Thursday, 30 October 2008

Tales from the Basement - Mergers and Acquisitons (1)

There is something about bus stops. Maybe because I often find myself standing at them, alone in the wind, with dim lights, and the wind blowing through my in need-of-a-haircut hair, but they make me think. Usually when I get these thoughts, it's probably remenicing that I am no longer leaning on a lamppost.... (ignore the comment, I just think Ian Angell, my former tutor, 's book "No More Leaning on Lampposts" has a surreal title, and its content is even more interesting).

Anyway, I know a couple of friends of mine that work in M&A, or Mergers and Acquisitions divisions of some leading investment banks. It's like slavery, because these people work the longest hours there is, and call there excel sheet home. I do not really want to know what there actual jobe entails, but my friend, the exotics trader, claims its the most boring and tedious job in the field.

That's there choice, although, I'd like to find out if those M&Aers know what it is like to be on a receiving end of a merger or an acquisition from the client side. They broker and engineer the deal, but once it goes through, they make their cut, and skedadle off, with the clients left to deal with the mess of either merging, incorporating, or integrating the 2 companies that just got M&Ad (nice I should make a t-shirt that says "Smile! you've just been M&A-d).

Well, I am on an integration team for a company that was aquired by another, much larger, company. I'll focus on the tech side for now, rather than the acquisition process, which is buying out the partners, all the outstanding shares, assets etc etc...

The way acquistions usually work, at least in software, is that companies make a strategic build-vs-buy decision once they are looking at usually a 5-year growth/survival/competitivness plan. A company will decide that it needs to offer a certain product or solution, either to gain a competitive advantage, or maintain competitivness within the market it operates. Usually, the second reason is the main reason for an acquisition: the idea already exists in the market, is offered by the major competitors, or a small company offers it, and it is small enough to be acquired. (That small company is usually a spinoff or a venture by someone in the business, who isn't really shooting at becoming a competitor himself, and can sell the idea with a working product and a client base, making a nice bonus when the company is acquired). On the other hand, usually new ideas are built in-house by companies, and existing ideas are only built internally when buying an already existing company-product (interchangeable terms here), is less cost effective.

Which brings us to the main problem, or issues that the i-bankers don't have to deal with, which is integrating the businesses together now that they have been M&A-d, which is one of the situations I am in. We, the mother company, work mainly with C++, which is the cornerstone of our applications framework. Mainly financial databases, market data, stock exchanges - and that's the most I can tell you due to respecting confidentiality! Anyway, the acquisition company operate(d) with Java. I can't say much about the details, but, C++/Java interfacing, especially that these are serious products with a serious code base, that is at least a few years old, are not in the .NET/C#/JVM kind of integration realm, which creates some hoops to jump through to create a seamless experience for the end-user: Be it Java, C++, or Spaghetti Gorgonzola, for the user, it should all be the same speed, same look and feel, same results - everything.
If you work with software, you are probably familiar with the concept of meshing , and we all know how much that can be of a pain. That's why, we , just like many other companies in finance that worked with a wide scope of data formats and forms, have their own internal integration technologies, to create one main interface that all technologies need to integrate to, and that's the main interface that the user interacts with.

It's a tough spot.... Internal technologies are always clunky, clumsy, buggy, because, there are just that many people working on refining them- it's not like open source, with myriads of people working on the infinite use cases a programming language or system may have. But, in finance, two things are prevail:

1) There are too many data sources that you have to have a common platform - a suite that brings everything into one place.

2) Finance institutions have the money to build serious technology in house, and lack the trust to give it to anyone else!

At least that's the technology briefing on M&A, but there is the other managerial side as well: different structure of work, different hierarchies, different corporate culture, different business process, etc etc... that often when an acquisiton is made, there is alot of people shuffling, with people leaving and new people being brought in to join the new kids on the block. (I'll talk about this in another post).

All of that, is not the worry of the M&A dudes......

