Quote of the week:
'Cowardice asks the question: "Is it safe"? Expediency asks the question: "Is it politic"? Vanity asks the question: "Is it popular?" But conscience asks the question:"Is it right?" And there comes a time when one must take a position that is neither safe, nor politic, nor popular but one must take it because one's conscience tells one what is right.' - Martin Luther King Jr. (Hat-tip to Mr. & Mrs. Pappano Hussain)
Some previous articles from the IWB have been picked up by the International Business Times. Please click here, drive up traffic and leave some comments.
Commentary of the week:
Belly-dancing while Rome burns:
At times of economic stress, many of the most unusual sources become the best places to find entertainment. For example, when times are good, we become very trusting of people in power and begin to speak of concepts such as Leadership and Experience. We begin to admire expertise in exotic fields of study and begin to perceive of the people in those fields as people that know what they are doing. When times are bad, pronouncements that would usually be seen as prophetic and full of wisdom come to be seen as they really are: comedic guesses in the dark. The economics department at one of the banks comes to mind here, but since we shouldn't get personal (not that the economics department at a bank is very personal), we shall let them escape unnamed. What is more alarming than our minor pop-economists though is that our full slate of 'Global Leadership' is completely and utterly flummoxed and confused at how to deal with this crisis. While Ittihad does not yet have a complete solution to the world's problems because our photocopier is being difficult, we do recognize bad ideas when we see them - and at the moment, all these various 'solutions' that we have come across seem to be terrible ideas.
Idea #1 is a bailout of all, if not most failing businesses, especially if they are in the financial space or in the business of manufacturing bombs or cars that might as well be tanks. Idea #2 is to let people who took on unsustainable debts pay it off over longer terms. Idea #3 is to let the government buy everything. Idea #4 is to not do anything but talk a lot. Idea #5 is for everyone to take up farming. Needless to say, there is a good story we can tell around each idea but it won't save your retirement funds because half of those are toast already and they won't allow your kids to buy the shiny new car they want in their first year of college. So what is a good idea then, you ask? Well, as I said the photocopier is not working so the full plan cannot yet be shared - but once again, each losing investment has its own dynamic so specific advice over the newsletter is difficult. Nevertheless, there are some general timeless principles that we would do well to keep in mind and I will share two of them with you today.
The first thing to do at times like this is to manage cash-flow such that unexpected events have a minimal impact on the family finances. Although I have spoken about the dangers of uncovered debts before, this would be an excellent time to take two pieces of paper and make up two statements. One is a balance sheet of your assets and liabilities to get a handle on what you owe and to whom. The other is a statement of cash flows that shows on a monthly basis how much is coming into the house and how much is being siphoned away by the marketing departments at the companies that keep sending you bills. Once you have an accurate picture of these, look at how you can move your outgoing cash from your discretionary spending and needless bills (you do not need satellite TV for example, or a TV for that matter) to the regular paying down of your liabilities. For most of us, liabilities come in the shape of a gigantic house that is not sealed too well and so gets very hungry for natural gas in the winter, so the sooner we can get it away from the clutches of the friendly neighbourhood banker, the better it is. For others, these come in the shape of cars that protect us from the company of bus-people and bicyclists so the sooner we can actually own the wheels that move us the better it is. The idea here is to weather the coming economic storm in a manner that does not leave you too vulnerable and exposed to happenings outside your control that can still be messed up further by our political and economic leadership.
The second thing is a little less financial and a little more personal. All of us at some point find that we are at some plateau in our careers and that we are neither moving forward at a great speed, nor dropping into the abyss of becoming forgettable. If this is where you are at work, then my friend, this is a dangerous time for you. With the way things are shaping out, the teenage math prodigy who couldn't get a job designing weapons of mass destruction but found one designing debt instruments which are almost as bad has ensured that your company will probably lose customers over the next little while. This means that you have to become indispensable, which may mean that you have to improve your schooling, your areas of expertise, or be willing to do more than what is merely your job in order to ensure that neither you, nor none of your colleagues at work get laid off for 'economic reasons'. Be the person that will make and facilitate the creation of indispensable teams that pull in the same direction and accomplish great things. Be the pleasant antidote to the slow poison that is workplace stress, and then go home and be even better with the family as well. A few years of being excellent at work and considerate at home will get you into the habit of being that way forever and will IA rub off on your kids and significant other as well - finding you some peace at a time where there seems to be only strife.
The one thing that you cannot, under any circumstances, even think of doing, is trusting that what is happening inside the circles of power around the world, particularly the financial world, is somehow guaranteed to provide your family with some benefit. While this may be the friendly cynic in me speaking, I fail to see much inspiring leadership around this economic crisis at this crucial time. Just as the Emperor Nero once played the harp while half of Rome burned down, we seem to have our own makers of useless noise. The difference is that while the sound of the harp is somewhat soothing, our policy-makers seem to be doing little more than belly-dancing of the noisy and tasteless kind. All this managing of the public's emotions and the relentless flip-flopping is making some of us quite dizzy. Perhaps you will protect yourself and turn this noisy dance on the nightly news off for a while. After all, you have a job to do and a family to take care of - what are you doing watching all this economic belly-dancing on TV while the education of your kids is at stake?
Noteworthy News
Finance News:
1. The most indebted town in the USA ... read more here
2. As usual, women have it right when it comes to finance. A survey of what 'Financial Success' means ... read more here
3. Swiss Banking comes to Canada ... and leaves with $5.6B tax-free ... read more here
4. PM calls for global peer review mechanism for the financial sector ... read more here
Economic News:
1. Govts. Get together to redesign the Global Financial System (again) ... read more here
2. Reflating the Chinese Dragon ... read more here
3. Home Re-sales down by 14% ... read more here
Islamic / Middle East / Emerging Markets:
1. China calls for the technology transfer of the 'Green' kind ... read more here
Interesting but not all Finance:
1. Does anyone in Toronto really know what Garbage really is, and how the recycling system works? ... (hat-tip to S Qureshy) ... read more here
2. Saudi Arabia has the oil, but Oman has found the rock that consumes CO2 ... read more here
3. How easy it is to make fake news ... read more here
Wednesday, November 19, 2008
Tuesday, November 4, 2008
The Loony Loonie
Quote of the week:
'I tried to get cash out of the ATM but it said 'Insufficient Cash'. I didn't know if it meant them or me.'- quoted from the Globe and Mail speaking about Banks.
Some previous articles from the IWB have been picked up by the International Business Times. Please click here, drive up traffic and leave some comments.
Commentary of the week:
The Loony Loonie:
As you may have noticed if you went over to the US this last week in order to test whether the overzealous border guards are still keeping us safe by checking whether someone is sneaking in cats across the border, the exchange rate between the Loonie and the Greenback seems to be in a bit of flux. Currency traders don't know if the US$ is going up, down, sideways, into hiding or whether refugee status is about to be granted to the Japanese Yen. Sometimes the world's smartest people believe the CDN$ is worth $0.80US, sometimes $1.45 and sometimes it's worth more than what you can find at the dollar store. So what are we as Canadians subject to this kind of fluctuating standard of life supposed to think about this sad and confusing state of affairs?
Sometimes events such as this prove something, but by the grace of God we live in a theory-free environment here at Ittihad, so we know that events of this past week prove nothing - they just point us in many different directions. First, despite our various governments' assurances to the contrary, things are not fine and dandy and our beloved policy-makers have no clue about how to deal with the crisis or where the next blow-up (yes, this is actually a financial term nowadays) will be. Second, what started in the debt markets has spread to the real economy, to the fictional and now to the fantastic. After all, currency markets are fantastic in the sense that they are the most liquid (more money moves through these than anywhere else), most efficient (more or less instantaneous trades), they never close (yes, currency can be traded 24/7/365.25) and above all they generally enjoy the perception of having currencies backed by governments and thus essentially worth something. Third, we discover a link between resources and the CDN dollar, but a confusing absence of a corresponding link between the US$ and resources (this may not be entirely true, but bear with me for a moment). We thus discover that this link is not as solid and obvious in the short run as we would like for us to be happy about living in a sensible world.
In theory, currencies trade against each other based on supply and demand, meaning if someone from Mongolia wants to buy up lots of CDN oil, gas, maple syrup or beaver pelts (fur is wrong btw), they have to buy CDN dollars by exchanging Togrogs for dollars, driving up the price of dollars and driving down the price of Togrogs. Since Canada has lots of agricultural produce, oil, gas, meat and brains to export, people have enough demand for the dollar. When the price of any of these commodities such as oil, wheat, uranium etc. goes up, people from abroad need to buy more CDN loonies in order to buy the commodities they need and this excess demand drives up the value of the CDN loonie as well. Of course, this works the other way around as well. If the price of oil falls, less CDN dollars are needed by foreigners to pay for the oil, so demand for CD loonies falls and the value of the loonie falls as well. This is the theory anyway, and given what has happened to the exchange rate recently, this is the way things have been explained to us. Canada, it is said, is a resource based economy and as the price of Oil goes, so does the price of the Loonie. Sounds simple, doesn't it?
Perhaps too simple. While it may be true that the correlation between the price of Oil and the CDN Loonie is such that we think they are stalking each other harmoniously, there is something deeper that drives both of them perhaps. Let us use the price of Oil as an example to make this point clearer. Let us say that the world uses X barrels of Oil per day and this demand is somewhat inelastic in the sense that regardless of whether gas is 90 cents or $1.50, driving around Northern Ontario in the fall is still a necessity and un-give-up-able. Let us now ask what the price of oil has been over the last little while given that demand for oil is somewhat constant. Lo and behold, we find that the price of oil has gone from $140 this past summer to around $60 now, but demand has been steady in the sense that there are still as few bicycles on the street as there were over the summer (perhaps even fewer) and we have not discovered any new ocean of Oil under yet another Arab country which has doubled our supply. Why then, according to the theory, is the price of Oil falling?
Well, this is where the theory of course breaks down a bit and all sorts of qualifications have to be added. It seems that it is not just present demand that we have to take into account but the futures markets as well. This means that you and I (actually just you, because my bicycle does not use gas) have been paying for gas at $1.40 for a few months not because there was some present demand, but because there were all sorts of investors who had borrowed money from banks in order to buy futures contracts of oil for speculative purposes. Now that the banks have called back those loans and these investors are realizing once again that prices can move both up and down, this pressure in the oil market is gone and we are seeing Oil drop to $60. It is this cooling of speculative froth that has brought down the price of oil and through its effects on the Loonie, our standards of living as well.
