Theo

Today minus 5 years Theo van Gogh was slaughtered by a guy the media call Mohammed B. The guy practically butchered Theo and at his death turned him over on his belly and drew his knife into Theo's back, the knife carrying a message of hate and revenge.

Theo has a nice name, 'van Gogh', and his name always reminds me of an american college professorini (this time female) who, on her visit through the Paris Louvre, told her not too bright and/or culturally inclined college class, that HERE was a selfportait painted by the famous french impressionist van Gogh. In my world, you have to invent something utterly spectacular around the van Gogh name to surpass this unbelievable story. Theo's death created that invention.

Theo is dead, he has been dead for exactly five years now. Theo was a documentary maker, a film maker, a person with too much love for the things he hated and that meant his death by Muslim hands. Yes, by spitting out the cause of his murder and equating that to a certain religion is exactly what I mean. By Muslim hands. Not by someone who happens to come from Marocco, happened to own a very big knife and happened to cross Theo, as usual bycicling through Amsterdam thinking, yeahhh, maybe I feel like killing today. Theo was not friendly to Muslims, he was neither friendly to more or less any minority or majority group in the Netherlands. But neither of these other groups killed him. Only Mohammed B. felt the need to do so, and he did so, thinking that his namegiver Mohammed (the 1st) would have done the same...(which is probably true).

Which of course is stupid, preposterous, and dangerous but IMHO -again- true.

Five years later a dutch member of Parliament (House of representatives if Parliament is too complex a word for you) by the name of Geert Wilders has been scrutinized by a three-member set of (assumedly) academic professionals. Today the conclusion of their 'research' effort leaked to the press and it said this Geert W. is a threat to our democratic system. Geert is stated to be 'ultra-right wing' and is -on his own- responsible for creating hate to the dutch government.

In my opinion this screams for a counter-answer.

As everybody who is more or less well informed and house-broken in the world of the dutch old boys/girls network (and beyond) will know, there is noone in this group who does not hate government less than Geert. To be more specific, a simple survey of people who hate government's actions will either be readers of the biggest newspaper the Netherlands has (the 'Telegraaf') or is a member of the dutch 'liberal' party, the VVD, as it is named over here. Liberal is not to be translated in its US-equivalent, meaning leftish, but has to be seen in its dutch perspective meaning anti-government, market oriented, ultra conservative (a bit like the GOP in the US), or both (reread the sentence to understand these last two words).

Our country is in turmoil. Geert's market share now accounts for about 20% of the electorate public and of course the old parties see that % as threatening -which is correct- and impossible to cope with, as they demonstrate on a daily basis. Another 20%-ish party, the second dutch liberal party which is more or less equivalent to the US noun 'liberal', called D'66, has a spokesman/leader named Pechtold, who today called Geert W. a racist. Stupid of course because Geert W. does not preach racism, he preaches anti-Muslim-ism, or to be more specific, he regards the Muslim faith to be an ideology, more than a religion and he (Geert) equates this ideology as fascism, which of course he has every right to, especially because of course he is right.

The only difference between him and me is that every religion (Jewish/ Christian/ Hindu/ Muslim/ name a few others if you like) has this same flaw: they are all non-democratic, are all woman suppressors, gay orientation negative, have one strong leader be it a pope, a dalai lama or otherwise, have their own sacred books, rituals and the like, that tell a god-given (or inspired) truth, and as far as I'm concerned cannot cope with the dynamics of modern day life. In short: Geert is right in his battle, he is not right in thinking that only Muslims carry misconceptions (albeit that the Muslim belief is record holder in all disciplines named above).

Geert is an asshole. He truly believes that the Muslim belief is detrimental to democracy. He is right of course, BUT, he does not extend his ideas to other 'beliefs' who are at least as detrimental to your spiritual health. The thing is: other beliefs have seen the signs of the time and do not stress anymore their idiotic rules, written down in their idiotic sacred books. Nobody reads books anymore so the religious leaders can easily free themselves of criticism by 'forgetting' to openly speak about their own sacred rules. Muslims have proven to be not so smart. They still think that the words of a war-monger named Mohammed were true, a man who married and had sex with a 7-year old girl, a man who made his fortune by robbing his enemies (yeah sure 'enemies of the faith....'), an illiterate man who did not even read the Thora or the Bible, where these books in the 8th century were readily available, and made statements on the basis of the Thora/Bible which are utterly crazy, unfounded, misinterpreted, untrue and thus the antithesis of 'truth'. This man-of men is adored in the Muslim world although his sacred book either condemns or accepts other religions (depending on their 'suras' being written in Medina or in Mecca). Whose book is ordened using the lenght of the sura texts as ordening principle, where historic dates would have been a much better criterion.