But, hey, justice comes to some eventually! With all the i-banks feeling the squeeze, some have merged or been bought out by others, and now they can see what it is like to be M&A-d!

Tuesday, 28 October 2008

The Amero

I was hanging with my friend AJ yesterday, and as we talked through the night, we came upon the discussion of world currencies and the Amero. He claims that through our lifetime, we shall see fewer and fewer currencies worldwide.

True, because that is starting to happen, and quite soon also. For example, if everything goes as planned, by 2010, the Arab Gulf countries will adopt a unified currency, the Khaleeji. It will be the main currency for Saudi Arabia (largest economy), United Arab Emirates (second largest economy), and Kuwait, Bahrain , Qatar , with Oman and Yemen to follow in later years. It's pretty likely that all the in the Gulf would follow suit.

The credit crisis today, has awakened currencies talk, especially with the plunge of the world's leading currencies, such as the US Dollar, the Euro, and sadly, the British Pound. Hot gossip around the financial world today, is about the Amero, or the North American Union suggested unified currency for the United States , Canada and Mexico. I am not a financier, and I barely know the terms definitions, but I do know some, and I kinda program the systems behind the number crunching. I also know, that the currency markets (aka Futures: exchange rates and interbank offering rates) have alot to do with the trade balances amongst world economies, and when you devalue, re-value, dollarize, or adopt a new currency, there will be some impact on the local economy, and, if it's a leading economy (i.e. an economy that is used as a benchmark or indicator to world economic market movements etc... ) adopting a currency such as the Amero, may have significant effects. I am not an advocate of conspiracy theories, but well, here is what Hal Turner thinks in this video.

As a resident of the United Kingdom earning in British Pounds, but a national of Lebanon, where USD is the main currency along with the Lebanese Pound, I am interested in the GBPUSD-FX1 exchange rate and because of the bluddy credit crunch, well, the pound has slumped in the past six months against the dollar.

This means I am forced to keep my money in the UK and in British pounds, until the GBP recovers against the dollar, and my purchasing power, in countries such as Lebanon that adopt the dollar as a second currency improves. At least I know this much about exchange rates. (So does everyone else ey...)

Anyway, the Amero isn't the only potential currencies to be introduced, there is a whole list of them: (Courtesy of Wikipedia)
Worth keeping an eye on this.

Sunday, 26 October 2008

The Anomaly of Lebanese Banking

Everyone seems to have an identity crisis these days. People seem obsessed about their ancestors and their origin and and...No one seems to come from anywhere anymore, but the more of a fruit salad you are, the more interesting of a person.

I am Lebanese.

Ok, I am a bit of a fruit salad,I speak with a slight American accent, grew up trilingual, at home we celebrate every religious occasion there is (we almost celebrated festivus, and we are not even religious!) , my mom is English, my dad spent most of his life in Germany, and my immediate family is scattered along 4 continents, and I don't even look Lebanese. But I am, and I am proud to be! Why would I want to be proud of a country that's historically known for its struggles and their inability to agree on a single thing?!

Well, our banking system for one.

Lebanon's banking system has been the rock of our country, and if we had an economy, it would be it's cornerstone. Lebanese people (like the Jews) are very good at math , and people networking. Now if that's not spelling out F-I-N-A-N-C-E, I don't know what is. Whether locally or abroad , Lebanese people have excelled in the financial industry, to amazing levels. For our small country, Lebanese people have achieved considerable heights, but when it comes to money, we are in a class of ourselves (at least if you measure against the relative population) that unlike other domains where alot of us Lebanese excel outside the country, when it comes to finance, we excel both at home and abroad. London and New York, stink with Lebanese financiers, and Dubai, is literally there playgroung, but I am not talking about that.

Lebanon, was one of the few, if not the only, country whose banking system was not hit by the credit crunch. In fact, Lebanese banks, have made better than average profits during this period.