One gets the impression more and more that the stock market is just daily theatre for the masses while the real business of the day gets done in the futures and derivatives markets by people of 'vision'. What is worse is that the ideas being bandied around to solve the issues at hand are being developed by the same visionaries that thought making commodities expensive for the rest of the world in order to make trading profits. Over $700Billion in the US and tens of Billions of CDN tax dollars later, perhaps our short-sightedness in trusting fantastic visions of the future over a little bit of sense now will finally become clearer.
Noteworthy News
Finance News:
1. Wachovia Bank declares a $24B loss for the quarter. This is the bank that financed and has grown along with RJ Reynolds (of Marlboro cigarettes fame) since the 1950's ... read more here
2. 10 Reasons to be Optimistic about the markets ... read more here
3. Some Investment Banking humour ... read more here
4. 5 things to know if you're thinking about Real Estate (not all advice is beyond question of course) ... read more here
5. A good column on Investor Psychology ... read more here
Economic News:
1. The wonders of Globalization. Iceland's financial system is the first to collapse completely, requiring a 'bailout' by the IMF ... read more here
2. Interesting video on the way the Monetary system works (or doesn't really work) ... read more here
3. The best picture to describe the US economy I have seen yet on this page (good article too btw) ... read more here
4. The investment views of one of the finest investors in Canada (who has also lost lots of money) ... read more here
Islamic / Middle East / Emerging Markets:
1. Slowdown in Persian Gulf has grave implications for non-oil exporting Arab countries ... read more here
Interesting but not all Finance:
1. Is sentence length is important if you are running for President in the US? ... read more here
2. Margaret Atwood on the Debt Crisis and how fairness should be the cornerstone of finance. I wonder if someone pointed her to the usury laws of Abrahamic faiths ... read more here
3. Very interesting article on the politics of being Muslim in the US during the election ... read more here
4. Rotterdam gets a Muslim mayor ... read more here
5. Personal stories of some great risks ever taken by people in business for themselves ... read more here
6. A nice story about the biggest mosque in Germany ... read more here
'I tried to get cash out of the ATM but it said 'Insufficient Cash'. I didn't know if it meant them or me.'- quoted from the Globe and Mail speaking about Banks.
Some previous articles from the IWB have been picked up by the International Business Times. Please click here, drive up traffic and leave some comments.
Commentary of the week:
The Loony Loonie:
As you may have noticed if you went over to the US this last week in order to test whether the overzealous border guards are still keeping us safe by checking whether someone is sneaking in cats across the border, the exchange rate between the Loonie and the Greenback seems to be in a bit of flux. Currency traders don't know if the US$ is going up, down, sideways, into hiding or whether refugee status is about to be granted to the Japanese Yen. Sometimes the world's smartest people believe the CDN$ is worth $0.80US, sometimes $1.45 and sometimes it's worth more than what you can find at the dollar store. So what are we as Canadians subject to this kind of fluctuating standard of life supposed to think about this sad and confusing state of affairs?
Sometimes events such as this prove something, but by the grace of God we live in a theory-free environment here at Ittihad, so we know that events of this past week prove nothing - they just point us in many different directions. First, despite our various governments' assurances to the contrary, things are not fine and dandy and our beloved policy-makers have no clue about how to deal with the crisis or where the next blow-up (yes, this is actually a financial term nowadays) will be. Second, what started in the debt markets has spread to the real economy, to the fictional and now to the fantastic. After all, currency markets are fantastic in the sense that they are the most liquid (more money moves through these than anywhere else), most efficient (more or less instantaneous trades), they never close (yes, currency can be traded 24/7/365.25) and above all they generally enjoy the perception of having currencies backed by governments and thus essentially worth something. Third, we discover a link between resources and the CDN dollar, but a confusing absence of a corresponding link between the US$ and resources (this may not be entirely true, but bear with me for a moment). We thus discover that this link is not as solid and obvious in the short run as we would like for us to be happy about living in a sensible world.
In theory, currencies trade against each other based on supply and demand, meaning if someone from Mongolia wants to buy up lots of CDN oil, gas, maple syrup or beaver pelts (fur is wrong btw), they have to buy CDN dollars by exchanging Togrogs for dollars, driving up the price of dollars and driving down the price of Togrogs. Since Canada has lots of agricultural produce, oil, gas, meat and brains to export, people have enough demand for the dollar. When the price of any of these commodities such as oil, wheat, uranium etc. goes up, people from abroad need to buy more CDN loonies in order to buy the commodities they need and this excess demand drives up the value of the CDN loonie as well. Of course, this works the other way around as well. If the price of oil falls, less CDN dollars are needed by foreigners to pay for the oil, so demand for CD loonies falls and the value of the loonie falls as well. This is the theory anyway, and given what has happened to the exchange rate recently, this is the way things have been explained to us. Canada, it is said, is a resource based economy and as the price of Oil goes, so does the price of the Loonie. Sounds simple, doesn't it?
Perhaps too simple. While it may be true that the correlation between the price of Oil and the CDN Loonie is such that we think they are stalking each other harmoniously, there is something deeper that drives both of them perhaps. Let us use the price of Oil as an example to make this point clearer. Let us say that the world uses X barrels of Oil per day and this demand is somewhat inelastic in the sense that regardless of whether gas is 90 cents or $1.50, driving around Northern Ontario in the fall is still a necessity and un-give-up-able. Let us now ask what the price of oil has been over the last little while given that demand for oil is somewhat constant. Lo and behold, we find that the price of oil has gone from $140 this past summer to around $60 now, but demand has been steady in the sense that there are still as few bicycles on the street as there were over the summer (perhaps even fewer) and we have not discovered any new ocean of Oil under yet another Arab country which has doubled our supply. Why then, according to the theory, is the price of Oil falling?
Well, this is where the theory of course breaks down a bit and all sorts of qualifications have to be added. It seems that it is not just present demand that we have to take into account but the futures markets as well. This means that you and I (actually just you, because my bicycle does not use gas) have been paying for gas at $1.40 for a few months not because there was some present demand, but because there were all sorts of investors who had borrowed money from banks in order to buy futures contracts of oil for speculative purposes. Now that the banks have called back those loans and these investors are realizing once again that prices can move both up and down, this pressure in the oil market is gone and we are seeing Oil drop to $60. It is this cooling of speculative froth that has brought down the price of oil and through its effects on the Loonie, our standards of living as well.
One gets the impression more and more that the stock market is just daily theatre for the masses while the real business of the day gets done in the futures and derivatives markets by people of 'vision'. What is worse is that the ideas being bandied around to solve the issues at hand are being developed by the same visionaries that thought making commodities expensive for the rest of the world in order to make trading profits. Over $700Billion in the US and tens of Billions of CDN tax dollars later, perhaps our short-sightedness in trusting fantastic visions of the future over a little bit of sense now will finally become clearer.
Noteworthy News
Finance News:
1. Wachovia Bank declares a $24B loss for the quarter. This is the bank that financed and has grown along with RJ Reynolds (of Marlboro cigarettes fame) since the 1950's ... read more here
2. 10 Reasons to be Optimistic about the markets ... read more here
3. Some Investment Banking humour ... read more here
4. 5 things to know if you're thinking about Real Estate (not all advice is beyond question of course) ... read more here
5. A good column on Investor Psychology ... read more here
Economic News:
1. The wonders of Globalization. Iceland's financial system is the first to collapse completely, requiring a 'bailout' by the IMF ... read more here
2. Interesting video on the way the Monetary system works (or doesn't really work) ... read more here
3. The best picture to describe the US economy I have seen yet on this page (good article too btw) ... read more here
4. The investment views of one of the finest investors in Canada (who has also lost lots of money) ... read more here
Islamic / Middle East / Emerging Markets:
1. Slowdown in Persian Gulf has grave implications for non-oil exporting Arab countries ... read more here
Interesting but not all Finance:
1. Is sentence length is important if you are running for President in the US? ... read more here
2. Margaret Atwood on the Debt Crisis and how fairness should be the cornerstone of finance. I wonder if someone pointed her to the usury laws of Abrahamic faiths ... read more here
3. Very interesting article on the politics of being Muslim in the US during the election ... read more here
4. Rotterdam gets a Muslim mayor ... read more here
5. Personal stories of some great risks ever taken by people in business for themselves ... read more here
6. A nice story about the biggest mosque in Germany ... read more here
Monday, October 20, 2008
Nowhere to Hide
Quote of the week:
'A half truth, like half a brick, is always more forcible as an argument than a whole one. It carries better.' - Stephen Leacock. After listening to people's solutions for the economy, this is a very fitting quote.
Some previous articles from the IWB have been picked up by the International Business Times. Please click here, drive up traffic and leave some comments. This way, perhaps the usually faulty media coverage of Muslim issues will change for the better.
Commentary of the week:
Nowhere to Hide:
Many of us go through life collecting one bad decision after another, but live reconciled to our choices because we do not have to live with their full consequences. We choose to eat unhealthily, but let our doctor or family worry for us; we choose to stress out about gas prices, but still buy SUV's that compound the problem and we invest somewhat wisely, but borrow irresponsibly. Thus, the contradictions in our lives are endless, but they don't catch up to us because life usually moves too fast for us to take too many moments to reflect; too fast for us to know what we are doing and all too quickly the moments to right the wrongs pass. There are other moments though, when the pace of life slows down as well and our mistakes come back from the mess we call the past to haunt our excruciatingly long present. This is what is happening in the financial markets these days, where every day there is some new low that was quite obvious in hindsight. At moments like these, one is reminded of the ultimate Judgement, when there will be nobody else to blame, and nowhere else to turn. This, in a nutshell then, is where we are. We have messed up as a society and twist and turn as we may now, there is probably no weaselling out of this one. What we call our standard of living is undergoing some destabilization and perhaps even re-standardization. All our financial decisions as a society over the past little while, are now coming back as a spectacular show of fireworks requiring the full blaze of our attention.
So how do we make sense of all this? And what are we to do in such times? Well, other than going back to read 'Dealing with Losses' once again, there is very little to do quickly - best to understand where we are and ONLY then can we make plans never to be here again. Jumping from one asset class to another just because that will be fashionable for the next three hours is like trying to jump from one donkey to another as they ride past one another silently in the night - it can be exciting and the action involved in switching will no doubt be satisfying, but only God knows where the new donkey will end up in the end.
The easiest way to understand this turmoil is to look at the stock market and deconstruct it a bit - and I apologize for being pedantic but I think it best to start at the beginning. The stock market, for those who are unfamiliar with its intricacies, is a place where people come to trade their shares in businesses. Usually, they trade with each other through brokers, without the underlying businesses themselves being involved in the trade. This is how the majority of trading takes place - between people, using third party shares. Now, some traders are bigger than others because instead of trading just their own life-savings, they make decisions for thousands of future pensioners or investors. These are generally called asset managers. More recently though, a new beast has come to play in this market - this is the leveraged trader - the trader who has little money of his own but lots of borrowed funds (usually from banks) to place (read 'invest' and / or 'speculate with') here and there as he sees fit. The latest estimates are such that around 30% of trading in the stock market is undertaken by this last kind of animal.
