business

Politicians… putting the “n” in cuts


Perhaps it’s a consequence of having a cynical mind, but don’t you find politicians these days are just so condescending?

They were always condescending I suppose, it’s just that they used to be so much better at putting us in our place… “plus ca change” and all that…

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Other People’s Money, the Property Gamble Continues


real-estate

real-estate (Photo credit: Jon Garfunkel)

If you have seen the classic movie, Other People’s Money with Danny DeVito, then you will know what I mean.

It has been a poor few years for investing in property, especially commercial real estate. We have had a string of disasters and upheavals: the Japanese nuclear fiasco, the Arab Spring, the European Union and it’s employment and budgetary problems, the ongoing Credit Crisis, the inability of Central Bankers and governments to come to terms with the profligacy of the past decade, to name but a few. But these are not the real culprits as other manmade disasters have contributed to a far greater extent.

Problems in the commercial real estate markets have been exacerbated by the lack of commercial funding at rates acceptable to buyers due to excessive risk premiums being charged by banks. One of the main culprits in this equation is the banks and their senior management. Traditionally, and still to some degree today, bankers are paid according to performance. This is all well and good when they are investing their own money in ventures and lending to commercial real estate projects that are being developed on a speculative basis. However, this just does not work when they are managing deposits of small business men and others that want to keep their monies safe.

Speculative commercial real estate developments, something that banks have invested in and lent money to are just that, a speculation or a bet. Like a casino if you were, when you go in and change your money, you know that at the roulette table the best odds are still a gamble and you could lose everything. Imagine going to work every morning and having to gamble with other people’s money and get paid for it. Imagine again, if you will, that you are working for a company that asks you to do this on a daily basis and they will pay you a salary, often a fantastic salary, and allow you to have a benefits package to match any available in the market.

gambling

gambling (Photo credit: Sean MacEntee)

They will pay your pension and give you a company credit card for entertainment purposes and a telephone with which to promote your bets on commercial real estate. Now you are getting the message. But hold on, it doesn’t end there. You are allowed to make bets on the property market by deciding which project you should lend to so as to make the balance sheet of the bank look good.

The balance sheet needs to look good because then the senior management can say they made a great deal of money betting other people’s money and they then award themselves a large, and according to them, well deserved bonus, a policy which filters down to the lower staff as well, to ease the feeling of complicity and give each other mutual pats on backs.

It’s a vicious circle and the sufferer in this orgy of gambling has been the taxpayer. We are only coming to this realisation in recent times with the never ending series of bailouts that seem to have occurred throughout the world during the past three years and the excesses of bankers exposed.

When is an Apple not just an Apple – when it’s an A.pl apparently…


Apple’s thirst for litigation seems to be moving from the sublime to the ridiculous.

I have just read on Reuters that Apple, through its legal representatives in Poland Baker McKenzie, have filed another court case. This time it’s against an online grocery retailer called A.pl. Apparently the reason for this filing is the similarity between the names of the two companies and the fact that Apple feels that A.pl maybe stealing its thunder in Poland.

It seems to me that although this litigation may be justified, in legal terms, the real loser is the English language. From now on anything that has the word apple in it seems to belong to the Cupertino-based Goliath. I mean, if Apple had its own way, the snake in the Garden of Eden will probably be giving Eve an orange as Apple may file a complaint and religion may have to be rewritten!

And from this nugget, I move swiftly onto the Apple vs. Samsung saga. I really cannot fathom what all the fuss is about… court cases spanning four continents, millions, nay billions, of dollars that could be spent on better things all over the world lining the pockets of fat cat lawyers. All one can glean from this court cases is that the greed of these “two bickering children” is limitless in their quest for supremacy of the mobile phone waves.

Well, I can understand to a certain extent, but I feel they have really misunderstood the reason for the fight in the first place.

Principle or Principal?

Yes, I know, there are people out there who will use the old adage, it’s the principle… but I often say to them that they have spelt it wrong. These days, it’s the principal, not the principle that counts.

And that is my main gripe: it is not the principle that counts here, but the principal… the billions of dollars at stake in the war for dominance of the burgeoning smart phone market. Yes, Samsung copied Apple’s innovative products, yes, Apple is apparently more inventive. We all agree on that front, however, their head to head battle, where so far only the lawyers are the winners, seems an enormous waste of money… at a time when a billion dollars spent wisely could save millions of lives all over the globe.

The Facebook Debacle: Stand & Deliver, Your Money AND Your Life


What we think of YOU

If anyone were to look at the lyrics of Adam & the Ant’s 30 year old single, one would be amazed at the relevance if some of its oracle-like predictions were applied to Facebook and its billionaire CEO,  Zuckerberg. Moreover, if recent news is anything to go by, we are seeing just how much highway robbery one can legally get away with these days and still be one of the most “liked” people in the world. Dick Turpin eat your heart out!

Facebook…where does one begin to unravel the hype and scrutinise what’s actually going on? And where does one start to look at the reality behind the astronomical numbers and make sense of the endless smoke and mirrors that is Facebook? It has been reported, in the last 24 hours or so, that over 8% of Facebook’s accounts aren’t real. That translates to well over 80 million accounts!

Let’s translate those figures into something more realistic to us mere mortals: it can be estimated that out of the hundred billion dollar valuation that Facebook recently had before its IPO, each account, that means your account, my account and the other billion-odd people’s accounts were worth, to Facebook, about USD100 each. Just the facts now: that means that (at least) USD8 billion of the Facebook valuation by Goldman Sachs, Morgan Stanley and the other underwriters was BS, something we know now as the shares languish at more realistic levels.

And for Facebook to now start reporting that nearly 10% of its user accounts are fake seems to any  normal person to be fraud. Were you or I to go into the market, take money off people and then turn around and say well… I lied,  without even an iota of apology: “I didn’t know until a few days ago that my business is actually smaller, erm, than I told you, erm, and its moving to a platform that I cannot control, erm,” would definitely be punishable by a term in a federal penitentiary.

But highway robbery doesn’t stop just there, and Zuckerburg and his gang of advisers and lawyers certainly makes Dick Turpin look like an amateur. With its shares, just yesterday, falling to nearly 50% of their IPO price, an intraday price of USD19.84, it surely stands to reason that the US attorney, Preet Bharara, Wall Street’s sheriff, should start taking an interest in what’s going on here as this is nothing short of legalised robbery. Investors have been short changed, with Facebook valuation not only being hyped up to an extra USD50 billion, but also being subjected to more and more bad news each quarter  – all of which the company denies it knew about before the IPO.

It becomes harder to believe that Facebook didn’t know about these fake accounts six months ago, as it is hard to believe that Facebook was not fully aware of the slowdown in advertising and the impact smart phone and tablet sales were having on its business. Material disclosures of these kinds would have affected the valuation of the stock, however, Zuckerburg with his army of lawyers and billions of dollars in the bank will not be an easy target, even for the Sheriff.