| As everyone knows, the tsunami in Southeast Asia was devastating both in the loss of life and economically to the region. However now that the clean up is underway in the region, deep sea creatures that live too deep to be studied are being found scattered throughout the wreckage. These creatures were washed up on shore when the waves hit. |
To watch the movie and to read my dated posting, I think I should have made the movie myself... lol.
I was watching the uncomfortable grilling by the US lawmakers on Ben Bernanke and Henry Paulson on the US rescue plan. Pity those two guys. They are trying to fix a problem which was inherited and they have to suffer the embarrassment of trying to persuade the lawmakers to approve the funds.
But who really are the culprits that brought about such a calamity? I shall try to ascribe blame to the relevant parties. But please note, it’s a highly subjective issue and everyone has a different opinion. Here’s my two cents worth (and rapidly diminishing two cents in value):
The blame game:
30% - Management of Investment Banks & Mortgage Lenders
They were greedy and overpaid. They had thrown risk management out the window. When the going is good, they pocket more than their fair share.
Paulson (left) and Bernanke could have tried to reverse the damage in their early days as they basically inherited a huge problem.– AP The worst punishment they got was to walk out the door with nary an apology. The vast amount of liquidity in the system and the thirst for mortgages prompted them to “invent” new fangled instruments to package these loans and resell them, with little regard to the leverage effect.
Lenders kept pushing adjustable-rate and subprime mortgages, while investment banks bundled millions of risky loans and resold them to investors.
It was when these investment banks started to buy these same instruments that they really decimated their capital.
15% - Alan Greenspan
He will continue to deny it was his doing, but since 2001, he advocated lowering interest rates and continued a strong money supply growth policy.
That prompted the public to buy properties and even speculate in them. Greenspan was well known for lowering rates aggressively to counter any crisis €“ the query was that by doing that markets were never allowed to adequately correct the imbalances.
This led to the credit explosion.
He must have noticed the deterioration in the credit market back in 2003 and 2004 or was just plain blind. But he hadn’t warned lenders of using the “non traditional mortgages” now seen as a precursor to the credit crisis which unravelled as early as December of 2005, shortly before Greenspan resigned.
The excessive liquidity in the system was not just owing to the Fed’s measures. Major central banks were guilty of pumping vast amount of money supply into the system. Back in 2004, Greenspan opposed tougher regulation of financial derivatives, and actually praised adjustable-rate mortgages and refinancing for homeowners.
35% - Ratings Agencies
They are the unwitting culprits. (I am being nice here). They rated loans and bonds based on these mortgages AAA status, which caused many buyers to believe in their assurance that they were buying solid AAA papers.
The ratings agencies again acted too late to downgrade these papers €“ long after the damage is done.
They had earlier accorded high ratings and analysis which fuelled interest in these instruments to be hawked to unsuspecting investors. It is also this that led the investment banks to boldly pile up these instruments.
What kind of value-added analysis are the issuers paying these rating agencies for? It’s obvious that the analysts knew that a bulk of the packaged loans consisted of subprime.
Were the fees too enticing? Were the ratings agencies trying to curry favour with the banks? If these agencies cannot do their jobs without fear or favour, then how can investors rely on these ratings?
Maybe the US should empower the government to rate bonds, especially if the government requires certain kinds of fund managers to own only officially-rated bonds.
15% - The Regulators
The financial markets and the various instruments have their respective regulatory units.
You may include the Fed, the CFTC (Commodity Futures Trading Commission), the SEC (Securities and Exchange Commission), FDIC (Federal Deposit Insurance Corp), even the FASB (Financial Accounting Standards Board) into the fold.
They are supposed to regulate and oversee the markets and the financial instruments.
But where was the voice of reason? The last six years’ housing and subprime mortgage bubble and bust had little to do with excessive government intervention.
Instead, they had all to do with the lack of any basic sensible government regulation of the mortgage market.
They should have instituted new guidelines and rules to govern these CDOs (collateralised debt obligation), credit default swaps, and the leverage aspect of financial firms and their capital at risk.
Even now, they are mainly silent.
5% - US Treasury chief Henry Paulson & Federal Reserve chief Ben Bernanke
They could have tried to reverse the damage in their early days as they basically inherited a huge problem.