Now, with the credit crunch in the mortgage sector, many banks are simply unable to decide whether they want to call in all their outstanding loans, or if they want to keep loaning money to people with little cash. As they resolve this in their own sweet time at tax-payer expense, the hedge fund animal realizes that the game may be up soon and starts to sell what he owns in order to have cash handy in case his loans are called in. As 30% of buy orders starts to dry up in the stock exchange, and an extra 30% of sell orders pour in, what you have is yet another lop-sided trend. Just as the extra 30% of cash on the buy side drove the stock market up these past few years, the extra 30% of shares being sold now are causing many others to liquidate their holdings as well. This is the magic of leverage - as our Hedge Fund friends borrow at prime to invest at Prime times Ten, things seem great and their perceived expertise grows along with their portfolio. Suddenly though, out of no fault of their own other than excessive greed on behalf of their investors, if returns are now Prime times Negative Ten - these erstwhile geniuses are wiped out before they can finish the resulting sneeze from the solitary 'caffe latte avec cinnamon' they can afford on their new paycheque.
What is worse is that they now have to suddenly return their leased car and since their bosses are in line at the dealership just ahead of them, now the car business is affected also. Then the tire business is affected because there is no more demand for racing tires to be used in rush hour traffic and then soon the furniture business is toast because Mr. Hedge Fund has to give back the leased couch and use the plywood chair he is building himself because he is no longer employed and has extra time on his hands. Repeat this story a few thousand times because it is not just one part of the financial space that is affected but almost all of them and you have the beginnings of a fundamental restructuring of way business is done in financial circles.
Perhaps, just perhaps, this is one reason why Muslims and many of our other faithful friends believe that God knows Best, and that there are deep reasons in Islam and other faiths to avoid speculation, uncertainty and the Riba-i and usurious forms of debt that are so prevalent in the world of Finance today. Indeed, one could almost say that if done the right way, Islamic Finance has the potential to be medicinal for the world. Sadly, we are nowhere close to this potential and at this point, there is nowhere to hide.
Just the way we feel as if we are being cooked on a hot, humid and sunny day at a beach without any shade; our portfolios and retirement strategies are being cooked by a faulty system that stands outside our control because of our own mistakes. In our next column, perhaps we can discuss some possible strategies to find some shade. In the meantime, I hope you enjoy the tan ...
Noteworthy News
Finance News:
1. 10 things to learn from the credit crisis ... read more here
2. A very good FAQ section on questions such as 'Why countries can't go bankrupt? ... read more here
3. The CDN govt. buys $25B of mortgages using our tax dollars! ... read more here
Economic News:
1. The Economist now predicts a Global Recession. It's a good thing journalists don't have long term memory ... read more here
2. Will the cure for our economic ills be worse than the disease? ... read more here
3. Lots of bankruptcies on the way ... read more here
4. Canadian job growth in trouble ... read more here
Islamic / Middle East / Emerging Markets:
1. Real Estate in Dubai falters ... read more here
Interesting but not all Finance:
1. An interesting, dissenting view on the Chinese Economy ... read more here
2. Trousers in Sudan are 'Disturbing the Peace' ... read more here
'A half truth, like half a brick, is always more forcible as an argument than a whole one. It carries better.' - Stephen Leacock. After listening to people's solutions for the economy, this is a very fitting quote.
Some previous articles from the IWB have been picked up by the International Business Times. Please click here, drive up traffic and leave some comments. This way, perhaps the usually faulty media coverage of Muslim issues will change for the better.
Commentary of the week:
Nowhere to Hide:
Many of us go through life collecting one bad decision after another, but live reconciled to our choices because we do not have to live with their full consequences. We choose to eat unhealthily, but let our doctor or family worry for us; we choose to stress out about gas prices, but still buy SUV's that compound the problem and we invest somewhat wisely, but borrow irresponsibly. Thus, the contradictions in our lives are endless, but they don't catch up to us because life usually moves too fast for us to take too many moments to reflect; too fast for us to know what we are doing and all too quickly the moments to right the wrongs pass. There are other moments though, when the pace of life slows down as well and our mistakes come back from the mess we call the past to haunt our excruciatingly long present. This is what is happening in the financial markets these days, where every day there is some new low that was quite obvious in hindsight. At moments like these, one is reminded of the ultimate Judgement, when there will be nobody else to blame, and nowhere else to turn. This, in a nutshell then, is where we are. We have messed up as a society and twist and turn as we may now, there is probably no weaselling out of this one. What we call our standard of living is undergoing some destabilization and perhaps even re-standardization. All our financial decisions as a society over the past little while, are now coming back as a spectacular show of fireworks requiring the full blaze of our attention.
So how do we make sense of all this? And what are we to do in such times? Well, other than going back to read 'Dealing with Losses' once again, there is very little to do quickly - best to understand where we are and ONLY then can we make plans never to be here again. Jumping from one asset class to another just because that will be fashionable for the next three hours is like trying to jump from one donkey to another as they ride past one another silently in the night - it can be exciting and the action involved in switching will no doubt be satisfying, but only God knows where the new donkey will end up in the end.
The easiest way to understand this turmoil is to look at the stock market and deconstruct it a bit - and I apologize for being pedantic but I think it best to start at the beginning. The stock market, for those who are unfamiliar with its intricacies, is a place where people come to trade their shares in businesses. Usually, they trade with each other through brokers, without the underlying businesses themselves being involved in the trade. This is how the majority of trading takes place - between people, using third party shares. Now, some traders are bigger than others because instead of trading just their own life-savings, they make decisions for thousands of future pensioners or investors. These are generally called asset managers. More recently though, a new beast has come to play in this market - this is the leveraged trader - the trader who has little money of his own but lots of borrowed funds (usually from banks) to place (read 'invest' and / or 'speculate with') here and there as he sees fit. The latest estimates are such that around 30% of trading in the stock market is undertaken by this last kind of animal.
Now, with the credit crunch in the mortgage sector, many banks are simply unable to decide whether they want to call in all their outstanding loans, or if they want to keep loaning money to people with little cash. As they resolve this in their own sweet time at tax-payer expense, the hedge fund animal realizes that the game may be up soon and starts to sell what he owns in order to have cash handy in case his loans are called in. As 30% of buy orders starts to dry up in the stock exchange, and an extra 30% of sell orders pour in, what you have is yet another lop-sided trend. Just as the extra 30% of cash on the buy side drove the stock market up these past few years, the extra 30% of shares being sold now are causing many others to liquidate their holdings as well. This is the magic of leverage - as our Hedge Fund friends borrow at prime to invest at Prime times Ten, things seem great and their perceived expertise grows along with their portfolio. Suddenly though, out of no fault of their own other than excessive greed on behalf of their investors, if returns are now Prime times Negative Ten - these erstwhile geniuses are wiped out before they can finish the resulting sneeze from the solitary 'caffe latte avec cinnamon' they can afford on their new paycheque.
What is worse is that they now have to suddenly return their leased car and since their bosses are in line at the dealership just ahead of them, now the car business is affected also. Then the tire business is affected because there is no more demand for racing tires to be used in rush hour traffic and then soon the furniture business is toast because Mr. Hedge Fund has to give back the leased couch and use the plywood chair he is building himself because he is no longer employed and has extra time on his hands. Repeat this story a few thousand times because it is not just one part of the financial space that is affected but almost all of them and you have the beginnings of a fundamental restructuring of way business is done in financial circles.
Perhaps, just perhaps, this is one reason why Muslims and many of our other faithful friends believe that God knows Best, and that there are deep reasons in Islam and other faiths to avoid speculation, uncertainty and the Riba-i and usurious forms of debt that are so prevalent in the world of Finance today. Indeed, one could almost say that if done the right way, Islamic Finance has the potential to be medicinal for the world. Sadly, we are nowhere close to this potential and at this point, there is nowhere to hide.
Just the way we feel as if we are being cooked on a hot, humid and sunny day at a beach without any shade; our portfolios and retirement strategies are being cooked by a faulty system that stands outside our control because of our own mistakes. In our next column, perhaps we can discuss some possible strategies to find some shade. In the meantime, I hope you enjoy the tan ...
Noteworthy News
Finance News:
1. 10 things to learn from the credit crisis ... read more here
2. A very good FAQ section on questions such as 'Why countries can't go bankrupt? ... read more here
3. The CDN govt. buys $25B of mortgages using our tax dollars! ... read more here
Economic News:
1. The Economist now predicts a Global Recession. It's a good thing journalists don't have long term memory ... read more here
2. Will the cure for our economic ills be worse than the disease? ... read more here
3. Lots of bankruptcies on the way ... read more here
4. Canadian job growth in trouble ... read more here
Islamic / Middle East / Emerging Markets:
1. Real Estate in Dubai falters ... read more here
Interesting but not all Finance:
1. An interesting, dissenting view on the Chinese Economy ... read more here
2. Trousers in Sudan are 'Disturbing the Peace' ... read more here
Wednesday, October 8, 2008
Pointers for Eid
Quote of the week:
'Islamic financial institutions, in an attempt to compete in "the conventional, interest-based marketplace," have churned out products that give lip-service to Islam while using "ploys that sound minds reject and bring laughter to enemies.' - Taqi Usmani [quoted on Portfolio.com (big hat-tip to Owais Qureshi)].
Eid Mubarak - All of us at the Ittihad tribe wish that you all have a wonderful Eid with your loved ones, your nearest and dearest and even the people you have to meet on Eid because you just have to.
Some previous articles from the IWB have been picked up by the International Business Times. Please click here, drive up traffic and leave some comments. This way, perhaps the usually faulty media coverage of Muslim issues will change for the better.
Commentary of the week:
The Economics of Eid:
The end of Ramadan is just around the corner and it seems that many of us are making plans for finally rewarding ourselves with home-made Halal steak in the afternoon while sipping the lemonade we couldn't even think of during the fast because of its mouth-watering aspects. But before all this hullabaloo about Eid parties carries us away into a festive spirit that drains us of the piety that we built up over the month in a matter of days, perhaps a deep breath and some reflection on what it is that we have done to deserve the kheer (look it up, or better yet, try it) we have been blessed with is warranted. The answer of course, is very little. The kheer, just like Eid, just like your monthly paycheque, just like the cash your uncles and aunts gave you on Eid for no reason other than the fact that you were cute once (but only when you were young), and the love within your family and friends is a blessing and a gift from the Divine. So as you have enjoyed these blessings and continue to enjoy them, the question to ask yourself on Eid is: Are you going to be someone that just enjoys what you have been given from Above, or are you going to be a vehicle through which these blessings pass on to others as well? The reason I bring this up is that Eid is actually a wonderful time to teach responsibility, gratitude and resource-management to the young and the still youngish (unfortunately, it may be too late for the old-ish, who like to believe that they are set in their ways and thus cannot change). These are some things I will be thinking of teaching my brand-spanking new nephew (even though he thinks what I say is gibberish) and perhaps you will find some food-for-thought in them as well. At the very least, you can find some young person who has been brought up the right way, is polite and therefore has to listen to you discuss these theories with him / her so he can get his mind off sports / cell-phone features.
