Saturday, July 28

US 'plans huge Saudi arms deal'

BBC NEWS | Americas | US 'plans huge Saudi arms deal'

also Israel is very upset about it. I wonder why? I mean, who in the name of all that's holy, will ever operate all these very expensive equipment? Not the Saudi's themselves. If Iran ever attacks, you will find the planes and buses all filled with panic stricken saudi's, heading east or north east at a rapid clip. Remember what happened when Iraq attacked? You think I am joking? I am not, the ordinary saudi was extremely bitter about the going ons of the royals and the army. At one shot, almost the entire governing layer of Saudi Arabia had buzzed off. So if Iran attacks, it will be the Americans and Brits who will have to back again to save its butt. Again, the stupidity comes through. The Saudis are basically paying billions for equipment which they dont know, dont want, dont need, cant operate so that they have an insurance policy from the Brits/Americans for an event that the west is engineering. The ironies and stupidities are so many that it has a certain unique beauty of its own.

Also check out something that I had written before on what the Saudi usage of British equipment and comments made by British technicians operating the Al Yamamah contract.

Counting the cost of holding on to Siachen - The world highest battlefield

Counting the cost of holding on to Siachen - Yahoo! India News

An interesting story on the world's highest battlefield and the huge costs that India has to spend in maintaining the troops. But then, one always gets these questions. Why spend money on a ballistic submarine when the money could be spent on the National Health Service? Why spend money on cosmetic surgery when the money can be spent on say breast surgery? why spend money on fat people when money can be spent on thin people? Why spend money on smokers when you can spend money on non smokers? why spend surgery money on a person who crashed his car while speaking on a mobile phone when the money could be spent on the victim who was run over by the car? why spend money on the NHS for bog standard non threatening operations when the money could be sent to darfur for starving people who are actually dying?......

But at the end of the day, the money that the state is a choice, just like individuals make a choice. The only difference is, the state (which is hopefully democratic) is spending based upon what the people want!. In this particular case, the Indian state thinks that it is worthwhile to expend all this money to protect boundaries and provide security. You can debate it till the cows come home (pun intended) but the democratically elected government of India has decided. :)

Bahrain’s Wafa Crowned Miss Arab World 2007

Sheetudeep » Bahrain’s Wafa Crowned Miss Arab World 2007

Hot diggity dah, check out the lovely young ladies!, apparently this contest has been running for the past 3 years including this one. Now look at what the winners have done. The current winner is a professor at Law Faculty of Bahrain University, the Ms. Egypt was a football referee who proudly claimed to be participating in the contest to plug Egypt's tourism and sports. Good, ladies, go for it. And for those who think arab women are shy oriental women, poke in the eye. For those who think that beauty pageants are useless, poke in the eye. For those who think too much, jeez, just watch something nice and pretty, ok? stop overanalysing!

the link between the liquidity of a firm's stock and its ownership structure

We examine the link between the liquidity of a firm's stock and its ownership structure, specifically, how much of the firm's stock is owned by insiders and institutions, and how concentrated is their ownership. We find that the liquidity-ownership relation is mostly driven by institutional ownership rather than insider ownership. Importantly, liquidity is positively related to total institutional holdings but negatively related to institutional blockholdings. This finding is consistent with the hypothesis that while the level of institutional ownership proxies for trading activity, the concentration of such ownership proxies for adverse selection. Journal of Financial Markets 10 (2007) 219–248, Ownership level, ownership concentration and liquidity by Amir Rubin.

The study is mainly in the USA, but frankly, in my opinion, the results can be extrapolated in the UK as well, similar structures and to a lesser extent to Europe. This is particularly poignant given the European bank's situation where we would have expected institutional blockholding to protect us (look at the interlocking web of ownerships of any big european bank) but on the other hand, because of electronic trading, they got side swiped by the hedgies. (another example how corporate governance laws and structures are horribly behind the market and IT developments).

