Page 1

September / October 2012

Mica (P) 180/05/2012

Volume: X

Issue: 07

www.worldbizmagazine.com

Pusillanimous ?

China Rebalancing

Turkey

Bridging Europe & Asia

GFC ‘08

A Billion Warnings

Four Spectacular Gems


All which is beautiful and noble is the result of reason and calculation - Charles Baudelaire


l l l

Sovereign Ratings l Public Finance Ratings Corporate Ratings l Structured Ratings l SME Ratings Bond Ratings


C ontents

In Focus 9

TURKEY

13

Economic Indicaters

A Bridge For Europe & Asia

Turkey’s Economic Performance 83

Arts & Culture A Country for all Tastes

Current Affairs 27

Ryan — Pusillanimity? Our Termite Mound

03

19

25

29

35

Research

56

41 51

Credit Rating

The Shifting Sand of Stability

Fed Hits Kill Switch On Liquidity Is there No Fiscal Stimulus to Come

Gold & Silver Shine Weaker U.S. Dollar

Gold & Silver Mining Shares Why are Prices Stagnant?

China Rebalancing Has the Great Rebalancing Already Started?

Americas Greatest Threat Dependence on the Fed

GFC ‘08 A Billion Warnings

The American Dream Is Over Who Destroyed the Middle Class – Part II

Invest Guide Major Cities

33

Financial Havens

Hybrid Cars A Revolution in the Automotive Industry

Indonesia

45

47

The Land Of Gold

Islamic Banking – Part I Banking On Faith

49


Pictorial 59

Lifestyle Mediterranean Sea

Tendence 2012

4 Spectacular Gems

Food Review

Frankfurt, Germany 61

The Ivy

International Automobile Salon

Automobile

Moscow, Russia

Speed Personified

Fashion Fashion Imperatives

Killing Them Softly – The Movie Dark, Cynical & Fairly Great

Sports 89 91

93

101 103 105 107 109 111

69 63 65 67 71

Burberry Campaign Evolution & Volume

Legend of Calcio

Martina Hingis

Horoscope: The Month Ahead

Princess of the WTA

What it holds for you

Ayrton Senna Failure Not an Option

Mutual Funds Selection Stock Selection Technical Projections SGX BC Round Up Announcement Calendar

Health Conserve Your Energy

History 9 – 11 September

Book Review Clues to Success

Social Cause Human Traficking

Education University Of Toronto , Scarborough

75 77 81 87

Infotainment

Pavel Nedvěd

Monthly Round Up Portfolio Picks

73

Editor In Chief: Rana Abrar Managing Editor: Zohaib Ijaz Executive Editor: Asim Masood Senior Editors: Gianluca Tragoni, Neha Asim, Martin Jared Assistant Editors: Michael Adam, Ronald Alistair, Fredrick McGregor, David Fitzpatrick Junior Editors: Tabinda Mian, Megan Arstein, Harold Fuller, Juan Caramillo, Ethan Fleming Research: Catherine Zalinski, Ahmad Malik, Andrea Cole, Gilbert Hughes, Anne Mary Production: Mohd. Faisal Saleem, Vikas Raman, Deepak Gill, Saad Ahmed Gill, Osman Gondal, Ali Riaz Legal: Rana Usman Zeb Khan, The Advisor’s Law Firm Art & Digital Engineering: Upasana Shanker, Fasil Jackson Creative Director: Zehrish Ali Photography: Steven Coombe, Arthur Corliss, Joan MacKinnon Editorial Advisor: Katherine Matthews Published By: Gemini Credit Capital Singapore Pte. Ltd For Advertising: advertising@worldbizmagazine.com For Feedback: feedback@worldbizmagazine.com For Subscription: subscribe@worldbizmagazine.com For Editor: editor@worldbizmagazine.com

95

99


Feature Investment

GOLD & SILVER MINING SHARES

Why are Prices Stagnant? By: JULIAN D.W. PHILLIPS

This is perhaps one of the most asked questions among gold investors today. But the answer is not a simple one. It goes to the basics of which people invest in gold in the first place and what form of gold they buy.

U.S. Demand

Who Buys Gold?

It's so easy to become short-sighted in the different facets of the gold market. In the U.S., it's easy to believe that gold price rises seen since 2005 are due to either the economic outlook of the U.S. or the strength and weakness of the USD. There's no doubt that in the short-term, gold price movements are driven by traders focused on the exchange rate between the dollar and the euro. But what gold are they buying? The sophisticated trading operations and tools available in the developed world are able to discount such moves quickly and dramatically, seemingly providing such gold and silver price dominance. Looked at on a day-to-day basis, the evidence of such dominance is overwhelming. The volumes of gold bought and sold daily are enormous. But are they buying the sort of gold that moves the gold price? Traders on COMEX buy and sell derivatives in the form of Options and Futures contracts. This is not physical gold. Indeed COMEX officials informed us that only 5% of the volumes traded involve an actual transfer of physical gold.

03

Sept / Oct 2012

While the SPDR gold Exchange Traded Fund holds in HSBC vaults more than 1,500 tonnes, only a few tonnes, on average, move each week, reducing the price impact of these investors considerably. Institutions that do buy gold, allocate an amount to be invested in the gold sector. This amount has as its underlying motive to create profits from these investments. Under the usual risk-reward concept, with the objective of maximum total return, institutions will spread this allocation to the different aspects of the gold market. At times they may feel that the bullion price will produce the most short-term profits, so invest directly in physical gold, perhaps counter-balancing these positions with futures and options which adding a portion of trading to the portfolio. Long-term positions may well be taken in gold mining company shares, provided the higher returns justify the higher risk –this includes the corporate risk and risk of higher costs of production cutting back potential profits. But it's normal to spread the risk of gold shares with a physical gold position. The net result is that institutions may well hold only a 30 to 50% position in physical gold, with the intention of holding these for the long-term. The result is that when one adds the buying and selling of all the gold instruments together over time and weighs them against the volume of physical gold buying and selling over time, the weight of short-term trading in its various forms, heavily outweighs that of physical gold buying, perhaps 10 to 1. Surprisingly this makes U.S. physical gold activity a tiny proportion of total gold-related investment and trading activity. After all, to the U.S. investor making a dollar profit from their gold dealings and not holding it for the long term, is the thrust of their activity. Gold bullion holding for the longterm is not their primary interest.

WORLD BUSINESS MAGAZINE


Feature Investment

Overall, the U.S. accounts for +7% of world gold physical demand only, primarily for the jewelry sector. If it was not for the sophistication of its markets and measured on physical demand alone, the U.S. demand is insufficient to dominate the gold price. But the sheer volume of activity in the short-term does dominate the short-term price, but not the long-term price. Of this total demand for gold in its various forms, what portion goes into gold mining shares? It is very small. After the arrival of gold Exchange Traded Funds in the market

Emerging World Demand Between 65% and 75% of the world's demand for physical gold comes from the emerging world. One hundred per cent of this is for long-term financial security. Even recycled gold is sold with the intention of rebuying again either when the price is lower or when investors are able to afford to buy again. This applies both in China and in India. The investment attitude behind such buying is for the purpose of financial security. It is both rare and insignificant for investors in the emerging world to buy gold mining shares or Futures & Options or the shares of gold Exchange Traded Funds. The emerging world sees these as speculative instruments related to gold and not gold itself. They are not interested in investing outside their world usually. The profit motive is virtually absent from these investors' minds. But when the money volumes spent by these investors is set against the money volumes of the developed world investors in gold instruments, it is tiny because they buy usually once for the long-term and rarely sell. But their demand is insistent and persistent over time. This is why their impact on the long-term gold price is so significant. However, as to the shares of gold mining companies, the bulk of investors in the emerging world have little to zero money invested in them.

Central Bank Demand The pattern of behaviour of central banks is similar to that of the emerging world. They buy only gold bullion for the long-term and are not particularly interested in the price of gold. They have zero interest in buying the shares of gold mining companies.

Silver Prices We've followed the silver price for some considerable time and seen that the silver price moves with the gold price, more on the rise and more on the fall, but they move together because they're treated as a long-term investment that counters the falling value of currencies as a whole. We have no reason to see why this well established pattern should change. Therefore it's reasonable that we should talk about gold and silver shares in the context of this article.

Who Buys Gold, Silver Shares? Apart from a small number of cosmopolitan investors in the emerging world, only investors in the sophisticated markets of the developed world invest in the shares of gold and silver mining companies. It’s quite sobering to realize this. Their reasons relate as much to ownership of those companies as to sound long-term investments. The culture of short-term trading in the emerging world is related more to gambling than to wise investment trading. Institutional investors and the wealthy retail investor are among the buyers. The criteria they use is only partially related to the price of gold and silver. The prime reason for them buying gold & silver mining shares now is that these will produce a greater total return than the gold and silver prices themselves. Why else would they take on the added risk that comes with these corporate investments?

Equities Have Added Risks & Costs It is easy to assume that gold and silver mining shares will move with the gold and silver prices, but they haven’t. They have underperformed precious metal prices by a wide margin. It suffice is to say now that mining company shares come with a lot more baggage than just prices that dominate the performance of the companies.

Mining companies have all the risks of a commercial enterprise except the difficulty in selling its products.

What it has little to no influence on is the price it sells its product at. It is at the mercy of all the market factors that contribute to price-making. The only impact the company has is its contribution to supply. Finding the gold or silver it intends to mine. It has to not only find it but establish just how much of it there is to mine and under what conditions it must be mined. These can directly affect the cost of producing gold or silver. For instance in South Africa at Goldfields mine miners work at depths of around three kilometers or nearly 2 miles deep. Mining costs don't only cover getting to that depth but the cooling systems needed to lower the temperature to bearable working levels. Labor and energy costs used in getting the ore out. With labor becoming more demanding each year, production halts are increasing.

Leeville Mining Complex - Nevada, United States

WORLD BUSINESS MAGAZINE

4 Milling the ore and extracting the gold and silver. 4 Refining the gold to acceptable selling standards. 4 Management effectiveness risks.

Sept / Oct 2012

04


Feature Investment

The life of the reserves which are profitable. These are affected by the price of gold or silver. Where silver is mined as a by-product, this is not as important of an issue and with the average cost of mining silver currently so low, we do not regard it as nearly as important of an issue as it is with gold mining. Political risk is becoming of paramount importance as we watch country after country see mining profits as a major source of tax revenue. When mining companies are threatened with nationalization or 'windfall taxes' or are appropriated by governments, nothing could undermine investor's incentives to invest more. With more and more gold mining occurring in nations where this is a possibility, investors, who may have been inclined to invests, may take a closer look at where the mining will take place. Currency is an increasing risk as the global monetary scene decays. Can you believe that the South African Rand was traded at R1.84 to the British pound? Today 37 years later it trades at R13 to the British pound. At that time South Africa produced 1,000+ tonnes of gold per annum, today this total is somewhere south of 200 tonnes. This affects the cost of fuel and capital equipment in particular. South Africa remains reliant on labour for the bulk of its mining. While a local Rand cost, wage demands are frequently well above inflation. Add all these risks up and you have an industry that carries far more risks than the ordinary commercial enterprise. Because of this, investors look for much better returns on their investments. What has helped lately is the growing trend to link dividend payments to profit and to the gold and silver prices. Several silver and gold mines, i.e. Coeur d'Alene and Newmont, follow this practice and have seen their share prices outperform their competitors who do not follow this practice. After all, it's not enough to simply keep mining without rewarding investors directly through dividends.

Do gold mining company profits keep pace with the rise in gold price?

Should Gold Shares Keep Pace with the Gold Price? The concept used to be that if you invested in a gold mining company, it would be able to hold back costs and ensure profits rose faster than the gold or silver prices. This would, in itself, add leverage to the dividend payments to the investor. Or the mining companies could increase reserves and the life of the mine to increase the capital value of the company with the intention of rewarding investors over a long period of time in a way that the gold and silver prices could not. But this is not the case today as it becomes increasingly difficult to replace used reserves. Until the last couple of years it was not the policy to reward investors through good dividends. The rising capital value of the company was supposed to translate into higher share prices allowing investors the joy of capital gains.

Are gold and silver mining companies costs stable?

equities, the total return on the shares of gold and silver mining shares should be well ahead of the total return gold and silver itself. Is that what their performance has shown? Until this sort of adjustment is made the attraction of the precious metal mining companies will be less than the metals themselves. A look at the rising costs of gold and silver mining companies – particularly gold mining companies—shows that they’ve climbed too fast. In 2005 when the gold price was close to $300 the mines were profitable. Today in South Africa costs are shooting past $1,000 an ounce. Elsewhere, to a lesser extent, the same has been happening –costs are rising so strongly that profits are not rising in line with the rising gold and silver prices. There appears to be an insidious belief in the minds of suppliers that they can increase prices as the mines reap a higher reward for their mining. No matter what efforts mining companies make to keep down costs, profits do not rise as expected, i.e. as the precious metal prices rise. Investors see this and do not feel that their profit potential justifies a far greater investment. To understand this, an investor must look at the reasons he has for investing. If his investments supply this, then he keeps them. If not, then he sells them. An investor’s needs should rule the dividend policies. These days, when markets aren’t giving the total returns expected, successful equity investing is harder to achieve.

But mining equities in general have not outperformed the metals themselves and have not rewarded investors sufficiently for the added risks they take. Consequently their attraction has lessened.

Generally, there is far less certainty to the profitability of gold and silver mining companies then there is to the pure gold and silver investment. But is this always the case? g

By linking dividends to the gold and silver price, equities should keep up with the gold or silver price, but to ameliorate the risks of mining

Julian D.W. Phillips of www.GoldForecaster.com

05

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Global News

News in brief

The Headlines By: Staff

Obama unites hope with realism in pitch for re-election President Barack Obama asked Americans for patience in rebuilding the weak economy as he appealed for a new term in office and defiantly rejected Republican Mitt Romney’s proposals to restore growth. In accepting the presidential nomination at the Democratic National Convention, Obama gave a more down-to-earth follow-up to his 2008 “hope and change” message. “America, I never said this journey would be easy, and I won’t promise that now,” he said. “Yes our path is harder -- but it leads to a better place.” Senate committee launches probe of JPM’s “Whale” losses A U.S. Senate committee has launched a probe into JPMorgan Chase’s “London Whale” trading losses, according to a source familiar with the investigation. The Permanent Subcommittee on Investigations, chaired by Senator Carl Levin, is interviewing current and former employees of JPMorgan’s Chief Investment Office in connection with the bank’s $5.8 billion loss on trades in an obscure corner of the credit market, according to the source. BP executives sought to blame “blue collar rig workers”: U.S. BP executives wanted to concentrate blame for the Deepwater Horizon oil spill disaster on “blue collar rig workers” in order to save themselves, U.S. government lawyers wrote in a court document that was partially redacted. According to the newly public and complete version of the court document, Justice Department lawyers are taking an even harsher tone against BP Plc for the 2010 oil spill than previously thought, invoking the language of class conflict. Former lawmaker Giffords wows convention crowd Former Arizona congresswoman Gabrielle Giffords, still recovering from being shot in the head, made a moving appearance at the Democratic National Convention to lead the pledge of allegiance. The hall erupted into a standing ovation as Giffords walked across the stage - limping, but without a cane - accompanied by U.S. Representative Debbie Wasserman Schultz, the president of the Democratic Party and a close friend. . 07

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Global News

Glencore’s Xstrata bid near collapse as shareholders vote Glencore’s $34-billion bid for miner Xstrata stands on the brink of collapse, with only hours to go before a shareholder vote and little sign of a resolution to the impasse that has pitted the trader against rival investor Qatar. An 11th-hour agreement between Glencore and Qatar, the top two shareholders, could still get the deal over the line. But time runs out on the merger effort, when shareholders on both sides are called to meetings in the Swiss lakeside town of Zug, Xstrata’s home base. Zetas cartel feud augurs more blood, fear in Mexico The most brutal drug cartel in Mexico appears to be rupturing with its hit men turning their guns on each other in a twist to the country’s turf wars that threatens a new wave of bloodshed and chaos. The killing of Zetas by Zetas, including the massacre of 14 suspected gang members on the outskirts of the central city of San Luis Potosi last month, springs from an internal feud between the cartel’s supreme commander and his deputy. Draghi gets ECB backing for unlimited bond-buying The European Central Bank agreed to launch a new and potentially unlimited bond-buying program to lower struggling Euro Zone countries’ borrowing costs and draw a line under the debt crisis. Seeking to back up his recent pledge in July to do whatever it takes to preserve the Euro; ECB President Mario Draghi said the new plan, aimed at the secondary market, would address bond market distortions and “unfounded” fears of investors about the survival of the Euro. Morgan Stanley latest bank to lose traders to merchant firm Three Morgan Stanley gasoline traders in Europe are set to join Swiss commodity trader Mercuria, a source said, the latest Wall Street bank to lose traders to aggressive merchants. Morgan Stanley Managing Director Leo Sint Nicolaas, as well as Sebastian Ferraccù and Louis Mitchell, are expected to move from London to Geneva to work for the Merchant Firm Mercuria, the source said. WORLD BUSINESS MAGAZINE

Sept / Oct 2012

08


Infocus Country

TURKEY

A Bridge For Europe & Asia By: Zohaib Ijaz

Islam has made a comeback after decades of secularism

Once the centre of the Ottoman Empire, the modern secular republic was established in the 1920s by nationalist leader Kemal Ataturk. Straddling the continents of Europe and Asia, Turkey's strategically important location has given it major influence in the region - and control over the entrance to the Black Sea. Turkey is a vibrant, competitive democracy of 79 million people with a thriving economy whose influence in its region has grown as it has moved away from its secular roots under an Islamic-leaning government. The government led by Prime Minister Recep Tayyip Erdogan and his pro-Islamic Justice and Development Party received a strong mandate in parliamentary elections in June 2011. Supporters credit Mr. Erdogan with elevating Turkey’s profile in

09

Sept / Oct 2012

the Middle East, turning the country into an increasingly assertive regional player at a time when several of its neighbors are locked in sometimes violent struggles for democracy.

Overview Turkey's progress towards democracy and a market economy was halting in the decades following the death of President Ataturk in 1938. The army saw itself as the guarantor of the constitution, and ousted governments on a number of occasions when it thought they were challenging secular values. Efforts to reduce state control over the economy also faced many obstacles. After years of mounting difficulties which brought the country close to economic collapse, a tough recovery programme was agreed with the IMF in 2002.

The austerity measures imposed then meant that by the time the global financial crisis came round in 2008, Turkey was in a better position to weather the storm than many other countries. The level of public debt was already relatively low, and although the effects of the recession were still felt, by 2010 the Turkish economy had started to bounce back - to the extent that by the beginning of 2011, concerns were being raised over whether the boom was sustainable.

Rise of AKP Concerns over the potential for conflict between a secular establishment backed by the military and a traditional society deeply rooted in Islam resurfaced with the landslide election victory of the Islamist-based Justice and Development Party (AKP) in 2002.

WORLD BUSINESS MAGAZINE


Infocus Country

The secularist opposition has on several occasions since then challenged the constitutional right of the AKP to be the party of government. In March 2008 the Constitutional Court narrowly rejected a petition by the chief prosecutor to ban the AKP and 71 of its officials, including President Abdullah Gul and Prime Minister Recep Tayyip Erdogan, for allegedly seeking to establish an Islamic state. In recent years the government has accused military officers of plotting to overthrow it through an alleged secret organization called Ergenekon. The chiefs of staff resigned in the summer of 2011 in protests at the arrests of officers, allowing a civilian government rather than the military themselves to appoint their successors for the first time.

of thousands became refugees in the ensuing conflict with the PKK, which Turkey, the US and the European Union deem a terrorist organization. Kurdish guerrilla attacks briefly subsided after the 1999 capture of PKK leader Abdullah Ocalan, but soon began to increase again. Partly in a bid to improve its chances of EU membership, the government began to ease restrictions on the use of the Kurdish language from 2003 onwards. As part of a new "Kurdish initiative" launched in 2009, it pledged to extend linguistic and cultural rights and to reduce the military presence in the mainly Kurdish southeast of the country. Nonetheless fighting has continued. A PKK offer in July 2010 to consider a truce

if the government were to extend Kurdish civil rights was met with an official refusal to respond to "terrorist" statements.

Foreign Relations Turkey became an EU candidate country in 1999 and, in line with EU requirements, went on to introduce substantial human rights and economic reforms. The death penalty was abolished, tougher measures were brought in against torture and the penal code was overhauled. Reforms were introduced in the areas of women's rights and Kurdish culture, language, education and broadcasting. Women's rights activists have said the reforms do not go far enough and have accused the government of lacking full commitment to equality and of acting only under EU pressure.

Kurdish Fishermen on Derbandixan Lake

The Kurdish Issue Turkey is home to a sizeable Kurdish minority, which by some estimates constitutes up to a fifth of the population. The Kurds have long complained that the Turkish government was trying to destroy their identity and that they suffer from economic disadvantage and human rights violations. The Kurdistan Workers Party (PKK), the best known and most radical of the Kurdish movements, launched a guerrilla campaign in 1984 for an ethnic homeland in the Kurdish heartland in the southeast. Thousands died and hundreds

WORLD BUSINESS MAGAZINE

The Kurdish Issue still prevails

Heads of the pre Roman King Antiochus

Sept / Oct 2012

10


Infocus Country

After intense bargaining, EU membership talks were launched in October 2005. Accession negotiations are expected to take about 10 years. So far, the going has not been easy. Turkey has long been at odds with its close neighbor, Greece, over the divided island of Cyprus and territorial disputes in the Aegean. The breakthrough in its EU membership talks came just weeks after Turkey agreed to recognize Cyprus as an EU member - though it quali- Sultanahmet Mosque Istanbul, Turkey fied this conciliatory step by declaring that it was not tantamount to the macroeconomic fundamentals of the full diplomatic recognition. country, the economy grew with an average annual real GDP growth rate of 5.2 Several European countries continue to percent over the past nine years between have serious misgivings over Turkey's EU 2002 and 2011. membership, and Germany and France have called for it to have a "privileged As the GDP levels more than tripled to partnership" with the EU instead of full USD 772 billion in 2011, up from USD membership. Turkey long saw itself as the 231 billion in 2002, GDP per capita soared eastern bulwark of the Nato alliance, and to USD 10,444, up from USD 3,500 in the underlined this by having close ties with given period. The visible improvements in Israel, but in recent years a chill has crept the Turkish economy have also boosted into Turkish-Israeli relations, and Ankara is foreign trade, while exports reached USD now devoting considerable effort to culti135 billion by the end of 2011, up from vating better relations with Arab countries. USD 36 billion in 2002. Similarly, tourism revenues, which were around USD 8.5 bilEconomic Outlook lion in 2002, exceeded USD 23 billion in 2011. The Turkish economy has shown remarkable performance with its steady growth Significant improvements in such a short over the last eight years. A sound macroperiod of time have registered Turkey on economic strategy in combination with the world economic scale as an exceptional prudent fiscal policies and major structural emerging economy, the 16th largest econoreforms in effect since 2002 has integrated my in the world and the 5th largest econothe Turkish economy into the globalized my when compared with the EU countries, world, while transforming the country into according to GDP figures (at PPP) in 2011. one of the major recipients of FDI in its region. While many economies have been unable to recover from the recent global financial The structural reforms, hastened by Turrecession, the Turkish economy expanded key’s EU accession process, have paved by 9.2 percent in 2010, and 8.5 percent the way for comprehensive changes in a in 2011, thus standing out as the fastest number of areas. The main objectives of growing economy in Europe, and one of these efforts were to increase the role of the fastest growing economies in the world. the private sector in the Turkish economy, Moreover, according to the OECD, Turto enhance the efficiency and resiliency of key is expected to be the fastest growing the financial sector, and to place the social economy of the OECD members during security system on a more solid founda2011-2017, with an annual average growth tion. As these reforms have strengthened rate of 6.7 percent.

11

Sept / Oct 2012

4 Institutionalized economy fueled by

USD 110 billion of FDI in the past nine years and 13th most attractive FDI destination in the world (2012 A.T. Kearney FDI Confidence Index)

4 16th largest economy in the world and 6th largest economy compared with EU countries in 2011 (GDP at PPP, IMF-WEO). 4 Robust economic growth over the last nine years with an average annual real GDP growth of 5.2 percent. 4 GDP reached USD 772 billion in 2011, up from USD 231 billion in 2002. 4 Sound economic policies with tight fis cal discipline.

4 Strong financial structure resilient to the global financial crisis. 4 Rapid recovery from the global financial crisis.

Life in Turkey An increasing number of people from various parts of the world are moving to Turkey to start a new life, to work or even to find peace of mind for their retirements. The country has developed dramatically in the last ten years and the pace of progress in certain fields is nothing short of aston-

WORLD BUSINESS MAGAZINE


Infocus Country

ishing. Most of Turkey’s new residents hail from countries like the UK, Germany, Ireland, Denmark, the Netherlands, Norway, Austria, Belgium, France and the USA. With its unique geographical location combined with a rich and diverse history, right in the cradle of many different civilizations, Turkey is a privileged place to live for expatriates and their families. Housing - From flats in urban centers to villas in suburbs, there are a multitude of options to choose from when looking for housing in Turkey. Major metropolitan areas have the most modern and complete environment for an extravagant life in the city, where luxurious residence complexes offer all the daily amenities such as private security, kindergartens, sports complexes, social facilities, parking lots and shopping malls for their residents. Healthcare - The healthcare system in Turkey mainly operates with three different types of hospitals: public, university and private. While social and health securities are governed in essence by the state, it is also possible to have private health insurance. The majority of hospitals in Turkey, both public and private, are either meeting or surpassing international standards in equipment quality and expertise. Banking & Finance - Turkey’s significance on the world finance stage is on the

Taksim Square, Istanbul

WORLD BUSINESS MAGAZINE

rise. The financial capital of the country, Istanbul, with its rich and vibrant economy, is now slated to become a World Finance Center. The country’s banking industry demonstrated remarkable resilience to the effects of the global financial crisis without any government backing, and Turkish banks are now regarded as the soundest in Europe. With service quality matching and exceeding international standards, Turkish banks are widely acclaimed as being fast integrators of technology into their services. Many foreign banks either operate directly in the country or entered the market via mergers and share acquisitions, providing services in all aspects of banking to individuals and investors alike. A wide range of insurance services and products are available for both individuals and corporations with very competitive premium rates. Transportation - The transportation system in Turkey makes good use of the country’s highly developed infrastructure. For urban transportation, the major cities of the country are equipped with extensive rail networks both under and above ground, while public and private buses carry hundreds of thousands daily. In addition to public transport, taxi services are extremely common, offering a lowcost and expedited means of local travel. For coastal towns like Izmir and Istanbul, ferry services offer many travelers a viable choice, being both fast and far reaching.

For long distance travel, highways are the choice for many, as hundreds of travel agencies run daily bus shuttles to even the farthest towns and cities from major metropolitan centers. Rail is another means of low-cost and widely used transport; the rail network crosses Turkey from east to west. Leisure & Sports - The cultural activities that one can engage in Turkey are only limited by individual interests and capabilities. Be it arts, hobby, entertainment or other leisure activities, the possibilities are countless. In all major cities movies, plays, concerts, ballets, operas and other varieties of cultural activities are awaiting either participants or spectators. Local festivals and more traditional forms of leisure activities are also rising in popularity. Turkey’s rich geography and suitable terrain make the country an ideal place for alternative sports such as mountaineering, golf, scuba diving, rafting, skiing and yachting. Naturally, wellestablished and popular sports like football, basketball, volleyball have a considerable number of players and supporters all over the country. Eating & Drinking - Globally renowned Turkish cuisine owes its fame to the country’s unique geographical location at the crossroads of the continents, enriched by various cultures that form the history of modern Turkey. Every region of Turkey has a cooking style of its own, where one can find the authentic tastes of local delicacies, while major cities of the country have restaurants offering very fine examples of dishes from all over the world. Specialties like pastries and desserts unique to the Turkish cuisine are all-time favorites for tourists and visitors, while the famous spirit Turkish Raki is well-known and respected with a “drinking code” of its own. The quality wines produced by Turkish producers, frequently acclaimed by international institutions for their taste and sensation, not only increase the reputation of the Turkish wine industry worldwide but also add an authentic Turkish character to history’s oldest man-made drink. Last but not least, the Turkish coffee, first introduced to Europe in the 16th century, never ceases to be the finishing touch to any meal, especially when accompanied by another Turkish specialty, the Turkish delight. g

Sept / Oct 2012

12


Economy Indicators

An Overview

Turkey’s Economic Performance By: STAFF

Gross Domestic Product

The Gross Domestic Product (GDP) in Turkey was worth 773.1 billion US dollars in 2011, according to a report published by the World Bank. The GDP value of Turkey is roughly equivalent to 1.19 percent of the world economy. Historically, from 1968 until 2010, Turkey GDP averaged 191.7 billion USD reaching an all time high of 735.3 billion USD in December of 2010 and a record low of 15.8 billion USD in December of 1968. Turkish GDP grew in the first quarter this year but is heading south on Euro Zone crisis.

