Remember the CEOs of the big three Detroit US automakers flew in to Washington on their private jets to seek federal money to bail them out. This caused much disquiet in both the public as well as sthe Senate and the House. At the end, some $17 billion were dished out to prevent the collapse of GM and Chrysler. It was justified that if these company were not bailed out, millions of jobs will be lost and the cost will even be higher for Washington. But this sum was only a temporary relief and was just to delay the eventual bankruptcy.
But Washington was compell to offer more money if these big 3 can come up with a restructuring plan. From the political perspective, President Obama has no choice but to bailout these companies. It is a matter of how to justify to the taxpayers and making it palatable to Senate. A task force for the restructuring of the auto industries in now in place to work out a viable plan to include all parties including the unionised workers. Another $22bn is required to prevent the collapse of the big 3.
But by bailing out or subsidising the auto industries, the US will violate WTO rules. The US has been a consistent complainant against China and European Unions in recent years, arguing that government-backed loans and tax breaks to industries were illegal subsidies. Those cases are pending or were settled. These will have repercussions on free-trade agreements or risk giving in to a protectionist backlash in the US. US will lose the moral high ground to lecture the rest of the world on free market.
In the long term, even if the automakers are bailed out, the future will continue to be mired by its ability to compete with the rest of the automakers especially Japanese and Korean. Unless it can restructure its production and cost components, produce more efficient cars and priced competitively yet remained profitable, the US automakers will continue to be a liability to the US taxpayers.
--------------------------------------------------------------JFK
Saturday, February 21, 2009
Friday, February 20, 2009
BAILING OUT AMERICAN HOMEOWNERS
We often heard of the 'American Dream'. Today this dream has become 'American Nightmare'. Millions of Americans are losing their homes with foreclosure rate hitting historical proportion. I see this coming long ago. When politicians bullshit to the American public about the good American life, misled them year in year out of the ever bright future they have. And American naively believes the rhetoric and spends beyond their mean. Individual becomes highly leveraged by taking excessive loan through mortgages. The ever greedy banks readily and happily lend with no regards for credit worthiness. Then the mortgages are packaged into financial instrument that no investors really understood or bother to understand the risk of such investment. The outcome is now history.
President Obama unveiled his much-anticipated bailout plan to sort out this ‘make in America’ housing crisis. He pledges 275Bn dollars to help stem the wave of foreclosure sweeping the country. Accordingly to various new sources, up to 10 million homeowners may face foreclosures by 2012 if nothing is done. The president reckons that if they do nothing now, the cost will even be higher later. In my opinion, that may be true. The bursting of the housing bubble was the root cause of this economic crisis. Unless and until the prices of properties stabilised, the banking crisis will continued to be stress and will not recover. Only when both the housing and the banking recover, then America can expect to be out of this recession.
This is a smart move by Obama both politically and economically. But the outcome and repercussion is still questionable and debatable. President Obama next move is likely to fix the auto industry. Then next he should move on to fix the banking system. Here is where the core problem of the present economic crisis lies.
----------------------------------------------------------------
President Obama unveiled his much-anticipated bailout plan to sort out this ‘make in America’ housing crisis. He pledges 275Bn dollars to help stem the wave of foreclosure sweeping the country. Accordingly to various new sources, up to 10 million homeowners may face foreclosures by 2012 if nothing is done. The president reckons that if they do nothing now, the cost will even be higher later. In my opinion, that may be true. The bursting of the housing bubble was the root cause of this economic crisis. Unless and until the prices of properties stabilised, the banking crisis will continued to be stress and will not recover. Only when both the housing and the banking recover, then America can expect to be out of this recession.
This is a smart move by Obama both politically and economically. But the outcome and repercussion is still questionable and debatable. President Obama next move is likely to fix the auto industry. Then next he should move on to fix the banking system. Here is where the core problem of the present economic crisis lies.
----------------------------------------------------------------
Monday, February 16, 2009
COMMUNISM VERSUS CAPITALISM
Back in the 50s through the 80s, the world was simply divided into 2 spheres. One is free and one non-free. Of course the word ‘free’ was coined by the West to show its superiority and its better appeal. The eastern block of communist countries like to use words like ‘people’ and ‘democratic’. Example is People Republic of China and Democratic Republic of Korea.
During the early 1900, communism, with it strong egalitarian socialistic principle was gaining popularity in a period of turmoil, desperation and frustration between the poor and the rich landlord class in many part of Europe and Asia. The ideals are very noble. All men are equal and all work for the benefit of the states. The state plans and allocates the use of labour and resources. The state in return take care of all it citizens for food, health, education and housing. It became very popular with the poor and the peasants. This gain momentum after WW2 with China and many Asian countries espoused communism.
On the other hand, the West, USA and Western Europe believe in free market. All enterprises and properties are privately own. The state will have minimum interference. Market is a function of demand and supply. Allocation of resources will be based on this principle. Individual has the right to choose and meritocracy is the order. And it is believed that this system is more efficient and better in resource allocation and wealth creation. In US, citizens are responsible for their own food, health and housing. In Europe, it is moderated where the state assist in area of health, education and some basic welfare. This system is widely adopted in most part of the world like Singapore.
The profound difference is the political system. The free world had elections periodically to choose it leaders while the communism countries, the citizens do not have this luxury. It is dominated by the communist party members that govern mostly with iron hand and no dissent is allowed. Individual right and freedom of expression is nonexistent. As mentioned earlier, all enterprises in communist countries are state own, whereas there are privately own in capitalist states.
