Life As It Goes By

Captain America, leading Uncle Sam, had responded to the nonsense from the brash Wall Street fighters. Slamming a 10-year 50% tax on banks was really something I had in mind as well. However, I still feel the range should be extended to the individuals that receive the sky-high bonus. A 50% income tax on their bonuses is still way too little for the kind of risks (unless a life is cost less than trillions of dollars) they have taken for the past year.

I don’t expect this to end so quickly. That gotta be some kind of retaliation, given the fact these bankers had been so well fed with silver spoons. Besides, they are elite, top of the minds. They will come up with groundbreaking schemes like those in the derivative products they sold. Unless they wise up and keep their mouth shut. In this way, the damage shall be limited just to the banks, not the individuals. They will win most in this option. This is why I propose President Obama to launch a second attack with the income tax.

Yes, we do want to corner them and give them really a hell of time. We badly need some discipline in the house. The financial crisis has hit us hard and painfully. We should not forget this and so should they not. If this crisis is to be labeled as a classic excuse of being the norm of economic cycles or trends, then let regulation be a new lesson of uncertainty. Yes, they are going to be so screwed that they will regret what they have done for the making of the crisis. They would want to change industry and not work in this line any more. Yes, we are going to come so hard on them that they would have nightmares every nights, worrying about the unethical deals they have committed during the day.

In reality, here are a few things that I feel will follow suit: rise in stock market, poor quarterly results for banks (blaming government actions have severely demoralized the spirits in the banks) and acquisitions. The rise in stock market means a transfer of funds from the hard cash to paper profit or loss. Of course, it is not just limited to the stock market. Any market that is capable of giving returns of investment shall be affected: currency, bonds, commodities, ETFs and so on. This is only the short term strategy. To get these money back after only 10 years, it will be an unsound investment. In the meantime, there will be lots of political lobbying around to try to shorten their sentence. Money is power and banks have plenty of them.

Any investors would think of a long term plan. At this juncture, they have a choice of stating their true financial status now (and hence justify the levels of their current bonus) or report a much lesser value, keeping a portion for the future. Those banks on the borderline  ($50 billion) could save themselves by not joining the leaders of the herd. Those leaders might want to take a gamble and go for it this round. No one will ever know when such opportunity will knock again. Besides, first time offenders might take a lighter punishment or let off unnoticed. But it is still a 50-50 game. If they do think long, they will find ways to produce 2 quarters of rather disappointing results to avoid a repeat next year.

One best way of spending is to acquire big. This will slow the whole growth while keeping the stock price up. What this brings would be laying off of staff in banks and less consumer choices. The smart ones are already doing that now. And while we are talking about banks all this time, the tax proposal by President Obama include other financial institutions such as insurance companies.

This is assuming no big reactions from the those involved in this tax proposal which will only come into effect in June. Since it is based on the past year’s books (unless I got it all wrong), I believe the effect will remain. There got to be a way to bypass the tax restrictions imposed. With their clever minds, they will soon come up with something. Benefits-in-kind can include stuff such as properties, stock options/shares themselves and all kinds of big-ticket items. As for the companies themselves, they can break into smaller parts, so that none falls into the category of “above $50 billion”. Basically, options are plentiful.

It will be more than just a chasing game. It’s life and death. These monies or bonuses are the blood of these people and they will do anything for them. Expect the best, the very best from them to get back what they feel they deserve.

The financial crisis is over now. At least for the bankers. They have the best of years for the past few years. Having received record bonus in the year 2007 before the tumbling of stocks in 2008, which triggered the flow of funds from governments to help them save the free fall. Amazingly, like perfectly crafted plan, the stock market returned to the levels before the crisis towards the end of 2009. The bankers were thrown another lifeline: another chance to bag big money. Once in a lifetime opportunity, some must have felt. Where can you find someone who will give you money to gamble, take back exactly what he or she has lent you and ask no share of your winnings even though they are 2 or 3 times the amount you have lent? There is no way they are going to let go of this chance…

Disappointed? Why should I? I have finally found a certain future for myself. No matter how smart the governments are, they are just politicians. What do they know about making money and controlling the financial systems? It belongs to the exclusive club, only for the most intelligent men. The past 3 years have shown who are made of better materials. Even in the post crisis, the bankers still dare to show hand to the guys in the White House or Westminister. Never once there is a need for them to be on their kneels to beg. Saying sorry in the public costs so much little to the amount of dollars they will get from the bonus. It doesn’t take a financial analyst to see how worthwhile the deal is. Only the fools at the top of the nations think repentance is on the way.

