Oct 28, 2008
Solvere Lim
Cognose.blogspot.com
CtS Cognoscere tenus Solvere @ www.cts-ideas.com
Cognize before Happening
Solving beyond Root Cause
The invents of Black, Scholes and the like are creating instruments whose values are not subjected to real market supply and demand, but by formulas, but by human decision makings.
Human decision-makings, when not subjected to the immense law of nature is as good as fiction, - subjected to human greed and inadequacy, promise riches beyond dreams, yet deliver horrors beyond hell.
This has failed the very basic of measurable, all three of them – accountabilities, transparency, while losses are as good as pouring good money into a bottomless pit.
“Sorry sir, your investment is now worth nothing!” as one banker told an old man who put his life long savings in Lehman’s instruments.
Derivatives, Collaterals, Options are fabrications of human, expose no facet to be measured, stand on no ground to be realizable, while the values and prices detached from each other.
Did they channel the wealth, even a fraction of the whole sum, into any real wealth creations?
NO!
Therefore these are not critical to market functioning – they can be eliminated.
With Market slumps, investors withdrawing, this is the best time States joining hands together to dissolve all these activities.
With slow down in economy, helping economy to grow is the highest priority.
Therefore transaction credibility, improving efficiency, economy of scales, while cutting agencies’ costs are what can be done, must be done.
Before this window opened, it was already recommended to start with banking, finance, basic insurance, health care.[1]
With this window opened, we can now cover cashless, electronics transactions.
These will create a lot of constructive jobs for programmers(who other wise may become hackers), accountants, engineers(who otherwise may become traders).
Which one created real wealth?
Which is a more sustainable path?
Which one mitigate crimes, before happening?
Which one provide self-esteemed and gains others’ respect?
[1] Dynamite Economy 3.11 Approach - Finance Industry, Sep 22, 2008, Cognose.blogspot.com
Showing posts with label Finance Regulation. Show all posts
Showing posts with label Finance Regulation. Show all posts
Thursday, October 30, 2008
Wednesday, September 24, 2008
Dynamite Economy 3.3 What has Happened
Solvere, Cognose LIM Swee Keng (Sep 22, 2008)
www.cts-ideas.com tab Cognose.blogspot.com
Dynamite Economy 3 - Deadly Urgency
Dynamite Economy
www.cts-ideas.com tab Cognose.blogspot.com
Dynamite Economy 3 - Deadly Urgency
Dynamite Economy
Sep 17, 2008, within the last 50 hours, two out of four top investment banks AND one of world largest insurers collapsed. This is not the beginning, neither do we see a pause in sight. It is just a moment in a long sequence, a rapid sequence, a rapid sequence without a pause, a rapid sequence of Dynamites detonating, spare no country, spare no industry, spare no leaders, differentiate not poor or rich man, hurting every social fabric.
Within the last 100 days or so, fifth ranking investment banks together with two largest mortgage companies fallen. Oil prices hit the predicted mark of $120 on May 5, 2008, struggles for survival started to be felt around the world, strikes of transport workers, airlines cut operations are some indicators.
Even with such time window for rethinking, elaborate deliberation, free from official position, the former Federal Chairman, Allan Greenspan, both US Presidential candidates, only state what is already obvious to all – greatest disaster in 100 years, worse than The Great Depression, etc, without analysis, never mind about causes, impacts, solutions. The criterions for rescue considerations, were poorly uttered …..
From the following reports, we see that economists, bankers without basic understanding of market, economy, made wrong statement, almost all of the time, even late into events.
2007 March 14, “Subprime alone won't sink Wall Street bankers” “SUBPRIME CRASH: It may not be fatal, but it can be painful” USA Today, Lehman Bros, told investors during its quarterly earnings call that its exposure to such loans is minimal. That came a day after Goldman Sachs reported strong quarterly results despite any troubles in its subprime mortgage business.
2007 May 17, “Bernanke Believes Housing Mess Contained” Forbes reported.
2007 July 18, “Same Old Ben with a Dash of Subprime” Forbes reported Ben Bernanke concern subprime
What has becomes obvious are:
1. Three out of top five investment bankers already failed.
2. Immense sum of well governed sovereign funds that equivalent to the labor product of one full year of labor by 11 million Australian work force, or the highly skill to sell double the number of 737 jets since 1968, is going to poured into the market, without adding one jobs, without producing any goods and services.
