October 21, 2011

Too much debt - or too little debt

The US debt crises continues - but according to a recent published article, the US avoided another crises a couple of years ago - the US no-debt crises. According to the report "Life After Debt," published in 2000, the US could have paid of its debt by 2012 - that is the next year.

Source: npr.org
The problem with having no debt at all is that no one can buy US Treasury bonds and the world is dependent on these bond because they are safe - or they used to be safe anyway.

Source: npr.org

October 20, 2011

Lending or not lending - that is the question?

Many people blame the current high US unemployment rate on the banks and say that the banks are not lending enough money to small businesses - and if the small business do not have enough money, they can not hire new employees. But is this true?
Bernie Marcus - the co-founder of Home Depot - says it is not true. He argues that small businesses do not hire new employees because they do not trust in the future of the US economy. Small businesses are scared that President Obama and the rest of the government are thinking short-term and not long-term.

October 12, 2011

Apple after Steve Jobs

Many people said that Apple could not survive without Steve Jobs and that people would lose interest in the company. But one fact is that people who may not be the "standard geek type" are staying up the entire night (writing about it on Twitter) and are waiting for the iOS 5 release like it is the day before Christmas. They seem to click the "check for update"-button like they are mad

Example of Tweets:

  • I can't stop clicking "Check for Updates"... Give me  already!
  • I'm like a little kid on Christmas Eve night...can't sleep want iOS5!!
  • LOL RT : RT : The "check for update" button has got to be sick of me by now. 

October 11, 2011

The new rogue trader: Kweku Adoboli

Nick Leeson is a well know rogue trader - that is - a trader trying to win much, but fails and loses a lot instead. He said:
You expect to be caught in the first 24 hours. Every time the door to your office opens, or the phone rings, you think it will be somebody looking for answers. You live in fear. In that very initial period, the heart is racing. You should have closed the position at the earliest opportunity, and taken no more than a slap on the wrist. 
But when the call, or the knock on the door, doesn't come, you start to grow in confidence. You start to believe that you'll have the time to correct it, that you can push the barriers that little bit further – that you can get back to ground zero and start again.

The latest rogue trader is Kweku Adoboli who managed to lose $2 billion due to bad trading and is now being charged with fraud and false accounting. Kweku Adoboli traded exchange traded funds, which track different types of stocks or commodities. Nick Leeson traded mostly futures contracts which tracked the Japanese stock market: Nikkei.
The reason that no-one managed to discover what Kweku Adoboli was doing is that he had experience from working in the back office of the bank. This is slightly different from Nick Leeson who had co-workers who helped him hide his trading losses. Both of them eventually got caught, and while Nick Leeson is out of prison -Kweku Adoboli is to be expected to live inside the prison walls for some time.

Source: The IndependentBBC News

October 10, 2011

The world´s most competitive economies

The World Economic Forum have announced the world´s most competitive economies.The result is as follows:
  1. Switzerland
  2. Singapore
  3. Sweden
  4. Finland
  5. USA
  6. Germany
  7. Netherlands
  8. Denmark
  9. Japan
  10. Britain

The rankings are based on economic data and a survey of 15,000 business executives and includes 142 countries. USA used to be number 1 in 2008 but has fallen to number 5. The reason is the US government debt and declining public faith in political leaders and corporate ethics. But the US productivity, highly sophisticated and innovative companies, excellent universities and flexible labor market are helping the US to remain in the top 5.
One interesting fact is that the emerging markets are climbing on the list with China at 26, Brazil at 53, India at 56, and Russia at 66.

Source: msnbc.com

October 6, 2011

China goes a little bit more green

A small fire truck. Source: China Daily - Xinhua
There is an auto show going on in China. The Nanjing International Auto Show of 2011 features more than 500 cars from 73 brands. The interesting fact is that 200 cars are environmental friendly. The world is finally moving in the correct direction.

Source: China Daily

October 5, 2011

25 Million Pounds Documentary about Nick Leeson

The documentary "25 Million Pounds" from 1996 is about the collapse of Barings Bank in the 1990s. The bank collapsed thanks to the trader Nick Leeson who lost £827 million ($1.3 billion) primarily by speculating on futures contracts. If you want to learn more about Nick Leeson, you can watch the movie Rouge Trader or read the book with the same name.

Nick Leeson was released from prison in 1999 and is now a speaker lecturing about risk and corporate responsibility. You can visit his homepage here: Nick Leeson.com

October 4, 2011

Starbucks wants to see more people working

The people running Starbucks - with 17000 stores in 55 countries - have run out of patience and wants to create a fund to stimulate the creation of more jobs in the US. This Monday, Starbucks created the fund "Create Jobs for USA" together with Opportunity Finance Network - OFN. OFN is a group of private financial institutions that provide affordable loans to low-income people and communities. So far, Starbucks have donated $5 million to the fund.

The idea came from Howard Schultz who is CEO of Starbucks. Howard Schultz thinks that small businesses are an engine for job growth, but currently these small businesses can´t access enough credit. And if they can´t access enough credit, they can´t hire unemployed people. He thinks that the politicians in Washington are not doing enough to help small businesses. Earlier in August this year, Howard Schultz wanted to withhold campaign donations to the president and members of Congress until a deal on the US debt, revenue and spending was reached.

People visiting Starbucks can contribute and donors who give $5 or more will get a wristband inscribed with the word "Indivisible." And thanks to fractional reserve banking, every $5 donation will generate $35 in financing for small businesses, nonprofit groups, commercial real estate projects and affordable housing.

Source: Reuters

October 3, 2011

The Essence of the Stock Market

This is a classic image that explains how the stock market works from a psychological point of view. The image is a very popular one and can be seen in magazines, newspapers, encyclopedias, and textbooks. 

But who made it? The answer is Kevin Kallaugher. He has painted similar images since March 1978, when The Economist recruited him to become their first resident cartoonist in their 145 year history. 

Here are a few other images related to the stock market:

Greece vs. Russia

Source: BBC Sport 
Another new week with problems in Europe. IMF thinks that Greece are not doing enough and a Greece default on her debt is closer than ever. But this is not the first time a country defaults on its debt - it also happened in Russia in 1998.
When Russia defaulted in 1998, the stock market crashed with around 20 percent, but recovered soon. That crash resulted in a small financial crisis when the Hedge Fund: Long Term Capital Management collapsed as a result of the crash. The situation did not result in a deep financial crisis thanks to a bailout by Goldman Sachs, AIG, Berkshire Hathaway and the Federal Reserve Bank of New York.
Ian Wyatt has written an interesting article comparing the current situation in Greece with the situation in Russia in 1998:

Russia 1998:
  • debt to GDP: 57%
  • GDP: $220 billion
  • national debt: $131 billion
  • share of world sovereign debt: 0.47%
Greece 2011:
  • debt to GDP: 144%
  • GDP: $330 billion
  • national debt: $475 billion
  • share of world sovereign debt: 0.57%

One big difference today is that the problems in Greece are well known by everyone - while the Russian default of 1998 came as a big surprise to everyone. On the other side, Greece is not the only country having trouble. If Greece defaults on its debt, many other countries in Europe may follow.

Source: Seeking AlphaWikipedia