Quote of the week:
'Logic will get you from A to B. Imagination will take you everywhere.' - Albert Einstein.
Commentary of the week:
Dealing with Losses:
In most kinds of financial journalism, the story we are told as consumers is that investment losses are possible, but unlikely over the long term. We are told that the world (and the stock market in particular) will probably continue to 'go up' and that if we are investing in something for the long term, there is little reason to worry. As somewhat unsophisticated consumers of this financial fiction, we have very little idea of what it means to 'go up' and what exactly it is that is going to go up. We worry about just our dollars, and hope that each dollar we have put into the 'market' will come back either as a happy family of dollars, or at least as a dollar with smaller kids in tow. Yet even though we believe this to be true, and even though the markets cooperate by indeed going up most of the time in Canada, there is always the inevitable bust every few years that most financial commentators can only explain in hindsight. As you know, we are a bit different here at Ittihad, and take economic uncertainty and the unpredictability of public markets as more of a given. Also given the present investment climate, I think it is best to really begin to prepare for the possibility of monetary losses as the full impact of the bank failures in the US comes to light. This does not mean people pull out their savings, just that loss is as much a part of life as gain is and if we can presume to educate people about how to react when they make money, we should also try and do the same when they end up losing a bit. As it is, we have to be very careful about what is happening in the North American markets right now, so a discussion of some coping strategies to take away the stress of being invested are probably in order.
So, here are the top 5 things you can do (but don't have to) when you see the TSX (and your savings) dropping like the temperature in winter or like a stone in water:
1. Stop worrying already and just Panic - It is after all, your money and if you don't panic, who will? Also, call up your broker, call him names and warn him that you will sue him if he does not personally drive over in the car that you paid for and give back your money in old $20 bills. At the very least, this will calm you down, make you feel like you are in the movies and will thereby make you feel better about the loss. If you actually decide to follow through with your threat, it might also keep your lawyer friend in business while his investments go down even more than yours.
2. Become unreasonable with your kids - Kids love parents who are unpredictable and twitch nervously when the business news comes on. This gives them an opportunity to rebel in even more unreasonable and childish ways so they can thereby become more mature over time. Without this training of how to be unreasonable people, how would they survive in civilized society?
3. Become sullen and / or abrasive at work - Your boss is clearly unhappy at the TSX's lack of spirit because he has even more of his money invested than you, so why should you be nice while he gets to be the bully? Do some bullying of your own, hide someone's mouse or disconnect their keyboard and watch the fiasco as they complain to the IT people, who will no doubt misdiagnose the problem. Do not however, mess with the coffee - that would be mean.
4. Tell yourself the market dip is only temporary - Don't worry, what goes down must come up also, shouldn't it? (or was it the other way around?). History shows that after every bust, there was a boom. So what if you have to suffer through a few years of losses in order to enjoy the good times again? Remember, until the hope is gone, there is always hope.
5. Sell everything else that you own and buy more public stocks - This is for professionals only. Do not attempt this at home, or outside the home. Above all, do not attempt this anywhere near home, or with your home.
What I really like about this list is that the top 3 can be applied in your personal life as well. There is nothing like a bit of panic to wake you up, the kids are there to be pushed around anyway and having fun at work between the meetings is always helpful to overcome the monotony of being bullied.
Of course, the best way to deal with the issue of financial losses is to take some time out of our needlessly busy and cluttered lives and learn how these things really work so we can understand a little bit of what is really going on. In this way, both gains and / or losses will be more expected and so we will have calmer lives rather than becoming emotionally subject to the latest financial rumour. In my humble view, our faith in the financial markets and banks has been so solid for so long that we have become fundamentally unprepared to make decisions about our financial health on our own. To use a particularly timely analogy - if our car kept breaking down, we would either change the car or learn why it keeps breaking down on us. Why then, do we accept both a faulty financial system and such deep public ignorance of it as a part of our life that cannot be changed?
--------------
Upcoming Events:
Barzakh Community Services, a charitable, non-profit organization led by Muslim women, has invited yours truly to speak about family financial matters from a Muslim perspective. The event is designed to address issues such as Wills, Taxes and the way to approach the complete financial planning process - so it may be worthwhile for you to attend. Usually I am invited to speak about Islamic Finance, but this presentation will IA be about Financial Planning in general and some of the challenges involved for us as Muslims. I have been told that one of the severest problems within the Muslim community is not really the lack of wealth, but the lack of financial sophistication - so this event should go some way towards addressing this critical issue. Lastly, as this is an educational presentation and we are just helping BCS, you will not need to write Ittihad a cheque at the end. You might still want to support BCS as a community organization however, so please don't leave your chequebook at home altogether.
__________
Finance News:
1. Seems the Globe is a couple of days behind us at Ittihad (hat-tip to Kamran Niazi) ... read more here
2. Excellent column on the future for the home finance market in the US ... read more here
3. This column shows you everything (or almost everything) that is wrong with financial journalism ... read more here
Economic News:
1. Title of the week - ' Do Economists Need Brains?' (I would have asked whether they had brains but then realized that I have economist pretensions as well) ... read more here
2. Inflation is up in Canada also ... read more here
3. The situation in Britain is becoming a bit dire ... read more here
4. Article on whether Inflation or deflation is on the cards ... read more here
Islamic / Middle East / Emerging Markets:
1. Prices in Asia rise as Central Banks fail to agree on measures to contain inflation (as if this is within their power now) ... read more here
2. A new Asian Financial Crisis on the cards? ... read more here
Interesting but not all Finance:
1. The effects of a family feud on business (or business feud on family) ... read more here
2. Why Green and Islamic are somewhat different ... read more here
3. A 'cuil' story about a challenger to Google ... read more here
Thursday, July 31, 2008
Tuesday, July 29, 2008
Homes and Economic Vulnerability
Quote of the week:
'Only six months ago, politicians were counting on Fannie Mae and Freddie Mac, the country's mortgage giants, to bolster the housing market by buying more mortgages. Now the rescuers themselves have needed rescuing.' - The Economist.
Commentary of the week:
Homes & Economic Vulnerability:
By now only the most ardent of optimists are still hanging on to the view that the N. American economy (both financial and real) is on a solid footing and will come through this Credit Crisis relatively unscathed. Indeed, the entire financial sector is in the kind of upheaval that many of us are not fortunate (unfortunate?) enough to live through more than a few times in our lives. While there are many theories about how we got here and what must be done to get out of this tight space, there are few that connect where we find ourselves with the very structure of the economy. What I mean to say here is actually quite simple. The point here is that there is a very strong link between dependency and vulnerability, such that it is the very things that we depend on that make us vulnerable. This is true in our personal lives, in our professional lives (think Microsoft's various and crashes at work) and in the broader economy also.