Looking at my country, Singapore, many enterprises like power, water, telecommunication, hospital, transport and properties are wholly or partially state owned. Does that make Singapore a communist country? The citizens pay for almost everything at market prices. And many enterprises and properties are privately own. Does that make Singapore a capitalist country? Some say this is socialistic democratic. But whatever we call it, what is more important is, have this system imperil or failed us? Where will Singapore be today if we are like china or we adopted the American system? In fact the Chinese has tried to emulate the Singapore system.
Communism has failed because it has lost it appeal and has been found to be unworkable as human being is never altruistic. The present economic crisis has also exposed the flaws capitalism. A lot of questions have to be answered. Do free market principles still relevant to this globalised world with news and information movement at the finger tips? The people of the world are more educated too. Skills and talents are no more limited to the developed west and is easily source globally. Movement of capital and resources move seamlessly across continent with modern transport system.
Free market principles will always be relevant. Except this time, the proponent of free market principles may be haunted by what it promotes in the past. Why a car mechanics in Thailand should be paid only 10% of what his counterparts earn in the West. Why should a factory workers in Vietnam or China are paid peanuts doing the same jobs. Since market forces will determine the best use of resource and capital, more jobs will be lost in the West. But when this reality bites, will the west change the goal post to suit its own interest. There is a very great chance; trade protectionism will be in favour among the western politicians trying to look after their constituencies.
Something I feel may be plausible. We may be moving into a period of ‘global wealth redistribution’. The west has exploited the rest of the world for far too long. It started with the ‘Opium War’ when the Chinese is forced to buy opium in the guise of free trade under the cannons of the English Navy. Also the west has been living beyond their means through easy credits. The west dominance of technology is about over as the rest of the world has caught up. The days of cheap raw materials and resources too are numbered as demand spike up as other countries like China, India, Russia and Brazil develop. As such, the west can no longer monopolised on technology and dictate it trading rules to the rest of the world.
Under the capitalistic system, wealth will always be limited to few. The income gap between the rich and the middle class will widen. With high employment rate, there will be too many poor with no social help from the government. When this happen in a democratic country, politicians cannot ignore the needs of ordinary people in a ‘one man one vote’ system. There is no way the present form of capitalistic system can benefit the majority of the people. Inevitably, the US will have to reform the present free market system.
The US can make reform to its own system but this will entail a lot of painful decisions. Or it can change or reform the trading and market system of the rest of the world to minimise its own pain. I personally think the US will find it convenient to do the latter. It is indeed ironic that China is moving away from communism and eventually US will also move away from its form of capitalism.
My point is, capitalist is definitely not having the last word and communist may be having the last laugh even though it is dead. This global economic crisis will definitely bring about a new economic and political order. Nobody knows how this will evolve.
--------------------Living to see the world---------------------
During the early 1900, communism, with it strong egalitarian socialistic principle was gaining popularity in a period of turmoil, desperation and frustration between the poor and the rich landlord class in many part of Europe and Asia. The ideals are very noble. All men are equal and all work for the benefit of the states. The state plans and allocates the use of labour and resources. The state in return take care of all it citizens for food, health, education and housing. It became very popular with the poor and the peasants. This gain momentum after WW2 with China and many Asian countries espoused communism.
On the other hand, the West, USA and Western Europe believe in free market. All enterprises and properties are privately own. The state will have minimum interference. Market is a function of demand and supply. Allocation of resources will be based on this principle. Individual has the right to choose and meritocracy is the order. And it is believed that this system is more efficient and better in resource allocation and wealth creation. In US, citizens are responsible for their own food, health and housing. In Europe, it is moderated where the state assist in area of health, education and some basic welfare. This system is widely adopted in most part of the world like Singapore.
The profound difference is the political system. The free world had elections periodically to choose it leaders while the communism countries, the citizens do not have this luxury. It is dominated by the communist party members that govern mostly with iron hand and no dissent is allowed. Individual right and freedom of expression is nonexistent. As mentioned earlier, all enterprises in communist countries are state own, whereas there are privately own in capitalist states.
Looking at my country, Singapore, many enterprises like power, water, telecommunication, hospital, transport and properties are wholly or partially state owned. Does that make Singapore a communist country? The citizens pay for almost everything at market prices. And many enterprises and properties are privately own. Does that make Singapore a capitalist country? Some say this is socialistic democratic. But whatever we call it, what is more important is, have this system imperil or failed us? Where will Singapore be today if we are like china or we adopted the American system? In fact the Chinese has tried to emulate the Singapore system.
Communism has failed because it has lost it appeal and has been found to be unworkable as human being is never altruistic. The present economic crisis has also exposed the flaws capitalism. A lot of questions have to be answered. Do free market principles still relevant to this globalised world with news and information movement at the finger tips? The people of the world are more educated too. Skills and talents are no more limited to the developed west and is easily source globally. Movement of capital and resources move seamlessly across continent with modern transport system.
Free market principles will always be relevant. Except this time, the proponent of free market principles may be haunted by what it promotes in the past. Why a car mechanics in Thailand should be paid only 10% of what his counterparts earn in the West. Why should a factory workers in Vietnam or China are paid peanuts doing the same jobs. Since market forces will determine the best use of resource and capital, more jobs will be lost in the West. But when this reality bites, will the west change the goal post to suit its own interest. There is a very great chance; trade protectionism will be in favour among the western politicians trying to look after their constituencies.
