Saturday, 26 January 2008
U.S.A. Subprime effect
In the world of competitive finance, there's never a bad time to make money. Sure the subprime market has many feeling the pinch, but the real opportunists find ways to profit in any circumstance. For example, one strategy is short selling or in other words, betting on a loss. In a must read NYTimes article, Ben Stein examines Goldman Sach's practices of knowingly creating and selling flawed financial investments while covering themselves in the process.
But it's not just the Big Guys who are getting all the breaks. In my favorite story of the subprime fiasco, some people are fighting foreclosures with impressive Talmudic reasoning:
A Federal Court Judge rejected 14 foreclosure claims by Deutsche Bank, which was trying to collect on securitized sub-prime mortgage loans it acquired. The judge stated that the Bank did not really own the “bad loans” because it acquired them after defaults had already occurred. He asked the bank to prove it held the mortgage at the time of the foreclosure notices or said he will dismiss its claims.
The snowballing effect of subprime defaults is the result of repackaging, revaluing, and reselling various debts to various investors. However, once the debt is securitized and resold it can be difficult to track down who owned what and when. As a result Deutsche Bank not only loses on the initial investment, but cannot even recoup the losses through the typical hedge of property foreclosure.
Click on the Radio icon TNG and hear a discussion for California Investors with debate about real estate opportunities in the current crises in USA
Storm coming your way soon.........
Wednesday, 23 January 2008
Estimated size of Sovereign wealth funds
- UAE Abu Dhabi ADIA launched in 1976 $625bn
- Norway Government Pension Fund - Global launched 1990 $322bn
- Singapore GIC launched in 1981 $215bn
- Kuwait KIO launched in 1953 $213bn
- China Investment Corporation launched in 2007 $200bn
- Singapore Temasek launched in 1974 $108bn
- Qatar Qatar Investment Authority launched in 2005 $60bn
- US(Alaska) Permant Reserve Fund launched in 1976 $40.2bn
- Brunei Brunei Investment Authority launched in 1983 $30bn
Norway is currently the most transparent Sovereign Fund in the world. For further details on Sovereign Wealth Funds see Nordic Partnership report for potential for new sovereign wealth funds 2008.
The sovereign wealth funds are estimated to control more than $2 trillion in assets, more than hedge funds. And a lot of is coming out of jurisdictions that are raking in money from rising oil prices.
The problem is that this puts an enormous amount of power into the hands of a small number of people. And governments are not the same as shareholders, they have different agendas. Particularly if they represent autocratic regimes.
On the other hand, these sorts of investments help to stabilize markets. The Abu Dhabi Investment Authority's move on Citigroup is a case in point.
What's needed is more transparency. Getting the funds to release reports detailing their strategies and holdings would be a good start. But how that's worked out remains to be seen. Still, an answer is needed because this problem will not go away.
Kuwaiti fund eyes US subprime bargains
By Henny Sender in New York
Published: January 1 2008 22:03 | Last updated: January 1 2008 22:03
The Kuwait Investment Authority is following its peers in the Middle East in the hope of finding bargain investments in the US in the wake of the subprime mortgage crisis.
The $213bn sovereign wealth fund, unique in the Middle East because its inflows are governed by law and subject to parliamentary oversight, rather than the wishes of the ruling family, is particularly interested in opportunities in financial services.
“Perhaps we are at the eye of the storm now and are close to the peak of the problem,” Bader Al-Sa’ad, head of the KIA, told the Financial Times. “We don’t see prices dropping much more.”
Mr Al-Sa’ad said he intended to speed up decision-making at the KIA to take advantage of the opportunities thrown up by the crisis. “With Citi, the Abu Dhabi Investment Authority had good timing,” he said, noting that it took ADIA less than three weeks to seal its late November deal to invest $7.5bn in convertible securities in Citigroup. “I believe we need to move faster in some of our response time.”
In recent months, the KIA has been scouring Asia for investments, especially in banks, to capitalise on torrid economic growth in the region. The KIA has already made huge profits on its $700m stake in Industrial and Commercial Bank of China. But Asian banks are also expensive, trading in many cases at up to six times book value. By contrast, banks in Europe and the US, which have been hard-hit by the turmoil in the mortgage market, are trading at about book value, he said.
Like executives at other sovereign wealth funds, Mr Al-Sa’ad expressed dismay that off-balance sheet issues could surface in the US so soon after the shock of Enron’s implosion, following that company’s massive use of off-balance sheet vehicles to disguise the extent of its debts.
Mr Al-Sa’ad said sovereign wealth funds were long-term investors and far more stable than hedge funds because they do not use a lot of leverage. He took care to highlight the differences among sovereign wealth funds, noting that while some are increasingly competing with private equity firms, others, such as the KIA, seek to partner with them.