GDP Annual Growth Rate The Gross Domestic Product (GDP) in Turkey expanded 2.3 percent in the first quarter of 2012 over the same quarter of the previous year. Historically, from 1999 until 2012, Turkey GDP Annual Growth Rate averaged 4.04 Percent reaching an all time high of 12.60 Percent in March of 2010 and a record low of -14.70 Percent in March of 2009. There are underlying fears that due to the current crisis in Europe, Turkey might soon start registering a negative trend in its Annual Growth Rate.

GDP Per Capita The Gross Domestic Product per capita in Turkey was last reported at 5741 US dollars in 2011, according to a report published by the World Bank. The GDP per Capita in Turkey is equivalent to 43 percent of the world’s average. Historically, from 1960 until 2010, Turkey GDP per capita averaged 3094.9 USD reaching an all time high of 5348.6 USD in December of 2010 and a record low of 1556.0 USD in December of 1961. While the Turkish economy has been growing steadily, living standards have increased significantly, which is reflective in the GDP per Capita.

Population Historically, from 1960 until 2011, Population averaged 51.60 Million reaching an all time high of 73.64 Million in December of 2011 and a record low of 28.23 Million in December of 1960. The total population in Turkey was last reported at 73.7 million people in 2010 from 28.2 million in 1960, changing 161 percent during the last 50 years. The vast majority of the population are Muslims and Turkey has 1.07 percent of the world´s total population which means that one person in every 94 people on the planet is a resident of Turkey.

13

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Economy Indicators

Interest Rate

The benchmark interest rate in Turkey was last reported at 5.75 percent. Historically, from 1990 until 2012, Turkey Interest Rate averaged 61.03 Percent reaching an all time high of 500.00 Percent in March of 1994 and a record low of 5.00 Percent in February of 2000. In Turkey the interest rates decisions are taken by the Central Bank of the Republic of Turkey Monetary Policy Committee (Türkiye Cumhuriyet Merkez Bankasi - TCMB). It is rumoured that Turkey’s central bank will begin to narrow the upper end of the socalled interest-rate corridor gradually starting next month.

Inflation Rate The inflation rate in Turkey was recorded at 9.1 percent in July of 2012. Historically, from 1965 until 2012, Turkey Inflation Rate averaged 38.5 Percent reaching an all time high of 138.7 Percent in May of 1980 and a record low of -4.0 Percent in June of 1968. Turkey’s inflation rate climbed to 11.1 percent in April, the highest in 3 1/2 years, adding to pressure on the central bank to tighten its monetary policy and implement fiscal discipline. Core inflation, excluding items such as food and energy, accelerated to 8.2 percent from 7.9 percent.

Balance of Trade Turkey reported a trade deficit equivalent to 7153 Million USD in June. Historically, from 1984, Turkey Balance of Trade averaged -2163.3 Million USD reaching an all time high of -2.0 Million USD in December of 1988 and a record low of -10414.0 Million USD in September of 2011. Major exports are: textiles and clothing, automotive, iron and steel, white goods and chemicals, pharmaceuticals and ships. Imports mainly machinery, chemicals, semi-finished goods, fuels and transport equipment. Its main trading partners are: European Union (57% exports, 40% imports), Russia and The United States.

Business Confidence Business confidence declined to 107.3 in July of 2012 from 108.1 in June of 2012. Historically, from 2007 until 2012, Business Confidence averaged 102.7 reaching an all time high of 121.2 in April of 2007 and a record low of 52.0 in December of 2008. The Central Bank of Turkey Business Tendency Survey compiles the assessments of the senior managers, whose decisions are important for the economy, on the recent past, current situation and their expectations regarding the future course of business environment.

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

14


Economy Indicators

Unemployment Rate The unemployment rate in Turkey was last reported at 8.2 percent in May of 2012. Historically, from 2005 until 2012, Turkey Unemployment Rate averaged 10.9 Percent reaching an all time high of 16.1 Percent in February of 2009 and a record low of 8.8 Percent in May of 2006. Turkey’s unemployment rate fell to 8.2 percent of the workforce in the three months from April to June, from 9.4 percent in the same period in 2011. Unemployment remains a major challenge for the government in Turkey where many young people enter the workforce each year.

Current Account Turkey reported a current account deficit equivalent to 4247 Million USD in June. Historically, from 1984 until 2012, Turkey Current Account averaged -1010.9 Million USD reaching an all time high of 1132.0 Million USD in September of 1998 and a record low of -9593.0 Million USD in March of 2011. Turkey’s current-account deficit narrowed for a sixth month in April after the lira’s decline and tighter monetary policy by the government curbed imports.

Government Budget Turkey reported a Government Budget deficit equal to 1.40 percent of the country’s Gross Domestic Product in 2011. Historically, from 2001 until 2011, Turkey Government Budget averaged -6.84 Percent of GDP reaching an all time high of 0.80 Percent of GDP in December of 2006 and a record low of -33.00 Percent of GDP in December of 2001. Turkey’s government won’t allow new nonstrategic projects and is seeking to cut public spending as the Finance Ministry drafts a budget for next year, as they want to keep expenditures low by lowering public spending in 2013.

Government Debt to GDP Turkey recorded a Government Debt to GDP of 39.40 percent of the country’s Gross Domestic Product in 2011. Historically, from 2000 until 2011, Turkey Government Debt to GDP averaged 53.13 Percent reaching an all time high of 77.90 Percent in December of 2001 and a record low of 39.40 Percent in December of 2011. Turkey halved the ratio of public debt to GDP from almost 80 percent in 2001 to less than 40 percent before the global crisis of 2009. g

15

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


ITIL Hong Kong www.itiltd.com.hk Unit - B 8F, Wing Cheung Industrial Building, 109 How Ming Street, Kwan Tong, Hong Kong

Turning the Cogs of the Industry Towards a Greener Future


Economy Indicators

economic overview

Report Card of Nations

By STAFF GDP/ capita l PPP

GDP GDP

Angola

84.39

Austria

376.16 0.2

26709.71 40005.22 8.40

Australia

924.84 1.3

Argentina

368.71 0.9

Bahrain

28.3

Bangladesh Belgium

I/R

Popultion Inflation

Uneployment BOT (USD million)

Current Acct (USD/ million)

Govt Debt as%

Govt Budget

25.00

34200

34200

-4.8

31.4

2.30

1.00

4.30

-716

-716

-2.6

72.2

24968.48 39406.67 22.5

1.6

3.75

5.1

-203 AUD

-203 AUD

-4.1

22.9

10749.32 16011.52 40.09

9.9

9.0

6.70

+1517

+1517

0.2

44.20

5.1

24586

28657

1.15

2.75

-

3.7

+ 1276

+ 1276

-3.7

100.08 6.7

558.06

1659.15

164.4

9.15

7.75

4.50

-1196

-1196

-4.49

27.3

3.4

467.47 0.3

1357.36

6119.93

18.99

24533.97 37600.44 11

11.12 10.25

3.20

1.00

7.20

-119 EUR

-119 EUR

-3.7

27.7

5.8

+807

+807

2.6

98

2087.89 0.2

4699.4

11210.36 190.7

4.99

9

16.7

2.6

31238

50515

2.0

-

3.7

-

-

-

66.2

Bulgaria

47.71

0

2546.41

13799.84 190.73 1.70

0.18

12.9

-639 BGL

-639 BGL

-2.10

-

Canada

1574.05 0.5

Cambodia

14.3

China

5878.63 1.8

Brazil Brunei

6.5

0.4

25588.29 38988.94 34.3

1.2

1.0

7.3

-367 CAD

-367 CAD

-1.5

16.30

813

2251

14.29

5.10

1.26

-

-

-

-

85.0

2425.47

7598.84

1341.0 3

6.56

4.1

18700

18700

-1.1

30.4

+1047

1.40

25.8

Chile

203.44 1.4

6334.11

15731.73 17.13

3.1

5.00

6.60

+1047

Columbia

288.19 0.3

3236.58

9462.02

46

3.4

5.25

10.4

270

270

-2.9

11.2

Costa Rica

35

4.17 7842

12140

4.83

5.8

13.0

5.00

-3500

-3500

-4.02

34.7

Cyprus

25.0

1

28588

1.1

2.9

2.0

6.8

-443000 EUR

-443000 EUR

-6.3

-

Czech Republic

192.15 -0.8 7377.74

3.2

0.75

8.2

37496 CZK

37496 CZK

-3.1

63.4

Denmark

310.4

2.1

0.7

4.2

6900 DKK

6900 DKK

-1.8

41.2

-7.9

46.5

0.3

30003

25283.32 10.5

30782.26 39489.15 5.6

8.6

9.25

12.4

-7800

-7800

2560

0

22884.95 33819.86 65.0

2.0

1.0

9.8

-5801 EUR

-5801 EUR

-5.2

76.4

Finland

238.8

0.8

27313.95 36651.24 5.36

3.1

1.0 EUR

9.5

-401 EUR

-401 EUR

-0.50

85.8

Germany

3309.67 0.5

25329.32 37260.16 81.6

1.7

1.0 EUR

7.4

14400 EUR

14400 EUR

-1.0

48.60

Ghana

31.31

357.59

9.10

14.50

12.90

-706

-706

-7.50

81.2

Greece

304.87 0.2

1.4

1.0 EUR

22.6

- 2338 EUR

- 2338 EUR

-9.1

41.20

Egypt France

218.91 0.4

0.3

1975.55

6179.97

1689.97

84.5

23.84

13574.22 27804.58 11.3

4.3

0.50

3.2

- 43000 HKD

- 43000 HKD

+3.5

165.3

20028.74 10.00

5.3

7.00

11.5

+690 EUR

+690 EUR

4.30

33.9

34009.7

34894.87 0.32

5.40

5.00

7.10

5361 ISK

5361 ISK

-9.10

80.60

1729.01 5.3

822.76

3582.48

1210.2 7.55

8

9.4

-16266

-16266

-4.6

87.80

Indonesia

706.56 1.4

1143.83

4325.24

237.6

4.5

5.75

6.3

-641

-641

-1.6

68.05

Ireland

203.89 -0.2 27806.65 41188.37 4.5

1.8

1.0 EUR

14.3

+3536 EUR

+3536 EUR

-13.1

25

Italy

2051.41 -0.8 18601.38 31555.19 60.6

3.3

1.0 EUR

10.1

-202 EUR

-202 EUR

-3.9

108.2

4.4

-907 JPY

-907 JPY

-9.7

120.1

Hong Kong

224.46 0.4

Hunary

130.42 -1.2 5629.1

Iceland

12.59

2.4

India

Japan

17

GDP/ Growth capita

Country

39309.65 33752.9

128.1

0.2

0.00

4559

5759

6.12

4.40

9.52

13.5

-7967

-7967

-

211.7

2482.78

12174.24 16.54

4.80

6.50

5.40

+12300

+12300

-2.40

-

0.70 467.47

1689.01

40.9

13.06 18.0

12.70

-59300 KES

-59300 KES

-6.40

11.40

110

5.4

48900

4

11.38 4.10

2.20

-

-

-

50.5

237.8

-3.2 5184.71

3

+7500 MYR

+7500 MYR

-5.3

-

5497.81 1.2

Jordan

26

Kazakhstan

142.99 8.6

Kenya

31.41

Kuwait Malaysia

Sept / Oct 2012

35537.08 46503.04 7.1

8

81800

14730.93 28.5

1.7

3.0

WORLD BUSINESS MAGAZINE


Economy Indicators

Country Mexico Morocco

GDP/ Growth capita

GDP GDP

1039.66 91.2

GDP/ capita l PPP

Popultion

1.3 5.3

6105.3 1844.35

14498.37 112.3 3.4 4712.01 32.4 1.2

942.03

23.4 3.37

Mozambique

9.58

3.5

389.75

New Zealand

126.68

1.1

15296.49 29530.55 4.37 1.6

Nigeria

193.67

7.68 540.34

Norway

414.46

1.1

2380.62

158.3 12.9

40128.05 56691.96 4.9

I/R

Inflation

0.5

Uneployment BOT (USD million)

Current Acct (USD/ million)

Govt Debt as%

Govt Budget

4.5 3.00

5.1 9.90

-270 -16700 MAD

-3500 -16500 MAD

-0.5 -3.40

43.8 49.90

12.50

17

-276

-415

-13.00

32.00

2.5

6.7

+355 NZD

- 1300 NZD

-8.4

37

12.00

23.90

+9200

8140

-2.96

17.9

1.5

3

+38400 NOK

+113000 NOK

+13.6

43.7

2007

-

-

3

3.7

3.47

15.00

18.4

12.3

12

5.7

- 1517

-655

-6.6

60.01

Oman

27

4.21 21421

25600

Pakistan

174.8

3.04 668.55

2687.63

175

Paraguay

18.47

2.9

1621.04

5180.84

6.46 3.8

6.25

6.00

-1351

179

-0.40

15.00

Peru

153.84

1.6

3180.37

9537.54

29.80 4.1

4.25

8.1

+584

-587

-0.60

24.30

Philippines

199.59

2.5

1383.4

3969.26

94.6 2.9

4.0

6.9

- 1069

-131

-2

40.5

Poland

468.59

0.8

6575.14

19783.26 38.2 3.6

4.75

12.6

-3 EUR

-228 EUR

-5.1

56.3 107.8

1.0

14

-842 EUR

-807 EUR

-4.2

4.5

0.6

+51406 QAR

+24357 QAR

+4.8

17.8

14287.26 21.5 1.8

5.25

7.7

-714 EUR

-626 EUR

-5.2

33.3

2923.14

19840.45 142.9 3.6

8

5.4

+19100

+42300

0.8

9.6

6.8

9425.30

22713.41 26.0 5.3

2.0

10.5

+263000 SAR

+49300 SAR

+9.1

7.5

222.70

10

32537.76 57935.85 5.1

5.0

0.03

2.1

+2022 SGD

+ 17066 SGD

0.7

100.80

89.03

0.7

8440.15

3.40

1.00

13.7

+105 EUR

-575

-4.80

43.30

-6.40

47.60

Portugal

228.54

-0.1 11749.49 25610.05 10.6 2.7

Qatar

98.31

4.4

33931.83 80943.89 1.5

Romania

161.62

-0.1 2636.29

Russia

1479.82 1.9

Saudi Arabia

375.77

Singapore Slovakia

23422.77 5.4

1.1

1.00

12.40

-122 EUR

-132.7 EUR

29003.56 48.99 2.2

3.25

3.2

+2448

+1780

-2

34

10570.3

5.5

25.2

-8930 ZAR

-152600 ZAR

-4.8

38.8

1.00

24.4

-3350 EUR

-3240 EUR

-8.5

68.5

7.75

4.1

-965

-1064

-8

85.0

1.5

7.8

+59000 SEK

+64200 SEK

+0.3

38.4 55.0

12705.76 27062.99 2.07 2.40

Slovenia

47.76

South Korea

1014.48 0.9

16372.5

South Africa

363.7

3745.34

Spain

1407.41 -0.3 15458.21 32070.08 46.1 1.9

Sri Lanka

49.55

8.3

1295.75

Sweden

458

0.8

32295.92 39029.24 9.39 1

0.2 2.7

5077.98

49.99 5.7 20.45 7

0

3.1

+2480 CHF

+26470 CHF

+0.4

-

23.16 1.74

1.88

4.12

+689

+12095

-1.9

40.8

2712.51

8553.78

68.14 2.6

3

0.66

-730

1516

-1.5

41.7

0.2

26557.9

42254.88 16.62 2.1

1.00

6.2

+4091EUR

+18191.1 EUR -4.7

65.2

44.29

3.2

3164.90

9549.75

10.55 5.80

3.50

18.30

-703 TNT

-

-2.60

40.40

Turkey

735.26

0.2

5348.57

15320.88 73.72 8.87

5.75

9.1

-6597

-4960

-1.4

39.4

UAE

230.25

3.3

21088.26 47215.31 4.71 0.8

1.0

4.3

+291951 AED

+112.7 AED

-0.6

16.9 85.7

37666.39 46580.91 7.79 -1.1

Switzerland

523.77

0.7

Taiwan

430.58

1.06 -

Thailand

318.85

11

The Netherlands

783.41

Tunisia

UK

2246.08 -0.3 27321.13 35903.69 62.25 2.8

Ukraine

137.93

0.6

1036.84

6721.02

USA

387.85

0.0

5528.36

12232.80 28.83 23.80

Venezuela

14582.40 1.9

37527.35 47198.50 311.0 1.7

Vietnam

103.57

4.0

722.74

3204.82

88.36 8.34

Zambia

16

7.6

1405

21.638

13

WORLD BUSINESS MAGAZINE

45.78 0.6

8.5

0.50

8.2

-4421 GBP

-8450 GBP

-8.3

7.5

8.6

-1748

-1209

-5.5

40.5

15.65

6.50

+9683

4576

-4.02

45.5

0.25

8.2

- 50062

-137310

-8.7

103

9

2.3

-279

-

-4

38

20.92

14

-

-

-

-

Sept / Oct 2012

18


Economic Affairs

CHINA REBALANCING

Has the Great Rebalancing Already Started? By: MICHAEL PETTIS My very smart former PKU student Chen Long, who follows monetary conditions in China as closely as anyone else I know tells me: The most interesting thing is that even if CPI remains stable monthon-month, it will turn negative yearon-year in January 2013. And if it continues to decline month-on-month at current rates, we could see negative year-on-year CPI as early as August/ September. June CPI increased 2.2% from a year ago, slightly lower than market consensus of 2.3%. June PPI dropped 2.1% on yearly basis, versus the median forecast of a 2.0% decline. On a monthly basis, CPI and PPI were down 0.6% and 0.7% respectively. The consumer price index has posted three consecutive months of negative monthly growth, and it was also the China’s official GDP growth rate has fallen sharply – as Beijing announced that GDP growth for the second quarter of 2012 was a lower-than-expected 7.6% year on year, the lowest level since 2009 and well below the 8.1% generated in the first quarter. This implies of course that quarterly growth is substantially below 7.6%. Industrial production was also much lower than expected, at 9.5% year on year. In fact China’s real GDP growth may have been even lower than the official numbers. This is certainly what electricity consumption numbers, which have been flat, imply, and there have been rumors all year of businesses being advised by local governments to exaggerate their revenue growth numbers in order to provide a better picture of the economy. Some economists are arguing that flat electricity consumption is consistent with 7.6% GDP growth because of pressure on Chinese businesses to improve energy efficiency, but this is a little hard to believe. That “pressure” has been there almost as long as I have been in China (over ten years) and it would be startling if only now did it have an impact, especially with such a huge impact occurring so suddenly. Adding to the slow economic growth, the country may be tipping into deflation. Recently the National Bureau of Statistics released the following inflation data: In June, the consumer price index (CPI) went up by 2.2 percent year-on-year. The prices grew by 2.2 percent in cities areas and 2.0 percent in rural areas. The food prices went up by 3.8 percent, while the non-food prices increased by 1.4 percent. The prices of consumer goods went up by 2.3 percent and the prices of services grew by 1.9 percent. In the first half of this year, the overall consumer prices were up by 3.3 percent over the same period of previous year. In June, the month-on-month change of consumer prices was down by 0.6 percent, prices in cities and rural went down by 0.6 and 0.5 percent respectively. The food prices dropped by 1.6 percent, the non-food prices kept at the same level (the amount of change was 0). The prices of consumer goods decreased by 0.9 percent, and the prices of services increased by 0.3 percent.

19

Sept / Oct 2012

second consecutive month-on-month fall of PPI. Moreover, the year-on-year PPI growth has been negative for four months. Inflation in China seems to have been licked. This is just what one would have expected in a financially repressed system, in which inflation creates its own correction by increasing the financial repression tax on household savers (thus reducing consumption) and lowering the cost of capital for manufacturing borrowers. Of course this same system means that deflation is unlikely to last very long because, as long as interest rates are not slashed, deflation will cause the real deposit rate and the real borrowing rate to rise. These increase consumption and reduce production, so putting upward pressure on prices.

Trying to revive the bubble now will only crash the economy

Unlike some other analysts, in other words, I am not concerned about deflation persisting for long unless the PBoC cuts interest rates much more sharply than any of us expect. I know this may sound strange – most analysts believe that cutting interest rates will actually reignite CPI inflation – but remember that the relationship between inflation and interest rates in China is, as I have discussed many times before, not at all like the relationship between the two in the US. It works in the opposite way because of the very different structure of Chinese debt and consumption.

Hard Landing? Overall at any rate things seem to be going so badly in the economy that recently Premier Wen Jiabao warned, yet again, that the economy is under serious pressure, and then did the same a few days later. According to an article in Xinhua, Wen reaffirmed Beijing’s commitment to growth:

WORLD BUSINESS MAGAZINE


Economic Affairs

Premier Wen Jiabao said that stabilizing economic growth is the most pressing matter currently facing China. Policies and measures to stabilize economic growth currently include boosting consumption, diversifying exports and promoting investment, Wen said while meeting representatives from research institutes and companies. The emphasis on investment to shore up growth comes as the world’s second-largest economy is being challenged with slumping external demand and low consumption at home. Wen said the structure, quality and cost-effectiveness of investment should be given greater importance, adding that investment should be used to improve livelihoods and help the country develop scientifically. Given the very weak numbers, and Beijing’s reactions, China seems very clearly to be heading towards a hard landing, and many Chinese and foreign experts are urgently warning that Beijing must cut interest rates even more sharply, expand credit, and so save China and the world from disaster. We’ve already had two cuts this year in the lending rate. Here is what Xinhua said: The central bank cut interest rates for a second time in a month, fueling concerns that the slowdown in the world’s second-largest economy is worse than predicted. The People’s Bank of China lowered benchmark deposit rates by 25 basis points and cut lending rates by 31 basis points. The central bank cut interest rates on June 8 for the first time since 2008 to bolster economic growth. “The limits for rates charged on individual property loans will not change and financial institutions must strictly implement differentiated policies on property loans to continue constraints on speculative purchases,” the central bank said. A leading economist said that cutting rates twice in a month suggests weak growth. “The two cuts in interest rates within a month indicate that the GDP growth rate in the second quarter is indeed weaker than expectations,” said Lu Zhengwei, chief economist at the Industrial Bank, adding he expected that the figure would be 7.6 percent. The cuts, or at least the first one, seem to have some impact. Although loan growth has been much slower than expected for most of this year, the June loan numbers finally surprised the market on the upside. According, again, to Xinhua:

China, in other words, is finally repairing one of its worst distortions

China’s new yuan-denominated loans surged in June as the government moved to buoy the slowing economy. The June new yuan-denominated loans rose 285.9 billion yuan (about 45 billion U.S. dollars) year-on-year to 919.8 billion yuan, the People’s Bank of China (PBOC), or the central bank, announced. PBOC data showed that new yuan-denominated loans in June hit a three-month high after reaching 1.01 trillion yuan in March. Mark Williams, at Capital Economics, added a lot more color: China’s bank lending last month turned out not to be as weak as we had feared. Net new loans amounted to RMB920bn. This was only slightly above the median forecast of analysts surveyed by Bloomberg (RMB880bn) as well as our own (RMB900bn). But ever since the People’s Bank cut interest rates last week, we had thought that the risks to these forecasts were skewed heavily to the downside, on the belief that weak lending was the most likely trigger for the rate move. In fact, new lending was significantly higher last month than in May when it reached RMB793bn. That suggests that government attempts to revive bank lending were starting to work, even before last week’s rate move. The fact that the government has continued to loosen nonetheless is positive for GDP growth in the near-term. A continued pick-up in lending to fuel investment should quieten immediate doubts about the economy in the months before the leadership handover. But it is questionable how much stimulus China really needs at this point and, in particular, the degree to which more investment-led growth should be welcomed. I think Williams is right, and I agree that those calling for additional interest rate cuts and more rapid investment and credit expansion are wrong. Why? Because what is happening in China may be just what China and the world need. After many failed attempts, over the past six months we may be seeing for the first time the beginning of China’s urgently needed economic rebalancing, in which China reduces its overreliance on investment in favor of consumption. Regular readers may be surprised to see me say this. For the past four or five years analysts have been earnestly assuring us that the rebalancing process had finally begun, and I had always insisted that it couldn’t have begun yet. Why? Because as I understand it rebalancing is almost arithmetically impossible under conditions of high GDP growth rates and low real interest rates. Once the real numbers came in, it always turned out that in fact imbalances had gotten worse, not better. Typically many of those too-eager analysts have resorted to insisting that the consumption data are wrong, although even if they are right this does not confirm that rebalancing had taken place since errors in reporting consumption have always been there. But this time seems different. Now for the first time I think maybe the long-awaited Chinese rebalancing may have finally started.

Is the economy tipping towards deflation

WORLD BUSINESS MAGAZINE

Of course the process will not be easy. Debt levels have risen so quickly that unless many years of overinvestment are quickly reversed China will face debt problems, and maybe even a debt crisis. The sooner China starts the rebalancing process, in other words, the less painful it will be, but one way or the other it is going to be painful and

Sept / Oct 2012

20


Economic Affairs

the real cost of borrowing. China, in other words, is finally repairing one of its worst distortions. But this necessarily comes at a cost. Raising the real borrowing cost cannot help but reduce investment growth and increase cash flow pressure on local governments, and so with the rise in real rates China’s GDP growth rate must fall sharply. China bulls, late to understand the unhealthy implications of the distortions that generated so much growth in the past, have finally recognized how urgent the rebalancing is, but they still fail to understand that this cannot happen at high growth rates. The problem is mainly one of arithmetic. China’s investment growth rate must fall for many years before the household income share of GDP is high enough for consumption to replace investment as the engine of rapid growth.

there are many in China who are going to argue that the rebalancing process must be postponed. With China’s consumption share of GDP at barely more than half the global average, and with the highest investment rate in the world, rebalancing will require determined effort.

How to Rebalance The key to raising the consumption share of growth, as I have discussed many times, is to get household income to rise from its unprecedentedly low share of GDP. This requires that among other things China increase wages, revalue the renminbi and, most importantly, reduce the enormous financial repression tax that households implicitly pay to borrowers in the form of artificially low interest rates. But these measures will necessarily slow growth. The financial repression tax, especially, is both the major cause of China’s economic imbalance and the major source of China’s spectacular growth, even though in recent years much of this growth has been generated by unnecessary and wasted investment. Forcing up the real interest rate is the most important step Beijing can take to redress the domestic imbalances and to reduce wasteful spending. And this seems to be happening. Beijing has reduced interest rates twice this year, and reluctant policymakers are under intense pressure to reduce them further. The students in my central bank seminar at PKU tell me that there are new rumors about the way the cuts were implemented. “Usually it is the PBoC that submits a proposal of rates cut to the State Council,” one of them wrote me recently, “but this time (July 5th) it was the State Council who handed down to the PBoC the decision to cut rates, so that the PBoC was not fully aware of the rates cut before July 5th.”

As China rebalances, in other words, we would expect sharply slowing growth and rapidly rising real interest rates, which is exactly what we are seeing. Rather than panicking and demanding that Beijing reverse the process, we should be relieved that Beijing is finally resolving its problems. Andy Xie has a typically intelligent article on just this subject in South China Morning Post. In it he warns: China has cut interest rates twice in a month, showing the government’s grave concern for the weakening economy. But it is the wrong medicine. Side effects will include worsening inflation, saddling credulous property speculators with debt and weakening the banking system’s ability to handle the looming bad-debt crisis. The renminbi may come under devaluation pressure, too. Cutting interest rates is doubling down on a bad hand; the policy of printing money to fuel bubbles was wrong in the first place. To revive the economy, China must cut taxes, slim down the government, retrench state-owned enterprises, strengthen the rule of law, and give businesses incentives to focus on quality, technology and brands. Except for the “worsening inflation” part, I agree. He goes on to conclude: “Trying to revive the bubble now will only crash the economy.”

