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.
Monday, August 16, 2010
Will There Be A Double-Dip Recession in 2010?
Despite the pessimistic – but logical – economic outlook harbored by the US FED Chairman and US Treasury Secretary, will there be a double-dip recession in the second half of 2010?
By: Ringo Bones
Our global financial markets are indeed confidence driven. Look no further than the recent pessimistic – but logical – economic outlook of US Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Timothy Geithner has recently sent various stock markets across the globe in an unprecedented sell-off. Maybe it might just be the current dismal jobs market in the US is somewhat hard to overlook, but still – like a celebrity diagnosed with a manic-depressive disorder – our still recovering global financial market still needs constant reassurance just to maintain its bottom line. But a more pressing concern is that will there be a double-dip recession in the US and elsewhere around the world during the second half of 2010?
Despite the pessimistic outlook of the United States’ financial top brass, most of the world’s leading economists are still confident that the occurrence of a global double-dip recession in the second half of 2010 is still very unlikely. A prolonged economic recovery slowdown perhaps, but still, there are already historic precedents that a global double-dip recession might not happen at all during the second half of 2010. And the following is the oft used explanation cited by leading economists.
Even though our current global financial woes was primarily caused by the subprime mortgage crisis that started in the US near the end of July 2007 that was inadvertently allowed to spread around the world, we already have a handle on how to deal with such “financial emergency”. Though now only of academic interest to economists, the “mini recession” or “growth recession” of 1966-1967 exposed the American people to a credit crunch that curtailed housing prices and shaved 20% off stock prices. Many economists see our slowed global recovery as a mere growth recession it follows the textbook definition of such.
As in when the production output and employment growth for half a year or more are significantly less than the average trend or rate of growth – as what is happening right now in America – an economy is said to be in a growth recession, even if the actual growth rates never turn negative. But is it yet too early to panic?
The signs that seem to point to the inevitability of a double-dip recession in 2010 – the lagging jobs creation and dismal manufacturing growth in the US – can be hard to deny. Worse still, a lack of “organic growth” instead of just the “artificial” growth due to the economic stimulus packages could inevitably lead to the fragile global economic recovery back into recession.
While America’s middle class has recently become the country’s nouveau poor due to mortgage foreclosures that drove a growing number of them into bankruptcy and the UK government becoming too obsessed with balancing between economic growth and recession, Germany had recently experienced its greatest quarterly GDP growth rate yet since the 1991 reunification. An economic growth that made the Eurozone countries outpaced the United States and strengthened the euro once again.
Another reason why almost all economists are still optimistic enough to predict that a double-dip recession will probably never happen for the rest of 2010 because the financial reforms already in place to make sure the global credit crunch of 2008 will not happen again. And yet almost all of them say that a bullish economic recovery is still far off into the future.
Given that the global economy is very much confidence driven and can be compared to a manic-depressive celebrity that needs constant reassurance just to function socially. Then it is still safe to say that a double-dip recession is still and has always been just around the corner. If not in 2010, there’s always next year to worry about.
By: Ringo Bones
Our global financial markets are indeed confidence driven. Look no further than the recent pessimistic – but logical – economic outlook of US Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Timothy Geithner has recently sent various stock markets across the globe in an unprecedented sell-off. Maybe it might just be the current dismal jobs market in the US is somewhat hard to overlook, but still – like a celebrity diagnosed with a manic-depressive disorder – our still recovering global financial market still needs constant reassurance just to maintain its bottom line. But a more pressing concern is that will there be a double-dip recession in the US and elsewhere around the world during the second half of 2010?
Despite the pessimistic outlook of the United States’ financial top brass, most of the world’s leading economists are still confident that the occurrence of a global double-dip recession in the second half of 2010 is still very unlikely. A prolonged economic recovery slowdown perhaps, but still, there are already historic precedents that a global double-dip recession might not happen at all during the second half of 2010. And the following is the oft used explanation cited by leading economists.
Even though our current global financial woes was primarily caused by the subprime mortgage crisis that started in the US near the end of July 2007 that was inadvertently allowed to spread around the world, we already have a handle on how to deal with such “financial emergency”. Though now only of academic interest to economists, the “mini recession” or “growth recession” of 1966-1967 exposed the American people to a credit crunch that curtailed housing prices and shaved 20% off stock prices. Many economists see our slowed global recovery as a mere growth recession it follows the textbook definition of such.