My friend, Professor Christian De-Cock, recently ran a big corporate governance research project for the ESRC and i helped him out in a small way, it was real fun, but when it gets published, I will post the results. It related to how corporate governance is changing its spots.

Ideal Timing and Approach for Bundled Outsourcing: When Scale Drives Even Greater Synergies

Ideal Timing and Approach for Bundled Outsourcing: When Scale Drives Even Greater Synergies

In this special research report sponsored by Accenture, TechVentive chief executive Brian Sommer looks beyond the current popularity of shared services. As with any business model, Sommer argues, the shared services context is continuing to evolve as it morphs toward outsourcing.The latest development is bundled outsourcing, which entails outsourcing several business processes across multiple functions at one time to a single service provider. This evolution of the outsourcing is fast emerging as a strategy used by business and government executives to drive value into their enterprises while simultaneously shedding cost. As Sommers sums it up: “Shared services and outsourcing are two business models that recognize the power of scale. Combine them and even more opportunities are available for businesses.” This report examines not only the business benefits of bundled outsourcing but considers how companies should construct their road maps for implementing bundled outsourcing and how to conduct the all-important choice of third-party service provider.

I keep on seeing the debate in the media and political fields being restricted to the idea that outsourcing and offshoring is just relating to cost. No my friends, the argument has long moved on. Now the world is indeed flat and global supply chains are in clear evidence even in the banking industry.

Here's another idea. I see the main benefit of this as the next wave. What do I mean by this? Here is an example. Do you guys recall what BarclayCard banged on about when the e-commerce wave was peaking? you setup your e-commerce site, and we will give you a packaged bundled service toolkit, which includes card services, payment, audit, banking, technology, web tools, etc. etc. Just take that idea and blow it up to a much bigger global scale.

So we can go to say a bank in emerging markets in North Africa, South East Asia, Latin America), which has local presence but to build up the infrastructure and operations would be a pain. So a bundled offering would be something like payment services, plus our e-commerce offering, plus our harvest / symphony contracts with our partners. So to simplify massively, what the client gets is a one stop solution for his product structuring, processing, hosting, execution, etc. All he has to worry about is his client and the pricing. This is very simplistic, but there you go. At this moment this is relatively common in the asset management space but there is a very large space in the other financial industry product spaces.

European Banking: How Leading Acquirers Are Riding the M&A Growth Wave

European Banking: How Leading Acquirers Are Riding the M&A Growth Wave

With average merger and acquisitions (M&A) deal sizes on the rise, European banks are catching a new growth wave. However, a recent report from Accenture and the Economist Intelligence Unit indicates that most senior banking executives question their ability to achieve satisfactory cost and revenue synergies through a merger or acquisition. To reach these goals—and consequently increase shareholder return—banks must upgrade their M&A capabilities. But what are those capabilities and how do companies strengthen them? In this Strategy Point of View, Accenture looks at some of the ways "leading acquirers" in European banking achieve high performance in M&A—in other words, how they make M&A an effective tool for consistently outpacing their competitors and achieving a higher total return for their shareholders.

Large mergers, as a business strategy, are more often than not, utterly useless. they are classic examples of pride and ego in action. But that comment needs to be qualified, if you leave firms alone and not tie them up in knots of nationalistic or strange economics red tape, they tend to attain the right size. In many cases, even in Europe, where national boundaries have ended up meaning that an average stock transaction in europe is 10-20 times more expensive than usa, financial institution mergers have not been successful. Not surprisingly, it is mainly due to the fact that the managers who are driving this are doing this more because of their cojones rather than their brains. And you know how that translates into action. So while a very few are good, most are, well, frankly dross. But a good article on how to make M&A work!.

Is there a diversification discount in financial conglomerates?