But only now, they are talking about having proper mechanisms to regulate derivatives and new instruments. Sigh.
There were institutions and people appointed to do these jobs; it’s just that they did not do their jobs properly. I am still waiting for some of the culprits to be prosecuted for what they did or didn’t do.
At the end of the day, it appears that what some of them didn’t do would be more punishable.
“But what about the American borrowers/homeowners,” you ask? Shouldn’t they too shoulder some of the blame? I left them out of the above equation for various reasons listed below:
a) I do think there should be an element of “personal responsibility” but it seems to me that they are already paying the cost of their foibles. Many have had their homes foreclosed, they have lost their deposits and payments made on these loans.
It seems to me, they are THE ONLY group that has actually “really lost” materially and has been punished.
b) The bailouts do not really bailout the end borrowers. They simply extend the life of the companies.
Maybe the bailouts will allow the companies more time to foreclose these properties in an orderly manner. Very few of those will be able to renegotiate their existing loans on decent terms to allow them to continue to fund their mortgages.
Most of the loans were priced at a time when property values were at least 30%-40% higher than now. Perhaps, it’d be better to declare bankruptcy than to continue to reconfigure the loan?
c) The public are not equipped to regulate themselves. That is why there are agencies created with “capable people” to regulate and monitor the markets.
You cannot expect the majority of borrowers to understand in detail CDOs, credit default swaps, or whether the brokers are leveraging themselves to the hilt.
You instead get assurance from top ratings agencies that brand certain papers as top notch grade. Who will really pore over hundreds of pages in a report, examine if these debt papers/bonds consist of thousands of small mortgages spread out over the country or how to value the price trends and affordability ratios of borrowers?
d) The public often acts in herd-like mentality and like most people, they are driven by the pursuit of wealth.
They see people making 50% in two years from speculating in properties and they, too, want to be part of it. Then they apply for loans, and were probably even more shocked that mortgage lenders were more than willing to lend to them.
The markets are often characterised by bouts of insanity; if you stir them up with enough incentives and carrots, people will act irresponsibly.
The regulating agencies are there to ensure an orderly market and to quell excesses. The people cannot do it themselves.
The ones who got out early will think they are very smart. The ones who got hit will think they were unfortunate victims. Both are wrong in their perception of their actions, financial decision making and brain power.
Both groups are closer to each other in every aspect than they would care to admit. It’s like a game of financial musical chairs “ the winners and losers are those who act the fastest/slowest when the music stops“ not how smart you are.
PS: In case you haven’t figured the headline out: The bald, the beard & the ugly are Paulson, Bernanke & Greenspan.
p/s photos: Ema Fujisawa (my date in Tokyo)
Can you imagine Pepsi and Coca-Cola getting together? Or Verizon and AT&T? That's how strange it was when Apple and Microsoft announced their partnership at the 1997 Macworld Expo. After 12 years of financial loss, Jobs needed to get Apple money, and quickly. So he turned to Bill Gates, who made a $150 million investment in Apple.
"The era of competition between Apple and Microsoft is over as far as I'm concerned," Jobs said. "This is about getting Apple healthy, this is about Apple being able to make incredibly great contributions to the industry and to prosper again.”
A great salesman, Jobs knew the importance of aesthetics; he realized Apple's products looked dated. In 1998, Jobs called a meeting at Apple, sat everyone down and said, "You know what's wrong with this company? The products SUCK -- there's no sex in them."
Today, Apple is credited for creating the most beautiful technology, from colorful iMacs to sleek iPads.
Apple began as a computer-only company, but Jobs knew it needed to broaden its approach if it wanted to become truly successful. Apple began expanding its products beyond just computers with the release of Final Cut Pro, followed by MP3 players, music, iPhones and iPads.
Jobs changed the company's name from Apple Computer, Inc. to Apple Inc. in 2007 to symbolize the new, broader vision.
Other retailers were not giving Apple products adequate positioning. Jobs' solution? The Apple Store. Scattered throughout the world, these successful outlets are now the "darlings of the retail computer industry".
