Finance Weekly Updates

Learning from Iceland

In the past couple months, the term Iceland has become synonymous with economic havoc. All of Iceland’s major banks, their currency, and their stock market, collapsed within a matter of weeks. The citizens of pastoral Nordic nation awoke one morning to find their savings evaporated, their salaries slashed, their homes and investments devalued. What led to this shocking calamity, and what can we learn from it?

1. Currency Bubble – Speculative investment in the Krona had reached bubble proportions. Having such a small currency so heavily over-invested invited an abrupt fall, as foreign investors, who held the vast majority of the currency, had no compunctions about unloading it at the first sign of trouble.

2. Outgrowing your Country – Banks in Iceland had outgrown themselves and their country. According to some estimates, they were endebted to foreign creditors and depositors at a level equivalent to €160,000 per individual Icelandic citizen! Clearly it was not realistic for the Icelandic government, whose budget derives from the collection of taxes, to provide meaningful insurance on these deposits.

3. Bad Fences Make Bad Neighbors – Icelandic banks operated branches in Europe that were not properly structured in order to be independent from their parent institutions. As a result, they were ineligible for insurance or assistance from the British or European banking authorities. A very acrimonious debate erupted between the British and the Icelandic governments when Iceland intimated that it would not guarantee the deposits of non-Icelanders, and Britain retaliated by seizing the assets of those branches which operated on English soil.

Oil Prices Fall as Economy Falters

US consumers may be celebrating the recent fall of gas prices, but a number of disturbing fundamentals lie behind this seemingly positive development .

If we examine the underlying causes for the recent fall of oil from about $150 to under $70 a barrel, we will find some unsettling surprises.

First, we must understand that price is determined by the balance between supply and demand.
About a year ago, demand for oil exceeded supply for a number of reasons. First, the OPEC nations were limiting production to maintain high prices.

Second, a large amount of American capital was being invested in speculation on the continued rise of oil.
Investors were buying up ever more oil in the belief that its value would continue to appreciate.
This created bubble conditions in which the price escalated beyond an appropriate level, only to collapse at the first sign of trouble.

Third, US consumers were spending borrowed money freely, buying expensive gas and oil along with the large homes and vehicles that consume them. Once the US credit market tightened, the outlook was for consumer demand for oil to drop radically in the coming years.

All of this points to a disturbing conclusion: although the low price of oil may be convenient for the consumer in the short term, it reveals deep failings in the economy. Speculative investors have sustained massive losses on oil, and several hedge funds have lost all of their capital in this venture alone.

Consumers are curtailing their consumption of oil so abruptly that even substantial production cuts by OPEC cannot keep pace.

When investors are sustaining losses and consumers are unwilling or unable to spend, we are on the threshold of a major recession, if not a depression.

Home Prices | US Markets | Fixed-Rate Mortgage

That Dream Home May Be in Your Reach
So many families in the US have watched over the past decade as house valued drifted further and further out of reach. While some borrowed astronomical sums at nearly usurious rates, getting into the home ownership game at any price, others were relegated to the sidelines, whether by choice or due to a lack of financial ability. As the real-estate market implodes, this may be the ideal time for those ‘benchwarmers’ to come on the field and play the game.

Home prices have now fallen more than 30% in some US markets, particularly in the so-called ‘exburbs’,
the more remote suburbs whose desirability has been hampered by the rise in the price of gas. Over-construction has also led to a surplus of unsold houses, making contractors desperate to unload homes at almost any price.

Of course, given that wages are stagnating or even dropping, and that banks are much tighter with credit, it is going to be harder for most buyers to find a mortgage for which they can qualify. But there is another factor which works in their favor. We are now seeing a sustained policy of cutting interest rates on the part of the federal banks.

The primary purpose of this move is to make bank depositing unattractive, and business borrowing appealing, thus spurring entrepreneurial activity that can stimulate a dormant economy. But it also works to the advantage of home loan borrowers – rates are so low as to substantially reduce interest payments over the course of the loan.

Borrowers would be wise to select a fixed-rate mortgage, where they are assured that they will only pay the current low rate even when the economy rebounds and interest rates rise. In short, if you have some cash for a down payment and can get a Fixed-Rate Mortgage this may be the ideal time to buy that house you thought you couldn’t afford just a year or two ago.

Looking for a Tax Haven: Try Delaware, USA

Coming out ahead of both Switzerland and Luxembourg, the American state of Delaware was ranked first as the most opaque tax haven by the Tax Justice Network. The TJN is an organization whose mandate is to promote transparency in international finance.