Responsibility:
While Eid is a time of celebration in the sense that there are things to celebrate if we actually met our Ramadan goals, it is still not really a time to forget that we are still responsible for our long term future. So while we celebrate our private victory over hunger, we have not yet even made a dent on the abject levels of global or if one were to visit a homeless shelter or some Native reserves, even local poverty. So while during Ramadan we fasted so we would know in some shallow way what poverty of nourishment felt like, imagine the level of responsibility we should perhaps feel when we have been made familiar with that which was unfamiliar to our bourgeois lives, but is a constant reality for many below us on the totem pole of socio-economic status. Let us also celebrate the realization that this Ramadan, we disciplined ourselves to come close to a certain kind of poverty for a month. As we celebrate its end, let us also resolve to help others lift the burden of theirs.
Gratitude:
As I am one of the most popular people in Toronto and have therefore received a grand total of 1 invitation for an Eid Dinner (no, it is not from myself), there is nevertheless much to be thankful for. We must thank the divine for allowing us another opportunity to humble our various appetites, and be thankful to the people around us for being understanding of our temper tantrums, confusions, deliriums, chronic laziness and faulty decision-making that lack of nourishment forces upon our weak and impressionable minds. We must also thank the Divine for lining up all these uncles and aunts who want to give us cash, and for all the nephews and nieces that will be lining up to take their cut as well. I hope that we will remember that our wealth is entrusted to us from Above and the opportunity to make young people smile with the thoughts of spending money is innocent enough when they are young. Slowly but surely, they will grow old and realize that money is not their friend, but that you will always be family. Do not let the opportunity for this insight pass them by.
Resource - Management:
As we discussed at the start of the Ramadan series, this season is the time to be out and about in the beautiful places near us. As you have probably noticed if you are not above the tree line, the leaves have started to change colour and are lighting up the trails, streets, rivers and lakes with their blazingly bright show of seasonal goodbyes. There is a beautiful parallel here for us in this show of brilliance, which is that even the trees in this part of the world go through a fallow season, where they prepare to be poor in nourishment by shedding even their lungs. The autumn is their Ramadan - they die a small seasonal death while generously providing us the opportunity to look at the changes taking place within them with wonder. To make the point and my reasons for speaking about trees a bit clearer - as a wise man once said, 'the tree does not ask about those to whom its fruits go, it does what was intended of it, and lets God do the rest'.
So this Eid and this Fall, let us be less like busy people and more like trees. Be like a tree that was planted as a kindness to those around you and let this Eid be like your spring - blossom into the considerate, kind, loving, patient, ego-free and vivacious person that you asked God to make you the during your prayers in Ramadan. Now that would be worth a real celebration.
--------------
Upcoming Events:
Yet another conference on Islamic Finance has found its way to New York. The topics will include heavy doses of truly innovative thinking such as 'Making Distressed Debt Halal' and 'Making Hell Freeze Over'. The Ittihad contingent will be there to ruffle some feathers and no doubt be told by other members of the industry that we are crazy. Our CEO and VP (of dreamy voice fame) will be there as speakers so if you are in the area feel free to drop by and give them a hand in dragging IF back outside the fold of conventional finance. As I have once again been grounded by the powers-that-be, I will not be going and therefore will be unable to report my findings to you later.
Muslim Friend of William Osler's Health Center will be hosting an annual charity Golf Tournament at 8:00 am on Saturday, Oct 4th. As it starts at the ungodly hour of 8 on Saturday morning and involves the painfully slow tapping of a small ball into an even smaller hole, no doubt this will be an unqualified hit with the Muslim masses. This is your chance to see me swing the new graphite driver I pilfered from our VP and wipe the field with my solid 7-iron play. We will give a fee discount to any corporate team that beats the Ittihad team for our investment banking services so if you have ever played ice hockey, ball hockey, field hockey or walked around with a cane in your life, you have a chance at rare glory. Be there ... email here for registration
Ittihad will be sponsoring the Eid festivities at the Rogers Centre downtown, so if you would like to see the unfortunate members of the staff who get to work on Eid, please come on down and say hello to me and give me an Eid hug. Of course, the event itself is always fun for the kids because I hear that there is a camel ride and free ice-cream for those who can answer a skill-testing question on Islamic Finance. Be sure to bring your friends and family, it will be an excellent opportunity to meet new people and reconnect with some long-lost acquaintances.
Useless fact of the day:
Regulators: Government-employed lawyers who, having failed to get employment on Wall Street, have trouble understanding what is happening on Wall Street.- (Edward Chancellor)
__________
Finance News:
1. And then there were none ... Investment Banking as a standalone business becomes pretty much obsolete ... read more here
2. The Doctor's bill for the US economy ... read more here
3. How AIG went bankrupt ... read more here
Economic News:
1. Harper says your home equity is safe. Phew, he had me worried there for a bit ... read more here
2. The Swedish approach to 'resolving' the financial crisis ... read more here
Islamic / Middle East / Emerging Markets:
1. Ruling from Islamic Finance Board cripples the Sukuk market ... read more here
2. The most popular Islamic Finance Shariah scholars in the world (hat-tip to Owais Qureshi... read more here
3. The background to story #1 in this section ... read more here
Interesting but not all Finance:
1. The Hadron collider breaks down ... (BTW - Absolute zero is -273 deg C) ... read more here
'Islamic financial institutions, in an attempt to compete in "the conventional, interest-based marketplace," have churned out products that give lip-service to Islam while using "ploys that sound minds reject and bring laughter to enemies.' - Taqi Usmani [quoted on Portfolio.com (big hat-tip to Owais Qureshi)].
Eid Mubarak - All of us at the Ittihad tribe wish that you all have a wonderful Eid with your loved ones, your nearest and dearest and even the people you have to meet on Eid because you just have to.
Some previous articles from the IWB have been picked up by the International Business Times. Please click here, drive up traffic and leave some comments. This way, perhaps the usually faulty media coverage of Muslim issues will change for the better.
Commentary of the week:
The Economics of Eid:
The end of Ramadan is just around the corner and it seems that many of us are making plans for finally rewarding ourselves with home-made Halal steak in the afternoon while sipping the lemonade we couldn't even think of during the fast because of its mouth-watering aspects. But before all this hullabaloo about Eid parties carries us away into a festive spirit that drains us of the piety that we built up over the month in a matter of days, perhaps a deep breath and some reflection on what it is that we have done to deserve the kheer (look it up, or better yet, try it) we have been blessed with is warranted. The answer of course, is very little. The kheer, just like Eid, just like your monthly paycheque, just like the cash your uncles and aunts gave you on Eid for no reason other than the fact that you were cute once (but only when you were young), and the love within your family and friends is a blessing and a gift from the Divine. So as you have enjoyed these blessings and continue to enjoy them, the question to ask yourself on Eid is: Are you going to be someone that just enjoys what you have been given from Above, or are you going to be a vehicle through which these blessings pass on to others as well? The reason I bring this up is that Eid is actually a wonderful time to teach responsibility, gratitude and resource-management to the young and the still youngish (unfortunately, it may be too late for the old-ish, who like to believe that they are set in their ways and thus cannot change). These are some things I will be thinking of teaching my brand-spanking new nephew (even though he thinks what I say is gibberish) and perhaps you will find some food-for-thought in them as well. At the very least, you can find some young person who has been brought up the right way, is polite and therefore has to listen to you discuss these theories with him / her so he can get his mind off sports / cell-phone features.
Responsibility:
While Eid is a time of celebration in the sense that there are things to celebrate if we actually met our Ramadan goals, it is still not really a time to forget that we are still responsible for our long term future. So while we celebrate our private victory over hunger, we have not yet even made a dent on the abject levels of global or if one were to visit a homeless shelter or some Native reserves, even local poverty. So while during Ramadan we fasted so we would know in some shallow way what poverty of nourishment felt like, imagine the level of responsibility we should perhaps feel when we have been made familiar with that which was unfamiliar to our bourgeois lives, but is a constant reality for many below us on the totem pole of socio-economic status. Let us also celebrate the realization that this Ramadan, we disciplined ourselves to come close to a certain kind of poverty for a month. As we celebrate its end, let us also resolve to help others lift the burden of theirs.
Gratitude:
As I am one of the most popular people in Toronto and have therefore received a grand total of 1 invitation for an Eid Dinner (no, it is not from myself), there is nevertheless much to be thankful for. We must thank the divine for allowing us another opportunity to humble our various appetites, and be thankful to the people around us for being understanding of our temper tantrums, confusions, deliriums, chronic laziness and faulty decision-making that lack of nourishment forces upon our weak and impressionable minds. We must also thank the Divine for lining up all these uncles and aunts who want to give us cash, and for all the nephews and nieces that will be lining up to take their cut as well. I hope that we will remember that our wealth is entrusted to us from Above and the opportunity to make young people smile with the thoughts of spending money is innocent enough when they are young. Slowly but surely, they will grow old and realize that money is not their friend, but that you will always be family. Do not let the opportunity for this insight pass them by.
Resource - Management:
As we discussed at the start of the Ramadan series, this season is the time to be out and about in the beautiful places near us. As you have probably noticed if you are not above the tree line, the leaves have started to change colour and are lighting up the trails, streets, rivers and lakes with their blazingly bright show of seasonal goodbyes. There is a beautiful parallel here for us in this show of brilliance, which is that even the trees in this part of the world go through a fallow season, where they prepare to be poor in nourishment by shedding even their lungs. The autumn is their Ramadan - they die a small seasonal death while generously providing us the opportunity to look at the changes taking place within them with wonder. To make the point and my reasons for speaking about trees a bit clearer - as a wise man once said, 'the tree does not ask about those to whom its fruits go, it does what was intended of it, and lets God do the rest'.
So this Eid and this Fall, let us be less like busy people and more like trees. Be like a tree that was planted as a kindness to those around you and let this Eid be like your spring - blossom into the considerate, kind, loving, patient, ego-free and vivacious person that you asked God to make you the during your prayers in Ramadan. Now that would be worth a real celebration.