BLOM Bank and Audi Saradar, with Byblos bank not too far behind, have actually made record profits. BLOM, the biggest bank by deposits, has seen a 34% rise in its profits in the first 3 quarters of 2008. These three banks, are publicly listed on the Beirut Stock Exchange and would be equivalent to a AAA class stocks in the West. They are leading stocks, i.e. stocks that set the pace for the stock exchange index (gaining or loosing) , alongside Solidere, which is the other leading stock. Now, Solidere, is the development company for downtown Beirut area, in terms of construction. And it's a leading stock, as the housing market, and especially, the real-estate market in Lebanon, is booming, and sky-scrappers and high rise buildings are springing up in Beirut like there is no tomorrow. (If you don't believe me, ask Donald Trump, he's invested in Lebanon - well his ex-wife at least).

The Lebanese state, is the only state besides Switzerland, that has a banking-secrecy law. In fact, it's even harder for public authorities to get access to financial information regarding a certain individual in Lebanon, than it is to get it from a Swiss bank (true story - go ahead and try). If this is not an enough reason for UHNW individuals to move money to Lebanese banks, with all the commossion in the West, Lebanon is a very elegant and attractive place for Gulf Oil money. So much, that back in 2006, there was more deposits in Lebanon ($80bn) than there was in Kuwait ($75bn) , an oil producing country. (That's running accounts that is- which is possibly the closest you can get to the real information) What is held by the private (such as Saradar Private bank, part of the Audi Saradar group), investment , and asset management divisions, of these banks, is almost like massive hedge funds, where the banks have no obligation of releasing information about their investors. I know for a fact, that alot of oil money, sits in Lebanon.

If you don't believe me, well, get a load of this. US Hedge funds, are moving money into Lebanon, and it was reported by the New York Times. It's not me blaberring. But maybe, that's because our central bank forbid banks from getting into derivatives 3 years ago.Seems like a smart move, from Riad Salameh, our CB Governor, who won the World's Best Central Bank Government award by Euromoney in 2006- Mervin King take notice! We are not short of economists in our government either, with former minister of Economy Fouad Siniora heading the government cabinet as PM after long serving as Economy and Finance minister in all of slain Prime Minster Rafik Hariri's cabinets, with his deputy, Jihad Azour , now serving as Finance and Economy minister. (Now the Gordon Brown-Alistair Darling similarity is ridiculous!)

There are more banks, (58 banks as of October 2008) than there are banks in half the western countries, and almost as many banks as in Germany, the world's third biggest economy. Ok , am not comparing us with Germany, (Lebanon being the 77th economy in the world in GDP) , but well, with 4.5 million people in one country, that's one bank for less than 100,000 people. I still don't get it, but it works. At least Robert Fisk thinks so!

But the way I really know, is that, well, my friend works in the IT department at BLOMInvest, the investment arm of BLOM bank, and well, he said, in all the software they develop, they use "long integers", and have to support 12 digit numbers, in all applications.

That's alot of zeros.............and that's excluding the two zeros to the right of the decimal point!

Friday, 24 October 2008

The Supply-Demand Principle - Oil (I told you so)

Here is a statistic I like. Almost 60% of the world's oil is produced by non-OPEC members. Yes,
seven of the world’s fifteen largest oil producers, Russia, the United States, China, Mexico, Canada, Norway, and Brazil, are outside of OPEC. Although, production means nothing. The real statistic, is the exports by each country. This is actually where OPEC comes into play, and gets it's political sway. Here is a list of the top 14 oil exporters

Exporters2 Net oil
1. Saudi Arabia (OPEC)
2. Russia 6.57
3. Norway 2.54
4. Iran(OPEC) 2.52
5. United Arab Emirates (OPEC)
6. Venezuela (OPEC)
7. Kuwait (OPEC)
8. Nigeria (OPEC)
9. Algeria (OPEC)
10. Mexico 1.68
11. Libya (OPEC)
12. Iraq (OPEC)
13. Angola (OPEC)
14. Kazakhstan

Source: Energy Information Administration (EIA). .