The Costs of Slowing Needless to say I think Xie is right, and we should not be trying to revive “growth” because that simply means reviving the credit bubble. But

If my student is right (and this class has an impressive track record), this suggests that monetary easing is being driven by political considerations, not economic ones, which of course isn’t at all a surprise. But even with the rate cuts, perhaps demanded by the State Council, with inflation falling much more quickly than interest rates the real return for household depositors has soared in recent months, as has

“ 21

The renminbi may come under devaluation pressure

Sept / Oct 2012

China Shipping at Port Newark Container Terminal

WORLD BUSINESS MAGAZINE


Economic Affairs

Rebalancing will inevitably result in falling prices for hard commodities

won’t slower growth create social dislocation in China and economic dislocation around the world? No, not if it is managed well. Remember that Chinese rebalancing requires that household income grow faster than GDP for many years, and if Chinese growth slows even to 3%, as I expect it will within the next few years, but household income continues growing at 5-6%, this is far from being socially disruptive. Households don’t care what GDP growth is, they care about the growth in their spending power. The key to how painful this will be domestically is likely to be employment. So far this year rising unemployment doesn’t seem to have been a serious problem, but unemployment is a lagging indicator, and there is some evidence that we are starting to see strains in the job market. According, for example, to an article in Financial Times: China’s job market has started to show signs of stress, putting pressure on the government to intensify fiscal spending to prevent the economy from weakening further. Like politicians the world over, Chinese leaders’ biggest single economic worry is whether unemployment is under control, and analysts say the job outlook will help determine whether they launch a big stimulus effort as they did nearly four years ago. So far the labour market has held up much better than in late 2008 when 20m migrant workers lost their jobs. But cracks are appearing and that experience showed how the situation can change virtually overnight in China. “Depending on how deep the growth slowdown is, unemployment can deteriorate very suddenly,” said Ding Shuang, an economist with Citi. We will need to watch unemployment numbers closely in the next few months. As for the rest of the world, Chinese rebalancing under conditions of much slower GDP growth shouldn’t elicit panic. What the global economy needs from China is not faster GDP growth, but rather more net demand, i.e. a contracting trade surplus. Chinese rebalancing will eventually provide exactly that, although the trade surplus will probably rise first before it begins to decline. We are already beginning to see that happen. Here is the Financial Times on the subject: Chinese export and import growth both slowed in June, showing that the world’s second-largest economy faces strong headwinds. Exports rose 11.3 per cent from a year earlier, down from May’s 15.3 per cent pace. Imports increased 6.3 per cent from a year earlier, half of May’s 12.7 per cent and well below expectations. With imports so weak, China was able to pull in a trade surplus of $31.7bn, nearly double May’s total and the country’s biggest in more than three years. Earlier this year there was a debate about whether China’s then-declining trade surplus was likely to rise or to continue falling. At the time I pointed out that as long as the global environment allowed it, we should see China’s trade surplus rise substantially before it began declining. Why? Because it would prove much easier to reduce Chinese investment than to reduce Chinese savings, and the difference between the two, of course, is simply the trade account (or, more accurately, the current account, of which the trade account is by far the biggest component).

WORLD BUSINESS MAGAZINE

By the way, and as an aside, we need to make two adjustments to the trade surplus in order to understand what is really going on within the balance of payments. First, one of the causes of last month’s weak imports has been a sharp decline in commodity purchases. I have many times argued that commodity stockpiling artificially lowers China’s trade surplus by converting what should be classified as a capital account outflow into a current account inflow. If China is now destocking, then China’s real trade surplus is actually lower than the posted numbers. Second, we know that wealthy Chinese businessmen have been disinvesting and taking money out of the country at a rising pace since the beginning of 2010. One of the ways they can do so, without running afoul of capital restrictions, is by illegally under- or over-invoicing exports and imports. This should cause exports to seem lower than they actually are and imports to seem higher. The net effect is to reduce the real trade surplus. Since these two processes, commodity de-stocking and flight capital, work in opposite ways to affect the trade account, it is hard to tell whether China’s real trade surplus is lower or higher than the reported surplus. But once de-stocking stops, we should remember that the trade numbers probably conceal capital outflows. How does all this affect the world? In the short term rebalancing may increase the amount of global demand absorbed by China, but over the longer term it should reduce it. Rebalancing will inevitably result in falling prices for hard commodities, and so will hurt countries like Australia and Brazil that have gotten fat on Chinese overinvestment. Rising Chinese consumption demand over the long term and lower commodity prices, however, are positive for global growth overall, and especially for net commodity importers. Slower growth in China, it turns out, is not necessarily bad for the world. The key is the evolution of the trade surplus.g Michael Pettis Senior Associate at Carnegie Endowment for International Peace

Sept / Oct 2012

22


Economic Affairs

AMERICAS GREATEST THREAT

Dependence on the Fed

By: MONTY GUILD & TONY DANAHER

Will Bernanke do anything to curb dependency? By a host of measurements, the dependence of Americans on the largesse of the Federal government is growing at a rapid rate. This dependence is worrisome because it poses two dangers — to American economic stability and to the fabric of civil society. The economic danger has captured the news in the current election cycle, with both candidates trying to show how their respective plans are a way out of the closing debt and deficit trap. Total Federal debt is on course to reach 100 percent of GDP in two years, and historical analysis shows such debt levels as a tipping point at which economic negatives worsen dramatically. While most agree that government support programs can provide good services to the truly needy, what has been less discussed is the extent to which the deficit and the debt are driven by spending on programs which increase the dependence of citizens on the Federal government. The particular danger here is that the growing reliance on Federal spending will crowd out and compromise the healthier forms of reliance that are the glue of civil society — individual, family, community, and local self-reliance. Each year, the Heritage Foundation publishes its Index of Dependence on Government, which highlights the trend. Heritage, of course, has a point of view which it marshals data to support; it's been a prominent conservative think tank since the Reagan era. That orientation shows in some of the assumptions of this annual Index, as we'll note below. It is not our intention to

25

Sept / Oct 2012

Federal Reserve Bank of Dallas advocate either Republican or Democratic points of view in this letter. Our focus is to communicate data which identifies a major theme of society. The broad picture should give pause to people of any political persuasion who are concerned about the viability of American civil society, economic health, and democratic values. The usefulness of the Index is simply that, like any other index (the CPI, for example); it makes a welter of data appear as a coherent trend.

Total Federal debt is on course to reach 100 percent of GDP in two years

Heritage breaks down government spending into five broad categories, adjusts for inflation, and assigns weights to each: rural and agricultural services, housing, health and welfare, retirement, and higher education. (Defence spending isn't included — which skews the numbers, given the extent to which defence functions as a pork barrel from which politicians can take a feast of Federal dollars for their constituencies.) We'll discuss the numbers in a moment. First, though, it's important to note the context of this growing spending—a long-term decline in the proportion of Americans who help to fund that spending through their taxes. With all the talk about taxes flying around, it's easy to miss a crucial fact: the proportion of Americans who pay any income tax at all has declined dramatically over the past 40 years. In 1969,

we reached a high point: 88 percent of Americans were represented on a taxable return. By 2009, this had fallen to just over 50 percent. What this means is that as the dependence of Americans on Federal programs has grown, and as the outlay on those programs has taken us into more and more unsustainable debt, the proportion of Americans funding those programs has been declining sharply. Thus, increasingly, a significant portion of the population benefits from Federal spending without contributing to that spending. This creates a moral hazard, in that the politicians beholden to their voting constituents are less likely to rock the boat and reduce spending. Some 70 percent of Federal spending is now devoted to "dependence-creating" programs, a steady rise from 28 percent in 1962. Farm Subsidies, and Other Corporate Welfare - Of all the many forms of corporate welfare, spending on farm subsidies is one of the most egregious, since only 20 percent of the benefits go to the bottom 80 percent of farmers. Since benefits are directed almost exclusively to farmers of particular crops, and are dependent on how much of those crops are planted, this means that the system serves to privilege corporate farming interests above the family farmers, which many imagine to be the beneficiaries. So even while farming income climbed above the national average in the 1990s, farming subsidies continued to increase dramatically. This particular

WORLD BUSINESS MAGAZINE


Economic Affairs

case is a concise depiction of corporate welfare as a whole — the distortion of the market towards the privileging of large interests who engage in rent-seeking behaviour rather than productive entrepreneurial activity.

other government spending; in return the "trust fund" received Treasury bonds. Now that they will be redeemed, the ballooning cost will be borne, once again, by the taxpayers.

Housing - Since the creation of the Department of Housing and Urban Development (HUD) in 1965, the bulk of its funding has been directed to providing "project-based" housing for low-income families. Adjusted for inflation, HUD spending has The Unemployment line is increasing by the day climbed steadily since the department's creation. On top of this is the now-overwhelming presence of the the proportion of Americans Federal government in the provision of receiving these direct benefits home mortgages, through its 2008 bailout has doubled of Fannie Mae and Freddie Mac. More than 90 percent of single-family residential Welfare - Bill Clinton's 1996 welfare remortgage credit is now provided by these form was a landmark piece of legislation two quasi-governmental organizations and one of his signature achievements. whose huge operating losses have been Between 1996 and 2010, welfare caseloads backstopped by taxpayers. declined by more than 50 percent.

Health Care - As we've noted previously in comments about the ongoing demographic shifts and aging of the U.S. population, the overwhelming reality here is the incipient retirement of baby boomers and the dangerous downward trend in the dependency ratio. Medicare was another program established in the mid 1960s which has grown dramatically. Already, by 2010, the population of those eligible for Medicare was about a fifth of the non-elderly population. The Congressional Budget Office (CBO) projects that by 2035, the proportion will be more than a third. By midcentury, Medicare is anticipated to be consuming more than 10 percent of GDP. Many Medicare benefits have expanded over the past 10 years, notably Part D, the prescription drug benefit—another unfunded liability of the Bush years. Most significantly, Medicare is already running yearly deficits—to be covered by those Americans who actually pay taxes. The effects of the Affordable Care Act remain to be seen, the CBO estimates that by 2019, almost 20 million individuals will be receiving subsidized coverage through the exchanges established by the Act.

WORLD BUSINESS MAGAZINE

On the other hand, due to the bad economy, other forms of welfare dependency are rising. From 2008 to 2011, outlays on SNAP (food stamps) almost doubled, from about $39 billion to more than $75 billion. 15 percent of all Americans are now receiving assistance through SNAP. Retirement - Half of American workers are employed by companies that do not offer pension plans. Right off the bat, this means that for more and more people, one of the traditional "three supports" of retirement is non-existent—the other two being Social Security and personal savings. Those without pensions and without significant personal savings will be facing a retirement dependent on Social Security, at a time when the system will be under mounting fiscal strain. Here is where the dependency ratio comes in. To break even, Social Security needs to have 2.9 workers paying in for each worker who's retired and drawing benefits. The current ratio is 3.3, and by 2030, the increasing influx of retiring Boomers into the system will drive that down to 2, well into deficit territory. For many years, there was a surplus, but it was used to finance

Disability claims have been growing rapidly as well — during the recession, many who could claim eligibility have done so, when under better employment conditions, they would have instead found work. Higher Education - There is no question that the cost of higher education has risen rapidly. Many argue that the availability of a great deal of student loans and subsidies has driven up the costs of education, since the relatively easy money makes consumers initially less sensitive to the cost of what they're buying. Since 1982, the cost of a college degree has gone up at four times the rate of inflation. The government subsidized loans have ballooned, and again the taxpayers will pay the bill. To sum up, then, the situation faced by Americans is one in which a growing proportion of the population contributes nothing in income taxes towards ballooning Federal outlays on housing, health, education, retirement, and corporate welfare. From 1962 until now, the proportion of Americans receiving these direct benefits has doubled, from about 10 percent to about 20 percent; and the per capita funds received by this population has increased more than fourfold, from about $7,000 to about $32,000. Today, the average per capita spending on dependents exceeds overall median income. This presents a dangerous situation, as the dependent majority will have more and more power to elect and keep politicians who won't give them painful medicine. Politicians will say "yes" to the demands of the dependent majority to keep the benefits flowing, even if it means funding them through debt. Ultimately, of course, reality wins, lenders will not continue to lend to a country where debt and deficits are rising too fast and income sources are uncertain or already heavily taxed. In the final analysis, the biggest victims of the breakdown of an unsustainable system will be those who depend on it. g

Sept / Oct 2012

26


Political Affairs

RYAN — PUSILLANIMITY?

Our Termite Mound By: DAVID KOTOK

Which Ticket will be Pusillanimous?

"Civilizations, as I have endeavoured to show in this book, are highly complex systems, made up of a very large number of interacting components that are asymmetrically organized, so that their construction more closely resembles a Namibian termite mound than an Egyptian pyramid." (source: Civilization, by Niall Ferguson, page 299) We have now completed another round of the contest for the political leadership of that Namibian termite mound we call America. We hope many of our fellow citizens have the opportunity to read Ferguson's book and contemplate the wise and prescient summary in his concluding chapter. We hope that the four candidates for president and vice president also read and consider it. Paul Ryan helps the Republicans define their ticket. They want to talk about taxes, deficits, spending controls, transfer payments like Medicare, and other economic issues. If they can define the election in those terms, they have a very good chance of success.

somewhere between order & disorder

the edge of chaos

This is our system, our very own "termite mound." According to Ferguson, our system operates "somewhere between order and disorder." He also uses the phrase "the edge of chaos" to describe our situation. Ferguson notes, "Such systems can appear to operate quite stably for some time, apparently in equilibrium, in reality constantly adapting. But there comes a moment when they 'go critical'. A slight perturbation can set off a 'phase transition' from a benign equilibrium to a crisis – a single grain of sand causes an apparently stable sandcastle to fall in on itself." Ferguson is describing natural complexity in the form of governmental systems. A government can appear stable, he says, until it suddenly is not. He talks about how crises evolve until they "go critical."

Except in the context of class warfare, the Obama/Biden ticket does not want to talk about taxes, economics, the unemployment rate, or the financial circumstances in which the United States finds itself. They would rather position the election on foreign policy risk issues, diplomacy, social issues, and appointments to the Supreme Court. If they can characterize the electoral contest in that manner, they have a good chance of winning re-election.

Our American termite mound built up imbalances and then went critical in 2007. The onset of the financial crisis was first discernible in May of that year, when we saw slight changes in the pricing mechanism of various credit instruments. By July 2007, we had the announcement that Bear Stearns would take a $2 billion charge related to some mortgage-backed securities that would affect some hedge fund operations. Bear Stearns said not to worry about it; it was a small thing. Eight months later, they were merged with JPMorgan, and the Federal Reserve needed a $30 billion bailout fund to complete the transaction. That is "going critical."

With Ryan added to Romney, we may now draw clear distinctions between the two pairings of the candidates and the two parties.

Since 2007, we have witnessed a succession of financial failures, forced mergers, and criminal revelations. Both political parties have

27

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Political Affairs

a single grain of sand causes an apparently stable sandcastle to fall in on itself

had a role in the developments and subsequent catastrophes. Neither admits its role. Each blames the other. Our political record of accomplishment is horrible. We have neither a sustainable federal budget nor a workable budget mechanism. Nor is there much room for agreement within our political system. We no longer seem capable of centrist compromise. Instead, we have animosity, adversity, and cacophony that will intensify over the next ten weeks and only slightly subside after the November election.

Democrat’s Vice President Candidate

The choice of Paul Ryan was skilful, courageous, a gamble, or a mistake, depending on who is characterizing it. Democrats see it as opportunistic; Republicans see it as an advantage. Critics see it as a repeat of the Sarah Palin debacle. We do not agree with that criticism. There is a vast difference in skill and experience between Sarah Palin and Paul Ryan. Ryan enlivens the debate in a substantive way.

Romney/Ryan ticket be pusillanimous? Will the Obama/Biden ticket be pusillanimous?

Will we discuss long-term commitments of transfer payments for health-care and retirement benefits? Will we involve ourselves in the fundamental question of how to pay for these things? Will we resolve the controversy between those who would tax at 15-16-17 percent of our GDP and those who would spend at 24-25-26 percent? Will we address the issue of that gap? Is there a path to a compromise at 18-19-20 percent of GDP?

If we had those qualities all along, we would have resolved the issue of the mortgage-finance agencies, on which the pusillanimous Congress was silent when it passed the financial-reform bill. The biggest debt agencies in the world were not even discussed. Those agencies have cost the US taxpayer billions. Without pusillanimity, we would have had a legitimate discussion of the ethanol mandate. To discuss it and repeal it will require courage. Will we have a pusillanimous outcome to our discussion of critical agricultural issues, or will we witness courage and resolve on the part of our leaders?

Will we face the question of perpetual deficits and what they mean? This is the essence of the now-sharpened national debate. This is a good thing. The country needs the debate. The country needs to set the direction of its future, if it can. Niall Ferguson ends his book with the following quote: "Today, as then, the biggest threat to Western civilization is posed not by other civilizations, but by our own pusillanimity – and by the historical ignorance that feeds it." Pusillanimity means a lack of courage, timidity, faintheartedness, and the inability to face, define, and attack an issue with clarity. Will the

The United States wants to lose the pusillanimous quality that now corrupts its termite mound. The electorate is tired of it. It has had enough. It wants forthrightness, courage, clarity, and transparency.

The same question can be asked about issue after issue after issue. A pusillanimous approach will not benefit America. A final thought. Will the political campaign discuss the looming "fiscal cliff"? Not just talk about it, but also propose solutions that can pass in Congress? Estimates of the fiscal cliff run from $200-$300 billion to $800 billion, putting a significant dent in GDP. By some scenarios, it would put the US economy back into recession. There might, as some claim, be an "expectations process" that would diminish the impact of the fiscal cliff. No one knows for sure. What we do know is that we have had three years during which the United States has borrowed amounts measurable in the trillions, annually totalling roughly nine percent of its GDP. We know that is not a sustainable process. We also know that fiscal retrenchment is the means by which this deficit creation can be abated. We are guided by the words of the great historical economist Thomas Babington Macaulay, who phrased the issue in the following way over a century ago: "A democracy cannot survive as a permanent form of government. It can last only until its citizens discover that they can vote themselves largesse from the public treasury. From that moment on, the majority (who vote) will vote for the candidates promising the greatest benefits from the public purse, with the result that a democracy will always collapse from loose fiscal policies."

Republican’s Vice President Candidate

WORLD BUSINESS MAGAZINE

Let the debate begin. g

Sept / Oct 2012

28


Series Article

GFC ‘08

A Billion Warnings By: ZOHAIB IJAZ

Newswoman: We have so many economists coming on our air, and saying, oh, this is a bubble, and it's going to burst, and this is going to be a real issue for the economy. Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country? Ben Bernanke: Well, I, I guess I don't buy your premise. It's a

pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis.

Ben Bernanke became chairman of the Federal Reserve Board in February 2006, the top year for subprime lending. But despite numerous warnings, Bernanke and the Federal Reserve Board did nothing. Robert Gnaizda met with Ben Bernanke and the Federal Reserve Board three times after Bernanke became chairman. Only at the last meeting did Bernanke suggest that there was a problem, and that the government ought to look into it, but by then it was to late as the bubble had already burst and it was 2009. Robert Gnaizda warned, in an extremely explicit manner, about what was going on; and he came to the Federal Reserve Board with loan documentation of the kind of loans that were frequently being made. And he was listened to politely, and nothing was done.

One of the six Federal Reserve Board governors serving under Bernanke was Frederic Mishkin, who was appointed by President Bush in 2006. He was also on the Consumer Community Affairs Committee. On being asked about Robert Gnaizda’s warnings Mishkins response “was to be honest with you, I can't remember this kind of discussion.”

Ben Bernanke

As early as 2004, the FBI was already warning about an epidemic of mortgage fraud. They reported inflated appraisals, doctored loan documentation, and other fraudulent activity. In 2005, the IMF's chief economist, Raghuram Rajan, warned that dangerous incentives could lead to a crisis. Then came Nouriel Roubini's warnings in 2006; Allan Sloan's articles in Fortune magazine and the Washington Post in 2007; and repeated warnings from the IMF.

Dominique Strauss Kahn, Former Managing Director, IMF had talked on behalf of the institution about the upcoming crisis to everybody, including the Government, the Treasury as well as the Fed. Fredric Mushkin: You're just not sure, what do you do? And you, you might have some suspicions that underwriting standards are being weakened; but then the question is, should you do anything about it?

Christine Lagarde

29

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Series Article

By 2008, home foreclosures were skyrocketing, and the securitization food chain imploded. Lenders could no longer sell their loans to the investment banks; and as the loans went bad, dozens of lenders failed. The market for CDOs collapsed, leaving the investment banks holding hundreds of billions of dollars in loans, CDOs, and real estate they couldn’t sell. When the crisis started, both the Bush administration and the Federal Reserve were totally behind the curve. They did not understand the extent of it.

George Soros: Chuck Prince, of Citibank, famously said that, uh, uh, we have to dance until the music stops. Actually, the music had stopped already when he said that.

At the G7 Meeting in Tokyo, February 2008, The Former Finance Minister of France and the Current Managing Director for IMF stated that she had a discussion on the prevailing issue with Henry Paulson and told him that a Tsunami might be coming and you are proposing stuff like what swimming costume we are going to put on. Henry Paulson’s response was that things were pretty much under control. The Recession had started 4 Months before Paulson had made this statement. In March of 2008, the investment bank Bear Stearns ran out of cash, and was acquired for two dollars a share by JP Morgan Chase. The deal was backed by 30 billion dollars in emergency guarantees from the Federal Reserve.

George Soros

On September 7th, 2008, Henry Paulson announced the federal takeover of Fannie Mae and Freddie Mac, two giant mortgage lenders on the brink of collapse. Henry Paulson: Nothing about our actions today in any way reflects a changed view of the housing correction or the strength of other U.S. financial institutions. Two days later, Lehman Brothers announced record losses of 3.2 billion dollars, and its stock collapsed. Despite numerous warnings coming from all ends, that just went unheralded by the authorities who took no action. And The Global Financial Crisis had struck.g

Henry Paulson

“That was the time when the administration could have come in, and put in place, you know, various kinds of measures that would have reduced system risk” said Simon Johnson, Professor at MIT & Former Chief Economist, IMF

Nothing about our actions today in any way reflects a changed view of the housing correction or the strength of other U.S. financial institutions. Henry Paulson, September 7th, 2008

WORLD BUSINESS MAGAZINE

HQ Meeting at Lehmann Brothers just prior to the Collapse

Sept / Oct 2012

30


If You Have the Will, then We Have the Way

GLOBAL INVESTMENT BANKING GLOBAL CAPITAL MARKETS GLOBAL PORTFOLIO MANAGEMENT


Live Life to the Fullest Our Financial Practioners will allow you to Embrace Life as we provide the Peace of Mind; You Deserve. Allow us to be your Modus Operandi towards Financial Safe Havens. Mainstream Financial Services as been serving Institutional as well as High Net Worth client for more than a Decade. Specializing in Portfolio Management and Providing custom made Short & Long Term Solutions, specifically dealing in Precious Metals, Commodities, Emerging Markets, Stocks, Mutual Funds, Energy Sector, Forex, REIT & Bonds. Let your Money do the Work for You.


Invest Guide

MAjor Cities

Financial Havens By: STAFF With respect to the global cities of London, Paris, New York and Tokyo, the world has seen numerous emerging cities that are emerging investment havens as well. In this era of rapid urbanization and globalization, cities in developing nations are increasingly being thrown into the economic limelight. The balance of power is shifting; slowly but surely investors will realize the pull of cheap skilled labour as well as the abundance of untapped resources in these areas. Below, WBM has highlighted a few of these cities as follows which have already become prime destinations for Multi National Corporations and Key Individual Investors.

Beirut, Lebanon

The Capital of Lebanon is located on a peninsula at the midpoint of Lebanon’s Mediterranean coast. Beirut serves as the country’s largest and main seaport. The Beirut metropolitan area consists of the city and its suburbs. Beirut plays a central role in the Lebanese economy, with many banks and corporations based in its city centre.

Major Universities

American University of Beirut Beirut Arab University

Est. Population

1.59 Million

Major Companies HQs Banque du Liban Middle East Airlines

Fun Fact

Cedar groves only grow on Mount Lebanon, a cedar tree being the national symbol.

Johannesburg, South Africa

Johannesburg is the largest city in South Africa, the center of its important gold-mining industry, its manufacturing and commercial center, and the hub of its transportation network. Manufactures include cut diamonds, industrial chemicals, plastics, cement, electrical, electronic, and mining equipment, paper and paper products, glass, food products, and beer.

Major Universities

Wits University University of Johannesburg

Est. Population

2.41 Million

Major Companies HQs Johannesburg Stock Exchange Trust Bank

Fun Fact

Johannesburg is one of the 40 largest metropolitan areas of the world.

Kiev, Ukraine

The largest city of Ukraine, Kiev is the industrial, commercial, and cultural center also known to Russians as the “mother of cities”. Lying amid hills along the Dnieper and filled with gardens and parks, Kiev is one of Europe’s most beautiful cities, as well as a treasury of medieval art and architecture.

Major Universities

National Technical University National Pedagogical University

Est. Population

2.76 Million

Major Companies HQs Naftogaz Ukrainy Kyivstar

Fun Fact

Great Gate of Kiev, is not actually a gate but a design submitted by artist Victor Hartmann.

33

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Invest Guide

Vienna, Austria Vienna is the capital and largest city of Austria and administrative seat of Lower Austria, on the Danube River. The city plays an important role as a major riverfront town in Europe. Wien is one of the great historic cities of the world and a melting pot of the Germanic, Slav, Italian, and Hungarian cultures.

Major Universities

University of Vienna Webster University Vienna

Est. Population

Major Companies HQs Microsoft United Nations

1.71 Million

Fun Fact

Vienna is the last great capital of the Nineteenth Century Ball.

Canberra, Australia Canberra is the capital of Australia, in the Australian Capital Territory, located in SE Australia. The city was first settled in 1824, and chosen as the capital in 1908. In 1913, Canberra officially became the second capital of the commonwealth (succeeding Melbourne); however, although the Parliament first met there in 1927.

Major Universities

University of Canberra Australian National University

Est. Population

0.36 Million

Major Companies HQs Tower Software RuleBurst

Fun Fact

“Floriade”, Australia’s largest flower festival, is hosted in Canberra every Spring.

Brasilia , Brazil

Brasilia is the capital city and federal district of Brazil located in the southwest of Goias state. Inaugurated in 1960, it is situated in the highlands of central Brazil, and its modern public buildings stand out in sparsely settled countryside. The city was laid out (1957) in the shape of an airplane by the Brazilian architect Lucio Costa.

Major Universities University of Brasilia Catholic University

Est. Population

2.56 Million

Major Companies HQs Central Bank of Brazil Brasil Telecom

Fun Fact

The Television Tower is the highest structure of its kind in the world. g

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

34


Economic Affairs

THE AMERICAN DREAM IS OVER

Who Destroyed the Middle Class – Part II By: JAMES QUINN

In Part 1 of this three part series I addressed where and how the net worth of the middle class was stolen. In Part 2, I will tackle who stole your net worth and in Part 3, why they stole your net worth. Now let’s zero in on the culprits of this crime. Dude, Who Stole My Net Worth?

Where Art Thou, Uncle Sam?