Japan to create £25bn sovereign fund to invest in markets hit by sub-prime
Posted January 25, 2008 at 07:27 PM
The Times reports that, “Japan is in advanced discussions to create its first sovereign wealth fund in a move aimed at mobilising one of the world’s biggest pools of foreign exchange reserves. The plans, described to The Times by the Minister for Financial Services and Administrative Reform, would give Japan membership of what is fast becoming a formidably powerful club of investors.”
Libya’s sovereign fund shuns US investments
- Published: 03 February 2008 11:23
The head of Libya's National Oil Company has said that the country's $100bn sovereign wealth fund would avoid buying assets in the US because of the increasingly negative attitude towards investment by sovereign funds.
The circular Solar Islands with a diameter of 5 kilometers and an height of 20 meters consists of a torus, which is the steam storage, carrying the termosolar panels placed on a membrane.
What will the world be like in the New Energy Age?
"Morgan Stanley is a leader in the industry and their commitment to financing renewable energy has been clear from the start," said Arno Harris, chief executive officer of Recurrent Energy. "We look forward to putting this new fund to work quickly to help our clients transform empty rooftops into value-generating, sustainable assets."
Recurrent Energy sells solar electricity from its projects to institutional property owners (REITs and pension funds) and their tenants via a power purchase agreement at grid-competitive rates. Called Solar as a ServiceSM, Recurrent Energy's offering enables its customers to cost-effectively reduce their use of fossil-generated electricity across large property portfolios.
"Morgan Stanley is excited to work with Recurrent Energy to finance its solar power solution for institutional property owners. Recurrent Energy's unique approach to the rooftop solar market, in conjunction with the federal and state incentives, creates an innovative and economic solar solution for the marketplace," said Edward Levin, a Vice President of Morgan Stanley.
Advance Project Finance - Structuring Risk
Building the model:
- income statements;
- balance sheets;
- cash flow;
- retained earnings;
- equity returns;
- coverage ratios and
- present values.
- off-taker purchase;
- capital recovery;
- unit prices;
- market fundamentals;
- CAPM; and
- downside, base, and upside cases;
- use the model to price and negotiate the deal.
PROJECT FINANCE TRANSACTION AGREEMENTS
- Engineering, Procurement and Construction (EPC) Contract: - between the Project Company & the Engineering Firm.
- Operations and Maintenance (O & M) Agreement: - between the Operations Contractor and the Project Company, obligates the Operator to operate and maintain the project.
- Shareholders Agreement: - governs the business relationship of the equity partners
- Inter-creditor Agreement: - an agreement between lenders or class of lenders that describes the rights and obligations in the event of default.
- Supply Agreement: - agreement between the supplier of a critical key input and the Project Company (e.g. agreement between a coal supplier and a power station)
- Purchase Agreement: - agreement between the major user of the project output and the Project Company (e.g. agreement between a metropolitan council and a power station)
Project start ups with USP and IP either as SPV's of a bigger concern or with strategic partners bringing project management skills
Due diligence is used to investigate and evaluate a business opportunity. The term due diligence describes a general duty to exercise care in any transaction. As such, it spans investigation into all relevant aspects of the past, present, and predictable future of the business of a target company. Due diligence sounds impressive but ultimately it translates into basic commonsense success factors such as "thinking things through" and "doing your homework".
There are many reasons for conducting due diligence, including the following:
- Confirmation that the business is what it appears to be;
- Identify potential "deal killer" defects in the target and avoid a bad business transaction;
- Gain information that will be useful for valuing assets, defining representations and warranties, and/or negotiating price concessions; and
- Verification that the transaction complies with investment or acquisition criteria.
Lead and co-investors, corporate development staff, attorneys, accountants, investment bankers, loan officers and other professionals involved in a transaction may have a need or an obligation to conduct independent due diligence. Target management typically assists these parties in obtaining due diligence information but because it is unwise to totally rely on management third party consultants are often brought in to conduct due diligence.
Initial data collection and evaluation commences when a business opportunity first arises and continues throughout the talks. Thorough detailed due diligence is typically conducted after the parties involved in a proposed transaction have agreed in principle that a deal should be pursued and after a preliminary understanding has been reached, but prior to the signing of a binding contract.
The parties conducting due diligence generally create a checklist of needed information. Management of the target company prepares some of the information. Financial statements, business plans and other documents are reviewed. In addition, interviews and site visits are conducted. Finally, thorough research is conducted with external sources -- including customers, suppliers, industry experts, trade organizations, market research firms, and others.
There is no correct answer to this question. The amount of due diligence you conduct is based on many factors, including prior experiences, the size of the transaction, the likelihood of closing a transaction, tolerance for risk, time constraints, cost factors, and resource availability. It is impossible to learn everything about a business but it is important to learn enough such that you lower your risks to the appropriate level and make good, informed business decisions.
Yes. Too much due diligence can offend a target company to the point where they walk away from a deal. It can also result in "analysis paralysis" that prevents you from completing a transaction or provides time for a better competing offer to emerge. Accordingly, it is important that due diligence be prioritized and executed expeditiously. Appropriate investigation and verification into the most important issues often must be balanced by a sensible level of trust concerning lesser issues.
