The Ant and the Grasshopper

Do you remember the story of the Ant and the Grasshopper? The basic story goes like this

IN a field one summer’s day a Grasshopper was hopping about, chirping and singing to its heart’s content. An Ant passed by, bearing along with great toil an ear of corn he was taking to the nest.

“Why not come and chat with me,” said the Grasshopper, “instead of toiling and moiling in that way?”

“I am helping to lay up food for the winter,” said the Ant, “and recommend you to do the same.”

“Why bother about winter?” said the Grasshopper; “we have got plenty of food at present.” But the Ant went on its way and continued its toil. When the winter came the Grasshopper had no food, and found itself dying of hunger, while it saw the ants distributing every day corn and grain from the stores they had collected in the summer. Then the Grasshopper knew: “IT IS BEST TO PREPARE FOR THE DAYS OF NECESSITY.”


This is a Singapore version of the story where there is no winter! :).
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The Ant and the Grasshopper

Once upon a time,there lived an ant and a grasshopper. The grasshopper
does nothing else but jump around and play. On the other hand, the ant
is so hardworking, looking for food all day long and store them in it's
nest.

Looking at his hardworking friend working so hard, the grasshopper ask,
"Hey, Ant! U dun have to relax ah? Always buzy one. Come and play
with me lah."

To which the ant replied, "I can't lah i have to store all these food."

"Haiyah! Relax lah... Why u bother storing all these food? When u
hungry den go find lah." the grasshopper told the ant again.

"Eh,cannot lah... I have to standby for the coming winter season. Then
I no need to panick mah. I think u oso must standby u know." the ant
telling his friend.

"Where got time... I go play better. U wanna store food u go ahead
lah. I continue playing ok... bye!" And hop goes the grasshopper.

The Ant is a hardworking guy... oops i mean insect. Not like the
grasshopper who is so lazy. And so as days, weeks, months go by, the
winter still has not come yet but the ant is still seen searching and
storing food.

The two friends happen to meet again. "Hey Ant! U still haven't
finished storing food ah? Last time all the food all go where? So
fast finish ah?" asked grasshopper.

"I got keep but all overdue liao. So cannot eat anymore. All because
winter not here yet. Now i have to go and look for new food." sighed
the ant.

"But ant ah... U dun mind i ask ah... Did u ever have a thought that
Singapore where got winter?" ask the grasshopper again.

"AHHHH????!!!!!" the ant was shocked!

THE END.

The moral of the story is whatever u do better think properly 1st. Dun
anyhow humtam only...

Here's a version relating to the US politics perspective

"The ant works hard in the withering heat all summer, building his house and laying in supplies for the winter. The grasshopper thinks the ant is a fool and he laughs, dances and plays away the summer.

"Come winter, the shivering grasshopper calls a press conference and demands to know why the ants should be allowed to be warm and well-fed while others are cold and starving.

"CBS, NBC and ABC show up to provide pictures of the shivering grasshopper next to a video of the ants in their comfortable homes with tables filled with food. America is stunned at the sharp contrast. How can this be, that in a country of such wealth this poor grasshopper is allowed to suffer so unjustly?

"Al Gore exclaims in an interview with Peter Jennings that the ants have gotten rich off the back of the grasshopper and calls for an immediate tax hike on the ants to make them pay their `fair share.'

"Jesse Jackson stages a demonstration at the entrance to the ant city, where the news stations film the group singing, `We Shall Overcome.' Jesse then marches his demonstrators into the anthill, where they kneel to pray for the grasshopper and demand franchises and reparations for Jesse and his grasshopper friends.

"Finally, the Equal Employment Opportunity Commission drafts the `Economic Equity and Anti-Grasshopper Act,' retroactive to the beginning of the summer. The ants are fined for failing to have an affirmative-action program for green bugs and, having nothing left with which to pay retroactive taxes, the ant city is confiscated by the government."

The revised story goes on, but this column's readers will get the idea.

And finally, noticed this post from South Africa about two men, mediocrity and enterprise!, you can figure out who is the ant and who is the grasshopper.

Quite amusing indeed.


All this to be taken with a grain of piquant salt!!!

Corruption is one of the biggest friends of the terrorists

This was one of the shocking stories that I read yesterday (thanks EagleSM23). The ease with which corruption bypassed every security control check raised by the Indian state was gobsmacking. This makes a mockery of counter terrorism efforts.

And each and every agent who helped the reporters in breaking the rules are responsible for the potential death of terrorist victims if terrorists use this. Very good work by the media to expose these crooks. I wonder if the punishment for corruption can be increased?

some of the old medieval punishments sound good to me, like blackening their face, putting them face backwards on a donkey, tarring and feathering them, shaving their head, putting them in stocks and inviting passer byes' to pelt them with rotten vegetables, eggs and spit on them. Or perhaps take one of the islamic punishments like this one.

Bribery: This is another source of unlawful money, which Allah has forbidden. Giving a bribe to a judge or a ruler in order to incur injustice is a crime, for it leads to unfairness in ruling by taking away people's rights, and it leads to the spread of corruption. Allah says:"And eat up not one another's property unjustly, nor give bribery to the rulers that you may knowingly eat up a part of the property of others sinfully."Qur'an (2:18)

I am sorry, but corruption is my biggest bug bear, I absolutely hate it with a vengeance. Let the Indian political and religious leaders go after this, that will help the common man more than any amount of nuclear deals or promises for heaven in the hereafter.

All this to be taken with a grain of piquant salt!!!

New Delhi: A terrorist could easily acquire foolproof Indian identity for a few thousand rupees, a CNN-IBN investigation has revealed.

Anand Kumar Gupta invested Rs 35,000 in bribes and in
45 days got a ration card, a PAN card, a voter I-Card, a birth certificate and a passport—documents which prove he is an Indian citizen.

What’s shocking though that Gupta is a fictitious person and was created on a computer. It’s what a sleeper terrorist cell would do. Create a fake identity and live anonymously, waiting to be unleashed.

Undercover CNN-IBN reporters approached Jai Mata Di property dealers in Delhi to rent a house. Brokers Ajay and Sanjay took Rs 4,000 and a landlord Rs 10,000 and got the reporters a house in West Delhi. The rent agreement was in the name of Anand Kumar Gupta.

Tenant verification was made mandatory in Delhi after the attack on Parliament in December 2001, but the property dealers promised us to get police verification without having to meet the police. The only wanted Gupta’s identity proof, which could be easily arranged for by getting a fake driving licence in Meerut.

The property dealers in Delhi guided the reporters to a tout in the Meerut Road Transport Office. For Rs 1,000 and in four hours Gupta got a fake driving licence, his first proof of Indian citizenship.

With a fake driving licence and a rent agreement as residence proof, CNN-IBN reporters next approached MTNL for a landline connection. The phone was granted—a rent agreement document backed by an MTNL bill at the same address buttressed Gupta’s proofs of residence.

Next on the agenda was getting a ration card, is issued by the Food and Supplies Department. Ration shop owner Rajender, one of the hundreds brokers in Delhi, got a ration card for Gupta for just Rs 800.

Gupta now had a driving licence, ration card and two documents to prove his place of residence. He next managed to get an income certificate, which certified he earned Rs 2,500 rupees a month and was this entitled to free medication and education from the government.

Touts Sameer and Bharat charged Rs 1,700 for the income certificate and ensured that the mandatory verification of the application was kipped.

For Rs 17,500 Gupta had got himself a proof of residence in Delhi, a MTNL phone line, a ration card and a government-authenticated income certificate.

A citizen is born

This Citizen X now got ambitious: he wanted a birth certificate. Legally, only the hospital where one is born or the Sub-Divisional Magistrate's office can issue a birth certificate. But Subhash, a seasoned tout from South Delhi, knew otherwise.

CNN-IBN reporters cracked a deal with broker Subhash and got a birth certificate for Rs 3,000. Subhash mentioned a South Delhi address on the form but assures that the birth certificate was genuine. The Rs 3,000 for the certificate included bribes to the police, said Subhash.