Starting with the personal, imagine for a moment that you are planning in life to become the King of China. To do this, you have chosen the path of working in Islamic Finance until you are simply offered the throne by those who read your newsletter. You work hard, make things happen and when you get home, all you really want is one plate of steamed broccoli and for your better half to stay out of your way until you unwind from these lofty goals a bit. This continues for long enough that you forget to thank God for the broccoli and your wife for boiling it alive. One day though, you arrive and see raw broccoli on the table next to a folded note. Now you are afraid - you read the note and it confirms your fears. It says: 'I have had it - steam your own damn veggies'. This creates complications - your lofty plans are now toast. There will be no throne of China and there will be no more steamed broccoli. That which you depend on without thinking has made you intensely vulnerable.
The US economy is undergoing the pangs of something similar. The US economy is a pretty simple engine (at least for our purposes today). It depends on cheap goods for consumers, cheap investment from foreigners which helps keep consumer credit cheap at home and finally consumer spending for economic growth. This chain now seems to be broken. Furthermore, what is worse and really unnerving for people is that the chain has broken at a point where not many people (ahem) predicted that it would. Most people who did not believe the US growth model was sustainable thought that foreign parties would pull the plug on the party. In actuality, it has been the breakdown in esoteric real estate investments instead that has proved somewhat fatal (foreign funds and entities are inexplicably still buying up American Assets and Treasury Bills as quick as ever). Why this last part is so can be the topic for another day, but let me reiterate and clarify a bit.
One of the ways in which consumer credit has been kept cheap is through credit against the 'solid' and tangible asset that is the family home (ever heard the marketing about consolidating all your debt?). As people have asked to borrow for homes and then re-finance those homes, lenders have forwarded them funds but then sold these loans to others such as the semi-government agencies lovingly called Fannie Mae and Freddie Mac. Once these loans are on Fannie and Freddie's books as assets, these organizations package the loans up as investments that pay out a stream of income (read interest) and sell them to the highest bidder. These investments, we now find, are in over-priced homes and have been made with the optimistic expectations that consumers will keep paying their interest payments forever.
For the longest time, this assumption has held up quite well - just like the plate of broccoli, you could depend on it. This financial engineering did very well for investors, the government and home-buyers in the past. It kept the cost of borrowing down and because the investments are almost guaranteed by Fannie and Freddie, & investors both foreign and local thought that they were solid. Of course, we realize now that almost half of Freddie and Fannie's present assets might be tainted because they are now non-performing (I don't mean to alarm you but we are talking $2Trillion+). The US govt. has been called in to guarantee up to $5Trillion of real estate assets. Even if my numbers are off by a bit because info is sketchy, this is the largest assumption of private debt that a government has probably ever taken up upon its books, or almost definitely ever. Now, not only do you owe taxes to the government, but in a roundabout way you owe it your mortgage payment as well. And since the government only gets its money to backstop all these bad loans from taxes anyway, guess who pays at the end? It is almost enough to make your mind spin, which is perhaps why reasonable people usually work outside finance.
I think we are witnessing the end of something that has almost been a fixture in world affairs for as long as I have been around (many, many decades). One of them was the robustness and dependability of the American Economy, another was the American Dream. There used to be this idea that it was best to be a Free - Market Democracy. This used to mean a Government of the People, by the People, for the People. Whether or not you agree with the idea, it had a certain panache and our neighbours sometimes pulled it off despite themselves. Now I am not so sure - they have developed a new definition of a Free Market Democracy. It now means Taxes from the People, Mortgages for the People, Profits to the Financial People. We have depended on US excess for our economic prosperity for so long that I wonder now if this makes us vulnerable as well.
--------------
Upcoming Events:
N/A
__________
Finance News:
1. Asian Monetary Authorities speak openly about a crisis in the 'financial system' (their phrase not mine) as brought to light by the Freddie and Fannie Crisis ... read more here
2. Excellent column on the Fannie Mae and Freddie Mac situation ... read more here
3. IndyMac (one of the largest lenders in California) is collapsing ... read more here
4. A sobering, person-centric story on how debt and the marketing of debt solutions really works ... read more here
5. The FED protests at critics and insists that the banking system is 'sound' ... read more here
Economic News:
1. House Prices fall for first time in 9 years ... read more here
2. The Economist puts securitization and Home Finance in perspective ... read more here
Islamic / Middle East / Emerging Markets:
1. N / A
Interesting but not all Finance:
1. Funny and pithy column on Love and Economics (he must have stolen the topic from my short-list of future IWB titles) ... read more here
2. Saving Ontario's Boreal Forrest or setting off a mad rush to the North? ... read more here
3. Interesting column on gene sequencing / analysis and what it may mean for medical treatments in the future ... read more here
4. A special Report on the future of Energy ... read more here
'Only six months ago, politicians were counting on Fannie Mae and Freddie Mac, the country's mortgage giants, to bolster the housing market by buying more mortgages. Now the rescuers themselves have needed rescuing.' - The Economist.
Commentary of the week:
Homes & Economic Vulnerability:
By now only the most ardent of optimists are still hanging on to the view that the N. American economy (both financial and real) is on a solid footing and will come through this Credit Crisis relatively unscathed. Indeed, the entire financial sector is in the kind of upheaval that many of us are not fortunate (unfortunate?) enough to live through more than a few times in our lives. While there are many theories about how we got here and what must be done to get out of this tight space, there are few that connect where we find ourselves with the very structure of the economy. What I mean to say here is actually quite simple. The point here is that there is a very strong link between dependency and vulnerability, such that it is the very things that we depend on that make us vulnerable. This is true in our personal lives, in our professional lives (think Microsoft's various and crashes at work) and in the broader economy also.
Starting with the personal, imagine for a moment that you are planning in life to become the King of China. To do this, you have chosen the path of working in Islamic Finance until you are simply offered the throne by those who read your newsletter. You work hard, make things happen and when you get home, all you really want is one plate of steamed broccoli and for your better half to stay out of your way until you unwind from these lofty goals a bit. This continues for long enough that you forget to thank God for the broccoli and your wife for boiling it alive. One day though, you arrive and see raw broccoli on the table next to a folded note. Now you are afraid - you read the note and it confirms your fears. It says: 'I have had it - steam your own damn veggies'. This creates complications - your lofty plans are now toast. There will be no throne of China and there will be no more steamed broccoli. That which you depend on without thinking has made you intensely vulnerable.
