation tame hedge funds’ unbridled avarice?

By: Vanessa Uy

Okay I’ll admit it – and so do maybe a large number of people – that the financial world’s bereft of any semblance of corporate social responsibility is what probably makes it interesting to outsiders. If ever corporate social responsibility or ethical business governance existed during the “Decade of Greed”, the movie “Wall Street” surely would have never been made. Part of the financial world’s “cash cow” that tore the financial world into two camps when it comes to the widespread adoption of corporate social responsibility are hedge funds. But before we proceed further, let us discuss first the arcane and rigmarole – infested world of hedge funds.

A hedge fund is a private investment fund that charges a performance fee and usually offered only to a limited range of qualified accredited investors. Unlike true blue Initial Public Offerings or IPO s, in which anyone with money or other requisite funds can qualify to invest. Alfred Winslow Jones was credited for inventing hedge funds back in 1949. While there is no legal definition of hedge funds under the US securities laws and regulations, the term hedge fund usually pertain to funds invested in more complex and risky investments ignored by most – if not all - public funds. As a hedge fund’s investment activities are limited only by contracts governing the particular fund, it can make greater use of complex investment strategies such as short selling, entering into the futures markets, swaps and other derivative contracts and leverage.

As the nomenclature implies, hedge funds usually avoid potential losses in the principal markets they are invested to by hedging it by any number of available methods. But a number of long-term investments had been inappropriately named as hedge funds, especially absolute-return funds. Even though these so-called “pseudo hedge funds” do not actually hedge their investments.

Hedge funds had always acquired a reputation of secrecy, a financial cloak and dagger if you will. This could cause serious headaches in its attempt to comply the transparency proviso of corporate social responsibility and / or ethical business governance. Unlike open-to-the-public “retail” funds - like US mutual funds - which are marketed freely to the public, in most countries, hedge funds are specifically prohibited from being marketed to investors who have no professional accreditation or to individuals with sufficient private funds. Sadly, this limits the information a hedge fund is legally required to release because divulging a hedge fund’s methods could unreasonably compromise their business interests. Thus limiting the pertinent information that a hedge fund is allowed legally to release.

Since a typical hedge fund’s assets can run into many billions of dollars and is always be multiplied by leverage, their sway over markets, whether they succeed or fail, is potentially substantial. There is even a continuing debate over whether hedge funds should be more thoroughly regulated. Given their current sway in the commodities markets, especially to crude oil and staple foods like rice, corn and soybeans, a more thorough regulation is indeed a long time coming. The bad news is that a more thorough regulation could be viewed by the majority in the financial world as a move from an already over regulated Keynesian style economics into a Soviet-era “Socialist Command Economy”. A move that would prove to be an anathema to an overwhelming majority in the financial world who had clung on to their Protestant / Calvinist Work Ethic like their lives depended on it.

Corporate Social Responsibility: The Latest Praxis of Greed?

2008-04-17T04:51:00.000-07:00

As the latest buzzword in the world of business and finance that’s a few steps away from economic recession, is corporate social responsibility just a ploy used by companies to make them appear way less greedy?

By: Vanessa Uy

Sometimes I ask myself weather the current coverage by the mainstream media regarding corporate social responsibility is actually confusing the general public’s already distorted perception on why companies embraces corporate social responsibility in the first place. From the lighthearted “there just buying into the latest must have fashion accessory” perception of corporate social responsibility. To the press’s overly simplistic painting a picture that start-up companies that embraced corporate social responsibility for “idealistic” reasons are actually holding back a tidal wave of greed and corruption doesn’t help matters either. Even though I see the overall good in corporate social responsibility especially when it comes to the environmental side of things. The truth of the mater - like the one used to be tackled by agents Mulder and Scully in the TV series The X-Files – is not what it seams to be.

More than just a “look how caring we are” public relations ploy of big corporations, corporate social responsibility can serve also as a company’s unique selling point especially in today’s slowing down markets. Anything that helps your company will be tried in these somewhat desperate times I’m told, but what’s the point? Why adopt a policy that would wind up your company to lose money just to avoid the general public’s “resentment” of the financially successful i.e. rich from being directed at your company? Before we get overly philosophical, let’s first explore this concept of corporate social responsibility.

Corporate social responsibility is now currently made up of three broad layers. The most basic is the traditional corporate philanthropy which many view only big companies with relatively long history can afford. Like Google’s 25 million-dollar philanthropy, which the company announced in January 2008 to be awarded to social projects that tackle poverty and climate change. The second layer of corporate social responsibility can be thought of as a branch of risk management. This is when companies talk to Non Government Organizations and to governments regarding the current pressing problems like the cost of living, the environment, and also create codes of conduct that allow them to be more transparent in their day to day operations. Companies also talk with their competitors regarding these things as to form a collective risk management scheme and in keeping their workers “happy”. In other words “enlightened self-policing”. The third of which is how corporate social responsibility makes a company appear “caring” to the rest of the world which creates value to the company in which can also be used as a unique selling point.