Gupta didn’t exist but he was now born and he soon become a taxpayer. Using the fake driving licence and the rent agreement, CNN-IBN reporters picked up a PAN card issued by the Income Tax Department. The PAN card cost Rs 79.

Gupta now had all the documents to proclaim himself an Indian citizen. If only he could get a Delhi driving licence. Enter Uttam, a former employee of Delhi’s Transport Office, who makes a living by arranging driving licences.

For Rs 2,500 Uttam said he would get us a driving licence without the trouble of showing verification documents like birth or education certificates to officials.

“Saboot koi nahi hai aapke paas. Jogar se karvaunga aapka kaam. pehle learning banega aur phir ek mahine baad license miilega. Aap paisa feko tamasha dekho,” he said. (I will first fix a learner’s licence for you and then give you a complete licence after a month. You don’t have to show any proof—just pay and watch the game.)

A CNN-IBN reporter took a written test for the driver’s licence but it was a sham.

Anand Kumar Gupta could live and drive around Delhi fearlessly. He had the rights and privileges of an Indian citizen. Anand Kumar Gupta(a fictitious person and was created on a computer) could have been a terrorist.

Source:
http://www.ibnlive.com/news/indian-citizenship-on-sale-and-its-for-cheap/46601-3.html?xml

A taxonomy of THE Beast

Author unknown

666 = number of the Beast
665 = older brother of the Beast
660 = approximate number of the Beast
66600 = zip code of the Beast
$665.95 = retail price of the Beast
DCLXVI = Roman numeral of the Beast
666.0000 = Number of the High-Precision Beast
0.666 = Number of the Millibeast
/666 = Beast Common Denominator
-666½ = Imaginary number of the Beast
6.66e3 = Floating point Beast
1010011010 = Binary number of the Beast
6, uh . . . what was that number again? = Number of the Blonde Beast
1-666 = Area code of the Beast
666 mph = Speed limit of the Beast
$699.30 = Price of the Beast plus 5% state sales tax
$769.95 = Price of the Beast with all accessories and replacement soul
$656.66 = Walmart price of the Beast
$646.66 = Next week's Walmart price of the Beast Phillips
666 = Gasoline of the Beast
Route 666 = Way of the Beast
666 F = Oven temperature for roast Beast
352 – Oven temperature for roast Beast in Europe
666(k) = Retirement plan of the Beast
666 mg = Recommended Minimum Daily Requirement of Beast
6.66% = 5-yr CD interest rate at 1st Beast of Hell Nat. Bank, $666 min. deposit
$666/hr = Beast's lawyer's billing rate
Lotus 6-6-6 = Spreadsheet of the Beast
Word 6.66 = Word Processor of the Beast
i66686 = CPU of the Beast
665.9997856 = Number of the Beast on a Pentium
666i = BMW of the Beast
DSM-666 (revised) = Diagnostic and Statistical Manual of the Beast
1232 Octal, Apt. 29A = Beast's hexed address
668 = Next-door neighbor of the Beast
333 = The semi-Christ


All this to be taken with a grain of piquant salt!!!

banking regulation, think 10 times before implementing a law, and then discuss & consult widely

As the world becomes even more globalised and interconnected, the role of financial and banking regulation becomes even more crucial. If you get it wrong, then you can very well see firms move out or move their business out of your domain into somewhere else. One of the most high profile examples is the high impact of SOXA on the US industry, with firms moving their businesses out or not deciding to open up in the USA or not to raise funds in the USA. LINK! So it is but natural that i keep a very beady eye out on how banking regulation works around the world.

I came across this paper by Professor Tao Li from the School of Oriental and African Studies in London which has researched the shape of banking regulation across 118 countries with data taken from the World Bank, for a period between 1998 and 2000. While one can consider this time period to be too old, it is not too old once one considers the fact that changes in banking regulation and the consequent change in financial institution behaviour take few years to feed through. So I am ok with 7 years old data, it wouldnt change the results that much, but by 2010 we might have to reconsider the findings. The author analyses the results via four regulation dimensions namely the extent of government ownership of banks, the intensity of direct regulation of banks, the amount of measures to empower outside investors to monitor banks and the comprehensiveness of explicit deposit insurance. The author finds, as expected, correlations between banking measures with banking efficiency, development and overall financial development. In other words, good regulations live in symbiotic relationship with banking and financial market development. Again a d'oh statement but something that people tend to forget far too easily in my opinion. And as the history of the USA and banking reform has shown, it is far too easy to make knee jerk regulations and then a bad law end up creating far bigger problems than it was supposed to resolve.

All this to be taken with a grain of piquant salt!!!

Abstract
This article empirically investigates the patterns, determinants and impact of banking regulation in a large cross section of countries. Major differences of banking regulation across countries are found to be in four dimensions, i.e., the extent of government ownership of banks, the intensity of direct regulation of banks, the amount of measures to empower outside investors to monitor banks and the comprehensiveness of explicit deposit insurance. Based on these four dimensions, we identify five different patterns of banking regulation around the world. The article then tests economic, legal and cultural theories of the determinants of banking regulation, and finds dominant support for economic theory. Assessment regressions present evidence of different correlations of various banking regulation measures with banking efficiency, development and overall financial development. The findings imply a ‘big push’ view of reforming banking regulation, i.e., a big push to economic and financial sector development will lead tosubsequent improvements in banking regulation, which in turn will help the country’s banking and financial development.
Keywords: Banking regulation, law, culture, economic development, bankingefficiency, banking development, financial development
Li, Tao, JOURNAL OF EMERGING MARKET FINANCE, 6:1 (2007)

Britain thanked for welcoming 10,000 children refugees with an evocative sculpture

It was indeed a coincidence, I was waiting to meet Andrew in front of the Liverpool Street Station when I spotted a sculpture. Its amazing how you miss these giant signs right in front of your face but my excuse is that I do not use that exit. But the sculpture is amazing. It commemorates the rescue of ten thousand mainly Jewish children from the Nazi's just before the World War II kicked off. See here for more details. Makes one proud to be British, despite my previous post castigating ourselves for not doing much for the Iraqi Interpreters. And then I read about this absolutely foul and disgusting post at the Guardian Comment is Free. See the commentary and read the posts. The chap is an out and out troll. But here are some pictures that I took with my trusty mobile camera! :)


The Plaque reads,

Children of the Kindertransport

In gratitude to the people of Britain for saving the lives of 10,000 unaccompanied mainly Jewish children
who fled from Nazi persecution in 1938 and 1939

"Whosoever rescues a single soul is credited as though they had saved the whole world" Talmud

Dedicated by

Association of Jewish Refugees
Central British Fund for World Jewish Relief
2006

All this to be taken with a grain of piquant salt!!!


PS: that Talmud quote sounded familiar to me and I went searching for it, and sure as I am a homar, I found the reference: "If anyone slew an innocent person it would be as if he slew the whole mankind and if anyone saved a life it would be as if he saved the life of the whole mankind" [Al-Qur’an 5:32]

Update: TBS pointed out that I have used a strange translation from this site. And suggested this site for sura 5:32.

Because of this did We ordain unto the children of Israel that if anyone slays a human being-unless it be [in punishment] for murder or for spreading corruption on earth-it shall be as though he had slain all mankind; whereas, if anyone saves a life, it shall be as though he had saved the lives of all mankind. And, indeed, there came unto them Our apostles with all evidence of the truth: yet, behold, notwithstanding all this, many of them go on committing all manner of excesses on earth. - Muhammad Asad

On that account: We ordained for the Children of Israel that if any one slew a person - unless it be for murder or for spreading mischief in the land - it would be as if he slew the whole people: and if any one saved a life, it would be as if he saved the life of the whole people. Then although there came to them Our apostles with clear signs, yet, even after that, many of them continued to commit excesses in the land. -Yusuf Ali

For that cause We decreed for the Children of Israel that whosoever killeth a human being for other than manslaughter or corruption in the earth, it shall be as if be had killed all mankind, and whoso saveth the life of one, it shall be as if he had saved the life of all mankind. Our messengers came unto them of old with clear proofs (of Allah's sovereignty) , but afterwards lo! many of them became prodigals in the earth. - M. Picktall

Data protection and public data in the new age

I spotted an advertisement on the tube today for my credit rating information. In other words, I can apply to this firm, Experian, who holds a huge amount of credit information on me, and ask them what personal data do they hold. Now I have never given this firm any permission for it to hold my data but they still have it. Banks ring this firm up when i ask for a loan or take out a credit card, and check out Dr. Bhaskar Dasgupta's credit. Thankfully I am not a suspicious chap but even if I was paranoid about my data being held in an electronic database without my concern, under the law, i cannot do anything about it.