Something I feel may be plausible. We may be moving into a period of ‘global wealth redistribution’. The west has exploited the rest of the world for far too long. It started with the ‘Opium War’ when the Chinese is forced to buy opium in the guise of free trade under the cannons of the English Navy. Also the west has been living beyond their means through easy credits. The west dominance of technology is about over as the rest of the world has caught up. The days of cheap raw materials and resources too are numbered as demand spike up as other countries like China, India, Russia and Brazil develop. As such, the west can no longer monopolised on technology and dictate it trading rules to the rest of the world.
Under the capitalistic system, wealth will always be limited to few. The income gap between the rich and the middle class will widen. With high employment rate, there will be too many poor with no social help from the government. When this happen in a democratic country, politicians cannot ignore the needs of ordinary people in a ‘one man one vote’ system. There is no way the present form of capitalistic system can benefit the majority of the people. Inevitably, the US will have to reform the present free market system.
The US can make reform to its own system but this will entail a lot of painful decisions. Or it can change or reform the trading and market system of the rest of the world to minimise its own pain. I personally think the US will find it convenient to do the latter. It is indeed ironic that China is moving away from communism and eventually US will also move away from its form of capitalism.
My point is, capitalist is definitely not having the last word and communist may be having the last laugh even though it is dead. This global economic crisis will definitely bring about a new economic and political order. Nobody knows how this will evolve.
--------------------Living to see the world---------------------
Saturday, February 14, 2009
DEEPENING RECESSION
The entire Europe is in recession. Never has economic situation so dire since WW2. And the data and statistics announced shows the US recession is getting worst. More pain is expected in the near-term as bleak economic reports roll in, flagging more bankruptcies, bad debts and layoffs. Unemployment rate is climbing towards double digits. Home and properties continued to fall. Foreclosures do not seem to abate.
Across the world, manufacturing outputs and exports keep shrinking forcing factories shutdown. Cargoes carrried by both ships and aeroplanes too drop dramatically. Trade collapse and a slowdown are forcing many governments in Asia to take extraordinary measures to boost the economy.
Across the globe, from developed countries and developing countries, stimulus measures were announced. America has just announced another 800bn dollars stimulus package. In fact many countries are annoucing stimulus packages for the second or third times, like the US. Surely, behind closed doors, government officials and economists will be wondering with trepidation, whether all these measures can actually turn the economy around. The danger is what to do if it doesn’t work. Too much at are stake, both socially and politically. There will be more sleepless night for everyone from central bankers to consumers struggling to pay off their mortgages and daily bills. I too have my doubts. The economic crisis is so severe and the deterioration totally uncontrollable. Government and economist have been behind the curve and are still behind the curve.
The measures so far are simply reactive. They seem only to address the problem of boosting the economy through spending. While this is not wrong, the world leaders need to move faster to tackle the roots of the problem. In my view, the world, especially the US needs to address the failure of banking system, falling home prices and foreclosure. But the hardest part is to rebuild confidence. Confidence is the most critical part of economic recovery. With job losses and bankruptcies mounting, sentiment on the ground is at its lowest. You can put money in the pocket, but you can’t put confidence in the heart. When confidence is shattered, it likes repairing a broken glass.
The world economy is doomed. Obama said, ‘Recovery will be likely be measured in years, not months’. If the US takes unprecedented measures to have a total solution to address the banking and housing problem, there is still hope. Only great leaders with great vision can motivate it people that there is hope. Great leaders can convince its people to take the pains to achieve a better tomorrow. This responsibility now falls on the shoulders of Barack Obama.
----------------------Living to see the world--------------------------------------
Across the world, manufacturing outputs and exports keep shrinking forcing factories shutdown. Cargoes carrried by both ships and aeroplanes too drop dramatically. Trade collapse and a slowdown are forcing many governments in Asia to take extraordinary measures to boost the economy.
Across the globe, from developed countries and developing countries, stimulus measures were announced. America has just announced another 800bn dollars stimulus package. In fact many countries are annoucing stimulus packages for the second or third times, like the US. Surely, behind closed doors, government officials and economists will be wondering with trepidation, whether all these measures can actually turn the economy around. The danger is what to do if it doesn’t work. Too much at are stake, both socially and politically. There will be more sleepless night for everyone from central bankers to consumers struggling to pay off their mortgages and daily bills. I too have my doubts. The economic crisis is so severe and the deterioration totally uncontrollable. Government and economist have been behind the curve and are still behind the curve.
The measures so far are simply reactive. They seem only to address the problem of boosting the economy through spending. While this is not wrong, the world leaders need to move faster to tackle the roots of the problem. In my view, the world, especially the US needs to address the failure of banking system, falling home prices and foreclosure. But the hardest part is to rebuild confidence. Confidence is the most critical part of economic recovery. With job losses and bankruptcies mounting, sentiment on the ground is at its lowest. You can put money in the pocket, but you can’t put confidence in the heart. When confidence is shattered, it likes repairing a broken glass.
The world economy is doomed. Obama said, ‘Recovery will be likely be measured in years, not months’. If the US takes unprecedented measures to have a total solution to address the banking and housing problem, there is still hope. Only great leaders with great vision can motivate it people that there is hope. Great leaders can convince its people to take the pains to achieve a better tomorrow. This responsibility now falls on the shoulders of Barack Obama.