For whatever its worth, companies that had adopted corporate social responsibility since the 1990’s have been aiming to improve our two most pressing problems namely environmental protection and poverty alleviation. It seems like programs that address pre-existing environmental problems can also serve to improve local economic conditions. Concepts like organic farming, which crops and animals are produced without the use of harmful chemicals and animals are kept in free range as opposed to being kept in inhumane conditions. Fair trade, which farmers / producers are paid a fair price for their products as opposed to the lowest price allowed by law. Also sustainable utilization of natural resources like the Marine Stewardship Council or MSC which help keep fish stocks at a sustainable level while providing job security for the fishing industry.

Critics of corporate social responsibility say that it is just a cover used by companies who are performing badly and want rich treehuggers to purchase their initial public offerings with a perception that their clients are making a difference. But the results speak for themselves. Even though the mainstream press seems to over hype the political correctness of corporate social responsibility, embracing the idea for environmental reasons have not only improved the immediate environment of the companies that chose to, but the social conditions also improved. Companies that refurbish pre-loved / pre-owned computers to be either donated or to be sold at a bargain to impoverished communities are not only helping the environment by reducing the amount of e-wastes going into our overloaded landfills. They’re also creating new jobs and even future employment due to the computer literacy that results from donated computers.

Did Keynesian Economics Kill the Business Cycle?

2008-03-14T06:28:00.000-07:00

Not so long ago, economists resigned themselves to the fact that recession is just a part of the economic cycle. Then came John Maynard Keynes who shattered that dogma and revolutionized the science of economics. Will “Keynesian Economics” save us from the harmful effects of the business cycle?

By: Ringo Bones and Vanessa Uy

Despite the problems affecting our global economy like sub prime mortgage exposure and the worrying trend of economic recession, we often tend to forget the fact that business conditions have always been fluid and dynamic. One year, the markets are booming and bullish with jobs aplenty. Another year, the stock market goes into a free fall, and bankruptcy courts become more crowded than the Tokyo Subway at rush hour. As chronicled in our economic history books: recession, expansion, then recession follows a sequential saga. And in the memory of the bad old days of ruthless capitalism that brought us Black Tuesday – October 29, 1929 – the day the stock market crashed. Tales chronicling the “Great Depression” even mentioned about banks failing by the thousands and a very drastic slowdown of the US economy that weeds started to grow on the materialistic self-complacent provincialism of Main Street.

America’s post-World War II economy which is largely – if not totally – governed by the principles laid out by John Maynard Keynes in the hopes of making the 1929 “Black Tuesday” incident just an ugly footnote of the American economic history. Thus in the United States, pure capitalism has gradually given way to a mixed economy, in which the government shapes the tax and fiscal policies to stabilize the ups and downs of business. “Keynesian Economics” which is viewed by “conservative” Americans with disdain because it tends to undermine the Protestant / Calvinist work ethic that helped built the American nation, which in turn downgrades productivity. Government “over regulation” of industries like the savings and loans has resulted only in disaster. Despite of it’s detractors, the economic policies laid out by John Maynard Keynes gain widespread praise by economists for keeping a full-blown economic depression from ever happening again. But as the Federal Reserve Board acts to control the money supply and counteract the business cycle, can we really conclude that recessions are a thing of the past?

But economists tend to forget that economics – in general – is primarily greed driven. The promise of rich rewards / gains despite atrocious levels of risks is what makes traders take foolhardy decisions at the expense of their representative investors’ funds. And yet we can take real comfort in the fact that economic recessions are milder in the “Keynesian Mixed Economy” environment than they where under the pre - New Deal capitalism. And if they occur, post – World War II economic recessions are also shorter in duration and much rarer in occurrence. Let’s just hope that our current post – sub prime mortgage / credit crunch 2008 will follow this trend. Maybe the “worries” that made our grandparents and great grandparents gray and wrinkled is something that the under 25s will scarcely know.

The Flavors of Recession

2008-03-10T04:07:00.000-07:00

As we ring in 2008 with apprehension over the sub prime mortgage crisis and credit crunch that plagued the US economy during the latter half of 2007, the question remains: Is the US economy already in recession?

By: Ringo Bones and Vanessa Uy

One time honored wisdom states that if America sneezes, the rest of the world catches a cold. A colorful phrase used to describe economic recession and the primary reason why the rest of the world lives in fear – especially countries who exports most of their products to the US - every time the US economy heads into a downturn. But come 2008, the question on everyone’s minds still remains: Is the US economy already in recession?

