The Egyptian economy has collapsed. This was a process that began with the 'Arab Spring' and accelerated with the election of Morsi, deposed over the weekend by the Egyptian military.
What this shows is that the average Egyptian, Islamist or not, prefers to have food, shelter and safety to political ideology. Democracy doesn't mean much of anything if there are no free institutions.
The US foreign policy is not helpful here, because the US government is busily dismantling free institutions as a cornerstone of its own domestic policy. The US can hardly be expected to promote free institutions -- a free press, for example -- if it doesn't believe in free institutions on its own home turf.
A rule of law would be helpful as well, but current American domestic policy -- witness, the recent suspension of the employer mandate in the Affordable Care Act until elections are safely over -- is mainly a retreat from the rule of law. Actions speak louder than words and the world is plugged in these days.
The right to start a business and provide for your family is all that the average Egyptian wants and the demonstrations that crushed the political power of Morsi were a testament to that desire. Perhaps the Obama Administration should take notes.
Friday, 5 July 2013
The Next New Thing
Are you ready for this? How about "unlimited vacations for all." Paid for, of course.
Check out the NY Times editorial page today. These folks have launched their latest job-killing, economy-crushing plan -- unlimited paid vacations.
That should really entice employers to increase their work force. The new idea from the left is to have employees on the payroll who, in reality, are always on vacation.
Check out today's NYTimes editorial page if you think this is a mirage.
Check out the NY Times editorial page today. These folks have launched their latest job-killing, economy-crushing plan -- unlimited paid vacations.
That should really entice employers to increase their work force. The new idea from the left is to have employees on the payroll who, in reality, are always on vacation.
Check out today's NYTimes editorial page if you think this is a mirage.
Latest BNM measures to Curb Excessive Household Debt (July 2013)
Hot from oven. Bank Negara Malaysia (BNM) today announce some measures to address the alarming household debt among Malaysians. As reported, household debts have continued to increase at a strong pace, averaging at an annual rate of 12% over past 5 years. While this has been supported by positive income and employment conditions, in the more recent period, there has been a growing trend in the offering of financial products that are not in the long-term interest of consumers.
What does this mean?
This includes extended financing tenures of up to 45 years for house financing and 25 years for personal financing!!! Wow... Is it too long the tenure? While this may reduce the monthly repayments, in the long run, this increase the overall debt burden of households. If we don't stop this kind of practice, it will encourage excessive debt accumulation by households and increase the vulnerability of this sector.
Hence, BNM has to take actions...
The implementation of a set of measures aimed at avoiding excessive household indebtedness and to reinforce responsible lending practices by key credit providers. These measures, which take effect immediately, complements the earlier measures introduced since 2010 to promote a sound and sustainable household sector.
What are the measures?
- Maximum tenure of 10 years for financing extended for personal use;
- Maximum tenure of 35 years for financing granted for the purchase of residential and non-residential properties;
- Prohibition on the offering of pre-approved personal financing products.
Who will be affected the most?
For sure, borrowers (excessive one) will be short-handed. However, those good quality borrowers will not be affected. Meanwhile, the hands of financial institutions once again being tighten further. It will definitely impact the loans growth, but with a more quality growth. Property sector will face some minimal impacts, given most of the loan approved is within 35 years of financing.
For Finance Malaysia, this is good news for our country's financial sector. Excessive household debts, coupled with poor quality loans, will endangers the financial system. Worth to highlight here is the pre-approved loan is being banned now. Long time ago, Finance Malaysia is very uncomfortable with such offerings, with the intention to "indulge" bank clients to borrow. Now, we are relieve. Do you agree?
Thursday, 4 July 2013
Affordable Health Care?
The truth on ObamaCare is gradually unfolding. Two things are becoming increasingly clear: 1). Health care provision in the United States is going to deteriorate dramatically in the future because of the 'Affordable Care Act'; and 2). Health care costs in the US are going to escalate dramatically because of the 'Affordable Care Act.'.
You would think that the above two facts are inconsistent, but they aren't. There are a number of parts of the Act that are driving 1) and 2), but they can all be summarized by the following: The "Affordable Health Care Act" promises services but provides no real means of payment. Sound familiar? The same truth is why medicare and social security (and public pension funds) are on a pathway to insolvency.
The Obama Administration's decision to postpone enforcement on the 'large employer' part of the "Affordable Care Act" is an open admission that they don't want the public to see the true costs of the new laws and regulations. Once the elections are past, then, they say, they will enforce the law. The "Act" itself does not provide the Obama Administration with the wiggle room to postpone enforcement, but in the new Obama world of 'selective enforcement' of American law, the Obama Administration announced (in a blog message, no less) that they do not plan to enforce the large employer provisions until elections in 2014 are safely over.
The best health care system is a free market health care system. The insurance industry should be free to offer whatever health insurance plans they wish, to whoever they wish to offer them to.....period.
Concern about the uninsurable can be dealt with in the same manner as is done with auto insurance for drivers that are not normally insurable.
There is no reason for the government to take over the health care industry in the US. Just as with public pension funds and social security, the government promises to take care of its citizens, but, in reality, has made no plans to honor those promises. Ditto for the Affordable Care Act.
You would think that the above two facts are inconsistent, but they aren't. There are a number of parts of the Act that are driving 1) and 2), but they can all be summarized by the following: The "Affordable Health Care Act" promises services but provides no real means of payment. Sound familiar? The same truth is why medicare and social security (and public pension funds) are on a pathway to insolvency.