--------------
Upcoming Events:
Yet another conference on Islamic Finance has found its way to New York. The topics will include heavy doses of truly innovative thinking such as 'Making Distressed Debt Halal' and 'Making Hell Freeze Over'. The Ittihad contingent will be there to ruffle some feathers and no doubt be told by other members of the industry that we are crazy. Our CEO and VP (of dreamy voice fame) will be there as speakers so if you are in the area feel free to drop by and give them a hand in dragging IF back outside the fold of conventional finance. As I have once again been grounded by the powers-that-be, I will not be going and therefore will be unable to report my findings to you later.
Muslim Friend of William Osler's Health Center will be hosting an annual charity Golf Tournament at 8:00 am on Saturday, Oct 4th. As it starts at the ungodly hour of 8 on Saturday morning and involves the painfully slow tapping of a small ball into an even smaller hole, no doubt this will be an unqualified hit with the Muslim masses. This is your chance to see me swing the new graphite driver I pilfered from our VP and wipe the field with my solid 7-iron play. We will give a fee discount to any corporate team that beats the Ittihad team for our investment banking services so if you have ever played ice hockey, ball hockey, field hockey or walked around with a cane in your life, you have a chance at rare glory. Be there ... email here for registration
Ittihad will be sponsoring the Eid festivities at the Rogers Centre downtown, so if you would like to see the unfortunate members of the staff who get to work on Eid, please come on down and say hello to me and give me an Eid hug. Of course, the event itself is always fun for the kids because I hear that there is a camel ride and free ice-cream for those who can answer a skill-testing question on Islamic Finance. Be sure to bring your friends and family, it will be an excellent opportunity to meet new people and reconnect with some long-lost acquaintances.
Useless fact of the day:
Regulators: Government-employed lawyers who, having failed to get employment on Wall Street, have trouble understanding what is happening on Wall Street.- (Edward Chancellor)
__________
Finance News:
1. And then there were none ... Investment Banking as a standalone business becomes pretty much obsolete ... read more here
2. The Doctor's bill for the US economy ... read more here
3. How AIG went bankrupt ... read more here
Economic News:
1. Harper says your home equity is safe. Phew, he had me worried there for a bit ... read more here
2. The Swedish approach to 'resolving' the financial crisis ... read more here
Islamic / Middle East / Emerging Markets:
1. Ruling from Islamic Finance Board cripples the Sukuk market ... read more here
2. The most popular Islamic Finance Shariah scholars in the world (hat-tip to Owais Qureshi... read more here
3. The background to story #1 in this section ... read more here
Interesting but not all Finance:
1. The Hadron collider breaks down ... (BTW - Absolute zero is -273 deg C) ... read more here
Monday, September 22, 2008
Wailing Wall Street
Quote of the week:
'I do not feel obliged to believe that the same God who has endowed us with sense, reason and intellect has intended us to forego their use.' - Galileo Galilei.
Some previous articles from the IWB have been picked up by the International Business Times. Please click here and vote on how great you think they are. This way, perhaps the usual monotone coverage of Muslim issues found in the media will change for the better.
Commentary of the week:
Wailing Wall Street:
Once again, Wall Street has let us down. Here we were, planning to do an IWB on why taking a vacation is beneficial for the economy but have been dragged back from our fanciful musings into the nitty gritty of investment bank bankruptcies and Insurer fold-ups. It just seems that for all their education, smarts and financial sophistication, most people working in finance have perhaps missed their true calling as apprentices to donkey-cart drivers. Perhaps now they will have the opportunity to work in the field in which they should have been all along rather than wasting their lives brokering large deals between those who need to waste money and those with money to waste. The only question that keeps me up these days is - which section of idiot-financiers is dumber than the others? Is it the government regulators who have used up untold amounts of tax-payer money to shore up companies not worth their weight in cow-dung, or is it the people who spend years dreaming up complex, leveraged instruments only to pass them onto people just like them but with some more money?
So where did all this begin, you ask? Well, most things really begin after world war II, but we will skip over some decades and come to the early 70's. This is when President Nixon decoupled the US$ from gold and suddenly we could make as much or as little paper money as the banks that make up the Fed decided to at any time without necessarily having any gold to back it up. Of course, gold prices shot up (or rather, the worth of the US$ fell over the decade), but soon things became more predictable as people found a new way to do business. Everything suddenly became not just trade-able but a potential commodity to speculate with - Oil, Gold, Currencies, Wheat, Soyabeans and even the unmentionable animal. At the same time, some flawed geniuses in the US looked at bank (or savings and loans entities) balance sheets and realized that all these mortgages that people had, which were paying the lenders quite a bit of interest, but were essentially just sitting on the books (I am paraphrasing just a bit here). In the 1980's then, firms such as Bear Stearns (read the IWB obituary here) came up with ways to turn these mortgages back into cash by having one lender simply sell them as a package to investors looking for income. This is when the trading of fixed-income instruments (bonds) really took off and soon home-purchase payments your parents were paying diligently could actually be ending up at a small pension fund in Latin America that was unlucky enough to be a Bear Stearns customer.
Fast forward now to the present day and not only is it just the mortgage principals that are being traded, but interest payments and even the insurance on the mortgages. Actually, everything from credit card payments to the financing you have taken for your local mechanic's bill or marital furniture is ultimately being traded somewhere by a short man wearing glasses or by the computer program he has created to replace himself. All this works fine as long as no one cog in the machine creates problems, but alas, the machine was not made in Germany so breaks down. Since this one is American, lots of things break down and do so quite frequently.
Think of the US economy as a car, and money as gas. If a few people cannot pay their mortgages in the US, one of the cylinders in the engine is not really working and the car is not as efficient anymore. The Fed notices and jumps in to give it more power by giving it more gas. Since that doesn't solve the problem of the faulty cylinder, the car continues to run hotter than normal for bit and then the extra heat breaks something else down. This time, it is the mortgage-backed bond market, where nobody wants to invest anymore, and the Fed jumps in with yet more gas. Suddenly, all the bills for the companies that are involved in the mortgage market are unaffordable because they have no revenue - the Fed jumps in with yet more gas. Then the insurance companies that bought mortgages find that they are not getting paid - the Fed does the usual gas trick. After the insurance companies realize that they are toast (as per our views here), the investment banks realize that they have no customers - the Fed jumps in with High Octane gas. All this while, the car is slowing down because even though there are small explosions taking place in the engine, the engine is not really producing much power (think GM). Let us now suppose that the global political situation is such that the car has to travel uphill. So you have something with the shape of a car, with the engineering of a car, with the heat and sparks of a car, but the performance characteristics of a gas-tank with a lit fuse. It has lots of flammable gas, sparks but no real momentum. Clearly, the natural course would be for it to go screaming downhill while on fire.
The tragedy here is of course twofold. One, all of the gas the Fed, the Bank of Canada and others pour into this American junker is stolen from our cars as governments have one source of revenue and that is the taxes we pay either obviously or through the silent avenue of inflation. Two, many of the donkeys that were previously free will now be stuck with over-eager donkey-cart drivers looking to prove that it wasn't their fault.
Credit to Shahzad Siddiqui for suggesting the topic (and title) and Siddiq Mohamed for forcing me to say something about the tax implications.
Ramadan Mubarak - May this month be full of blessings for you all IA.
--------------
Upcoming Events:
You can watch our newly married (alas ladies), VP of Private Client Services, Mr. Firaaz Azeez, explaining some of the reasons why Ittihad exists and what we stand for as a company between 2 and 3 pm on Saturday the 27th of September on the Faith of Life Network on the CTS channel. Tune in for the depth of the ideas, but if that does not interest you, then perhaps I should also tell you that he has a dreamy voice and very pleasing appearance. Please tune in, listen to what the Private Client Division at Ittihad is up to these days and then call the Faith Of Life people to ask for a repeat or two.
Office for Rent:
As we have recently moved all our staff to the glass-enclosed cage that we call our head office, we have an entire fully furnished, gorgeous office for rent in a Medical Building at the corner of Sheppard Ave. and McCowan. The rent is minimal and the salient features of the space - such as the beautiful windows, the spacious Board-Room, the Corner offices, the nice faux mahogany furniture are enough to motivate your employees to work long hours while being paid whatever little you grudgingly give them. As this is a Professional Building (not just any building mind you, this one has achieved professional status through years of just sitting there), it would be most suitable for a growing real estate, accountancy or legal practice. You can visit the space and see the endless possibilities that this new location presents for your business by clicking here or calling Mr. Azeez at (416) 412 3999 ext. 115.
Useless fact of the day:
Campestral: something or someone that thrives in open countryside and under open skies, as opposed to the usual growth found in cubicles.
__________
Finance News:
1. Two for the price of one ... both Lehman Brothers and Merrill Lynch go under (but in different ways) ... read more here
2. Bill gates buys $32B worth of Garbage, and we are not even talking about Windows ... read more here
3. Time for many Investment Bankers to realize their true calling and become donkey-cart drivers ... read more here
Economic News:
1. I think the Chinese might end up 'saving' Wall Street ... read more here
2. The Economist opines (finally) on why things are so bad ... read more here
3. Why the underwriting of $62Trillion worth of derivatives may be a bad thing ... read more here
Islamic / Middle East / Emerging Markets:
1. One of the foremost Economists of Islamic Economics (a person who has researched the relative efficiency of debt vs. equity on an economy-wide basis) has written a piece on Ethical Investing. A must read ... read more here
2. Why the Sovereign Wealth Funds have not jumped in to save Wall Street (well, not yet anyway) ... read more here
Interesting but not all Finance:
1. Is there a food shortage in the world, or is there a water shortage? ... read more here
2. Teaching kids a financial lesson ... read more here
'I do not feel obliged to believe that the same God who has endowed us with sense, reason and intellect has intended us to forego their use.' - Galileo Galilei.
Some previous articles from the IWB have been picked up by the International Business Times. Please click here and vote on how great you think they are. This way, perhaps the usual monotone coverage of Muslim issues found in the media will change for the better.
Commentary of the week:
Wailing Wall Street:
Once again, Wall Street has let us down. Here we were, planning to do an IWB on why taking a vacation is beneficial for the economy but have been dragged back from our fanciful musings into the nitty gritty of investment bank bankruptcies and Insurer fold-ups. It just seems that for all their education, smarts and financial sophistication, most people working in finance have perhaps missed their true calling as apprentices to donkey-cart drivers. Perhaps now they will have the opportunity to work in the field in which they should have been all along rather than wasting their lives brokering large deals between those who need to waste money and those with money to waste. The only question that keeps me up these days is - which section of idiot-financiers is dumber than the others? Is it the government regulators who have used up untold amounts of tax-payer money to shore up companies not worth their weight in cow-dung, or is it the people who spend years dreaming up complex, leveraged instruments only to pass them onto people just like them but with some more money?