But what is an economic recession? Who decides? For years, the press and the Las Vegas odds-makers had adopted this simple pragmatic definition: When the real Gross National Product (total value of all goods and services, corrected for inflationary price rises) declines for two quarters (6 months) in a row – that is an economic recession. This rough definition is adequate for most purposes, and surely more “refined” than its "blue collar" counterpart which states: When your neighbor looses his job, its only economic slowdown, when you loose your job, it’s a full blown economic recession.

Another definition of economic recession that is formulated by The National Bureau of Economic Research, a prestigious nonprofit organization that has kept the official score on the US economy’s business cycles. The “bureau’s” definition is based on more refined tests and measurements. Yet, for the most part, The National Bureau of Economic Research arrives at the same conclusions as the press and Las Vegas odds-makers did when it applies it’s own definition. Which states: “An economic recession is a recurring period of decline in total output, income, employment, and trade usually lasting six months to a year and marked by widespread fluctuations in the economy.”

As time went on, economist these days had discovered and defined a new species of economic recession called a “mini” or “growth-recession” which the current Bush Administration says best describes on what is happening to the US economy right now. Even though most Americans – especially those under the age of 30 – think that the credit crunch is a new and recent phenomena that only came to life near the end of July 2007. But the credit crunch did happen way before, back in 1966 to 1967, when the American people had to live with a “growth-recession” when a credit crunch curtailed housing starts and shaved 20% off stock prices. A mini or growth-recession is defined as follows: When output and employment grow for half a year or more at significantly less than their average trend rate of growth, an economy is in a “growth-recession”, even if actual growth rates never turn negative.

Even though American billionaire and now the world’s richest man Warren Buffett and the financial firm Merrill Lynch both said that the US economy is already experiencing recession at the start of 2008. The Bush Administration still insists that the US economy is only undergoing a slow down and can be easily cured with an Economic Stimulus Package. Does the Bush Administration dread the use of the “R” word (recession) because they think it will cause widespread panic? But the US economy is indeed now experiencing full blown recession because 2008 jobless rates are at a five year high, home repossessions are on the rise, Wall Street shaky as world markets watch. Plus the price of crude oil and basic foods now at a record high is not helping matters either.

As the US Federal Reserve Chairman Ben Bernanke slash interest rates further and the Economic Stimulus Package planned to be increased to 200 billion US dollars - the latest ones in the form of "auctions" that could well undermine a financial firm's credit rating, will all of these measures be able to turn around the ailing US economy from sliding further into a deep recession? It’s a bit iffy, because as the US Federal Reserve makes cheaper still the cost of borrowing money, the “financially inept” – sorry to say – will be driven further into debt. This is so because its primarily due to greed driven foolhardy decisions that drove these people to concoct get rich quick schemes that started all this mess in the first place. Unless an epidemic of “financial enlightenment” sweeps across the United States, bankruptcy courts will be standing room only beginning 2008.

Who’s Afraid of Stagflation?

2008-03-07T04:54:00.000-08:00

Fast becoming an economic doomsayer’s buzzword in our post sub prime mortgage financial environment, will stagflation rear’s it’s ugly head again this 2008?

By: Ringo Bones and Vanessa Uy

Despite American economist, especially those in the pay of the Bush Administration, saying that the US economy is not yet in recession when we ring in 2008. But in our post - New Deal economic system that’s supposedly designed to keep economic recession a thing of the past, a form of economic malaise is now poised to threaten the on-going recovery process to lessen the impact of the sub prime mortgage crisis – namely stagflation.

Most of us living today – especially those under the age of 25 – has probably many questions to ask about stagflation, like: What is stagflation? Did stagflation happen before? Before we proceed, lets briefly discuss on what is stagflation and it’s primary causes.

When the post – World War II Keynesian Mixed Economy has alleviated the curse of old-fashioned economic depression and recession, it created the economic conditions that engendered the newfangled specter of stagflation. Stagflation is caused by a combination of stagnation in the production and employment sector with the inflation in the cost of living.

In 2008, stagflation now threatens China, Australia, and especially New Zealand whose individual Central Banks choose to raise the cost of borrowing money – i.e. raised interest rates – at a time when crude oil prices and food prices are at an all time high. The Las Vegas odds-makers say it’s a definite certainty that stagflation will definitely return in 2008, but let’s examine the economic conditions that made stagflation happen.

Back in 1979 during the Carter Administration, the economic slowdown of that year was primarily blamed on the artificially induced scarcity of the crude oil supply due to OPEC unable to respond the on-going geopolitical instability of the Middle East. This caused soaring food prices that contributed to the two-digit inflation that plagued America’s economy at the end of the 1970’s.