The US economy is undergoing the pangs of something similar. The US economy is a pretty simple engine (at least for our purposes today). It depends on cheap goods for consumers, cheap investment from foreigners which helps keep consumer credit cheap at home and finally consumer spending for economic growth. This chain now seems to be broken. Furthermore, what is worse and really unnerving for people is that the chain has broken at a point where not many people (ahem) predicted that it would. Most people who did not believe the US growth model was sustainable thought that foreign parties would pull the plug on the party. In actuality, it has been the breakdown in esoteric real estate investments instead that has proved somewhat fatal (foreign funds and entities are inexplicably still buying up American Assets and Treasury Bills as quick as ever). Why this last part is so can be the topic for another day, but let me reiterate and clarify a bit.
One of the ways in which consumer credit has been kept cheap is through credit against the 'solid' and tangible asset that is the family home (ever heard the marketing about consolidating all your debt?). As people have asked to borrow for homes and then re-finance those homes, lenders have forwarded them funds but then sold these loans to others such as the semi-government agencies lovingly called Fannie Mae and Freddie Mac. Once these loans are on Fannie and Freddie's books as assets, these organizations package the loans up as investments that pay out a stream of income (read interest) and sell them to the highest bidder. These investments, we now find, are in over-priced homes and have been made with the optimistic expectations that consumers will keep paying their interest payments forever.
For the longest time, this assumption has held up quite well - just like the plate of broccoli, you could depend on it. This financial engineering did very well for investors, the government and home-buyers in the past. It kept the cost of borrowing down and because the investments are almost guaranteed by Fannie and Freddie, & investors both foreign and local thought that they were solid. Of course, we realize now that almost half of Freddie and Fannie's present assets might be tainted because they are now non-performing (I don't mean to alarm you but we are talking $2Trillion+). The US govt. has been called in to guarantee up to $5Trillion of real estate assets. Even if my numbers are off by a bit because info is sketchy, this is the largest assumption of private debt that a government has probably ever taken up upon its books, or almost definitely ever. Now, not only do you owe taxes to the government, but in a roundabout way you owe it your mortgage payment as well. And since the government only gets its money to backstop all these bad loans from taxes anyway, guess who pays at the end? It is almost enough to make your mind spin, which is perhaps why reasonable people usually work outside finance.
I think we are witnessing the end of something that has almost been a fixture in world affairs for as long as I have been around (many, many decades). One of them was the robustness and dependability of the American Economy, another was the American Dream. There used to be this idea that it was best to be a Free - Market Democracy. This used to mean a Government of the People, by the People, for the People. Whether or not you agree with the idea, it had a certain panache and our neighbours sometimes pulled it off despite themselves. Now I am not so sure - they have developed a new definition of a Free Market Democracy. It now means Taxes from the People, Mortgages for the People, Profits to the Financial People. We have depended on US excess for our economic prosperity for so long that I wonder now if this makes us vulnerable as well.
--------------
Upcoming Events:
N/A
__________
Finance News:
1. Asian Monetary Authorities speak openly about a crisis in the 'financial system' (their phrase not mine) as brought to light by the Freddie and Fannie Crisis ... read more here
2. Excellent column on the Fannie Mae and Freddie Mac situation ... read more here
3. IndyMac (one of the largest lenders in California) is collapsing ... read more here
4. A sobering, person-centric story on how debt and the marketing of debt solutions really works ... read more here
5. The FED protests at critics and insists that the banking system is 'sound' ... read more here
Economic News:
1. House Prices fall for first time in 9 years ... read more here
2. The Economist puts securitization and Home Finance in perspective ... read more here
Islamic / Middle East / Emerging Markets:
1. N / A
Interesting but not all Finance:
1. Funny and pithy column on Love and Economics (he must have stolen the topic from my short-list of future IWB titles) ... read more here
2. Saving Ontario's Boreal Forrest or setting off a mad rush to the North? ... read more here
3. Interesting column on gene sequencing / analysis and what it may mean for medical treatments in the future ... read more here
4. A special Report on the future of Energy ... read more here
Monday, July 14, 2008
The Porsche Economy - Part II
Quote of the week:
'In Bradford all nurseries have been ordered to convert their dolls' houses into miniature mosques so that Muslim teddies have somewhere to pray'. - Mark Steel in a column about being Muslim in Britain.
Commentary of the week:
What is 'Finance'? (Part II - contd. from last week):
Now that all of you budding Islamic Financiers know how an Economy works, we should start drilling down a bit into how Finance works as well. Most people think you need to wear an over-priced suit and drive a Porsche to prove that you know anything about financial matters (who am I to argue with that?), but sometimes, just sometimes this knowledge seeps out and finds its way into the hands of bicyclists, paddlers and slow & short walkers like me who refuse to pay more for a suit than they would for a bad hair-cut - and who in turn, pass the protected word on to discerning readers like you in order to give you the tools you need to deflate the next overblown financial ego you meet.
As the sheer brilliance of last week's commentary is probably seared onto your minds, you will of course remember that one of the factors of production in an economy is Capital. Within the larger factor of capital is the field of finance, which is the name given to the movement of some kinds of capital between various actors in an economy. For example, if you have ever played Monopoly, you know that there is a lot of Property / Railways / Hotels / Houses available in that economy. These are the solid assets that we can call capital. There is also a 'bank' (not a real bank in the modern sense of the word), but the entity that holds the cash and really allows players to trade money, rents, property etc. with each other. That 'bank' in Monopoly does many of the things that the financial sector does in the real economy. Building on this only somewhat oversimplified example, Capital can include things such as buildings, plants, machinery and of course, the popcorn that Spengler asked us to invest in last week. Finance on the other hand, is more limited in the sense that finance should really only include the more liquid kinds of capital that are either in the form of cash already (both electronic and actual), or is instantly or somewhat easily convertible into cash (some definitional latitude please). The world of Finance then, has two main categories that sometimes leach into each other a bit with hybrid products, but which will be treated as distinct for our purposes here because they carry different legal rights and are easier to understand that way. The two categories then, are Debt Finance and Equity Finance.
Debt Finance is the movement of capital (or money) between Savers (people who have saved money) and Borrowers (people who are lo and behold, borrowing money in some way to finance something they cannot or do not buy with their own money). This is usually done through the medium of banks or credit unions or secondary lenders. The way this works is that I deposit $100 into a bank and then the bank turns around and loans >$1000 (not a typo) to my neighbour or my neighbour's company as some kind of debt. The account or product I use to make a deposit into the bank can include things such as cheque-ing accounts, savings accounts, GIC's and most other kinds of guaranteed deposits. For the borrower, my neighbour in this case, this includes things such as Mortgages, lines of credit, Mezzanine (the cool word of the day) Debt, Project financing and all manner of interest-bearing loans that my neighbour, may God Bless him, can use to finance something he cannot afford and is willing to pay some extra fee for as he uses and repays the funds that don't really belong to him, the bank, or even me (think about this one a bit).