So where did all this begin, you ask? Well, most things really begin after world war II, but we will skip over some decades and come to the early 70's. This is when President Nixon decoupled the US$ from gold and suddenly we could make as much or as little paper money as the banks that make up the Fed decided to at any time without necessarily having any gold to back it up. Of course, gold prices shot up (or rather, the worth of the US$ fell over the decade), but soon things became more predictable as people found a new way to do business. Everything suddenly became not just trade-able but a potential commodity to speculate with - Oil, Gold, Currencies, Wheat, Soyabeans and even the unmentionable animal. At the same time, some flawed geniuses in the US looked at bank (or savings and loans entities) balance sheets and realized that all these mortgages that people had, which were paying the lenders quite a bit of interest, but were essentially just sitting on the books (I am paraphrasing just a bit here). In the 1980's then, firms such as Bear Stearns (read the IWB obituary here) came up with ways to turn these mortgages back into cash by having one lender simply sell them as a package to investors looking for income. This is when the trading of fixed-income instruments (bonds) really took off and soon home-purchase payments your parents were paying diligently could actually be ending up at a small pension fund in Latin America that was unlucky enough to be a Bear Stearns customer.
Fast forward now to the present day and not only is it just the mortgage principals that are being traded, but interest payments and even the insurance on the mortgages. Actually, everything from credit card payments to the financing you have taken for your local mechanic's bill or marital furniture is ultimately being traded somewhere by a short man wearing glasses or by the computer program he has created to replace himself. All this works fine as long as no one cog in the machine creates problems, but alas, the machine was not made in Germany so breaks down. Since this one is American, lots of things break down and do so quite frequently.
Think of the US economy as a car, and money as gas. If a few people cannot pay their mortgages in the US, one of the cylinders in the engine is not really working and the car is not as efficient anymore. The Fed notices and jumps in to give it more power by giving it more gas. Since that doesn't solve the problem of the faulty cylinder, the car continues to run hotter than normal for bit and then the extra heat breaks something else down. This time, it is the mortgage-backed bond market, where nobody wants to invest anymore, and the Fed jumps in with yet more gas. Suddenly, all the bills for the companies that are involved in the mortgage market are unaffordable because they have no revenue - the Fed jumps in with yet more gas. Then the insurance companies that bought mortgages find that they are not getting paid - the Fed does the usual gas trick. After the insurance companies realize that they are toast (as per our views here), the investment banks realize that they have no customers - the Fed jumps in with High Octane gas. All this while, the car is slowing down because even though there are small explosions taking place in the engine, the engine is not really producing much power (think GM). Let us now suppose that the global political situation is such that the car has to travel uphill. So you have something with the shape of a car, with the engineering of a car, with the heat and sparks of a car, but the performance characteristics of a gas-tank with a lit fuse. It has lots of flammable gas, sparks but no real momentum. Clearly, the natural course would be for it to go screaming downhill while on fire.
The tragedy here is of course twofold. One, all of the gas the Fed, the Bank of Canada and others pour into this American junker is stolen from our cars as governments have one source of revenue and that is the taxes we pay either obviously or through the silent avenue of inflation. Two, many of the donkeys that were previously free will now be stuck with over-eager donkey-cart drivers looking to prove that it wasn't their fault.
Credit to Shahzad Siddiqui for suggesting the topic (and title) and Siddiq Mohamed for forcing me to say something about the tax implications.
Ramadan Mubarak - May this month be full of blessings for you all IA.
--------------
Upcoming Events:
You can watch our newly married (alas ladies), VP of Private Client Services, Mr. Firaaz Azeez, explaining some of the reasons why Ittihad exists and what we stand for as a company between 2 and 3 pm on Saturday the 27th of September on the Faith of Life Network on the CTS channel. Tune in for the depth of the ideas, but if that does not interest you, then perhaps I should also tell you that he has a dreamy voice and very pleasing appearance. Please tune in, listen to what the Private Client Division at Ittihad is up to these days and then call the Faith Of Life people to ask for a repeat or two.
Office for Rent:
As we have recently moved all our staff to the glass-enclosed cage that we call our head office, we have an entire fully furnished, gorgeous office for rent in a Medical Building at the corner of Sheppard Ave. and McCowan. The rent is minimal and the salient features of the space - such as the beautiful windows, the spacious Board-Room, the Corner offices, the nice faux mahogany furniture are enough to motivate your employees to work long hours while being paid whatever little you grudgingly give them. As this is a Professional Building (not just any building mind you, this one has achieved professional status through years of just sitting there), it would be most suitable for a growing real estate, accountancy or legal practice. You can visit the space and see the endless possibilities that this new location presents for your business by clicking here or calling Mr. Azeez at (416) 412 3999 ext. 115.
Useless fact of the day:
Campestral: something or someone that thrives in open countryside and under open skies, as opposed to the usual growth found in cubicles.
__________
Finance News:
1. Two for the price of one ... both Lehman Brothers and Merrill Lynch go under (but in different ways) ... read more here
2. Bill gates buys $32B worth of Garbage, and we are not even talking about Windows ... read more here
3. Time for many Investment Bankers to realize their true calling and become donkey-cart drivers ... read more here
Economic News:
1. I think the Chinese might end up 'saving' Wall Street ... read more here
2. The Economist opines (finally) on why things are so bad ... read more here
3. Why the underwriting of $62Trillion worth of derivatives may be a bad thing ... read more here
Islamic / Middle East / Emerging Markets:
1. One of the foremost Economists of Islamic Economics (a person who has researched the relative efficiency of debt vs. equity on an economy-wide basis) has written a piece on Ethical Investing. A must read ... read more here
2. Why the Sovereign Wealth Funds have not jumped in to save Wall Street (well, not yet anyway) ... read more here
Interesting but not all Finance:
1. Is there a food shortage in the world, or is there a water shortage? ... read more here
2. Teaching kids a financial lesson ... read more here
Wednesday, September 17, 2008
Casino Finance
Quote of the week:
'If the industry introduces too many new products, cynics will argue that sharia is being twisted for economic ends-the scholars are being paid for their services, after all. But if it fails to innovate, the industry may look too medieval to play a full part in modern finance.' - The Economist.
Please read this article about the industry and notice how smoothly, coolly and with such great perceived expertise on the matter, The Economist has painted us as medievalists unfit for modern finance. Too funny really ... as if modern finance is somehow better than medieval finance.
Some articles from the IWB have been picked up by the International Business Times. Please click here and vote on how great the articles are. Do be shameless and liberal with your praise.
Commentary of the week:
'Quick and Easy' Islamic Finance:
Regular readers of the IWB know that letting yours truly in at Financial industry conferences is always a bit risky so imagine my surprise when I was invited to the World Alternative Investment Summit held at the very plush, very luxurious Fallsview resort in Niagara Falls. At first, it was questionable whether I would be allowed to go after the cutlery fiasco that took place some decades ago (described here), but after many empty promises of good behaviour, permission was reluctantly granted and I had my bags packed and ready before the authorities could change their mind (or even finish the 'k' part of 'okay, you can go'). On the way there, I realized that in my excitement at being taken along, I had overlooked to read the agenda of the 'Summit'.
Reading the agenda while doing my best impression of a docile passenger had two effects. First, it made yours truly quite incredulous that the conference (which had a significant component devoted to Islamic Finance), was being held at a Casino (yes, that is correct), in the middle of Ramadan. Second, once I got over the shock of that realization, the predictability of the topics under discussion put me into a deep kind of sleep. Fast forwarding past our arrival at the venue and the sheer decadence of the surroundings, let me tell you what most of the conference was dedicated to.
As this was an 'Alternative' investment conference, you had the usual suspects in attendance. Lots of hedge funds, some real estate LP's, lots of lawyers, some back-office suppliers and of course, yet more lawyers. The salient themes of the conference were twofold, with a session on Islamic Finance thrown it at the end. First, as the liquidity crisis is having its way with public markets, the order of the day is to find assets that are uncorrelated with major stock market indices. This is supposed to create some predictability in your rapidly shrinking portfolio. Second, as there is very little gain to be had if funds just buy and hold stocks, the order of the day is to borrow from banks at prime and invest at prime + infinity% so we can all get rich quicker than we can resolve whether strawberry milk shake is better than chocolate. As we at Ittihad have heard this story again and again and have already decided on strawberry, we of course know that using borrowed money to invest is fine and dandy in this life only some of the time, but can be quite problematic for our next life - so we try and steer clear of this whole idea. As two of my fellow Ittihad geniuses were with me, I quietly nodded my head as if I agreed and did not make a scene by pulling out the hair in my beard at the insanity of it all. But alas, this sense of forced calm did not last - and the session on Islamic Finance broke all pretence at self-control.
While I will not bore you with all the ways in which I came away offended and quite hurt at the shallow way in which many people treat and think of Islamic Finance, there is an exchange that I would like to leave you with that is quite instructive. After describing to the audience how anything that our friendly hedge-fund types usually did or wanted to do could be structured in an 'Islamic' or 'Shariah-compliant' way, some members of the audience were left a bit confused. One question, which was 'well, if you can structure anything 'Islamically', then what is the difference, and why bother?' was answered along the lines of the thought that Muslims need to be liberated from their money (which I thought was a very clever way to put it). The second question (asked by my associate) was along the lines of whether what these practitioners were proposing was in line at all with the letter and spirit of Islam? The answer to this was such that I almost fell out of my chair and had to be first propped up and then restrained before I ran up onto stage, held the speaker's collar and then gently fixed the alignment of his tie before walking back calmly as if nothing had happened, but I digress.
The answer to this beautiful question was quite illuminating indeed. It was that the responsibility of the spirit of Islam, if there is such a thing that can be agreed upon, did not lie with those who create these products and structures, but with the Shariah Boards that approve them. Of course, when this question is asked of Shariah Boards, they simply turn around and say that it is not their responsibility to structure genuine solutions, it is their responsibility to pass on the legalese of individual contracts. Since three or four individual contracts can be combined to reproduce conventional finance quite well, both parties pass the buck to each other on the entire solution and make a mockery of whatever little Islam there is in Islamic Finance.
As we usually find that the only one's at these panels that make a direct link between Ethics and Islamic Finance are people from the Ittihad tribe (at this one it was our Dear Leader - God Bless him for introducing some integrity and dignity to the proceedings), I think it may be time to take some responsibility for what happens in Canada on our own shoulders. As such, let me humbly suggest that I hope you all will not allow anyone to 'liberate you from your savings' unless you are an aware, willing and educated participant in this grand liberation being planned at the Casinos of the world.
Ramadan Mubarak - May this month be full of blessings for you all IA.