Then US President Jimmy Carter with the help of then Treasury Secretary G. William Miller, and then Federal Reserve Board Chairman Paul Volcker choose to cure the “inflation” part of stagflation back in 1979 by increasing the cost of borrowing money – i.e. raising interest rates. High interest rates on loans – 15% for large companies, 20% for less credit - worthy borrowers – were intended to combat inflation. The bad news is high interest rates adds to the cost in running a company and thereby leads to inflated prices. Some companies kept costs down by downsizing – i.e. laying off more “expendable” employees to keep their bottom line healthy. The poor and the unskilled members of the American society bore the brunt of the corporate downsizing during the latter days of the Carter Administration.

The fiscal oversight in tackling the 1979 stagflation documented on how President Carter and his financial advisers choose to reign in on the inflation part of stagflation because of their trust on “off the shelf” methods (or was it their trust of prevailing “off the shelf wisdom”) of tackling inflation are already tried and true. But at the expense of economic stagnation that prevailed well into the 1980’s. Let’s just hope that the Bush Administration’s “Economic Stimulus Package” has provisos for preventing the repeat of the 1979 stagflation because of the damage it could inflict on the already ailing global economy. A lot is now riding on the current US Federal Reserve Chairman Ben Bernanke’s decisions because it’s not just the American Economy that is on the line. The export - oriented economies of the Asian Far East will surely be affected.

Sovereign Wealth Funds: Altruism’s Road to Hell?

2008-02-22T04:17:00.000-08:00

Touted as the primary means of revitalizing an ailing “economic system”. Do Sovereign Wealth Funds really help more than they inevitably hurt?

By: Vanessa Uy

Billionaire investor George Soros is one of those people who really have a high praise for Sovereign Wealth Funds. But how many of us have the investment savvy of George Soros? And most of all; will Sovereign Wealth Funds – if properly (and ethically?) used – help alleviate our current (2008) global economic slowdown? But first, a brief primer on what is a Sovereign Wealth Fund.

A Sovereign Wealth Fund is a fund that is owned by a sovereign state. These are usually composed of financial assets such as stocks, bonds, property or other financial instruments. Sovereign Wealth Funds are broadly defined entities that can manage the national savings for the purposes of investment. These pooled funds may have their origins in, or may represent foreign currency deposits, gold, Special Drawing Rights and International Monetary Fund (IMF) reserve position held by central holdings. In other words, Sovereign Wealth Funds are assets of sovereign nations, which are typically (but not necessarily) held in domestic and different reserve currencies such as the dollar, euro, and yen. The names attributed to the respective management entities may include central banks, official investment companies, state pension funds, sovereign oil funds and so on.

Even though it’s really beyond reproach that Sovereign Wealth Funds can save an ailing company or an “economic system”. But the problem of evil rearing it’s ugly head comes along when investors who are controlling a typical Sovereign Wealth Fund can now dictate the company’s policy – which they now own by the way and they can fire / replace the company CEO if he or she doesn't fall in line. Never mind the ensuing massive layoffs that typically occur if the “new management” thinks that this move will “streamline” the company.

This is why some countries are staunchly “Protectionists” when faced with the prospects and / or threats of Sovereign Wealth Funds. Imagine if The People’s Republic of China’s Sovereign Wealth Funds allowing the Beijing Government access to Lockheed Martin’s “Proprietary Trade Secrets”. And what about the Sovereign Wealth Funds of “Despotic Arab States”, are we ready to face another “New World Order”?

And then there’s the issue of corporate ethics and the latest corporate buzzword “Corporate Social Responsibility”. I’ll bet a number of us are wondering if their pension funds are used by the US Central Intelligence Agency to underwrite their “Extraordinary Renditions” program which sadly existing Sharia Banking Laws didn’t mention (preach?) about the sins of investing one’s money in the “Military – Industrial Complex”. Those of us who are weary of the evils of Capitalism should take a stand now.

In Banks We Trust

2008-01-28T03:10:00.000-08:00

Ever since the news of the Société Générale bank fraud spread around the world, bank depositors and the general public are now wondering whether banks are part of the solution – or cause of the problem – of our current global financial crisis?

By: Vanessa Uy

As the French bank Société Générale prepares to close its offices for the weekend last January 25, 2008. A 31 – year – old Junior Executive Trader named Jerome Kerviel now dubbed as the “rogue trader” managed to loose a little over 7 billion US dollars worth of Société Générale’s funds by trading on the European Equities Market. An amount equivalent to 15% of the bank’s total assets or the amount the bank earns in an average fiscal year. The Junior Executive’s questionable action was defined as a fraud under established trading laws. Now under custody, investigators have doubts whether Jerome Kerviel acted alone. If found guilty, Jerome Kerviel may face a 5 - year prison sentence and hefty fines. Since the incident happened, ordinary bank depositors around the world – i.e. you and me – now doubt whether commercial banks and related financial institutions can do their part in solving the current “financial turbulence”.