The Christian faith has at least the same or more of the same flaws. Our Bible was 'created' in the 4th century. Between the beginning of the first century (CE) and the fourth, many 'inspired' men wrote gospels and the like. Some 300+ gospels are known, but only four of them survived the fourth century. The Nag Hammadi finds as well as the Dead Sea Scrolls gave us much more than the four gospels we know. Rent the movie 'Stigmata' and learn that there are more than the easy four that Beethoven and especially Bach knew. We now have the Thomas gospel, where it says:

....... Lift a stone and you will find me......

Which is soemething else than joining mass at Saint Peter's Church in Rome.

I leave y'all with these thoughts, which are neither true nor useless. If you want to believe that prayers may help, one last set of words by my hero writer: Maarten 't Hart. He once wrote the following:

"Accepting nature's laws, a prayer would take 9 years to reach the first possibly inhabited planet. The answer (by god) would take the same 9 years. For your prayer to be answered you'd better have at least an 18 year patience...."

The Goast

Kent u de figuur in het plaatje van vandaag?

Nee?

Dachtikwel.

Ik leg uit:

Ooit was hij iemand die zich voordeed als monetair econoom (een binnenkort uit Van Dale's Woordenboek der Nederlandse Taal te verwijderen begrip, dat in het grootste deel der 20ste eeuw betekenis had, maar inmiddels al zo'n 36 jaar een historisch artefact is, waaraan echt niemand waarde hecht).

Nou dan weetuhetwel, iemand die niet bijtijds geloefd, gereefd, overstag is gegaan etcetera...

Tegenwoordig slijt hij zijn leven als miskend genie (zijn woorden), is hij directeur van een stichting die onder zijn beheer werd leeggeroofd (was dus als bestuurder nogal incapabel, maar werd uiteraard gesteund in zijn 'gedoe' door een College van Bestuurders dat net als Robin Linschoten en nog zo wat marktsukkels geen idee had waarover te moeten beslissen en 'het' dus maar overliet aan Plaatje's mening), wordt hij eens per honderd interviews weleens door RTL uitgenodigd om zijn zegje te doen (als alle andere coryfeeën b.b.h.h...), heeft hij bijgedragen aan de afbraak van wetenschappelijk onderwijs door af te dwingen dat cursussen van ca 8 weken voldoende diepgang bieden en de argeloze student verder (weg) brengen tot/van zijn ideaal, te weten: hoe wordt ik snel een bonusvanger, zonder daarvoor intellect te hebben meegebracht voor mijn nietsvermoedende baas. Want wetenschap gaat immers om ON-DER-ZOEK en dan mag het on-der-wijs wel een vachtje veren laten....

Zo iemand dus, maar dan erger.

Kort geleden werden de Nobelprijzen Economie (nooit door Alfred Nobel ingesteld, maar gefinancierd door een bank toch werkelijkheid geworden...) toegekend aan twee mensen (M/V) die tijdens hun carriëre getracht hebben IETS in te brengen naast het door de figuur in het plaatje voorgesteld, als alomoverheersend, overvloedig rationeel duidelijk, maar tegenwoordig amechtig naar adem happend, economisch systeem: het marktdenken, inclusief de daarbij behorende zegeningen. Alle gekheid op een teakhouten balk:

NIEMAND in het 'Nederlandse' heeft de moed genomen om iets ten faveure van Ostrom/Williamson (V/M) te zeggen, waar zij in vorige jaren maar al te graag werden geinterviewd en geciteerd om de zegeningen van MarktDenken-Economen te verheerlijken. Bij Ostrom/Williamson kijken ze wel uit, die 'old school' 'DESKUNDIGEN', want:

• a) ze weten niets van de kwaliteiten van die winnaars,
• b) ze hebben hun artikelen immers altijd als onzin in de open haard gedonderd
• b) als ze al iets weten zijn ze het er dus niet mee eens,
• c) want diep, maar ook ondiep, in hun hart geloven ze dat wat deze winnaars zeggen totale flauwekul is (en daarom zijn ze dus ook te typeren als 'old school')

en daarom dienen dit type klungeleconomen dus met wortel en tak te worden uitgeroeid.

Zo ook de plaatjes mens.

RARA wie bedoel ik met mijn welgemeende tirade.... (volgende alinea niet lezen, tenzij je het onderwerp van mijn dagblog bent...)