Equity Finance is the movement of capital (or money) between Investors (people who are buying some portion of a commercial enterprise) and Entrepreneurs or Partners (people who are willing to give up some ownership of their enterprise in return for funds in order to run it). This is usually done through the medium of capital markets such as the TSX (now you know what an IPO is), or private markets (now you know what I do at Ittihad) that facilitate investment of private capital into companies or projects. The obvious examples of this kind of finance includes things like Stocks, Mutual Funds, Seg Funds, Principal Protected Notes (PPN's), ETF's (which are technically shares), LP units and all manner of other jargonic things that pass for financial non-solutions which people like you and me invest in because someone told us it was a good idea and we believed their expertise at the time because our 24th baby was crying and the season finale of 'Little Mosque on the Prairie' was on TV and besides - how many things is one person really supposed to know?
Just one more thing this week my friends - hang in there. You should also know that while Finance is divided into Debt and Equity, the ratio between them is quite skewed. The debt in an 'advanced' economy at any given moment in time is more than 10 times the amount floating around in equity (don't ask me how I know this). This is why when people like the Fed or Bank of Canada Governor speak, markets hang on their every word. What moves markets and the economy is the debt portion of finance and the interest rate on that debt. Think of this as an inverted pyramid, with a small amount of actual cash at the bottom, but a progressively large amount of debt as you move higher. This is one reason why the financial sector is more unstable than postal workers who have had almost enough but cannot decide decisively.
So where does this fit in with Islamic Finance? Well, you have to actually take a step further back and ask what kind of an economy would enhance our various Faiths and allow us to live sustainable and contributory lives rather than the predatory ones we perhaps have to live today - but since we are on the topic of finance, let's talk about the cash. True Islamic Finance then, would simply not have a debt component, there would be no inverted pyramid (no $1000 loans on $100 deposits) and no government would be able to borrow money in order to go to war because the population would simply not buy the bonds necessary for such an enterprise. Of course, this would also perhaps mean that there would be no shiny new Porsche in every garage even if we all try really hard because bicycles might be the way to go instead. Perhaps that is why we continue to work within a debtor thought-process that impoverishes us spiritually - because having no debt is fine and dandy, but the drive up to Northern Ontario in a Porsche my friends, is probably priceless.
--------------
Upcoming Events:
N/A
__________
Finance News:
1. RBC entering the Islamic Finance space! - How exciting, now we will finally get to see if Canadian Muslims are actually as smart as they seem and whether they will defeat this (major hat-tip to Hisham Rahman) ... read more here
2. CDN bank to declare more losses? It seems that the end is nowhere in sight as far as the credit crunch is concerned ... read more here
3. Ottawa tightens up the mortgage rules they just loosened in 2006. Can you say - 'No Foresight'? ... read more here
Economic News:
1. Some more evidence about how Oil prices and Inflation are affecting small farmers in some rural areas (example of India) ... read more here
2. The domino effect in currencies after the fall of the US$. This has the potential to be a huge depressor of living standards across much of the world ... read more here
3. Does Free Trade help poor people? (or do more poor people help Free Trade?) ... read more here
4. How securitization often results in situations of 'moral hazard' ... read more here
5. How the UK has managed to take on more debt than its GDP ... read more here
Islamic / Middle East / Emerging Markets:
1. N / A
Interesting but not all Finance:
1. How the backdoor to Peace in difficult situations is sometimes held open by Faith ... read more here
2. 'Goodbye from the World's Biggest Polluter' ... read more here
3. For Muslims in the audience who think the media is unfair ... must read
'In Bradford all nurseries have been ordered to convert their dolls' houses into miniature mosques so that Muslim teddies have somewhere to pray'. - Mark Steel in a column about being Muslim in Britain.
Commentary of the week:
What is 'Finance'? (Part II - contd. from last week):
Now that all of you budding Islamic Financiers know how an Economy works, we should start drilling down a bit into how Finance works as well. Most people think you need to wear an over-priced suit and drive a Porsche to prove that you know anything about financial matters (who am I to argue with that?), but sometimes, just sometimes this knowledge seeps out and finds its way into the hands of bicyclists, paddlers and slow & short walkers like me who refuse to pay more for a suit than they would for a bad hair-cut - and who in turn, pass the protected word on to discerning readers like you in order to give you the tools you need to deflate the next overblown financial ego you meet.
As the sheer brilliance of last week's commentary is probably seared onto your minds, you will of course remember that one of the factors of production in an economy is Capital. Within the larger factor of capital is the field of finance, which is the name given to the movement of some kinds of capital between various actors in an economy. For example, if you have ever played Monopoly, you know that there is a lot of Property / Railways / Hotels / Houses available in that economy. These are the solid assets that we can call capital. There is also a 'bank' (not a real bank in the modern sense of the word), but the entity that holds the cash and really allows players to trade money, rents, property etc. with each other. That 'bank' in Monopoly does many of the things that the financial sector does in the real economy. Building on this only somewhat oversimplified example, Capital can include things such as buildings, plants, machinery and of course, the popcorn that Spengler asked us to invest in last week. Finance on the other hand, is more limited in the sense that finance should really only include the more liquid kinds of capital that are either in the form of cash already (both electronic and actual), or is instantly or somewhat easily convertible into cash (some definitional latitude please). The world of Finance then, has two main categories that sometimes leach into each other a bit with hybrid products, but which will be treated as distinct for our purposes here because they carry different legal rights and are easier to understand that way. The two categories then, are Debt Finance and Equity Finance.
Debt Finance is the movement of capital (or money) between Savers (people who have saved money) and Borrowers (people who are lo and behold, borrowing money in some way to finance something they cannot or do not buy with their own money). This is usually done through the medium of banks or credit unions or secondary lenders. The way this works is that I deposit $100 into a bank and then the bank turns around and loans >$1000 (not a typo) to my neighbour or my neighbour's company as some kind of debt. The account or product I use to make a deposit into the bank can include things such as cheque-ing accounts, savings accounts, GIC's and most other kinds of guaranteed deposits. For the borrower, my neighbour in this case, this includes things such as Mortgages, lines of credit, Mezzanine (the cool word of the day) Debt, Project financing and all manner of interest-bearing loans that my neighbour, may God Bless him, can use to finance something he cannot afford and is willing to pay some extra fee for as he uses and repays the funds that don't really belong to him, the bank, or even me (think about this one a bit).
