leftright-investment

The number one problem for the US and for Western Europe is job creation. There is no bigger problem. The politicians can focus on all sorts of other things: taxing rich people, subsidizing pet projects, bashing China, etc. But, anyone who thinks there is a bigger problem than unemployment is missing the forest for the trees. How do we get more jobs? That is not a tough question. It is only tough because we are talking about labor. If we asked the identical question about anything else, the answer would be painfully obvious. For some reason, politicians and many economists become completely irrational when asked how to increase the demand for labor. If the same politicians and economists were asked about how to increase the demand for anything else the answer would be immediately forthcoming. How do you increase the demand for something? How about making that something more expensive? Would that help? What about substantially increasing the taxes for people that use that som...

Wherever you look these days, there are people demonstrating for their "rights." These "rights" are the right to take money from other people so that the demonstrators can have free this and free that. If education and health care are to be free, who pays? The demonstrators could care less. Look at Greece. There are daily and massive demonstrations demanding that their failed welfare state continue to support the "entitled." It is always someone else that should pay for all of the things that the "entitled" want. Everything is a fundamental "right" without obligations on the part of the entitled to fund anything. There are no obligations to be imposed on the entitled. After all, they are the entitled. What about Italy and Spain? Who pays? Their answer is the same as the OWS (Occupy Wall Street) crowd. They payers are "the rich." As if the rich had enough assets to keep all of these entitled folks going on indefini...

The Groupon case is an interesting look at IPOs and how the investment banks that underwrite them suffer from very real conflicts of interests. Groupon’s initial filing for an IPO valued the company at around $30 billion, but after the SEC found accounting and disclosure problems analysts decreased their valuations to as low as $10 billion. The article below raises an interesting question. If the investment banks (Morgan Stanley, Goldman Sachs, and Credit Suisse) fought so hard to win the underwriting mandate for the IPO, shouldn't they have caught these warning signs? Or as former SEC chief accountant Lynn Turner said, have they simply become sales and marketing agents? The article suggests that the higher fees associated with a higher valuation could be a reason the underwriters turned a blind eye. But shouldn't they also act in the interest of their institutional clients and the general public? The underwriting firms seemed to have turned a ...

The European "deal" is mostly a mirage. The only "real" thing that takes place in the deal is the 50% write down of Greek sovereign debt and even that write down only applies to the 60 percent of the debt that is in "private" hands, meaning mainly in the hands of commercial banks. Buried in this deal is the possibility that CDS (credit default swap) contracts will not be triggered. That is probably a sop to the banks who are on the hook for these contracts, which, among other things, insure Greek sovereign debt. No payoff for those who took out insurance. Who would have thought? Europe is following the American pattern of reneging on past contracts to foster the illusion that they are solving today's problems. (America continues this pattern with debt forgiveness orchestrated by the White House, invalidating legitimate private sector contracts with the hope of securing more votes for Obama in 2012). As for the EFSF (European Financial Stability Fu...

The Chelsea Football Club has just lost their bid to re-purchase the land of their home stadium, Stamford Bridge, located in Southwest London, from Chelsea Pitch Owners. Chelsea Pitch Owners was a fan group set up in 1993 when the club was in financial difficulties and they “acquired the freehold of the pitch to protect Stamford Bridge, which has been Chelsea’s home for 106 years until then, from developers”. The management team of Chelsea FC was hoping that through negotiations and a voting session, Chelsea Pitch Owners would sell their shares back to the club. However, at the crunch meeting in the Great Hall of Stamford Bridge today, only 61.6% of votes cast by the shareholders in Chelsea Pitch Owners were in favor of selling the freehold of the land on which the Stamford Bridge stadium sits. In order for the vote to have passed, there needed to be at least 75% vote for the proposal. The result from today’s meeting would mean that Roman Abramovich, the Russian billionaire...

Nigeria, the tenth largest producer of oil worldwide, is beginning to amass its own wealth. While $59 billion in revenues from oil were generated in 2010, the federal government has no funds. How is it possible? Nigerian officials have often used savings “in reserve” for nationwide projects, the withdrawals never needing approval. Combined with public corruption and rampant poverty, it is unsurprising that any investor would consider entrusting their funds to the Nigerian government. This is all about to change, however. Nigeria is beginning to craft a new sovereign wealth fund- revenue surpluses not used for immediate cash or consumption are invested in a federal account of financial instruments (assets normally held include stocks, bonds, property, and precious metals). Thus, Nigeria has been able to invest for its own future benefit. The wealth fund also provides Nigeria with a hedge against resource risks, as 80% of revenues come from oil. These include volatility of its oil pric...