The British Information Commissioner, arguably one of the most advanced and progressive information regulators in the world, has just released guidelines on how to treat public information, the data protection requirements and the challenges thereof. It is mainly related to organisations who hold data to be more open and transparent about the data that they hold on individuals, and try to educate them on what data, why that data, what is it used for, what are the downsides, etc. Quite interesting reading indeed. But at end of the day, there is no way I can disappear from electronic databases, no law, no option, no nothing. So I have decided that besides taking common sense precautions against identity theft, I will actually try to be open and use this openness to make more friends and influence people. That is why this blog and my facebook account have quite a lot of personal information which I am happy to share!

Quite an interesting intellectual exercise nonetheless, to think about who owns data about you.



All this to be taken with a grain of piquant salt!!!

Clampdown on sick leave for 'burn out'

Sweden was always considered to be a liberal hothouse, where the benefits in play are huge. One of the reasons why that country has such a low gini coefficient is because of the high distributive nature of the society. That's all very fine and good, but sometimes it can go over on the other side when people start taking advantage of all this munificence. When people start disabusing this priviledge, then clampdowns happen, even in the world's most liberal society. Mind you, generally benefits need to be the exception, not the rule. And in my experience, all benefit systems almost always end up having huge problems, look at this article for an example in Sweden. For those who want a bit more detail, check out this journal article (abstract at the bottom of this post)

Here are some good excuses if you want to throw a sickie. But generally, this kind of unproductive and avoidable absenteeism (both long and short term) is very bad for the economy. Last year, it cost us £1.6 Billion!!!!, to put that into perspective, that amount would have helped to plug the deficit in our National Health Service!

All this to be taken with a grain of piquant salt!!!

Clampdown on sick leave for 'burn out'

Being granted sick leave for symptoms of 'burn out' could soon become much harder in Sweden due to new national guidelines to come into effect in October.The strict new guidelines, brought forward by the National Board of Health and Welfare (Socialstyrelsen) and the Swedish Social Insurance Administration (Försäkringskassan), will be used by doctors decide on which people are unable to work.

Jan Larsson, who chairs the committee that drew up the new rules, admitted to Dagens Nyheter that they would be controversial. He said the clampdown would particularly affect allegedly vague symptoms such as chronic fatigue syndrome and chronic pain. Instead of taking people with these symptoms out of work entirely, they should instead be advised to "stop working so much," Larsson said.Reduced sick leave periods and revised guidelines on expected work capacity are to be applied to around 90 diagnoses."We can't say that we have a good scientific basis for the new guidelines," said Larsson."Nonetheless, if we tried to skirt round the difficult diagnoses it would feel pointless to bring out guidelines."The new guidelines are intended to cut sick leave that does not have a properly thought-through purpose. They were commissioned by the previous government and have the support of the current administration.People diagnosed with fatigue syndrome currently stay off work for an average of 199 days. Under the new plan, people will usually not be granted any sick leave at all, although those whose symptoms include severe sleep problems will be granted several weeks leave. The guidelines also stipulate that an action plan should be put in place for these people.Depression is another diagnosis to face a clampdown. People with depression are currently off work for an average of 341 days. In the future, people with mild depression will not be granted sick leave at all, people with moderate depression will be granted three months, and people with serious depression will be told to stay at home for six months.


Long-term absenteeism due to sickness in Sweden. How long does it take and what happens after?
The European Journal of Health Economics
Volume 8, Number 1 / March, 2007, 41-50
Abstract In this paper, we analyze exits from long-term sickness spells in Sweden. Using data for more than 2,500 people, the aim is to analyze the transition to different states: return to work, full disability pension, partial disability pension, and other exits from the labor force. Given the complexity of the exit decision, which encompasses both the individual’s choice, the medical evaluation and the decision of the insurance adjudicator, we consider the outcome as being the result of two aspects of the exit process: one that governs the duration of a spell prior to the decision to exit, and another that governs the type of exit. Therefore, the analysis is done in two steps: first, we analyze the duration of the sickness spells, and then we analyze the process that governs the type of exit. The results indicate that both individual characteristics and push factors, such as regional unemployment, are important for both components of the decision process.

Can Publicly Available Information Be Used in Planning Terrorist Attacks?

I wrote yesterday about the dangers of providing free information to terrorists and as if by magic, this RAND report came out today. The report talks about whether you can use publicly available information to plan terrorist attacks? the answer is definitely yes, but the devil is in the detail. As I mentioned, professional terrorists will go to deep lenghts to investigate and analyse the target, so as to increase the chances of success and to know all there is to know about the risks and benefits. Similarly, this longer process helps the security services to catch them as well.

But the RAND report offers a good systematic way of analysing the information content for target selection. Please remember that this is exactly how an air-force target planner will go about selecting his targets as well. So it cuts both ways. In any case, mum's the word and wall's have ears! :)


All this to be taken with a grain of piquant salt!!!

Can Publicly Available Information Be Used in Planning Terrorist Attacks?
With the ever-growing presence of the Internet in people’s lives, it is easier than ever to obtain information from publicly available sources on a wide range of topics. This raises the question of whether terrorists can exploit this availability of information when planning terrorist attacks. Conversely, familiarity with public sources of information can also be useful to policymakers in defending potential targets. However, given the vast array of publicly available information, identifying all the information relevant to a potential target and assessing its possible value to terrorist planners is daunting. What is needed is a way to define the kinds of information that would be useful for planning and executing attacks on particular targets.
A RAND Corporation study developed a framework to guide assessments of the availability of such information for planning attacks on the U.S. air, rail, and sea transportation infrastructure and applied the framework in a red-team information-gathering exercise. Working with six plausible attack scenarios — two each in air, rail, and sea transportation infrastructures — and a modified intelligence preparation of the battlefield (ModIPB) framework based on U.S. Army doctrine, red-team members serving as proxies for terrorists were instructed to find information sufficient to complete an operation plan for each of the six scenarios.
Based on the exercise, the study found the following:
The ModIPB framework is a useful guide to identifying information relevant to the planning and execution of terrorist attacks. Relying on checklists provided by the study team, red-team members were able to identify information that, with scattered exceptions, proved useful for planning the hypothetical terrorist attacks in all six scenarios. The results of three validation exercises support this assertion.
Ease of identifying relevant information varied across information categories. General, descriptive information was the easiest to find, and detailed information about security procedures was the most difficult to find. Some types of information could be found for one class of infrastructure target or for one scenario but not others.
Based on these findings, the authors recommend that, to prevent information that includes security details from becoming public, infrastructure owners should review and revise procedures for operational and informational security. This is especially pertinent given that new information becomes public every day, as do new capabilities for searching and fusing information.
The authors also recommend that infrastructure owners consider information that can be obtained from easily accessible public-information sources, such as the Internet, in vulnerability assessments. Given that new information can become publicly available at any time, such vulnerability assessments should be conducted frequently.

Being nimble in the market by fast new product development and innovation

I talked about speed of product launch and innovation in the markets yesterday and pointed out that investment banking is one of the areas which is perhaps the fastest in designing a product, taking it to market and then making money out of it.

And as it so happens, Forbes has an article on how investment banks make money when the market is going up and when the market is coming down. In this case, the latter. And as can be seen, while some of the funds are taking a hit, overall, the big banks are protected from the market volatility. Now wouldnt you like to have that? the ability to launch products so fast that while you sell luxury products on the upside and then you sell cheap food on the downside!

All this to be taken with a grain of piquant salt!!!


