The English Budget

Now don't you just love the English? They have their peculiarities - the two faucets, driving on the right side etc- but, in my personal opinion, I think those peculiarities, fundamentally, come from a very old culture, a culture of a country that doesn't have an independence day, and has never been occupied for over a thousand years. Tradition, or the way the English go about their business, is deeply rooted in the culture, even if most of the people are unaware of these qualities. Some people refer to the Englishman's "indiferrence" to life, I'd rather think of it as "deep understanding of life." I particularly admire the English's ability of self ridicule, and who better than the Greatest Englishman to put it best, than Mr. Winston Churchill.

"If Hitler invaded hell I would make at least a favorable reference to the devil in the House of Commons. "

Those peculiarities, in my opinion, are a sublime way of outlining the importance of certain things, and I discovered today, that Alistair Darling, our notorious Chancellor of the Exchequer, who, now is the man calling the shots in the banking sector after nationalizing a number of banks, like the Royal Bank of Scotland, once the 5th largest bank in the world in assets, today is 60% nationalized. Based on the UK bailout of £500Bn , and with the British government leading by example, with the EU and the US structuring similar bailouts, it seems Mr. Darling is the leading figure to be the savior of the world economy, even if this will only be proven by history.

Anyway, the economy, should be the focal point of any government, and back to those "peculiarities", that's how the English show how truly they believe that. Get this:
The Chancellor, delivering his Budget, is the only person allowed to drink alcohol in the Chamber.

Now, personally, I think this is a recognition of the importance of the man's job, and how important it. is. Although the funny thing about this year's budget, is that the only man allowed to drink in the chamber, has imposed higher taxes on alcohol.


Deliciously English sarcasm.


Anyway, the British are the ones who invented Value Added Tax (VAT) , which, in simple terms, instead of taxing every entity and middle man between producer and consumer- just tax the end product- i.e. impose the tax on the goods being sold, and let the consumer pay the tax. This may sound a little counter intuitive, but actually this will cause companies and producers to cut their prices. Why, because, well, the government, to encourage businesses and help them flourish, will lower their tax the more business and production they make. But the money has to come from somewhere, so, just tax the consumer. The consumer anyway is the one using most of the government service, and well, what difference does it make as long as the price stays the same? i.e. By moving the tax from producer to consumer, the government helped the economy grow, but by keeping (or increasing slightly) the money it gets from tax. That's also a similar strategy to the never ending debate that rich people seem to pay less taxes on average, and that if people have more money and liquidity, they will tend to invest more, and the money will be re-invested in the economy.

They don't do that. They move to sunny countries. So, My darling Alistair, creates more stealth taxes for me to pay at the pub.

JP Morgan , the IBM of finance

I was lucky today, that while coming back from my best friend's , knackered like it was a day out of college.... On the tube, I found a copy of the Financial Times Weekend edition lingering about. I figured maybe it was some Lehman or Merril employee who, after flipping through it, got so disgusted and said fuck it!

I don't mind picking up the crumbs.

It usually works for Warren Buffet. He has done it time and time before. He did it with LTCM in 1998, and now he did it with Goldman Sachs. The mighty GS are now a commercial bank, as we bid farewell to the era of the glory days of investment banking as we know it (or don't know it, as no one seems to know what the fuck is going on). Sadly, Morgan Stanley , who is full of brilliant Lebanese financiers such as CEO John J. Mack, and co-president Walid Chammah , among many others, also had to switch to the more regulated, tighter commercial banking sector, so the Federal Reserve can have their back. (I think the Fed can be renamed F'ed at the moment). Anyway, Warren Buffet took a $5 billion stake in Goldman , to save it from crumbling.

The other news that JP Morgan has swooped in to buy Washington Mutual , which was the biggest savings and loans bank in the USA. JP got them for a mere $ 1.9 Billion, which is pretty cheap considering. WaMu 's collapse was the largest bank failure in US history. (Which reminds me, the Northern Rock saga was the first run on a bank in the UK for 140 years - and in 2008, we almost had two, as Bradford & Bingley seems to be in a pile of shite).

I can see what JP is doing.