The basic idea behind firms such as ABN, Citi, JPM, RBS, Barclays, any multi product line firm is that a firm like that can understand a client better, it can better deploy ideas to the client, look after all its requirements from soup to nuts, better manage risk across product lines, better managerial oversight, etc. And this is not a new idea, this idea can be traced back to great trading and banking houses in the old 18th and 19th century. If that is indeed the case, how come single product firms consistently beat these giant conglomerates in their return on capital? In other words, pick any type of single product firm, purely retail banking, purely insurance, purely asset management, purely investment banking, pure broking, and it will, much more often than not, beat the return on capital of these big behemoths. Further proving this image is how you always get rumours and pushes by hedge funds who can clearly see that the worth of the individual parts is greater is the sum of the parts. And as we have seen, with ABN as well. (as an aside, this form of behaviour isnt restricted to financial institutions, the giant conglomerates like Hanson, Tyco, etc. have all been broken up, although the exception such as GE is amazing. But the reason why it is so leads to the answer).

A recent research paper came across my inbox which confirms that the reason behind the under valuation of conglomerate shares is that the managers are unable to manage (see why GE is doing well? it has a brutal approach to capital, if any of its capital deployed units is not 1st or 2nd in its industrial segment, it kicks out that unit). The authors looked at a global sample of banks from Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong (China), India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kenya, Rep. of Korea, Malaysia, Mexico, Netherlands, Norway, Pakistan, Peru, Philippines, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, United States, and Venezuela across 5 years, 1998 - 2002. So no criticisms on scope or coverage. Further, it covers the upside and downside of the business cycle.
The crucial factor is, they didnt find a SINGLE conglomerate bank which had a diversification premium, every diversified bank was trading on a discount.

What does this mean? well, personally speaking, I am always reminded of what my first boss told me, never invest in a bank, lol. Secondly, this provides some interesting background to why conglomerates are a target (the irony is that they are being broken up as a conglomerate to be brought up by other banks to form bigger conglomerates - who said bankers were smart and having a long term view???). Finally, it reiterates the view that in order to be successful, one has to be brutal with capital and under-performance. Welcome to the creative destruction of capitalism!

Happy reading and happy weekend (I am going to fire up the BBQ :))

"This paper investigates whether the diversity of activities conducted by financial institutions influences their market valuations. We find that there is a diversification discount: The market values of financial conglomerates that engage in multiple activities, e.g., lending and non-lending financial services, are lower than if those financial conglomerates were broken into financial intermediaries that specialize in the individual activities. While difficult to identify a single causal factor, the results are consistent with theories that stress intensified agency problems in financial conglomerates engaged in multiple activities and indicate that economies of scope are not sufficiently large to produce a diversification premium."

Journal of Financial Economics 85 (2007) 331–367,

Is there a diversification discount in financial conglomerates?$ Luc Laeven, Ross Levine