--------------
Upcoming Events:
You can watch our newly married (alas ladies), VP of Private Client Services, Mr. Firaaz Azeez, explaining some of the reasons why Ittihad exists and what we stand for as a company between 2 and 3 pm on Saturday the 27th of September on the Faith of Life Network on the CTS channel. Tune in for the depth of the ideas, but if that does not interest you, then perhaps I should also tell you that he has a dreamy voice and very pleasing appearance. Please tune in, listen to what the Private Client Division at Ittihad is up to these days and then call the Faith Of Life people to ask for a repeat or two.
Office for Rent:
As we have recently moved all our staff to the glass-enclosed cage that we call our head office, we have an entire fully furnished, gorgeous office for rent in a Medical Building at the corner of Sheppard Ave. and McCowan. The rent is minimal and the salient features of the space - such as the beautiful windows, the spacious Board-Room, the Corner offices, the nice faux mahogany furniture are enough to motivate your employees to work long hours while being paid whatever little you grudgingly give them. As this is a Professional Building (not just any building mind you, this one has achieved professional status through years of just sitting there), it would be most suitable for a growing real estate, accountancy or legal practice. You can visit the space and see the endless possibilities that this new location presents for your business by clicking here or calling Mr. Azeez at (416) 412 3999 ext. 115.
Useless fact of the day:
Conniption: flirting with a stroke-like state due to intense anger or excitement. The feeling of being emotionally overwhelmed such that self-control falls below the top 3 on the list of one's priorities in life. Not recommended during Ramadan.
__________
Finance News:
1. The US Govt. decides to own everyone's home also ... welcome to the USSR, no, no - I mean the new USA ... (quite possibly the best news for Gold investors but don't quote me) ... read more here
2. After the fall of Bear Stearns, another large investment bank is having a delayed reaction ... read more here
3. Who bears the cost of mortgage bailouts ... read more here
Economic News:
1. Economist Paul Krugman speaks about the paradox of deleveraging ... read more here
2. An excellent article on the background of why the creation of credit in an economy is fraught with danger ... read more here
3. The problems with deposit insurance and how this creates issues for the industry ... read more here
4. What the instability of the US$ means for US policy-makers ... read more here
Islamic / Middle East / Emerging Markets:
1. An article on Islamic Finance from The Economist (must read article of the week) ... read more here
Interesting but not all Finance:
1. Introducing the Ramadan Phone. If only it could cook before sunrise also ... (hat-tip to Husein Kirefu) ... read more here
'If the industry introduces too many new products, cynics will argue that sharia is being twisted for economic ends-the scholars are being paid for their services, after all. But if it fails to innovate, the industry may look too medieval to play a full part in modern finance.' - The Economist.
Please read this article about the industry and notice how smoothly, coolly and with such great perceived expertise on the matter, The Economist has painted us as medievalists unfit for modern finance. Too funny really ... as if modern finance is somehow better than medieval finance.
Some articles from the IWB have been picked up by the International Business Times. Please click here and vote on how great the articles are. Do be shameless and liberal with your praise.
Commentary of the week:
'Quick and Easy' Islamic Finance:
Regular readers of the IWB know that letting yours truly in at Financial industry conferences is always a bit risky so imagine my surprise when I was invited to the World Alternative Investment Summit held at the very plush, very luxurious Fallsview resort in Niagara Falls. At first, it was questionable whether I would be allowed to go after the cutlery fiasco that took place some decades ago (described here), but after many empty promises of good behaviour, permission was reluctantly granted and I had my bags packed and ready before the authorities could change their mind (or even finish the 'k' part of 'okay, you can go'). On the way there, I realized that in my excitement at being taken along, I had overlooked to read the agenda of the 'Summit'.
Reading the agenda while doing my best impression of a docile passenger had two effects. First, it made yours truly quite incredulous that the conference (which had a significant component devoted to Islamic Finance), was being held at a Casino (yes, that is correct), in the middle of Ramadan. Second, once I got over the shock of that realization, the predictability of the topics under discussion put me into a deep kind of sleep. Fast forwarding past our arrival at the venue and the sheer decadence of the surroundings, let me tell you what most of the conference was dedicated to.
As this was an 'Alternative' investment conference, you had the usual suspects in attendance. Lots of hedge funds, some real estate LP's, lots of lawyers, some back-office suppliers and of course, yet more lawyers. The salient themes of the conference were twofold, with a session on Islamic Finance thrown it at the end. First, as the liquidity crisis is having its way with public markets, the order of the day is to find assets that are uncorrelated with major stock market indices. This is supposed to create some predictability in your rapidly shrinking portfolio. Second, as there is very little gain to be had if funds just buy and hold stocks, the order of the day is to borrow from banks at prime and invest at prime + infinity% so we can all get rich quicker than we can resolve whether strawberry milk shake is better than chocolate. As we at Ittihad have heard this story again and again and have already decided on strawberry, we of course know that using borrowed money to invest is fine and dandy in this life only some of the time, but can be quite problematic for our next life - so we try and steer clear of this whole idea. As two of my fellow Ittihad geniuses were with me, I quietly nodded my head as if I agreed and did not make a scene by pulling out the hair in my beard at the insanity of it all. But alas, this sense of forced calm did not last - and the session on Islamic Finance broke all pretence at self-control.
While I will not bore you with all the ways in which I came away offended and quite hurt at the shallow way in which many people treat and think of Islamic Finance, there is an exchange that I would like to leave you with that is quite instructive. After describing to the audience how anything that our friendly hedge-fund types usually did or wanted to do could be structured in an 'Islamic' or 'Shariah-compliant' way, some members of the audience were left a bit confused. One question, which was 'well, if you can structure anything 'Islamically', then what is the difference, and why bother?' was answered along the lines of the thought that Muslims need to be liberated from their money (which I thought was a very clever way to put it). The second question (asked by my associate) was along the lines of whether what these practitioners were proposing was in line at all with the letter and spirit of Islam? The answer to this was such that I almost fell out of my chair and had to be first propped up and then restrained before I ran up onto stage, held the speaker's collar and then gently fixed the alignment of his tie before walking back calmly as if nothing had happened, but I digress.
The answer to this beautiful question was quite illuminating indeed. It was that the responsibility of the spirit of Islam, if there is such a thing that can be agreed upon, did not lie with those who create these products and structures, but with the Shariah Boards that approve them. Of course, when this question is asked of Shariah Boards, they simply turn around and say that it is not their responsibility to structure genuine solutions, it is their responsibility to pass on the legalese of individual contracts. Since three or four individual contracts can be combined to reproduce conventional finance quite well, both parties pass the buck to each other on the entire solution and make a mockery of whatever little Islam there is in Islamic Finance.
As we usually find that the only one's at these panels that make a direct link between Ethics and Islamic Finance are people from the Ittihad tribe (at this one it was our Dear Leader - God Bless him for introducing some integrity and dignity to the proceedings), I think it may be time to take some responsibility for what happens in Canada on our own shoulders. As such, let me humbly suggest that I hope you all will not allow anyone to 'liberate you from your savings' unless you are an aware, willing and educated participant in this grand liberation being planned at the Casinos of the world.
Ramadan Mubarak - May this month be full of blessings for you all IA.
--------------
Upcoming Events:
You can watch our newly married (alas ladies), VP of Private Client Services, Mr. Firaaz Azeez, explaining some of the reasons why Ittihad exists and what we stand for as a company between 2 and 3 pm on Saturday the 27th of September on the Faith of Life Network on the CTS channel. Tune in for the depth of the ideas, but if that does not interest you, then perhaps I should also tell you that he has a dreamy voice and very pleasing appearance. Please tune in, listen to what the Private Client Division at Ittihad is up to these days and then call the Faith Of Life people to ask for a repeat or two.
Office for Rent:
As we have recently moved all our staff to the glass-enclosed cage that we call our head office, we have an entire fully furnished, gorgeous office for rent in a Medical Building at the corner of Sheppard Ave. and McCowan. The rent is minimal and the salient features of the space - such as the beautiful windows, the spacious Board-Room, the Corner offices, the nice faux mahogany furniture are enough to motivate your employees to work long hours while being paid whatever little you grudgingly give them. As this is a Professional Building (not just any building mind you, this one has achieved professional status through years of just sitting there), it would be most suitable for a growing real estate, accountancy or legal practice. You can visit the space and see the endless possibilities that this new location presents for your business by clicking here or calling Mr. Azeez at (416) 412 3999 ext. 115.
Useless fact of the day:
Conniption: flirting with a stroke-like state due to intense anger or excitement. The feeling of being emotionally overwhelmed such that self-control falls below the top 3 on the list of one's priorities in life. Not recommended during Ramadan.
__________
Finance News:
1. The US Govt. decides to own everyone's home also ... welcome to the USSR, no, no - I mean the new USA ... (quite possibly the best news for Gold investors but don't quote me) ... read more here
2. After the fall of Bear Stearns, another large investment bank is having a delayed reaction ... read more here
3. Who bears the cost of mortgage bailouts ... read more here
Economic News:
1. Economist Paul Krugman speaks about the paradox of deleveraging ... read more here
2. An excellent article on the background of why the creation of credit in an economy is fraught with danger ... read more here
3. The problems with deposit insurance and how this creates issues for the industry ... read more here
4. What the instability of the US$ means for US policy-makers ... read more here
Islamic / Middle East / Emerging Markets:
1. An article on Islamic Finance from The Economist (must read article of the week) ... read more here
Interesting but not all Finance:
1. Introducing the Ramadan Phone. If only it could cook before sunrise also ... (hat-tip to Husein Kirefu) ... read more here
Monday, September 8, 2008
Ramadan & Economic Sustainability
Quote of the week:
'I am as My servant thinks I am. I am with him when he makes mention of Me. If he makes mention of Me to himself, I make mention of him to Myself; and if he makes mention of Me in an assembly, I make mention of him in an assembly better than his. And if he draws near to Me an arm's length, I draw near to him a fathom's length. And if he comes to Me walking, I go to him at speed.' - Hadith Qudsi
Commentary of the week:
Ramadan and Sustainability:
As you can see, the Ramadan theme continues this week (and depending on responses, perhaps for the month). This could be because it is difficult to summarize in a single IWB the various strands of thought that being famished and dreaming of samosas all day forces upon weak minds such as yours truly or it could be that there is something unexplored about the subject still left to say. The thirst for something cool, refreshing and liquidy does not allow me the latitude to use the overtaxed brain matter too much today so I will leave this particular question for now. What I will share with you though, is a thought that is becoming more and more impossible for me to get away from as I reflect a bit on the first few days of fasting.