JP Morgan Chase, is now the biggest bank in the United States by far. What I think one of the strategies of Jamie Dimon, is to make JP so massive, that it just can't fail. It becomes such a behemoth, that it is so diverse and massive of a company, that it just can't go bust. It's the IBM effect. These behemoth companies, although can go into difficulties, are so large, that they become able to evolve as businesses. i.e. IBM, 20 years ago, was mainly a hardware company, yet, today, 54% of IBM's revenue comes from software and services, and its PC division, the same division responsible for the PC revolution of the 80s, and the key behind the rise of Microsoft (history note: When IBM started selling PCs left and right, it forced its consumers to purchase MS-DOS, which was Microsoft's flagship operating system at the time (now also known as Dummy OS), and Microsoft made millions out of royalties, which Bill Gates, no matter how much people hate him, mad a shrewd business decision to invest in R&D, and mainly in Graphical User Interfaces (GUIs) ). The strategy anyway seems to be working, and after buying out Bear Stearns, now they bought WaMu, and are well on the way of become one of the pillars of the US economy - the IBM of the financial industry. Just too big to fall.......
Check this picture i found:


[Source: Wikipedia article]

Now why do I have this urge of saying "Hi, and welcome to Goldman Sachs telephone banking. I am Tina and how can I help you today?" hehe.

Your shirt has just signed in

I have this bad habit of loosing my keys in my room. That's pretty much an achievement by itself, considering the size of my, small, ridiculously overpriced, awkward looking, room. I am not writing about the housing market in London (and the UK in general, which is in freefall - which counterintuitively is raising rent prices even more) as I will leave this for another round of (bitching) analysis. It's just about my keys being lost and wishing if there was such a way that I could locate the whereabouts of my keys through my phone for example (loosing my phone would be ridiculous of me - I can call it from my blackberry to locate it in my casa - again London housing market sarcasm left for later).

Anyway, this all got me thinking. This actually can be done! All I need is to have a key chain with and RFID chip inside it, and a server or some piece of software that can track it. Cool stuff. Well, RFIDs (Radio Frequency Identification) are miniature computer chips that emmit a radio frequency, that can be picked up by a receiver. These chips, now being massively produced, can be fitted unto anything: clothes, bags, cars, hairdryers, books, dogs, cats, squirrels, and of course, humans! Using a simple client-server application, you can track that radio frequencey from any basic computer device. And that can be done, of course....remotely.

This, my friend, is the internet of things.

Take a look around you. Your sitting on a desk, on a couch, in a living room, or in an office - even in a cafe somewhere (except,if you are in the jungle - if your a geek with internet access in the jungle - you got a problem. Reading blogs isn't exactly why you should be doing in a jungle). Anyway, you got things around you : tables, pens, papers, coffee cups, chairs, desks, couches etc. Imagine, that each one of these objects had an RFID chip in them. From this same computer (I am hoping your using firefox- go open source!)- you can just have one tab on your browser for this blog page, and a second one, has a list of all the things you'd like to keep track of. That might be pretty handy: you can locate your keys in a second, you can find your glasses, a book in a library- you can even get the exact position of your coffee mug inside the dishwasher, or your shirt in the cupboard......

This sounds a bit absurd and useless, true. Finding your keys maybe, handy, but why would I be interested in knowing the exact location of my shirt in the cupboard or my mug in the dishwasher. Yes, well, that may fall into useless inventions at first, but well, can become very important for example when you have a supply-chain management business, or, goods delivery company, or anything of the sort. You can virtually guarrantee zero loss of items from production to consumer - and you can track each and every item, at any point in time. Just like Malcolm Mclean , the who invented containers, revolutionized business, so can this - it has the potential to become a disruptive technology.

Some companies already use RFIDs, except they are not fully commercialized. Not only that, that there is still a larger unserviced market to write commercial-level software for these RFIDs, before it reaches the layman, i.e. us. I know that some airports are starting to put RFID tags on luggage in airports, except these are removed before the luggage reaches the passengers on arrival. A niche opportunity for some tech savy entrepreneur, would be to commercialize luggage RFIDs: When you buy your bag, you get a CD with it, that has a software that allows you to track where your bag is , at all time. Now, that would make the Heathrow Terminal 5 saga a very distant bad memory! You just cut out the middle man! Now, if I had the opportunity to entertain such an entrepreunerial opportunity, I would go the full nine yards, and reach the point, that, well, all you need to do when you buy your ticket, is provide your bag RFIDs as well. Once you are at the airport, you just dump your bags wherever, and the rest, through a piece of software on some tag reading device, all bags go to the right places, and maybe be creative in some optimizing pigeon hole algorithm for sorting luggage. When you arrive, you just take out your mobile, click a button, and bang! You know exactly where is your bag, and you can just go for a coffe and the bag will page you when its out from luggage handling. Now that, would be cool!