As in when the production output and employment growth for half a year or more are significantly less than the average trend or rate of growth – as what is happening right now in America – an economy is said to be in a growth recession, even if the actual growth rates never turn negative. But is it yet too early to panic?
The signs that seem to point to the inevitability of a double-dip recession in 2010 – the lagging jobs creation and dismal manufacturing growth in the US – can be hard to deny. Worse still, a lack of “organic growth” instead of just the “artificial” growth due to the economic stimulus packages could inevitably lead to the fragile global economic recovery back into recession.
While America’s middle class has recently become the country’s nouveau poor due to mortgage foreclosures that drove a growing number of them into bankruptcy and the UK government becoming too obsessed with balancing between economic growth and recession, Germany had recently experienced its greatest quarterly GDP growth rate yet since the 1991 reunification. An economic growth that made the Eurozone countries outpaced the United States and strengthened the euro once again.
Another reason why almost all economists are still optimistic enough to predict that a double-dip recession will probably never happen for the rest of 2010 because the financial reforms already in place to make sure the global credit crunch of 2008 will not happen again. And yet almost all of them say that a bullish economic recovery is still far off into the future.
Given that the global economy is very much confidence driven and can be compared to a manic-depressive celebrity that needs constant reassurance just to function socially. Then it is still safe to say that a double-dip recession is still and has always been just around the corner. If not in 2010, there’s always next year to worry about.
Saturday, July 31, 2010
Cacao: Lucrative Commodity Du Jour?
While the reading economic powers around the world are busy searching “creative” ways to stimulate our post credit crunch economy, has cacao unexpectedly become the speculative commodity du jour?
By: Ringo Bones
With the world’s leading economic powers are now busily printing money like there’s no tomorrow in order to lower the cost of borrowing money to stimulate our post credit crunch global economy. Seasoned investors have now resorted to commodities speculation as a hedge against the resulting inflation brought about by the widespread availability of cheap money. But is cacao – the raw material for chocolate making that had recently reached a 32-year price high the lucrative commodity du jour?
Though the moral hazards of commodities speculation has been around since there had been commodities speculation, there is also that risk of generating a hyper-inflated commodities bubble – as in a chocolate bubble. Anthony Ward, CEO of primo Mayfair street chocolate maker Armajaro has not just only recently earned the moniker “Choc Finger” but also been dubbed by the press as a real-life Willy Wonka when he used his company to single-handedly cornered the global chocolate market by spending 600 million dollars to buy a significant portion (7%) of the world’s “strategic” supply of cacao – the raw material for making cocoa and chocolate. Reminiscent of what the Hunt Brothers did during the late 1970s of cornering the silver market, Ward almost single-handedly managed to send the price of cacao on a 32-year price high. But is this “speculative” move economically viable in the long run?
At present – i.e. July 2010 – commodities are still a very attractive investment because they provide a very reliable hedge against the inevitable inflation resulting from the stimulus packages initiated by most governments around the world – i.e. lowering the cost of borrowing money. Unfortunately, commodities on our present austere fiscal environment of a post credit crunch world would make them a relatively thin market for the “foreseeable present”. The international commodities speculators –assumed that Anthony Ward had recently discovered a sort of commodities speculators’ “gold mine” at cacao attempted to mirror his move. Unfortunately this caused the chocolate bubble to burst – cacao commodities prices diving a precipitous 7% during the week of July 19 to July 23, 2010. Will cacao prices go any lower?
By: Ringo Bones
With the world’s leading economic powers are now busily printing money like there’s no tomorrow in order to lower the cost of borrowing money to stimulate our post credit crunch global economy. Seasoned investors have now resorted to commodities speculation as a hedge against the resulting inflation brought about by the widespread availability of cheap money. But is cacao – the raw material for chocolate making that had recently reached a 32-year price high the lucrative commodity du jour?
Though the moral hazards of commodities speculation has been around since there had been commodities speculation, there is also that risk of generating a hyper-inflated commodities bubble – as in a chocolate bubble. Anthony Ward, CEO of primo Mayfair street chocolate maker Armajaro has not just only recently earned the moniker “Choc Finger” but also been dubbed by the press as a real-life Willy Wonka when he used his company to single-handedly cornered the global chocolate market by spending 600 million dollars to buy a significant portion (7%) of the world’s “strategic” supply of cacao – the raw material for making cocoa and chocolate. Reminiscent of what the Hunt Brothers did during the late 1970s of cornering the silver market, Ward almost single-handedly managed to send the price of cacao on a 32-year price high. But is this “speculative” move economically viable in the long run?