The Croesus Chronicles

Profiting From The MeltdownRobert Lenzner, 08.08.07, 6:00 AM ET
A consortium of the nation's leading investment banks have quietly created an index that is not only protecting them against the recent market meltdown but also promising to make them bundles of money in the process.
The index, known as LCDX, was created just weeks before the meltdown began by shrewd financial operatives like JPMorgan Chase and Goldman Sachs, which suspected trouble was brewing in the leveraged loan market and needed a way to protect themselves and their hedge fund clients.
This was just-in-time financial engineering. On May 23, LCDX, a credit derivatives contract covering the potential default of 100 large corporate names, made its debut at 100.5. Rising interest rates, widespread fear about the fallout from the subprime mortgage fiasco, and an overhang of $250 billion in private equity loans that had to be refinanced triggered a vicious tumble in the stock market.
By late June, as fears about the extent of the subprime mortgage fiasco spread, the LCDX began to weaken, and those who'd shorted it began making money. Hedge funds loaded to the gills with leveraged buyout loans saw it as a way of hedging their positions, as the cash market in those loans was relatively illiquid.
Goldman Sachs has hedged a large percentage of its $72 billion in obligations, including private equity commitments. Bear Stearns reported last Friday it was "making money on hedges related to some large leveraged buyout loans ... or has been selling at lower prices than anticipated."
The leveraged loan market is not the only sector of the fixed-income market where the investment banks shrewdly created an index that would help them hedge against one of their most profitable but risky businesses--the issuance of asset-backed securities like the mortgage bonds used to finance the subprime housing market.
In early 2006 a small number of firms led by Deutsche Bank, Barclays, Bear Stearns and Goldman Sachs formed the ABX index (a credit default swap of asset-backed mortgages) of 30 most liquid mortgage-backed bonds. The savviest players like Deutsche Bank (which reportedly made $250 million) and several hedge funds on both sides of the Atlantic began shorting that ABX index in early 2006 at par. It now sells at 35, implying that the value of those mortgage-backed bonds and others of their ilk have lost 65% of their value, a potential loss in the tens of billions of dollars. Which means, of course, that smart money's made up to 65% on this one trade.
Indeed, Deutsche Bank derivatives research has been warning clients for months that the leverage in the asset-backed market, especially the collateralized debt obligations set up to hold pools of subprime mortgage-backed securities, had far too much embedded leverage--up to 100 times too much.
LCDX, ABX and over 20 other indexes are the creation of CDS Index--a private concern owned equally by 16 major financial institutions like JPMorgan, Goldman Sachs, Deutsche Bank, Morgan Stanley and Barclays Capital. The other members are Bank of America, BNP Paribas, Citigroup, Credit Suisse, Lehman Brothers, Merrill Lynch, RBS Greenwich, UBS and Wachovia.
The banks claim that in creating these indexes they were simply responding to the demands of their clients, including a host of top hedge funds, which also have made money on many of these trades. These firms meet informally with Goldman Sachs' managing director, Brad Levy, currently serving as acting director of CDS Index. They decide what fixed-income asset class may have reached its peak and requires an outlet for liquidity and the dispersion of risk. The consortium was formed after years of bitter internecine warfare by the investment banks, which were creating their own in-house indexes to rival their competitors.
The indexes that CDS has been quietly creating are tools for the repricing of the entire credit market. First, it was the residential housing market, then the debt of European companies just barely investment grade, and more recently the mortgages in the commercial real estate market. Some observers believe, though, that the volatile price movement in these indexes the past few weeks is the result of market players being able to take both a negative and positive stance, without having to take any clear position on how serious the crisis in the credit markets might be or could become.
Sunil Hirani, founder of Creditex, says, "If we did not have these credit derivative default indexes--LCDX, CDX, iTraxx Crossover, and others--the credit markets would be functioning with even more volatility, as everyone would be in the dark about pricing and the way to disperse risk." Creditex is a major factor in the credit derivative market.
Of course, it also means there are a lot of folks quietly making a bundle of money while the markets crater. Moreover, no regulatory authority has to approve the creation of these indexes. Nor is there widespread transparency of the trading or price action in these indexes.
Markit, a British company 60% owned by a number of these investment banks, administers the market in credit derivative swaps and posts an average price for each contract at the end of the trading session on Markit.com. A few firms like JPMorgan send their clients daily research updates on the markets and recommend when to buy and when to sell. The Wall Street Journal and the Financial Times have begun to publish a few of the index prices.
There is some concern that the current volatility in the credit markets is due to the lack of liquidity in these indexes. But Markit officials believe about $200 billion of LCDX has traded since May 23. And Hirani says his firm has been doing $20 billion of business in the $100 billion daily volume in the iTraxx Crossover index, which is the index for 100 large European companies.
Still, some of this volume could be hedge funds or investment banks trading in and out of the market to make a few points. LCDX, the credit derivative that is fast becoming the most popular of these, is bound to be volatile, as it includes loans issued by Ford Motor and United Airlines. In September a revised index will include the loans of prospective buyouts like Alcatel, Tribune and Chrysler. Since the collateralized loan obligations market is frozen at this time, it means the only way a hedge fund or investment firm with losses in the corporate loan market can protect itself is to go short on these indexes, which is where the big money truly lies.
To be sure, much of this is a zero sum game, which means that for every winner on the short side, there is a loser on the long side. European and Asian financial institutions are believed to have been the unsuspecting buyers of the riskiest tranches of the ABX index, for instance.
Lately, the most extreme risk appears to be for mortgages issued in the commercial real estate market in the U.S., which is the province of an index that began trading in April, the CMBX, to be followed soon by CMBX Europe, an index of commercial real estate loans in Europe. This could mean the hedge fund fraternity believes commercial real estate mortgages have been sold at an inflated price level there was well.

Corruption adds insult to injury after floods devastate India

This canker of corruption in India and South Asia has to be removed. It has to be erradicated with a blunt shovel and castration if required. This is a cancer, this rots the body politic. And the fact that none of the political parties are immune from this disease is worse. Hence this note, if you suspect anybody of bribery, submit a report to the Bribeline (details here). Noli illegetimi get away, I say. Lock them up and throw away the key. Real enemies of the state. Twenty Million citizens are suffering from disease, hunger, lack of shelter, all their possessions gone away in the floods and these leeches, these stinking vultures will feed on their misery and take away their hope. May the fleas of 1000 camels infest their armpits. I hope the donor agencies are extra careful and the government vigilance department keeping a beady eye out on these cockroaches.

UPDATE: and now the bloody world bank thinks that giving cash grants is best. Yes, but then that makes it into a corruption heaven!. oh! joy.

All this to be taken with a grain of piquant salt!!!

Corruption threat to India flood aid

By Amy Yee in New Delhi

Published: August 9 2007 17:21 | Last updated: August 9 2007 17:21

Humanitarian aid intended to help nearly 20m victims of India’s worst floods for years is in danger of being siphoned away by corruption, according to human rights activists.

Altogether, more than 30m people across India, Nepal and Bangladesh have been affected by the floods. More than 200 have been killed and millions displaced, and thousands of villages are marooned. Hundreds of thousands of people have sought refuge on elevated highways, railway tracks and rooftops.

As rain abates and floodwaters recede, aid officials warn of a looming public health crisis brought by diseases carried in water or by insects. In Bihar, stagnant water posed a serious threat to about 11m people, including 1.5m young children, said Unicef, the United Nations Children’s Fund.

“Entire villages are days away from a health crisis if people are not reached in the coming days,” says Dr Marzio Babille, Unicef’s health chief in India.

Aid is flowing in. Oxfam, the international aid agency, this week launched a £1m ($2m, €1.48m) appeal to help flood victims in India, Bangladesh and Nepal. Canada has pledged US$900,000 in emergency aid relief for flood victims.

The UN’s World Food Programme has committed $500,000 to Nepal and estimates it will need to raise another $1.5m for food relief.

But watchdogs say it has been common practice in the past for aid to be siphoned off by corrupt officials. Shoddy, cheap supplies such as counterfeit medicines are being distributed instead of genuine ones, says Suhas Chakma, director of the Asian Centre for Human Rights in Delhi.

“The practice has been known for a long time,” says Mr Chakma, adding that a network of government officials sought to benefit from aid flows ahead of the annual monsoon floods.