3. Before this, smaller token of such injection, already escalated commodities prices to a level that pull the carpet under all business survival – Oil prices exceeded $120 that whole world felt physical choked.
Monday, September 22, 2008
Dynamite Economy3.5 Who is at Fault?
Solvere, Cognose LIM Swee Keng (Sep 22, 2008)
http://www.cts-ideas.com/ tab Cognose.blogspot.com
Dynamite Economy 3 - Deadly Urgency
3.5 Who is at Fault?
To resolve any issues, we must seek the causes.
For such unprecedented scale, unprecedented spread, as Dynamite Economy, we must also understand the very motivation forces that effected these causes into affecting whole world economy.
But the spread, magnitude determined that even there is a person, a group, an industry that is liable for this disaster, the greater environment allowed it to exist, propagate, proliferate, eventually almost everyone participated, so affected.
To assign fault to anyone, is so very easy, is definitely possible.
In this situation that demand unity, if we focus on fault assignment, will only divide the people, divert the resources.
We cannot afford it, can we?
Even everyone is at fault,
Even so,
we must objectively study every wrong move,
1. Not just the effect, but the broader, deeper impacts.
2. Not just the causes, but the immense motivation forces behind that bring these effects to cause series of over whelming failures.
http://www.cts-ideas.com/ tab Cognose.blogspot.com
Dynamite Economy 3 - Deadly Urgency
3.5 Who is at Fault?
To resolve any issues, we must seek the causes.
For such unprecedented scale, unprecedented spread, as Dynamite Economy, we must also understand the very motivation forces that effected these causes into affecting whole world economy.
But the spread, magnitude determined that even there is a person, a group, an industry that is liable for this disaster, the greater environment allowed it to exist, propagate, proliferate, eventually almost everyone participated, so affected.
To assign fault to anyone, is so very easy, is definitely possible.
In this situation that demand unity, if we focus on fault assignment, will only divide the people, divert the resources.
We cannot afford it, can we?
Even everyone is at fault,
Even so,
we must objectively study every wrong move,
1. Not just the effect, but the broader, deeper impacts.
2. Not just the causes, but the immense motivation forces behind that bring these effects to cause series of over whelming failures.
Dynamite Economy 3.11 Approach - Finance Industry
Solvere, Cognose LIM Swee Keng (Sep 22, 2008)
http://www.cts-ideas.com/ tab Cognose.blogspot.com
Dynamite Economy 3 - Deadly Urgency
3.11 Approach - Finance Industry
Banks are lubricants for market economy.
Banks shall not, can never be wealth creator.
It was clearly stated in Aug 2007, that Banks making 9% profit over weak economy that barely made 1% profit is unsustainable. The big profit is through instruments, then sub-prime instruments.[1]
All the Top 5 Investment Banks has since faced the realities, except the top two still able to resist, the rest collapsed.
When there are OAW in banks clients’ pocket, the temptation is so high.
So they pretend they are wealth creator, these are fabrications, fabrication cannot be really fulfilled
Banks shoulder upon themselves promises they can never fulfill.
So dreamers’ hearts broken, banks bankrupting.
Rules of law are last resort, is late, it can be applied only after grave harm is inflicted.
Greed for profit is human nature, trying to ignore, using money to feed, law to control are feeble.
Salvaging is too late, too costly, usually the result is decimation of wealth.
So to satisfy temptation is the most important for design, for regulation.
Successful application will improve social order, for economic stability.
Banks should be divided into two categories:
First, Banks as they are remain as a conduit, a lubricant, continuously improving effectiveness, efficiency for capital formation, capital flow in the market. This category subjected to lower return, tight governance, and government backing.
Second, Investment Characters. These are avenues for higher return, naturally coupled with higher risk. No one should bank on it for survival, emergency. So they should not be called banks. The coupling of the secured character of banks with the promises of high return investment led to overwhelming popularity. Just like most euphoria, eventually brought about today’s disaster. By calling themselves Investment Characters, they make everyone aware the nature, the character of such investment – taking high risk may be rewarded handsomely. Investors take their own risk – “caveat emptor”. When it fails, there is no embankment to protect against the onslaught of storm.