The end is fixed. A sad ending for the bankers is a mission impossible. Sarcastic I may sound here but helpless is the louder voice in me. There is nothing anyone can do to change that. No, it’s not the duty of the God to punish those who take profits for the risks taken. It’s the choice of the governments to pick the jobs of the bankers, rather than the general public to save. Their fears of greater failures have provided the answers to why they made such a choice. And now to save their own jobs, they are thinking of ways to raise taxes (or incomes to the governments) for the majority while keep taxes on sensitive items such as stock markets and currency stimulant.

I have decided not to wait and see anymore. No more disappointments. Now it’s the time to jump on the bandwagon. Join the banks or you will regret for life. Be on the winning side. The line is clear.

This article is definitely overdue and my apologies for this.

It has been a hectic start of the year for me. It’s not about work though. I just had a good break, much needed after such an eventful year. X’mas spending has been normal, like everyone here. Thanks to the great works done by governments around. The measures taken to save the financial sector have proven to be effective. Fewer people than it supposed to be, were out of the job. Business lending has not been less active and property prices have more or less recovered to levels before crisis (applies to some regions though).

There remain questions, or uncertainties to be exact, to be answered. Rising public debts and high unemployment rates keep the minds of many top policy maker spinning. According to Keynesian economics, jobs could be created in the public sector and hence, aggregate demand would be raised. However, when you have state government such as that in California, at the brink of bankruptcy, you will find it hard to get funds to pay for these much needed extra hands. Some time in 2009, there was a bill for energy passed and yet there was little impact on the job market from the so-called stimulus package. One would wonder now whether the same will happen to the healthcare bill.

Other governments have some other worries on hand: double-dip recession, default risk and weather change. Those with deep pockets can afford to provide a second round of stimulus to hold the economy, at least in current state. As for those ailing states, the future remains bleak.

UK and their European counterparts suffer another wave of attacks (from the nature this time) when sudden change in weather take the cities by storm. China is another victim of this change but perhaps in a better position and mood for the new year, having known that its GDP for 2009 registered growth of close to 10%.

United States of America almost encountered another attack from terrorist. Perhaps it is a sign of lady luck coming back home. The terrorist had outsmarted the system and must have gotten himself a shock, knowing that. Obviously, the shock did him no good as explosives fail to work (probably more thorough testing is still required to ensure there is no further reaction between the private parts of a human body and the explosives). Regardless of the outcome, the intention might be interpreted as a revenge on the recent progress (on the capture of Mr Osama’s family members).

The road ahead is still unclear. Which direction will the world economy head remains a mystery. Signs of strong growth particularly in China are welcome. There could be the before or after effects of the collective actions by the governments around the world. There were many economic growths around the globe in 2009. But this one looks authentic enough. Having said so, it is insufficient for just one such growth around the world. To swing the whole world back to the growth side, it seems, much more is needed. To be fair, an imbalance is preferred. If every country is going to the double dip recession, then the whole world may enter depression again. This somehow reflect the importance of a growing China.

This got to be the latest buzzwords. American shoppers have opted to pay in cash than credit card. There are calls to Asia to increase their domestic spending, hoping to turn them from export economies to import ones. Then, there is another case of over spending (or borrowing to be specific) from the recent Dubai crisis.