Equity Finance is the movement of capital (or money) between Investors (people who are buying some portion of a commercial enterprise) and Entrepreneurs or Partners (people who are willing to give up some ownership of their enterprise in return for funds in order to run it). This is usually done through the medium of capital markets such as the TSX (now you know what an IPO is), or private markets (now you know what I do at Ittihad) that facilitate investment of private capital into companies or projects. The obvious examples of this kind of finance includes things like Stocks, Mutual Funds, Seg Funds, Principal Protected Notes (PPN's), ETF's (which are technically shares), LP units and all manner of other jargonic things that pass for financial non-solutions which people like you and me invest in because someone told us it was a good idea and we believed their expertise at the time because our 24th baby was crying and the season finale of 'Little Mosque on the Prairie' was on TV and besides - how many things is one person really supposed to know?
Just one more thing this week my friends - hang in there. You should also know that while Finance is divided into Debt and Equity, the ratio between them is quite skewed. The debt in an 'advanced' economy at any given moment in time is more than 10 times the amount floating around in equity (don't ask me how I know this). This is why when people like the Fed or Bank of Canada Governor speak, markets hang on their every word. What moves markets and the economy is the debt portion of finance and the interest rate on that debt. Think of this as an inverted pyramid, with a small amount of actual cash at the bottom, but a progressively large amount of debt as you move higher. This is one reason why the financial sector is more unstable than postal workers who have had almost enough but cannot decide decisively.
So where does this fit in with Islamic Finance? Well, you have to actually take a step further back and ask what kind of an economy would enhance our various Faiths and allow us to live sustainable and contributory lives rather than the predatory ones we perhaps have to live today - but since we are on the topic of finance, let's talk about the cash. True Islamic Finance then, would simply not have a debt component, there would be no inverted pyramid (no $1000 loans on $100 deposits) and no government would be able to borrow money in order to go to war because the population would simply not buy the bonds necessary for such an enterprise. Of course, this would also perhaps mean that there would be no shiny new Porsche in every garage even if we all try really hard because bicycles might be the way to go instead. Perhaps that is why we continue to work within a debtor thought-process that impoverishes us spiritually - because having no debt is fine and dandy, but the drive up to Northern Ontario in a Porsche my friends, is probably priceless.
--------------
Upcoming Events:
N/A
__________
Finance News:
1. RBC entering the Islamic Finance space! - How exciting, now we will finally get to see if Canadian Muslims are actually as smart as they seem and whether they will defeat this (major hat-tip to Hisham Rahman) ... read more here
2. CDN bank to declare more losses? It seems that the end is nowhere in sight as far as the credit crunch is concerned ... read more here
3. Ottawa tightens up the mortgage rules they just loosened in 2006. Can you say - 'No Foresight'? ... read more here
Economic News:
1. Some more evidence about how Oil prices and Inflation are affecting small farmers in some rural areas (example of India) ... read more here
2. The domino effect in currencies after the fall of the US$. This has the potential to be a huge depressor of living standards across much of the world ... read more here
3. Does Free Trade help poor people? (or do more poor people help Free Trade?) ... read more here
4. How securitization often results in situations of 'moral hazard' ... read more here
5. How the UK has managed to take on more debt than its GDP ... read more here
Islamic / Middle East / Emerging Markets:
1. N / A
Interesting but not all Finance:
1. How the backdoor to Peace in difficult situations is sometimes held open by Faith ... read more here
2. 'Goodbye from the World's Biggest Polluter' ... read more here
3. For Muslims in the audience who think the media is unfair ... must read
The Porsche Economy - Part I
Quote of the week:
'My advice to individual investors? Invest in some popcorn, because the next six months will be something to watch'. - Spengler speaks about problems in the banking sector (www.atimes.com).
Commentary of the week:
What is an 'Economy'? (Part I):
A young person whose intelligence and knowledge I respect quite a bit admitted to me on Friday that she knew nothing about economics and finance. As this young person will probably grow to be the President of the World Bank one day, I have taken it upon myself to ensure that something of economics and finance penetrates the consciousness of young people (and those who are young at heart) before they begin to make up for themselves a definitive picture of how the world really works. After all, it is never too early to fill young minds with economic propaganda - there was Adam Smith (who is rumoured to have been a bestseller in Victorian high schools), there was David Ricardo, there was Karl Marx, now there is Ittihad.
As such, today we begin to define what people really mean when they speak about an 'Economy'. As your humble correspondent lives and breathes this stuff, I sometimes forget that people actually have real lives and don't always know (or care) exactly what pseudo-experts like me are saying when we propound our theories on 'what must be done' to the economy. Usually, the lens through which we look at the world is not economic, but rather has a political, social or justice bent. This is usually because many people do not actually study Economics as a subject and choose instead to become doctors, lawyers, engineers, professors and all manner of other (I feel like adding 'useless' here but that would be too much of a blow to people's self-esteem) things that allow them to contribute to society in great ways but leaves them generally clueless about the gravity of our economic situation.
So here is my half-page summary of everything you need to know about an economy to impress your spouse into a stunned silence with your considerable grasp on why exactly you were laid off and cannot meet the mortgage due at the end of the month (go bi-weekly - you will save money) because you bought too much Kawartha Dairy Ice Cream with your inadequate severance package in order to make yourself feel better about the injustice of it all. After all, heating up the divine Biryani you brought with you (because a Subway sandwich is too bland) in the corporate head office is not an objectionable offence in Canada and there must have been a deeper economic factor working against you.
The economy then, is simply a construct that economists have made up to help make sense (or nonsense) of the actual Economy (read this as many times as it takes). It is a concept that has some basis in reality of course, but seeks to describe a complex web of commercial relationships by reducing them to simpler factors. Each economy is made up of these factors, much like a cake is made up of certain simpler ingredients. These factors (and there is some disagreement but not much) are 1. Land, 2. Capital, 3. Labour, 4. Technology. These inputs combine to produce what is called 'Wealth', which is measured in monetary terms ($'s) and is also called GDP and / or GNP by those inclined towards pretence at expertise.
The first factor - Land, is obviously a no-brainer. Without land, we would all be fish and there would be no Ittihad Weekly Briefing over email. I would still probably broadcast through sonar waves, but God knows best. Also, there would be no agriculture, no food, and no oil. Even if we were able to live without food, we wouldn't be able to drive our SUV's and Mini-Vans because they would sink and that is just plain wrong and does not bear thinking about. The second factor, Capital, is a bit more complex. This factor includes money (and finance) and the capital stock of factories / machinery / infrastructure / resources etc. available to an economy at any given moment. When people speak about investing in order to create jobs, this is what they mean - creating factories and companies with infrastructure in order to staff them with minions such as yours truly. Capital also includes the financial infrastructure that moves money between people who have it and the people who need it (perhaps this should be a commentary topic on its own). The third factor, Labour, is where you and I come in. We come to work, are given a computer (which is capital, not technology), we type away and create something of value (unless its spam) and thereby grow the economy. People better than us do better things - some actually make beautiful things like architecture and some do the noblest thing of all and teach beautiful ideas. There are of course, other more complex and elegant theories of how labour is really the one factor that brings dignity to others, but this is neither the time nor the space. Lastly, we come to Technology - which does not include the latest computers or gadgets we use to strategically interrupt our Friday prayers. Technology in the economic sense is the way in which the other 3 factors combine in order to produce Wealth. In this way, two economies with the same amount of land, capital (including gadgets) and labour can still produce different amounts of wealth because of a more effective combination - better technology.