The Obama Administration's decision to postpone enforcement on the 'large employer' part of the "Affordable Care Act" is an open admission that they don't want the public to see the true costs of the new laws and regulations. Once the elections are past, then, they say, they will enforce the law. The "Act" itself does not provide the Obama Administration with the wiggle room to postpone enforcement, but in the new Obama world of 'selective enforcement' of American law, the Obama Administration announced (in a blog message, no less) that they do not plan to enforce the large employer provisions until elections in 2014 are safely over.
The best health care system is a free market health care system. The insurance industry should be free to offer whatever health insurance plans they wish, to whoever they wish to offer them to.....period.
Concern about the uninsurable can be dealt with in the same manner as is done with auto insurance for drivers that are not normally insurable.
There is no reason for the government to take over the health care industry in the US. Just as with public pension funds and social security, the government promises to take care of its citizens, but, in reality, has made no plans to honor those promises. Ditto for the Affordable Care Act.
Wednesday, 3 July 2013
Political Unity Collapses in Portugal
Enforcing austerity doesn't win much popular favor as the politicians in Portugal have discovered. The center right government in Portugal has pretty much collapsed over the weekend. Greece is also back in the news as it struggles to implement its own version of austerity.
No European government backing austerity will survive. Germany's Angela Merkel will be the most prominent casualty as she faces the electorate next year. Gone already are the political leaders of Greece, Spain, Italy, and France. It won't be long before their successors are under siege as well.
The EU-ECB plan of increasing debt and forcing austerity on their populations has been a failure from day one. The political unraveling of Europe was easy to predict and not at all surprising to watch. The fear is that extremists of the far left will eventually assume power and Europe will become a different place.
No European government backing austerity will survive. Germany's Angela Merkel will be the most prominent casualty as she faces the electorate next year. Gone already are the political leaders of Greece, Spain, Italy, and France. It won't be long before their successors are under siege as well.
The EU-ECB plan of increasing debt and forcing austerity on their populations has been a failure from day one. The political unraveling of Europe was easy to predict and not at all surprising to watch. The fear is that extremists of the far left will eventually assume power and Europe will become a different place.
Monday, 1 July 2013
New Fund: OSK-UOB Capital Protected Essentials Fund
As the world population continues its growth led by the emerging countries coupled with the higher purchasing power, the demand for the essentials or basic commodities (i.e. those that we use daily such as cotton for clothing, corn and sugar for food, crude oil for energy) have significantly increased. Further, with the imbalance of increase in demand and slower growth in supply, this has also resulted in a situation where consumers now and going forward have to pay more for fuel, clothing and food.
With the expectation of further increase in the prices of these essentials or basic commodities, OSK-UOB has established a fund that will capitalize on the price movements of these essentials or basic commodities, which is OSK-UOB Capital Protected* Essentials Fund.
Fund Asset Allocation:
 |
| Indicative Asset Allocation |
Over The Counter (OTC) Option:
A 4-year option whose underlying reference is a basket of 4 commodities, i.e. Brent Crude Oil, Cotton, Sugar and Corn, and each commodity is represented by a listed futures contract.
Why it also called "Memory Option" ?
This is because the option is structured to provide 4 annual coupon payments during the tenure of the fund, if at the relevant observation date, all of the 4 underlying reference commodities prices are greater than or equal to their initial reference prices determined at the commencement date of the fund. It has a "memory" component i.e. the annual coupon payable can be carried forward if it failed to met the conditions for a particular year.
103% Capital Protection?
Yes. The capital protection covers the investors' capital investment and includes the 3% sales charge payable by investors.
Hence, the fund is suitable for investors who:
- have a low risk tolerance;
- seeks capital protection*;
- seek potential returns from commodities essential to our daily lives;
- have a medium term horizon; and
- seek income
Source: OSK-UOB Investment Management
* Investors are advised that the fund is not a guaranteed fund. Capital protection is provided through investments in ZNIDs and not by a guarantee. Consequently, the return of capital is SUBJECT TO the credit/default risk of the issuers of the ZNIDs and may result in losses.
China Slows
Asia is beginning to weaken. Given the stagnation in the western economies, this is not good news. Unemployment in the Eurozone remains above 12 percent and US unemployment rates have fallen only because of the massive shift of workers out of the work force. Growth in the West is so slight as to be within the margin of error for measuring the data. The only real global economic strength has been Asia and that may be ending.
Granted there are bright spots in the US -- fewer in Europe. US housing is stabilized and there are pockets of feeding frenzy here and there in the residential market. But, overall, there is still weakness. Now with Obamacare looming and the unleashing of the EPA, things could easily deteriorate in the US.
While everyone watches the Fed, the real story is a micro story. The mass of regulation, rules and additional costs that businesses face, even if demand were to increase, will keep a lid on economic expansion. Debt problems will also limit the future of Western economies. Too many promises, too few resources to deliver on those promises.
Fed activity is mainly important for inflationary expectations and pressures. With a sick economy (made sick by federal policies since 2008), there isn't much inflation. But there will be. That's what the recent uptick in treasury rates is all about.
Granted there are bright spots in the US -- fewer in Europe. US housing is stabilized and there are pockets of feeding frenzy here and there in the residential market. But, overall, there is still weakness. Now with Obamacare looming and the unleashing of the EPA, things could easily deteriorate in the US.
While everyone watches the Fed, the real story is a micro story. The mass of regulation, rules and additional costs that businesses face, even if demand were to increase, will keep a lid on economic expansion. Debt problems will also limit the future of Western economies. Too many promises, too few resources to deliver on those promises.
Fed activity is mainly important for inflationary expectations and pressures. With a sick economy (made sick by federal policies since 2008), there isn't much inflation. But there will be. That's what the recent uptick in treasury rates is all about.
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