“Thus far, both political parties have been remarkably clever and effective in concealing this new reality. In fact, the two parties have formed an innovative kind of cartel—an arrangement I have termed America’s political duopoly. Both parties lie about the fact that they have each sold out to the financial sector and the wealthy. So far both have largely gotten away with the lie, helped in part by the enormous amount of money now spent on deceptive, manipulative political advertising.” – Charles Ferguson – Predator Nation When you dig into the charts and data supplied by the Federal Reserve generated report, the data which goes back to 2001 tells a story not addressed by the deceptive, manipulative, political propaganda that passes for investigative reporting by the captured mainstream media. The chart below compares the median versus mean income growth from the last three Fed consumer surveys. Overall, it reveals a lost decade of negative income growth for the average middle class family. In the early part of the decade the average middle class family made some progress as jobs were relatively plentiful and the internet crash mostly impacted the rich, who own most of the stocks in the country. This is why the median income rose while the average income fell. The wealthy have a large impact on the average because they own the vast majority of assets in this country. The stock market debacle was unacceptable to the oligarchs and their money printing puppet Greenspan.

sophisticated” rating agencies stamped a AAA rating on the smelly pile of feces

Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

Greenspan and his handpicked successor Bernanke represented the conservative wing by reducing interest rates to ridiculously low levels, failing to carry out their regulatory obligations, encouraging recklessness, and purposefully failing to acknowledge and deflate the greatest housing bubble in world history: “American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.” – Alan Greenspan – February 2004 “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.” – Ben Bernanke – October 2005 “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” – Ben Bernanke – November 2005

Both the liberal and conservative wings of the ruling oligarchy were in complete agreement. A new bubble needed to be blown in order to refill the coffers of the ruling class. Paul Krugman spoke for the liberal wing: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as

35

Sept / Oct 2012

The master plan worked like a charm from 2004 through 2007 as you can see by the tremendous surge in average income. The stock market rocketed by 75% between 2003 and 2007 and national home prices shot up by 50%. Wall Street creatively invented no doc, negative amortization, interest only, subprime mortgages and generated a frenzy of demand from anyone that could scratch an X on a loan document, just as Greenspan had demanded. Being “sophisticated” financial institutions, they were able to assemble thousands of shit loans that were certain to default into one big derivative package of shit and their captured lackeys at the “sophisticated” rating agencies stamped a AAA rating on the smelly pile of feces. Always looking out for the best interests of their clients (aka Muppets), the upstanding Wall Street firms sold the derivative piles of shit to them as can’t miss investments. Wall Street profits went off the charts. Billions in

WORLD BUSINESS MAGAZINE


Economic Affairs

bonuses flowed to the rich and powerful Wall Street titans. Megacorporations generated record profits as consumers utilized the Fed induced tsunami of easy debt to buy BMWs, 72 inch HDTVs, home theaters, stainless steel appliances, granite counter-tops, Caribbean cruises, Jimmy Choo shoes, and Rolex watches in a mad frenzy of consumer delusion. What you might also notice in the chart above is that median household income somehow declined during this decadent orgy of corporate fascist pleasure. The vast majority of households in this country generate 75% to 81% of their income from wages. Virtually none of the income generated in 85 million households (the bottom 75%) comes from interest, dividends or capital gains. You need money to make money. The top 10% only generated 46% of their income from wages. The report does not provide details on the top 1%, but wages most certainly account for less than 20% of their income. Interest, dividends and capital gains represented 22.2% of the income for the top 10%, while it represented less than 1% of income for the bottom 75%. This data is the smoking gun that proves that Federal Reserve policy and control fraud on a grand scale by the titans of Wall Street was designed and executed to benefit only the wealthy elite billionaire class and their co-conspirators. All the income gains during this time accrued to the psychopathic amoral financial oligarchy. The average family saw their real wages decline and anyone lured into the housing market during this time frame by the “sophisticated” financial experts at Citicorp, Bank of America, Wells Fargo, Merrill Lynch, Countrywide, Washington Mutual, Wachovia, Bear Stearns, Goldman Sachs, Lehman Brothers, and the other members of the Too Big To Fail criminal syndicate was set up for epic loses. As expected, the psychopathic banker class could not be satisfied with the results of their looting. Their gluttonous voracious greed culminated in a historic collapse of the worldwide financial system resulting in a housing implosion, stock market crash and 8 million middle class Americans losing their jobs. The Fed report does show that average household income declined more than median household income after this historic financial oligarchy created collapse. Only 15% of families own stocks and only 50% have retirement ac-

With the Financial Crsis, the blue collar jobs are also running out counts. Approximately 50 million households in the country have virtually no stocks and less than 30% have retirement accounts. The top 10% wealthiest households, with a median household net worth of $1.2 million, proportionately own 3 times as much stock as the average family and 90% have retirement accounts. Therefore, the 57% crash in stocks impacted the top 10% to a greater extent, while the average family was most impacted by the 28% drop in home prices. Despite the fact that the median net worth of the top 10% actual rose from $1.17 million in 2007 to $1.19 million in 2010 (while the bottom 80% saw their net worth decline by 36%) the losses in the stock market were intolerable to the banker predators and their captured government parasite politicians. All the “solutions” to the Wall Street induced financial debacle have been designed to benefit those who committed the crime and should have done the time. The singular design of those pulling the strings was to replenish the treasure chests on Wall Street, engineer a stock market rally to pump up the net worth and capital gain income for the 1%, and protect the vested interests of the financial elite. All the obscene criminally generated profits created during the boom were privatized into the grubby hands of the financial predators, while the subsequent gargantuan losses were socialized onto the backs of the American middle class taxpayers and future unborn generations. TARP was rammed through the captured Congress by the oligarchs despite a 300 to 1 opposition from the public in order to protect obscenely wealthy bankers, stockholders and bondholders. The $800 billion of debt financed political pork, disguised as stimulus, was doled out to corporate contributors, union thugs, and a myriad of other special interests. Zero interest rates are specifically geared to generate billions of risk free profits for Wall Street and to force retirees to gamble their dwindling retirement funds in the rigged stock market. Bernanke and Paulson threatened the limp wristed pocket protector CPAs at the FASB into allowing Wall Street banks to make up the value of their loan portfolios in order to mislead the public regarding their insolvency. The tripling of the Federal Reserve balance sheet from $950 billion in September 2008 to $2.9 trillion today was done to remove the toxic assets from the balance sheets of the Too Big To Fail Wall Street cabal at 100 cents on the dollar. QE1, QE2, and Operation Twist have had the sole purpose of providing the

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

36


Economic Affairs

“sophisticated” financial elite with the funds to pump into the stock market using their high frequency trading super computers.

• There are 7.7 million fewer full-time workers now than before the recession, and 3.3 million more part-time workers. • Eight million people have left the labor force since the recession “ended” — adding those back in would put the unemployment rate at 12% instead of 8.2%. • The number of unemployed looking for work for at least 27 weeks jumped 310,000 in May, the sharpest increase in a year. I would add a few more data points to David’s list of woe:

The subsequent Federal Reserve contrived 100% increase in the S&P 500 has repaired the damaged balance sheets of the moneyed interests, while the average middle class family has sunk further into debt and despair. The powerful entrenched sociopathic marauder class cares not for the average middle class American. They can barely conceal their contempt and disgust for the masses as they blatantly flaunt their hegemony and supremacy over our decrepit decaying corrupted economic system. M. Ramsey King described the disgusting display last week: “Jamie Dimon’s appearance before the Senate Banking Committee was a sickening display that clearly demonstrated that Congress has been thoroughly corrupted by Wall Street. Instead of grilling Dimon, Senators acted like overly affectionate puppies fighting each other for an opening to smooch their master.” The destruction of the middle class has been methodical and systematic. The top 10% of earners had a median net worth of $1.19 million, or 192 times as much as the median wealth of $6,200 of those in the bottom 20% in 2010. In 2007, the top 10% had 138 times as much wealth as the bottom 20%. In 2001, it was 106 times as much. With the continued rise in the stock market, declining real wages for the middle class, and further home price declines, the gap between the top 10% and the bottom 20% has continued to widen. The level of pain being experienced by the middle class has reached an unprecedented extreme. A few data points from David Rosenberg make that clear:

• Over 7.5 million homes have been foreclosed upon by the Wall Street bankers since 2008. • The National Debt has increased by $5.7 trillion (57% increase) since September 2008, while real GDP has risen by $305 billion (2.3% increase) since the 3rd quarter of 2008. • Interest income paid to senior citizens and savers has declined by $400 billion (29% decline) since September of 2008 due to Ben Bernanke’s ZIRP. • Government transfer payments have risen by $500 billion (32% increase) since September 2008, while private industry wages have risen by $200 billion (4.7% increase). • The price of a gallon of gas has risen from $1.70 in December 2008 to $3.53 today. • Food prices have risen by 7% to 10% since late 2008, even using the falsified BLS data. A true assessment by anyone who actually goes to a grocery store (not Bernanke – his maid does the shopping) would be a 10% to 20% increase. The middle class has a gut feeling they are being screwed by somebody, they just can’t figure out who to blame. The ultra-wealthy elite keep up an endless cacophony of propaganda and misinformation designed to confuse an increasingly uneducated and willfully ignorant public while blurring the facts for those educated few capable of understanding the truth. They have been able to keep the masses dumbed down through government run education; distracted by sports, reality TV, Facebook, internet porn, and igadgets; lured by mass media messages of materialism; and shackled with the chains of debt used to acquire the goods sold by mega-corporations.

• Forty-six million Americans (one in seven) are on food stamps. • One in seven is unemployed or underemployed. • The percentage of those out of work defined as long-term unemployed is the highest (42%) since the Great Depression. • 54% of college graduates younger than 25 are unemployed or underemployed. • 47% of Americans receive some form of government assistance. • Employment-to-population ratio for 25- to 54-year-olds is now 75.7%, lower than when the recession “ended” in June 2009.

37

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Economic Affairs

ica. The vilest fraud in the history of man was perpetrated by these evil men and not one executive of these firms has been prosecuted. Obama, the champion of the little people, has proven to be nothing but a figurehead for the powers that be. Proof that the Wall Street syndicate is winning the war couldn’t be any clearer than the fact that the top six criminal banks now have 40% more of the nation’s assets in their vaults than they did before they burned down the economy.

We’ve become a society oppressed by a small faction of ultra-wealthy masters served by millions of impoverished, uneducated, sedated slaves. But the slaves are getting restless and angry. The illegally generated wealth disparity chasm is growing so large that even the ideologue talking head representatives of the elite are having difficulty spinning it. Even uneducated rubes understand when they are getting pissed on.

“Senator, don’t piss down my back and tell me it’s raining” – Fletcher – Outlaw Josey Wales The situation is growing increasingly unstable and has left the country susceptible to an extreme outcome when this teetering tower of debt topples.

The demonization of the victims continues, while the perpetrators prosper. The sociopaths appear to be winning; just as they seemed to be winning in the later stages of the Roman Empire. “And we often fall into this bias on the prompting of con men and sociopaths of the predator class who use it to justify their own criminal actions and personal injustice. They are not burdened with empathy for their victims, and even delight in their misfortune. But they must find ways to make their actions more acceptable to society as a whole that normally does have such concerns for equity and justice.” – Jesse

The moneyed interests have brilliantly pitted the middle class against the lower classes through their control of the media, academia, and the political system. They have cleverly blamed the victims for their own plight. They have convinced the general public that millions have lost their homes to foreclosure because they were careless, greedy and stupid. They blame the Community Reinvestment Act. They blame others for taking on too much debt when they were the issuers of the debt. The Wall Street moneyed interests created the fraud inducing mortgage products, employed the thousands of sleazy mortgage brokers, bullied appraisers into fraudulent appraisals, paid off rating agencies, bribed the regulators, bet against the derivatives they had sold to their clients, threatened to burn down the financial system unless Congress handed them $700 billion, and paid themselves billions in bonuses for a job well done. But, according to these greedy immoral bastards, the real problem in this country is the lazy good for nothing parasites on food stamps and collecting unemployment, who need to stop complaining and pick themselves up by their bootstraps and get a damn job. It’s a storyline used against Occupy Wall Street and anyone who questions their right to plunder what is left on the carcass of Amer-

The demonization of the victims continues, while the perpetrators prosper.

WORLD BUSINESS MAGAZINE

“Are we like late Rome, infatuated with past glories, ruled by complacent, greedy elite, and hopelessly powerless to respond to changing conditions?” – Camille Paglia I think you know the answer to this question. g

Sept / Oct 2012

38


Current Affairs

FED HITS KILL SWITCH ON LIQUIDITY

Is there No Fiscal Stimulus to Come By: CLIF DROKE

Lately investors have been worried about liquidity, specifically the central bank’s willingness (or unwillingness) to continue providing it, and with good reason. Without periodic injections of liquidity, investors eventually lose interest as financial markets begin to languish. And in a financial economy like the U.S., the death of a bull market means the death of the economic recovery. Bull markets are to a large extent liquidity driven affairs. Without an abundance of excess monetary liquidity sloshing through the financial market, stocks and commodities have little hope of developing the necessary ingredient of forward momentum. Momentum is what attracts an ever-growing number of investors to participate in a bull market, which in turn is what keeps the bull market going. When liquidity dries up, momentum perishes ECB Faces deep concens over health of Banks and investors quickly lose interest. This, in a nutshell, is how bull markets turn into bear markets, viz. Bull markets typically begin with a massive dose of liquidity, just as the absence of liquidity. they end whenever the liquidity stream dries up. The reason why an increasing number of market participants have been agitating for the Recently we have seen two significant central bank meetings: the world’s leading central banks to amp up the liquidity is obvious: the FOMC meeting the ECB meeting to discuss monetary policy. Both U.S.-led global financial market recovery that began in 2009 appears the U.S. and European central banks disappointed investors who exto be slowly winding down according to a number of monetary inpected the banks to show their willingness to provide more monetary dicators. stimulus. One indication of how much liquidity has diminished in just the last The Dow Jones Industrial Average reacted to this disappointment few months can be seen in the following chart. The following graph by falling some 200 points (intraday) over the course of the last two shows the Treasury yield curve, which is calculated by dividing the days. The NYSE Broker/Dealer Index (XBD), which is much more 10-year Treasury yield into the 3-month T-bill. On a very basic level sensitive to future liquidity expectations, plummeted 9% since the tells you gross profit margins of financial institutions. They borrow Fed meeting. The gold and silver stocks were also subject to the short-term money and loan it out at long-term yields. A rising yield widespread investor disappointment and were down both Wednescurve – especially when above the 1% level – is generally regarded as day and Thursday. Although the damage has so far been fairly limited bullish for the financial market and economic outlook. within the PM stock group, volatility among individual mining shares has been increasing since the central bank meetings (see HUI chart below).

Since the first and second quantitative easing (QE1 and QE2) programs of recent years the yield curve has been well above 1%. But in

41

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Current Affairs

recent months the yield curve has been falling, as you can see here. The indicator is still reflective of an overall healthy monetary trend, but the falling nature of the Treasury curve may suggest to the Fed that it was high time for the Fed to give the market some sort of boost in the short term…even if that “boost” was nothing more than the promise of further stimulus down the road. The Fed’s latest failure to do so is another reason why investors are understandably concerned about the tenacity of the recovery and are questioning how much longer it can last without central bank intervention. The leaders of both the Fed and the ECB threw out statements to the effect that they may intervene before the end of this year, such an intervention isn’t likely. Fed chief Bernanke, like his predecessor, relies on the stock market as a barometer to tell him when intervention is seasonable. Barring an unforeseen market collapse by the end of this year, another round of QE is unlikely in 2012. Aside from the overall strength projected by the major stock market indices, another important indicator is giving Bernanke some assurance that he is okay to hold off on intervening. The New Economy Index (NEI), which reflects the market performance of the leading U.S. consumer and business companies, is at a new all-time high as of this writing. This chart presents the picture of a bullish consumer retail economic picture, one that Bernanke is surely watching. The last time the Fed intervened with QE2, the NEI had preceded this by giving a “sell” signal. No such sell signal has been made in the New Economy Index since 2010. While it’s true that the consumer retail economy is still in good shape, it is a mistake to use surface measures of near-term economic

strength like corporate profits and retail sales to guide policy decisions. Undercurrents of deflation can still be seen bubbling to the surface from time to time; moreover, the danger of an economic conflagration in Europe – and the possibility of it spreading to the U.S. – are reasons the Fed should relax its monetary policy stance. Unfortunately, there is every reason for believing the Fed will once again fall asleep at the wheel just as it did in the 2-3 years leading up to the 2008 credit crisis.

fiscal stimulus needed to resuscitate the flagging economy

Federal Reserve Bank of Chicago

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

42


Current Affairs

Traders Disappointed with Central Bank Meetings The Fed isn’t solely to be blamed here. It is a truism of history that both governments and central banks have an inveterate tendency to underestimate the amount of monetary and fiscal stimulus needed to resuscitate a flagging economy. Worse, governments often make the wrong policy choices during the most critical times of an economic crisis. Paul Johnson, in his 1991 book Modern Times, made some insightful observations about the economic policies of the Great Depression. He noted for instance, “…the 1932 Revenue Act saw the greatest taxation increase in U.S. history in peacetime, with the rate on high incomes jumping from a quarter to 63 percent. This made nonsense of [President] Hoover’s earlier tax cuts but by now Hoover had lost control of Congress and was not in a position to pursue a coherent fiscal policy.” Sadly, history has a perverse way of repeating itself and if that observation holds true we can expect to see additional tax increases (in various forms) in the coming years as governments try to deal with the problem of deflation. Although QE1 and QE2 had a discernible impact in lifting equity and commodity prices in the years since the 2008 credit crisis, the Fed’s decision to hold off on any further liquidity increases will

43

Sept / Oct 2012

sooner or later feed into the deflationary undercurrents within the global economy. The reluctance of banks and governments to provide additional stimulus – whether in the form of monetary easing, lower taxes and regulatory easing – will contribute to the downward velocity of the declining long-wave cycle in the next couple of years. Gold, as the ultimate safe haven at both ends of the long-wave, will eventually prove its merit as a store of value in deflation. Before we arrive at that critical juncture, however, there will undoubtedly be phases of volatility along the way that temporarily obstruct gold’s forward progress – just as we’ve seen since last September. Although it may seem premature to assert that the Fed has hit the proverbial “kill switch” on liquidity, in the context of the long-wave deflation we’re in this isn’t an exaggeration. By not maintaining an ample supply of liquidity, the Fed has effectively numbered the days of the recovery. Whatever gains the market makes will come primarily from a combination of investor psychology, the peaking 4-year cycle plus the residual momentum from the 2009-2012 bull market between now and early 2013 (when the final “hard down” phase of the 60-year cycle begins). g Clif Dorke is the Author of “2014: America’s Date with Destiny”

WORLD BUSINESS MAGAZINE


Industry Guide

HYBRID CARS

A Revolution in the Automotive Industry By: DANIELLA RADZINSKI With a growing global consciousness of environmentalism and carbon footprints, comes the growth and opening of various green industries that haven’t previously had a chance. One of those budding green markets is that of hybrid vehicle manufacturing, with production already blossoming worldwide as many different countries and companies adapt to this revolution.

Look To the Future Forecasting the future of the automotive market ain't no easy task. The complex forces at work, including widely ranging government incentives and automaker's often-rosy outlooks, make predicting the future all the more difficult. Will hybrids be a boon to the automotive industry? Will electric vehicles bomb? Predictions regarding the automotive industry's future are simply guesses based on some facts, complex tracking of trends, significant speculation and, sometimes, lies. With all this in mind, we now turn our attention to Alan Baum, a Michigan-based auto industry analyst who has predicted the future of the industry for nearly 30 years. Baum's expertise is hard to question and his forecasting model is unorthodox, but remember, even the best laid plans don't always yield accurate results. Baum predicts a burgeoning market for advanced technology vehicles. Within the next five years, Baum forecasts that we'll see more than 50 conventional hybrid models, over 30 electric vehicle models, almost 20 plug-in hybrid models and even a few fuel cell models in production. The folks over at Hybrid Cars provided a breakdown of the vehicles that Baum believes we'll see in the next five years: Baum is tracking a whopping 108 electric-drive vehicles by model year 2015. That's up from 22 grid-free hybrids and one electric car, the Tesla Roadster, in production today. There will be 27 new model introductions for the model year 2011 aloneeffectively doubling the number of hybrids and plug-ins in a single year. Baum indicates that the 2011 U.S. line-up will add 13 conventional hybrids, 3 plug-in hybrids, and 11 battery electric cars. By the model year 2015, the new car market will have 108 electric-drive models. Nearly half of them will be conventional hybrids, but there will also be 18 plug-in hybrids, 32 EVs, and 6 fuel-cell electric cars. Baum is quick to point out that many of the vehicles that he tracks, have not been announced by automakers. Again, it's a prediction, which involves educated guesses, statistical analysis and perhaps even some voodoo magic. Baum wrapped up this round of forecasting by predicting that advanced technology vehicles could account for as much as five percent of annual sales in the U.S. by 2015, which amounts to nearly One Million Hybrids being sold per year.

Toyota and Honda; however, built on an industry always striving for efficiency, took a different take on the same technology and proceeded with their hybrid programs to the ridicule and scorn of Detroit. Fast forward to today and no one in Detroit is laughing any more. Delphi and GM are facing bankruptcy, as shares of GM have dropped to the lowest levels in 18 years. Ford takes two steps backwards with each step forward. American automotive industry just isn't going in the right direction.

nearly One Million Hybrids being sold per year (Forecast, 2015)

Toyota, on the other hand, is on the verge of becoming the world's largest automaker as it sits on a pile of massive profits. Sure, Detroit has been in this kind of predicament before, and it survived. This time; however, it is different. In the 70's and 80's, when high energy prices pushed many Americans into Japan's economy cars, there was one main difference compared to today: Japan's vehicles were fundamentally no different than America's vehicles. Sure, they were smaller and built better than expected, but they functioned just like any other automobile. This converted many Americans into Toyota and Honda owners, but SUV popularity gave Detroit a product that Japan just didn't have. Today; however, things are far different. This time there will be no SUV to save Detroit. Even worse, hybrid vehicles have come full circle to haunt Detroit's arrogance and incompetence. I mean, Detroit had a billion tax dollars and what did they do with it? Nothing!

Jog Down Memory Lane Back in the 1990's Congress gave a billion tax dollars to Detroit to create America's next generation of clean and efficient vehicles. They failed. Though they developed electric and hybrid prototypes, Detroit refused to push the edge of technology forward, citing numerous excuses for not better utilizing the billion dollars we taxpayers gave them.

45

Sept / Oct 2012

Hybrid Car Manufacturing Line

WORLD BUSINESS MAGAZINE


Industry Guide

American automotive industry just isn’t going in the right direction.

Many analysts, such as J.D. Power, believe that by 2012, hybrid sales will achieve around 600,000 total units. I'm here to tell you that sales will easily surpass twice that number by 2012. Toyota will sell 600,000 hybrids per year - by itself - starting around 2008, but that's just the beginning of the bad news for Detroit. Around that same time, when Toyota starts to make J.D. Power analysts look silly, Toyota will be utilizing its third generation Hybrid Drive, a move that is going to make hybrids more fuel efficient, more powerful, and CHEAPER, possibly cutting hybrid costs in half or more. As Toyota achieves this level of production, Ford hopes to ramp up development of its hybrid program to 250,000 vehicles per year. That's good news for Ford, but will Ford hybrids compete with Toyota hybrids then? If Ford is using the same hybrid drive at the same costs in 2008 as they are today, how will they compete with cheaper, more fuel efficient, and better performing Toyota hybrids? Then there is GM. GM is still a bit of a wild card in the hybrid game because, well, they don't yet have any full hybrids. GM's hybrid technology is going to vary significantly from the technology of both Ford and Toyota - yet early reports seem to indicate that the core of GM's hybrid technology will achieve its greatest improvements in highway driving. Twenty years ago, Americans did do the majority of their driving on open roads and highways, but we no longer live in that world. Not only do the majority of Americans live in urban areas, they drive in significantly more congestion than 20 years ago - even those that live in suburban and rural areas. Stop signs and street lights have turned even the small town commute into stop-and-go traffic during the morning and evening commutes. According to transportation studies by government and university alike, the problem isn't only going to get worse, it's going to get significantly worse. City driving, not highway driving, MUST become the standard by which fuel efficiency is determined. In such driving, conventional vehicles and even clean diesel vehicles simply cannot compare with hybrid vehicles, and hybrid technology is just emerging. For example, second generation hybrid technology turned the first generation Prius

WORLD BUSINESS MAGAZINE

Ongoing Work towards the next revolution in Hybrids into a second generation superstar. Toyota's third generation hybrid drive will make the Prius, and all other Toyota hybrids, even faster, more powerful, more fuel efficient, and cheaper than current Toyota hybrids. By the fourth generation such gains will again be achieved. By that time hybrid vehicle costs might equal conventional vehicle costs. At that point, it becomes very hard to justify the costs of conventional technology, not hybrid technology. Yet, GM might barely be on the map by then. Ford, with its similarities to Toyota - in terms of its hybrid drive - might be able to capitalize on Toyota's success via better supply channels, but could they ramp up production quickly enough to match Toyota? Maybe. Regardless, the automotive world as we know it, is over. GM and Ford might compete in this new world, but without developing their own Prius, it's not going to be easy. g

Toyota Prius is the Leading Hybrid Car

Sept / Oct 2012

46


Invest Guide

INDONESIA

The Land of Gold By: KATIE COLVIN Official Name

Kingdom of Morocco

Area

446,550 sq km

Population

32.27 Million

Capital Muscat Languages

Arabic (official), Berber, Freanch

GDP PER CAPITA (AT PPP) $ 4,712

Spun across the equatorial line, Republic of Indonesia lies approximately 3000 km wide, connecting the Indian Ocean and the Pacific Ocean. The largest archipelago nation in the world, with well over 17.000 islands, Indonesia is gifted with its abundant natural resources along with large number of population of 240 million by 2009. This potential was known since the colonial age, when the Dutch and the Portuguese occupied large part of the country to capitalized upon its resourceful land. It took more than 3 centuries before Indonesia gained its independence in 1945. Soon after, Indonesia entered the age of change where it shaped the country to what it is now, starting with revolution period to the reformation period by the early millennium. Since the 90s, Indonesia has become one of the fastest growing countries in Asia and the world in terms of economic and financial growth in spite the economic recession of 1998 and 2009. It was said in old transcript, ‘whatever you plant in Indonesian soil, it can turn to gold’. As such was the optimism faced by the foreigners who came and dwell in this tropical land. The geological condition of Indonesia enables varieties of crops to grow fruitful, whilst the earthly resources are being excavated for future needs. Although, the one biggest potential the country has is the people. Unlike any other populated countries with single ethnic culture, Indonesia is dominated with thousands of cultures making it a very unique market for economical purposes.

Knocking at your Doorstep While everyone knows about the merits of investing in China and India, Indonesia barely rates a mention. But fund managers who specialize in Asian shares say the archipelago presents investment opportunities every bit as good as China and India over the long term. Like India and China, it has a rapidly growing middle class. Its economy

47

Sept / Oct 2012

may only be half the size of Australia's but it is growing at almost 7 per cent a year. It rivals Australia as a commodities exporter and Indonesian companies are the most profitable in Asia. It's a far cry from 1997, when the Indonesian government was forced to nationalize the banks after the country was among the most badly hit by the East Asian financial crisis.

Political Stability As a developing country, Indonesia faces huge challenges but it is enjoying political stability, its share market is attractive and

Whatever you plant in Indonesian soil, it can turn to gold

there's a good selection of quality stocks in the resources sector, banking and consumer stocks. Since his election as president in 2004, "SBY" (Susilo Bambang Yudhoyono) has changed the investment landscape, according to the Asia portfolio manager at fund manager Five Oceans Asset Management, Rob Nunley. "He has done a very good job of turning things around in the economy," Nunley says. "Those positives we see in India and China - the middle-class income growth, the positive demographics and urbanization - exist in Indonesia."

rious regional competitor as Asian economies compete for foreign investment, especially at a time of weakening economic growth. The investment news came a day after Moody's Investors Service became

the second major ratings firm to lift Indonesia's debt rating to investment-grade status, a move that is expected to make it easier for Indonesia to attract foreign capital. Foreign direct investment in Indonesia grew 20% last year to 175 trillion rupiah ($19.3 billion). At that rate, Indonesia now appears to be significantly outpacing many other Asian countries that used to easily surpass it in drawing foreign money, such as Thailand. The strong numbers in Indonesia come despite continued complaints from many businesses in the U.S. and elsewhere that say Indonesia lacks sufficient legal protections and adequate infrastructure to sustain big investments. That Indonesia is able to draw so much foreign money despite those lingering concerns, which Indonesian officials say are overblown, suggests investors are increasingly willing to overlook the country's shortcomings to get access to its vast natural resources and large consumer market of more than 200 million people. It also suggests Indonesia could draw even more big-ticket investments if further economic reforms are passed. Singapore, Southeast Asia's financial capital, was the top foreign investor in Indonesia during the year, followed by Japan and the United States, and then the Netherlands

FDI Foreign direct investment into Indonesia surged to a record last year in the latest sign of rising global interest in Southeast Asia's largest economy. The data indicates Indonesia is Raja Ampat Islands, Indonesia emerging as a more se-

WORLD BUSINESS MAGAZINE


Invest Guide

and South Korea. The industries that attracted the most international investment were transportation, mining and utilities. Indonesia has become a darling of some international companies and investors in recent years as its strong economic expansion and relative political stability have given more people confidence in the market, analysts say. Its gross domestic product has expanded more than 5% in seven out of the past eight years. Indonesia expects it to grow more than 6% this year.

