Tuesday, October 28, 2008
Friday, October 24, 2008
Credit crisis induced stress.
If you are facing credit crisis induced stress, take time to look at this presentation. You will find stress relief techniques that you can adopt without punching a hole in your pocket any further.
Credit Crisis Stress 2
View SlideShare presentation or Upload your own.
Wednesday, October 22, 2008
Understanding the Current World Financial Situation
From My InBox:
A simple explanation for the present financial crisis - the Indian way.....
Once upon a time in a village in India , a man announced to the villagers that he would buy monkeys for *$10.*
The villagers seeing there were many monkeys around, went out to the forest and started catching them.
The man bought thousands at *$10*, but, as the supply started to diminish, the villagers stopped their efforts.
The man further announced that he would now buy at *$20.* This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms.
The offer rate increased to* $25 * and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at *$50*! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.
In the absence of the man, the assistant told the villagers:
'Look at all these monkeys in the big cage that the man has collected. I will sell them to you at *$35* and when he returns from the city, you can sell them back to him for *$50*.'
The villagers squeezed together their savings and bought all the monkeys.
Then they never saw the man or his assistant again, only monkeys everywhere!
* Welcome to WALL STREET...........*
The story is not complete, so I have added 2 episodes:
The real situation is actually more complicated. Had the transactions been confined to physical real monkeys, one could do a physical estimate and expose the con. The smart assistant (he went to Stanford) sold monkey futures to the villagers. Say he sold a contract for a future sale of 10 monkeys to be delivered in 2 weeks at $20 per monkey = $200. But there is no physical delivery in a future contract. Since the villagers expected the price to rise to $50, $20 is a real bargain. That $200 future monkey purchase contract would be worth $500 in 2 weeks. The assistant could sell any number of futures without reference to the actual population of monkeys. There was no need to sell real monkeys from the cage. When the con is exposed the villagers will be left with the original real monkeys and investors in futures with reams of paper.
And the assistant's brother-in-law was even smarter (he went to Harvard). He issued monkey bonds paying 5% pa (compared to the 1% pa from an old fashion bank). The money would be invested in another forest 100 miles away where there had been sightings of, on the average, 50 monkeys daily over the last 30 days. This information was passed on to a rating company. The young punks in the rating company then assumed that if there would be a daily harvest of 50 monkeys, then the expected income would amount to $912,500 (= 50 x 365 x $50). After deducting $100,000 for his profit, he would have $812,500 which could service total bonds of $16,250,000 at 5% pa.
Being a prudent person, the assistant's brother-in-law only expected to issue bonds of $11,000,000 in aggregate. Wow! That's very safe and the bond deserves a triple A rating subject to a fee. Of course, there has to be some risk. So there is a term in the monkey bond that made it worthless should a 'credit event' occur, 'credit event' being defined as anyone of the following: complete extinction of the monkey species, three monsoons in a row in India or DBS Bank becoming insolvent. Now any banker worth his MBA knows these would not happen. So off the banker went to sell $11,000,000 worth of bonds to retirees who were greedy enough to believe the banker's "It's very safe" story.
Of course, we now know that the assistant's brother-in-law disappeared along with the assistant, having pocketed $10,000,000 after deducting say, a million dollars to the banker.
Now the central bank says, "Caveat emptor, mate!"
A simple explanation for the present financial crisis - the Indian way.....
Once upon a time in a village in India , a man announced to the villagers that he would buy monkeys for *$10.*
The villagers seeing there were many monkeys around, went out to the forest and started catching them.
The man bought thousands at *$10*, but, as the supply started to diminish, the villagers stopped their efforts.
The man further announced that he would now buy at *$20.* This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms.
The offer rate increased to* $25 * and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at *$50*! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.
In the absence of the man, the assistant told the villagers:
'Look at all these monkeys in the big cage that the man has collected. I will sell them to you at *$35* and when he returns from the city, you can sell them back to him for *$50*.'
The villagers squeezed together their savings and bought all the monkeys.
Then they never saw the man or his assistant again, only monkeys everywhere!
* Welcome to WALL STREET...........*
The story is not complete, so I have added 2 episodes:
The real situation is actually more complicated. Had the transactions been confined to physical real monkeys, one could do a physical estimate and expose the con. The smart assistant (he went to Stanford) sold monkey futures to the villagers. Say he sold a contract for a future sale of 10 monkeys to be delivered in 2 weeks at $20 per monkey = $200. But there is no physical delivery in a future contract. Since the villagers expected the price to rise to $50, $20 is a real bargain. That $200 future monkey purchase contract would be worth $500 in 2 weeks. The assistant could sell any number of futures without reference to the actual population of monkeys. There was no need to sell real monkeys from the cage. When the con is exposed the villagers will be left with the original real monkeys and investors in futures with reams of paper.
And the assistant's brother-in-law was even smarter (he went to Harvard). He issued monkey bonds paying 5% pa (compared to the 1% pa from an old fashion bank). The money would be invested in another forest 100 miles away where there had been sightings of, on the average, 50 monkeys daily over the last 30 days. This information was passed on to a rating company. The young punks in the rating company then assumed that if there would be a daily harvest of 50 monkeys, then the expected income would amount to $912,500 (= 50 x 365 x $50). After deducting $100,000 for his profit, he would have $812,500 which could service total bonds of $16,250,000 at 5% pa.