To complete the lesson, we should also speak a bit about measuring an economy. The only universally accepted measure of an economy at the moment is the amount of wealth it produces on an annual basis using the factors we have discussed. This wealth includes all manner of commercial transactions but little else. On a planet that is cut up into little (and big) countries, we are all just competing with each other to produce (read consume because they are the same) more stuff. As the field of economics simplifies life for us, it also simplifies us into one-dimensional people. Of course, this does not mean that we all move to the Yukon and live off the land (I have heard that there is an economy there as well). It just means that we should sometimes reflect a bit and not take at face value the demands put on us as people to produce and consume in this value-less way. But alas, we are all in the same boat here, and the fiction that all of us should and can have a red Porsche if we just try hard enough is just too persuasive. Since smarter people than me came up with this system, I am convinced. Are you?
--------------
Upcoming Events:
N/A
__________
Finance News:
1. Almost makes you wish short-selling was allowed in Islamic Finance (almost) ... read more here
2. The next time someone tells you the stock market is the place to be in order to stay ahead of inflation, quote the Economist ... read more here
3. This is too funny. First, the Fed puts $100's of Billions into the Asset Backed Security (ABS) market. Then they help JP Morgan buy Bear Stearns and put the support of a main street bank behind a wall street company. Then they move assets off Bear Stearns' books. After that they themselves value the assets and declare that there has been no loss. So much fun playing when you are the striker, the goalie and the referee all in one isn't it?! ... read more here
4. Warren Buffett losing money?! ... must be propaganda ... read more here
5. The continuing saga of the $52B Bell Canada buyout ... read more here
Economic News:
1. The price of economic progress in Kenya and social progress in Florida ... read more here
2. How the slowdown in the housing sector affects the Economy (a nifty chart) ... read more here
Islamic / Middle East / Emerging Markets:
1. N / A
Interesting but not all Finance:
1. Want to lock in your gas price for the year? ... read more here
2. What does it really mean to be green? ... read more here
'My advice to individual investors? Invest in some popcorn, because the next six months will be something to watch'. - Spengler speaks about problems in the banking sector (www.atimes.com).
Commentary of the week:
What is an 'Economy'? (Part I):
A young person whose intelligence and knowledge I respect quite a bit admitted to me on Friday that she knew nothing about economics and finance. As this young person will probably grow to be the President of the World Bank one day, I have taken it upon myself to ensure that something of economics and finance penetrates the consciousness of young people (and those who are young at heart) before they begin to make up for themselves a definitive picture of how the world really works. After all, it is never too early to fill young minds with economic propaganda - there was Adam Smith (who is rumoured to have been a bestseller in Victorian high schools), there was David Ricardo, there was Karl Marx, now there is Ittihad.
As such, today we begin to define what people really mean when they speak about an 'Economy'. As your humble correspondent lives and breathes this stuff, I sometimes forget that people actually have real lives and don't always know (or care) exactly what pseudo-experts like me are saying when we propound our theories on 'what must be done' to the economy. Usually, the lens through which we look at the world is not economic, but rather has a political, social or justice bent. This is usually because many people do not actually study Economics as a subject and choose instead to become doctors, lawyers, engineers, professors and all manner of other (I feel like adding 'useless' here but that would be too much of a blow to people's self-esteem) things that allow them to contribute to society in great ways but leaves them generally clueless about the gravity of our economic situation.
So here is my half-page summary of everything you need to know about an economy to impress your spouse into a stunned silence with your considerable grasp on why exactly you were laid off and cannot meet the mortgage due at the end of the month (go bi-weekly - you will save money) because you bought too much Kawartha Dairy Ice Cream with your inadequate severance package in order to make yourself feel better about the injustice of it all. After all, heating up the divine Biryani you brought with you (because a Subway sandwich is too bland) in the corporate head office is not an objectionable offence in Canada and there must have been a deeper economic factor working against you.
The economy then, is simply a construct that economists have made up to help make sense (or nonsense) of the actual Economy (read this as many times as it takes). It is a concept that has some basis in reality of course, but seeks to describe a complex web of commercial relationships by reducing them to simpler factors. Each economy is made up of these factors, much like a cake is made up of certain simpler ingredients. These factors (and there is some disagreement but not much) are 1. Land, 2. Capital, 3. Labour, 4. Technology. These inputs combine to produce what is called 'Wealth', which is measured in monetary terms ($'s) and is also called GDP and / or GNP by those inclined towards pretence at expertise.
The first factor - Land, is obviously a no-brainer. Without land, we would all be fish and there would be no Ittihad Weekly Briefing over email. I would still probably broadcast through sonar waves, but God knows best. Also, there would be no agriculture, no food, and no oil. Even if we were able to live without food, we wouldn't be able to drive our SUV's and Mini-Vans because they would sink and that is just plain wrong and does not bear thinking about. The second factor, Capital, is a bit more complex. This factor includes money (and finance) and the capital stock of factories / machinery / infrastructure / resources etc. available to an economy at any given moment. When people speak about investing in order to create jobs, this is what they mean - creating factories and companies with infrastructure in order to staff them with minions such as yours truly. Capital also includes the financial infrastructure that moves money between people who have it and the people who need it (perhaps this should be a commentary topic on its own). The third factor, Labour, is where you and I come in. We come to work, are given a computer (which is capital, not technology), we type away and create something of value (unless its spam) and thereby grow the economy. People better than us do better things - some actually make beautiful things like architecture and some do the noblest thing of all and teach beautiful ideas. There are of course, other more complex and elegant theories of how labour is really the one factor that brings dignity to others, but this is neither the time nor the space. Lastly, we come to Technology - which does not include the latest computers or gadgets we use to strategically interrupt our Friday prayers. Technology in the economic sense is the way in which the other 3 factors combine in order to produce Wealth. In this way, two economies with the same amount of land, capital (including gadgets) and labour can still produce different amounts of wealth because of a more effective combination - better technology.