Special Capital Territory of Jakarta, Indonesia

Benefits & Risks of Investing Indonesia's strong economic growth and favorable demographics make it a great country for investors, but there are several risks that investors should be aware of before committing any capital. For instance, the country's strong growth makes it a premiere target for inflation, while it entails more geopolitical risk than typical U.S. investments.

Benefits 4 Strong Historic Growth - Indonesia has been one of the best performing investments throughout the world economic crisis that began in 2008. In fact, it was the only economy posting any real economic growth in 2011. 4 Relatively Less Risky - Indonesia may be less risky than many emerging markets, with an average annual return of over 25% and a beta coefficient of less than 0.8, according to a February 2011 study by MSCI and Bloomberg. 4 Room to Grow - Indonesia's market capitalization is significantly smaller than

“

FDI grew 20% last year to $19.3 billion

WORLD BUSINESS MAGAZINE

�

Susilo B Yudhoyono with Obama the BRIC economies, which suggests that it has ample room to grow, even if overall growth rates were to slow down, according to a NYSSA analysis.

Risks 4 Inflation Risk - Indonesia has faced rising inflation along with its economic growth. If these rates were to move out of control, it could lead to higher interest rates that may negatively impact the country's equity prices. 4 Geopolitical Risk - Indonesia resides in Southeast Asia, which means that it may face more geopolitical risk than developed countries like the United States or members of the European Union.

Structural Reforms Needed Indonesia continues to rate poorly on international indexes measuring the perception

Dancers of Bali, Indonesia of corruption published by Transparency International, which most recently ranked Indonesia 100 out of 183 countries, with 183 being perceived as the most corrupt. Overstretched infrastructure means companies have to shoulder the extra expense of building their own roads and power plants. Political and economic reforms the country needs to grow are often blocked by political squabbling, analysts say. "To deliver on the growth story and attract even more investments, Indonesia needs to take more decisive steps to implement key outstanding structural reforms," said Leif Eskesen, chief economist for India and Asean at HSBC Global Research in Singapore. Still, Indonesia is confident that the money flow won't be turned off even if global economic jitters make companies and money managers more cautious. g

Sept / Oct 2012

48


Profession Guide

ISLAMIC BANKING – PART I

Banking on Faith

By: NATHANIEL JOHNSON

Islamic banking is becoming increasingly popular in Asia. More financial institutions are offering Islamic banking services to their customers. Consider this, Islamic banking car loans in Malaysia grew by almost 20 percent in the 12 months to May this year. In Indonesia, the number of bank branches offering Islamic financial services has nearly tripled in the last five years. Asia is not alone in seeing huge growth in Islamic banking. According to Moody’s, worldwide demand for Islamic financial products is expected to surpass $1 trillion in value this year. While the Arab Gulf region still dominates this industry, Asia is catching up quickly. According to Bloomberg, the region made up 68 percent of the nearly $8 billion of Islamic bonds or sukuk sold globally this year. Malaysia has emerged as Asia’s leading Islamic financial centre, being the world’s biggest issuer of Islamic bonds. Islamic banking in Malaysia has a 20 percent market share, compared with 35 percent in the Gulf States.

Interest Free Banking Modern banking system was introduced into the Muslim countries at a time when they were politically and economically at a low ebb, in the late 19th century. The main banks in the home countries of the imperial powers established local branches in the capitals of the subject countries and they catered mainly to the import export requirements of the foreign businesses. The banks were generally confined to the capital cities and the local population remained largely untouched

49

Sept / Oct 2012

by the banking system. The local trading community avoided the “foreign” banks both for nationalistic as well as religious reasons. However, as time went on it became difficult to engage in trade and other activities without making use of commercial banks. Even then many confined their involvement to transaction activities such as current accounts and money transfers. Borrowing from the banks and depositing their savings with the bank were strictly avoided in order to keep away from dealing in interest which is prohibited by religion. With the passage of time, however, and other socio-economic forces demanding more involvement in national economic and financial activities, avoiding the interaction with the banks became impossible. Local banks were established on the same lines as the interest-based foreign banks for want of another system and they began to expand within the country bringing the banking system to more local people. As countries became independent the need to engage in banking activities became unavoidable and urgent. Governments, businesses and individuals began to transact business with the banks, with or without liking it. This state of affairs drew the attention and concern of Muslim intellectuals. The story of interest-free or Islamic banking begins here.

What is Islamic Banking? Islamic banking is defined as banking system which is in consonance with the spirit, ethos and value system of Islam and governed by the principles laid down by Islamic Shariah. Interest free banking is a narrow concept denoting a number of banking instruments or oper-

WORLD BUSINESS MAGAZINE


Profession Guide

ations which avoid interest. Islamic banking, the more general term, is based not only to avoid interest-based transactions prohibited in Islamic Shariah but also to avoid unethical and un-social practices. In practical sense, Islamic Banking is the transformation of conventional money lending into transactions based on tangible assets and real services. The model of Islamic banking system leads towards the achievement of a system which helps achieve economic prosperity.

History The first instance of Islamic banking came into the picture in Egypt in 1963. The pioneering efforts by Ahmad El Najjar brought this bank into existence, whose key principle was profit sharing (noninterest based philosophy of Shariah). By the end of 1976 there were 9 such banks in the country. These banks neither charged nor paid interest but their activities were mostly limited to trade and industries where these banks invested directly or as partners of depositors. Hence, functionally these banks were working more as financial institutions rather commercial banks. In 1971, Nazir Social Banks is known to be the first commercial bank in Egypt, though its charter never made references to Shariah. The first bank explicitly based on Shariah principles was established by the Organization of Islamic countries (OIC) in 1974, called Islamic Development Bank (IDB). This bank was primarily engaged in intergovernmental activities for providing funds for development projects running into member countries. Its business model involved fees for financial services and profit sharing financial assistance for projects. With time, during the 1970s several Islamic banks came into existence, including the Dubai Islamic Bank (first Islamic private commercial bank, 1975), the Faisal Islamic bank of Sudan (1977) and the Bahrain Islamic bank (1979). Others from the Asia Pacific re-

Difference between Conventional & Islamic Banking CONVENTIONAL BANKING

4Money is a commodity besides medium of

exchange and store of value. Therefore, it can be sold at a price higher than its face value and it can also be rented out.

gion include the Philippine Amanah Bank (PAB), formulated under presidential decree. Pakistan also had an established Islamic banking system at the time which unfortunately didn’t survive. Within a decade of the first private bank coming into existence in Dubai, the global industry had more than 50 such banks in the same country. Most banks were a result of private initiatives, whereas the first concrete government initiative was taken by the Iranian government, when in 1985 no bank was permitted to give or take inter-

ISLAMIC BANKING

4Money

is not a commodity though it is used as a medium of exchange and store of value. Therefore, it cannot be sold at a price higher than its face value or rented out.

4Time value is the basis for charging interest

4Profit

4Interest is charged even in case the organi-

4It operates on the basis of

4 While disbursing cash finance, running fi-

4The

4 Conventional banks use money as a commodity which leads to inflation.

4The money is linked with the real assets therefore it contributes directly in the economic development.

on capital.

zation suffers losses by using bank’s funds. Therefore, it is not based on profit and loss sharing.

nance or working capital finance, no agreement for exchange of goods & services is made.

WORLD BUSINESS MAGAZINE

on trade of goods or charging on providing service is the basis for earning profit and loss sharing. In case, the businessman has suffered losses, the bank will share these losses based on the mode of finance used.. execution of agreements for the exchange of goods & services is a must, while disbursing funds under Murabaha, Salam & Istisna contracts.

est. Interests was replaced with service charges of 4-8% and guaranteed minimum profits. The true phase of development of Islamic financial institutions actually occurred in the 1980s. Earlier initiatives were more inclined towards interest free Islamic banking, but the emergence of financial systems was evolved in the 80s. However, nonpayment of interest still remains the pivotal part of Islamic banking, whereas principles of Islamic finance such as property rights, sanctity of contracts and the rules of sharing risk are also supported. In 1985, the High Council of OIC (Organization of Islamic Conference) declared takaful /Islamic insurance as Shariah compliant. The new, wider spectrum of Islamic finance covers not only banking activities but also capital markets, capital formation and other financial instruments and intermediaries. g

Sept / Oct 2012

50


Research Report

Gold & Silver Shine

Weaker U.S. Dollar By: Ron Hera

Gold, silver and crude oil prices are closely related to the movement of the U.S. dollar. After a healthy consolidation, gold began to move up in August 2012. At the same time, deteriorating expectations for crop yields in the American Midwest moved corn and soybean prices to new highs. Higher food prices in late 2012 or early 2013 could have far reaching and geopolitically destabilizing effects likely to weigh on stocks, putting the shine back on precious metals. While billionaires George Soros and John Paulson are buying gold, silver has been in backwardation in recent weeks and silver held in ETFs rose to $16.2 billion according to Bloomberg.

The key international measure of the U.S. dollar’s value is the price of crude oil. Recessions, depressions and economic slowdowns in the U.S., U.K., Europe, China and Japan have softened demand for crude oil, moderating crude oil prices and making the U.S. dollar stronger than it would have been otherwise.

While increasing risk of geopolitical instability, including fear of a U.S. or Israeli war with Iran, account for rising crude oil prices and renewed interest in precious metals, the proverbial elephant in the room remains the U.S. dollar vis-Ă -vis a crumbling Euro. Precious metals mining stocks hit a low in mid May when the U.S. Dollar Index (USDX) shot up +5.5% (4.33 points) from 78.71 on April 27 to 83.04 on May 31. By July 24 the USDX had made a 2-year high of 84.10 as Spanish bond yields soared against a backdrop of continued worries over the European debt crisis. The U.S. dollar then slid -2.25% (1.89 points) to 82.21 on August 2, bouncing back to 82.60 by August 17 with a flat 50-day moving average as precious metals prices and mining stocks rose.

Weaker fuel consumption in the U.S. has been offset by steady global demand and fears of war in the Middle East which could disrupt oil shipments through the Strait of Hormuz in the Persian Gulf. Although crude oil prices could moderate in the near term if tensions in the Middle East are resolved, it is more likely that the region will become more chaotic due to higher food prices in late 2012 or early 2013. Further, it is far more likely that conflict between the U.S. or Israel and Iran will escalate. In the long term, oil prices will rise due to growing global demand and higher production costs, i.e., for heavy sour crude, shale oil, etc.

Weak U.S. Dollar Fundamentals The U.S. dollar is fundamentally weaker than it appears to be based on the USDX. Economic growth in the U.S. is extremely weak, despite massive government deficit spending. Gold mining stocks, in particular, have suffered due to higher costs related to higher energy prices and lower ore grades, which have compressed cash margins and pushed out returns on capital investments. Gold demand, however, has not abated and higher production costs effectively put a floor under the price of gold.

51

Sept / Oct 2012

U.S. federal government debt of roughly $16 trillion, chronic budget deficits of more than $1 trillion per year and unfunded liabilities of more than $62.3 trillion are unsustainable compared to the U.S. Gross Domestic Product (GDP) of $15.29 trillion (2011 est.), which includes government deficit spending. On a Generally Accepted Ac-

WORLD BUSINESS MAGAZINE


Research Report

counting Principles (GAAP) basis, which accounts for unfunded liabilities, the U.S. federal deficit would be approximately $5 trillion. The U.S. debt to GDP ratio is approximately 100%, which is worse than that of Spain. Further, the U.S. remains embroiled in foreign wars and continue to prosecute a global “War on Terror” at a total combined cost of several trillion dollars to date. The Federal Reserve has purchased a large portion of U.S. Treasury bonds since 2008, making the demand for U.S. debt appear stronger than it would have otherwise and artificially suppressing Treasury bond yields. The Federal Reserve’s asset purchases (buying toxic mortgage backed securities, quantitative easing I and II and “operation twist”, etc.) represent “money printing”. Money printing weakens the currency and causes prices to rise, which punishes savers, workers and consumers in general. The U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) has shown little change but pre-1980 measures of inflation are as high as 9%.

alternatives.” The USDX is a weighted geometric mean of the U.S. dollar’s value compared with the euro (57.6% weight), the Japanese yen (13.6% weight), the British Pound sterling (11.9% weight), the Canadian dollar (9.1% weight), the Swedish krona (4.2% weight) and the Swiss franc (3.6% weight). • Euro (EUR) – The saga of European sovereign debt, the threat of default, austerity versus economic growth, rating cuts, last minute rescues and civil unrest continues unabated. The Euro is, in fact, extremely weak which makes the U.S. dollar appear unnaturally strong. The European Central Bank (ECB) has little choice but to create more Euros to bail out the system. • Yen (JPY) – Japan’s recession after a tragic series of economic shocks, i.e., the 2011 tsunami and Fukushima nuclear disaster resulted in an inflow of yen back into Japan, increasing demand in the foreign exchange market. The strengthening yen necessitated massive interventions by central banks to weaken the currency in order to stabilize trade. • Pound sterling (GBP) – The U.K. is mired in a deep recession and the Bank of England is engaged in a series of monetary injections that have weakened the pound. There is no visible light at the end of the tunnel. • Canadian dollar (CAD) – Because Canada’s economy is intertwined with that of the U.S., the Canadian dollar has remained more or less at parity with the U.S. dollar, although it has historically been the weaker of the two. • Krona (SEK) – Sweden’s economy depends on exports and her largest trading partners are in the European Monetary Union, e.g., Germany, Finland, France, Netherlands and Belgium. If the krona appreciates, Swedish exports will fall.

U.S. domestic price inflation is evident to consumers in terms of food and energy prices, if not in the CPI. The rising cost of living in the U.S. must be contrasted with declining real income and high unemployment. Unemployment in the U.S. indicates a long-term, structural decline in the U.S. job market. Specifically, the civilian population employment ratio has declined for more than a decade.

• Swiss franc (CHF) – The Swiss National Bank has pegged the Swiss franc to the Euro depriving the investors of a traditional safe haven.

The Most Favored Nation The Most Favored Nation, China is struggling to maintain its exports and GDP growth in the face of economic deceleration while battling inflation and the fallout of regional real estate bubbles. The Renminbi (RMB) is closely linked to the U.S. dollar and is managed downward by the People’s Bank of China (PBoC) in order to support Chinese exports. Due to the relative weakness of other currencies (mainly the EUR, GBP and RMB), the U.S. dollar’s recent strength is illusory. While a weaker U.S. dollar would aid U.S. exports and reduce the U.S trade deficit, high inflation would also punish savers, workers and consumers in general.

By all rights, the U.S. dollar should be far weaker, but, to quote Sir Winston Churchill, “the dollar is the worst currency, except for all the

WORLD BUSINESS MAGAZINE

A solution to the European sovereign debt crisis, a larger and longer term refinancing plan by the ECB, or signs of economic recovery in the Eurozone, would send the U.S. dollar down sharply. Additionally, strong growth in the BRIC countries or an economic recovery in China would greatly increase upward pressure on global commodity prices.

Sept / Oct 2012

52


Research Report

Conversely, a continued slowdown in the People’s Republic of China, which is more likely, will reduce demand for base metals which is bullish for silver because most silver is produced as a byproduct of base metals mining.

China is a major producer and importer of gold and Chinese companies are aggressively buying crude oil and natural resources around the world but, according to the PBoC, Chinese currency reserves grew 1.9% to $3.24 trillion as of June. Platinum group metals (PGM) could fall as a function of weaker automobile demand if the Chinese economy continues to slow but Chinese automobile sales are up 22.6% year over year. Weaker automotive demand could be offset by safe haven investment demand for platinum and, in the short term, PGM prices are rising sharply due to ongoing mine labor problems in South Africa.

The People’s Bank of China and other central banks purchased 400 tonnes of gold in the 12 months ended March 31, 2012 compared with 156 tonnes during the same period in 2011, according to the World Gold Council.

Gold, Silver, Crude Oil

People’s Republic of China, together with the other BRIC countries (Brazil, Russia, India and China), South Africa and Iran, is slowly but systematically preparing to move away from the U.S. dollar. At some point, the currently gradual movement of global trade away from the U.S. dollar will reach a critical mass and accelerate, which will impact the US dollar massively. The loss of its world reserve currency status is an existential threat to the U.S. dollar. For the time being, however, this loss of status as the Global Reserve Currency is not in the interest of any of the major players, i.e., People’s Republic of China, to dump the U.S. dollar. Despite poor economic conditions in the United States of America, U.S. consumers are more addicted than ever to costeffective imported products from China, and with the passage of time their addiction is likely to rise further .

53

Sept / Oct 2012

Given the weak fundamentals of the U.S. dollar and the fact that its weakness has been masked by a variety of factors, prices could increase too quickly for policy makers, i.e., Federal Reserve Chairman Ben Bernanke, to respond. The U.S. dollar is vulnerable in the face of potential Eurozone stabilization, stronger than expected demand from BRIC countries, or geopolitical disintegration linked to higher food prices. Additionally, further intervention by the Federal Reserve could send the U.S. dollar sharply downward and cause a disruptive spike in global commodity prices. Pressure on the Federal Reserve to engage in further monetary easing, e.g., quantitative easing III (QE3), or an equivalent program, is growing. Gold, silver and related mining shares will rally heading into late 2012 and are likely to break out dramatically as current trends develop. g Ron Hera is the founder of Hera Research, LLC (www.heraresearch.com) located in Olympia, Washington, USA

WORLD BUSINESS MAGAZINE


Asia Capital Ventures Pte Ltd http://www.asiacapital.com.sg/ No.3- 1121, Joo-Chiat Complex-2, Joo Chiat Road, Singapore-420002,

Extend Your Reach to Investors


World Rating

Credit rating

The Shifting Sand of Stability

WORLD BUSINESS MAGAZINE

SICRA

Singapore Credit Rating Agency

Sept / Oct 2012

56


World Rating

Credit rating

SICRA

The Shifting Sand of Stability

Singapore Credit Rating Agency

57

Name

Region

Rating

Angola

Africa

b+

Highly speculative

Stable

Austria

Europe

aa+

High grade

Positive

Australia

Australia

aaa

Prime

Stable

Argentina

South America

B

Highly Speculative

Stable

Bahrain

Asia

bbb-

Lower medium grade

Stable

Bangladesh

Asia

bb

Non-investment grade speculative

Stable

Belgium

Europe

aa

High grade

Negative

Brazil

South America

bbb

Lower medium grade

Negative

Brunei

Asia

aa

High grade

Stable

Bulgaria

Europe

bbb

Lower Medium Grade

Stable

Canada

North America

aaa

Prime

Positive

China

Asia

aa-

High grade

Stable

Chile

South America

A+

Upper Medium Grade

Stable

Columbia

South America

bbb-

Lower medium grade

Negative

Costa Rica

North America

bb

Non investment grade speculative

Stable

Cyprus

Europe

bb+

Non investment grade speculative

Negative

Czech Republic

Europe

aa+

High grade

Positive

Denmark

Europe

aaa

Prime

Stable

Egypt

Africa

bb-

Non investment grade speculative

Stable

France

Europe

aa+

Prime

Stable

Finland

Europe

aaa

Prime

Stable

Germany

Europe

aaa

Prime

Stable

Ghana

Africa

b+

Highly Speculative

Stable

Greece

Europe

c

In default with little prospect of recovery

Stable

Hong Kong

Asia

aaa

Prime

Stable

Hungary

Europe

bb-

Non- Investment Grade Speculative

Negative

Iceland

Europe

bbb-

Lower Medium Grade

Stable

India

Asia

bbb+

Lower medium grade

Stable

Indonesia

Asia

bbb-

Lower medium grade

Stable

Iran

Asia

d

In Default

Negative

Ireland

Europe

bbb-

Lower medium grade

Stable

Italy

Europe

bbb+

Lower medium grade

Stable

Japan

Asia

aa-

High grade

Stable

Jordan

Asia

bb-

Non-investment grade speculative

Negative

Kenya

Africa

b+

Highly speculative

Stable

Kuwait

Asia

aa

High grade

Negative

Lebanon

Asia

b+

Highly speculative

Stable

Malaysia

Asia

a-

Upper medium grade

Positive

Sept / Oct 2012

Description

Outlook

WORLD BUSINESS MAGAZINE


World Rating

SICRA

Singapore Credit Rating Agency

Name

Region

Mexico

South America

bbb

Lower medium grade

Positive

Morocco

Africa

bbb-

Lower medium grade

Stable

Mozambique

Africa

b+

Highly Speculative

Negative

New Zealand

Australia

aa

High grade

Stable

Nigeria

Africa

bb-

Non- Investment Grade Speculative

Negative

Norway

Europe

aaa

Prime

Positive

Oman

Asia

a

Upper medium grade

Stable

Pakistan

Asia

ccc

Highly speculative

Stable

Paraguay

South America

bb-

Non- Investment Grade Speculative

Stable

Peru

South America

bbb

Lower Medium Grade

Stable

Philippines

Asia

bb

Non-Investment Grade Speculative

Stable

Poland

Europe

a-

Upper medium grade

Negative

Portugal

Europe

bb-

Non- Investment Grade Speculative

Stable

Qatar

Asia

aa

High grade

Stable

Romania

Europe

bb

Non-Investment Grade Speculative

Stable

Russia

Europe

bbb

Lower medium grade

Stable

Saudi Arabia

Asia

aa-

High grade

Stable

Singapore

Asia

aaa

Prime

Positive

Slovakia

Europe

a

Upper medium grade

Stable

Slovenia

Europe

a

Upper medium grade

Negative

South Korea

Asia

a

Upper medium grade

Stable

South Africa

Africa

bbb+

Lower medium grade

Negative

Spain

Europe

a-

Upper medium grade

Stable

Sri Lanka

Asia

bb

Non-Investment Grade Speculative

Stable

Sweden

Europe

aaa

Prime

Stable

Switzerland

Europe

aaa

Prime

Stable

Taiwan

Asia

aa-

High grade

Negative

Thailand

Asia

bbb

Lowe medium grade

Stable

The Netherlands

Europe

aaa

Prime

Negative

Tunisia

Africa

bb+

Non- Investment Grade Speculative

Stable

Turkey

Asia

bbb-

Lower medium grade

Stable

UAE

Asia

aa+

High grade

Stable

UK

Europe

a

Prime

Stable

Ukraine

Europe

b+

Higly speculative

Stable

USA

North America

aa+

High grade

Stable

Venezuela

South America

b

Highly speculative

Negative

Vietnam

Asia

bb-

Non-Investment Grade Speculative

Stable

Zambia

Africa

ccc

Highly speculative

Stable

WORLD BUSINESS MAGAZINE

Rating

Description

Outlook

Sept / Oct 2012

58


Events Pictorial

Tendence 2012

Frankfurt, Germany 24 - 28 August

ŠAll Rights Reserved by Messe Frankfurt

59

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Events Pictorial

©All Rights Reserved by Messe Frankfurt

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

60


Events Pictorial

Moscow International Automobile Salon

Moscow, Russia 29 August - 09 September

61

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Events Pictorial

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

62


History Article

9 – 11 September

A Day We Will Never Forget By: MARTIN JARED

On September 11, 2001, at 8:45 a.m. on a clear Tuesday morning, an American Airlines Boeing 767 loaded with 20,000 gallons of jet fuel crashed into the north tower of the World Trade Center in New York City. The impact left a gaping, burning hole near the 80th floor of the 110-story skyscraper, instantly killing hundreds of people and trapping hundreds more in higher floors. As the evacuation of the tower and its twin got underway, television cameras broadcasted live images of what initially appeared to be a freak accident. Then, 18 minutes after the first plane hit, a second Boeing 767–United Airlines Flight 175–appeared out of the sky, turned sharply toward the World Trade Center and sliced into the south tower near the 60th floor. The collision caused a massive explosion that showered burning debris over surrounding buildings and the streets below. As millions watched the events unfolding in New York, American Airlines Flight 77 circled over downtown Washington, D.C., and slammed into the west side of the Pentagon military headquarters at 9:45 a.m. Jet fuel from the Boeing 757 caused a devastating inferno that led to the structural collapse of a portion of the giant concrete building. All told, 125 military personnel and civilians were killed in the Pentagon, along with all 64 people aboard the airliner. Less than 15 minutes after the terrorists struck the nerve centre of the U.S. military, the horror in New York took a catastrophic turn for the worse when the south tower of the World Trade Center collapsed in a massive cloud of dust and smoke. The structural steel of the skyscraper, built to withstand winds in excess of 200 miles per hour and a large conventional fire, could not withstand the tremendous heat generated by the burning jet fuel. At 10:30 a.m., the

“ 63

That day changed the lives of many and the way we now look at the world.

Sept / Oct 2012

As the world looks towards the 11th anniversary of the 9/11 attacks, World Business Magazine will join organizations and individuals across the globe to remember and honour the thousands of innocent men, women, and children killed in the horrific attacks of February 26, 1993 and September 11, 2001

other Trade Center tower collapsed. Close to 3,000 people died in the World Trade Center and its vicinity, including a staggering 343 fire fighters and paramedics, 23 New York City police officers and 37 Port Authority police officers who were struggling to complete an evacuation of the buildings and save the office workers trapped on higher floors. Only six people in the World Trade Center towers at the time of their collapse survived. Almost 10,000 others were treated for injuries, many severe. Meanwhile, a fourth California-bound plane–United Flight 93–was hijacked about 40 minutes after leaving Newark International Airport in New Jersey. Something went array and the plane then flipped over and sped toward the ground at upwards of 500 miles per hour, crashing in a rural field in western Pennsylvania at 10:10 a.m. All 45 people aboard were killed. Its intended target is not known, but theories include the White House, the U.S. Capitol, the Camp David presidential retreat in Maryland or one of several nuclear power plants along the eastern seaboard. That day changed the lives of many and the way we now look at the world. World Business Magazine has taken the initiative to end the Hatred and hope all its avid readers would follow suit regardless of race, faith or nationality. Let us come together for the 11th anniversary of 9/11 to honour, remember and reunite. g

WORLD BUSINESS MAGAZINE


Book Review

POSITIVE IMPACT

Clues to Success

By: MAURICE EDWARDS circumstances. The power of teamwork and cooperation towards a common goal of success is, without question, the most significant ‘weapon’ any business or individual can have and harness. This book embodies a guide to success for individuals and organizations alike to: • Move from customer service to customer care • Increase their profitability by being true to themselves • Turn their staff into long-term employees • Establish and reinforce relationships that matter • Earn recognition in their fields • Gain the respect of others Each chapter represents an element of truth, a pearl of wisdom, for each of us to take into account, understand, and incorporate into our work and personal lives. Michael Virardi is convinced that the chapters in his book, his own “clues” to success, his own “Positive Impact”, will lead you to your own experiences of success as an individual and a professional.