Being a prudent person, the assistant's brother-in-law only expected to issue bonds of $11,000,000 in aggregate. Wow! That's very safe and the bond deserves a triple A rating subject to a fee. Of course, there has to be some risk. So there is a term in the monkey bond that made it worthless should a 'credit event' occur, 'credit event' being defined as anyone of the following: complete extinction of the monkey species, three monsoons in a row in India or DBS Bank becoming insolvent. Now any banker worth his MBA knows these would not happen. So off the banker went to sell $11,000,000 worth of bonds to retirees who were greedy enough to believe the banker's "It's very safe" story.
Of course, we now know that the assistant's brother-in-law disappeared along with the assistant, having pocketed $10,000,000 after deducting say, a million dollars to the banker.
Now the central bank says, "Caveat emptor, mate!"
Laughter is the best medicine
Can anyone laugh reading news about the economy? Yes, you can if you see them through the eyes of Desi Joe.
Here is my take thinking as a Buddhist.
I hope these will turn your alarm off for a little while.
Here is my take thinking as a Buddhist.
![\Toon\](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tizDbjI06WkwHa-OXTsVcEMlW4yJt6j7iYEiuOYobpOloWO1hBjIO3uoTtY39YkIDrTEnYEY5EXFi_9bipu7ivl2fDSR5iUVcP5204O8t8ui5ZxSTdx4u46K3thy-McRlCCFdfESRpnKuRN2OUA91r8ytJ=s0-d "\Toon\")
I hope these will turn your alarm off for a little while.
Tuesday, October 21, 2008
How the bailout works...
Young Chuck moved to Texas and bought a Donkey from a farmer for $100. The farmer agreed to deliver the Donkey the next day.
The next day the farmer drove up and said, 'Sorry son, but I have some bad news, the donkey died.'
Chuck replied, 'Well, then just give me my money back.'
The farmer said, 'Can't do that. I went and spent it already.'
Chuck said, 'Ok, then, just bring me the dead donkey.'
The farmer asked, 'What ya gonna do with him?
Chuck said, 'I'm going to raffle him off.'
The farmer said, 'You can't raffle off a dead donkey!'
Chuck said, 'Sure I can Watch me. I just won't tell anybody he's dead.'
A month later, the farmer met up with Chuck and asked, 'What happened with that dead donkey?'
Chuck said, 'I raffled him off. I sold 500 tickets at two dollars a piece and made $998.'
The farmer said, 'Didn't anyone complain?'
Chuck said, 'Just the guy who won. So I gave him his two dollars back.'
Chuck now leads the US bank bailout team.
The next day the farmer drove up and said, 'Sorry son, but I have some bad news, the donkey died.'
Chuck replied, 'Well, then just give me my money back.'
The farmer said, 'Can't do that. I went and spent it already.'
Chuck said, 'Ok, then, just bring me the dead donkey.'
The farmer asked, 'What ya gonna do with him?
Chuck said, 'I'm going to raffle him off.'
The farmer said, 'You can't raffle off a dead donkey!'
Chuck said, 'Sure I can Watch me. I just won't tell anybody he's dead.'
A month later, the farmer met up with Chuck and asked, 'What happened with that dead donkey?'
Chuck said, 'I raffled him off. I sold 500 tickets at two dollars a piece and made $998.'
The farmer said, 'Didn't anyone complain?'
Chuck said, 'Just the guy who won. So I gave him his two dollars back.'
Chuck now leads the US bank bailout team.
This blog started with...
The presentation "Wake Up People" was created in answer to a contest "The Credit Crisis in 30 Slides Contest" organised by SlideShare.
I think it is a wonderful way to garner interest to share thoughts on what the current economic crisis is about. Interested in winning these prizes?
1st Prize iPod Touch
2nd Prize iPod Nano
3rd Prize iPod Shuffle
Prizes asides, I believe that we are all going to be winners even without posting any slides entries. Just take a look at the entries made. I am sure you are going to pick up some credit solutions if not financial knowledge along the way.
Here is mine to start with.
So, now you know. If you are alarmed about the financial situation you are in, where should you go? That answer should tell you if you have been paying attention to my wake up call...
I think it is a wonderful way to garner interest to share thoughts on what the current economic crisis is about. Interested in winning these prizes?
1st Prize iPod Touch
2nd Prize iPod Nano
3rd Prize iPod Shuffle
Prizes asides, I believe that we are all going to be winners even without posting any slides entries. Just take a look at the entries made. I am sure you are going to pick up some credit solutions if not financial knowledge along the way.
Here is mine to start with.
So, now you know. If you are alarmed about the financial situation you are in, where should you go? That answer should tell you if you have been paying attention to my wake up call...
Set The Alarm
Everybody's talking about the economic crisis. Maybe it is time to check our spending habits.
Before you take out that credit card, take a deep breath and ponder for a moment. Are actually trying to catch up with the Joneses, again?
That should set the alarm ringing.
Before you take out that credit card, take a deep breath and ponder for a moment. Are actually trying to catch up with the Joneses, again?
That should set the alarm ringing.
Subscribe to:
Posts (Atom)