Although, I'd really like to see the day when my shirt is on my IM - "your shirt has just signed in"......

No war for who's Oil?

I should apologize to Professor Yahya Sadowski for the blog title, which originates from his article in Le Monde Diplomatic newspaper, entitled, "No War for Who's Oil?". I am in no way of the caliber of Prof. Yahya, but I think the title is just super cool and still captures the moment, even five years after he wrote it, and its something I think is worth a thought, a special with the oil prices falling and rising like a yo-yo. His article, is about the war on Iraq concludes, that the war on Iraq, was not about oil. At least not entirely. This is only reconfirmed today, because Iraq is yet to affect the oil prices.

Man, Eagle-Eye Cherry songs can capture so many situations. The dude seriously needs to write more songs. Anyway, the oil prices hitting 165$ a barrel, feels like "been here once before".

Here is a graph of the oil prices between 1970 and 2007.



If one notices that in 1981, the barrel peaked at 85$ a barrel. Add that to inflation and purchasing power of the dollar at the time, this could roughly equal the same value of a barrel of oil today. The only difference is, that now China is creeping up on the United States in terms of consumption, and probably will surrpass it in the coming years, and the price of oil is not stopping it. The argument that the West is trying to raise prices of oil to slow the growth of the Chinese dragon, is fundamentally flawed. The second argument, that the West are seeking to control Arab oil, again, is also fundamentally flawed. Thirdly, oil prices are usually an effect of global markets, rather than a cause.

Today, the barrel is at 82$. Now that sounds counter-intuitive doesn't it? It's less than what a barrel cost in 1981, and with Western economies in turmoil (should I mention the UK £500Bn bailout, the nationalization of RBS , the German EU480Bn, the US $700Bn and so on and so forth - they are all different bailout formats- but thats for a different post to discuss), the Chinese and the Indians, as well as the Brazilians and South Africans who have joined the bandwagon of already-emerged markets, are definitely enjoying all this chaos, if, for the sole reason that Oil, is dirt cheap! When Western Economies are slowing down, if oil was a catalyst, then the Eastern Economies are accelerating. Either way, I was in Saudi Arabia - and the yanks can have all the oil they need, the Saudis sure don't need that much, believe me. (Can you imagine that you can get a full tank for 10$?)

So, No War for Who's Oil? It ain't about oil lads, its about political goals. Lets drop the canned conspiracy theories.

So if it's not Oil they are after, what is then? I don't like to really, mix my blog with political strategies and tactics, because I am no expert, although political economics is a major discipline. But, now that oil is out of the equation , well, ask yourself this: Where is Iran on the map, and what are the two countries bordering it?


Now, let me worry about the Lebanese Hummus lawsuit.

Big Brother is your best friend

I'll spare the business and technical details. Just try to think of this: 10 years down the line, you'll get most of information you need from Wikipedia (if u think it is not creditable - think again.) , you'll be using your web account (gmail/facebook or something futuristic) for everything: you'll be "an account" - order food, clothes, transfer money , watch TV (digital broadcast is here - yay!) fall in love - you name it, and you'll be doing that all day, everyday - with your mobile. Eventually, we'll all have blackberries. (or my geek phone HTC S740).
The bottom line is, your life will change because ur expectations will change, because you'll have much more information about people and things. You will DEMAND more information. i.e. you'll know ur friends whereabouts at all times, there hobbies, there friends, and they will expect to know u equally. We will all be Lindsay Lohans and George Bush (check this : twitter.com), so, you'll want to reconsider how u perceive people and privacy.

Resistance .... is futile! (not really, but I always wanted to say this).