For as long as I can remember, banks are seen as “agents of economic progress.” This is so because in school our teachers had instilled in us that if we save our money in banks - as opposed to stashing it in our “secret cookie jar” - we will be contributing to the economic progress and welfare of our nation. But recent events, like the Société Générale bank “fraud” case introduced a worm of doubt on everyone’s perceived trust between their money and their bank.

As of late, top economists had been pointing their fingers on the culture of “savings disparity” as the primary cause of the US credit crisis that is now threatening the global economy. These economists point out that on average, typical Americans save an equivalent of about 10% of their annual income, while in China its 50%. The prevailing wisdom about the role of banks on a nation’s / state’s economy lead the economists to conclude that the phenomenon of “savings disparity” is the overwhelming reason why – at present – the US Economy is weakening. While China’s remained strong despite the “bad decisions” made by US banks and related financial institutions that lead to the credit crunch and sub prime mortgage crisis. But since – taken as a whole – the global economy is a relatively complex dynamic system that’s continuously in flux, only time will tell if the Federal Reserve chairman Ben Bernanke and the Bush Administration’s resort to John Maynard Keynes – style economics. Like the 145 - billion dollar “Economic Stimulus” package that will supposedly prevent the US Economy from sliding into a recession. Or should everyone of us prepare for a repeat of the “Banking Panic of 1857”, or the draconian credit control measures of the Roosevelt Administration that lead to the “Bank Holiday” of March 4, 1933. Just remember what John Maynard Keynes wrote early in his career: “In the long run we are all dead.”

Structured Settlements: A Barrier to Social Justice?

2008-01-16T04:28:00.000-08:00

Now more than ever, governments worldwide are forced to choose between the welfare of their citizens or in maintaining the “bottom line” of corporate entities.

By: Ringo Bones and Vanessa Uy

American social justice crusader Michael Moore had criticized structured settlements in his documentary “Bowling for Columbine” citing that -in practice- it is pro-corporation and anti-corporate victim. In the recent Heiligendamm G8, ATTAC-the anti G8 pressure group-are very clear on where they stand on the issue of structured settlements with their motto that states: “The world is not for sale.” But what is a “structured settlement”? A structured settlement is a financial or insurance arrangement- including periodic payments- that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in the US and Canada during the 1970’s as an alternative to lump sum settlements. Structured settlement payments are sometimes called “periodic payments.” A structured settlement that is incorporated into a trial judgment is called “periodic payment judgment.” Almost instantly after being instituted by the major economic powers in their judicial system, structured settlements were later adopted by London, Australia and the rest of the “Industrialized West.” If this form of settlement is being widely adopted by the Western World, then conventional wisdom dictates that this is a good thing – right?

In practice, the equitability of structured settlements break down when the claimant has became terminally ill and doesn’t have much time to live. This works in favor of the corporation responsible for the said injury/damage to the health and well being of the plaintiff. Back in June 2007, the BBC reported on a court appeal in the US to pay compensation to Vietnamese citizens affected by the defoliant “Agent Orange” then in use during the Vietnam War. The claimants lost on the first round of court hearings, but they vow to persevere.

Basing on what we currently know about the “Agent Orange” issue, the Vietnamese victims of the said defoliant face an uphill battle. Since the manufacturers of the “Agent Orange” used during the Vietnam War – DOW Chemical Corporation and Monsanto Corporation – have close ties to the powers-that-be on the Pentagon and Capitol Hill. Even though -at present- DOW and Monsanto are currently involved with structured settlements with American Troops who became chronically ill and developed cancer while being exposed to “Agent Orange” during their “Tour of Duty” in Vietnam during the 1960’s.

DOW and Monsanto’s “delay tactics” will only do the company favors since their yet-to-be-recognized claimants are slowly dying out. This might not pass as justice to most of us civilized folks, but it’s the law!

Should We Be Investing in Gold

2008-01-03T03:28:00.000-08:00

For the last 30 years or so, it’s a well-known fact that as the value of the US dollar decreases, the price of gold increases. In today’s post-US sub-prime mortgage economic climate, does it still make good fiscal sense to invest in gold?

By: Ringo Bones and Vanessa Uy

As the price of oil draws ever closer to the 100 US dollar-per-barrel mark, is our present (fiscal year 2007) global economy fast becoming into the economic climate that existed in 1980? Even though there are similarities like the Federal Reserve reigning in on credit and interest rates, the tumultuous political situations in the Middle East. The US$100 in 1980 is still higher in value after FTC algorithm-inflation-adjustments compared to US$100 circa-2007. Armed with this data, will the price of gold do a 1980 era repeat of reaching over the US$800 per-ounce price range?