In a strict sense, everyone needs to spend to do their part in boosting the economic growth (if it is still real anymore). Otherwise, governments will have to keep pumping money to … (stock markets? I have really no clue where they go but definitely not my pocket) But it is not a simple task. I mean, to spend. I can’t even guarantee the availability of my job and house for the next few months, how can I commit to spend? Sure, I can spend on small, affordable items but when it comes to big ticket items, no way I am taking such risks (even at such a low interest rate). I think everyone will have a happy X’mas this year since it’s still within our means to spend on some gifts. In addition, the pocket money from the governments have benefited us in one way or the other. This is highly dependent on the efficiency of the distribution channels used by the governments.

This is the result of pursuing numbers too closely. When the economy is doing tremendously well, there will be whistle blowers giving warnings of spending too much (based on some numbers they have collected). At the opposite tip of sine wave, governments encourage you to spend when you don’t feel the need to do so. That’s the reality in life. And yet the same scenario happens again and again. We use numbers to forecast and prepare ourselves for such extreme situations but we always can’t avoid going there. Hence, we can deduce that there are always something (such as this) that we can never control no matter how accurate is our forecasting model.

How can an economy that is built on exports be turned into one that depends on imports? Spending alone won’t do the job. There got to be enough purchasing power and level of demand for imported goods first. For the latter, factors affecting purchase decision are more important than just asking people to simply spend. Revaluing currency is an option to increase the level of demand and enhancing the competitiveness of the nation’s goods. But bear in mind, that’s something which everyone can do though they might face resistance from forex traders. Hopefully, we won’t see another collapse in a currency in near term.

Back to the basics, the only way to crawl back to the recovery is to continue to make attractive products at an unbelievable price (but a profitable one). Yes, it is impossible but many have done that. Maybe you will be surprised to know that online shopping is growing. The same for hybrid cars, mobile broadband products and probably netbooks.

Think about the strengths and weaknesses of your trades. How to achieve sustainable competitive advantages in your strongest products should be something you focus now. Don’t just improve overseas sales. Try to give your home a chance as well. You should know your neighbours better. Understanding their needs should be cheaper than doing the same for foreigners.

In short, I am against spending recklessly, especially in times like this. The economy has contracted much by now. There are lots of inventories available. They should come cheap to me, as a consumer now. A good bargain, I should re-phrase. Companies thinking of holding on to these inventories instead of their employees will be put into real tests in the next few quarters. It’s true that many economies are recovering from recession. It also seems to be me that these are the works of the governments, by responding to the numbers and creating a smoke screen. Intention, I feel, is to increase confidence of the general public. However, it is slowly failing due to the fact that unemployment rate is still high. This key number is the main target for many nations now. It is going to be another huge investment and again the distribution channels have to work at the highest level of efficiency.

For me, I would bet on more value-for-money goods than government measures that are based on the numbers.

IT or Information Technology is something we are no longer unfamiliar with nowadays. There might be minority of people who pride themselves on not being caught in some crazy trends but I believe this number is coming down. I just hook my father up to the Internet more than half a year as his faithful service (Teletext giving “real time” stock prices) from the local broadcaster suddenly stopped. Instead, calling busy brokers to ask for price information, he approached me for help. So, I threw together a decent laptop loaded with SUSE Linux and then, it began… Amazingly, my dad survives till today, making only complaints about the inability to install some Window applications recommended by my sister.

Even though things seem still to be growing, the industry is shrinking as the IT giants began to cross one another’s path. Take the G-M-Y, M-G-Y or Y-M-G for example, Microsoft (M) has been aggressively pushing for market share in the search engine business. Partnering with Yahoo (Y) and Wolfram Alpha (if you don’t know what it is, see this),and at the same time, (close to) bribing News Corporation, Microsoft is really putting up a good fight for something they have missed out in the beginning despite being ahead with the Internet technologies. They focused too much on the web browser technology and neglected the true potential of web services or portal. They followed up with the purchase of Hotmail and tried to build a community around the MSN portal but they are still way behind Yahoo and Google (G). Just imagine how fast Google builds up its email service, brushing Hotmail and Yahoo! Mail aside. As for the portal, Google tries to do it in a different way (typical of Google) while they take cautious measures to protect their most valuable assets: search engine.  Though they also try to imitate services such as Yahoo! Finance and Yahoo! News, they should receive credit in exploring in other areas such as Google Maps, Google book and Google Docs.