There is a digital footprint to all of this, and well, they can find you - what you do on the web will be you - and if you're worried about credit cards online, u have only your own stupidity to worry about, and how dodgy is your browsing. "They" is not the government - its the Googles, Microsofts, IBMs , YouTubes , Facebooks, etc... that basically keep a log of everything and anything you do on the web. Sure, this sounds like a blatant invasion of privacy, but well, we have to live with it, and there is nothing we can do about it. Of course, there are laws that protect us and disallow this information to be used against or without your consent, but that' really kind of a hollow protection, because once the information is out there, it's out there. If you said that your girlfriend was fat while chatting to your friend on msn or something, and she happens to stumble on your conversation history - you are history. What I am trying to say, that you can deny saying that, and you can also claim that she had no right to see your logs, but well, she did, and you can't take that back. But that's all bullocks, in my open source loving opinion.

A small story. During the Cold War, the United States had mini high frequency microphones all across the coast of Cyberia, that were supposed to record tons of shit that was going on in the former Soviet Union.
Fair enough, although, these microphones, were completely useless. Why? Becuase there was really no one to process all that data. The bottom line is, that most of the web is actually text, and well, since machines can't think (Alan Turing prove that machines can't ever think for themselves , using something called the Turing Test), and because machines can't think, well, even with all the sophisticated indexing and mining techniques, it still boils down to some kind of text search, and, the complexity of having smart searches, within these "data agents" becomes gastronomical with the exponential increase in data, and those logs, while may be very useful, are really mainly useful for those generating them.

i.e. If I wanted to know what I was talking about with my best friend a month ago, it may take me like a couple of minutes or so, to go back to that date and skim through the log to figure out what we were talking about. But, if I want to go through a log , so these logs are basically just the details to a more global picture, to which only those who create that picture, can use it.

Bottom line is, that all this data we generate, we should not fear the fact that now everything we do is being watched, and that Big Brother is watching us. I believe in a different thing. I believe in evolution, and again, I keep mentioning the word "critical mass", and once all these "logs" gain enough critical mass to become a fact of life, then, we will just evolve to seeing the value in having all our information on record. We will no longer try to hide our information, but rather, embrace it. In a sense, we will WANT to keep a log on all the details of our life, because, at the end of the day , we are the information we generate, and well, if we can look back at our lives, in ever more details, then, we can develop a better understanding of ourselves, our behaviors, actions and feelings.

So, if you're worried that if you are reading this blog, google is keeping a timestamp on the time and day you visited this site, well, great! One day, when I am rich and famous, you can actually go back in time and see exactly when ......

"I told you so."

Google vs. Facebook

I was doing some research, and I thought this might be of value in dealing with the flotsam and jetsam of our daily lives, of which for most, a considerable amount of waking hours are spent on the web.

Microsoft valued Facebook at $15 Billion. Sounds a little odd. But, one must realize that the biggest competitor to Google, will be Facebook. Those of you who have not joined Facebook yet, worry not, for you already are on facebook anyway - it's just called "Google"!

Let me explain. If you are using Gmail while reading this, look around ur screen: Gmail, Calendar (schedule an even) Documents, Photos (Picasa :)) etc... Look closer : Labels, Chat, Drafts Spam protection. If you really want to go wild, be brave and activate stuff from Google Labs.

This is looking more and more like Lotus Notes, or Microsoft Outlook, isn't it? It's faster, virtually unlimited storage, but also has a way to connect you to other users. Now, I am writing this using my gmail account, but, I can mask my addres to charles@loves.newyork ! You can even use gmail to send messages as if it was from Hotmail. Cool stuff! Go to settings, have a play. More, and many more features to come. You'll soon hook up your mobile to your gmail account - you already can, and some people will eventually find ways to send spam texts, and Google will find a way to filter it. It's a whole realm.

Wait a minute.

This sounds awfully like Facebook, doesn't it? You can send messages from facebook to email, upload documents and files, schedule events, etc., the works. Google just has a different approach to all of this, and probably a bit more effective, because, it's all about learning curves. (I am not a google man, but not a Microsoft man either - Google isn't better, it's just different). Humans in general have a resistance to change, and, introducing things bit by bit, makes the transition easier, and also makes people not only more used to it, but dependent on it.