With an aspect of Sharia Banking Laws fast becoming into vogue in Western financial sectors like the idea of financial institutions should only honor “concrete” or “tangible” forms of collateral, the lure of investing into precious metals –like gold- had recently become the hottest trend in high-yield investments. But the precious metals market is by no means strictly infallible and not immune from unlawful market manipulation. If anyone still remembers-or cares- about the “Hunt-silver debacle” will surely attest to this. At the beginning of the 1970’s the Hunt brothers – heir to the multi-billion dollar fortune of Texas oil/petroleum tycoon H.L. Hunt used their billions to purchase and hoard silver in an attempt to increase the price of silver to be comparable to that of gold. But near the end of March 1980, the Hunt brothers, along with a major Wall Street firm and U.S. securities and commodities markets came almost to the brink of financial disaster. Even though those were different times back then, if most of today’s current billionaires will do a “stunt” similar to what the Hunt brothers did -but to gold- the price of gold could reach US$10,000 per-ounce.

Our current allure of gold and its related retinue of precious metals, stemmed from the US sub-prime mortgage crisis that became news by the end of July 2007. During the succeeding months, the fallout of the US sub-prime mortgage crisis affected the global currency market – with their anchor – the US dollar weakened by inflation due to the Bush administrations current quagmire in Iraq. (At an average cost of US$1billion-per-week, it does seem like Uncle Sam is setting up a colony on a distant earth-like planet orbiting the star Alpha Centauri). Bonds and conventional bank savings accounts quickly lost their appeal as inflation drained their purchasing power. So investors and their dogs everywhere quickly began to turn to the oldest stores of value they can find – gold and related precious metals.

The novice investor may ask: “Why invest in gold?” Well, since the time paper money gained widespread appeal. These “paper money” –by common sense- should be worth just about or lesser than the paper on which it is printed on, unless the paper money’s value is backed-up by “tangible” or “concrete” assets namely gold, silver or the other related precious metals. But it is mainly the “gold standard” i.e. a monetary standard under which the basic unit of currency is defined via a stated quantity of gold circulating freely into the international financial system, hence the term “bank notes”. The reason we expend an almost excessive amounts of our mining expertise in obtaining this rare but almost useless metal, which even in “gold rush” days involves the “processing” of a ton of ore just to get 17 grams of gold. At present, even “processing” a ton of ore just to get 3 grams of gold is considered very economically viable. And also, it is because gold is what makes our paper money able to buy things i.e. purchasing power. The other uses of gold is in the jewelry industry, dental “bridgework” and electroplating electrical / electronic components to make them corrosion resistant.

While platinum is far more useful than gold and the gyroscopes of modern bombsights are made from it. Unlike gold or silver, platinum doesn’t occur in its native state in nature i.e. free elemental form. Platinum, and its related metal siblings on the Periodic Table namely rhodium, iridium and palladium are usually refined via proprietary chemical process that is a highly guarded trade secret. Usually a batch of beige - colored mud (ore concentrate) is added with a “secret” chemical mixture to obtain the pure metallic platinum and its metal siblings.

A lesser known metal that is more useful expensive, and rarer than gold is gallium. The main user of gallium is the electronics industry where it is used in making semiconductors with high switching speeds and “solid state” night-vision goggles. Without gallium, the green-tinged Paris Hilton Sex Video would not have been possible. Yet gallium plays no part in backing the value of our paper currency.

So what does this all mean? Being closeted –but fiscally challenged – philanthropists that we are. We do believe in charity –only during those times that we are practically overflowing with money. We’ve read “The Politically Incorrect Guide to American History” by Thomas E. Woods, Jr., Ph.D.. And the part of that book that really speaks to us is about how charitable giving grew at a faster rate during the 1980’s, described as “the decade of greed” (after the movie “Wall Street”?). Statistics had shown that charitable giving during the 1980”s really grew at a faster rate than it had during the previous 25 years. A really “scary” proof to the saying that: “greed is good”. Because of this, its now in the best interest of major charitable organizations like Oxfam and the UN Food Programme for us to “become rich”. With skyrocketing grain / staple crop prices due to the hastily set-up biofuel industry, the United Nations Food Programs food / grain purchasing power has been drastically reduced. So they need more money just to maintain their existing / basic programs.

The Dot Asia Domain Name: Kickstarting the Region’s Economy?

2008-01-03T03:25:00.000-08:00

The age of Internet domain name real estate has finally arrived, will you be the next I.T. billionaire?

By: Ringo Bones

There’s a new domain name in our “Internet Town”, it’s called dot Asia (.asia). One of the latest lines of domain names that’s named after an actual geographic location. Looks like we used up all of those little Pacific Island nations as a source of domain names.

Interested customers to the auction have 6 months to register, so register as soon as humanly possible because these things go out fast. Registration for “dot asia” opened on Tuesday October 9, 2007. Protection wanted from cyber-squatters?

Back in August 9, 1995, nobody knew that the dot com boom that started then will eventually go bust five years later. Now, Internet entrepreneurs are more wary on the promise of easy money. Even experienced Internet domain name developers are forever mindful that their “South Sea” domains like Tuvalu’s dot tv and Tokelau’s dot tk might mimic the “South Sea Bubble Burst of 1720”.

