Financial & Economic Blog

SAN JOSE, Calif. - June 28, 2007 - Cisco® (NASDAQ: CSCO) today announced that it has passed another milestone in the rapidly evolving wide area network (WAN) optimization market with the deployment of its 1000th customer. Since launching its Wide Area Applications Services (WAAS) solution in September 2006, Cisco has seen broad adoption of its product across multiple industries, helping customers to solve IT challenges such as branch office application performance, remote backup and ...

 

Sir Alexander Belloc-Brayne celebrates the financial rescue of Eurotunnel and prepares to replace Warren Buffett at Berkshire Hathaway

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May 2007

Good to be back on English soil after our election-monitoring tour of duty in France. Her Ladyship and I are thoroughly charmed by the idiosyncrasies of French political life as exemplified by the appointment of Dr Bernard Kouchner to the Sarkozy cabinet. I don’t know about you, but I find it rather difficult to pigeonhole a former Minister for Health and Humanitarian Action in the Mitterrand government who supports the present Anglo-American occupation of Iraq while remaining “on the side of the oppressed”. Socialist Neo-Con is the best I can manage for now.

Predictably, that other great neo-con, Tony Blair, has vaulted the Channel to be the first to embrace a kindred spirit and (presumably) to brief Sarko on handling Gordon Brown – no doubt proposing an inaugural dinner at the Granita, whose fare is known to distract the most single-minded of men. Tell it not in Gath, but Her Ladyship and I are quietly impressed by Mr Brown’s decision to forsake the foreign stage in favour of the old Green and Pleasant – listening to and learning from the common man in preparation for the age of open government. Not that Gordon has ever lacked humility, mind, which explains why we have blanket means-testing, pension fund dividend taxation, next to no gold reserves and an average hourly tax rate that exceeds the minimum wage.

Incidentally, Her Ladyship and I are most grateful to the consortium of American banks that have rescued Eurotunnel from financial oblivion, without which the Belloc-Brayne caravan might still be stranded at our Parisian oasis. There seems much to commend in the ingenious Gounon debt-for-equity restructuring, even if it does entail exchanging their debt for our equity and gives the private equity vultures carte blanche to asset-strip Groupe Eurotunnel before re-floating the skeleton on the stock exchange. The way I see it (as an ordinary shareholder), 13% of Groupe Eurotunnel beats 87% of nowt most of the time. Her Ladyship, though, is firmly opposed to the Gounon Plan on an important point of principle which seems to centre on the loss of our £1-per-trip Eurostar shareholders’ concession.

I must say that there appears to be quite a head of steam building up on Europe, what with the chairman of Honda threatening to pull out of Swindon unless Great Britain joins the single currency – as good an excuse as any for quitting a dreary Wiltshire town. Her Ladyship claims victory over the European federalists who have backed down on the legality of using pounds and ounces in daily commerce, but I suspect that the Trojan horse may well have been calibrated in imperial units. Something in my water says that the departure of the great imposter from No. 10 may bring out the Europhile in Gordon Brown and that the five insurmountable barriers to monetary union will melt away as swiftly as they were erected.

Returning to matters of private equity, I read that the Chinese State Investment Company is to take a $3bn stake in Blackstone. Eminently enterprising to contemplate pouring up to $1,200bn worth of foreign exchange reserves into high-yielding instruments rather than loans to the Yanks at the risk-free interest rate – an attitude that captures the spirit of 21^st Century Chinese National Socialism rather nicely. Reports from Chongqing tell of schoolchildren ploughing their Spring Festival dosh into the Shanghai and Shenzhen exchanges, inspired by a rash of get-rich-quick investment manuals. Let a hundred flowers bloom… Keep this under your hat, but I detect a market for the Personal, Social and Health Education & Citizenship curriculum which preaches financial prudence to our own A-Level speculators. Should go down a storm with the little emperors out east. Well spotted, Belloc-Brayne! There may be a Queen’s Award for Export Achievement in this for you.

And hurrah for those splendid FTSE100 companies that have shaken off their six-year pension deficits. Shows what rising bond yields and a simultaneous asset-price bubble can achieve. All we need is a higher death rate and the final-salary scheme will be back in business! Word is that UBS and Aegon plan to buy out the schemes of the remaining high-cap black-holers in order to remove obstacles to private equity deals. Very far-sighted! Mind you, things are a little bleaker in the public sector, where £29bn is paid out in pensions benefits each year against £19bn in contributions. I wonder who picks up the tab? In fairness, public servants carry the burden of paying contracted-out rates of National Insurance for their State Second Pensions (available from age 60), so the taxpayer can hardly begrudge a subsidy of £50k per head - surely a small price to pay for a contented Civil Service!

Of course, we are blessed to have the Financial Services Authority on hand to defend our pension rights in the private sector. All the signs are that the FSA is clearing the decks for action, having suddenly abandoned its Split-Cap Investment Trust show trial on the grounds of “practicality” – a new criterion in regulatory history. Her Ladyship speculates that the FSA and the Treasury are preparing for a wave of compensation claims arising out of the mis-regulation of Equitable Life – hence the recent pre-emptive 500-page “brute force” rebuttal of the Parliamentary Ombudsman’s report. The way I see it, though, the FSA is about to act on the Fraud Advisory Panel’s demand that it police the Second Life “virtual online community”, whose avatars can launder Linden dollars with impunity and exchange them for US dollars. No one better equipped for the task than the FSA, which is widely perceived in the City as inhabiting a parallel universe.