Even flood prevention mechanisms, such as river embankments and sluice gates, are deliberately left unmaintained, commentators say.

“Every time they are washed away, it means more money for the contractors, technocrats and politicians,” the Indian daily The Hindustan Times wrote this week.

Two years ago the district magistrate of Patna, the capital ofBihar, and 10 others including bank officials, were charged with conspiring to siphon away more than $2m released by the state government for flood relief.

Government officials deny the claims. “As far as flood relief is concerned, there won’t be much [corruption] here,” says Omesh Sinha, relief commissioner for Uttar Pradesh. “Here everyone is watching. The media, NGOs [non-governmental agencies], senior officers are visiting all the spots.”

He concedes, however, “The problem of corruption sometimes comes in the restoration of infrastructure, roads, embankments. That kind of problem may come up.”

Leslie Browne, executive director of Oxfam India, says curbing corruption in humanitarian aid is “something that Oxfam has learned over time”.

The agency distributes supplies to local partners, rather than money, he says. “There are good people and work does get done,” Mr Browne stresses.

But could aid be siphoned away from the needy? “The possibilities are there,” he says.

Run for the pyramids, the Indians are coming

Now this is a news item which you would not usually catch. A foreign government, proudly banging the drum about how an Indian firm is going to invest billions of dollars in Egypt in the basic oil refining and downstream activities!!!! Indian firms are investing heavily in Africa, both from a governmental as well as corporate perspective. The government is more interested in gathering petroleum reserves but as one can see, even private firms are making a beeline to do so. It is frankly a one way bet. You get project financing quite easily, there is a very large amount of fixed assets as collateral, Egypt is reasonably safe and the market is guaranteed in India and other places. Plus Egyptian oil is quite sweet. More importantly, what they will do is to use their immense value chain power to drive downstream and generate products ranging from lubricating oil to plastics, fertiliser and other products which need hydrocarbon based raw feedstock. See what Reliance has done in Gujarat and that's what I guess what Reliance will be trying to do in India. Very good move indeed.

But to add a bit of emotion to the story, I was sitting in a hubby bubbly place with Zuhair, a Saudi friend of mine outside Riyadh and we were seeing this story about how somebody is going to take up a franchise of some lubricating oil (I forgot the name of the brand). Zuhair said, quite bitterly as it so happens, "we are the world's biggest petroleum extraction country and we cant even convert it into basic lubricating oil, we are not owners of this country, we are simply one of those old style landlords". That's what I would think as well, with such a huge Arab history, almost floating on a sea of oil, why weren't the Egyptian oil blocks developed by the Egyptian firms? As it so happens, a huge amount of the value addition will simply go back to India. I know that's globalisation for you, but surely the Egyptian Government must have a think about this! It is not like Egyptian entrepreneurs are unable to fund such a large project, they are huge in telecommunications across Europe and the Middle East. Curious.


All this to be taken with a grain of piquant salt!!!

Reliance to invest $10 bn in Egypt

CAIRO: The Egyptian government said on Thursday that the Indian industrial group Reliance will invest $10 billion in the oil refining, petrochemicals and plastics industries in Egypt.

The state news agency MENA said Egyptian Prime Minister Ahmed Nazif announced the decision by the Indian company after meeting Reliance executives in the port city of Alexandria.

Nazif's spokesman, Magdy Rady, said the investments by Reliance would include $1 billion to build an oil refinery and $7 billion in petrochemicals, MENA added. It gave no further details of the projects.

The Egyptian government estimates Indian investments in Egypt are worth $320 million. Reliance Petroleum Limited, a subsidiary of Reliance group, has been importing and marketing Egyptian crude oil since 2001.

The Impoverished Social Scientist's Guide to Free Statistical / Mathematical and Financial Software and Resources

While I am not impoverished monetarily, I am impoverished time wise. So the last thing I need is to muck around with statistical software. Now I have MINITAB for basic stats, EXCEL for generalised xls type of work (mainly financial modelling and for industry/firm modelling where data changes regularly, also use it for my investment analysis), SPSS for the heavy duty statistical crunching and basic time series analysis. I also prefer to use C++ for the times that I need to run simpler statistical but heavy computational routines. But all this is expensive and pretty time consuming. I used to use LISP, FORTRAN, APL but then wont say when as that would be showing that I belong to the cretaceous era (at least in technology era's!, I have worked on punched cards at a textile mill once!, lol).

But this page is brilliant, should be bookmarked and/or tattooed on your noticeboard or at least handed out to every undergraduate student! :) Happy experimenting but for god's sake, keep away from bloody Microsoft Vista, its the spawn of the devil, it will make your hair fall out and your knees hurt (from the frequent falling to the knees to pray in front of the computer god!)

All this to be taken with a grain of piquant salt!!!

carving your thumb via surgery so that you can use your iPhone better?????!!!!!!

:O (speechless!!!


All this to be taken with a grain of piquant salt!!!


Man endures thumb surgery to better enable iPhone use

Definitely this should be filed under “truth is stranger than fiction.”
The North Denver News reports that Thomas Martel, 28, of Bonnie Brae, Colorado recently underwent “whittling” thumb surgery to better enable him to use the iPhone.
Thomas Martel, 28, of Bonnie Brae is a big guy. So he has a hard time using the features on ever-shrinking user interfaces on devices like his new iPhone. At least, he did, until he had his thumbs surgically altered in a revolutionary new surgical technique known as “whittling.”
“From my old Treo, to my Blackberry, to this new iPhone, I had a hard time hitting the right buttons, and I always lost those little styluses,” Martel tells reporter James Bently. “Sure, the procedure was expensive, but when I think of all the time I save by being able to use modern handhelds so much faster, I really think the surgery will pay for itself in ten to fifteen years. And what it’s saving me in frustration - that’s priceless.”
Well OK, Tom.
“This is really, on the edge sort of stuff,” explains Dr. Robert Fox Spars, who worked on developing the procedure. “We’re turning plastic surgery from something that people use in service of vanity, to a real tool for improving workplace efficiency.”
As Bently describes it, “the procedure involved making a small incision into both thumbs and shaving down the bones, followed by careful muscular alteration and modification of the fingernails.
While Martel’s new thumbs now appear small and effeminate in comparison to his otherwise very large hands, he says he can still lift “pretty much anything I could lift before the surgery - though opening spaghetti sauce jars has been a problem. That was a big surprise.”
So now, Martel feels iPhone empowered.
But he’s not the only one to struggle with opening spaghetti sauce jars. Push down and twist? Yea, right.

Nokia to outsource chip development

So Nokia is also going down the Nike way? It is indeed curious, how fast life is changing and our industrial landscape is getting modified. Companies such as Nike and Nokia, both global brands with product strategies which are rapidly going global rather than regional have clearly shown that it makes more sense for them to concentrate on the customer side of the market and product design rather than the product manufacturer.

In the same fashion, financial insitutions are also outsourcing their research, their processing, their information technology, and so on and so forth. What will be left will be a very high value add, very thin layer of client interaction managers responsible for client relationship management and revenue generation. Then you will have a circle of compliance, legal and administration and finally a set of vendor / partner relationship managers who will make sure that the downstream process and value chain is working in a tickety boo fashion. Bits are already in place but I would say that the full evolution has about 3 years still to run and we will soon see (post full MiFID impact in 2009), of a Nike/Nokia in the financial markets.

Nokia to outsource chip development

By David Ibison in Stockholm and Maija Palmer in London

Published: August 8 2007 19:09 Last updated: August 8 2007 22:58

Nokia, the world’s largest maker of mobile phones, is to stop in-house development of semiconductors for most of its mobile phones and outsource the business to third parties.

The Finland-based company said the move would free an undisclosed sum for research into more complex chips needed for its advanced multimedia, internet-enabled handsets.

Nokia will use four chipset suppliers – Texas Instruments, Broadcom, Infineon Technologies and STMicroelectronics. Chipsets are combinations of integrated circuits that operate together.

The Finnish company also said it would licence coveted modem technology for the first time, so generating additional revenue.