BTW: als je kijkt en leest, ontslagbeul, ik bedoel jou natuurlijk, maar daar was je zonder deze hint natuurlijk nooit op gekomen. Je bent en blijft immers een nietszeggende sukkel die zijn wetenschappelijke status ontleent aan (inmiddels als zodanig erkende) onzin, maar zal tot je 67ste (jou gun ik het als eerste, maar ik beklaag je publiek dat nog twee-extra-jarenlang zal moeten worstelen met de onzin die je preekt, met de kletspraat die je als 'deskundig' verkoopt op RTL [wat schokt dat trouwens, en zou jij ook niet graag bestuurslid/commissaris van DSB zijn geweest, gezien je illustere (???) voorgangers?]) moeten doorpijgeren, is goed voor je, dan leer je wat werken is, ook al doe je er niet veel voor.

OK, zo kandiewelweerevenjan...

Maar serieus, denken jullie nu echt dat het 'model' dat economenprofessorini dagelijks de wetenschappelijke onderwijswereld inslingeren ook maar ENIG realiteitsgehalte heeft?

Nou dan.

What a Day

Yesterday minus 20 years I had my 60 minutes of fame: I received my doctorate.

Thnx Roger, Guy, Jaap, Frans, and a few others for granting me my final university diploma. One question posed at this exam (by Guy) will always be on my mind. He asked: 'all the attention for performance measurement, does that not evoke massive hysteria among finance professionals to do better (= to be more greedy) than their competitors, and does that not lead to a financial community that is not servicing money transactions only, but tries to live luxuriously on the proceeds of their risky ventures?' (In short they receive bonuses and do not care about risk).

Uhhmmm, what Could I Say in response. Something like: I do not believe finance people are That greedy, but if they are, they share a common goal: be/act/trade efficiently.... 20 years later I know better. Indeed finance professionals as well as professors (the first 7 letters of both words are the same, but please do not let yourselves be confused, they both Think the same.

I got my doctorate, I had a party that same evening/night that (at the time) had all the characteristics of a marriage, with the exception of a bride... But I enjoyed it. Hope you did too.

Yesterday minus 0 years marked the end of the DSB (Dirk Scheringa Bank), a small bank that was presided over by its founder, Dirk Scheringa, who ruthlessly forced non-finance-educated people into contracts beyond their potential, capital wise that is. He sold his clients mortgages and demanded that these same clients bought capital insurance with provisions as high as 85% of the insured sum. He sold loans with the compulsary added extra of high penalty cost whenever the client would opt out and refinance elsewhere. In short, he sold financial products to financially illiterate people that believed in their saviour Dirk S who was a former assistant accountant and a policeman before becoming a self-made banker .

Today the DSB filed for bankruptcy, forced to do so by its regulators. These regulators (the dutch central bank and the 'Authority on Financial Markets' or AFM) showed to be incompetent during the last 5 years, yes FIVE years, by not acting against near criminal intent, against outlawed double sales (meaning: you cannot have ONE of our product UNLESS you also buy another), against practically everything a bank should NOT do. The dutch central bank's president is Nout Wellink, migraine victim as I am, who will step down from his position in one of the coming months, because of negligence shown in his decision making actions.

Pieter Lakeman is MY hero. Back in the 70s (former millennium) I had the pleasure of working with him on a number of cases (mostly power-related law suits on the effectiveness and strenghts of worker's counsel legitimacy regarding reorganisations as well as mergers and acquisitions). He (Pieter) is 67 now, I am his junior with only 60 to my name/age. Pieter is the financial Don Quijote that I always wanted to be. October 1st 2009 he participated in a TV news item on the DSB case and told DSB-clients to get their money out as soon as possible, which in fact induced a bank run that ultimately resulted in DSB's filing for bankruptcy. The bank run ran to about 600 million euros until yesterday early morning. After that the curators stepped in and froze every single transaction to or fro DSB.

Pieter and Arnoud Boot, a finance professor from Amsterdam appeared on THE dutch talk show, and Pieter easily won as Arnoud unmistakingly lost the debate. Arnoud, one of the OLD SCHOOL economists with no academic future whatsoever, babbled about generics, while Pieter had an easy job talking about specifics, finishing Arnoud as a non-informed amateur. Great job or should I say: GREAT performance.

All is well that ends well. An active DSB is more dangerous than a dead one.

