Archive for the ‘Financial’ Category
Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men earning, no bank transactions required There are no transaction fees and no need to give your real name. More merchants are beginning to accept them. Bitcoin can be used to buy things electronically. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally. Several marketplaces called bitcoin exchanges allow people to buy or sell bitcoins using different currencies. Mt. Gox is the largest bitcoin exchange. You can buy webhosting services, pizza or even manicures. No one controls it. Bitcoins aren’t printed, like dollars or euros they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems. It’s the first example of a growing category of money known as crypto currency. Bitcoins are stored in a “digital wallet,” which exists either in the cloud or on a user’s computer. The wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money. Unlike bank accounts, bitcoin wallets are not insured by the FDIC. Though each bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed only their wallet IDs. While that keeps bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them. Bitcoin is pseudonymous, meaning that funds are not tied to real-world entities but rather bitcoin addresses. Owners of bitcoin addresses are not explicitly identified, but all transactions on the blockchain are public. In addition, transactions can be linked to individuals and companies through “idioms of use” and corroborating public transaction data with known information on owners of certain addresses. Additionally, bitcoin exchanges, where bitcoins are traded for traditional currencies, may be required by law to collect personal information.That’s why it has become the currency of choice for people online buying drugs or other illicit activities. Bitcoin can be send in an instant worldwide. Users can use several accounts or multiple bitcoin addresses as they are not linked to names personal address or other personal identifying names. Today Bitcoin is worldly renowed as of 2017 there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
The managing director of Singapore’s corporate regulator, the Monetary Authority of Singapore Ravi Menom told the Australian Securities and Investments Commission’s (ASIC) annual conference in Sydney that financial regulators around the globe needed to keep up emerging technologies and and share information to cope with new risks.
Ravi Menom stated “cyber attacks are a growing treat to the financial ecosystem as more financial services are delivered over the internet”.
He also added that “there will be growing security and privacy concerns from cyber threat and may be even systemic concerns”.
Mr. Medcraft also stated companies should be legally required to report the cyber attacks, saying the number of unreported attacks was staggering. “no one told. It is really frightening.
Chinese President Xi Jinping launched the new “Asia Infrastructure Investment Bank” (AIIB) in Beijing on the 16th Jan 2016.
The AIIB represents a shift in global lending from global banks like the International Monetary Fund (IMF) or the World Bank, as is presents new options for country-states to access funds.
AIIB is a $100 billion funded bank with a list of founding stakeholders from 31 countries. See AIIB.
Leading Investors Major shareholders include the BRIC countries. China, India and Russia form lead investors.
Un-aligned Investors Traditionally non-BRIC aligned investors include Britain, Germany, France, Australia and South Korea.
Abstaining Investors Countries that have abstained from investing in AIIB include the United States, Japan and Taiwan.
The implication of the new AIIB bank is a changing global shift of investment via entities in the USA. Coupled with other initiatives to de-couple the global financial system from the USA, this shift presents a financial shift that could spell danger for the US banking system.
The irony of the $100 billion dollar investment is that it is priced in US dollars.
Goldman Sachs said in a note on 22nd Feb 2016, that the first quarter capital markets revenues are down by 15%. This is the weakest in recent history.
It looks like that 0.5% increase in US interest rates is having an effect. The banks know its coming, and the number of job cuts (<200) pale in comparison to the carnage of the 2008 GFC (several million). So its time for bank to suck it up a little and stop whining about a very marginal 0.5% rate increase.
This is the second time the chinese stock market has halted trading.
Chinese stocks plunged Monday, spurring a trading halt for the rest of the session, and other APAC stock markets after feeble manufacturing surveys revived concerns over the mainland’s economic slowdown.
The Shanghai Composite tumbled 6.85 percent to 3296.66 and the Shenzhen Composite plunged 8.1 percent.
The CSI 300 briefly plummeted 7.02 percent; when that index rises or falls 7 percent, a trading halt in China’s markets is triggered for the rest of the session.
Hong Kong’s Hang Seng was also down 2.48 percent at 21,370.62. Stocks in Australia, Japan, South Korea and India also fell. Energy plays, however, saw some gains after oil prices bounced during Asian trading hours.
7% down in Shanghai and 2% down in Hong Kong. Those are pretty massive adjustments. If China does indeed have sizable investment in Iran’s oil industry, the severing of Saudi diplomatic ties should be good news rather than bad.
So Dick Smith (DSH) has just gone into liquidation after listing in 2013. What happened?
Private equity group Anchorage Capital bought Dick Smith from Woolworths in 2012 for an initial payment of just $20m.
Anchorage then “dressed the company up to look good for just one thing – to persuade people to buy shares,” according to analysts from Forager Funds Management.
Anchorage “wrote down the value of the inventory, took provisions for future onerous lease payments, wrote down the value of the plant and equipment and liquidated a lot of the inventory as quickly as they possibly could to throw off cash,” according to Forager’s Steve Johnson.