Our War on Terror - Books - Review - New York Times

Our War on Terror - Books - Review - New York Times

very nice review

some extracts are here

The book to begin with in looking for a revised 21st-century strategy is, unexpectedly, the landmark U.S. ARMY/MARINE CORPS COUNTERINSURGENCY FIELD MANUAL (University of Chicago, paper, $15). It was released as a government document in December 2006, but owing to its enormous popularity (1.5 million downloads in the first month alone), it has now been published by a university press, with a provocative, highly readable new foreword and introduction that testify to the manual’s "paradigm-shattering" content.
When the terrorists struck on 9/11, the United States military was singularly unprepared to deal with them. One reflection of the Pentagon’s mind-set at the time was the fact that the Army counterinsurgency manual had not been updated since 1986 and the Marine Corps guide had not been revised since 1980.
This lack of preparedness showed. In Afghanistan and Iraq, the armed forces did not have the appropriate intelligence, linguistic capabilities, weapons, equipment, force structures, civil affairs know-how or capacity to train security forces in other countries. "It is not unfair to say that in 2003 most Army officers knew more about the U.S. Civil War than they did about counterinsurgency," Lt. Col. John A. Nagl writes in the foreword to the University of Chicago edition. But while the Bush administration dug in, refusing to admit how ill-suited its premises were to the new century, American military officers revised their old doctrines on the fly.
The leading architect of the manual was David Petraeus, then a lieutenant general, who commanded the 101st Airborne Division in the initial invasion of Iraq in 2003 and took responsibility for governing Mosul, Iraq’s second-largest city, immediately thereafter. He is now the overall American commander in Iraq. Petraeus emphasized economic and political development and is said to have asked his soldiers, "What have you done for the people of Iraq today?" He worked with another military man who also saw that his job would have to be more than strictly military — Lt. Gen. James Mattis, who commanded the First Marine Division during the initial invasion and then in 2004 returned to help stabilize Anbar Province. His division motto was "No Better Friend, No Worse Enemy — First Do No Harm." In February 2006, while the new counterinsurgency doctrine was still being drafted, and while international criticism of American military excesses mounted, Petraeus invited journalists, human rights lawyers, academics and practitioners of counterinsurgency to Fort Levenworth to vet a draft, initiating what participants characterized as one of the most open and productive exchanges of ideas they had ever witnessed.
The fundamental premise of the manual is that the key to successful counterinsurgency is protecting civilians. The manual notes: "An operation that kills five insurgents is counterproductive if collateral damage leads to the recruitment of 50 more insurgents." It suggests that force size be calculated in relation not to the enemy, but to inhabitants (a minimum of 20 counterinsurgents per 1,000 residents). It emphasizes the necessity of coordination with beefed-up civilian agencies, which are needed to take on reconstruction and development tasks.
The most counterintuitive, as well as the most politically difficult, premise of the manual is that the American military must assume greater risk in order to gather much-needed intelligence and, in the end, achieve greater safety. The emphasis of the 1990s on force protection is overturned by the assertion of several breathtaking paradoxes: "Sometimes, the more you protect your force, the less secure you may be." "Sometimes, the more force is used, the less effective it is." "Sometimes doing nothing is the best reaction." Sarah Sewall, a former Pentagon official who teaches at the Kennedy School of Government at Harvard University (and a close colleague of mine), has contributed an introduction that should be required reading for anybody who wants to understand the huge demands effective counterinsurgency will place on the military and the voting public. "Those who fail to see the manual as radical probably don’t understand it," she writes, "or at least what it’s up against."
Sewall can say what the generals who devised the manual cannot. She addresses the concern that the manual is nothing more than a "marketing campaign for an inherently inhumane concept of war," arguing that if politicians continue to put young American men and women in harm’s way, military leaders have an obligation to enhance effectiveness, which in a globalized era cannot be disentangled from taking better care of civilians. Military actions that cause civilian deaths, she argues, are not simply morally questionable; they are self-defeating.
But Sewall explains that even if the military can overcome the substantial challenges of executing such a counterintuitive doctrine — and here the near-daily reports of large-scale civilian loss of life as a result of United States counterinsurgency operations in Afghanistan and Iraq are a reminder of the yawning gap between theory and practice — it will not succeed if it does not get the civilian leadership and support it needs. The military does not have the expertise to perform the range of economic and political tasks associated with nation-building, but in Iraq and Afghanistan, as civilian reconstruction teams went unstaffed, it was forced to pinch-hit. Sewall rightly calls for the "risks and costs of counterinsurgency" to be spread across the American government, but notes this is not an overnight job. "More people play in Army bands than serve in the U.S. foreign service," she writes.
The manual shows that the demands of counterinsurgency are greater than those the American public has yet been asked to bear. Sewall is skeptical that the public — now feeling burned by Iraq — will muster the will, even in Afghanistan, to "supply greater concentrations of forces, accept higher casualties, fund serious nation-building and stay many long years to conduct counterinsurgency by the book."

Six in 10 US BlackBerry users check emails in bed, survey finds

Six in 10 US BlackBerry users check emails in bed, survey finds | Technology | The Guardian

I am a crackberry addict, yes, I admit it, if somebody takes away my blackberry, it would be like somebody removing my lungs.