----------------------Living to see the world--------------------------------------
Tuesday, February 10, 2009
CAPITALISM IN TROUBLE
The fall of communism in Poland 20 years ago heralded the end of communism. The last nail in the coffin came when the Berllin Wall fell. The rest of the Russian satellites countries abandon communism one by one. There was so much hope and euphoria in Eastern Europe when western style democracy was adopted. Along with it come capitalism and free market. It was supposed to bring better life and cure the ills of communism. The perennial food shortages and long queue were gone.
The present day global economic crisis had once again brings hardship to these ‘liberated’ countries. Capitalism is supposed to bring wealth and well being to mankind. But with the shutdown of shipyards and factories, many hard questions need to be asked. Has capitalism failed? The guns (western politicians and media) have gone silent. What happens to these champions of capitalism?
Capitalism has not only failed, but has compromised the future of next generations, not only in economic term but as well as the environment. The world resources have been plundered in the name of profit. The income gap between the rich and the poor diverge even more. Yes, lot of wealth is created, but it goes to the minority. The majority continues to struggle for basic needs. Capitalism has made the world economy far more volatile and poorer nation more vulnerable. Some example was the recent spike in world crude oil and commodities prices. The ordinary citizens just couldn’t afford to pay for these basic necessities.
This failure does not mean communism is better and it will make a comeback. Communism has failed miserably as it will never work because human beings are never altruistic. During the Asian Financial crises, I remembered IMF (headed and backed by West and US) lectured the world on free market. Weak companies must be allowed to fail and market forces will support the more efficient and strong. Today, America is saying the banks and auto industries are just too big to fall, hence the need to spend billions of taxpayer money and borrowed money from Asians to bailout out these failed companies. This is an overt omission of the failure of western style capitalism.
But there is no other alternative. Communism was a total failure. Capitalism is the only viable system available today. But this system must be properly regulated for the interest of the entire world and the majority. Specifically the financial industries need new set of regulation and oversight. The rich countries must not dominate and exploit the poor countries. Regulations must not be allowed to be manipulated by lobby and interest groups for self gratification. Corruption, financial scandals and abuse of power must be punished with sentences no different from that meted out to rapists and murderers.
During Deng’s era, China said, ‘Capitalism with Chinese characteristic’ may now be food for thoughts for those who has embraced unfettered capitalism. But china is still far from perfect and fari from developed status. And the western media should stop the ranking which countries are most ‘free’. Instead, rank countries which are most successful in term education, quality of life and living environment. This could provide a benchmark for weaker country a model to emulate. The good thing about this economic crisis is that Uncle Sam will not be lecturing the world on economic issues of good governance and prudence for a long time.
------------------Living to see the world--------------
The present day global economic crisis had once again brings hardship to these ‘liberated’ countries. Capitalism is supposed to bring wealth and well being to mankind. But with the shutdown of shipyards and factories, many hard questions need to be asked. Has capitalism failed? The guns (western politicians and media) have gone silent. What happens to these champions of capitalism?
Capitalism has not only failed, but has compromised the future of next generations, not only in economic term but as well as the environment. The world resources have been plundered in the name of profit. The income gap between the rich and the poor diverge even more. Yes, lot of wealth is created, but it goes to the minority. The majority continues to struggle for basic needs. Capitalism has made the world economy far more volatile and poorer nation more vulnerable. Some example was the recent spike in world crude oil and commodities prices. The ordinary citizens just couldn’t afford to pay for these basic necessities.
This failure does not mean communism is better and it will make a comeback. Communism has failed miserably as it will never work because human beings are never altruistic. During the Asian Financial crises, I remembered IMF (headed and backed by West and US) lectured the world on free market. Weak companies must be allowed to fail and market forces will support the more efficient and strong. Today, America is saying the banks and auto industries are just too big to fall, hence the need to spend billions of taxpayer money and borrowed money from Asians to bailout out these failed companies. This is an overt omission of the failure of western style capitalism.
But there is no other alternative. Communism was a total failure. Capitalism is the only viable system available today. But this system must be properly regulated for the interest of the entire world and the majority. Specifically the financial industries need new set of regulation and oversight. The rich countries must not dominate and exploit the poor countries. Regulations must not be allowed to be manipulated by lobby and interest groups for self gratification. Corruption, financial scandals and abuse of power must be punished with sentences no different from that meted out to rapists and murderers.
During Deng’s era, China said, ‘Capitalism with Chinese characteristic’ may now be food for thoughts for those who has embraced unfettered capitalism. But china is still far from perfect and fari from developed status. And the western media should stop the ranking which countries are most ‘free’. Instead, rank countries which are most successful in term education, quality of life and living environment. This could provide a benchmark for weaker country a model to emulate. The good thing about this economic crisis is that Uncle Sam will not be lecturing the world on economic issues of good governance and prudence for a long time.
------------------Living to see the world--------------
Saturday, February 7, 2009
HO CHING STEPS DOWN
Change of Guard
Just after lunch yesterday, DJ News flashed an alert that an important announcement is pending 3.30pm. Immediately, the market forum went into overdrive with theories and rumours. Among them were big acquisitions by TH through Standard Chart and SIA losing 2 billion in fuel hedging. But none were even close to what was officially released.