Google Docs could be the trigger point for the war between Microsoft and Google. Challenging Microsoft’s 2nd prized product with features (free and collaborative) it lacks of, Google presents itself as quite a competitor in this arena. Thanks to the many acquisitions before and the maturity of the Office technologies, Microsoft is able to stand off such challenges (not the first time since Sun Microsystems and IBM have been in the competition for quite some time. Not to forget other Office products built for Linux and Mac OS). But things might change in the future as Google seems to have taken the right step. Microsoft should learn from the lessons it had with GNU tools (free software tools). While Linux did make a big impact on the server software business, its success with consumer is not as measurable. But GNU tools and free tools such as Eclipse have seriously challenged Microsoft’s compiler tools’ business. When it tries to release the product for free a few years ago, it is a sign of things changing. Seriously, collaborative software for unlimited users (and of course, for zero license fee) is very attractive for multinational companies and international community. If the Google Doc is able to match up with Microsoft Office or somewhere close to OpenOffice or IBM Lotus Symphony, it would be my default choice (rather than preferred one).

This probably explains why Microsoft is fighting so hard in this business of searching. So far, these wonderful services from Google have a common issue. They may not be as outstanding as its search engine service, particularly in terms of popularity and technological edge. We have used Google search engine for more than 10 years now and will continue to do so, just as we will use Microsoft Windows. Google Maps looks promising until Bing Maps and Yahoo! Maps can be seen on some websites. Google books remain a black horse. Having cleared recently a barrier with publishers, it still faces an uphill task especially in the face of Amazon.com. This is always the case when you are changing the landscape of the industry. See what MP3 or digital audio has done to the music industry. Anyway, the great benefits of the technology are becoming visible in national libraries. Another reason why Microsoft is in this battle could be the attacks incoming (Google Chrome in both web browser and Operating System). It just can’t sit there and take the hits.

With the Google Chrome OS, Google prepares to make a paradigm shift in the industry landscape again. Already running in mobile phones in the Android version, the OS is tagged with what Google is famous for: search, and its other services. In this move, Google tries to spread over a wide range of platform, building on its currently available services or technologies. They might be over stretched but it definitely worth a try. But by completing this step, Google has set stage for direct confrontation with Microsoft across the horizon. Next, it would just need to push forward (vertically) for all technologies and head for a showdown.

Let’s not leave Yahoo! out of the picture. Its portal services or business is still amazingly strong, thanks to the first-mover advantage. It just needs to re-discover the magic that brings them to where they are today. Amidst the commotion of selling the company, Yahoo! shows signs of seeing the light at the end of the tunnel. Abandoning the search engine business (which might already have been a lost cause), partnering with cash rich Microsoft and extending on the email service (to include facilities to social networking and so on), Yahoo! is making the right moves. It is also a key player in online advertising but this is also the most intense competition would be. Being more focused now, Yahoo! can be a force and relive its past glorious moments. Strategy should be simple: kept out from the battle between the 2 Goliaths and stay afloat as there will be tremors created by the two from time to time for sure.

I remembered that I have been asked more than once, after stating proudly the football club  that I support, the reason why I supported the club. Is it purely the passion or because this is the team that brings me the most wins from all my bets. What’s the connection? I didn’t really get the first few times. I simply gave my answer though I still give my answer (which is passion, of course) now. But I began to understand, from the other thread of thought.

If I were a gambler, came across soccer bets as one of available options in the betting shop and won a few rounds, then I would naturally grow to like a particular team: my lucky team, which may become my favourite team. To do some homework, I would want to watch them play. And that’s maybe how I learn the rules of the game. This is also how I would get more confident of my choice. It will be okay for the team to lose once in a while because I know them well that they be back on winning the next time.

I have friends who were genuine fans of football clubs of great history. They have now turned to gambling as they join the fight with their clubs to gain glory. The passion for the game has remained but the approach might have shifted.

It’s a sad story I am painting here. Of course, there are still a number of die-hard fans who would not trade their faith with luck. I can’t help wondering whether should I honour them or laugh at their (or our) stupidity. We watch the same game, cheer for the same players and gets moody over the same results but those who place bets will win more than us (though the same applies to the opposite). There’s the difference.