Testimonials The end game of business is financial, but the business of business is social. People are your most important asset and Michael's book is essential in enhancing your human capital. Peter Economides - Global Brand Strategist

Author:

Michael Virardi This book is all about making a Positive Impact on the world at large, on others around you, and even on yourself. You’d be amazed at how many obstacles we build up around ourselves, without even knowing it. By taking you through a journey of story-telling, Michael Virardi specifies the 26 simple ways to boost your business and your life. By blending elements of customer service and sales and transforming them into something stronger than each alone, Michael explains how important it is to differentiate yourself in today’s market. Michael’s objective is to help readers to absorb his knowledge and experiences, accumulated through his life’s experiences, and to apply his messages as they see fit in order to achieve their goal, which is none other than personal and professional success. Success, however, is not something tangible; rather, it is a balanced blend of great relationships with others, professional recognition in your field and environment, and positive self-esteem. People need to be determined to offer added value in everything they do; at work, in their personal lives, and to themselves. Adding value to your products or services is not a matter of circumstances or capabilities; it is a matter of choice, your choice. We all need to go the extra mile, to offer that little bit more that sets us apart from the rest, and to differentiate ourselves in ways that add real value to our customers. Doing all this alone is quite a feat; this book helps you use the power of the collective, whatever your

65

Sept / Oct 2012

Most people have a deep desire for career advancement and success. Yet these are tough goals that lie at the end of a rocky and uphill road. Michael’s book, "Positive Impact", is a suitable guide for anyone who is aiming high and is determined to reach the top. Theodoros E Aristodemou - President of the Bank of Cyprus Group

About the Author Michael R. Virardi is a motivational speaker and inspiration coach who helps companies and individuals to dream big, achieve their goals, and transform themselves into whatever they wish to be. With a solid background in customer care, sales and management, Michael speaks on such issues as true customer care, boosting sales through personality, and differentiation for success. He is a sought-out speaker at seminars, training events, and conferences and always brings with him his passion for inspiring people, wherever he goes. An avid reader and visiting lecturer at several Universities, Michael believes that the tools to grow and become successful are inherent within us all; drive, passion, and will. g

WORLD BUSINESS MAGAZINE


BY GIVING JUST A FEW HOURS OF MY DAY

I HELP CHILDREN PREPARE FOR

ABECAUSE LIFETIME OF LEARNING I DON’T JUST WEAR THE SHIRT, I LIVE IT. GIVE. ADVOCATE. VOLUNTEER. LIVE UNITED

®

Ruth Rusie is part of United Way’s ongoing work to improve the education, income, and health of our communities. To find out how you can help create opportunities for a better life for all, visit LIVEUNITED.ORG. ®


Social Cause Article

HUMAN TRAFICKING

Crime Against Humanity By: STAFF

The human tragedy behind human trafficking

Maria’s story

Every day after school, Maria sold bread by the side of the road to supplement her family’s limited income. When business was slow, the 15-year-old chatted with Sofia, a 35-year-old woman who lived in the same Latin American village and often stopped by to visit. The two developed a friendship, and in 2004 Sofia made Maria an offer. She promised a high-paying job in the capital that would allow Maria to send money home and help pull her family out of poverty. Maria agreed and, at Sofia’s urging, did not tell her parents she was leaving. On the day of the trip, Sofia gave Maria a drink that made her dizzy, then unconscious. When she awoke, the two of them were in a taxi arriving at an unfamiliar restaurant in the capital. Sofia told Maria to go in and clean up, after which the taxi driver drove her and three other girls to a guesthouse. The taxi driver called them inside one after another; Maria was the last. Inside the guesthouse, the taxi driver raped her. Stunned and broken, but feeling powerless to stop what was happening, Maria was brought back to the restaurant, where she was forced to waitress for a month until Sofia returned. At that point, Sofia claimed to be Maria’s mother and collected the girl’s wages, then relocated her to another restaurant in the city. There, Maria was again forced to wait on tables, but soon the servitude extended to sex with customers in a backroom. Weeks later, the cycle was repeated: Sofia arrived, claimed Maria’s earnings and relocated her, this time to a dancing parlor. Suspicious of Sofia and Maria’s relationship, the owner of the establishment alerted the local authorities, but they took no action. At the dancing parlor, Maria was forced to work, but was not sexually exploited. Maria’s salvation finally came when, one night, her uncle happened to visit the dancing parlor. Recognizing Maria, he informed her parents, who sought assistance from a human rights association. Staff from the association freed Maria and filed a criminal suit against the perpetrators in a provincial court. In December 2005, Sofia was sentenced to 10 years in prison and fined approximately US$ 250, which Maria received as compensation. The taxi driver was not convicted. Despite Maria’s testimony, the investigating judge dropped the charges against him because Sofia and Maria made contradictory statements and Maria was unable to locate the guesthouse where she was raped. The judge made no attempt to summon witnesses from the guesthouse or restaurant.

The Blue Heart

The Blue Heart represents the sadness of those who are trafficked while reminding us of the cold-heartedness of those who buy and sell fellow human beings. The Blue Heart Campaign’s goal is to inspire people and mobilize support for action against human trafficking by international organizations, governments, civil society, the private sector and ultimately by individuals. The Blue Heart also aims to enable citizens to show their support to the cause and to increase understanding of, and create urgency around the issue of human trafficking in order to spur coordinated actions to fight the crime. In the same way that the red ribbon has become the international symbol of HIV/AIDS awareness, this campaign aims to make the Blue Heart into an international symbol against human trafficking. By “wearing” the Blue Heart you will raise awareness of human trafficking and join the campaign to fight this crime. g

In the time it has taken you to read these 3 stories, as many as twelve children across the globe have been trafficked – for sex.

67

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Health Article

CONSERVE YOUR ENERGY

Pushing the Limit By: SHARON CADENA

We’ve all had those days where we’re pushed to the limit. We’re physically exhausted, emotionally drained, and unable to give another ounce of attention to any meaningful task. It’s like we’re supposed to be the energizer bunny, and just “keep going, and going, and going.” Though, unlike the energizer bunny we must recharge our battery if we want to maintain health and well-being.

Be a sprinter not a marathon runner With all the tasks and responsibilities we are committed to, it can feel like we must be on the go constantly. Though, this approach can actually be counterproductive. A more efficient method to achieve productivity is to work in shorter intervals followed by short breaks. Specifically, work for about 90 minutes then take a 15 minute break. Working shorter intervals prevents burn-out by providing recovery time to rest the mind and recuperate from any accumulating stress. We need time for emotional, mental, and physical recovery. Expecting others or ourselves to work endlessly without a break is a perfect recipe for burn-out, so make time to take a break.

Learn to Maintain Energy Sometimes we just have to push through those extremely busy days. In order to keep energy level high during times of heavy work-load, there are a number of tips that can be applied. Positive Attitude - Learn to prevent stress by staying mindful of your thought process. Even if you don’t want to do something, find a way to reframe the circumstances that helps you keep a positive attitude. Energy comes from our attitude. With an enthusiastic and appreciative attitude, we will have much more energy and vitality. Uplifting Music – Listening to emotionally appealing music can be a wonderful way to stay energized, as long as you’re able to concentrate on what you’re doing, and are in a suitable setting, such as working from home or traveling in the car. Try putting on some uplifting and energizing music and sing along. Avoid caffeine and drink more water – Focus on drinking more water and staying hydrated in order to keep a more balanced energy level. By drinking water, you’ll feel healthier and will avoid the serious energy drain that comes from a caffeine crash. Recovery Time – Again take breaks during the day. Make sure to have moments where you can regain your attention capacity and refresh your emotional state. Even if it’s just a short break, make sure to put this in your schedule, and don’t neglect it. Sufficient Sleep – Getting enough sleep can be exactly what’s needed to maintain high energy. Many people can do without sufficient sleep for one or two nights, but don’t go without restorative sleep for too long. If you need to take a power nap, take one, otherwise exhaustion will always be on the horizon.

69

Sept / Oct 2012

Take a Day Off Everyone needs to take time off once on awhile, whether this is just one day a week or a more extended vacation. By taking a day off where you devote time to family, hobbies, and other responsibilities, you’ll begin to see more pronounced creativity and energy being applied to the rest of your week.

Even God took a day off, so don’t feel like you can’t make the time

We need a work-life balance to really enjoy what life has to offer. You don’t want to be incessantly working your entire life and one day look back on everything that passed you by. The movie Click is an excellent example of the regret that can come from getting stuck in the rat-race, and viewing every activity not directly related to our goals as a hindrance. Before we know it we’ve missed the most precious moments. Start to view time-off as an important value where you’re creating wonderful memories.

Stillness & Silence The modern times offer little rest and relaxation. We have forsaken stillness and silence for the constant sounds and activity of technology, media, and gossip. No matter how unnatural it may feel at first, learn to make time to get in touch with yourself through stillness and silence. This can provide a powerful tool to manage the stress of everyday life and avoid burnout.Make time in your life to dedicate to those people you care about, and those activities you truly enjoy. There is no need to wish for more time in the day, or to focus on “when” you’ll have more money and free-time. Learn to stay present before time passes you by. Accept that you may not get everything done all at once. You have your whole life ahead of you, so sit back, relax, and enjoy the party once in awhile. g

WORLD BUSINESS MAGAZINE


The “I’ll Just Have One More” Martini 3 oz. gin or vodka 1/2 oz. dry vermouth 3 olives 1 automobile 1 long day 1 diminishing attention span 1 too many Combine ingredients. Drink. Repeat. Mix with sharp turn, telephone pole.

Never underestimate ‘just a few.’ Buzzed driving is drunk driving.


Education Review

UNIVERSITY OF TORONTO, SCARBOROUGH

Velut arbor - As a Tree Through the Ages By: Staff

Ideas, insights, knowledge & opportunities await.

Toronto is the best of all worlds. The city has exceptional diversity: nearly half of Toronto’s 2.5 million residents were born outside Canada. The city’s living mosaic continues to draw the best and the brightest, who come here seeking world-class business, culture and education in one of the safest cities in North America. University of Toronto is world-renowned university in a celebrated city where knowledge meets achievement, history meets future and ambition meets inspiration. According to the Times Higher Education Supplement, 2010, the University of Toronto is one of six universities world-wide ranked in the top 17 for all fields. The other five are UC Berkeley, Cambridge, Oxford, Stanford and UCLA. Located in St. George Street in Toronto - North America's thirdlargest financial centre, the School’s MBA program is now ranked in the top 15 in North America by the Financial Times. The faculty, 72 per cent of which is international, is currently ranked 16th worldwide by the for its research output.

innovative programs and close interaction with Canada’s leading faculty benefit from a vibrant campus life and the reputation that only “Canada’s #1 research university” can provide.

UTSC Story The Scarborough campus was established in 1964 out of a spirit of innovation and engagement. The vision for the university was to complement strong academic programs with experiential learning practices in an intimate and welcoming environment. The university has come a long way since those early days, when it was known as “Scarborough College,” with the addition of new students, new faculty and new buildings. And, as you’ll see in this view book, there are a lot of exciting changes on the horizon for the UTSC campus and student body.

Alumni

University of Toronto Scarborough University of Toronto Scarborough offers the ambitious student unlimited possibilities for academic and personal growth through

Job Placement:

85%

Interesting fact: The school's dean, Roger Martin, is considered by Business Week as one of the most influential management thinkers in the world.

71

Sept / Oct 2012

Donald Sutherlan

Lorne Michaels

WORLD BUSINESS MAGAZINE


Education Review

Learning for Today’s World The UTSC educational experience is continually evolving to give its students an edge when it comes to acquiring advanced degrees or gaining employment. On the path to achieving their goals, students seek answers that address real-world challenges. Students can explore current issues in programs like new Media Studies or Strategic Management, or consider crossing traditional academic boundaries through programs in biological Chemistry, Global Asia Studies or neuroscience. You can also customize your studies by creating unique combinations of double majors and minors. The result? Dynamic, relevant new programs that offer you countless academic and employment opportunities. Students on the UTSC campus have no shortage of resources to draw from. With the scale and population of a mid-sized Ontario University, UTSC has a full breadth of programs and support services that are available to assist you. What’s more, we’re part of the University of Toronto system, so students can access the resources that are associated with the largest university in Canada. g

WORLD BUSINESS MAGAZINE

What I appreciated most about UTSC was that it is a very unique and friendly environment where people from diverse cultural backgrounds can interact and learn from each other.” Juanma – Graduate 2011, Economics for Management Studies “I joined UTSC because it’s the kind of community where students and faculty are supported and encouraged to try new things and take risks.” Prof. Maydianne Andrade “When we engage with the world in meaningful ways, we have an opportunity to broaden our critical considerations – and then bring that understanding back to enrich our academic inquiry.” Prof. Rickhalpern - Dean, University of Toronto Scarborough

Sept / Oct 2012

72


Travel Review

MEDITERRANEAN SEA

4 Spectacular Gems By: STAFF

Derived from the Latin word mediterraneus for "inland" or "in the middle of the earth," the Mediterranean Sea covers an approximate area of 2.5 million km². An important route for merchants of ancient times, the Mediterranean region allowed for trade and cultural exchange between emergent people. Today, the area is full of gems for the discerning traveler.

Aeolian Islands, Italy One of our favorite places of the Mediterranean for their exceptional beauty, the archipelago, not far from Sicily, consists of eight islands of volcanic origin, with incredible and unique views that have the power to astonish even the most skeptical traveler. A beach with azure waters, the mountainous islands are also home to ancient historical towns with narrow streets, Mediterranean-style homes and fine restaurants. If you are a lover of beach holidays, you should visit the Aeolian Islands at least once.

73

Sept / Oct 2012

Cassis, France For those who love the French style of holiday, Cassis is a place that will not disappoint. Located near Marseille in the south, the town of Cassis is famous for its spectacular cliffs, many coves with hidden beaches and wine. Apparently, the city was the first of three French vineyards to benefit from the designation of origin (label of origin) introduced in 1930. Today, the famous white wine from Cassis is the symbol of this fascinating region.

WORLD BUSINESS MAGAZINE


Travel Review

Malta Lonely Planet Malta is called “a microcosm of the Mediterranean.” In fact, they’re right. Malta is a mix of Europe and North Africa with Arabic influences, which make it a place so different, fascinating and unique. Particularly rewarding for history buffs, admire the beautiful architecture from the Norman, Gothic, Renaissance and Baroque periods, while also enjoying ancient buildings dating back to 6,000 years ago, with several museums from archeology to modern history.

WORLD BUSINESS MAGAZINE

Hydra, Greece The first reason to love Hydra is that cars and motorcycles are not allowed by law on the island. Hydra is truly a special place among the islands of the country Greece, making you feel the spirit of traditional Greece with a coast full of small ports, clear waters and a number of excellent restaurants. The cluster of small houses and traditional streets along the coast reminds one of being in a romantic movie. g

Sept / Oct 2012

74


Food Review

THE IVY

From London to Dubai By: Gianluca Trigoni

The Ivy, Dubai is situated in the heart of Dubai’s business district at The Boulevard of the luxurious and iconic Jumeirah Emirates Towers. The Ivy here has not only managed to replicate the kind of hype associated with the original, but has also successfully replicated the venue in every last detail – from the wall-to-wall wood panelling and distinctive green leather chairs to the famous stained-glass lattice windows. If it weren’t for the work of prominent regional artists adorning the walls, you’d be forgiven for thinking you’d woken up in the West End. But if you’re willing to embrace this illusion, you’re likely to have a very enjoyable experience. I was more than ready to embrace the illusion. With temperatures outside hitting the high 40s, I was happy to escape Dubai just for a few hours. My illusory London getaway was made all the more sweet by the service. From the moment my date and I walked in to the moment we sat down and the moment I covered the pristine white tablecloth with breadcrumbs, the service was faultless. You can argue that The Ivy Dubai lacks soul, but its service is genuine and warm. Serving lunch and dinner, the restaurant offers a brasserie-style menu with a selection of Ivy classics. An ideal place for a business lunch, evening dinner or simply a drink at the bar, the restaurant is also able to accommodate up to 18 guests in the private dining room for a more secluded experience. Enter into The Ivy’s signature oak-paneled doors and delight in an intimate dimly-lit interior complete with harlequin stained glass win-

75

Sept / Oct 2012

dows and contemporary artwork aligning the walls. The London restaurant was designed by Martin Brudnizki who sought to recreate the restaurant’s West Street original in Covent Garden within new surroundings- the spot of the former Scarlett’s. The Ivy’s arrival has hit the Dubai social scene with a bang. Already known as a London celebrity-haunt, word was out that the Dubai restaurant already had a waiting list in just the first few weeks of opening. It’s not hard to see why; exquisite British culinary creations are served elegantly by knowledgeable staff and in an interior which is perfectly slated for the arty crowd. The restaurant’s spacious interior can seat up to 40 guests in the bar and lounge area while the main restaurant can accommodate up to 90 heads and the outdoor terrace placed in the interior of The Boulevard another 60. There is also a private dining room with room for 16. The Executive Chef is none other than Colin Clague formerly of Zuma. While the menu is predominantly British and European, every so often you’ll catch a slight Japanese twist. In London, The Ivy is an institution that is visited as much for its food as for its reputation as a meeting place for celebrities and socialites. I’m unsure whether someone of continental culinary heritage would be as enthused by The Ivy - Dubai dishes, but then The Ivy is less of a dining experience than it is a restaurant experience – and, in this respect, it excels. The Ivy is a sure hit and merits many returns. g

WORLD BUSINESS MAGAZINE


Automobile Review

SPEED PERSONIFIED

Answers to Your Power Prayers By: MARTIN JARED

BMW Zagato Roadster

Italian finesse meets Bavarian roadster tradition

B

arely three months after the sensational premiere of the BMW Zagato Coupé, BMW and Zagato are turning heads again at the 2012 Pebble Beach Concours d’Elegance with the fruits of their latest collaboration. Created in just six weeks’ worth of lavish handcraftsmanship, the BMW Zagato Roadster represents another masterful ex-ample of the traditional coachbuilder’s art and an elegant take on the sporty, masculine marker laid down by the BMW Zagato Coupé. At the Pebble Beach Concours d’Elegance, this one-of-a-kind automobile finds itself in the best possible company. Every year connoisseurs and exponents of coach built classics come together on California’s Pacific coastline to gorge on, mull over and be amazed by an array of automotive exotica. Indeed, you’d be hard pressed to find a more appropriate venue for the premiere of the BMW Zagato Roadster.

77

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Automobile Review

Audi R8 V10 The Art of Power Seduction

T

his Audi probably would have never happened had Porsche gained control of the Volkswagen Group five years earlier. But now the Audi R8 V10 is out, larger than life and even better than expected. True, the Gallardo is sharper. The SL63 AMG is wilder. And the 911 Turbo is all that in a more compact package. But in terms of total dynamic balance; anyone-can-do-it, A-to-B ground-covering ability; and that all-important blend of confidence, compliance, and comfort, the 5.2-liter V-10-powered R8 is the new leader of the pack. It doesn’t get much better than this. Nobody could fail to spot one of these in the rear-view mirror – and the exhaust note as it goes past is sublime. The aluminium-bodied R8 sits firmly planted to the tarmac and is every inch a supercar from all angles. A see-through section over the mid-mounted engine is the cherry on the cake. g

WORLD BUSINESS MAGAZINE

Sept / Sept Oct 2012 / Oct 78


Culture Fashion

FASHION IMPERATIVES

Trend Watch Out

By: KATHLEEN WILCOX

Over the Knee Boots From Paris to New York, this "go-with-everything" boot trotted down runways, perfectly tapping into the season's mood of feminine power dressing. In New York, Alexander Wang, Joseph Altuzarra and Vera Wang, to name a few, showed just-above-the-knee to thigh-high leather boots, ranging in colour from nudes and browns to burgundies and blacks. During these swiftly darkening days, fashionistas everywhere are picking up on the decided downbeat--but totally trotworthy--trend of strapping on a pair of over the knee boots for everything from a strut through the maze of cubicle land, to a trip through Tarjay, to your standard night on the town. An older woman can totally rock the look, but she needs to mind the gap. When worn with a garment that comes down to the top of the boot, you get a sleek look that’s age appropriate. Over the Knee Boots are being shown on every runway, but usually with short skirts or even shorts. Sleek, ultra-sexy yet powerful, this boot is a celebrity favourite. Angelina Jolie, Gwyneth Paltrow and Emma Roberts have all been caught on camera wearing over-the-knee boots.

81

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Culture fashion

Rocking White

Blouse

One of fashion’s most basic classics is the white shirt. Done up or done down this piece is such an icon of fashion that everyone needs to have a good one in their closet. Forget Granny's tyrannical rule: no white after Labour Day. Nothing says "Fall!" like a jaunty white blouse - and this season is offering a multifarious medley of funky cuts that are in violent opposition to anything Plain Jane would wear. The varieties are endless -- cotton with stretch, fitted silhouettes, cuff and sleeve details, and collar variations -- but they all work under everything from cardigans to jackets or on their own with wide-leg trousers. Even though the concept of a crisp white top is very simple, you can showcase a huge assortment of styles through different designs (ruffles are romantic, origami pleats are futuristic, and so forth). No matter what your shape, fashion proclivities, age or jobby-job, the white blouse will never go out of style. It just so happens that this season, there's a fresher crop of options from which to pluck your pick.

Editor’s Choice Do Go Monochromatic for a Classy Over-the-Knee Boot Look Jennifer Lopez rocks one of the best over-the-knee boot looks with these sexy thigh high suede boots. The high heel goes great with her short black dress (and this is funny, but the boots must be on loan because a close-up shot of the soles reveals tape to keep them from getting scuffed up.) J Lo adds a pop of contrast to the monochromatic look with a cool fringed brown leather bag.

WORLD BUSINESS MAGAZINE

Sept / Sept Oct 2012 / Oct 82


Arts Culture

Turkish Culture

A Country for All Tastes By GIANLUCA TRIGONI

Turkey has so much to offer her visitors; breathtaking natural beauties, unique historical and archaeological sites, steadily improving hotel and touristic infrastructure and a tradition of hospitality and competitive prices. Therefore, it is not surprising that this country has recently become one of the world's most popular tourism destinations. Due to Turkey's diverse geography, one can experience four different climates in any one day. The rectangular shaped country is surrounded on three sides by three different seas. Its shores are laced with beaches, bays, coves, ports, islands and peninsulas. The summers are long, lasting as long as eight months in some areas. Turkey is also blessed with majestic mountains and valleys, lakes, rivers, waterfalls and grottoes perfect for winter and summer tourism and sports of all kinds.

Dance Turkey has a very ancient folk dance tradition, which varies from region to region, each dance being colorful, rhythmic, elegant and stylish. Folklore has also had a considerable influence on bal-

83

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Arts Culture

The Mevlana Whirling Dervishes let. First imported from Europe and Russia, ballet became institutionalized in the Republican era along with other performing arts. The Turkish State Ballet owes its momentum and development to the great British choreographer Dame Ninette de Valois. The State Ballet in both Ankara and İstanbul has, for decades, performed many world classics. Several new foreign and Turkish productions have been introduced into the repertoire over the years and a number of modern dance groups like the infamous “Fire of Anatolia” (Anadolu Atesi) have recently begun to give performances all over the world.

Music

Turkish Folk Dancer

Turkish music evolved from the original folk form into classical through the emergence of a Palace culture. It attained its highest point in the 16th century through the composer “Itri”. Folk music has developed gradually over the centuries in the rural areas of Turkey. It is highly diversified with many different rhythms and themes. Musical archives contain almost 10,000 such folk songs. Turkish religious music, mostly in the form of songs, is centuries old and rich in tradition, embodied most perfectly by Sufi (Mevlevi) music. The Turks were introduced to western classical music through orchestras, which were invited to the Sultan's Palace to celebrate occasions such as weddings.

Opera & Ballet In the period prior to the proclamation of the Republic in Turkey, opera, ballet and the theatre were mostly centred around Istanbul and Izmir. The first showing of opera at the imperial court was by artists trained by Guiseppe Donizetti (1788-1856) from the Italian opera. During the Republic, Ahmet Adnan Saygun, Necil Kazım Akses and Cemal Reşit Rey were the first composers of opera, operettas and musicals. A. Adnan Saygun’s first two operas, Özsoy and Tasbebek, Necil Kazım Akses’s Bay Önder staged in Ankara, a Mozart musical Bastien and Bastienne staged at the Ankara State Conservatory with pupils playing libretto in Turkish (1936),and the staging of western

WORLD BUSINESS MAGAZINE

operas such as Madame Butterfly and Tosca (1940-1941). The orchestrations, chorus and solo recitals of 1950-1952 all contributed to form a foundation for the establishment of today’s State Opera and Ballet. Notwithstanding the short history of opera in Turkey which only spans 56 years, the General Directorate of State Opera and Ballet counts amongst its members many artists of international fame, and aside from Ankara and Istanbul, many other branches have been set up in cities around the country and the results everywhere have been very successful.

Sept / Oct 2012

84


Arts Culture

Fine Arts Until the 18th century, painting in Turkey was mainly in the form of miniatures, usually linked to books in the form of manuscript illustrations. In the 18th century, trends shifted towards oil painting, beginning with murals. Thereafter, under European inspiration, painting courses were introduced in military schools. The first Turkish painters were therefore military people. In 1923, following the proclamation of the Republic, a society of contemporary painting was set-up, followed by many other such schools. Art exhibitions in Turkey’s cities multiplied, more and more people started to acquire paintings, and banks, and companies began investing in art.

Theatre & Cinema Turkish theatre is thought to have originated from the popular Karagöz shadow plays, a cross between moralistic Punch and Judy and the slapstick Laurel and Hardy. It then developed along an oral tradition, with plays performed in public places, such as coffee houses and gardens, exclusively by male actors. Atatürk gave great importance to the arts, and actively encouraged theatre, music and ballet, prompting the foundation of many state institutions. Turkey today boasts a thriving arts scene, with highly professional theatre, opera and ballet companies, as well as a flourishing film industry. The country enjoys numerous performing arts festivals throughout the year, the most prestigious of which is the Istanbul International Festival and the Antalya Film Festival.

Literature Literature has long been an important component of Turkish cultural life, reflecting the history of the people, their legends, their mysticism, and the political and social changes that affected this land throughout its long history. Nowadays, the irrefutable master of the Turkish popular novel is Yaşar Kemal, with his authentic, colorful and forceful description of Anatolian life. Young Turkish writers tend to go beyond the usual social issues, preferring to tackle problems such as feminism and aspects of die East-West dichotomy that continues to fascinate Turkish intellectuals.g

The Nobel Prize in Literature for 2006 was awarded to the Turkish writer Orhan Pamuk who in the quest for the melancholic soul of his native city discovered new symbols for the clash and interlacing of cultures.

85

Sept / Oct 2012

The Kurdish form an Integral part of the Turk Culture

WORLD BUSINESS MAGAZINE


Movie Review

KILLING THEM SOFTLY – THE MOVIE

Dark, Cynical & Fairly Great By: ANASTASIA YUDINA

Cosmopolis Jackie Cogan is a professional enforcer who investigates a heist that went down during a mob-protected poker game.

A tasty modern crime yarn with political overtones, Brad Pitt and an over-weaning sense of style.