Time allocated for completion can vary widely with each situation. Many preliminary agreements define the timeframes in which due diligence will be conducted. Time schedules through the closing of a transaction are typically tight -- parties should ensure that adequate time is allocated to due diligence.
Every transaction will have different due diligence priorities. For example, if the main reason you are acquiring a company is to get access to a new product they are developing to accelerate your own time to market, then the highest priority task is to ensure that the product is near completion, that there are no major obstacles to completion, and that the end product will meet your business objectives. In another transaction, the highest priority might be to ensure that a major lawsuit is going to be resolved to your satisfaction.
Due diligence costs are based on the scope and duration of the effort, which in turn are dependent on the complexity of the target business and other factors. Costs are typically viewed as an essential expense far outweighed by the anticipated benefits and the downside risks of failing to conduct adequate due diligence. The involved parties determine who will bear due diligence expense.
Certain activities conducted during due diligence can breach confidentiality that a transaction is being contemplated. For example, contacting a customer to assess their satisfaction with the target company's products might result in a rumor spreading that the company is up for sale. Accordingly, to maintain confidentiality, we often contact customers under the guise of being a prospective customer, journalist, or industry analyst.
A well-run due diligence program cannot guarantee that a business transaction will be successful. It can only improve the odds. Risk cannot be totally eliminated through due diligence and success can never be guaranteed.
In this litigious world, you can be sued for just about anything and failing to conduct due diligence is no exception. Parties involved in a business transaction may find themselves being sued by their clients, investors, customers, employees, suppliers, or other third parties asserting failure to conduct proper due diligence or pursuing a liability that was overlooked or incorrectly assessed by due diligence.
No. However, conducting proper due diligence may serve as a strong legal defense to third-party claims after a transaction closes. Due diligence may also reduce legal issues by alerting a purchaser or investor to potential liabilities that can be mitigated in various ways prior to closing the transaction.
Stem Cell Stem Cells Paradigm shift to Human Species
Haps High Altitude Platforms Paradigm shift to telecommunications and broadcast
Geopolymer - Paradigm shift to the Cement Industry
Hedge Funds hold $1.5 trillion in assets
Nano Technology Paradigm shift in manufacturing and production
In 1962, Thomas Kuhn wrote The Structure of Scientific Revolution, and fathered, defined and popularized the concept of "paradigm shift" (p.10). Kuhn argues that scientific advancement is not evolutionary, but rather is a "series of peaceful interludes punctuated by intellectually violent revolutions", and in those revolutions "one conceptual world view is replaced by another".
Think of a Paradigm Shift as a change from one way of thinking to another. It's a revolution, a transformation, a sort of metamorphosis. It just does not happen, but rather it is driven by agents of change.
For example, agriculture changed early primitive society. The primitive Indians existed for centuries roaming the earth constantly hunting and gathering for seasonal foods and water. However, by 2000 B.C., Middle America was a landscape of very small villages, each surrounded by patchy fields of corn and other vegetables.
Agents of change helped create a paradigm-shift moving scientific theory from the Plolemaic system (the earth at the center of the universe) to the Copernican system (the sun at the center of the universe), and moving from Newtonian physics to Relativity and Quantum Physics. Both movements eventually changed the world view. These transformations were gradual as old beliefs were replaced by the new paradigms creating "a new gestalt" (p. 112).
Likewise, the printing press , the making of books and the use of vernacular language inevitable changed the culture of a people and had a direct affect on the scientific revolution. Johann Gutenberg's invention in the 1440's of movable type was an agent of change. Books became readily available, smaller and easier to handle and cheap to purchase. Masses of people acquired direct access to the scriputures. Attitudes began to change as people were relieved from church domination.
Similarly, agents of change are driving a new paradigm shift today. The signs are all around us. For example, the introduction of the personal computer and the internet have impacted both personal and business environments, and is a catalyst for a Paradigm Shift. We are shifting from a mechanistic, manufacturing, industrial society to an organic, service based, information centered society, and increases in technology will continue to impact globally. Change is inevitable. It's the only true constant.
In conclusion, for millions of years we have been evolving and will continue to do so. Change is difficult. Human Beings resist change ; however, the process has been set in motion long ago and we will continue to co-create our own experience. Kuhn states that "awareness is prerequisite to all acceptable changes of theory" (p. 67). It all begins in the mind of the person. What we perceive, whether normal or metanormal, conscious or unconscious, are subject to the limitations and distortions produced by our inherited and socially conditional nature. However, we are not restricted by this for we can change. We are moving at an accelerated rate of speed and our state of consciousness transforming and transcending. Many are awakening as our conscious awareness expands.
Reference: Kuhn, Thomas, S., "The Structure of Scientific Revolutions", Second Edition, Enlarged, The University of Chicago Press, Chicago, 1970(1962)
HAVING A SPIRITUAL EXPERIENCE
WE ARE SPIRITUAL BEINGS
HAVING A HUMAN EXPERIENCE