The cash was then used by Anchorage to effectively make Dick Smith ‘buy itself’.
The writedowns inflated profits, a key factor in enticing investors into the company.
For example: a stock item that may have been bought for $100 may have been in the books at $60 after the writedowns, which meant an extra $40 profit on every sale.
The writedown of plant and equipment lowered depreciation charges, also boosting the bottom line.
“But when they liquidated all that inventory to pay for the purchase price, they didn’t replace it,” according to Forager’s Steve Johnson.
“And the new owners of the business, since it’s been listed on the stock market, have had to put in a lot more money to fund the increase in inventory.”
Coupled with an aggressive expansion plan which added 75 stores (25% more stores), Nick Abboud helped bring Dick Smith into the ground.
A growing number of prominent hedge funders are also quietly cordoning off private enclaves within Hedge funds for themselves. These include big-name firms like Eric Mindich, Dan Och and others who have created what are known as single family offices. Not everyone is happy about it. Critics say managers should focus on their hedge funds.
“I expect hedge fund managers to be 100 percent invested in their hedge funds,” said Karl Scheer, chief investment officer of the $1.2 billion endowment at the University of Cincinnati. “I prefer that they’re singularly focused in order to achieve the best results.”
As you can see the potential of conflicts-of-interest where Fund Managers leverage the large fund for their private enclaves. This is how Goldman Sachs was able to bet against their private-equity clients during the Global Financial Crisis of 2008.
At a time of slowing economic growth and massive corporate debts, a deflationary spiral would be China’s worst nightmare. In addition, the risk is mounting. The producer price index (PPI) has been in negative territory for 39 consecutive months, since February 2012.
The growth of China’s consumer price index (CPI), though still positive, has also been falling steadily, from 6.5 percent in July 2011 to 1.2 percent in May 2015. If experience is any indication, China’s CPI will turn negative very soon.
In China’s last protracted bout of deflation, from 1998 to 2002, persistent declines in prices were the result of monetary and fiscal tightening that began in 1993, compounded by the lack of exit mechanisms for failed enterprises. After peaking at 24 percent in 1994, inflation began to decline in 1995. However, GDP growth soon began deteriorating rapidly. In an effort to revive growth in a difficult global environment and buffer exports against the impact of the Asian financial crisis, the Chinese government loosened monetary and fiscal policy beginning in November 1997.
However, it was too little, too late. By 1998, when CPI inflation began to fall, producer prices had already been declining for eight months, and remained negative for a total of 51 months, with CPI growth beginning to recover after 39 months.
An obvious lesson is that the government should have switched to loosening earlier, and more forcefully. However, this experience also underscores the impotence of monetary policy in a deflationary environment, owing to the unwillingness of banks to lend and of enterprises to borrow. The fact that loss-making enterprises were allowed to churn out cheap products, eroding the profitability of high-quality enterprises (and thus their incentive to invest), prolonged the deflation.
Nonetheless, China eventually managed to rid itself of deflation and return to rapid economic growth. For starters, a decline in investment during the deflationary period — together with firm closures, mergers, and acquisitions — reduced overcapacity, clearing the way for investment to rebound strongly in 2002. At the same time, expansionary fiscal policy increased effective demand, while the government, backed by its strong public-finance position, was able to tackle nonperforming loans effectively, thereby increasing commercial banks’ willingness to lend, and firms’ ability to borrow.
Moreover, housing market reforms and the development of a mortgage-loan market in the late 1990s fuelled rapid growth in real estate investment, which reached an annual rate of over 20 percent in 2000. As a result, real estate development became the most important contributor to economic growth, even as exports boomed following China’s accession to the WTO.
The problem with the emergence of these new growth engines is that it enabled China’s leaders to delay important structural reforms. As a result, China now faces many of the same challenges it faced in the late 1990s — beginning with overcapacity.
After 15 years of rapid growth in real estate development, this is not surprising. But that does not make it any less risky. In fact, allowing overcapacity to continue putting downward pressure on prices, China’s economic growth will not stabilise at a rate consistent with its potential. Instead, the economy will end up in a vicious spiral of debt deflation.
At this point, the authorities could eliminate overcapacity through firm closures, mergers and acquisitions, and other structural measures. They could also seek to eliminate excess capacity by using expansionary monetary and fiscal policies to stimulate effective demand. In theory, the long-term solution would be to pursue structural adjustments that would improve the allocation of resources. However, that would be painful and slow. Striking a balance between the short- and long-term approaches will prove to be a major challenge for China’s leadership.
Complicating this effort is the fact that, unlike in 1997–2002, China cannot absorb overcapacity by stimulating real estate investment and exports. And no one knows whether the much-discussed ‘innovative industries’ can have the impact that real estate investment and exports did — not least because there is so much excess capacity in the traditional industries.
China must do whatever it takes to avoid falling into the debt-deflation trap. Fortunately, China still has room to invest in growth-enhancing infrastructure and innovative industries. Policies to expand social security and improve the provision of public goods could support these efforts, boosting domestic consumption by allowing households to reduce their precautionary savings.