Thursday, July 26

Guantanamo Bay Detainees Assessment

Guantanamo Bay Detainees Assessment

This is a very interesting research which has been conducted by The Combating Terrorism Center (CTC) at West Point. While this obviously needs to be treated with care, I believe this is the first time we have such detailed statistical evidence of the detainees!

Happy Eeading!!

PS: the information was sent out by the US Department of State! as below:

Washington Foreign Press Center U.S. Department of State ======================================

The Combating Terrorism Center (CTC) at West Point, an independent, accredited academic institution, has just posted their study of the Guantanamo Bay detainees unclassified information on their website:

Media contact info for West Point / CTC is here:

U.S. Military Academy at West Point, NY
(U.S. Army Military Academy, Combating Terrorism Center)
Mr. Frank DeMaro845-938-2006
Mr. Clint Watts845-938-8495
West Point, NY is an hour's drive north of New York City. =======================================

Washington Foreign Press Center Suite 800,
National Press Building
529 14th Street,
NW Washington, D.C. 20045
Phone:(202) 504-6300
Fax:(202) 504-6334

Prisoner found guilty of masturbating in his cell

Prisoner found guilty of masturbating in his cell Special reports Guardian Unlimited

Very amusing indeed!, lol but I will avoid the puns! :P

Hero Dog Who Helped in 9/11 and Hurricane Katrina Rescue Efforts Dies - Hero Dog Who Helped in 9/11 and Hurricane Katrina Rescue Efforts Dies

I have a soft spot for dogs and written earlier about this. But its a shame to read about this brave dog!

Overpopulation is only of concern when the population is not productive

BBC NEWS South Asia India's demographic dividend

An excellent exposition on how demographics and population can actually provide benefits unlike the commonly held belief that overpopulation is bad for a country. No, Sir. its only bad if the population does not have opportunities, are not trained and corruption doesnt drain away their efforts. if this is the case, then a country with 2 people will have problems!

Is the UK facing up to Bahrain's past?

BBC NEWS UK Is the UK facing up to Bahrain's past?

Now this is a curious incident, I didnt know about this, but is definitely worthy of following up. The Bahrainis are getting all het up about this. They are calling Ian Henderson, a Britisher, as the Butcher of Bahrain. And Human Rights Watch has complained about him. See his wiki page here. Why did it come up through the blogosphere? because this gentleman is actually heading back to Bahrain for a visit. Very curious but given his links with the british political system, i daresay nothing will happen.I find it curious as to why the Bahraini Human Rights people havent launched a case against Ian Henderson here in the UK under the ICC. UK has signed the ICC, so there is no reason why a legal case cannot be launched!

MPs fear danger in queues at airports

MPs fear danger in queues at airports Terror threat to Britain Guardian Unlimited

I agree, embarkation areas such as check in concorses are the most dangerous target areas in terrorism terms. In my research, I check a huge number of target areas and find out which ones are most effective on various counts and embarkation areas are the worst!

The solution for french financial market job problems? better furniture!!!!!!!!

JOB MARKET NEWS: London sucking up derivatives specialists

this just made me laugh like mad, the solution to french financial market good graduate jobs is????


If this is the level of policy decision making, then heaven help sarco!!

Lebanese Army Supporters

Now this will definitely increase the morale of those Lebanese soldiers banging on the palestinian camps full of those terrorists!

Story : Yahoo! News

Wednesday, July 25

Management consultants are often 'more project workers than ideas people'

ESRC Society Today - Management consultants are often 'more project workers than ideas people'

I have been one, have hired many and live with many more. I mean management consultants. I have to admit that the research that this is based upon is slightly limited and possibly drops all management consultants into one bucket. The projects, - a multinational company (strategy analysis), a financial services retailer (IT development), a prison (project management and quality) and a local authority (e-procurement) do not relate to projects which do call for expert management consulting advice relating to regulatory changes, or new market opening or new product development, etc. But still, interesting reading

Few Muslims 'back suicide bombs'

BBC NEWS Americas Few Muslims 'back suicide bombs'

Good news indeed, this should help in further reducing the supply of terrorists as well as choke off the supply chain and infrastructural support. But caution is still suggested, it doesnt take that much to create a terrorist event, not people not resources!