Synopsis Adapted from George V. Higgins novel and set in New Orleans, Killing Them Softly follows professional enforcer, Jackie Cogan (Pitt), who investigates a heist that occurs during a high stakes, mob-protected, poker game. Under the eye of a mysterious driver, Jackie must track down and punish those responsible for the heist. His assignment is complicated by those he comes up against along the way - an aging, drunken hit man, some bumbling local gangsters, and the ladies’ man who ran the ill-fated game. Cast: Brad Pitt – Jackie Cogan, James Gandolfini - Mickey, Ray Liotta - Markie Trattman, Richard Jenkins – Driver, Scoot McNairy - Frankie, Ben Mendelsohn - Russell, Vincent Curatola - Johnny Amato America’s not a country, it’s a business. Now fucking pay me.” These aren’t just stand-out lines from this stark, bitterly funny, savagely cynical crime drama; they’re its mission statement. In 2007’s The Assassination of Jesse James by the Coward Robert Ford, producer-star Brad Pitt and writer-director Andrew Dominik took down a national icon; this time, it’s the whole damn nation. A juicy, bloody, grim and profane crime drama that amply satisfies as a deep-dish genre piece, Killing Them Softly rather insistently also wants to be something more. Dominik’s outstanding Killing Them Softly has the rigor and poise of the great American crime pictures of the 1970s. It is a loose adaptation of George V Higgins’ 1974 crime novel Cogan’s Trade, relocated from Boston to New Orleans, 2008, a city bludgeoned by Hurricane Katrina and suckerpunched by the Great Recession. Moving the action to decimated post-Katrina New Orleans without a tourist in sight, Dominik

WORLD BUSINESS MAGAZINE

not a coun“ America’s try, it’s a business. Now” has done a keen, disciplined job of coaxing the plot out of the shadows while retaining the flavor of underclass lingo and attitude. With the background dominated by thenpresidential candidate Barack Obama’s optimistic speeches stressing the availability of “the American promise” to all, as in almost every scene, televisions blare with Obama’s Presidential campaign promises, but the story that unfolds gives the lie to his hopeful rhetoric. Pitt plays Jackie Cogan, a hired killer paid to clean up the aftermath of a heist on a mob-controlled poker game by two weaselly wannabes on the make (Scoot McNairy and Ben Mendelsohn). His modus operandi is stealth: "I like to kill them softly, at a distance," he explains, although needless to say, things don't pan out entirely in accordance with his wishes. He is assisted by Mickey (James Gandolfini), a monstrous backup assassin who looks as if he should be living under a bridge, eating goats. The film is terribly smart in every respect, with ne’er-a-false note performances and superb craft work from top to bottom, but it never lets you forget it, from Pitt’s pithy excoriation of Thomas Jefferson’s hypocri-

fucking pay me.

sy right down to his “Crime is the business of America” final line that is bound to be widely quoted. The film noir crime dramas of the late 1940s and early 1950s were about a palpable unease in the country, but this remained a subtext rather than the overt subject of the films. Here, Dominik explicitly articulates his intended meanings, which have to do with money, institutional rot and what happens when you don’t keep your economic house in order. Dominik shoots the action in a grimy shallow focus, as if the entire nation is cloaked in a miasma of atomized filth, and his screenplay is tough as beaten steel and shot through with pessimistic, even nihilistic humor: Pitt’s electrifying final speech is worth the price of admission alone. Either approach is valid but, perhaps in this day and age, audiences need their messages to be quick and direct. Killing Them Softly delivers them that way. g

them softly, at ” “ I like to akilldistance

Sept / Oct 2012

88


Sports Football

PAVEL NEDVĚD

Legend of Calcio By: STAFF

Profile Date of Birth:

Aug 30, 1972

Place of Birth:

Cheb, Czechoslovakia

Nationality:

Czech

Height:

5ft 10 in

Weight: 70 Kg Position:

Left Midfielder

Awards and Honours Sparta Prague Lazio 4 4 4 4 4

Serie A: 2000 Coppa Italia: 1998, 2000 Supercoppa Italiana: 1998, 2000 UEFA Cup Winners' Cup: 1999 UEFA Super Cup: 1999

4 Czechoslovak League: 1993 4 Czech Gambrinus Liga: 1994, 1995 4 Czech Republic Cup: 1996

La Furia Ceca - “The Czech Fury”

Juventus 4 Serie A: 2002, 2003 4 Supercoppa Italiana: 2002, 2003 4 Serie B: 2007 Personal Awards 4 Czech Footballer of the Year: 1998, 2001, 2003, 2004, 2008 4 UEFA Team of the Year: 2003, 2004, 2005 4 Euro 2004 Team of the Tournament Career Goals 4146 Club Goals & 32 International Goals

Some players are simply unmistakable. Edgar Davids had his trademark protective goggles; Roberto Baggio had his curly ponytail, Ruud Gullit, his manic dreadlocks…and Pavel Nedvěd, with his instantly recognisable golden locks. But it is as much for his style of play rather than his resemblance to Owen Wilson that Nedvěd is remembered for. The Czech Fury, fondly nicknamed by Bianconeri supporters after it quickly became apparent that he would be more than simply a replacement for the Real Madrid bound Zinedine Zidane, Nedvěd became a legend in his own right, terrorising defences throughout Italy and Europe with his trademark rocket fuelled surges towards the opposition goal. He possessed an uncanny way of moving across the pitch, with speed, control and grace. It is hard to describe his movement, because although

89

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Sports Football

After the final whistle, he was given a standing ovation by both Juve and Lazio fans.

he looked like a speeding locomotive that must have made even the likes of Maldini and Nesta feel like rabbits in headlights, there was something graceful about it. Graceful, and yet messy. Almost untidy. But boy could he move, and his shot was one of the most feared across the world.

Club Football Nedvěd began playing football in his native Czech Republic. He moved to local giants Sparta Prague and won the league title in only his first season at the capital. After spending four seasons in Prague, he was snapped up by S.S. Lazio following his good performances at Euro 1996. In the summer of 1996, Nedvěd moved to Rome to join Lazio and enjoyed a successful spell at the Italian capital. He quickly became a crowd favourite and formed a formidable midfield with the likes of Dejan Stanković and Robero Mancini. At the 1999 UEFA Cup Winners' Cup final, his goal in the 81st minute sealed the title for the biancocelesti. After the end of the decade, Lazio suffered financial problems and Nedvěd was signed by Serie A giants Juventus for €41 million as a replacement for Zinedine Zidane, who had left for Real Madrid. He became a fan favourite and gained the nickname La Furia Ceca (The Czech Fury) due to his relentless energy and runs down the left wing. Once he moved to Juventus, he looked as if no other shirt would do. Not to say that he did not give his all for his other clubs, but he lived and breathed Juventus. He was an integral part of the Bianconeri’s spine along with Buffon, Del Piero and Cannavarro.

When Juventus were forcibly relegated due to the match-fixing scandal, Nedvěd's future was heavily discussed but he decided to stay in Turin in order to help the club gain promotion to Serie A. Together fellow veterans David Trézéguet and captain Alessandro Del Piero, the three of them scored 47 of the 83 goals Juve scored in Serie B as they won promotion at the first time of asking. Nedvěd initially planned to retire after the 2007-08 season but decided to extend his contract for another season in order to play in the Champions League for the last time. During the 2008-09 season, he announced his retirement in a press conference despite calls from some fans to postpone it. He played his last game as a professional against Lazio, his former team, and was handed the captain's armband for the day by his good friend Alessandro Del Piero. Juventus won 2-0 to finish in second place with Nedvěd supplying the assist for Vincenzo Iaquinta's second goal of the match. After the final whistle, he was given a standing ovation by both Juve and Lazio fans.

International Football Nedvěd made his full international debut in November 1992 against Romania. He was one of the key players in the Czechs' run to the final at the Euro 1996 and has also captained the team on many occasions. Initially Nedvěd retired after the Euro 2004, in which he was named in the Team of the Tournament. However, he came out of retirement and helped the Czech Republic qualify for their first World Cup since the break-up of Czechoslovakia. However, they were unable to advance to the knockout stages and he made his retirement final in August 2006. He refused calls from teammates to come out of retirement to play at the Euro 2008. Now a Director of Football at Juventus, Nedvěd’s passion for the beautiful game does not look like dwindling any time soon. With a young son whom is his namesake and who Pavel senior trains, this may well not be the last time we witness a Pavel Nedvěd on a football pitch. g

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

90


Sports Tennis

MARTINA HINGIS

Princess of the WTA By STAFF

Profile Birthdate

September 30, 1980

Birthplace

Kosice, Slovakia

Height

5’7’’ (1.70 m)

Weight

130 lbs. (59 kg)

Plays

Right-handed (two-handed backhand)

Status

Pro (October 14, 1994)

BEST KNOWN FOR

What rivalry? I win all the matches.

Little Swiss Miss Martina Hingis was the top women's tennis player in the world in the late 1990s, but ankle injuries and a cocaine scandal cut her career short.

Martina Hingis was born in what is now regarded as Slovakia on September 30, 1980. Sometime after, her parents divorced and her mother, Melanie Molitor, moved her daughter to Switzerland, her home ever since. Her mother has been the driving force in her life and has served as her only coach throughout her illustrious career.

Early Years A fantastic player in her own right, her mother imparted to Martina an uncanny ability to control a match and finish a point with flair and flawless technique. So sure was she that her daughter would become a tennis star, that she named her after the most celebrated female player at the time of her birth, Martina Navratilova. A symbol of tennis dominance and freedom because of her defection to the United States, Navratilova represented the type of player and person Molitor wanted her daughter to become.

Tennis was like being on holiday all year ‘round

By the age of four, Hingis was competing in tournaments and displaying a natural talent to strike the ball. Two years later she was playing against girls over the age of nine. Athletic pursuits were her life at the time, as she would participate in tennis clinics by day, play a soccer game in the evening and then hit more balls at night. Martina also demonstrated a love for horseback riding that has persisted to the present day.

A New Player in Town Hingis blitzed through the Swiss ranks as a child, winning a succession of tournaments and becoming the under-18 champion. At the unbelievable age of 12, Martina won the junior French Open and announced her presence to the tennis world. Two years later, she took advantage of the lax age restriction rule on tour and joined as a professional. Her impact was immediate as she began to upset more experienced and older players en route to becoming a dazzling sensa-

91

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Sports Tennis

She’s as mean as a snake. She reminds me of me. -- Martina Hingis on Maria Sharapova.

In November 2007 she announced her retirement, still plagued by health problems and after having tested positive for cocaine at the Wimbledon tournament earlier in the year - a charge she strenuously denied. With 40 career titles in singles, a slew of doubles triumphs and millions of dollars in prize money, Hingis has an important place in tennis history. Hingis proved that nothing is better to watch than a court maestro adept at spin, ball trickery and shot variety. g

During a coin toss once, Hingis tweaked Davenport by saying, “ Do you want me to serve or break you?”

tion on the court and off. At the end of the year, Hingis cracked the top 100.

Hingis on a High Her career since then has been nothing short of spectacular, with five Grand Slam titles and the designation as one of the best doubles players of all time. Before the advent of the power game on the female tour with women like Venus and Serena Williams, Lindsay Davenport and Jennifer Capriati, Hingis dominated and took over the mantle held high by Steffi Graf as the best in the world. Between 1997 and 1999 she won five Grand Slam tournaments: the Australian Open three times, the US Open and Wimbledon once apiece, making her the youngest ever winner of the prestigious English tournament. She dominated women’s tennis from 1997 to 2001, holding the world number one ranking for 209 consecutive weeks. In her career, she has won a total of 43 WTA Tour singles titles and 37 WTA doubles titles. Her doubles titles include the Wimbledon (1996, 1998), the Australian Open (1997, 1998, 1999), the US Open (1998), and the French Open (1998, 2000). She announced in October 2002 that she planned to take an indefinite break from tennis because of a recurring foot injury. However, she embarked on a successful comeback in January 2006, finishing 6th in the world rankings. Martina also won the Australian Open mixed doubles title (with Mahesh Bhupathi) and the Italian Open. She received the Laureus World Sports award for comeback of the year in 2006.

WORLD BUSINESS MAGAZINE

I’m glad you’re doing this story on us and not on the WNBA. We’re so much prettier than all the other women in sports

Sept / Oct 2012

92


Sports Formula1

AYRTON SENNA

Failure Not an Option By: STAFF

Profile Day of birth: March 21, 1960 Place of birth: São Paulo Nationality: Brazilian Died: May 1, 1994 Active Years: 1984–1994 World Championships: 3 Grand Prix Entries: 162 Grand Prix wins: 41 Pole positions: 65

In life unbeatable, in death irriplaceable.

He streaked through the sport like a comet, an other-worldly superstar whose brilliance as a driver was matched by a dazzling intellect and coruscating charisma that illuminated Formula One racing as never before. No one tried harder or pushed himself further, nor did anyone shed so much light on the extremes to which only the greatest drivers go. Intensely introspective and passionate in the extreme, Ayrton Senna endlessly sought to extend his limits, to go faster than himself, a quest that ultimately made him a martyr but did not diminish his mystique. Ayrton Senna da Silva was born on March 21, 1960, into a wealthy Brazilian family where, with his brother and sister, he enjoyed a privileged upbringing. He never needed to race for money but his deep need for racing began with an infatuation for a miniature go-kart his father gave him when he was four years old. As a boy the highlights of Ayrton's life were Grand Prix mornings when he awoke trembling with anticipation at the prospect of watching his Formula One heroes in action on television. At 13 he raced a kart for the first time

and immediately won. Eight years later he went single-seater racing in Britain, where in three years he won five championships, by which time he had divorced his young wife and forsaken a future in his father's businesses in favour of pursuing success in Formula One racing, where he made his debut with Toleman in 1984. At Monaco (a race he would win six times), his sensational second to Alain Prost's McLaren - in torrential rain - was confirmation of the phenomenal talent that would take the sport by storm. Arguably faster than any other driver of his era, as his 41 grand prix wins and three world titles proved, Senna also had a ruthless streak like no other. Prior to his death at Imola in 1994, his incredible skill was showcased with some sensational wins, like his record six at Monaco and the famous displays of wet weather virtuosity at Estoril and Donington Park. One of the remarkable victories of Ayrton was the one at at Interlagos (Brazil) when he was saluted euphorically by Juan Manuel Fangio

Fear is exciting for me

93

Sept / Oct 2012

I have no idols. I admire work, dedication and competence.

WORLD BUSINESS MAGAZINE


Sports Formula1

Emotion, pleasure and challenge 1991, when asked about what he felt at 300 km/h

'The best driver with the best car cannot have other result but the championship itself,' it was said. Nevertheless, the year started with difficulties to Ayrton with two poles and two retirements in Brazil and Pacific, while his challenger, Benetton's Michael Schumacher won both races. Next episode, final episode, would be that of San Marino. His self-absorption did not preclude deep feelings for humanity and he despaired over the world's ills. He loved children and gave millions of his personal fortune (estimated at $400 million when he died) to help provide a better future for the underprivileged in Brazil. Early in 1994 he spoke about his own future. "I want to live fully, very intensely. I would never want to live partially, suffering from illness or injury. If I ever happen to have an accident that eventually costs my life, I hope it happens in one instant."

My biggest error? Something that is to happen yet.

Being second is to be the first of the ones who lose. on the podium (Argentine five-times champion pointed Brazilian as his successor). Senna said farewell to McLaren with a win - the last of his career - at Adelaide (Australia). Frank Williams contracted Senna to drive one of his cars for 1994 season, alongside Damon Hill.

And so it did, on May 1, 1994, in the San Marino Grand Prix, where his race-leading Williams inexplicably speared off the Imola track and hit the concrete wall at Tamburello corner. Millions saw it happen on television, the world mourned his passing and his state funeral in Sao Paulo was attended by many members of the shocked Formula One community. Among the several drivers escorting the coffin was Alain Prost. Among the sad mourners was Frank Williams, who said: "Ayrton was no ordinary person. He was actually a greater man out of the car than in it." g

“ WORLD BUSINESS MAGAZINE

If you have God on your side, everything becomes clear.

Sept / Sept Oct 2012 / Oct 94


Infotainment Brand

BURBERRY CAMPAIGN Evolution & Volume By: Gianluca Trigoni

95

Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Infotainment Brand Images © Copyright Burberry/Testino

“We wanted to play with everything that’s at the heart of the Burberry world – celebrating our brand and London through imagery, film, music, weather and our iconic outerwear, all in a very poetic and British way. Using London as the backdrop, we shot the series of cinematic, emotive black and white images and short films with the incredibly talented Gabriella Wilde and Roo Panes, who effortlessly bring the campaign and our collections to life across all of our platforms.” Christopher Bailey, Burberry Chief Creative Officer

WORLD BUSINESS MAGAZINE

Sept / Sept Oct 2012 / Oct 96


Infotainment Brand

It was like welcoming an old friend; their looks have changed, but the warm familiarity is still there. This, however, was no living person that we were welcoming, rather it was Burberry’s interpretation of Autumn / Fall 2012 as it took to one of fashion week‘s runways. I think by now you guys know that we are fans of Burberry (if only for their classic trench). I recently came across their new Ad Campaign for their 2012 Autumn/Winter Collection. I was immediately drawn to it due to its cinematic feel. I love the whole monochrome stills from a movie vibe it has going on. Creative director for the shoot Christopher Bailey and famed photographer Mario Testino have done an excellent job of showcasing the collection as well as drawing in attention to look at the images as a whole rather than just staring at the clothes. I get an art gallery kind of vibe from these shots, they wouldn’t be seen out of place in a photography exhibition. If you recall last season, Burberry enlisted My Week With Marilyn actor Eddie Redmayne and model Cara Delevingne to display their designer duds. In continuance with their trend of hiring a female model and male celebrity, Burberry has enlisted Gabrielle Wilde and

97

Sept / Oct 2012

Images © Copyright Burberry/Testino

"I'll Move Mountains" Singer Roo Panes to assist with their marketing campaign. The ads take place on a quintessential foggy London night. Both Gabrielle and Roo seem to share a chemistry and both look amazing in Burberry's latest collection that includes jackets, shirts, dresses, sweaters, and of course, the aforementioned trench coat. So well established is the fashion house’s branding that Burberry can always feel familiar. We all know what to expect of it. We all know that the catwalk will offer up many twists on outerwear, particularly the trench coat, and that the collection’s true creative spark is generally found in other pieces where the outerwears’ motifs and details are fully explored. Familiarity needn’t breed contempt, and Burberry Autumn / Fall 2012 offering is proof of that.

WORLD BUSINESS MAGAZINE


Infotainment Horoscope

The month ahead

What it Holds for You By: Paula von Straten

AQUARIUS (JAN 20-FEB 18)

The love of your life is a bit closer to home than you think. You need to show patience and keep your feet very firmly on the ground, but still remain sharp enough to grasp each opportunity that comes your way. Neptune in Aquarius will help you with the patience side of the equation, but it is up to you to break free of outside influence and stay on course. Don’t make any wild claims about financial matters this month as these things have a way of coming back to haunt you.

TAURUS

(APRIL 20-MAY 20) A chance encounter leads to something more this month, keep your eyes peeled. Don’t let that golden opportunity pass you by, you know you can do better, success is within your grasp this month. You are in danger of getting stuck in a rut but don’t worry by next month things will improve and perhaps a chance to book that holiday you have been dreaming about. The planet Jupiter will give you inspiration and allow your ideas to bear fruit. Don’t worry this month lady luck is smiling down on you.

LEO

(JULY 23-AUG 22) There is nothing wrong with dreaming but if it becomes an obsession then you need to rethink your priorities. Be careful of looking through those rose colored spectacles this month, not everything is as bright as it looks. Make sure you do your research before you rush into anything. Learn to compromise instead of getting angry, sit down and work out a plan that will suit everyone’s needs as well as those of your own. Dig a little deeper and do your research before you invest in something that you may come to regret later on.

SCORPIO

(OCT 23-NOV 21) Sometimes the hardest relationships are the ones worth holding onto. You will have more ability to overcome any setbacks by standing on your own two feet, irrespective of what other people try to say or imply about you, and things will continue to get better right in to the next month. The period from starting from October 23rd is when you can express yourself with confidence as The Sun shines at its brightest. It may be necessary to tighten your belt but don’t despair next month will be a much better time financially.

99

Sept / Oct 2012

PISCES

(FEB 19-MARCH 20) Things are starting to heat up for you on the romantic side of things. Whether attached or single, expect thrills and excitement this month. Don’t get too ambitious with pie in the sky ideas but just concentrate on getting the simple things right for the best results. You will also have the strength to take charge at home and make a good compromise for everyone with conflicts that are ultimately heading your way. A small windfall is heading your way this month but be sure to spend it wisely once you have received it.

GEMINI

(MAY 21-JUNE 21) Face up to your own mistakes and stop blaming others. Take control of your life this month and things will slowly improve. You are making yourself worse by dwelling on what might have been, instead look around at what you have now and learn to appreciate it and be grateful. The planetary alignments at the beginning of October will bring you new opportunities to reach your goal and give you a better chance to succeed. Don’t spend money on what you don’t really need, instead save up for the most important events in your life.

VIRGO

(AUG 23-SEP 22) Have a little patience, matters of the heart is not something that can be rushed. It takes time to find the one you love. Make a clear decision about where you want to go from here and let that be your main goal. It is an ideal quiet time for Virgos everywhere to get to know their romantic partners better. The Moon and Mars in Leo are an especially difficult combination to resist. Helping those in need is admirable but do bear in mind that you have your own money worries.

SAGITTARIUS (NOV 22-DEC 21)

Don’t be pushed into something you do not feel ready for, only when you feel comfortable and right should you proceed. Your colleagues appreciate you more than you think, stay positive and you will find your tasks easier to manage. Although October 2012 starts off a little slow for you compared to those around you, stick to your guns and don’t be over influenced by outside forces to make rash changes. You get exactly what you pay for, you will need to bear this in mind when making any purchases this month.

ARIES

(MARCH 21-APRIL 19) If you are serious about your relationship then show how committed you are otherwise you will find things will become worse during this month. You will get your reward this month but only if you show perseverance. Keep your feet firmly on the ground though; don’t let your heart rule your head. Allow The Moon and Uranus to work out their differences before acting at your maximum however. Watch how you spend your money on this month, it may look tempting but can you really afford it? If not leave it until next month.

CANCER

(JUNE 22-JULY 22) Don’t go along with other people’s ideas and opinions just because they tell you to do something, you are your own person. Do speak up for yourself; you will be at your best the beginning of October with the help of Uranus and Jupiter. However with the influence of Mars and the Moon opposing Pluto it would be wise to keep your head down at certain times, especially on the 19th of this month. Look into other possibilities for improving your financial situation, by looking online you will find plenty of opportunities.

LIBRA

(SEP 23-OCT 22) Don’t be disheartened, all is not lost, you can turn things round in your favor just by having more faith and confidence in yourself. The further Libra gets in to October, the more you gain back control. The problems affecting all aspects of your life, especially those where you had to accept the will of others are coming to an end. By the end of the month it is your turn to show the universe who is boss. Watch out for those who are trying to get you to part with your hard earned cash.

CAPRICORN (DEC 22-JAN 19)

Ask yourself is this exactly what you want out of the relationship if not you may need to speak your mind. You will receive a new job offer this month; it is up to you whether to accept this as you may need to make certain sacrifices by taking it on. The ideal time is just after The Moon leaves Capricorn and you gain control. You have done well to save what little money you do have so don’t spoil things now by over spending this month, your time will come soon.

WORLD BUSINESS MAGAZINE


Finance Investments

Portfolio Picks

Ingredients to Success

101 Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Finance Investments

GOLD (Minus) Risk Factor: 7%

With a healthy risk cushion the portfolio concentrates on High Yield Products with the aim of maximum general market return while also diversifying into low risk instruments to reduce the overall portfolio volatility due to their low correlation to Capital Markets.

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

102


Market Picks

Mutual Fund selection

Major Profomers By STAFF FPA Crescent

FPACX NAV Day Change

NAV

0.11|0.39%

$28.39

Yield 0.76%

Load None

GOLD Total Assets $9.2 bil

Fee Level Above Average

Expenses 1.18%

Turnover 32.0%

Status Open

Min.Inv. $1,500

52-Week Range Category Investment Style Credit Quality/Interest Rate Sensitivity 2011 FPA, long th 24.74-28.68 Moderate Allocation Large Blend -as the firm n

Performance

FPA Paramo

YTD

1 Mo

1 Yr

3 Yr*

6.94

2.75

10.01

-1.72

10.27

5 Yr* 2010 5.05

10 Yr* Dennis Brya Capital Fund 9.07

1.10

0.65

0.94

2.91

— Thomas Atte and the FPA 3.10

87

2

43

27

2006 3

# of Funds in Cat

893

938

888

770

669

Growth of 10,000

10,694

10,275

11,001

13,408

12,793 2000

Fund +/- Morningstar Moderate Target Risk +/- Category % Rank in Cat

* Annualized returns.

1 professi FPA FPA 378 is comp

23,822 Old Mutual U parent.

Eric Ende an Paramount F

Top Holdings CVS Caremark Corp

Weight %

Last Price

Day Chg % 52-Week Range

0.77 199632.28 - 48.69The Crescen Romick joins Aon 3.42 51.96 USD 0.48 39.68 - 53.35 leads the FPA Covidien, Ltd. 2.84 56.05 USD 0.38 41.35 - 57.86 Eric Ende be Microsoft Corporation ` 2.82 30.82 USD 1.65 24.26 - 32.95passing of G Wal-Mart Stores Inc 2.15 72.60 USD 0.48 49.94 - 75.24 1995 Eric Ende be % Assets in Top 5 Holdings 15.12 establishes th

Increase

Decrease

1991

United Asset Corporation.

Dividend and Capital Gains Distributions

32.24 15.74 6.07

4.28

US Stock Non US Stock Cash Bond Other

103 Sept / Oct 2012

45.55 USD

New to Portfolio

Asset Allocation

45.17

3.89

1984Diatribution FPA become Distribution Distribution Long-Term Short-Term Return of Dividend Date NAV Capital Capital Capital Income Total previously m portfolio man Gain Gain Absolute Va 07/02/2012 27.55 0.0900 0.0300 0.0000 0.1200 0.2400 12/20/2011 26.58 0.4700 0.0000 0.0000 0.1000 0.5700 FPA Perenni 07/01/2011 28.00 0.0400 0.0000 0.0000 0.2100 0.2500 12/13/2010 26.50 0.4300 0.0200 0.0000 0.1500 0.6000 07/01/2010 24.01 0.0000 0.1900 0.0000 0.1700 0.3600

Top Sectors Consumer Defensive

Fund 3 Yr High

3 Yr Low

Cat Avg

21.56

27.56

18.65

Financial Services

17.55

17.55

12.84

15.27

Healthcare

16.06

22.20

16.06

11.99

Technology

16.05 12.10

16.05 12.10

6.31 5.72

14.48 11.33

Consumer Cyclical

10.69

WORLD BUSINESS MAGAZINE


Market Picks

Oakmark Equity & Income I

OAKBX Yield 1.29%

NAV Day Change

NAV

$28.61

0.12|0.42%

SILVER

Load Total Assets Expenses Fee Level Below Average 0.77% None $19.0 bil

Turnover 47.0%

Status Open

Min.Inv. $1,000

52-Week Range Category Investment Style Credit Quality/Interest Rate Sensitivity 25.07-29.38 Moderate Allocation Large Blend --

Performance 10 Yr*

YTD

1 Mo

1 Yr

3 Yr*

5 Yr*

5.77

2.14

7.88

8.07

4.20

8.15

-2.88

0.49

-1.48

-1.26

2.06

2.18

95

13

71

79

9

3

# of Funds in Cat

893

938

888

770

669

378

Growth of 10,000

10,577

10,214

10,788

12,622

12,283

21,886

Fund +/- Morningstar Moderate Target Risk +/- Category % Rank in Cat

* Annualized returns.

Top Holdings Weight %

UnitedHealth Group Inc

Last Price

3.45

54.30 USD

Day Chg %

52-Week Range

-0.71

41.32 - 60.75

Nestle SA ADR 3.30 62.31 USD 0.03 52.85 - 67.71 US Treasury Note 1.25% 3.27 — USD — — US Treasury Note 1.375 3.25 — USD — — Diageo PLC ADR 3.06 109.22 USD -0.62 73.23 - 111.00 16.33

% Assets in Top 5 Holdings

Increase

Decrease

New to Portfolio

Dividend and Capital Gains Distributions

Asset Allocation

Distribution Distribution Long-Term Short-Term Return of Dividend Diatribution Date NAV Capital Capital Capital Income Total Gain Gain

14.23%

13.89% 58.07% 12.31% 1.5

0%

US Stock Non US Stock Cash Bond Other

WORLD BUSINESS MAGAZINE

12/15/2011 12/16/2010 12/17/2009 12/18/2008 12/13/2007

26.36 27.48 25.27 21.35 27.03

0.4705 0.0000 0.0000 0.5746 1.5056

0.0000 0.0000 0.0000 0.0000 0.0000

0.0000 0.0000 0.0000 0.0000 0.0000

0.3753 0.2247 0.2934 0.3858 0.6046

0.8458 0.2247 0.2934 0.9604 2.1102

3 Yr High

3 Yr Low

Cat Avg

Top Sectors Industrials

Fund 22.78

22.78

18.08

13.63

Healthcare

20.48

22.56

18.33

11.99

Energy

18.33

18.33

12.55

9.88

Consumer Defensive

15.62

20.71

15.62

10.69

Consumer Cyclical

13.16

13.16

9.71

11.33

Sept / Oct 2012

104


Market Picks

Stock Selection

Major Profomers

Charles Schwab Corp Price

$13.49

0.07|0.52%

Market Cap 17.3 bil

Yield 1.78

52-Week Range 10.56-15.53 Forward P/E 18.3

Day Change

GOLD

SCHW

Avg Vol. 8.2 mil P/CF 54.3

Volume 10.5 mil P/S 3.6

P/B 2.1

Based in San Francisco, Charles Schwab operates in the brokerage, banking, and asset-management businesses. The company runs a large network of brick-and-mortar brokerage branch offices and a well-established online investing website. It also operates a bank and a proprietary mutual-fund business. Additionally, Schwab offers services to independent investment advisors. Sector Financial Services

Industry Capital Markets

Financials Income Statement

Stock Type Cyclical

Employees 13,700

Annual

4,076 1,325 454 0.38 1,194

4,231 1,245 787 0.68 1,160

1,287 458 275 0.20 1,274

1,191 451 238 0.20 1,210

8,910 92,568 50,590 86,342 6,226

7,452 75,431 38,820 70,358 5,073

9,839 111,816 66,257 102,706 9,110

9,520 97,572 52,339 90,838 6,734

Cash Flow

Cash From Operations Cash From Investing Cash From Financing

9,882 108,553 60,854 100,839 7,714

$5.43

-9 1,437 -15,410 -14,057 12,109 15,419

Price

Name

BlackRock Inc T. Rowe Price Group TD Ameritrade Holding Corporation

52-Week Range 4.20-7.37 Forward P/E 3.7

0.01|0.18%

Yield 1.58

% Chg

$176.37 $61.44 $17.11

1,918 -2,067 1,684

TTM Sales$ mil

0.20 0.10 1.85

8,930 2,817 2,669

Silver

FIATY Day Change

-232 -6,488 6,130

Competitors

Fiat Group S.p.A. ADR Price

2,464 -8,667 9,951

In millions except "EPS". Currency in USD.