Glad to see some clarity emerging in the retirement market, with Pensions Minister John Hutton standing firm against the do-gooders who would have him guarantee that £1 paid into the new National Personal Pension Account “will make savers £1 better off than non-savers…” I ask you! I am greatly relieved to hear that NPPAs will “face the same level of regulation as all other trust-based occupational pensions” which suggests that the Regulator will get tough if a £1 contribution turns out to be worth less than £1 through mis-investment as distinct from means-testing - and not before time! Meanwhile, the Inland Revenue has delivered another helpful pensions-simplifying measure, with HMRC Business Income Manual (Vol. 46035) hinting that employers' contributions may no longer attract corporation tax relief where the “remuneration package is excessive for the value of work undertaken by that individual for the employer” - a principle that would seem to embrace virtually all executives at Prodigal Life. Too simple by half, if you ask me!

Must rush. One languishes in the wilderness for an eternity and then several job opportunities come at once. Nurse is badgering me about applying for the World Bank Presidency. I cannot quite bring myself to tell her that the post is traditionally occupied by an American Neo-Con and dashing her hopes of a Shaha Riza-type role which, at $193,590 p.a., pays even better than a lap dancer at The Crazy Horse. Meanwhile, Lady Belloc-Brayne has sent my curriculum vitae off to Berkshire Hathaway, where the hunt is on for the successor to the great Warren Buffett. Word is that the 600-odd applicants to date are a rum bunch, and include a Canadian mystic and a Talmudic scholar who moonlights as a hedge fund manager. Her Ladyship insists that my stewardship of the Belloc-Brayne Model Portfolio has not gone unnoticed and that my pioneering work in the field of Inertia Investing speaks for itself. Nebraska here we come!

 

 

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Market research firm Datamonitor PLC predicts that offshore outsourcing by financial services firms will double over the next four years as these companies turn over larger and more strategic parts of their operations to offshore providers.

Financial services firms in the U.S. spent about US$590 million on offshore services from third-party outsources last year, while their European counterparts spent about $480 million overseas, says Anders Maehre, managing analyst at the London-based company.

But by 2008, Datamonitor expects offshore spending by financial services firms in Europe and the U.S. to nearly double to more than $2 billion, said Maehre. Among the services financial companies will increasingly send offshore are business process functions such as mortgage processing, insurance underwriting and claims processing.

Financial services firms are asking their offshore providers to play an ever-larger role in core operations, said Maehre. Providers that were initially tasked to perform specific application and support work, for instance, are now being asked to take over the development area, he said.

In some cases, the rationale behind these expanded outsourcing deals isn't just cost reduction, said Maehre. The move is also seen as an opportunity to improve business processes that companies may be a struggling to fix internally because of political resistance.

Offshore providers are also reacting to customer demand for more extensive services by buying up consulting capability. Last month, two large offshore firms, Satyam Computer Services Ltd. and Cognizant Technology Solutions Corp., each bought consulting companies to better enable them to help companies with strategic IT development.

"We have seen the market evolve, and the expectation of our customers (has) changed dramatically over the last few years," said B. Ramalinga Raju, founder and chairman of Hyderabad, India-based Satyam. "Customers are no longer content with getting the low-end technology services from offshore."

Satyam last month acquired Citisoft PLC, an investment management consultancy, for $23 million, with an additional performance-based payment of up to $15.5 million over a three-year period.

Teaneck, N.J.-based Cognizant acquired Fathom Solutions LLC for $19 million in cash and stock, and a "contingent consideration" of $16 million payable in two years. That firm was founded by former Accenture executives in 1999, and has expertise in financial services and telecommunications.

"We aspire to move up the value chain in the services that we offer," said Francisco D'Souza, chief operating officer at Cognizant. He said the purchase will better enable his company to give customers "the best of both worlds" -- strong offshore capabilities coupled with consulting services.

The India-based firms are also competing against U.S.-based providers such as IBM and Electronic Data Systems Corp., which have been building up their own offshore centers to add to their existing consulting capabilities, said Maehre.

Source : www.offshoringtimes.com

I have been working in the IT/financial services industry since 1993.  Specifically, I have been working directly with the credit union movement in regards to financial institutions.  To this day, it amazes me that more people are not well versed when it comes to the differences between credit unions and banks.

 

Whenever I meet new people outside of work, one of the first topics that comes up in conversation is occupation.  When I tell people that I work at a credit union, they are taken back.  A credit union?  Yes, a credit union.

 

So what is a credit union?  A credit union is a cooperative financial institution that is owned and controlled by its members.  Depending on which credit union you decide to join, your credit union will more than likely provide you with the same products as a bank…but with much better service!  Credit Unions are obsessed with providing their members with the best service possible.  In addition, most credit unions will offer their products and services with much better pricing than banks.