So, there you go. OPEC dominates the list of exporters, which is what really controls the price of oil world wide, because it simply is the supply and demand basic law. If they control the supply, they control the price: increase supply, price drops, decrease supply, price goes up. Of course, I am making the assumption that demand is relatively constant, which it is, apart from minor fluctuations. Some countries are trying to reduce their oil-dependence (like the Western countries - Britain moving to nuclear like France already has- I talk about it here) yet, other emerging countries, make up for that drop in demand by increasing theirs.

Anyway, there are three core factors worth focusing on, and why I believe Oil is more often an effect rather than a cause.

1) Saudi Arabia: Saudi Arabia, in it's Najd desert, has the biggest oil reserve in the world, estimated at single handily supplying the world with oil for a couple years (of course, this is just an estimation, but is roughly around 30bn barrels ). The importance of Saudi Arabia, and why it has such power , whether in OPEC or on the world stage, is a major player, because it is the only country in the world with the ability to affect the price of oil by increasing its production, not to mention, that the cost of oil extration per barrel is the lowest in the world. (Saudi Aramco, although government owned, would be the largest oil company in the world, with an estimated size of somewhere around $750 billion. (I've seen there oil rigs and sites- massive!) Unfortunately, they are treated as the elephant in the room....

2) Russia : Russia is the second largest exporter, and it, like the third largest exporter Norway, are non-OPEC members. (I'll exclude Norway from the debate, its third on the list but it is much smaller compared to the other two, and it's political placing isn't of much significance- apologies to Scandinavians...) Although, Russia, unlike Saudi Arabia, has two fundamental problems: Size and Weather. Russia is by far the largest country in the world, with around 17 Million Square Kilometers, and well, we all known what Siberia's weather is like. Those two issues are of significant importance because digging for oil can be a very risky business, and oil rig engineers are highly skilled people that don't come cheap. Operating at below zero temperature doesn't make it ideal conditions, neither does middle-of-nowhere sites that, due to extreme whether conditions sometimes maybe shut down or suspended, in addition to the transporting oil and pipelines that can freeze up isn't great. That's one advantage Saudi has over them- heat, although can be scorching and uncomfortable, but operating in 50'C is better than operating at -30'C temperatures. Cost of extracting a barrel thus runs higher.

3) The United States : Surprisingly the USA, when it comes to the oil game, contrary to popular belief, it has no real say. It is by far the largest oil consumer, at around 20 million barrels/day, which in itself is a mind boggling number. So, when you are consuming more than what the 3 biggest exporters can send you, then you're kinda under the mercy of the oil barons. Well, we all think the mighty USA doesn't bow to them- no, of course not, but, it has to use its political and military sway to pressure these countries, as it cannot play the oil game alone. So, basically, besides ma man Obama making phone calls to Opec and Mr. Medvedev (or Putin hehe), he can't really do anything. Well, sure, the US oil companies have huge investments in Saudi and around the world, but well, that doesn't necessary translate into patriotism in a capitalist economy, does it? Now, back to the supply-demand game, the USA can reverse the game and drop its consumption and thus cause a drop in the oil prices , because well, if no one wants something, the price falls, but we all know that's difficult to achieve, not with uncle Joe, John McCain's midwest cousin driven his truck all around up and down Cleveland.

Again, I say it, oil is an effect, not a cause. So, now the credit crunch has hit the world, and the whole world economy is slowing down, surprise surprise, the oil prices, which hit a record high a while back, have began falling, because, well, production by industry world wide has slowed, and so has uncle Joe in the midwest, decided that ordering take-out maybe a cheaper option than driving to McDonalds.

So, to keep a bit of the supply-demand balance, OPEC decided to cut its production. (Although, i think, the hell with it, lower the prices back more, maybe the world economy moves again!)