Air Show Buzz

Air Show Buzz

Poetry in flight, beautiful, just beautiful

Check out the raptor in flight!!!

Lovemaking hedgehogs disturb the peace in Germany

Lovemaking hedgehogs disturb the peace in Germany Oddly Enough Reuters

So my son asked me this joke question, how do hedgehogs make love? I was gobsmacked and then he goes, "verrrrrrrryyyyyyyyyyyyyy carefully!!!" before collapsing into peals of laughter!

Tuesday, July 24

Terrorism insurance backstop clears hurdle - MarketWatch

Terrorism insurance backstop clears hurdle - MarketWatch

This is a very good measure. This will provide a bit more security to the hoi polloi who are worried sick about the final wall which protects people from terrorism liabilities.

See a previous column which I had explored a bit of a background on this issue.

The Island and Lake Combination

The Island and Lake Combination

This is so amusing, lol, thank god they came to an end!!!, so here you will find the answer to the question you always wanted to know, Largest island in a lake on an island in a lake on an island is????????? / World - Mugabe’s bills pave way for takeovers / World - Mugabe’s bills pave way for takeovers

The Moron strikes again. Sighs, nothing much to be said, just watch this slow moving country sized train crash in fascination. Also see a nice article in the Guardian CiF today.Also see what i wrote before on this.

I also read this chap, he is wickedly funny, very amusing indeed! :)

VP polls: VHP decries 'politics of religion'-India-The Times of India

VP polls: VHP decries 'politics of religion'-India-The Times of India

Its when I read the incoherent, illogical and frankly stupid outpourings of this chap that i worry about the world's largest democracy. No wonder he is considered comical and worse, with leaders such as this chap, the political maturity of India's political parties is arrested. Indians do need their various religious based political parties (Akali Dal, BJP, BSP, IUML, etc.) to grow into what we see as the social democratic parties. A close example would be what we see as the christian democrats in Europe.

DNA - World - Singhs and Kaurs are not welcome in Canada - Daily News & Analysis

DNA - World - Singhs and Kaurs are not welcome in Canada - Daily News & Analysis

I am constantly amazed at the propensity of governments to proclaim laws which go slam bang in the face of common sense. See the above example. Why would you have such a complicated law in the first place?Tangentially, it reminds me of the extreme sensitivity that Koreans have with their names and the most amazingly complex history behind personal names of Koreans. I made a big boo boo when I visted Seoul once, but that's besides the point. Here, read a bit of a background on this very interesting issue.

Iranian Truth - Ahmadinejad Popularity Poll in Iran

Iranian Truth - حقيقت ايرانى » Ahmadinejad Popularity Poll in Iran

A very interesting view on the current opinions on President Ahmadinejad. He is an interesting character, economically illiterate of course, but then, hey, people get the leaders they deserve.Iran is so complicated, last week's economist ran a good overview of this amazing country. I also chat frequently on the Yahoo Professors Room and quite a lot of professors, teachers and graduate students from Iran participate there. One thing is for sure, they are extremely nationalistic and patriotic in nature. Something that is quite in common with the turkish particpants from that region. Funny how the other arab nations arent as much, no? Also ironical is that historically, both the ottoman and safavid empires collapsed partially because of their emnity towards each other.Oh!, another thing in common is their lovely treatment of minorities, but now I am drifting, lol. Anyway, check out some previous posts on Iran » Women and the Wall » Women and the Wall

Read this young lady's words. She is smart, intelligent, eager, faithful but she still has to creep around in the house of god. Long way to go, my friends, long way to go.

Huge News: Egyptian Mufti Kills Death Penalty for Apostasy « Ali Eteraz

go check this out, very good news and something that I wholeheartedly agree with. Also see my previous essays on muslim reformers on my blog!