 

Banks are owned by stockholders who mainly care about the profits and revenues of the institution.  Credit Unions are run by a board of volunteers who look out for the best interest of the credit union. In addition, credit unions tend to offer lower loan rates and higher dividend rates when compared to banks.

 

For more information on credit unions, please read this:  http://en.wikipedia.org/wiki/Credit_union 

 

When you’re ready to join a credit union, you can find a list of credit unions near you be clicking here.

 

So…I have finally jumped into this world of blogging.  Before starting this, I really had a hard time deciding what to blog about.  As timing would have it, Scott Hanselman just posted an article on how to “Keep Your Blog from Sucking.”  Scott works for a vendor that my employer uses.  Though I have only met him once, I can honestly say that he is a very smart guy and I enjoy subscribing to his site.

 

I recently came across another associate’s blogging site.  I have known James for many years and consider him a valuable networking contact within the IT financial services community. I liked his site a lot – very easy on the eyes from a presentation perspective, the content is engaging, and he shoots directly across the bow. 

 

Anyway, I determined that I cannot make this a technical blog because I no longer have any technical skills in my repertoire.  I also arrived at the conclusion that I did not want to make this a personal blog because then nobody would read this…does anybody really care what’s going on in my life?  Didn’t think so.  Then I thought about making this industry specific to my career:  information technology and financial services.  There has to be people out there that want to read about that, right?  We’ll see...

 

After much thought, I have decided to blog on all of the above.  I’ll mainly stick to IT and financial services topics, with a blend of technical (as far as I can go) with some personal stuff mixed in.  I’ll start out with this and hopefully draw some interest.

 

The Bank Account Illegal Use Prevention Law, which was enacted in December 3^rd 2004, imposes the criminal sanction against it.[1] It was enforced on December 30, 2004.

1.      The law prohibits the activity of getting a bank account named of other person under the aim of using it pretending him. The person who gives the bank account is punished if he knows the intention of pretending person. It also is prohibit if the assignment is without payment;

2.      The law also prohibits the purchasing contract or turning over it with payment, if there is no transaction between seller and buyer or no reason for a buyer to get it;

3.      The solicitation or temptation of above mentioned activity would be punished.

4.      If above activity is executed on a business, the burden of sanction is getting heavier.

The Financial Services Agency gets the information regarding alleged illegal bank account from financial sectors and reports it publicly.

The accumulated number of information which reported to the agency from September 2003 to the end of March 2007 is 14,171, while it is 629 in this year (2007).[2]

Moreover, the financial institution stops for the depositor to use these account, and the number reaches 7,317, while 5,772 was cancelｌed compulsory. 

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[1] http://www.fsa.go.jp/policy/honninkakunin/f_boushi/01.pdf

[2] http://www.fsa.go.jp/news/18/ginkou/20070427-1.pdf

Practically every time an institution knocks on the door of a bank, it's to arrange for something financial - mostly loan and sponsoring. It's amazing that so few entrepreneurs are looking to benefit from the relationships that these banks have.

Banks traditionally have offered money and interest in a very trustworthy way. Throughout the years though, banks have developed deep relationships with consumers as well as corporations and entrepreneurs.

As cash is becoming a commodity, access to these relationships are a service that banks are commercializing. And they should - it's of tremendous value of any entrepreneurial company to quickly establish the right relationship with the right company.

The obvious challenge now is how to operationalize this intermediary role. A clerk's time is very limited already. So the pioneers are looking into the use of social networking engines, very much like LinkedIn.com's networking capabilities combined with the matching power of an eBay. We'll have to see how that is going to fly, as it's the personal approach that contains the true value of this networking - it's the clerk who has the contacts and the insights into the businesses. Besides: if this will fly with a matching system then what do we need banks for?

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The METI has decided to restrict the foreign commodity futures option trading by the regulation subject to the Specific Commercial Trading Practices Law.[1][2]

By the regulation, the customer will have a right of cancellation within eight days receiving the contractual document noticed the cancellation right. To the breach of the regulation, the administrative body can issue the business suspension order and impose the criminal sanction; imprisonment up to three yeas or fine up to 3 million yen.

But, it is curious why the METI has a jurisdiction over such financial product trading.

In Japan, the FSA administrates the securities trading. But the definition of security is so limited that it does not include the foreign commodity futures option. On the contrary, the METI administrates a commodity futures trading and a foreign commodity futures trading except currency, therefore the ministry became to have the jurisdiction to the option trading concerning a commodity.

I think it is necessary to simplify the regulation concerning the financial products in the financial products trading law and the administrative authority is concentrated in the FSA. It makes it possible for a consumer to be able to understand the abstract of the regulation. In current situation, a consumer cannot know what law is applied to his financial trading.

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[1] METI, http://www.meti.go.jp/policy/consumer/sankoshin/sk_bukai/070216/siryou5-1.pdf

[2] Mainichi Shimbun: April 25, 2007 http://www.mainichi-msn.co.jp/shakai/wadai/news/20070424k0000m010154000c.html