Balance Sheet

Net Loans Total Assets Deposits Total Liabilities Stockholders’ Equity

Stock Style Large Core

Quarterly

2011-12 2010-12 2009-12 2012-06 2011-06

Revenue 4,709 Net Interest Income 1,725 Net Income 864 Earnings Per Share 0.70 Shares Outstanding 1,229

Fiscal Year Ends December

Market Cap 5.9 bil

Volume 26,588 P/S 0.1

P/B 0.5

Avg Vol. 67,800 P/CF 0.8

Fiat S.p.A. makes autos (Fiat, Alfa-Romeo, Lancia, Abarth, Fiat Commercial, Ferrari, Maserati, and 58.5% ownership plus managerial control of Chrysler), automotive parts, engines, and transmissions (Magneti Marelli, Teksid, and Fiat Automotive Powertrain Technologies), as well as industrial robots (Comau). Heavy trucks (Iveco), farm equipment (Case New Holland), and construction equipment (CNH) were spun off to Fiat S.p.A. shareholders, effective Jan. 3, 2011, as Fiat Industrial S.p.A. Sector Consumer Cyclical

Industry Auto ManufacturersGrowth

Financials Income Statement

Revenue Operating Income Net Income Earnings Per Share Shares Outstanding

Stock Type —

Employees 200,582

Fiscal Year Ends December

Stock Style Mid Value

Annual

2011-12

59,559 3,336 1,334 1.06 1,064

2010-12

2009-12

Cash Flow

35,880 992 520 0.41 1,157

50,102 359 -838 -0.68 1,157

Cash From Operations

5,195

6,110

4,601

Capital Expenditures

-5,528

-2,864

-3,386

Free Cash Flow

-333

3,246

1,215

In millions except "EPS". Currency in EUR.

Competitors Balance Sheet

Current Assets Non Current Assets Total Assets Current Liabilities Total Liabilities Stockholders’ Equity

105 Sept / Oct 2012

36,488 43,543 80,031 67,771 71,304 8,727

29,777 43,665 73,442 13,569 61,898 11,544

41,669 25,566 67,235 18,545 56,934 10,301

Name

Price

% Chg

TTM Sales $ mil

Toyota Motor Corp ADR Nissan Motor ADR Honda Motor Co Ltd ADR

$79.62 $18.67 $31.89

-0.76 -1.11 -0.41

263,655 112,451 110,720

WORLD BUSINESS MAGAZINE


Market Picks

Daimler AG Price

52-Week Range 38.89-64.01

Day Change

$48.92

0.07|0.14%

GOLD

DDAIF Market Cap 52.2 bil P/B 1.0

Yield 4.33 Forward P/E 7.2

Avg Vol. 66,200 P/CF —

Volume 40,693 P/S 0.4

In addition to Mercedes-Benz and Smart cars, Stuttgart, Germany-based Daimler AG also makes trucks, vans, and buses under brands including Mercedes-Benz, Freightliner, Western Star, Fuso, Setra, and Orion. Daimler Financial Services provides the company’s dealers and its customers with vehicle financing. Daimler also owns 3.1% of each Renault and Nissan. Renault owns 3.1% of Daimler. The company also owns 7.9% of Tesla Motors, 15% of Russian truck maker Kamaz, and 22. Sector Industry Stock Type Employees Fiscal Year Ends Stock Style Consumer Cyclical Auto Manufacturers — 273,749 December Large Value

Financials Annual

Income Statement

Revenue Operating Income Net Income Earnings Per Share Shares Outstanding

2011-12

2010-12

2009-12

Cash Flow

106,540 8,755 5,667 5.31 1,067

97,761 7,274 4,498 4.28 1,052

78,924 -1,513 -2,640 -2.63 1,004

Cash From Operations Capital Expenditures Free Cash Flow

57,003 78,827 135,830 53,139 99,457 36,373

54,280 74,541 128,821 47,538 98,560 30,261

Balance Sheet

Current Assets Non Current Assets Total Assets Current Liabilities Total Liabilities Stockholders’ Equity

61,118 87,014 148,132 54,855 108,508 39,624

Suncor Energy Inc Price

$31.28

SU

-696 -5,876 -6,572

8,544 -5,208 3,336

10,961 -3,845 7,116

In millions except "EPS". Currency in EUR.

Competitors Name

Price

Toyota Motor Corp ADR Volkswagen AG Nissan Motor ADR

$79.62 $129.50 $18.67

% Chg

TTM Sales$ mil

-0.76 0.50 -1.11

263,655 223,042 112,451

Silver 52-Week Range 22.55-37.37 Forward P/E 8.3

Day Change

0.34|1.10%

Yield 1.52

P/B 1.2

Market Cap 48.9 bil

Avg Vol. 4.0 mil P/CF 4.7

Volume 4.4 mil P/S 1.2

Suncor Energy is an integrated energy company, producing 550 thousand barrels of oil equivalent per day, 90% oil, from its assets in Canada, the North Sea, and other international locations. Key to Suncor’s success is its oil sands assets, which produce over 330 mbpd from mining and in situ operations. Most of this is upgraded and sold either to the market or refined at one of Suncor’s four refineries in the U.S. and Canada, with total throughput capacity of 455,000 bpd. Sector Energy

Industry Oil & Gas Integrated

Financials Income Statement

Revenue Operating Income Net Income Earnings Per Share Shares Outstanding

Stock Type — Annual

Employees 13,026

Stock Style Large Value

Quarterly

2011-12 2010-12 2009-12 2012-06 2011-06 Cash Flow

39,790 7,069 4,304 2.67 1,582

36,287 4,247 3,571 2.27 1,574

25,480 1,289 1,146 0.95 1,211

9,722 1,118 333 0.20 1,558

9,587 1,041 562 0.31 1,587

14,124 60,653 74,777 10,310 36,177 38,600

10,513 59,656 70,169 8,526 33,448 36,721

8,331 61,415 69,746 7,848 35,635 34,111

13,998 61,328 75,326 10,010 36,134 39,192

12,107 57,236 69,343 9,517 32,554 36,789

Balance Sheet

Current Assets Non Current Assets Total Assets Current Liabilities Total Liabilities Stockholders’ Equity

Fiscal Year Ends December

WORLD BUSINESS MAGAZINE

Cash From Operations Capital Expenditures Free Cash Flow

9,988 -6,850 3,138

5,486 -5,833 -347

2,575 -4,246 -1,671

5,283 -3,084 2,199

4,768 -3,517 1,251

In millions except "EPS". Currency in CAD.

Competitors Name

Price

% Chg

Imperial Oil Ltd Husky Energy, Inc. Canadian Oil Sands Ltd

$45.01 $26.07 $21.04

-0.60 -0.23 1.40

TTM Sales $ mil 31,532 25,441 4,080

Sept / Oct 2012

106


Markets Data

Technical Projections

Market Analysis

FINANCIAL SERVICES

S3

S2

S1

PP

R1

R2

R3

H

L

C

EURUSD

1.1754 1.1943 1.2258

1.2447

1.2762

1.2951

1.3266

1.2637 1.2133

1.2572

USDJPY

75.98

77.64

78.61

79.3

80.27

80.96

79.57

77.91

78.34

GBPUSD

1.5199 1.5344 1.5604

1.5749

1.6009

1.6154

1.6414

1.5895 1.549

1.5863

USDCHF

0.9005 0.9253 0.9401

0.9649

0.9797

1.0045

1.0193

0.9898 0.9502

0.9548

AUDUSD 0.9864 1.0071 1.0199

1.0406

1.0534

1.0741

1.0869

1.0613 1.0278

1.0327

NZDUSD

0.8074

0.8175

0.8324

0.8425

0.8223 0.7973

0.8026

76.95

0.7675 0.7824 0.7925

USDCAD 0.9549

0.97

0.9781

0.9932

1.0013

1.0164

1.0245

1.0084 0.9852

0.9861

EURJPY

91.83

93.37

95.93

97.47

100.03

101.57

104.13

99.02

98.48

EURGBP

0.7683 0.7748 0.7834

0.7899

0.7985

0.805

0.8136

0.7963 0.7812

0.7921

EURCHF

1.1899 1.1949 1.1978

1.2028

1.2057

1.2107

1.2136

1.2079 1.2

1.2006

1.2

1.2401

1.263

1.3031

1.223

1.2171

EURAUD 1.1141

1.137

1.1771

94.92

1.16

EURNZD

1.4382 1.4674 1.5154

1.5446

1.5926

1.6218

1.6698

1.5738 1.4966

1.5634

EURCAD

1.1821 1.1975 1.2186

1.234

1.2551

1.2705

1.2916

1.2493 1.2128

1.2398

GBPJPY

118.03 119.55 121.91

123.43

125.79

127.31

129.67

124.96 121.08

124.26

CHFJPY

76.44

77.74

79.87

81.17

83.3

84.6

86.73

82.46

79.03

82.01

AUDJPY

77

78.82

79.86

81.68

82.72

84.54

85.58

83.5

80.64

80.9

NZDJPY

60.29

61.45

62.17

63.33

64.05

65.21

65.93

64.5

62.62

62.88

CADJPY

74.68

76.08

77.75

79.15

80.82

82.22

83.89

80.56

77.49

79.41

GBPCHF

1.4741 1.4912

1.503

1.5201

1.5319

1.549

1.5608

1.5372 1.5083

1.5148

GBPAUD

1.4225 1.4467 1.4913

1.5155

1.5601

1.5843

1.6289

1.5398 1.471

1.5358

107 Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Markets Data

FINANCIAL SERVICES

GBPNZD

1.8336

1.8649

1.9194

1.9507

2.0052

2.0365

2.091

1.9819

1.8961

1.974

GBPCAD

1.5237

1.5351

1.5498

1.5612

1.5759

1.5873

1.602

1.5727

1.5466

1.5644

AUDCHF 0.9138

0.9477

0.9669

1.0008

1.02

1.0539

1.0731

1.0348

0.9817

0.986

NZDCHF 0.7116

0.7372

0.7515

0.7771

0.7914

0.817

0.8313

0.8026

0.7627

0.7659

CADCHF 0.9262

0.9434

0.9556

0.9728

0.985

1.0022

1.0144

0.99

0.9606

0.9678

AUDCAD

0.961

0.9891

1.0037

1.0318

1.0464

1.0745

1.0891

1.0598

1.0171

1.0184

NZDCAD 0.7489

0.7694

0.7806

0.8011

0.8123

0.8328

0.844

0.8217

0.79

0.7917

AUDNZD

1.2712

1.2781

1.2913

1.2982

1.3114

1.3183

1.3044

1.2843

1.2851

1.258

Pivot Points Commodity

S3

S2

Normal Range S1 PP R1

Crude Oil

92.66

93.59

95.07

96

Natural Gas

2.636

2.671

2.737

2.772

Heating Oil

3.0885 3.1098 3.1456 3.1669 3.2027 3.224

3.2598 3.1881

3.131 3.1815

2.8028 2.8871 2.9899 3.0742 3.177

3.2613 3.0926

2.9055 2.9715

1661.3 1678.4 1709.7 1726.8 1758.1 1695.5

1647.1 1692.6

Gasoline RBOB

2.7

H

Last Bar L

R2

R3

C

97.48

98.41

99.89

96.92

94.51

96.56

2.838

2.873

2.939

2.808

2.707

2.802

Gold

1612.9

Silver

29.265 29.78 30.785

33.825 31.815

30.295 31.79

Copper

3.3502 3.3788 3.4202 3.4488 3.4902 3.5188 3.5602 3.4775

3.4075 3.4615

Platinum

1458.5 1480.3 1510.4 1532.2 1562.3 1584.1 1614.2 1553.9

1630

31.3

32.305 32.82

1502

1540.6

EXTREME RANGE

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

108


Markets Data

SGX BC ROUND UP

The number game

Name CapitaLand CapitaMall Trust CapitaMalls Asia City Developments ComfortDelGro Corp DBS Group Hldgs Fraser & Neave Genting Singapore PLC Global Logistic Properties Golden Agri-Resources Hongkong Land Hldgs Jardine Cycle & Carriage Jardine Matheson Hldgs Jardine Strategic Hldgs Keppel Corp Neptune Orient Lines Noble Group Olam Int'l Oversea-Chinese Banking Corp SIA Engineering Co Sembcorp Industries Sembcorp Marine SingTel Singapore Airlines Singapore Exchange Singapore Press Hldgs Singapore Technologies Engineering StarHub United Overseas Bank Wilmar Int'l

109 Sept / Oct 2012

Symbol C31 C38U JS8 C09 C52 D05 F99 G13 MC0 E5H H78 C07 J36 J37 BN4 N03 N21 O32 O39 S59 U96 S51 Z74 C6L S68 T39 S63 CC3 U11 F34

Current Price SGD 3.01 SGD 1.98 SGD 1.655 SGD 11.52 SGD 1.675 SGD 14.45 SGD 8.21 SGD 1.365 SGD 2.37 SGD 0.710 USD 6.10 SGD 46.29 USD 53.82 USD 33.24 SGD 11.19 SGD 1.090 SGD 1.20 SGD 1.920 SGD 9.29 SGD 4.19 SGD 5.28 SGD 5.00 SGD 3.39 SGD 10.65 SGD 7.04 SGD 3.97 SGD 3.41 SGD 3.61 SGD 19.09 SGD 3.13

52-Wk 52-Wk Average High Low Volume 3.19 2.01 1.73 12.02 1.715 14.99 8.66 1.8 2.45 0.805 6.69 51.79 56.6 35.75 11.67 1.515 1.68 2.76 9.65 4.29 5.5 5.46 3.62 11.98 7.35 4.12 3.43 3.88 20.23 6.05

2.19 1.615 1.125 8.5 1.3 10.81 5.32 1.22 1.495 0.55 4.17 35.72 42.06 23.7 7.02 0.995 1.02 1.525 7.68 3.34 3.21 3.05 3 10.05 5.91 3.6 2.61 2.72 14.42 3.04

11,852 6,702 6,174 1,054 3,038 4,613 3,856 60,601 8,310 66,875 2,261 231 226 187 5,400 9,946 50,129 14,089 4,223 299 3,487 7,461 21,290 1,249 1,909 2,871 2,162 2,099 2,574 8,964

WORLD BUSINESS MAGAZINE


Markets Data

PE 12.1 17.2 14.1 13.1 14.8 11.2 13.2 16.3 16.1 5.5 2.7 12.8 5.6 5.2 10.8 6.4 14.1 12.4 13.8 17.1 11.6 13.9 13.6 37.4 25.8 16.3 19.7 19.6 13 10

PB 0.85 1.22 0.99 1.5 1.81 1.17 1.66 2.61 1.07 0.85 0.35 3.02 0.76 0.44 2.4 1 1.23 1.38 1.47 3.45 2.19 4.61 2.29 0.98 9.03 2.96 5.53 240.67 1.39 1.18

WORLD BUSINESS MAGAZINE

Yield

Market Capitalization (M)

EPS

DIV

2 4.7 1.8 0.7 3.6

12,793.82 6,590.27 6,434.19 10,475.15 3,502.44

SGD 0.249 SGD 0.115 SGD 0.117 SGD 0.878 SGD 0.113

SGD 0.08 SGD 0.0937 SGD 0.03 SGD 0.18 SGD 0.06

3.9 2.2 0.7 1.2 2.6 2.6 3.3 2.3 0.7 3.8 N/A 1.7 2.6 3.2 5 2.8 2.2 4.7 1.9 3.8 4 2.1 5.5 3.1 2

34,995.07 11,588.54 16,652.57 2,493.24 9,114.66 17,878.95 16,465.35 24,428.36 25,840.14 19,959.79 2,815.76 7,666.46 4,589.21 31,967.29 4,599.09 9,417.50 10,413.56 53,997.78 12,532.62 7,519.29 6,322.75 10,459.24 6,192.34 30,362.53 20,036.47

SGD 1.291 SGD 0.62 SGD 0.084 USD 0.118 USD 0.104 USD 2.27 USD 2.897 USD 9.528 USD 6.36 SGD 1.032 USD -0.185 USD 0.068 SGD 0.155 SGD 0.672 SGD 0.245 SGD 0.454 SGD 0.361 SGD 0.25 SGD 0.285 SGD 0.273 SGD 0.244 SGD 0.173 SGD 0.184 SGD 1.463 USD 0.25

SGD 0.56 SGD 0.18 SGD 0.01 USD 0.0235 USD 0.0147 USD 0.16 USD 1.23 USD 1.25 USD 0.225 SGD 0.43 N/A USD 0.0165 SGD 0.05 SGD 0.3 SGD 0.21 SGD 0.17 SGD 0.25 SGD 0.158 SGD 0.2 SGD 0.27 SGD 0.24 SGD 0.155 SGD 0.2 SGD 0.6 USD 0.0495

Sept / Oct 2012

110


Finance Schedule

Announcement Calendar

Critical Date for Investors

High Impact

DATE

Medium Impact

IMPACT

Low Impact

GMT

ANNOUNCEMENT

TIME

CURRENCY

9:00am 10:00am

EUR EUR

Current Account Trade Balance

9:30am 10:00am Tentative 1:30pm

GBP EUR EUR USD

Core CPI y/y ZEW Economic Sentiment Spanish 10-y Bond Auction Current Account

Tentative Tentative 9:30am 3:00pm

JPY JPY GBP USD

Monetary Policy Statement BOJ Press Conference MPC Meeting Minutes Existing Home Sales

12:50am 9:00am 1:30pm 5:00pm

JPY EUR USD EUR

Trade Balance Flash Manufacturing PMI Unemployment Claims ECB President Draghi Speaks

9:30am Tentative 3:00pm

GBP EUR USD

Final GDP q/q Italian 10-y Bond Auction New Home Sales

9:00am 1:30pm 1:30pm 1:30pm

EUR USD USD USD

M3 Money Supply y/y Core Durable Goods Orders m/m Unemployment Claims Final GDP q/q

12:30am 2:45pm

JPY USD

Unemployment Rate Chicago PMI

3:30am 10:00am All Day

CNY EUR USD

2:30am Tentative 7:00pm

AUD GBP USD

Trade Balance 10-y Bond Auction FOMC Meeting Minutes

8:00am 1:30pm 1:30pm

CHF EUR USD

Foreign Currency Reserves ECB Press Conference Unemployment Claims

7:45am 7:45am 10:00am

EUR EUR EUR

French Gov Budget Balance French Trade Balance Final GDP q/q

Mon Sep 17

Tue Sep 18

Wed Sep 19

Thu Sep 20

Wed Sep 26

Thu Sep 27

Fri Sep 28

Mon Oct 1

Wed Oct 3

Thu Oct 4

Fri Oct 5

111 Sept / Oct 2012

HSBC Final Manufacturing PMI Unemployment Rate Total Vehicle Sales

WORLD BUSINESS MAGAZINE


Finance Schedule

DATE Fri Oct 5

Mon Oct 8

Tue Oct 9

TIME

CURRENCY

IMPACT

ANNOUNCEMENT

Tentative 1:30pm 1:30pm

EUR CAD USD

French 10-y Bond Auction Unemployment Rate Unemployment Rate

8:00am All Day

EUR EUR

German Trade Balance Eurogroup Meetings

12:50am 3:00am Tentative 9:30am 9:30am 7:00pm

JPY CNY CNY GBP GBP USD

Current Account GDP q/y Trade Balance Manufacturing Production m/m Trade Balance Federal Budget Balance

Tentative 6:00pm

EUR USD

German 30-y Bond Auction 10-y Bond Auction

1:30am 9:00am Tentative Tentative 1:30pm 1:30pm 6:00pm

AUD EUR GBP EUR CAD USD USD

Unemployment Rate ECB Monthly Bulletin 30-y Bond Auction German 10-y Bond Auction Trade Balance Trade Balance 30-y Bond Auction

Day 1 Tentative 9:00am 9:30am 1:30pm

ALL CNY EUR GBP USD

IMF Meetings Foreign Direct Investment ytd/y Italian Trade Balance Unemployment Rate Core PPI m/m

Day 2

ALL

IMF Meetings

Day 2

ALL

IMF Meetings

9:30am 1:30pm

GBP USD

Core CPI y/y Core Retail Sales m/m

8:00am 10:00am 10:00am Tentative 1:30pm 2:15pm

CHF EUR EUR EUR USD USD

Trade Balance Core CPI y/y Trade Balance Spanish 10-y Bond Auction Core CPI m/m Industrial Production m/m

Wed Oct 10

Thu Oct 11

Fri Oct 12

Sat Oct 13 Sun Oct 14 Mon Oct 15

Tue Oct 16

WORLD BUSINESS MAGAZINE

Sept / Oct 2012

112


Trans Capital Modaraba Pte. Ltd. www.transcapital.com.sg

A New Dawn in the Age of Integration

Launching a Spectrum of Islamic Financing Instruments

113 Sept / Oct 2012

WORLD BUSINESS MAGAZINE


Glossary Financial

Financial terminologies

Definations of Key Terms

G

eneric Securities

A security backed by recently issued loans or mortgages. A generic security does not yet have a history that potential investors can look to for past performance rating as a seasoned security does. However, as they are valued less by investors, generic securities are less expensive to purchase.

H

With the continuous evolution of the finance industry, the language used has been refined. The importance in the precision of terms and expressions used in the industry is imperative for communication between institutions, stockbrokers and even the common man on the street. As such, we have selected some key financial terms that will prove useful to an investor.

A

lienation Clause

A clause in a mortgage contract that requires full payment of the balance of a mortgage at the lender’s discretion if the property is sold or the title to the property changes to another person. Nearly all mortgages have an alienation clause.

To lower the value, quality or status of something or someone. In the context of coins, it is the process of melting down a coin and mixing it with a lower quality metal to create additional coins of the same denomination.

B

equest

E

D

ebasement

nd Loan

onorarium

A voluntary payment that is given to a person for services not paid for legally or traditionally . Honoraria are typically used to help cover costs for volunteers or guest speakers. For example, travel expenses paid of a speaker at a conference.

I

nterstate Banking

The expansion of banking across state lines. It became widespread in the mid 1980s, when state passed legislation that allowed bank holding companies to acquire out-of-state banks on a reciprocal basis with other states.

J

udgmental Credit Analysis

The act of giving personal property or money such as stocks, bonds, jewellery and cash left to an individual or organization through a will or estate plan. Bequests are made to family, friends, institutions or charities. When real estate is bequeathed, it is called a “devise.”

A permanent, long-term loan used to pay off a short-term construction loan or other form of interim financing. Although an end loan can have features that delay the repayment of principal, at some point, an end loan begins to amortize and differs from construction loans.

A method of approving or denying credit based on the lender’s judgment rather than on a particular credit scoring model. Judgmental credit analysis entails evaluating the borrowers application and using prior experience dealing with similar applicants to determine credit approval.

C

F

K

aptive Finance Company A subsidiary whose purpose is to provide financing to customers buying the parent company’s product. They can range from mid-sized entities to giant firms. Their range of services can also vary widely, from basic card services to full-scale banking.

WORLD BUSINESS MAGAZINE

loat Time The amount of time between an individual writing and submitting a check as a payment and when the individual’s bank receiving the instructions. The Clearing of the Check for the 21st Century Act (Check 21),was two to four days now its just a day.

ey Rate The specific interest rate that determines bank lending rates and the cost of credit for borrowers. The two key interest rates in the United States are the discount rate and the Federal Funds rate. are used to implement monetary policy.

Sept / Oct 2012

114


Glossary Financial

L

agged Reserves

Q

stick Indicator

V

aloren Number

A method of bank reserve calculation whereby the financial institution is required to keep a certain level of reserves with the Federal Reserve Bank of the region. The amount of capital reserves required is based on the value of all outstanding deposits in the bank’s demand deposit accounts from two weeks prior.

A technical indicator developed by Tushar Chande to numerically identify trends in candlestick charting. It is calculated by taking an ‘n’ period moving average of the difference between the open and closing prices. A positive value means most of last ‘n’ days have been up, and increasing buying pressure.

An identification number assigned to financial instruments in Switzerland. These numbers are similar to the CUSIP numbers that are used in Canada and the U.S. A typical valoren number is between six to nine digits in length. Market data firms and other financial institutions use it for security identification.

M

R

W

cDonough Ratio

eference Entity

hole-Life Cost

A ratio that was developed during the Basel II conference by the Basel Committee on Banking Supervision. The ratio has evolved out of the Cooke ratio, which was originally developed during Basel I in 1998. Improvements were made to the ratio from time to time to update it.

One of the underlying parties involved in a credit derivative contract. The reference entity bears the credit risk of the contract, and can be a corporation, government that issues debt of any kind. If a default occurs the buyer of the credit default swaps receives payment from the seller.

The total cost of owning an asset over its entire life. Whole life cast includes all costs such as design and building costs, operating costs, associated financing costs, depreciation, and disposal costs and the usually overlooked environmental impact and social costs.

N

S

X

Notional Value is the total value of a leveraged position’s total assets. This term is commonly used in the options, futures, capital and currency markets because a very small amount of invested money can control a large position (and have a large consequence for the trader).

Secured Bond is a type of bond that is secured by the issuer’s pledge of a specific asset, which is a form of collateral on the loan. In the event of a default, the bond issuer passes title of the asset in question or the money that has been set aside onto the bondholders.

An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra platform offers increased flexibility for seeing order depth within the markets and offers trading in stocks, funds, bonds, warrants and commodities contracts.

O

T

Y

A loan or extension of credit that is larger than what the borrower can repay. Overextensions can require the borrower to consolidate his or her debts into a single loan. Consumers who must use more than a third of their net income to repay debt are overextended.

An informal term for a set of financial records that use double-entry bookkeeping. The term T-account describes the appearance of the bookkeeping entries. The account title would appear just above the T, debits would be listed on the left side of the T and the credits on the right side.

A form of compensation that a mortgage broker, acting as the intermediary, receives from the original lender for selling an interest rate to a borrower that is above the lender’s par rate for which the borrower qualifies. it must be disclosed on the HUD1 Form.

P

U

Z

The name given to the group of banks contributing to the Euro Interbank Offer Rate (EURIBOR) similar to LIBOR. This group is made up of the largest participants within the Euro money market. The panel bank makes interest rate quotes that banks offer one another for overnight loans.

The amount of a bank deposit that comes from checks that have yet to be cleared by the bank from which the checks are drawn. Essentially, uncollected funds are sums of money that the bank needs to account for prior to releasing the funds to the depositor.

otional Value

verextension

anel Bank

115 Sept / Oct 2012

ecured Bond

-Account

ncollected Funds

etra

ield Spread Premium

ero Uptick

Zero Uptick is when a transaction is executed at the same price as the trade immediately preceding it, but at a price higher than the transaction before that. For example, if shares are bought and sold at $47, followed by $48 and $48, the last trade at $48 is considered zero uptick. g

WORLD BUSINESS MAGAZINE


Making Your Target

Easier

We provide Advisory & Consultancy services in Portfolio Management Fund Management IPO Management Merger & Acquisitions www.GeminiCredit.com.sg

Strategic Advisory Capital Raising Valuation Services Project Financing

World Business Magazine  

Finance & Business Magazine

Advertisement