Email is still the most used application on the web, and companies are just building on top. Because, all what the internet does, and this is quoting it's inventor Sir Tim Berners Lee, "it connects us together" .

Well, congratulations. You have just been social-networked!

Saudi Stock Market crash

I am a big fan of Eagle-Eye Cherry. One of his songs has the title "Been here once before", and with the markets around the world, well, notably the US and European markets mainly, who seemingly recovered on Friday, (if you call recovering from the worst crash since the 1929 depression a recovery) crashing significantly, this reminds me of the stock market crash in Saudi Arabia in 2006.

Allow me to quote Robert Gilpin from his book Global Political Economy "...greed is the only human trait found to be insatiable." Well, Wall Street or Tadawol boil down to the same thing in my opinion: Greed. Today's crash is mainly because of sub-prime mortgage loans and derivatives, and the Saudi Arabian crash was because of over-enthusiastic middle class investors and the greed of the Ultra-High Net Worth Individuals (UHNWI), that bloated stock values to exploit the very young, and very immature Saudi Market.

Here is how Tadawul looked in 2006 around the fourth quarter of the fiscal year.













Ed, from whom I borrowed the above chart, has a better explanation in his Daily Dose of Optimism. I am just shedding light on the similarities of markets, even if they are in the Middle East, which is considered a young market. (I foresee a post on Shari'a bonds coming at one point!) as Arabs, especially us Lebanese, have been traders for centuries. Anyway....

A good friend of mine, of whom I graduated almost at the same time from university in Beirut, invested $10K in the KSA stock market, and he almost cashed in, as it rose up 35%, only to see it then crash by 50%, and he ended in a loss. Since he was my classmate, you can imagine that he wasn't a big time investor, and he was maybe looking to make some fast cash so he could get married to his college sweetheart (whom he eventually broke up with - talk about crashes!) . So was the case of hundreds of others in Riyadh. The trick about KSA is that betting is illegal, and it seems that for ordinary Saudis, it has become the new pass time, more like obsession.

My friend didn't sell but figured the market will bounce back, yet, this was just a market correction, and stocks had deflated back to their normal price.

Fast forward to 2008, and I think N. Taleb would like me when I call all these financial reporters stupid, when they misuse his term "Black Swan". I hate it when people throw around buzz words that they don't know what they mean. What is happening today is NOT a black swan: Although the markets are crashing and there are alot of similarities to 1998 , when LTCM went down, it's not the same, and it's much worse. A black swan is when something unforseen, and unpredictable happens. What started the fall of LTCM is when the Russian government defaulted on it's bonds, triggering a liquidity issue. The sub-prime mortgage isn't unexpected, it's based on bad decisions and spiralling calculations by the banks, which was seen coming since a few months. NOT a black swan.

Here is how the Dow index looks like today:



This is due to a culminating problem, the sub-prime mortgage. In a nutshell, when markets were healthy, and banks felt happy, they became too easy with their lending, notably when giving out mortgage loans. So, here is how it goes: the bank valuates a house at lets say, $500k, and they give out a loan for 600k$. The housing market prices at the time were soaring, so, in case the home owner couldn't pay out his mortgage, then the bank would sell the house which was now valued more than 600k - that is if markets kept going up- thus the bank ends up making a profit AND getting there money back.

There is a catch.

When homeowners started taking bigger loans, which of course incurred bigger interests, they figured after a while, that not only was it too high of an interest for them, but they also didn't need that bigger house anyway! (Greed again) So, they did the obvious, and sold the house. One by one, people started selling houses, and the house prices dropped. So, the house that cost 500k, now cost 450k. The banks, instead of making a premium,ended up with a loss. The house sold at a sub-prime price. In some other post, once things clear up more and more, I may try to explain to myself how this packaging and re-packaging of these losses by the I-banks, got them to the second chart above.

The parallelism between the market today, and the Saudi market in 2006 ,the ordinary man who thought that he could get a good deal and improve his life: house, marriage, etc., because money was abundant and so easy to get, sent us all tumbling down. Blame the banks, because well , they are the one doing the lending, and well, if the pie looks big, everyone wants a bigger piece.

That is called greed......and they'll just do it again.