The creation of this category is so very important for channeling excess capital back to the market. These are excess liquidity that is not survival critical. Failures in venture shall not be supported by government. Since they are not survival critical, the impact of failures will not affect the economy at large, surely not national stabilities, global orderliness.
US government chose to support Insurance and not Investment Banks is one great improvement in understanding, despite inadequate one, too late.
Finance Industries is not the only industry that needs this segregation, philosophical segregation.
In face of OAW, Medical cares, Education, Insurances also need such differentiating approach to differentiating for the survival essential and the comfort, pampering of the overly-endowed.
We shall divide Cosmetic Care from Essential Medical Care; Enjoyment Institutions from Scholastic pursuits, Basic Education; Wealth Protection Insurance from Disability, Retirement Pension.
With this approach, the governance of such institutions is made easier:
1. Aggregating to achieve economy of scale, in training, in facilities, in expertise.
2. Segmentation to provide premium products,
3. Dispensing of public subsidies, canvassing for support can be appropriately managed, scaled.
This is the wisdom derived from the great Western culture. Western strict disciplines, strict discipline of research brought about today’s leadership in the world, in science, in technology, in financial institutions.
Even a simple, singular transaction, we need to enter twice, one left, one right, one credit, one debit, to ensure there is accountability, accounting trails, mistakes minimized.
Even Black & Shore inspired many, very complex, very precise models, none can stand to the very basic requirements of strict science – cause and effect, measurable and repeatable. Forgotten the Western Strict Discipline in research, this cancer was allowed to grow under the eyelids of the best of Finance Industries for almost a decade, led to the collapse of world finance industries and repercussion spread through out the world.
Without addressing it now, it may bring about worse than Great Depression & World War II.
To ensure a stable, progressive, efficient economy, strict discipline in managing the essential is essential to survival, if not social serenity, if not transaction efficacy, efficiency, world order.
Every one yearn for freedom, full freedom of expression, full spectrum of fabrications, not limiting to Collaterals, Derivatives, Options, Free- willing Valuation. When one is such given, one must shoulder his own risks, and cannot count on others to bear the blunder, just like no one is entitled to taking a slice away from the pie, when it is ready, when it is tasty. This again is Western Strict Discipline of Transparency, then Accountability.
This two-prone approach provides solutions that satisfy seemingly mutually exclusive requirements –
highly secured vault for essential liquidity AND infinite free flowing cannels for excessive capital
together they shall ensure the spirit of free market principal and social good order –
Basic, critical capital flows efficiently, reliably.
no capital is stashed away from the economy
no creativities is stifled
no naive lost his sole piggy bank.
It is darkness that bring us cherish the sunrise.
It is strict disciplines that provide us the basic securities, so that we can venture beyond, venture freely, venture for high profits – even reach the unreachable stars, dreams the unrealizable dreams.
It is only when the society can provide everyone with basic securities, that society can be safe, stable, progressing.
The rich, the powerful, are the most vulnerable, in a society that is full of strife, conflicts, unemployment.
[1] “Dynamite Economy” Aug 8, 2007 http://www.cts-ideas.com/G0813DynamiteEconomy.pdf
http://www.cts-ideas.com/ tab Cognose.blogspot.com
Dynamite Economy 3 - Deadly Urgency
3.11 Approach - Finance Industry
Banks are lubricants for market economy.
Banks shall not, can never be wealth creator.
It was clearly stated in Aug 2007, that Banks making 9% profit over weak economy that barely made 1% profit is unsustainable. The big profit is through instruments, then sub-prime instruments.[1]
All the Top 5 Investment Banks has since faced the realities, except the top two still able to resist, the rest collapsed.
When there are OAW in banks clients’ pocket, the temptation is so high.
So they pretend they are wealth creator, these are fabrications, fabrication cannot be really fulfilled
Banks shoulder upon themselves promises they can never fulfill.
So dreamers’ hearts broken, banks bankrupting.
Rules of law are last resort, is late, it can be applied only after grave harm is inflicted.