At 4pm. The investing world got their truth. CEO Ho Ching will be stepping down and will be replaced by former CEO of BHP, Charles Goodyear. Then another round of rumours and theories for the reasons of the change of guard at such turbulent times begin to make its round. Of course, the market and the netizens are never short of.
Chairman Danabalan took pains to debunk the rumours that Ho Ching left not because of Temasek poor performance from the recent acquisition of Barclay, ML, Citi, Standard Chart and UBS. Ho Ching herself said that the change was planned long ago and that Temasek need new “energy”.
I do not know HC personally, except that she was a scholar and wife of our PM. Many times she was the target of pot-shots unfairly lobbed at her due to this relationship with the PM. This has kept her away from the limelight of media interviews and press conferences. That unfortunately denied Temasek the ability to effectively tell its side of the story. Temasek is the world 5th largest SWF. As it took the world stage recently when it bought huge stakes in multinationals, politicians from the developed west begin to place SWF under microscope, there is a real need to manage its public image and perception. This could be the reason why a foreign white man is asked to helm this $185B funds. Together with the 2nd in command, who is also white, will be in a better and easier position to manage the western media which are typically sceptical of Singapore.
Another reason in my opinion was more to do with domestic politics. As an early investor in troubled Merril Lynch, Standard Chart and Barclays Banks which now sit on paper loss of US$5B, US$3.2B and $4.6B respectively (source from The Edge). But these losses have to be balanced against the profit from Bank of China and CCB. This losing investment continues to bleed and the losses have yet to abate. Potentially, these losses can be explosive and become a nasty liability for the PM and it may be strategic move for this handover.It may also spare PM the unnecessary criticisms and embarrassment and allow him to concentrate his energy to deal with this economic crisis. This I think is a wise move.
Another reason I believe, could be a change in investment and portfolio philosophy. Temasek has been heavily invested in financial sector. Financial sector may have seen it best days and will no longer give superior returns in the future. Resources and commodities may be the future and now is the best time to make long term investment after the recent collapse of stock market. The ex-CEO of BHP brings with him all the credentials and inside knowledge in this sector. This will definite provide Temasek the edge and the confidence to move into this sector.
So much for my speculation.
Just after lunch yesterday, DJ News flashed an alert that an important announcement is pending 3.30pm. Immediately, the market forum went into overdrive with theories and rumours. Among them were big acquisitions by TH through Standard Chart and SIA losing 2 billion in fuel hedging. But none were even close to what was officially released.
At 4pm. The investing world got their truth. CEO Ho Ching will be stepping down and will be replaced by former CEO of BHP, Charles Goodyear. Then another round of rumours and theories for the reasons of the change of guard at such turbulent times begin to make its round. Of course, the market and the netizens are never short of.
Chairman Danabalan took pains to debunk the rumours that Ho Ching left not because of Temasek poor performance from the recent acquisition of Barclay, ML, Citi, Standard Chart and UBS. Ho Ching herself said that the change was planned long ago and that Temasek need new “energy”.
I do not know HC personally, except that she was a scholar and wife of our PM. Many times she was the target of pot-shots unfairly lobbed at her due to this relationship with the PM. This has kept her away from the limelight of media interviews and press conferences. That unfortunately denied Temasek the ability to effectively tell its side of the story. Temasek is the world 5th largest SWF. As it took the world stage recently when it bought huge stakes in multinationals, politicians from the developed west begin to place SWF under microscope, there is a real need to manage its public image and perception. This could be the reason why a foreign white man is asked to helm this $185B funds. Together with the 2nd in command, who is also white, will be in a better and easier position to manage the western media which are typically sceptical of Singapore.
Another reason in my opinion was more to do with domestic politics. As an early investor in troubled Merril Lynch, Standard Chart and Barclays Banks which now sit on paper loss of US$5B, US$3.2B and $4.6B respectively (source from The Edge). But these losses have to be balanced against the profit from Bank of China and CCB. This losing investment continues to bleed and the losses have yet to abate. Potentially, these losses can be explosive and become a nasty liability for the PM and it may be strategic move for this handover.It may also spare PM the unnecessary criticisms and embarrassment and allow him to concentrate his energy to deal with this economic crisis. This I think is a wise move.
Another reason I believe, could be a change in investment and portfolio philosophy. Temasek has been heavily invested in financial sector. Financial sector may have seen it best days and will no longer give superior returns in the future. Resources and commodities may be the future and now is the best time to make long term investment after the recent collapse of stock market. The ex-CEO of BHP brings with him all the credentials and inside knowledge in this sector. This will definite provide Temasek the edge and the confidence to move into this sector.
So much for my speculation.
LAYOFF OF THE CENTURY
Last week, China announced 26 million has gone out of job directly attributed to the economic recession in the develop world. From countries to countries, employment figures keep propping higher. Soon many countries will be looking at double digits unemployment. To better understand the magnitude of the unemployment. We can equate 26 millions as the entire population of Australia not working or about 6 times Singapore population not working. If we add all the unemployment in the rest of the world, the numbers may be just mind blogging.
Last night, US reported another set of brutal January job report. Almost 2 million jobs lost in US in the last 3 months bringing unemployment to 7.6%. There is just no end in sight to further job lost. The US economy is basically driven by domestic’s consumption. It is obvious that with job lost, consumption will decrease thus creating more jobs lost, bringing about a very vicious cycle of job losses. As consumption decreases, the world manufacturing countries will see more factories shutdown or downsize. Retrenchment is inevitable. The same vicious cycle will repeats in these countries leading to more jobs lost. If the US government fails to stimulate consumption, the unemployment rate will exacerbate further. As the recession becomes deeper and longer, there can be no escape from the dreaded depression every country trying to avoid.