And that's what happening. I didn't say it, Bloomberg did. see!

p.s.: In line with what I said, Saudi Arabia cut its production most :)

Monday, 20 October 2008

Energy and Nuclear

I always tell my Dad that there will come a day when the far West and far East will tell the Middle East to drink their oil. Oil, is not a sustainable energy source, because well, although for the moment we have alot of it floating around many places, it will eventually run out. That's why it is called "fossil fuel" because well, you need fossils to make it. Although fossils, are sediments that take thousands of years to become oil. I'll spare the geology/physics/chemistry explanation. (I hate chemistry)

Anyway, the Greens think carbon emission is destroying the planet, cutting down trees for coal energy is worsening the problem, and all those SUVs people are driving are definitely not helping. That's where the Kyoto agreement comes into play. But, the largest fuel consumers, the USA (surprise surprise) still refuse to sign it, and the Chinese aren't very eager either.

So, oil is out, and coal is out, and Gas, also falls under the same carbon emission category. That leaves the world with a fundamental problem. Where are we going to get the energy we need to power our factories, generate our electricity, etcetera?

So far there have been a number of alternative energy sources, such as winds, such as generating electricity through large wind propellors that generate electricity through the rotation of the turbines, and, there is no accurate statistic, but a percentage, although small, of electricity in the world is generate through these windmills. Yet, there main problem is efficiency, and a large number of these windmills is needed to generate comparitavely a limited amount of electricity. Likewise, there are turbines that generate electricity, also through rotation, yet the wheels of these turbines are generated by the energy of flowing water, i.e. rivers, damns, etc. But again, efficiency is an issue.

There is a very nice solution to all of this! Hydrogen fuel!

Hydrogen fuel, is already used in spacecrafts. It has --- except it comes with a "handle with care" tag. ....and it burns into water (or H2O)

What is Cold Fusion? aha, good question. The chemical reaction behind the stars, or, more clearly, the Sun (the sun is just another star in the millions of galaxies) , is fusion. Now, fusion, is the "burning" of Hydrogen atoms. Well, this reaction creates an amazing amount of energy, an energy so great that it one Hydrogen bomb is equivalent to some 200 atomic bombs, and something like 2000 times the magnitude of Hiroshima and Nakazagi . The problem with that, is that it gets to be, well, quite hot, if I were to use my English sarcasm. If cold fusion can be achieved, that means that a similar fusion reaction can be replicated, except without all that heat. How, well, if I knew, I wouldn't tell you, because then I'd be a billionaire vacationing in the Caribbean to worry about a blog. (then again, maybe i'd be bored and blog anyway)

The UK government decided that by 2020, it is going to cut its carbon emission by 42%, in a big drive to reach 0% carbon emission by 2050. They are quite serious about this, and they have brought in one of the big guns, Lord Turner, to chair the commission on carbon emission. Lord Turner is a big gun, because, he also heads the Financial Services Authority (FSA) , and when the government brings in a finance and economics heavyweight to chair a committee, that means they are serious about it. We all know, in England, money men are the bread and butter.
Well, cutting carbon emission does require alot of steps, such as becoming energy wise, at the very least.

My father always used to follow me around telling me to switch the lights off when I wasn't in the room. I don't think he was worried about carbon emission, but more about our electricity bill, but, it does help the carbon emission too! (I learned to be energy wise before there was any wiseness to have! Thanks Dad).

Since I did mention economy by referring to Mr. Turner, well, one of the things that the UK is working towards, is gravitating more towards nuclear energy,which is really the fun part for the moment.

Electricite De France, or EDF, has acquired British Energy, the UK's biggest energy producers, for £12.4b
n. BE owns some eight nuclear reactors, and more importantently owns a number of sights around the UK that would be ideal for building new Energy plants. Today, 78% of France 's energy comes from nuclear, with EDF owning most of the nuclear plants. The government's plan is to clean up what is left of the nuclear weapons industry and re-model it into energy production, as well as give its current nuclear energy production (14% of the total energy production) a much needed facelift.

Although, when it comes to EDF, they are not just looking to the UK, but to become the premier energy company in the world. They know that energy is one of the bigger markets in the future. After all they are a f0r-profit company, and they are trying to also expand into the USA, which doesn't come as a surprise, as the USA is the biggest consumer of energy. Well, if it is the biggest consumer of oil, doesn't that computer to the biggest consumer of energy?