Nevertheless, at the same time China’s leadership must continue to pursue its agenda of structural reform and adjustment, even if it may have an adverse impact on growth in the short run. China simply cannot afford to continue to kick the reform can down the road.
Mark Twain once purportedly said, ‘History doesn’t repeat itself, but it does rhyme’. China should brace itself for a period of deflation, which may be even more protracted than the last one. However, with the right approach — and a bit of good luck — China can make sure that, this time, it recovers more sustainably than in the past.
Australian companies will soon be publishing financial results, as well as information about sustainability efforts.
Corporate social responsibility of the big four banks – Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac is a continuing topic of debate following recent scandals and reports of unsustainable activities.
Yet according to ANZ chairman, David Gonski, Australians ought to “stop bashing the banks” for being large and profitable.
This comment should put civil society on guard.
A recent study by the Centre for Corporate Governance at the University of Technology Sydney, part of the UNEP Inquiry into the Design of a Sustainable Financial System, examined self-regulatory and voluntary sustainability efforts of the world’s largest banks, in partnership with Catalyst Australia which scrutinised the efforts of the big four Australian banks.Sustainable finance
The “four pillars” of the Australian banking system are a dominant part of the Australian economy: the four banks are featured in the top five of the ASX 200 and hold A$522 billion of Australian household deposits, equal to one-third of Australia’s gross domestic product.
In the words of David Murray, former CBA boss and chair of the Financial System Inquiry: “banks fund most of the assets in the economy – whether it’s businesses, governments themselves, homes or projects, whatever else.”
This market dominance results in great power and great responsibility. As banks provide the majority of external finance to companies and governments, they can influence practices: bank lending potentially has more impact on sustainable enterprise than investment and divestment on the stock market.
Banks can thus wield their enormous market power to support sustainable activities, while their actions can likewise contribute to detrimental behaviour.Conflicting images
The examination of the sustainability efforts of Australian and international banks reveals a schism between symbolic and substantive sustainability efforts.
At the 2014 World Economic Forum, Westpac was named the most sustainable company in the world. ANZ has been named as a leader in the global banking sector by the Dow Jones Sustainability Index, a major reference point for sustainable investors, six times in the last seven years, while NAB and the CBA have likewise been recognised for their sustainability performance.
Yet despite being lauded for their sustainability efforts, the public image of big Australian banks have suffered in the wake of dodgy financial advice scandals, disputed fees, and allegations of rate-fixing and insider trading.
Banks have drawn the ire of environmental activists by extensively funding the fossil fuel industry, coal mining along the great barrier reef, and nuclear arms manufacturing. Oxfam Australia claims the Big Four are also backing agricultural and timber companies accused of land grabbing in developing countries.
As a result, public confidence in banks is low: according to a national survey, part of the research by Catalyst Australia, 76% of respondents believe that banks put profits before their social and environmental responsibilities.
Regulation and Supervision
In 2005, the Government launched an Inquiry into Corporate Responsibility and Triple Bottom Line reporting. It examined the extent to which the Australian legal framework encourages or discourages company directors from considering interests of stakeholders other than shareholders, the suitability of voluntary sustainability measures, and the appropriateness of reporting requirements.
The Committee found that legal amendments were undesirable, as it deemed it “not appropriate to mandate the consideration of stakeholder interests into directors’ duties”.
Furthermore, the Committee recommended that sustainability reporting should remain voluntary, fearing that “mandatory reporting would lead to a ‘tick-the-box’ culture of compliance”.
In the aftermath of the global financial crisis, financial sector regulators were pushed to exercise more supervision and be less trusting of self-regulatory efforts. Consequently, in 2013 the Government launched the Financial System Inquiry. Regrettably, the terms of reference did not address social and environmental sustainability and risks in the financial sector.
The readiness to increase supervision to avoid financial risks is not matched by a similar willingness to supervise and regulate the social and environmental risks caused by the financial sector. This emphasis on voluntary efforts is problematic, as the study by Catalyst Australia shows that only 26% of the Australian public believe banks will behave ethically and responsibly if they self-regulate.
Bridging the governance gap
While many Australian and overseas banks have successfully shaped sustainable corporate imagery, the research by the Centre for Corporate Governance and Catalyst Australia finds that self-regulation permits facts to be obscured and leaves social and environmental matters peripheral to business strategies.
The assurance that banking activities are based on sustainable principles requires public monitoring of compliance and performance – as US litigater Louis D. Brandeis famously said:
“Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”
In order to accomplish this, directors’ duties ought to be reformulated to include social and environmental responsibilities, sustainability reporting requirements should be redefined and further embedded in corporate governance systems, and social and environmental risk assessments should apply the precautionary principle, shifting the burden of proof to actors that potentially cause harm.
Robust governance, regulation and supervision should not be seen as measures that restrain innovation or entrepreneurship, but rather as instruments that can help to restore trust, and ensure that banking activities are conducted openly, fairly and sustainably