With extremely bleak job scenario, the social and political costs become more uncertain but definitely leads to social unrest, chaos and increased crime rates. Young will suffer from malnutrition and illiteracy. The aged will suffer from lack of health care. Many will suffer from depression and there are already sign of increasing suicides. Corruption too will increase especially in the third world when one has to find means to feed their families. The will be increase in illegal economic migrants when people are faced with hardships. Conflicts between neighbouring countries will be inevitable. Major industrialised nations may seek trade protectionism to pacify it local constituents. Such action can snowball into trade wars. The world is definitely heading into very turbulent times.
So these are the ills of massive unemployment. But the cause of this massive unemployment is free trade and capitalism. Capitalism solely works on the market forces of supply and demand and is supposed to provide the best efficiency for the usage of capital and resources. Capitalism and free trade are supposed to bring wealth and improve the livelihood of the people. Ironically now, it has brought despair and pains to so many people. So we see the ugly side of free market and capitalism, it has failed to address the social cost to human being. Market is incapable of self regulation. Market forces may not be efficient as previously believed by the pioneering economists. Perhaps Karl Marx may be laughing in his grave this time.
If unemployment is cyclical synonymous with an economic recession, then there is hope that those jobs will be returned to workers when the economy recovers. What fearsome is when cyclical unemployment becomes a structural unemployment, as a result of a paradigm shift to a 'new economy' after this economic crisis. Many of the jobs may become redundant and job losses become permanent. High unemployment may become a new global crisis leading to trade war and conflict. Affected country really needs to be nimble to adjust to the changes and formulate strategies to solve this problem.
-----------------Living to see the world---------------------------
Last night, US reported another set of brutal January job report. Almost 2 million jobs lost in US in the last 3 months bringing unemployment to 7.6%. There is just no end in sight to further job lost. The US economy is basically driven by domestic’s consumption. It is obvious that with job lost, consumption will decrease thus creating more jobs lost, bringing about a very vicious cycle of job losses. As consumption decreases, the world manufacturing countries will see more factories shutdown or downsize. Retrenchment is inevitable. The same vicious cycle will repeats in these countries leading to more jobs lost. If the US government fails to stimulate consumption, the unemployment rate will exacerbate further. As the recession becomes deeper and longer, there can be no escape from the dreaded depression every country trying to avoid.
With extremely bleak job scenario, the social and political costs become more uncertain but definitely leads to social unrest, chaos and increased crime rates. Young will suffer from malnutrition and illiteracy. The aged will suffer from lack of health care. Many will suffer from depression and there are already sign of increasing suicides. Corruption too will increase especially in the third world when one has to find means to feed their families. The will be increase in illegal economic migrants when people are faced with hardships. Conflicts between neighbouring countries will be inevitable. Major industrialised nations may seek trade protectionism to pacify it local constituents. Such action can snowball into trade wars. The world is definitely heading into very turbulent times.
So these are the ills of massive unemployment. But the cause of this massive unemployment is free trade and capitalism. Capitalism solely works on the market forces of supply and demand and is supposed to provide the best efficiency for the usage of capital and resources. Capitalism and free trade are supposed to bring wealth and improve the livelihood of the people. Ironically now, it has brought despair and pains to so many people. So we see the ugly side of free market and capitalism, it has failed to address the social cost to human being. Market is incapable of self regulation. Market forces may not be efficient as previously believed by the pioneering economists. Perhaps Karl Marx may be laughing in his grave this time.
If unemployment is cyclical synonymous with an economic recession, then there is hope that those jobs will be returned to workers when the economy recovers. What fearsome is when cyclical unemployment becomes a structural unemployment, as a result of a paradigm shift to a 'new economy' after this economic crisis. Many of the jobs may become redundant and job losses become permanent. High unemployment may become a new global crisis leading to trade war and conflict. Affected country really needs to be nimble to adjust to the changes and formulate strategies to solve this problem.
-----------------Living to see the world---------------------------
Thursday, February 5, 2009
INDECENT PAY
Indecent Pay
The days of fat bonus for CEOs and top executives may be over. In good times, some CEO gets up to $1 million dollars a day. Nobody questions such hefty pay when the stock market is booming and corporations produced exceptional profits. With the banking systems losing over US$1 trillion and stock market loses over US$25trillion, a lot of questions need to be ask about executive’s remuneration and compensation packages. But first just see what $1 trillion in numeric is.
1,000,000,000,000
When the above amount is lost just in the financial institutions, many of the top executives continues to receive bonus. Wall Street paid out some $18 billion of bonus to some of these financial troubled institutions. That is total indecency of the first degree. American taxpayers had to spend billions to bailout some of the failed financial institutions like BOA, Citi, FreddieMac, WaMu, AIG, Merril Lynch, just to name the familiar few. That, I agree with Obama, ‘its shameful’ and ‘it’s the height of irresponsibility’.
Talking of corporate governance and accountability, where is it? Yes CEOs are paid to produce good profit for the benefit of shareholders. In the obsession to deliver profit, CEO has taken risks that have done irreparable damages and even caused demise to so many good companies. Perhaps, remuneration should also have a punitive clause to protect shareholders and bonus should be based on company 3 to 5 year’s performance rather than just 1 year.