To complete the lesson, we should also speak a bit about measuring an economy. The only universally accepted measure of an economy at the moment is the amount of wealth it produces on an annual basis using the factors we have discussed. This wealth includes all manner of commercial transactions but little else. On a planet that is cut up into little (and big) countries, we are all just competing with each other to produce (read consume because they are the same) more stuff. As the field of economics simplifies life for us, it also simplifies us into one-dimensional people. Of course, this does not mean that we all move to the Yukon and live off the land (I have heard that there is an economy there as well). It just means that we should sometimes reflect a bit and not take at face value the demands put on us as people to produce and consume in this value-less way. But alas, we are all in the same boat here, and the fiction that all of us should and can have a red Porsche if we just try hard enough is just too persuasive. Since smarter people than me came up with this system, I am convinced. Are you?
--------------
Upcoming Events:
N/A
__________
Finance News:
1. Almost makes you wish short-selling was allowed in Islamic Finance (almost) ... read more here
2. The next time someone tells you the stock market is the place to be in order to stay ahead of inflation, quote the Economist ... read more here
3. This is too funny. First, the Fed puts $100's of Billions into the Asset Backed Security (ABS) market. Then they help JP Morgan buy Bear Stearns and put the support of a main street bank behind a wall street company. Then they move assets off Bear Stearns' books. After that they themselves value the assets and declare that there has been no loss. So much fun playing when you are the striker, the goalie and the referee all in one isn't it?! ... read more here
4. Warren Buffett losing money?! ... must be propaganda ... read more here
5. The continuing saga of the $52B Bell Canada buyout ... read more here
Economic News:
1. The price of economic progress in Kenya and social progress in Florida ... read more here
2. How the slowdown in the housing sector affects the Economy (a nifty chart) ... read more here
Islamic / Middle East / Emerging Markets:
1. N / A
Interesting but not all Finance:
1. Want to lock in your gas price for the year? ... read more here
2. What does it really mean to be green? ... read more here
Monday, July 7, 2008
Seminar Feedback
Quote of the week:
'In theory there is no difference between theory and practice. In practice there is.' - Yogi Berra. (Hat-tip to Ms. Imtiaz)
Commentary of the week:
Seminar Feedback:
As you know, we presented a seminar on our ideas about Islamic Finance to the community at the TARIC masjid this past weekend. It was well attended by lots of men (alas, the sisters don't want to know about money even though they control most of it), who came armed with excellent questions and strong views on the subject. I have received many feedback forms which are full of praise for my good self (that is the official story and I am sticking with it) but they seem to fall into two camps. This divergence is worth analyzing a bit deeply because I think it speaks volumes about human nature. The respective camps are:
1. The Seminar was great. We loved that it was educational, interactive and had nothing to do with products and sales. It made us think, which God knows we don't do enough of.
2. The Seminar was terrible. We already know all we need to know about the idea of Islamic Finance, we want to know about Halal products that we can use right now. We mean NOW. Did we say NOW?
And there you have it - the community has philosophers and it has practical, action-oriented people (credit to our good Sr. Pappano for this insight). The first camp thrives in the world of ideas. The second flourishes in a structured, predictable action-oriented environment. To me the question is not who is right (obviously only I am right), but which section of the community is more dangerous? This is not as simple a question as it sounds, so let me explain a bit.
Like any other industry, Islamic Finance is subject to the whims of Supply and Demand. There is a growing Muslim population (some people say too quickly growing but we will leave that aside for now) and an even larger population of people interested in Ethical Finance. Voices from section 2 (the practical people) demand that their 'needs' (which somehow are the same as everyone else's commercial needs) be met in an Islamic manner. Then others from section 2 also, decide to do something about it and create products and services to Supply the needs of the people who demanded Islamic solutions. Before you know it, thanks to people from section 2, Muslims across the world are demanding Islamic Financial services and the type 2's are in business big-time. But in their rush to produce a new reality and choices for themselves, what have the type 2's really done?
In my opinion (and lots of people tell me I am wrong J), while we have a huge Islamic Finance industry, we have much less Islamic Finance going on (read this again if you didn't get it). As the problem is being both defined and solved by practical, action-oriented people, Islamic Finance is becoming a field of technical sophistication but philosophic bankruptcy. The whole point of Islam was to help instil justice, fairness and a fairly equitable distribution of wealth in society while protecting the balance of Nature. Instead, we have reduced Islam to a tool with which we solve petty financial issues such as credit cards and collateralised loans with which to buy things we cannot afford on our own. There is something deeply elegant about running an economy without debt. This elegance is being tarnished if we think we can 'do Islamic Finance' by removing references to 'interest' in contracts to make things 'Halal'. Our sense of practicality is leading us into waters charted quite well by other communities who got around usury laws using similar tricks in the medieval past.
So what is the solution (cause you know I am one of the practical types that worries about solutions)? All this while, the people from the first section (the philosopher types), have had nothing really to do. They sit around, call the type 2's disrespectful names and are generally cynical and pessimistic about the problems faced by Muslims and people of Faith these days. As they are frequently confused with academics, they feel they no place in the industry and feel left to one side as matters of great import such as the appropriate benchmark rate is determined by the type 2's. This situation is a mistake. Islamic Finance does not belong to the type 2's of the world that want to solve problems NOW, come what may. It belongs really, if there is such a thing as belonging, to the world and all within it as a rich, textured and fundamentally elegant way in which to manage the problems of an economy.
This should include the Type 1's who are struggling with this marginalization at seminars. Every seminar they go to, people ask them for a cheque at the end. The educational, community service aspect of the information is subsumed by the drive for relationships to be commercial and ratified to be so by the transfer of money. This is injustice of a very deep kind. We must allow people to have access to knowledge about Islamic Finance without asking them for money at the end. For the people who attended the session last Saturday and asked for product details, this is why I didn't answer your pointed questions. This particular seminar series is for people who want to discuss ideas. If you want a financial solution to your particular problem, call me at work and I will try and help. Better yet, come to our investment seminars. Don't complain about more education - even the first word of the Holy Book was 'Read'.
For those who missed the seminar, I hope you will come out to the next one. For those who came, I hope you recognize that both you and I are truly blessed to be involved in some manner with Ittihad and this initiative, where there is the freedom to do things with integrity. I look forward to seeing you all the next seminar. For the record, people loved the samosas and the turnout was humbling in terms of both numbers and the intelligence of the discussion. We are a beautiful community with much to contribute to Canada and the world, and I want to thank the administration at TARIC once again for inviting us and having the courage to allow us to engage the community directly on issues where usually their input is just monetary. I look forward (quite shamelessly) to being invited back.