Although Switzerland received the highest score for secrecy, here called opacity, along with several other countries such as Malaysia and small Caribbean countries like Barbados, when calculated together with the country’s importance as a place of cross-border financial activity, Delaware outranked these other countries.
The outcome of the ranking is as follows:

USA (Delaware)
Luxembourg
Switzerland
Cayman Islands
United Kingdom
Ireland
Bermuda
Singapore
Belgium
Hong Kong

Exclusive Relais & Chateaux Hotel Listings

Only 480 of the finest hotels and restaurants in the world have received entry into the exclusive association, Relais & Chateaux. Established in France in 1954, this association accepts outstanding properties with unique character and style. To stay in a hotel that is part of the Relais & Chateaux collection is to enjoy life just a bit more.

Hotel Blantyre – Hotel Blantyre, situated halfway between Boston and New York City in an elegant country Tudor-style house, offers a fantastic getaway. Enjoy a visit to the Normal Rockwell museum, a hot air balloon ride, horseback riding and more. Return to the Blantyre for their spa treatment and for a cooking class by the Grand Chef Christopher Brooks.

Planter Inn – For a trip down South, you simply must stop at the Planters Inn in Charleston, South Carolina. Overlooking the Old City Market, this hotel is surrounded by colonial houses and is in the heart of the Charleston historic district. Enjoy four poster beds, period-style furnishings and luxury accommodations. Dine at the Peninsula Grill for an award-winning culinary experience.

The Jefferson Hotel – The newly renovated 99 room Jefferson Hotel is the first Washington D.C. property to win entry into the Relais & Chateaux luxury hotel collection. Newly renovated by Ogden CAP Properties, LLC, with Principal and Co-Founder Connie Milstein, this exquisite hotel enhances any stay in the Washington D.C. area.

Profiting During a Recession

While the current recession certainly has an impact on most businesses, there are actually ways that some businesses can benefit from the current difficulties. As Dr. Mike Walden, the North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, says:

” When you have recession, people are going to change some of their spending habits. For example, typically we see during a recession people buy fewer new cars. That means they’re keeping their existing cars longer, and that probably means they’re going to need more repairs on those existing cars. Also look at construction. Construction often shifts during a recession from building new homes to people staying in their homes and perhaps remodeling. So remodeling may go up.”

College towns may find the economic downturns helping them as well. As VSU Associate Professor of Economics Cindy Tori points out, “If you have a business that can tap into that student population it’s going to help you position yourself for that recovery.”

The Business of Magazine Subscriptions

Magazine subscriptions are big business. There are many companies on the market today that offer fantastic rates on your favorite magazines. The question then becomes – where should you get your magazine subscription? Is there even a better way to read your favorite magazines?

First, the cheapest way to read some of your favorite publications is to do so online. Most magazines today have websites where they feature some of their articles each month. You can browse through parts of O Magazine, for instance, at their online site. This is not, however, going to provide you with all of the information that you love in your magazines. It only offers a sampling. It’s also not the coziest way to enjoy reading, as sitting in front of the computer doesn’t lend itself to cuddling in bed or reading on the couch.

The library is another option. Certainly, you’ll be able to find some magazines at the library and can check them out for free. The problem with this approach is that the best and most popular magazines have usually been taken before you get there, and you’ll have to continually return to the library to get the magazines for the following month.

Another option is to get a subscription with the magazine company. If you know which magazine you want, you can fill out the form inside the magazine or call the number provided and sign up for a subscription. Another option is to use a discount magazines subscription company like National Magazine Exchange or Magazine Deals Now. The benefit of these companies is that you can often switch magazines mid-year if you decide that you’re tired of cooking magazines and want to read about animals instead. These registries offer flexibility while providing great rates.

Aetna: Medication Therapy management

Aetna announced that members who enroll in its 2010 Medicare plans will have access to enhanced services called medication therapy management (MTM) aimed at helping them safely and effectively take medications prescribed by their physician.  MTM, which will be delivered by Mirixa Corporation, brings together pharmacists, patients, physicians and other health care professionals to help patients with their medications.

The Varied List of Rhodes Scholars

Wining a Rhodes scholarship is an incredibly prestigious honor and one that often marks future success. 32 American students are chosen each year out of 1500 applications. Winners exhibit exemplary service, academic achievement, and character.

Started by the estate of Cecil Rhodes in 1902, The Rhodes Scholarship program is the oldest international educational fellowship in the world. In his will, Cecil Rhodes wrote down four criteria by which applicants are to be evaluated. These include their literary and scholastic attainments; their energy to use their talents to their best capacity; their character as defined by their truth, courage, devotion to duty and sympathy for others; and their instincts to lead and think of the interests of others.