The boards of directors too should be accountable. They too, should forfeit the director’s fee if the company were to lose money due to reckless and irresponsible decisions of the companies’ executives.
We must take cognisant that the banking and financing business is unique from others like manufacturing or services. Here an individual banker can single handed produced millions dollars of profit. Can any company CEO turn away profit. The answer is an unqualified no and CEO is willing to pay accordingly for any skilful person who can produce the profit. For this reason alone, many successful bankers will be continued to be paid millions. The simple fact of life is, if you can bring in millions, you will be paid millions like sportsmen, singers, actors etc
--------------------Living to see the world-------------------------
The days of fat bonus for CEOs and top executives may be over. In good times, some CEO gets up to $1 million dollars a day. Nobody questions such hefty pay when the stock market is booming and corporations produced exceptional profits. With the banking systems losing over US$1 trillion and stock market loses over US$25trillion, a lot of questions need to be ask about executive’s remuneration and compensation packages. But first just see what $1 trillion in numeric is.
1,000,000,000,000
When the above amount is lost just in the financial institutions, many of the top executives continues to receive bonus. Wall Street paid out some $18 billion of bonus to some of these financial troubled institutions. That is total indecency of the first degree. American taxpayers had to spend billions to bailout some of the failed financial institutions like BOA, Citi, FreddieMac, WaMu, AIG, Merril Lynch, just to name the familiar few. That, I agree with Obama, ‘its shameful’ and ‘it’s the height of irresponsibility’.
Talking of corporate governance and accountability, where is it? Yes CEOs are paid to produce good profit for the benefit of shareholders. In the obsession to deliver profit, CEO has taken risks that have done irreparable damages and even caused demise to so many good companies. Perhaps, remuneration should also have a punitive clause to protect shareholders and bonus should be based on company 3 to 5 year’s performance rather than just 1 year.
The boards of directors too should be accountable. They too, should forfeit the director’s fee if the company were to lose money due to reckless and irresponsible decisions of the companies’ executives.
We must take cognisant that the banking and financing business is unique from others like manufacturing or services. Here an individual banker can single handed produced millions dollars of profit. Can any company CEO turn away profit. The answer is an unqualified no and CEO is willing to pay accordingly for any skilful person who can produce the profit. For this reason alone, many successful bankers will be continued to be paid millions. The simple fact of life is, if you can bring in millions, you will be paid millions like sportsmen, singers, actors etc
--------------------Living to see the world-------------------------
Tuesday, February 3, 2009
NO BLUEPRINT FOR RECOVERY
NO BLUEPRINT FOR ECONOMIC RECOVERY
The world economy has had exponential growth since WW2. This was a period of relative calm. With the demise of communism in Russian, Europe and China in Asia, the focus has shifted from political philosophy to economic growth especially after the fall of the Berlin Wall. With the European espousing free market economy and the US embraced unfettered capitalism, wealth creation has been phenomenal. The ill of capitalism, ‘greed’ has reared its ugly head. This had led to excessive production and unsustainable development especially in real estates. There is just too much inventories from houses to consumer goods. The relentless effort to pursue profit had driven the financial world to be over leveraged. Now is a period of financial deleveraging and digestion of excessive inventories of commodities, industrial products, to household goods. All these will take some time.
This week world leaders, think tanks, academics, entrepreneurs, economists are gathered at Davos for the World Economic Forum to understand and attempt to formulate strategies to avert this economic calamity. On hindsight, it is now easier to pinpoint the root cause of this economic mess. And there will of course be no shortage of ideas and solutions. But the problem is always in implementation and whether the politicians and its citizen are willing to take the strong dose of medication to cure this economic illness. Some need stronger medicine than others. Does politician has the courage to face the truth and convey the message to its people, without to worry about their political costs.
The democratic world of one man one vote may find itself disadvantage against the Chinese where the central government can unilaterally make the tough and necessary decisions. The free world might find itself bogged down my domestic politics to take the most appropriate but painful resolution to address this financial mess.
The world also needs a new financial architecture and a new social contract with its people. But each country has its own unique idiocy and circumstances. So it is impossible to have a global or universal standard to get the entire world out of this economic mayhem. Inadvertently, a universal policy or action may hurt one country more than the others and politician may not have the political will to implement it. At the end of the day, each country had to move on its own pace it is comfortable with. No government will want to solve this problem by having to default on its power to govern.
So the world will never be able to come up with universal economic blueprint to weather this storm.
--------------------------Living to see the world------------------
The world economy has had exponential growth since WW2. This was a period of relative calm. With the demise of communism in Russian, Europe and China in Asia, the focus has shifted from political philosophy to economic growth especially after the fall of the Berlin Wall. With the European espousing free market economy and the US embraced unfettered capitalism, wealth creation has been phenomenal. The ill of capitalism, ‘greed’ has reared its ugly head. This had led to excessive production and unsustainable development especially in real estates. There is just too much inventories from houses to consumer goods. The relentless effort to pursue profit had driven the financial world to be over leveraged. Now is a period of financial deleveraging and digestion of excessive inventories of commodities, industrial products, to household goods. All these will take some time.