To me, the IT / Internet / computer industry – after recovering from the dot com bust of 2000 - has done so much good to those fresh out of college looking for gainful employment, especially those living in the impoverished parts of the world. The industry could essentially fulfil the promise of the Clinton Global Initiative of keeping every batch of fresh graduates securely employed by creating new jobs – like domain name developers – every 5 to 8 years. If all goes well, this mission would be a piece of cake for the industry.

Lexington Law: Prosperity Tool or Needless Rigmarole

2008-01-03T03:22:00.000-08:00

Now that on-line banking services are now as secure as their traditional equivalent, does the Lexington Law Firm’s service (promise?) of improving one’s credit score help or hinder our goal towards financial security?

By: Ringo Bones and Vanessa Uy

Since the advent of on-line banking, meeting ones financial needs like e-loans is now only a mouse click away. Some on-line banks have even adopted the concepts of Nobel laureate Professor Muhammad Yunus’ “Banking for the Poor.” You can now avail to a socially responsible investing by providing small business loans to the needy via the Internet. But as one’s on-line business keeps on growing, sooner or later, one will encounter “credit report” problems. Fortunately, there are service providers on-line whose business is to provide solutions to these kinds of problems.

As seen on their adverts, Lexington Law firm promises to improve your credit score and provide credit repair. Lexington Law firm has pioneered credit services over the Internet. Lexington Law firm has been providing credit repair services for many years and have a select group of experienced attorneys who specializes in credit repair. The law firm had helped over 90,000 Americans repair their credit by removing inaccurate, misleading or unverifiable items / information from their client’s credit reports. From bankruptcies to charge - off to tax liens, Lexington Law firm have challenged virtually every credit problem under the sun. They’re good at what they do because they believe in their work. Their attorneys enjoy what they do and are committed to their clients. This means they get you results that you –the client-can count on, results that can literally turn your life around.

Lexington Law firm ignited the consumer credit repair revolution in 1991 with their off-line credit repair services, and reinvented the consumer credit repair process in 1997 with it’s e-Client service. Lexington is committed to providing the best and most effective credit repair solutions to consumers through its innovative credit repair and Internet offerings. At present, Lexington has helped over 200,000 Americans repair their credit reports by removing inaccurate, misleading, or unverifiable information. The firm also promises 24 hour 7 days a week support, same day service, no hidden fees and their clients can cancel anytime.

Since their establishment in 1991, only a very small minority of Lexington Law firm’s clients experienced dissatisfaction of the services provided. Like the one client who voiced her opinion on creditforum.org, she said Lexington Law firm does “NOT” provide dispute letters to clients? Spam disputes only? While some of Lexington Law firms more extreme critics describe the firm as an “ENRON” waiting to happen.

From what I had observed so far, Lexington Law firm provides an invaluable service of improving one’s credit score especially in this age of on-line banking where prospective clients can only “meet” the bank manager in cyberspace. The service they provide could literally save your credit so that when the time comes when you need money in a hurry, there will be no problem asking your on-line bank for an e-loan i.e. to borrow money. I wonder if Lexington Law firm also includes credit counseling or a tip to reduce debt as part of their on-line service? Also, one can’t ignore the testimonials of thousands of their satisfied clients, which only serve to strengthen Lexington Law firm’s reputation.

Like all business related firms, only time will tell if Lexington Law firm will boom or bust in this new age of on-line banking where the primary goal of their clients is the acquisition of extra money. I just hope that they’ll survive the current July 2007 slowing down of America’s credit market.

Domain Names: The Internet’s Real Estate Bonanza?

2008-01-03T03:18:00.000-08:00

From the 1990’s “Dot Com” boom to the bubble bursting in 2000, are domain names the magic bullet that will restore investor confidence on the Web?

By: Ringo Bones and Vanessa Uy

Touted as the “Real Estate Market of the Future” in the middle of the 1990’s, domain names are now a billion-dollar industry, not only for the major search operators like Google and Yahoo but also to a new breed of Internet real estate developers. Domain names have since become the “bread and butter” of the on line marketing and on line advertising business. Having outgrown the “dot com” slump of 2000, domain name – the real estate of the web – have been delivering far greater returns compared to it’s real world counterpart as reported on CNN.com. For those of you who have the resources to invest in the domain name development business yet don’t know what it is, here’s a primer.

Domain name refers to the first part of a URL - (URL stands for Uniform Resource Locator – the unique address of any Web document that can be keyed in a typical browser’s OPEN or LOCATION / GO TO box to retrieve a document) – on to the first / where the domain and name of the host or SERVER computer are listed. This is usually arranged in reverse i.e. name first, then domain. The domain name gives you the information on who (the origin of) “published” the page i.e. made it public by putting that page on the Web.