Well, not every company can do that if they do not yet have a range of desirable products. Sometimes, we can still change the way we distribute our products, our channels, are we bound by old trusted relationships which may not be so effective now.
Jobs does not use focus groups. Instead, he tells customers what they want before they know they want it. "[Apple has] a great track record for making you want -- and buy -- things you thought you didn't need," says Carl Howe, director of consumer research for Yankee Group. Last year when the iPad was announced, people gawked. Nearly 20 million sales later, it's not so funny.
Apple releases products that are innovative in and of themselves, but they are also integrated visions. iPods mesh beautifully with iTunes; iPads and iPhones collaborate with the app store. According to Jobs, "creativity is just connecting things." Apple frequently shows how the sum is greater than all of the parts.
Ivy league graduates aren't the only people who can run companies. "Part of what made the Macintosh great was that the people working on it were musicians, and poets, and artists, and zoologists, and historians who also happened to be the best computer scientists in the world," Jobs said.
Jobs gets people hooked on a feeling. It's not the products his customers buy, it's what the products represent. Remember, people first and foremost care about themselves, so make products they can relate to.
Steve Jobs said in his Stanford commencement speech: "Have the courage to follow your heart and your intuition. They somehow already know what you truly want to become."
5. Willy-nilly (adj.), impotent.
6. Negligent (adj.), describes a condition in which you absentmindedly answer the door in your nightgown.
7. Lymph (v.), to walk with a lisp.
8. Gargoyle (n), olive-flavored mouthwash.
9. Flatulence (n.) emergency vehicle that picks you up after you are runover by a steamroller.
10. Balderdash (n.), a rapidly receding hairline.
11. Testicle (n.), a humorous question on an exam.
12. Rectitude (n.), the formal, dignified bearing adopted by proctologists.
13. Pokemon (n), a Rastafarian proctologist.
14. Oyster (n.), a person who sprinkles his conversation with Yiddishisms.
15. Frisbeetarianism (n.): The belief that,when you die, your soul flies up onto the roof and gets stuck there.
16. Circumvent (n.), an opening in the front of boxer shorts worn by Jewish men.
The Washington Post's Style Invitational also asked readers to take any word from the dictionary, alter it by adding, subtracting, or changing one letter, and supply a new definition.
Here are this year's winners:
1. Bozone (n.): The substance surrounding stupid people that stops bright ideas from penetrating. The bozone layer, unfortunately, shows little sign of breaking down in the near future.
2. Foreploy (v): Any misrepresentation about yourself for the purpose of getting laid.
3. Cashtration (n.): The act of buying a house, which renders the subject financially impotent for an indefinite period.
4. Giraffiti (n): Vandalism spray-painted very, very high.
5. Sarchasm (n): The gulf between the author of sarcastic wit and the person who doesn't get it.
6. Inoculatte (v): To take coffee intravenously when you are running late.
7. Hipatitis (n): Terminal coolness.
8. Osteopornosis (n): A degenerate disease. (This one got extra credit.)
9. Karmageddon (n): its like, when everybody is sending off all these really bad vibes, right? And then, like, the Earth explodes and it's like, a serious bummer.
10. Decafalon (n.): The grueling event of getting through the day consuming only things that are good for you.
11. Glibido (v): All talk and no action.
12. Dopeler effect (n): The tendency of stupid ideas to seem smarter when they come at you rapidly.
13. Arachnoleptic fit (n.): The frantic dance performed just after you've accidentally walked through a spider web.
14. Beelzebug (n.): Satan in the form of a mosquito that gets into your bedroom at three in the morning and cannot be cast out.
15. Caterpallor (n.): The color you turn after finding half a grub in the fruit you're eating.
And the pick of the literature:
16. Ignoranus (n): A person who's stupid AND an asshole.
Despite mounting concerns about inflation, Jakarta says GDP of 7-8 per cent is achievable in coming years if the current trends of strong consumer demand and large capital inflows continue.
“Economic growth will be more than (the projected) 6.4 per cent this year. If there are extraordinary circumstances, the economic growth could expand to reach close to 7 per cent”, Central Statistics Agency chief Rusman Heriawan was quoted by the Jakarta Globe as saying.