This week world leaders, think tanks, academics, entrepreneurs, economists are gathered at Davos for the World Economic Forum to understand and attempt to formulate strategies to avert this economic calamity. On hindsight, it is now easier to pinpoint the root cause of this economic mess. And there will of course be no shortage of ideas and solutions. But the problem is always in implementation and whether the politicians and its citizen are willing to take the strong dose of medication to cure this economic illness. Some need stronger medicine than others. Does politician has the courage to face the truth and convey the message to its people, without to worry about their political costs.
The democratic world of one man one vote may find itself disadvantage against the Chinese where the central government can unilaterally make the tough and necessary decisions. The free world might find itself bogged down my domestic politics to take the most appropriate but painful resolution to address this financial mess.
The world also needs a new financial architecture and a new social contract with its people. But each country has its own unique idiocy and circumstances. So it is impossible to have a global or universal standard to get the entire world out of this economic mayhem. Inadvertently, a universal policy or action may hurt one country more than the others and politician may not have the political will to implement it. At the end of the day, each country had to move on its own pace it is comfortable with. No government will want to solve this problem by having to default on its power to govern.
So the world will never be able to come up with universal economic blueprint to weather this storm.
--------------------------Living to see the world------------------
Sunday, February 1, 2009
SICK BULL IS DEAD
SINKING BULL IS DEAD
The bull, stuck in the deep mud since last year, kept alive with rope around its horns, is now grasping for its last few breaths. Even with all the ropes (bailouts and emergency loans), the bull is destined for the history book like Bear Stern and Lehman Brothers. And the rest of the once mighty corporations like Citibank, UBS, RBS, AIG, GM etc are all hanging precariously on the cliff. Any burst of strong wind will see some of them falling off the cliff into oblivion.
Locally, despite the enormous budget, there was no post market rally. The massive stimulus budget announce by Barack Obama does not tickle the market. Around the world, from Australia, China and Japan, similar massive stimulus budgets were also announced. And stock markets continue to ignore and even react negatively. Such indifference points to the market resignation and scepticism. There seem to be an air of hopelessness and helplessness.
Around the world, the dreaded R word has become reality as countries after countries announce 3Q GDP contractions and officially confirm recession in these countries. Next quarter, most countries expect even worst contraction. Countries only hope to see improvement at 3Q or 4Q. It won’t be long when the dreaded D word will become the fashionable and most commonly used word from analysts and politicians.
With all these stimulus packages and some restructuring processes in place, there are concerns that all these measures may not work. So what is next? There has been talk about the G20 entering into a new Brettonwoods. There is a dire need for the world to look deeply in how to better regulate the banking system, SWF, hedge funds and all the financial instruments that have been emancipated from free and unfettered capitalism. There is a real need for a new set of universal regulations for the globalised world.
But do the world’s leaders, especially the US and the European have the political will to stomach the painful changes need to address the financial ills of this world. The world may be able to absorb the colossal financial loss, but the social cost will definitely take a political toll on many governments. And that, I hope will not become the ‘Waterloo’ for politicians who have to make the tough decisions. On a more optimistic and positive note, this crisis may become a catalyst for politicians to act decisively. It is often believed crisis create great leaders.
Of course there will always the dangers of trade protectionism for domestic politics. We need responsible leaders with vision to lead the world out of this economic mess. Any further deterioration will lead this world into depression, bringing unimaginable hardship to the entire world.
-----------------------------------Living to see the world------------------------------
The bull, stuck in the deep mud since last year, kept alive with rope around its horns, is now grasping for its last few breaths. Even with all the ropes (bailouts and emergency loans), the bull is destined for the history book like Bear Stern and Lehman Brothers. And the rest of the once mighty corporations like Citibank, UBS, RBS, AIG, GM etc are all hanging precariously on the cliff. Any burst of strong wind will see some of them falling off the cliff into oblivion.
Locally, despite the enormous budget, there was no post market rally. The massive stimulus budget announce by Barack Obama does not tickle the market. Around the world, from Australia, China and Japan, similar massive stimulus budgets were also announced. And stock markets continue to ignore and even react negatively. Such indifference points to the market resignation and scepticism. There seem to be an air of hopelessness and helplessness.
Around the world, the dreaded R word has become reality as countries after countries announce 3Q GDP contractions and officially confirm recession in these countries. Next quarter, most countries expect even worst contraction. Countries only hope to see improvement at 3Q or 4Q. It won’t be long when the dreaded D word will become the fashionable and most commonly used word from analysts and politicians.
With all these stimulus packages and some restructuring processes in place, there are concerns that all these measures may not work. So what is next? There has been talk about the G20 entering into a new Brettonwoods. There is a dire need for the world to look deeply in how to better regulate the banking system, SWF, hedge funds and all the financial instruments that have been emancipated from free and unfettered capitalism. There is a real need for a new set of universal regulations for the globalised world.
But do the world’s leaders, especially the US and the European have the political will to stomach the painful changes need to address the financial ills of this world. The world may be able to absorb the colossal financial loss, but the social cost will definitely take a political toll on many governments. And that, I hope will not become the ‘Waterloo’ for politicians who have to make the tough decisions. On a more optimistic and positive note, this crisis may become a catalyst for politicians to act decisively. It is often believed crisis create great leaders.
Of course there will always the dangers of trade protectionism for domestic politics. We need responsible leaders with vision to lead the world out of this economic mess. Any further deterioration will lead this world into depression, bringing unimaginable hardship to the entire world.
-----------------------------------Living to see the world------------------------------
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