The decision to broaden its range of chipset suppliers and licence proprietary technology for high-speed WCDMA/HSDPA mobile phone chips will be an opportunity for chip companies such as STMicroelectronics and Broadcom to enter a new market.

Only Nokia, Ericsson Mobile Platforms and Qualcomm are believed to have the technology to make cost-effective WCDMA/HSDPA chips.

“We will have more players in the industry who will be total solution providers,” said Niklas Savander, Nokia’s executive vice-president for technology platforms.

On Wednesday, Nokia shares closed 4 per cent ahead at €22.48 in Helsinki. Broadcom rose 9.8 per cent to $35.98 by the close in New York and STMicroelectronics shares were little changed at $16.91. Infineon rose 2.7 per cent to €11.36.

However, Texas Instruments fell 0.3 per cent to $33.73 and Qualcomm slipped 0.3 per cent to $40.15.

Richard Windsor, an analyst at Nomura, said: “This is the most negative news for Qualcomm, which makes excellent margins in WCDMA chipsets.”

He added that the company will now face much greater competition and pricing pressure in the long-term.”

Nokia’s move to broaden its range of chip suppliers is also negative for Texas Instruments, which has been Nokia’s sole supplier of 3G and Edge semiconductors but will now have to compete with others.

Nokia plans to transfer 200 staff to STMicro.

Analysts: Insurers Need to Accelerate Product Development by Insurance Networking News

Not a surprise. This is something that insurance companies, retail institutions and commercial banking need to think about deeply. The problem that we have with these industry sectors is that the rate of new product development overall sucks. Seriously sucketh majorly. Why? because historically, the demand hasn't simply been there. What do you mean demand? Well, ask yourself, when was the last time you went into a bank and asked for a new type of financial product that will get your mortgage few bits better than before or try to link your savings account with your brokerage account? retail customers are generally not that forthcoming or even welcoming towards new products. But if you build a better mouse trap, they will come! think about the single bank account structures, think about critical illness cover, etc. etc. their takeup is great.

But that doesn't mean that you sit back and think of England or USA or Mongolia. It is a tough life out there and many smaller boutiques are doing very well with rapid new development. And they are doing very well because their costs of distribution over the web and new channels means that their infrastructure is designed around multi product strategies (no hulking huge mainframe based single product single location process systems), their distribution is load independent, they can white label products very easily and their incremental cost for each additional sale is near zero. Hence, new product development is key and more importantly it has to be very fast. Take a clue from how the investment banking world works, the curve from new idea to development to sale to early adopters to main stream and commoditification can be as little as 3 weeks and generally not more than 1 year. Compare that to a life insurance policy. 100 years? I rest my case.




Analysts: Insurers Need to Accelerate Product Development

August 8, 2007 - El Segundo, Calif. - To remain competitive in the life and annuity industry, insurers should exploit technology to create more innovative products and introduce them faster, according to insurance industry analysts speaking at Computer Sciences Corp.’s Life and Annuity Users’ Forum.

More than 350 insurance industry executives attended the users’ forum in Naples, Fla. The event featured more than 150 sessions on topics ranging from industry trends to how product configuration software can reduce time to market for insurance products.

“Insurers that are unable to assess their customers’ needs, build products to support them, and deliver them to the sales channels quickly will find it difficult to compete,” says Kimberly Harris-Ferrante, research vice president at Stamford, Conn.-based Gartner Inc. “Product configuration technologies let insurers craft and test new products with less IT involvement, improve integration between the product engine and policy administration systems, and improve product management through the use of a central product library.”

“Improving time to market for life and annuity products with their rapidly proliferating features, minimums and guarantees is a widely acknowledged competitive necessity,” says Matthew Josefowicz, managing director of Celent LLC’s insurance practice. “The ability to innovate products is worthless without the ability to get those products to market rapidly.”

The need for more finely tuned products was identified in the November 2006 report “Insurance CIO/CTO Pressures, Priorities, Projects and Plans for 2007: Survey Results” from Boston-based Celent. Celent presented the results of the survey at the conference.

The report also showed that top areas of significant new project spending vary by size and sector, but include initiatives focused on underwriting, claims, product development and data mastery. Document handling, policy administration system replacement, ACORD XML adoption, and agent portals, and BPM all show up among the most common areas of significant new project spending. The report lists the top areas of "significant" and "some" new project spending by four size-and-sector groups of insurer respondents.

Web services/SOA is real, according to the report. Adoption of enterprise service buses and UDDI infrastructures may not yet be widespread, but the average insurer had approximately 15 services live within its enterprise, and about half of the sample is using Web services/SOA for internal and external integration to enable new business and underwriting. ACORD XML continues to play a role in more than half of these initiatives.

The incremental mainframe migration is continuing, and Linux is becoming an important element of platform modernization along with Windows. While most large insurers rely on at least partially on mainframes for their core policy systems, the overall role of mainframes continues to wane gradually.

Sources: CSC and INN archives

If You Were a Terrorist, How Would You Attack? - Freakonomics - Opinion - New York Times Blog

Well well well, Steve is a brave man indeed. But before that, my research has thrown up places and logistics which will provide the greatest amount of disruption based upon the impact on the markets. The idea being, the market already incorporates information and is therefore the best estimator and aggregator of all intelligence available. And I am afraid, the results are at variance to what Levitt is proposing. Unlike him, I am not going to tell you what the research results are.

You see, we are at threat from these jihadi terrorists. Now the "professional" terrorists such as the 9/11, 77, madrid, mumbai bombers are smart, professional and they do target selection properly. So we can manage that. Its the slightly idiotic, moronic jihadi's who are the bigger danger because they dont know much about terrorist target planning, so basically look around and try to do amateaurish target selection. See the Glasgow bombing as an example. So the last thing I want to do is to provide more ammo and ideas to these idiots.

More importantly, Steven, we are simply unable to protect ALL targets, we simply dont have the time, money, technology even if we have the inclination and motivation. So trying to come up with a list is simply making it more difficult for our law enforcement, and I would strongly advice against it.


If You Were a Terrorist, How Would You Attack?
By Steven D. Levitt
The TSA recently announced that most airplane carry-on restrictions will stay in place for at least another year, until new X-ray technology has been fully installed. Surprisingly, one item that will now be permitted on board is a lighter. While it seems crazy to keep people from bringing toothpaste, deodorant, or water on a plane, it doesn’t seem so strange to ban lighters, which could be used to start fires. I wonder whether the lighter manufacturers were lobbying for or against this rule change — on the one hand, having 22,000 lighters confiscated per day would seem good for business; but on the other hand, maybe fewer people will buy lighters if they can’t travel with them.
Hearing about these rules got me thinking about what I would do to maximize terror if I were a terrorist with limited resources. I’d start by thinking about what really inspires fear. One thing that scares people is the thought that they could be a victim of an attack. With that in mind, I’d want to do something that everybody thinks might be directed at them, even if the individual probability of harm is very low. Humans tend to overestimate small probabilities, so the fear generated by an act of terrorism is greatly disproportionate to the actual risk.
Also, I’d want to create the feeling that an army of terrorists exists, which I’d accomplish by pulling off multiple attacks at once, and then following them up with more shortly thereafter.
Third, unless terrorists always insist on suicide missions (which I can’t imagine they would), it would be optimal to hatch a plan in which your terrorists aren’t killed or caught in the act, if possible.
Fourth, I think it makes sense to try to stop commerce, since a commerce breakdown gives people more free time to think about how scared they are.
Fifth, if you really want to impose pain on the U.S., the act has to be something that prompts the government to pass a bundle of very costly laws that stay in place long after they have served their purpose (assuming they had a purpose in the first place).
My general view of the world is that simpler is better. My guess is that this thinking applies to terrorism as well. In that spirit, the best terrorist plan I have heard is one that my father thought up after the D.C. snipers created havoc in 2002. The basic idea is to arm 20 terrorists with rifles and cars, and arrange to have them begin shooting randomly at pre-set times all across the country. Big cities, little cities, suburbs, etc. Have them move around a lot. No one will know when and where the next attack will be. The chaos would be unbelievable, especially considering how few resources it would require of the terrorists. It would also be extremely hard to catch these guys. The damage wouldn’t be as extreme as detonating a nuclear bomb in New York City, of course; but it sure would be a lot easier to obtain a handful of guns than a nuclear weapon.
I’m sure many readers have far better ideas. I would love to hear them. Consider that posting them could be a form of public service: I presume that a lot more folks who oppose and fight terror read this blog than actual terrorists. So by getting these ideas out in the open, it gives terror fighters a chance to consider and plan for these scenarios before they occur.