At present – i.e. July 2010 – commodities are still a very attractive investment because they provide a very reliable hedge against the inevitable inflation resulting from the stimulus packages initiated by most governments around the world – i.e. lowering the cost of borrowing money. Unfortunately, commodities on our present austere fiscal environment of a post credit crunch world would make them a relatively thin market for the “foreseeable present”. The international commodities speculators –assumed that Anthony Ward had recently discovered a sort of commodities speculators’ “gold mine” at cacao attempted to mirror his move. Unfortunately this caused the chocolate bubble to burst – cacao commodities prices diving a precipitous 7% during the week of July 19 to July 23, 2010. Will cacao prices go any lower?
Wednesday, July 28, 2010
EU Banks’ Stress Tests: Redundancy in Accountancy?
Despite of being labeled as “too soft” by leading economists, are the recent EU banks’ stress tests really capture the big picture of the Eurozone’s current economic health?
By: Ringo Bones
The recent EU banks’ stress tests, which are conducted by independent auditors – which publicized its findings last July 23, 2010 – showed that of the 91 major Eurozone banks evaluated, only 7 had failed the stress tests. Germany’s Hypo Real Estate failed, which is not surprising given the bank’s exposure to bad credit at the height of the 2008 global credit crunch. Also, one Greek bank failed, while 5 of Spain’s banks under evaluation had failed to pass muster on their survivability of an economic downturn scenario that was deemed “too soft” by leading economists. But does the recent EU banks’ stress tests really tell the true economic picture of the whole Eurozone?
Or could it be that the problem is not economic or even fiscal in nature, but of the way the ailing Eurozone countries make concessions with their left-leaning trade and labor unions during the past 40 years? Unfortunately, from outsiders’ perspective, the Costa-Gavras’ Z has been taken, by most people, as a factual historical “documentary” of post World War II Greek society. That is incumbent governments’ buying the loyalty of their local left-leaning labor and trade unions’ loyalties using concession that endanger their countries long-term sovereign economic viability.
Most of Spain’s Caja banks that have just barely passed the recent EU banks stress test are also on the verge of bankruptcy because of Spain’s “past sins”. Various Spanish administrations since the Franco dictatorship had been making overly generous concessions with Spain's left-leaning trade and labor unions with scant regard to existing economic conditions. It is now very expensive to lay-off a worker in Spain then paying the required benefits.
Bank stress tests and quanititative easings had neither addressed the problems of Eurozone’s socialist model of employment benefits nor reformed them over the years to make them congruent with prevailing economic conditions. In the end, the annual EU banks stress tests may not only be seen by the world’s leading economists as too soft and not designed to cope with another 2008-era credit crunch, but also just another redundancy in accountability. Independent auditors have other and better things to do by the way.
By: Ringo Bones
The recent EU banks’ stress tests, which are conducted by independent auditors – which publicized its findings last July 23, 2010 – showed that of the 91 major Eurozone banks evaluated, only 7 had failed the stress tests. Germany’s Hypo Real Estate failed, which is not surprising given the bank’s exposure to bad credit at the height of the 2008 global credit crunch. Also, one Greek bank failed, while 5 of Spain’s banks under evaluation had failed to pass muster on their survivability of an economic downturn scenario that was deemed “too soft” by leading economists. But does the recent EU banks’ stress tests really tell the true economic picture of the whole Eurozone?
Or could it be that the problem is not economic or even fiscal in nature, but of the way the ailing Eurozone countries make concessions with their left-leaning trade and labor unions during the past 40 years? Unfortunately, from outsiders’ perspective, the Costa-Gavras’ Z has been taken, by most people, as a factual historical “documentary” of post World War II Greek society. That is incumbent governments’ buying the loyalty of their local left-leaning labor and trade unions’ loyalties using concession that endanger their countries long-term sovereign economic viability.
Most of Spain’s Caja banks that have just barely passed the recent EU banks stress test are also on the verge of bankruptcy because of Spain’s “past sins”. Various Spanish administrations since the Franco dictatorship had been making overly generous concessions with Spain's left-leaning trade and labor unions with scant regard to existing economic conditions. It is now very expensive to lay-off a worker in Spain then paying the required benefits.