Certainly, the list of past Rhodes Scholars is extremely impressive. It includes musician Kris Kristofferson; Louisiana Governor Bobby Jindal; Hamed Wardak, one of the founders of the Campaign for a US-Afghanistan Partnership (CUSAP); and star football player Myron Rolle. These are people to look to for future success and for later accomplishments.

Ex-CEO’s Helping Other Companies

A recent article in the Wall Street Journal from November 10, 2009 points to a new, and quite interesting business trend. A number of businesses are seeing a new trend with former chief executives taking an active role in helping troubled companies. John “Jack” Krol, for instance, was named, in November as outside chairman of Delphi Automotive LLP. Retired from DuPont Co. as their CEO, he is now working on Delphi’s operating plans and strategies.

Dennis Carey, a senior client partner at Korn/Ferry International, explains this trend. As he says, “These chairmen are strategic equal partners of the CEO because they already demonstrated a successful ‘in the trenches’ style of management.”

This trend is certainly most pronounced at struggling companies, but it’s being seen at more big businesses as well. The Corporate Library, a governance research firm, says that 46 former CEOs are now chairmen of other companies. This statistic is up from 14 in 2004.

Edward Whitacre Jr., for instance, a former CEO of AT&T Corp., has recently made television commercials for GM and has played a key role in convincing fellow directors to keep GM’s Opel brand and European operations.

This should prove to be a very interesting trend to continue to follow in the business world.

Introducing the iPad

Apple today introduced iPad, a revolutionary device for browsing the web, reading and sending email, enjoying photos, watching videos, playing games, reading e-books, and much more. Its high-resolution Multi-Touch display lets you interact with content — including 12 innovative new apps designed especially for iPad and almost all of the 140,000 apps. apple.com/ipad

Tips for Buying a Foreclosed Home

One great way to get a bargain today is to buy a home that is under foreclosure. You should be careful, however, if you plan to buy a foreclosed home buy using these five tips. Many companies, such as Keller Williams Realty, Inc., Trammell Crow, Lincoln Property and Kirk Sanford and Sightline Acquisition Corp, can offer even more tips of this sort for benefiting from a depressed economy.

Just because something is foreclosing doesn’t mean it’s a great deal. Sometimes, even the banks overprice their properties. Hire a good realtor and know the market. Pay attention to location; don’t buy in the wrong area just because something is a good deal. Get an inspection and do a title search. Spending a bit of money now can save you a great deal later. Finally, make sure you hire a good attorney.

Just because a foreclosed property might be the best way to go, don’t close out all other options. You might find a better deal with a seller than you do with a bank. Keep all of your options open and be a smart buyer. Surround yourself with knowledgeable people including real estate agents, lawyers and more.  Make sure to do all of your homework and to educate yourself about buying a foreclosed home before  you sign on the dotted line.

Malaysian Businessmen Optimistic About 2010

According to the International Business Confidence Survey, Malaysia is seen as one of the top ten countries regarded as best able to deal with the global economic crisis. Surveying 7500 businessmen in 24 countries, this survey conducted by Servcorp intended to gauge international business moral. Certainly, Malaysian businessmen such as Taek Jho Low, Regional Development Authority (Irda) chief executive officer Harun Johar, MIDA chairman Dr Sulaiman Mahbob and others should take heart.

Australia received the #1 spot with the highest vote of confidence for their ability to weather the recent global economic crisis, while China and India earned the second and third spots respectively.

The Malaysian economy did register a 6.2 percent negative growth during the first quarter of 2009; however, they have a positive growth forecast in the fourth quarter of 2009 and for the coming year in 2010.

The results of another survey, carried out by accountancy body, CPA Australia, indicate that business leaders in Southeast Asia are optimistic about the end of the global economic downturn. Of the 300 business leaders in the region, including a number in Malaysia, who were questioned, most said that they expect the global economic issues to be over by the end of 2010.

Hedge Funds Help Families Acquire Homes

The hedge fund community of New York has established an organization in conjunction with Habitat for Humanity whose mission is to help hard-working New York families fulfill their “once-in-a-lifetime” dream of home ownership.

These are families that without the intervention of Habitat and the support of hedge funds and private equity firms would not be able to compete for purchase of real estate in New York City.

Hedge Funds for Habitat-NYC is supported by some of the leading hedge fund and private equity firms in New York, including but not limited to:

Jason A. Press
The N.I.R. Group LLC, Corey Ribotsky,  Managing Partner
Walter Noel
PNC MultiFamily Capital
Tullett Prebon Holdings Corp
Vantage Partners

Looking for a Tax Haven: Try Delaware, USA

Coming out ahead of both Switzerland and Luxembourg, the American state of Delaware was ranked first as the most opaque tax haven by the Tax Justice Network. The TJN is an organization whose mandate is to promote transparency in international finance.