If you don't believe me, maybe you'd believe Warren Buffet, because he also is an advocate that the future of energy sector is bright (I don't work for Orange hehe), as he is in a bidding war against EDF.

But, we all know the problem of nuclear waste. In fact, in Lebanon, we know them well! Rumor has it , that during the civil war, we had a couple of nuclear wastes ships "visit" our harbors. What happened to their cargo, isn't exactly known, but well, maybe I got exposed to them? Could explain alot of things about my sense of humor.

But, there just may be a nice solution to all of this :)

Hydrogen fuel.

This is still under development, but it's extremely efficient, has a high yield of enery, and is carbon free. Why? Because, on combustion, Hydrogen turns into steam, or H2O, i.e. water vapor. That's quite cool, and well, Hydrogen is not only the lightest of gases , but its also one of the most abundant. It's not entirely fiction, because NASA already uses hydrogen fuel, to propel its spacecrafts into space, especially for exit and re-entry of the Earth's atmosphere. The problem with this, that the fuel is highly hazardous and unstable, and any mishap can cause unimaginable damage. You got any idea how high the temperature can get during a hydrogen combustion reaction? Think thousands of degrees celsius. Also, moving Hydrogen fuel around, is dangerous, that's why NASA uses something called solid fuel.

I know that BMW has an expiremntal Hydrogen powered car, but well.....I'd keep an eye on this. (right, which reminds me that I need VDU glasses....)


One of my good friends and colleagues at work is a brilliant engineer from Nigeria. He used to be a mechanical engineer, then had a career change and joined the software realm....
Anyway, I hang alot with him, and we talk alot about technology (and women when we are not geeking) and I also got to meet a number of his friends a co-patriots. There is a large number of Nigerian ex-pats here in London. In fact, the UK has the largest Nigerian community in the world, with an estimated 3 million immigrants.

One advice to the bankers: invest in Nigeria.

Nigeria is projected to become the third most populous nation on the planet by 2050, and it has some very interesting demographics. It is also very similar to the United States in many ways. It is a federal state, with 36 states in addition to the federal capital territory of Abuja, with Lagos, the former capital, being the most populated , with 11.5 million. They have 389 different ethnic groups, with many different languages and dialects. It is also a huge country, 1 million Square kilometers , and was projected by Goldman Sachs as on of the Next-11 economies of the world. It's also one of the biggest exporters to the United States, and an oil and natural resources rich country......

But this is all.....marginal.

If Adam Smith was still alive, he'd tell you that the real wealth of a nation, is its people, and the ability of the people to create wealth.

A bit of recap first, as I like to use an example put forward by Howard Baetjer Jr. in his book, Software As Capital . In the old days, a country's gross national product, relied on its labour force, and it's ability to produce. For example, in the mid 1800s, almost 45% of the United States worked in agriculture, in order to feed the nation. Today, with all the technology and advancement in science, it only takes 3% of the people to work in agriculture to feed the nation. So where did the other 42% go? They surely didn't move t Hawaii, but they had to seek employment in other places. Well, they simply "moved up a notch", and that technology, that is making the life of a farmer so easy became the biggest employer, and we had the industrial revolution. Cars , trucks, pipes, TVs, factories, big buildings, picked up the 42% and empoyed them. As we move towards a more "knowledge based economy" , manual labour is needed less, and mental ability is needed more. But, likewise, these sectors became over-teched, and fewer people were needed to operate the factories, and again, the United Kingdom, which was the first country to fully industrialize, is leading the way in "de-industrialization". It seems people have moved to banking, but well.... we all know how that is going.