In the 1990’s – when the Internet evolved from a mere “academic curiosity” to a telecommunications medium with a promising economic viability – the exclusive right to use Internet domain names became a highly contested issue. Enterprising individuals knew that there’s money to be made in these unique sequences of letters that are divided – by convention – into segments separated by periods that correspond to the numerical Internet Protocol Addresses that identify each of the millions of computers connected to the Internet. Because domain name labels enable packets of information to be sent to their specific destinations across the Internet, the commercial implications are not lost to the world’s various advertising agencies.

Domain name development profits does not only fill the coffers of unscrupulous entrepreneurs, but can also benefit an impoverished country because all countries are designated a top-level domain name on the Internet usually as a suffix to that country’s Internet Address. For example .be for Belgium, .hk for Hong Kong, .ph for the Philippines, .za for South Africa and so on. A number of these domain names have been featured on stamps. During the last few years of the 20th Century, a relatively poor Pacific Island nation of Tuvalu hit the jackpot when it received the .tv domain name, although initially Tuvalu’s citizens didn’t realize that they owned the most recognizable suffix of all, .tv.

Back in 1999, the .tv domain name gained “humanitarian / philanthropic” status when Jason Chapnik – a Canadian businessman- walked into a Tuvalu parliament meeting and pleaded his intentions to buy their domain name. After further negotiations, by the year 2000 Tuvalu decided to sign up with Chapnik to form a new company called Dot TV that’s currently based in Pasadena, California. Tuvalu owns 20% of Dot TV and received US$50 million from the lucrative deal which the country – via structured settlement – receives quarterly payments of US$1 million each over a period of 10 years. Tuvalu recently received a payment of US$18 million that instantly doubled the country’s GDP.

This sudden windfall of revenue allowed Tuvalu to achieve an economically independent status. Ever since gaining independence in 1978, Tuvalu could hardly afford the US$20,000 UN membership fee. It wasn’t until September 5, 2000 where Tuvalu could finally afford being UN’s 189th member nation. The domain name revenue enabled the various islands of Tuvalu the ability to upgrade their public infrastructure like roads, schools and water purification facilities. The upgrading of Tuvalu’s main airport to accommodate larger planes has allowed the country to export food for the first time in history.

Despite of the recently found wealth, the global community is now wondering whether Tuvalu can cope with the challenges of sea level rise due to global warming and the increased typhoons brought about by climate change with “dot com” funds alone. Is Tuvalu now in the front line for the global community’s battle against sea level rise?

On Line Social Money Lending Networks

2008-01-03T02:02:00.000-08:00

Ever since Mohamad Yunus was awarded the Nobel Peace Prize for proving the fiscal viability of lending money to the poor, are the on line counterparts just as effective?

By: Vanessa Uy

My grandfather’s present financially secure status was due to some big-hearted soul who took a chance by lending him some money as capital for a business start-up. This is just one of the success stories/testimonials that extol the virtues of money lending. But more often than not: Does it help more than it hurts? When Mohamad Yunus was awarded the Nobel Peace Prize last year for his “Banking for the Poor” program. Many of the urban poor in the slums of Bangladesh were very grateful for receiving the much needed start-up money / small business loan, thus getting them out of “the red.”

On the web, you can do your own DIY banking with the help of “Zopa.com.” This is one of the pioneering on line money lending sites, which started operating in England that lends money that is payable on the client’s own terms. A myriad of testimonials on Zopa’s website already professed that they benefited Zopa’s easy to pay terms. Since then, Zopa probably served as a vital lifeline to the majority of England’s “blue collar” population. Despite the risks of phishing, ID theft, and the proliferation of illegal key logging software that continually compromises on line security or just due to the relative lawlessness of the world wide web. “Zopa.com” still manages to provide material gains to their investors while offering a helping hand to those in need of extra cash. James Alexander CEO of Zopa says that his company has enough safeguards to minimize the risks.

If you want to help someone in a poor country to start his or her own enterprise, you should check out Kiva. Kiva is an on line social money lending site that allows you to sponsor an entrepreneur from a third-world country for as little as US$25. What I liked very much about Kiva is that they have a very good “transparency factor.” Thousands of charity cases, which have passed Kiva’s evaluation, are listed on their website. The short video clips contain individual business proposals. If you choose to invest, the maturation period of the loans are usually 6 to 12 months. And you, the investor are contacted via e-mail on your investment’s progress. One of Kiva’s success stories is Angel, a bicycle repairman from Rome, Bulgaria. Angel got booted out of the local bicycle repair shop in which he was previously employed due to “financial restructuring.” With Kiva’s helping hand, Angel now runs his own bicycle repair shop. With additional investments, you can help him expand his business and help to lessen the unemployment problem of his hometown.