Is there really no way to split the two apart? Betting has gotten so bad that match rigging is becoming a norm today, particularly in Europe. Popularity must have a hand in this. The world follows closely the soccer games in Europe (except for South America maybe), just like they did for basketball in US. In some countries, companies (media or telcos) fight fiercely over the exclusive rights over such contents.

However, the main factor is still gambling. It might be the least harmful of vices such as smoking, drinking and womanizing, considering the health costs over the long run. It’s a habit as hard to kick as drugs-taking. It plays down on 1 major element: hope. In a game of almost equal stakes, there is always a chance of you winning.

With legal betting stations and more casinos opening up worldwide, the choices for those who wish to try their luck shall be more and varied. It doesn’t really matter how much you place on each bet. Your share will be easily totaled up to an enormous amount with many more smaller shares like yours. Just think about it. For $2, you might stand the chance to get $200 in return. Where in the world can you find such a deal? Stock market? Okay, maybe… What about a $2 lottery for $1 million prize? Beat this!

A few days ago, Japan Finance minister reassured the position of the US dollar in the world by giving it Japan’s endorsement. It openly states that Japanese yen is not a candidate for the USD replacement. Remaining contenders are Euros, Yuan (unlikely too, as the Chinese has proposed a “basket” approach, rather than a single currency approach) and Special Drawing Rights, SDR from the IMF.

Question is  which one of the above carries the weight that the US dollar holds. It is true that the US currency has devalued though current trading value doesn’t truly represent that (those betting against or for dollar must be having lots of fun now). Having defeated the gold and slowly changing from paper to plastics or electrons, the US dollar has a presence which no other contender do have. As I learn from my ex-boss, history always play a part on the current development. All the constraints we see now could be the effects of the past. The US currency has deep roots.

To replace it, its rivals shall have to begin from the roots. The reason why you can use US dollar in  places where there is no access to the local currency, is because the huge foreign reserves of the US currency worldwide. The person who takes the USD from you can easily find someone else to exchange something for him. In a sense, it’s like gold.

Not only that, many things are priced in USD. One notable example is oil. It is almost impossible to value the current price of oil. If it is to correctly represent its worth, the price of oil will be too expensive for everyone and immediately, another round of world inflation will occur.

It is not possible to replace US dollars in one day. One has to prepare enough pulp or bakelite for the world consumption. Maybe the EU has such capabilities. However, they are not really united on this front. Till today, it still amazes me to see the existence of European Union. Who would have imagined that the colonial powers have gathered and cooperated, after seeing the centuries of wars among them. Have they lost their desire to dominate the world? It’s really hard to say. One thing is for sure though. Too many minds together can be as constructive, and as destructive as they can be.  Adding to that, are the diverse cultural background and historical contraints.

What about Yuan? China has been the topic of the new millennium. It is like it has been away for the past millennium. Its growth is envied by all though typical for all developing countries. The uniqueness about China is its ability to produce, not just for its own billion of consumers but also for the other billions in the rest of the world. Its value proposition is undeniably the best around the world at the moment. However, despite its actual age, China is still relatively young as an economical power. There are still many stages for it to reach before it fulfills its potential and matures. By this, I mean, when the China economy sneezes a bit and the whole world’s economy shakes. Then, the yuan and China are ready.

Having set such a difficult condition, it appears that there is no contenders that can really qualify and we are back to the same spot. We may need more than just a major change. A change that may take decades. Is it worth it? But if we were to keep status quo, we are devaluing our own money in relation to the current world currency of US. If we set appropriate values for our monies, we will face widespread inflation. It seems out of the 2 options, the first is a safer approach. Just like the choice taken by the Japanese minister… The Americans have promised that there won’t be a repeat of the financial system failure we just witnessed. I am thinking how long will this be? End of President Obama’s term? A decade? 2 or 3? The next generation will forget about this naturally and the effects for this time around is not as catastrophic (so who will remember this hard).