Perhaps it is also appropriate for me to describe exactly the circumstances in which this thought was forcibly put into my head. It sort of happened as I was huffing and puffing my way up the last hill to perform my various cleaning duties at the glass castle that is Ittihad on my two-wheeled human powered vehicle that I began to day dream about not having to huff and puff back home after work and instead thought of driving back in the red Porsche that had just overtaken me at something approaching light-speed at a distance so close as to almost take my bushy, flowing and truly impressive beard with it while I progressed at a pace approaching that of a particularly slow snail on her way to visit reluctant in-laws. Of course, it should not have been so easy for me to lose focus on what is truly important in life but what can I say - the car was the exact shade of cherry red it should have been and I was suffering from severe dehydration. The thought in question though, as I was deciding between making a sincere prayer for a drink of water or wishing for the Porsche itself, was driven home in quite violent fashion as my poor vehicle suddenly fell into what is perhaps the largest pothole east of the Grand Canyon. As my bones, wrists, knees, elbows, neck and torso felt the impact of a bicycle travelling upwards towards a fairly heavy body travelling downwards, I was reminded again of many things that I had foolishly forgotten. One was that there is language one must not use during fasting, or ever really. The second was that on the road of life, it is not the usual smoothness that is memorable, but the violence of the potholes. Once I recovered (if that is indeed the word), I also realized a deeper truth - which is that it is exactly such thoughts as the ones I was having for the Porsche and the vicious cycle of longing for things only to be bored with them later that festivals such as Ramadan are supposed to protect people such as me from.
Even if on the face of things we think of Ramadan as a particularly Muslim month, there is no denying that there are many religions, faiths and viewpoints that advocate the sacrifice of both some our petty needs and some of our deepest longings in order to develop something of a more refined personal and societal character. Festivals such as Lent come to mind, but I am sure that there are many others with whom we share some of the concepts of Ramadan. One reason this is important for one as obsessed with finance as me is that Ramadan to me is perhaps one of the most anti-consumption ideas to take some hold in a society bent on consuming itself and in theory this holds great promise for the development of a sustainable economy. To truly take advantage of this month and it's insights promises to let us break out from the mental prison of personal needs and take us through to the liberation of generosity and compassion instead. This is an important point because one of the things that we need at a societal level is a system or way of life that allows us to live as part of the world, not as parasites upon it. While one has to be very careful about promising grand solutions to the world's problems and we as Muslims certainly cannot claim to have everything figured out (the disagreements about the sighting of the moon come to mind), there is nevertheless a deep wisdom at work here in building a society that is willing to sacrifice personally for at least some part of the year in order to give the rest of the planet a bit of a break from their personal needs.
As this is not a very obvious topic for discussion (I think), I am somewhat sure that there has been very little research that has been done to determine whether widespread societal fasting such as that during Ramadan contributes to the sustainability of that particular economy. Of course - it may be difficult to gather evidence because we could be so far gone as Muslims that we simply shift our consumption to the evenings instead of during the day and thereby do not really change much except just our patterns, not the amount or kind of our consumption. If the latter is true, then perhaps this loss of the deeper meaning and transformational promise of Ramadan is a tragedy even larger than that of the pothole. One feels though, that that all of you fine IWB readers are better than that, and it is only moi that needs the bone-crushing reminders.
Ramadan Mubarak - May this month be full of blessings for you all IA.
--------------
Upcoming Events:
Go ahead, invite us ...
Office for Rent:
As we have recently moved all our staff to the glass-enclosed cage that we call our head office, we have an entire fully furnished, gorgeous office for rent in a Medical Building at the corner of Sheppard Ave. and McCowan. The rent is minimal and the salient features of the space - such as the beautiful windows, the spacious Board-Room, the Corner offices, the nice faux mahogany furniture are enough to motivate your employees to work long hours while being paid whatever little you grudgingly give them. As this is a Professional Building (not just any building mind you, this one has achieved professional status through years of just sitting there), it would be most suitable for a growing real estate, accountancy or legal practice. You can visit the space and see the endless possibilities that this new location presents for your business by clicking here or calling Mr. Azeez at (416) 412 3999 ext. 115.
__________
Finance News:
1. For those of you wondering what the Private Equity industry is up to ... read more here
2. An interesting story about the emerging nexus between Finance and the Army in Canada ... read more here
3. Is Commercial Banking the next in line for losses? ... read more here
Economic News:
1. Municipal Bond market in a bit of a pickle. Can't have cities and townships going bankrupt now can we ... read more here
2. Another Green Revolution with implications for a sustainable economy ... read more here
Islamic / Middle East / Emerging Markets:
1. Looking just beyond the headlines of a booming Indian economy ... read more here
2. Abu Dhabi is getting into the movie business. Can this mean that the next Superman will have a beard, or will wear his underwear on the inside?! Stay tuned ... read more here
3. Almost everything that is wrong with the field of Islamic Finance in one short paragraph (hat-tip to Sikander Ali) ... read more here
Interesting but not all Finance:
1. An excellent write-up on how universities contribute to local (and global) economies. A case study of the Perimeter Institute, funded by the founder of RIM (hat-tip to Suhail Ahmad) ... read more here
2. Absolutely and positively a must read for anyone that is fasting this Ramadan (hat-tip to Fariha Naqvi-Mohamed)... read more here
3. A piece of ice larger than the size of most countries breaks off the Arctic Ice-Shelf ... Hummer, anyone? read more here
'I am as My servant thinks I am. I am with him when he makes mention of Me. If he makes mention of Me to himself, I make mention of him to Myself; and if he makes mention of Me in an assembly, I make mention of him in an assembly better than his. And if he draws near to Me an arm's length, I draw near to him a fathom's length. And if he comes to Me walking, I go to him at speed.' - Hadith Qudsi
Commentary of the week:
Ramadan and Sustainability:
As you can see, the Ramadan theme continues this week (and depending on responses, perhaps for the month). This could be because it is difficult to summarize in a single IWB the various strands of thought that being famished and dreaming of samosas all day forces upon weak minds such as yours truly or it could be that there is something unexplored about the subject still left to say. The thirst for something cool, refreshing and liquidy does not allow me the latitude to use the overtaxed brain matter too much today so I will leave this particular question for now. What I will share with you though, is a thought that is becoming more and more impossible for me to get away from as I reflect a bit on the first few days of fasting.
Perhaps it is also appropriate for me to describe exactly the circumstances in which this thought was forcibly put into my head. It sort of happened as I was huffing and puffing my way up the last hill to perform my various cleaning duties at the glass castle that is Ittihad on my two-wheeled human powered vehicle that I began to day dream about not having to huff and puff back home after work and instead thought of driving back in the red Porsche that had just overtaken me at something approaching light-speed at a distance so close as to almost take my bushy, flowing and truly impressive beard with it while I progressed at a pace approaching that of a particularly slow snail on her way to visit reluctant in-laws. Of course, it should not have been so easy for me to lose focus on what is truly important in life but what can I say - the car was the exact shade of cherry red it should have been and I was suffering from severe dehydration. The thought in question though, as I was deciding between making a sincere prayer for a drink of water or wishing for the Porsche itself, was driven home in quite violent fashion as my poor vehicle suddenly fell into what is perhaps the largest pothole east of the Grand Canyon. As my bones, wrists, knees, elbows, neck and torso felt the impact of a bicycle travelling upwards towards a fairly heavy body travelling downwards, I was reminded again of many things that I had foolishly forgotten. One was that there is language one must not use during fasting, or ever really. The second was that on the road of life, it is not the usual smoothness that is memorable, but the violence of the potholes. Once I recovered (if that is indeed the word), I also realized a deeper truth - which is that it is exactly such thoughts as the ones I was having for the Porsche and the vicious cycle of longing for things only to be bored with them later that festivals such as Ramadan are supposed to protect people such as me from.
Even if on the face of things we think of Ramadan as a particularly Muslim month, there is no denying that there are many religions, faiths and viewpoints that advocate the sacrifice of both some our petty needs and some of our deepest longings in order to develop something of a more refined personal and societal character. Festivals such as Lent come to mind, but I am sure that there are many others with whom we share some of the concepts of Ramadan. One reason this is important for one as obsessed with finance as me is that Ramadan to me is perhaps one of the most anti-consumption ideas to take some hold in a society bent on consuming itself and in theory this holds great promise for the development of a sustainable economy. To truly take advantage of this month and it's insights promises to let us break out from the mental prison of personal needs and take us through to the liberation of generosity and compassion instead. This is an important point because one of the things that we need at a societal level is a system or way of life that allows us to live as part of the world, not as parasites upon it. While one has to be very careful about promising grand solutions to the world's problems and we as Muslims certainly cannot claim to have everything figured out (the disagreements about the sighting of the moon come to mind), there is nevertheless a deep wisdom at work here in building a society that is willing to sacrifice personally for at least some part of the year in order to give the rest of the planet a bit of a break from their personal needs.
As this is not a very obvious topic for discussion (I think), I am somewhat sure that there has been very little research that has been done to determine whether widespread societal fasting such as that during Ramadan contributes to the sustainability of that particular economy. Of course - it may be difficult to gather evidence because we could be so far gone as Muslims that we simply shift our consumption to the evenings instead of during the day and thereby do not really change much except just our patterns, not the amount or kind of our consumption. If the latter is true, then perhaps this loss of the deeper meaning and transformational promise of Ramadan is a tragedy even larger than that of the pothole. One feels though, that that all of you fine IWB readers are better than that, and it is only moi that needs the bone-crushing reminders.
Ramadan Mubarak - May this month be full of blessings for you all IA.
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Finance News:
1. For those of you wondering what the Private Equity industry is up to ... read more here
2. An interesting story about the emerging nexus between Finance and the Army in Canada ... read more here
3. Is Commercial Banking the next in line for losses? ... read more here
Economic News:
1. Municipal Bond market in a bit of a pickle. Can't have cities and townships going bankrupt now can we ... read more here
2. Another Green Revolution with implications for a sustainable economy ... read more here
Islamic / Middle East / Emerging Markets:
1. Looking just beyond the headlines of a booming Indian economy ... read more here
2. Abu Dhabi is getting into the movie business. Can this mean that the next Superman will have a beard, or will wear his underwear on the inside?! Stay tuned ... read more here
3. Almost everything that is wrong with the field of Islamic Finance in one short paragraph (hat-tip to Sikander Ali) ... read more here
Interesting but not all Finance:
1. An excellent write-up on how universities contribute to local (and global) economies. A case study of the Perimeter Institute, funded by the founder of RIM (hat-tip to Suhail Ahmad) ... read more here
2. Absolutely and positively a must read for anyone that is fasting this Ramadan (hat-tip to Fariha Naqvi-Mohamed)... read more here
3. A piece of ice larger than the size of most countries breaks off the Arctic Ice-Shelf ... Hummer, anyone? read more here
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