Bank stress tests and quanititative easings had neither addressed the problems of Eurozone’s socialist model of employment benefits nor reformed them over the years to make them congruent with prevailing economic conditions. In the end, the annual EU banks stress tests may not only be seen by the world’s leading economists as too soft and not designed to cope with another 2008-era credit crunch, but also just another redundancy in accountability. Independent auditors have other and better things to do by the way.
Thursday, June 24, 2010
Of Testosterone and Risk Taking
Many a commodities traders made very risky decisions during the peak of the Bull Market, but how risky is too risky and most of all does testosterone play a role?
By: Ringo Bones
As the alleged “rogue trader” of Société Générale named Jérôme Kerviel faced charges in a Paris court back in June 8, 2010 over his risky trading decisions that cost his company billions. And Kerviel was even described by former Société Générale chief executive Daniel Bouton as a terrorist. But does the extremely risky trading decisions made by the former securities trader for Société Générale explained away by chemistry – as in testosterone?
John Coates – research fellow of University of Cambridge – explains his recent findings on the role of testosterone in crucial financial trading decisions. Traders – especially men – tend to take more risks when their testosterone levels are on the high side. It has been recently found out that the more money a male trader makes the more their testosterone levels rise due to the “reward effect”. Does this explain the very risky decisions made during the peak of the Bull Market?
The testosterone to reward link can be a very vicious cycle in the profit-driven environment of securities trading, especially when risky decisions – if one is lucky – gets overgenerous rewards while disregarding the long-term effects of excessive financial risk taking. In situations like these, financial risks should be analyzed by the logical aspect of the trader’s brain – as opposed to getting off on a short-term reward high of a pheromone-addled brain. The “sex-appeal” of ungodly amounts of easy-money acquired in high-risk securities trading or even CFD trading in a highly charged environment can usually increase male testosterone levels. Thus skewing ones perception of the true long-term profitability of most issued securities. Moral hazards don’t even get a look-in anymore.
By: Ringo Bones
As the alleged “rogue trader” of Société Générale named Jérôme Kerviel faced charges in a Paris court back in June 8, 2010 over his risky trading decisions that cost his company billions. And Kerviel was even described by former Société Générale chief executive Daniel Bouton as a terrorist. But does the extremely risky trading decisions made by the former securities trader for Société Générale explained away by chemistry – as in testosterone?
John Coates – research fellow of University of Cambridge – explains his recent findings on the role of testosterone in crucial financial trading decisions. Traders – especially men – tend to take more risks when their testosterone levels are on the high side. It has been recently found out that the more money a male trader makes the more their testosterone levels rise due to the “reward effect”. Does this explain the very risky decisions made during the peak of the Bull Market?
The testosterone to reward link can be a very vicious cycle in the profit-driven environment of securities trading, especially when risky decisions – if one is lucky – gets overgenerous rewards while disregarding the long-term effects of excessive financial risk taking. In situations like these, financial risks should be analyzed by the logical aspect of the trader’s brain – as opposed to getting off on a short-term reward high of a pheromone-addled brain. The “sex-appeal” of ungodly amounts of easy-money acquired in high-risk securities trading or even CFD trading in a highly charged environment can usually increase male testosterone levels. Thus skewing ones perception of the true long-term profitability of most issued securities. Moral hazards don’t even get a look-in anymore.
Crude Oil Industry: Still Economically Viable?
With a somewhat costly cleanup and huge compensation costs slated to be paid out by BP due to the Gulf of Mexico oil spill, is the crude oil extraction industry still economically viable?
By: Ringo Bones
With the Gulf of Mexico oil spill now on its 65th day - and counting, add to that calls for a boycott of BP products (like if that’s even possible), many now wonder whether the crude oil extraction industry is still economically viable. Oil industry experts say that it will probably take a hundred BP Gulf of Mexico sized oil spills occurring per year before safety concerns about offshore oil drilling get serious budgetary reconsideration in order to maintain profits - precipitous drop in share prices notwithstanding.
BP’s competitors – i.e. other oil companies – had accused BP of operating outside the industry’s norms when it comes to their safety budget. Case in point is the 1998 memo from London to their US subsidiaries ordering a 25% operation cost cutting measures that eventually compromised their operational safety. Unfortunately leading to the disastrous BP refinery explosion in Texas City back in March 23, 2005. Recent Capitol Hill grilling of BP had even uncovered safety concerns of a former Deep Horizon rig worker named Tyrone Benton being disregarded due to the company’s cost cutting measures.