Greed for profit is human nature, trying to ignore, using money to feed, law to control are feeble.
Salvaging is too late, too costly, usually the result is decimation of wealth.
So to satisfy temptation is the most important for design, for regulation.
Successful application will improve social order, for economic stability.
Banks should be divided into two categories:
First, Banks as they are remain as a conduit, a lubricant, continuously improving effectiveness, efficiency for capital formation, capital flow in the market. This category subjected to lower return, tight governance, and government backing.
Second, Investment Characters. These are avenues for higher return, naturally coupled with higher risk. No one should bank on it for survival, emergency. So they should not be called banks. The coupling of the secured character of banks with the promises of high return investment led to overwhelming popularity. Just like most euphoria, eventually brought about today’s disaster. By calling themselves Investment Characters, they make everyone aware the nature, the character of such investment – taking high risk may be rewarded handsomely. Investors take their own risk – “caveat emptor”. When it fails, there is no embankment to protect against the onslaught of storm.
The creation of this category is so very important for channeling excess capital back to the market. These are excess liquidity that is not survival critical. Failures in venture shall not be supported by government. Since they are not survival critical, the impact of failures will not affect the economy at large, surely not national stabilities, global orderliness.
US government chose to support Insurance and not Investment Banks is one great improvement in understanding, despite inadequate one, too late.
Finance Industries is not the only industry that needs this segregation, philosophical segregation.
In face of OAW, Medical cares, Education, Insurances also need such differentiating approach to differentiating for the survival essential and the comfort, pampering of the overly-endowed.
We shall divide Cosmetic Care from Essential Medical Care; Enjoyment Institutions from Scholastic pursuits, Basic Education; Wealth Protection Insurance from Disability, Retirement Pension.
With this approach, the governance of such institutions is made easier:
1. Aggregating to achieve economy of scale, in training, in facilities, in expertise.
2. Segmentation to provide premium products,
3. Dispensing of public subsidies, canvassing for support can be appropriately managed, scaled.
This is the wisdom derived from the great Western culture. Western strict disciplines, strict discipline of research brought about today’s leadership in the world, in science, in technology, in financial institutions.
Even a simple, singular transaction, we need to enter twice, one left, one right, one credit, one debit, to ensure there is accountability, accounting trails, mistakes minimized.
Even Black & Shore inspired many, very complex, very precise models, none can stand to the very basic requirements of strict science – cause and effect, measurable and repeatable. Forgotten the Western Strict Discipline in research, this cancer was allowed to grow under the eyelids of the best of Finance Industries for almost a decade, led to the collapse of world finance industries and repercussion spread through out the world.
Without addressing it now, it may bring about worse than Great Depression & World War II.
To ensure a stable, progressive, efficient economy, strict discipline in managing the essential is essential to survival, if not social serenity, if not transaction efficacy, efficiency, world order.
Every one yearn for freedom, full freedom of expression, full spectrum of fabrications, not limiting to Collaterals, Derivatives, Options, Free- willing Valuation. When one is such given, one must shoulder his own risks, and cannot count on others to bear the blunder, just like no one is entitled to taking a slice away from the pie, when it is ready, when it is tasty. This again is Western Strict Discipline of Transparency, then Accountability.
This two-prone approach provides solutions that satisfy seemingly mutually exclusive requirements –
highly secured vault for essential liquidity AND infinite free flowing cannels for excessive capital
together they shall ensure the spirit of free market principal and social good order –
Basic, critical capital flows efficiently, reliably.
no capital is stashed away from the economy
no creativities is stifled
no naive lost his sole piggy bank.
It is darkness that bring us cherish the sunrise.
It is strict disciplines that provide us the basic securities, so that we can venture beyond, venture freely, venture for high profits – even reach the unreachable stars, dreams the unrealizable dreams.
It is only when the society can provide everyone with basic securities, that society can be safe, stable, progressing.
The rich, the powerful, are the most vulnerable, in a society that is full of strife, conflicts, unemployment.
Why should they not support such categorization?
[1] “Dynamite Economy” Aug 8, 2007 http://www.cts-ideas.com/G0813DynamiteEconomy.pdf
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