I am unsure as to the identity of the father of my baby, after all when you eat a can of beans you can't be sure which one made you fart.

The Child Support Agency was setup by the British Government to basically chase up deadbeat dads so that they can contribute money towards their children's upbringing. As it so happens, the United Kingdom has one of the highest rates of teenage and unmarried pregnancies in Europe. So you have these girls, having unprotected sex, and then having a child out of wedlock or with a partner in tow. End result? a spiral of unmarried mothers, no role models, no guidance, and the children sink deeper into poverty. So anyway, that's what the CSA was setup to do, and as it happens when Governments try to influence sexual behaviour, it failed miserably, because the economic benefits were outweighing the costs. Why would a woman be more careful when she doesnt bear the cost? Why would a boy be careful when he doesnt bear the cost?

But while you are gobsmacked, here are some funny reasons given (even if they are a joke!) and now you can see why the UK has such high incidents of births out of wedlock. Read and weep.

The following are all replies that British women have put on Child Support Agency forms in the section for listing father's details. These are genuine excerpts from the forms. Be sure to check number 11, it takes the prize.

1. Regarding the identity of the father of my twins, child A was fathered by Jim Munson. I am unsure as to the identity of the father of child B , but I believe that he was conceived on the same night.
2. I am unsure as to the identity of the father of my child as I was being sick out of a window when taken unexpectedly from behind. I can provide you with a list of names of men that I think were at the party if this helps.
3. I do not know the name of the father of my little girl. She was conceived at a party at 36 Grand Avenue where I had unprotected sex with a man I met that night. I do remember that the sex was so good that I fainted. If you do manage to track down the father, can you send me his phone number? Thanks.
4. I don't know the identity of the father of my daughter. He drives a BMW that now has a hole made by my stiletto in one of the door panels. Perhaps you can contact BMW service stations in this area and see if he's had it replaced.
5. I have never had sex with a man. I am awaiting a letter from the Pope confirming that my son's conception was immaculate and that he is Christ risen again.
6. I cannot tell you the name of child A's dad as he informs me that to do so would blow his cover and that would have cataclysmic implications for the British economy. I am torn between doing right by you and right by the country. Please advise.
7. I do not know who the father of my child was as all squaddies Look the same to me. I can confirm that he was a Royal Green Jacket.
8. Peter Smith is the father of child A. If you do catch up with him, can you ask him what he did with my AC/DC CDs?
9. From the dates it seems that my daughter was conceived at Euro Disney; maybe it really is the Magic Kingdom .
10. So much about that night is a blur. The only thing that I remember for sure is Delia Smith did a program about eggs earlier in the evening. If I'd have stayed in and watched more TV rather than going to the party at 146 Miller Drive , mine might have remained unfertilized.
11. I am unsure as to the identity of the father of my baby, after all when you eat a can of beans you can't be sure which one made you fart.

Inequality is a fact of life, but we have to deal with it

Economic inequality is a curious phenomena. The gut feeling when you hear
about economic inequality is that it is wrong and an non-equal society is
not right. So the typical response is to take the money from where it is in
excess and give it to the place where it is less. But when you sit back and
think about it, you then understand that inequality is a fact of life.
There is absolutely no reason why everybody has to be equal, there is no
physical, mental, sociological, economic or financial reason to be so. But
given that we are civilised, we calibrate that law of the jungle. So what
we make sure that some human systems treat everybody equally. Such as our
legal system, such as our election system, such as our hiring system, such
as our money raising system, such as our bank account system, our traffic
system. Everybody has an equal right to participate within that system but
within that system, you have inequality such as having a bigger or more
expensive car than the other. So as long as everybody has a car, nobody
minds that you have a Porsche while I have a 10 year old ford mondeo. But
we are not talking about cars or access to a job when referring to vast
swathes of the world where people live on incomes which are below $1 per
day. That is grinding poverty, at starvation levels, one meal away from
deep delimitating hunger without a safety net or access to clean drinking
water, health care or a roof over your head.

A recent report from the Asian Development Bank talked about one region of
the world, Asia, where we have severe poverty. One measure of inequality is
called as the Gini Coefficient, which measures a ratio of the incomes /
consumption (take your pick) of the top layer versus the bottom layer.
There are gigantic debates behind this simple ratio, whether or not you
measure absolute or relative incomes, top and tail the 1% or 10% or 20%,
whether you go for income or consumption, whether you adjust for the
exchange rate or not, and where do you get the data from. But let us leave
those debates aside for the journals of academia. As long as we are
consistent in measuring the ratio and people accept it by and large, we are
ok. As it so happens, we see that the Gini coefficients are highest for
Nepal and China, India is somewhat in the middle while Pakistan and Kyrgyz
republic are at the bottom. In other words, inequality is highest in Nepal
and China while Pakistan is doing comparatively well.

As the report mentions, this doesnt mean that Pakistan or India is doing
well, the % of severely underweight children is much higher in these
countries but that is a fault of the ratio, that it doesnt consider the
base. What do I mean by the base? A base is what I explained above. A base
level of service, like everybody having access to a car, is what you define
as the minimum level of income/consumption. In other words, you might be a
purist and very hard hearted, but you will never allow anybody to starve in
your country. At the bare minimum, you are happy that everybody has 2
square meals per day, 2 sets of clothing every 6 months and a basic
shelter. Or provide taxes so that the government can provide this bare base
level. Which means, you have immediately raised the bottom layer of
inequality to a common base level.

But overall, as long as the base level is handled right, and this base
level will differ from country to country, time to time, inequality isnt a
problem. At least as far as economics are concerned, but go back to what I
said at the beginning, your gut feeling revolts at the idea of inequality.
And unequal treatment, when taken to the extreme, is very conducive to
rebellion, revolution, terrorism and insurgencies. Study after study has
shown that conflicts are disproportionately skewed towards countries or
regions where there are inequalities or economic problems. For example, you
are more likely to see a revolution or conflict in Pakistan and India
compared to Sweden or Luxembourg.

So if you can manage to have the base level right, remove or control
corruption (which is a huge driver of inequality), have some
re-distributive ability (like sending funds and help to regions where rains
have failed or there is basic issues relating to economic development like
poor schooling, etc.), we are ok. But crucially, the solution is to have
equality in opportunity. As long as you give everybody the same
opportunity, it is good for the country. That means good schooling, good
access to capital, good courts to control and manage violations.


All this to be taken with a grain of piquant salt!!!

JPMorgan Chase, Syracuse University Partner for Tech Future

A very interesting tie-up between one of the giants of the financial institutions and a major US university so as to provide a financial technology education programme aimed at providing JPM with educated employees. While other universities have done executive education programmes, I believe this is the first time that financial technology has been addressed in this manner. It will be quite interesting to see the progress of this initiative.

Offshoring and Outsourcing, we have moved on from a pure cost basis

I have talked about offshoring and outsourcing before many times on this blog (see the keyword search on offshoring or here) and how simply looking at this from a cost perspective is wrong, medieval and went out with the dinosaurs. This article, from Bank Systems and Technology, provides much more detail on this phenomena that is rapidly evolving. This article looks at a particular part of a financial institution, namely Finance and Accounting insourcing to their customers. Turnaround is fair play and the idea that you do what you do best is gaining currency. So the Indian vendors such as TCS, WIPRO, Infosys pick up IT while the western financial institutions go after the processing elements.


All this to be taken with a grain of piquant salt!!!

Brad deLong is a familiar name to anybody who has been inside a B-School. His economics texts are seminal and in this column, he looks at the seriously amazing numbers being thrown about in the financial markets, and makes a case for regulating these markets while not fearing them.

Funny numbers, those!