Moving on, the point is, that all this poduction, needs consumption. Someone needs to buy the TVs and the cars and the hamburgers. So far, the Yankees are leading the way in mass consumerism, and well, that is why they have the biggest economy in the world? Why? Simple, because well, they are their biggest clients. The biggest client to all those US multinationals, are the Americans themselves, and it is a positive loop- the US firms don't need to worry about what is going on in the rest of the world, as long as there biggest market is in-house. (I work in a multinational, US-based company, and our biggest market is in the US of A).

And here is the biggest similarity for Nigeria.

I have observed closely, and so far from what I have seen, Nigerians enjoy life. (Why shouldn't they?!) . They like nice cars, nice things, and are even better than the yanks when it comes to knowing there taste in food. Ok I am biased because my friend is Nigerian, but, well, think of it this way, one Nigerian will be a bigger consumer than 2 indians, and 3 Chinese. Today, the wealth of a nation, is it's people, and Nigerians are up and coming.

Bigger, better, stronger, and, they are not short of brains either. One of them sits 3 feet away from me.

Invest now, coz sooner than later, they'll be up there. I am banking on it.

Monday, 13 October 2008

Technology and Airlines

I like to surf couches. I do alot of my "addictive learning" from a couch, whether it is reading, watching TV, surfing the web or what have you. I also like to surf couches in foreign countries - am very good at that. So, while surfing the other day, the beeb (BBC) had a program on Airlines and how the airline industry is changing. The one thing that spurred this post was that now that Airlines are going a-wall, they have introduced some new on-board services such as mobile phone usage and internet usage.

What the airlines are trying to do is create new ways to generate revenue, in a feeble attempt to save the ailing airline industry. (I am a big fan of Ryanair and Easyjet). Before I delve into why this is completely and utterly outrageous, notably from a technology expert standpoint, first a few things about the air transport business

1) Air regulations are changing : they are opening up the skies so regional airlines can go international. The United States and the UK agreed to loosen the restrictions on across the Atlantic flights, allowing for local airlines in the US to fly to the UK and vice versa for UK flights. This kind of de-regulations is restructuring the business of airlines, which began to happen when American Airlines and British Airways struck a deal on having joint flight routes and collaborative flights. i.e. You can fly to London on AA and return on British Airways or something of the sort (am not the expert) but the jist of the idea is that they created somewhat of an unfair competitive advantage because of their size...
Bu this is also good in a way, that as much as bigger airlines can compete in smaller regions, so can smaller , low-cost, airlines can compete in bigget markets. Although in some areas some airlines get more advantage and drive out other airlines from the business, but the regulators are aware of that. BAA, who controlled Heathrow , Gatwick and Stansted, has been forced to sell of its rights of control to two out of the three. (Surprise surprise, they decided to keep Heathrow- otherwise they are just trying to get onto the list of 100 worst business decisions in history. Duh- Heathrow is the busiest airport in the world).

2) Taxation - taxation currently is high for airlines, and some destinations are just too costly to fly to because of high taxes, leaving only the mega airlines flying there. Not to mention that mother countries for these airlines, also play a role in taxation, giving such companies as Emirates, where taxation is almost non-existent, a competitive advantage. (Taxation, as Ian Angell in "The New Barbarians" to which I am a follower, is one of the issues that will need to be re-thought completely. Well, if Halliburton moved its headquarters to Dubai, that must mean something, right?)

3) The Credit crunch. People are feeling the money decrease , so they are traveling less, but, bad economic situations are always a driving force for people to travel more, and let loose on some pressure.

4) Low cost airlines. Just simply brilliant. Travel, is now commodotized. It's like riding a bus. I don't care about the movie or food on the plane. It's a two hour flight and I can review my papers and check my emails, or catch a quick nap. Just get me to where I need to be, fastest and cheapest.

5) Oil and Fuel prices. I hate oil debates- oil isn't the catalyst that makes the world go round. Yeah everyone was complaining about high energy prices. Yeah right, look at the price now. Well, if that's the case, please peg the price of the ticket to the oil prices. But, of course, once ticket price goes up, its a nightmare bringing it down again, even if energy prices drop. Greed never drops, like I said in my post of September 24th, 2008.