Although Switzerland received the highest score for secrecy, here called opacity, along with several other countries such as Malaysia and small Caribbean countries like Barbados, when calculated together with the country’s importance as a place of cross-border financial activity, Delaware outranked these other countries.

The outcome of the ranking is as follows:

USA (Delaware)
Luxembourg
Switzerland
Cayman Islands
United Kingdom (London)
Ireland
Bermuda
Singapore
Belgium
Hong Kong

Finance Weekly Profile: Alan Quasha

From time to time we like to profile interesting and/or successful individuals making news in the world of finance. Alan Quasha is perhaps best known for his great talent restructuring companies. Among his more recent endeavors have been the restructuring of Genius Products. Formerly owned by Harvey and Bob Weinstein, Genius is an entertainment distribution company. Alan Quasha also facilitated the acquisition of the private equity operation of Lehman Brothers by the investment firm Reinet Investments.

Alan Quasha is a principal at Quadrant Management, an investment firm which focuses its resources on U.S. and emerging markets.

Alan Quasha started restructuring companies over thirty years ago when there was not much financial incentive to perform this task as an agent. Therefore, he learned early through necessity that the best approach was to become a partner in the process. This philosophy has assured many years of successful restructuring ventures and earned Alan Quasha his well-deserved excellent reputation.

Being a shy man by nature, Quasha has always avoided the limelight. He is associated with several other investment firms in addition to Quadrant, including Carret Asset Management Group and Vanterra Capital, where he is the founding principal of this global private equity fund.

Spirits Rise with Hedge Fund Gains

Hedge Fund managers have been in a good mood lately as world markets seem to head upwards, shaking off the unpleasant memories that hopefully is all that is left of 2008,one of the worst years in financial history.
The month of July alone saw the Eurekahedge Hedge Fund Index climb an additional 2.1 percent, adding another month to the five month growth streak of 2009.

To date the Index has improved an impressive 12 percent, with hopes for the rest of the year high.
Another index, the MSCI World Index soared 8.4 percent just in July bringing its year-to-date upward climb to 14%.

This extraordinary improvement relied mostly on the success of the fund managers of the Asian and emerging markets sectors.

“The month’s returns were achieved on the back of strong rallies across underlying equity markets despite a rough start to the month,” Eurekahedge wrote in its report.

This is good news to the hears of fund managers all over the world such as John Paulson, Eric Sprott of Sprott Hedge Fund

PIPE Investment Not a Pipe Dream For GM

As the financial world continues to feel the reverberations of one of the most daring, controversial and largest bailouts of a publicly traded company by the U.S. government in history, that is the General Motors decline into bankruptcy and the U.S. government’s bailout, Corey Ribotsky believes he is seeing just another PIPE investment, albeit on a grander scale.

In an opinion piece which appeared in HedgeWorld News, the managing partner and head portfolio manager of the NIR Group of Roslyn, New York, Corey Ribotsky, described the many ways in which the recent U.S. government bailout of General Motors Corporation resembles a PIPE deal which Ribotsky’s investment firm has been dealing with for years.

PIPE is an abbreviation for private investment in public equity, and according to Ribotsky’s take on the bailout, the U.S. government is investing in the publicly held equity of General Motors, or what’s left of it.

Investigators Warn: Stess Tests Not Enough

The  Oversight Panel which is supervising the U.S. government bailout of banks to the tune of $700 billion issued a report Tuesday, June 9th, stating that the Federal Reserve used “conservative and reasonable” methods for the assessment of the well-being of the country’s largest banks.
However the panel also said that the Fed’s most pessimistic scenario was not far reaching enough. One example is that the “stress tests” which were conducted by the Federal Reserve bases their conclusions on 2009 unemployment figures which averaged 8.9%. This year unemployment actually reached 9.4% in the month of May.

“While no one should gainsay the potentially positive results of the tests, it would be equally unwise to think that those results reflect a diagnosis of all of the potential weaknesses or create a necessarily sufficient buffer against future reverses for the banking system,” warned the panel in their report.

Do Investors Get Unbiased Research From Wall Street?

Appearing before a United States’ House of Representatives’ subcommittee hearing to discuss “Analyzing the Analysts: Are Investors Getting Unbiased Research from Wall Street?” Gregg Hymowitz, a founder and principal of EnTrust Capital Inc. offered his opinion as testimony. This thought provoking testimony can be viewed in full by following the link.