When it comes to boycotting multi-national corporations who don’t know the meaning of corporate social responsibility – like BP – just skip filling up your car in BP affiliated gas stations. But when it comes to your where your pension fund is invested, it can be a bit harder because unless you have a very gifted hedge fund manager, it is very likely that your pension fund is invested in crude oil ETFs to maximize its rate of return. You know those crude oil companies that had been suspected for sometime of assassinating local environmentalists who are not very friendly with “big oil”. Economically viable or not, the true cost of oil extraction companies usually shows up on their impact to the environment and of the social stability in their sphere of operation – especially when other complications are now in the picture like former 9 / 11 victims relief fund chief David Feinberg now overseeing the 20 billion dollar BP Gulf of Mexico oil spill compensation fund.
By: Ringo Bones
With the Gulf of Mexico oil spill now on its 65th day - and counting, add to that calls for a boycott of BP products (like if that’s even possible), many now wonder whether the crude oil extraction industry is still economically viable. Oil industry experts say that it will probably take a hundred BP Gulf of Mexico sized oil spills occurring per year before safety concerns about offshore oil drilling get serious budgetary reconsideration in order to maintain profits - precipitous drop in share prices notwithstanding.
BP’s competitors – i.e. other oil companies – had accused BP of operating outside the industry’s norms when it comes to their safety budget. Case in point is the 1998 memo from London to their US subsidiaries ordering a 25% operation cost cutting measures that eventually compromised their operational safety. Unfortunately leading to the disastrous BP refinery explosion in Texas City back in March 23, 2005. Recent Capitol Hill grilling of BP had even uncovered safety concerns of a former Deep Horizon rig worker named Tyrone Benton being disregarded due to the company’s cost cutting measures.
When it comes to boycotting multi-national corporations who don’t know the meaning of corporate social responsibility – like BP – just skip filling up your car in BP affiliated gas stations. But when it comes to your where your pension fund is invested, it can be a bit harder because unless you have a very gifted hedge fund manager, it is very likely that your pension fund is invested in crude oil ETFs to maximize its rate of return. You know those crude oil companies that had been suspected for sometime of assassinating local environmentalists who are not very friendly with “big oil”. Economically viable or not, the true cost of oil extraction companies usually shows up on their impact to the environment and of the social stability in their sphere of operation – especially when other complications are now in the picture like former 9 / 11 victims relief fund chief David Feinberg now overseeing the 20 billion dollar BP Gulf of Mexico oil spill compensation fund.
Thursday, June 17, 2010
The Piece of the Pie Paradox
In our still fragile post global credit crunch fiscal environment, do our decision makers still know the difference between wealth creation and wealth manipulation?
By: Ringo Bones
The concept of wealth creation can be a paradox in itself. Everyone is clamoring for his or her own piece of the pie, unfortunately, someone has to make it – and believe me, most “everyone” is not cut out to be able to make a good pie. Thus bringing us back to the paradox behind wealth creation, that is we cannot share the wealth until someone – and there’s not a lot of them just lying around – creates the wealth. In short industrial production of quality products produced under safe and environmentally sound working conditions were the workers are well cared for has been – and always will be – the surest way for a sovereign country and / or economic entity to create real wealth and prosperity.
Even the folks who initiated the Bolshevik Revolution back in 1917 understand the concept behind wealth creation that enabled the supposedly “capitalism clueless” Soviet Empire to last a little over seven decades. I mean have you ever seen those Soviet-era posters extolling the virtues of industrial production? Well, just about everyone got this down to a science. Without which Wall Street and other centers of the global stock market would be nothing more that over-glorified centers of wealth manipulation. One that relies on hedge funds, naked short-selling and overly complex derivatives to manipulate the redistribution of vanishingly small amounts of wealth – especially if the primary means of wealth production, as in the manufacturing industry, happens to go awry.
Back in 2008, it was those same over-glorified wealth manipulators that sent our global economy to the brink of collapse. Unscrupulous manipulators that blew smoke up our asses in their “successful” attempt to convince everyone about cheaper-priced goods are better. And product quality is a ting of the past and is now rendered irrelevant. Unfortunately, their marketing spin managed to convince almost everyone that cheaper goods are indeed better and that quality products belong to the distant past and are thus irrelevant - thus endangering the livelihoods of skilled manufacturers, especially in the United States and Germany, former centers of high quality goods manufacturing. In short, our insatiable demand for cheap products produced under slave-wage and dangerous conditions have endangered the wealth creation capability and / or potential of every established and emerging economic entity around the world.
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.
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