Anyway, enough preemption. These greed companies said they are going to to introduce new ways to derive revenue from passengers, such as allowing the use of mobile phones on the plane at a cost of 2£ per minute, or the use of the internet for a similar high cost as well.

That is outrageous.

I never switch off my phone when I fly. So sue me. It's an absolute rip off. Technologists have known for years that mobile frequency hardly interferes with the airline radio frequency, or any other frequency. Bottom line is, that with satellite communication, both mobile phones and flight radio transmission use the same technology except on different frequencies.
What I am saying is, that we could always use our phones and internet on the plane except they didn't allow it giving us all this security mumbo jumbo. So now that the airlines are in crap, it suddenly is possible? The technology didn't change, they just decided to rip us off. I tell you what i will do, which is what I also do when I get on a train that asks for me to pay for wireless internet. I'll plug my phone into my laptop and GPRS , and screw their Wi-Fi. You think i can't do that on the plane?


I am perfectly fine with airlines thinking of ways to make money. Low-cost airlines have been doing it for years. At least, they had the decency to give us the choice of buying the duty free perfume or not. Meals are not included, but available. Hungry, pay up. Not like the legacy airlines who sell you a movie and a meal for 10 times the cost. They are doing it again, yet this time, phone and internet, on a New York to London 7-hour flight, aren't the complimentary meal, its' a necessity and charging 2£ a minute, is just plain rubbish.

....and don't sell me the technology hazard story.

UK Bailout vs. US Rescue Package - Part 1

A good friend of mine, is one of my secret voices when it comes to finance, and I get alot of insight from him. Nick Taleb (I am pissing him off by calling him Nick, but well, you think he is the only one who can take the piss?) when he wrote his book Fooled by Randomness, in which he ruminates on his view on Finance and the markets, he mentioned that his book was the fruit of lengthy conversations into the night with one Jamil Baz, a well known professor of financial mathematics, who is now at the University of Oxford. Well, many of my posts, notably the ones on finance (I am solely to blame for the technology posts ) are also the result of exhaustive (and often satirical) conversations with my friend, who, is also a financial mathematician....
I may not be a Nick Taleb, sure, and I may not be (yet) and advocate of Karl Popper, but well, I did go to the LSE, to which Karl Popper was a famed philosopher. (Maybe you heard of George Soros? One of his disciples). Well, I am a disciple of Ian Angell, and one of his original New Barbarians, so, there might be some similarities.

Anyway, I was debating with my friend the difference between the UK bailout of £500 Billion to the Fed's $700 Bn rescue package.

They are fundamentally different.

The US Rescue package, to which was first rejected by congress, sending the markets into more turmoil and ever more decline, isn't exactly about the banks per say, but rather, buying out the bad mortgages, which is the source of the problem for the crisis. The housing market in the USA is crashing, and its taking down the whole economy with it. Now, I did mention this in a previous post, but, well, the banks were too loose on giving out mortgages overvaluing the houses which subsequently dropped into a sub-prime value, even less than the initial price. So, the banks are the ones to carry the loss. That is the cancer, because, the more the subprime crisis deepens, the lower the house prices will fall, making it a very vicious cycle, because the more house prices fall, the more banks will incur losses. So, what is the Fed doing with the $700bn? They are going to buy all these bad mortgages. The government, can sustain buying these mortgages at a loss, because, well, when it does buyout all the mortgages, it stops the domino effect, and kills the cancer. i.e. because the government, technically , can't go into a "liquidity" crisis per say, and won't need to sell off any of its assets, to stay afloat. (This is not exactly true, but lets just assume- no need to get into political economics).
So, that means that the government can just sit on these bad mortgages until the market recovers, and the value of these assets goes back to normal. The smart (and counterintuitive) thing about this, is that this move in itself, is the cause to stop the market from crashing, and will eventually drive the value of the houses back up and the government can re-sell them.

Cause and effect. I love Adam Smith. The UK bailout, although, is a different thing.