--------------
Upcoming Events:
N/A
__________
Finance News:
1. An interesting analysis of short-sellers (A borrows stock from B, sell lots of it to drive down its price and then buys it back at the lower price. A then returns the stock to B - pocketing the money made in the process). Unfortunately, there are issues in Islam about selling stuff you don't own so this is questionable. A very interesting article nevertheless ... read more here
2. The perils of the joint-ownership strategy for inheritance purposes ... read more here
3. Now the Global Banks are casting aspersions and questioning each other's balance sheets ... read more here
4. The Bank of Canada will accept US treasuries as security for loans ... (Might as well accept rolls of toilet paper too) ... read more here
5. People finally make the connection between Socially Responsible Investing and Islam ... read more here
Economic News:
1. The Future of Energy ... read more here
2. The Washington Post uses the R-word for the US economy ... read more here
3. Good analysis of the disagreements between Central Banks ... read more here
Islamic / Middle East / Emerging Markets:
1. N / A
Interesting but not all Finance:
1. US Company asks US court to use Shariah to decide a claim. I believe this is called Shariah Arbitrage ... (major hat-tip to Mansoor Ullah) - read more here
2. If you are chased by the police, you get to pay for their gas also (hat-tip to Siddiq Mohamed) ... read more here
'In theory there is no difference between theory and practice. In practice there is.' - Yogi Berra. (Hat-tip to Ms. Imtiaz)
Commentary of the week:
Seminar Feedback:
As you know, we presented a seminar on our ideas about Islamic Finance to the community at the TARIC masjid this past weekend. It was well attended by lots of men (alas, the sisters don't want to know about money even though they control most of it), who came armed with excellent questions and strong views on the subject. I have received many feedback forms which are full of praise for my good self (that is the official story and I am sticking with it) but they seem to fall into two camps. This divergence is worth analyzing a bit deeply because I think it speaks volumes about human nature. The respective camps are:
1. The Seminar was great. We loved that it was educational, interactive and had nothing to do with products and sales. It made us think, which God knows we don't do enough of.
2. The Seminar was terrible. We already know all we need to know about the idea of Islamic Finance, we want to know about Halal products that we can use right now. We mean NOW. Did we say NOW?
And there you have it - the community has philosophers and it has practical, action-oriented people (credit to our good Sr. Pappano for this insight). The first camp thrives in the world of ideas. The second flourishes in a structured, predictable action-oriented environment. To me the question is not who is right (obviously only I am right), but which section of the community is more dangerous? This is not as simple a question as it sounds, so let me explain a bit.
Like any other industry, Islamic Finance is subject to the whims of Supply and Demand. There is a growing Muslim population (some people say too quickly growing but we will leave that aside for now) and an even larger population of people interested in Ethical Finance. Voices from section 2 (the practical people) demand that their 'needs' (which somehow are the same as everyone else's commercial needs) be met in an Islamic manner. Then others from section 2 also, decide to do something about it and create products and services to Supply the needs of the people who demanded Islamic solutions. Before you know it, thanks to people from section 2, Muslims across the world are demanding Islamic Financial services and the type 2's are in business big-time. But in their rush to produce a new reality and choices for themselves, what have the type 2's really done?
In my opinion (and lots of people tell me I am wrong J), while we have a huge Islamic Finance industry, we have much less Islamic Finance going on (read this again if you didn't get it). As the problem is being both defined and solved by practical, action-oriented people, Islamic Finance is becoming a field of technical sophistication but philosophic bankruptcy. The whole point of Islam was to help instil justice, fairness and a fairly equitable distribution of wealth in society while protecting the balance of Nature. Instead, we have reduced Islam to a tool with which we solve petty financial issues such as credit cards and collateralised loans with which to buy things we cannot afford on our own. There is something deeply elegant about running an economy without debt. This elegance is being tarnished if we think we can 'do Islamic Finance' by removing references to 'interest' in contracts to make things 'Halal'. Our sense of practicality is leading us into waters charted quite well by other communities who got around usury laws using similar tricks in the medieval past.
So what is the solution (cause you know I am one of the practical types that worries about solutions)? All this while, the people from the first section (the philosopher types), have had nothing really to do. They sit around, call the type 2's disrespectful names and are generally cynical and pessimistic about the problems faced by Muslims and people of Faith these days. As they are frequently confused with academics, they feel they no place in the industry and feel left to one side as matters of great import such as the appropriate benchmark rate is determined by the type 2's. This situation is a mistake. Islamic Finance does not belong to the type 2's of the world that want to solve problems NOW, come what may. It belongs really, if there is such a thing as belonging, to the world and all within it as a rich, textured and fundamentally elegant way in which to manage the problems of an economy.
This should include the Type 1's who are struggling with this marginalization at seminars. Every seminar they go to, people ask them for a cheque at the end. The educational, community service aspect of the information is subsumed by the drive for relationships to be commercial and ratified to be so by the transfer of money. This is injustice of a very deep kind. We must allow people to have access to knowledge about Islamic Finance without asking them for money at the end. For the people who attended the session last Saturday and asked for product details, this is why I didn't answer your pointed questions. This particular seminar series is for people who want to discuss ideas. If you want a financial solution to your particular problem, call me at work and I will try and help. Better yet, come to our investment seminars. Don't complain about more education - even the first word of the Holy Book was 'Read'.
For those who missed the seminar, I hope you will come out to the next one. For those who came, I hope you recognize that both you and I are truly blessed to be involved in some manner with Ittihad and this initiative, where there is the freedom to do things with integrity. I look forward to seeing you all the next seminar. For the record, people loved the samosas and the turnout was humbling in terms of both numbers and the intelligence of the discussion. We are a beautiful community with much to contribute to Canada and the world, and I want to thank the administration at TARIC once again for inviting us and having the courage to allow us to engage the community directly on issues where usually their input is just monetary. I look forward (quite shamelessly) to being invited back.
--------------
Upcoming Events:
N/A
__________
Finance News:
1. An interesting analysis of short-sellers (A borrows stock from B, sell lots of it to drive down its price and then buys it back at the lower price. A then returns the stock to B - pocketing the money made in the process). Unfortunately, there are issues in Islam about selling stuff you don't own so this is questionable. A very interesting article nevertheless ... read more here
2. The perils of the joint-ownership strategy for inheritance purposes ... read more here
3. Now the Global Banks are casting aspersions and questioning each other's balance sheets ... read more here
4. The Bank of Canada will accept US treasuries as security for loans ... (Might as well accept rolls of toilet paper too) ... read more here
5. People finally make the connection between Socially Responsible Investing and Islam ... read more here
Economic News:
1. The Future of Energy ... read more here
2. The Washington Post uses the R-word for the US economy ... read more here
3. Good analysis of the disagreements between Central Banks ... read more here
Islamic / Middle East / Emerging Markets:
1. N / A
Interesting but not all Finance:
1. US Company asks US court to use Shariah to decide a claim. I believe this is called Shariah Arbitrage ... (major hat-tip to Mansoor Ullah) - read more here
2. If you are chased by the police, you get to pay for their gas also (hat-tip to Siddiq Mohamed) ... read more here
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