But to achieve such an ambitious target the country will need to address concerns of investors about government red tape, weak infrastructure and rising inflation, say observers.
The economy expanded by roughly 6 per cent in 2010 and the official government forecast is for an acceleration to 6.4 per cent in 2011. The country’s vice president and former central bank governor, Boediono, was even more optimistic:
“Our economic growth may exceed 6.4 per cent. Given the current positive trend, reaching between 7 per cent and 8 per cent is not impossible”, he told the Tempo newspaper.
Finance Minister Agus Martowardojo said with improved infrastructure alone, GDP would surpass 6.4 per cent this year. That – optimistically – implies the government will succeed in implementing plans to spend tens of billions of dollars on roads, ports, power plants and railways.
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- And then there's inflation. Some are concerned … the Indonesian government is not. Inflation slowed to 6.65% last month (back in September 2008 consumer prices rose 12.4%).
- Although GDP per capita grew by 11% in each of the past three years, the country still has among the lowest labor costs in the region, with wages that are roughly0ne-third the level of Malaysia and half the going rate in China. This low-cost looks to make the quickly growing country a manufacturing powerhouse in the near future as more businesses look beyond China for cheaper options.
The main obstacles for further development in Indonesia include deficiencies in basic infrastructure as well as health care and primary education, as highlighted by the Global Competitiveness Index. Furthermore, the country is limited in terms of capital access, due to its macroeconomic environment. Corruption is perceived to be very high, as evidenced by Indonesia’s performance in Transparency International’s Corruption Perceptions Index.
Some of the major problems in Indonesia today are:
Indonesia remains prone to sectarian and ethnic violence
More than 15% of Indonesians live below the poverty line
Infrastructure is poor, if not non-existent
Trade regulations, on the other hand, are less restrictive although the country does impose protective tariffs. The tax regime in Indonesia is welcoming towards investment, both domestic and foreign, and the country has a well-established bankruptcy law. Indonesia has signed and ratified the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States. Corruption is extensive and of concern to investors, reflected in Indonesia’s ranking of 143rd out of 180 countries in Transparency International’s 2007 Corruption Perceptions Index.
Indonesia Outlook 2010 And Beyond:
Asia is believed to be the source of world economic growth in the future. Led by China, the East Asian economy is projected to contribute to three quarters of 2.5 percent of world economic growth in 2010. Although its not just India and China in the Asian growth story. With a wealth of natural resources including copper, gold and coal Indonesia today is becoming an increasingly attractive investment market. With growth rates rising exponentially in China, its appetite for commodities also makes Indonesia - with its close proximity and abundance of natural resources - an ideal partner. Indonesia today is reaping the rewards of good economic policy and responsible debt management, boasting a 4.5 percent growth rate last year and expected to grow by 5.5-6 percent in 2010
Since ASEAN was founded in 1967, Indonesia has always been playing important role in ASEAN. Private consumption accounts for about two-thirds of Indonesia's GDP. Indonesia is also making real efforts to increase accountability in its energy and resources sector by moving to become a candidate country in the Extractive Industries Transparency Initiative (EITI).
Indonesia needs at least $140 billion in investment over the next five years to upgrade infrastructure and meet President Yudhoyono’s goal of 6 - 7 percent annual growth. Two-thirds of that funding will have to come from foreign investment. An enormous market size, young work force, growing economy, and political stability, Indonesia is dressing up for foreign investors in the times to come.
The country still has issues with deeply entrenched corruption, failing infrastructure and legal uncertainties. Yet it still offers big returns for investors to revel in.
That all factors into why the Japan Credit Rating Agency upgraded Indonesia’s government debt to investment grade this year.
It should know, since Japan is Indonesia’s largest, foreign, long-term investor. Investors there have long-kept parts of their fellow Asian nation in their portfolios.
Indonesia Stock Bubble Formation?
While the Indonesia markets surge attracting foreign investors to the countryForeign investors are snapping up Indonesia’s stocks and bonds. It's important to note that Bank Indonesia board members last year discussed the risks posed by an influx of foreign funds, and the bank studied the feasibility of imposing capital controls. Whatever might be the case, its quite clear that Indonesia is one of the most promising emerging markets not only in Asia but in the whole world.