Fear of Finance (J. Bradford DeLong)
Source:Finance
Fear of finance is on the march. Distrust of highly paid people who work behind computer screens doing something that doesn’t look like productive work is everywhere. Paper shufflers are doing better than producers; speculators are doing better than managers; traders are doing better than entrepreneurs; arbitrageurs are doing better than accumulators; the clever are doing better than the solid; and behind all of it, the financial market is more powerful than the state. Common opinion suggests that this state of affairs is unjust. As Franklin D. Roosevelt put it, we must cast down the “money changers” from their “high seats in the temple of our civilization.” We must “restore the ancient truths” that growing, making, managing, and inventing things should have higher status, more honor, and greater rewards than whatever it is that financiers do. Of course, there is a lot to fear in modern global finance. Its scale is staggering: more than $4 trillion of mergers and acquisitions this year, with tradable and (theoretically) liquid financial assets reaching perhaps $160 trillion by the end of this year, all in a world where annual global GDP is perhaps $50 trillion. The McKinsey Global Institute recently estimated that world financial assets today are more than three times world GDP – triple the ratio in 1980 (and up from only two-thirds of world GDP after World War II). And then there are the numbers that sound very large and are hard to interpret: $300 trillion in “derivative” securities; $3 trillion managed by 12,000 global “hedge funds”; $1.2 trillion a year in “private equity.” But important things are created in our modern global financial system, both positive and negative. Consider the $4 trillion of mergers and acquisitions this year, as companies acquire and spin off branches and divisions in the hope of gaining synergies or market power or better management. Owners who sell these assets will gain roughly $800 billion relative to the pre-merger value of their assets. The shareholders of the companies that buy will lose roughly $300 billion in market value, as markets interpret the acquisition as a signal that managers are exuberant and uncontrolled empire-builders rather than flinty-eyed trustees maximizing payouts to investors. This $300 billion is a tax that shareholders of growing companies think is worth paying (or perhaps cannot find a way to avoid paying) for energetic corporate executives. Where does the net gain of roughly $500 billion in global market value come from? We don’t know. Some of it is a destructive transfer from consumers to shareholders as corporations gain more monopoly power, some of it is an improvement in efficiency from better management and more appropriately scaled operations, and some of it is overpayment by those who become irrationally exuberant when companies get their names in the news. If each of these factors accounts for one-third of the net gain, several conclusions follow. First, once we look outside transfers within the financial sector, the total global effects of this chunk of finance is a gain of perhaps $340 billion in increased real shareholder value from higher expected future profits. A loss of $170 billion can be attributed to future real wages, for households will find themselves paying higher margins to companies with more market power. The net gain is thus $170 billion of added social value in 2007, which is 0.3% of world GDP, equal to the average product of seven million workers. In one sense, we should be grateful for our hard-working M&A technicians, well-paid as they are: it is important that businesses with lousy managements or that operate inefficiently be under pressure from those who may do better, and can raise the money to attempt to do so. We cannot rely on shareholder democracy as our only system of corporate control. The second conclusion is that the gross gains – fees, trading profits, and capital gains to the winners (perhaps $800 billion from this year’s M&A’s) – greatly exceed the perhaps $170 billion in net gains. Governments have a very important educational, admonitory, and regulatory role to play: people should know the risks and probabilities, for they may wind up among losers of the other $630 billion. So far there is little sign that they do. Finally, finance has long had an interest in stable monopolies and oligopolies with high profit margins, while the public has an interest in competitive markets with low margins. The more skeptical you are of the ability of government-run antitrust policy to offset the monopoly power-increasing effects of M&A’s, the more you should seek other sources of countervailing power – which means progressive income taxation – to offset any upward leap in income inequality. Eighteenth-century physiocrats believed that only the farmer was productive, and that everyone else was somehow cheating the farmers out of their fair share. Twentieth-century Marxists thought the same thing about factory workers. Both were wrong. Let us regulate our financial markets so that outsiders who invest are not sheared. But let us not make the mistake of fearing finance too much. J. Bradford DeLong, Professor of Economics at the University of California at Berkeley, was Assistant US Treasury Secretary during the Clinton administration. Copyright: Project Syndicate, 2007. www.project-syndicate.org
http://www.project-syndicate.org/commentary/delong61

Private Banking and Money Laundering: A case study of opportunities and vulnerabilities

This is an old US congressional report, dated back to 1999. So I think I am reasonably safe in commenting upon this report and private banking per se'. There are three issues people need to remember because those structural issues have yet to be resolved across the world. The first is that private banking is generally a low volume business. In other words, the number of transactions per client is very low, can be about 10 transactions per year. And its a relationship based business. So when you are talking about this level of business, you cannot have automatic Anti-Money Laundering tools (too expensive per client or even for the complete private client / private banking / wealth management business.

Second is the number of people per country per business. This is a high contact business and generally, you wouldn't find large numbers of people in the private client business. So the amount of oversight is comparatively lower compared to say retail or investment banking. So slip-ups do happen. Furthermore, you have to recall that since it is a people business, it is highly localised and spotty. So a private banker in Guyana will have almost complete discretion and very little oversight over his business in Guyana. Who else will know about it?

The third issue is that the rich and the highly rich and the filthy rich are horrendously sensitive to data protection and privacy. So besides being absolutely anal about keeping data private, countries impose draconian data protection, transmission and privacy requirements. So if the private bank is headquartered in say Bermuda or Switzerland, then you had it, data will be sparse, patchy, hidden, and unconnected. So a compliance or a risk manager will find it extremely difficult to audit or track any wrong doing.

But the regulators are getting very very stroppy about any failures on the part of private banks on AML practises such as here, or here, so I am afraid there is simply no excuse. While there is no terrorist activities to my knowledge which has gone through a private bank, there have been far too many cases of drug money, crime and corruption monies which have flushed through these dark hidden channels of the financial markets. And this case study is a wake up call. Read and Reflect.


Only the introduction is appended below, for the full report, go to the report linked here.

MINORITY STAFF REPORTFORPERMANENT SUBCOMMITTEE ON INVESTIGATIONSHEARING ONPRIVATE BANKING AND MONEY LAUNDERING:A CASE STUDY OF OPPORTUNITIES AND VULNERABILITIESNovember 9, 1999


for indent & between paragraphs------------->
Because of their central role in drug trafficking and organized crime, money laundering activities have been the subject of eight prior investigations of the Permanent Subcommittee on Investigations. Despite increasing international attention and stronger anti-money laundering controls, some current estimates are that $500 billion to $1 trillion in criminal proceeds are laundered through banks worldwide each year, with about half of that amount moved through United States banks.
This report summarizes the Minority Subcommittee staff investigation to date into U.S. private banks and their vulnerability to money laundering. The investigation has found that the products, services and culture of the private banking industry present opportunities for money launderers, and that without sound controls and active enforcement, private banking services have been and will continue to be used by those intent on laundering money.
Subcommittee Investigation
To date in this investigation, the Subcommittee staff has conducted almost one hundred interviews and reviewed tens of thousands of pages of documents. The interviews have included meetings with almost 50 private bank personnel, including private bankers, their supervisors, compliance personnel, auditors, senior bank management and board members. The staff has interviewed and obtained information from more than two dozen government agencies and organizations, including the United States Departments of State, Treasury and Justice, the Federal Reserve, Securities and Exchange Commission, International Monetary Fund, World Bank, and law enforcement personnel in Mexico, France and other countries. The Subcommittee staff has also spoken with private bank clients, and with banking and anti-money laundering experts in academic, regulatory and law enforcement circles.
The documents reviewed by the Subcommittee staff include a wide range of materials, from reports on the private banking industry, to reports on money laundering trends, to SEC filings, legal pleadings, private bank audits, bank examination materials, and numerous documents related to specific private bank accounts and transactions. The Subcommittee has issued subpoenas to over half a dozen financial institutions and entities.
The information gathered by the Subcommittee's investigation falls into three categories: (1) the anti-money laundering obligations of all banks, including private banks; (2) the elements of private banking that make it vulnerable to money laundering; and (3) four case histories at the Citibank private bank illustrating a range of issues related to money laundering.