Reading Glasses

There comes a time in a (wo)man's life when it is OK to say 'I can't read those silly little letters in the newspaper anymore dear' and then being sent to the optometrist to get your eyesight (re)measured. Same answer from them to all of us passed the age of 40-50: YOU are in NEED of reading glasses...

Same thing happened to me. I am a MINUS-type as far as spectacles are concerned. I see nothing far away but very much nearby. This is beautiful and guarantees perfect eyesight the longer you live. One handicap though: it won't happen overnight and it is very discriminatory as lengths of vision are concerned. Close reading (in dutch we say 'dichten', joke) is the first sign of progress, while the horizon view stays behind in terms of performance. In short: I fell for the optometrist's suggestion and went home with socalled Varilux glasses that offer the best of both worlds, i.e. read the newspaper: look through the lower part of the glasses, read road signs far ahead: look through the upper part of the glasses. Only problem, as I experienced, was computer screens. Not far away, but instead of horizontal a computer screen reads vertical on the table, which meant that the only way to read the screen is to tilt your head backwards in order to read (closeby means lower part of glasses, get it?).

A few years ago I concluded this solution made me (and my neck) unhappy. So I went back to the optometrist and asked for a set of computer glasses, where down (closeby) was to be up and up (faraway) was to be down istead of the normal (reversed) set. Stupid as they are the optometrist first says NO, because he does not understand. After long and painful discussions it finally became clear to the person involved that what I wanted was actually possible. So I ordered my reversed set of glasses. And upon delivery I was very happy, reading my screen as if I was still 20...

But times pass and after a few years (we are at the 'now' BTW) I noticed that I did not wear my computer glasses any longer. In short I went back to glasses I could use when 'faraway' was the needed view and looked 'over' my glasses whenever 'close reading' was required.

Now what.

New idea: After a tennis excercise with a friend who wore clip-on sunglasses, I came to realise that clip-on reading glasses was my thing. Back to the optometrist asking how soon he could deliver. Never, was his dull answer, what you are asking I cannot sell you.

Google is your friend so in 30 minutes (OK, slow, sure...) I found what I wanted: clip-on reading glasses perfectly fitting my eyesight handicap. 19 US$, or 13 € (ex shipping) from a US company (so there IS hope for the good old US of A). This is how they look:

Simple uh? Right! But then comes the difficult part: dutch service potential. Again, back to the optometrist: 'Hello, here I am again, and I got a surprise for you. What you could not deliver, I ordered on the internet and lo and behold.... a clip-on set of reading glasses....'

'But they are much larger than the glasses you wear now', the man said. 'Sure', I answered, 'that's why I came back to you because, of course, you can fit the clip-on to the size of my glasses'.

'Alas', the man said. 'Your clip-on is made out of polycarbonate and that will splinter if I try to saw it...' And he was adamant, I can tell you. No history of being a client for 30+ years could change his mind. No offer from me that it would be my risk and my risk alone if he would only try, could persuade him. I was sent away, into the rain (not his fault I must stress)...

But I have my tools I thought. I can do what he refuses to do. I use my Dremel miniature drill/saw/polish/grind/whatever-thing and I will fix this. You'll here about my ventures at this later... (I tell this story beforehand, because if splinters will make me blind you would not have known the cause and the story behind it, because I cannot type blind(folded)).

Devaluation

The time is right, or at least almost right. We're going in the right direction, but we're not there YET...

• Last week headlines told us that China is cautiously starting to sell off their US$-currency stock,
• It gets clearer by the day that the US-government debt (too big a number to pronounce) the US-government deficit (33%, compare that with the so much criticised dutch deficit around 5%), the US-trade deficit (nearly 31 bln US$ per october 2009), unemployment (the US says 9.5%, I say 15-20% counting 6-10% of people constantly on the road, moving from one job/place to another)

Much more figures could be given but this is sufficient: The US is headed in the direction of a (much) lower creditworthiness. And what happens when that happens? Right, one starts to think about devaluation... Beware, we're talking double digit devaluation here. I would expect something in the range 20%-40%!

As world trade and the US$ are so intertwined that disentangling the resulting knot would require the number crunching potential of all existing computers globally (let alone the programming and data part of this problem) that noone can tell what the consequences of such an act might be. Sure, the US$ would lose part of its value, sure, US-debts can be repayed easier and also: sure, every foreign investment in the US must be capitalized at a much lower value than before (e.g. in Euros).

Is this the most probable scenario? It would be like a massive Marshall plan in reverse at the expense of US-foreign millions of savers and investors. Therefore: I don't think so (and, planners and decision makers beware: there will be instant civil/global war against you if you decide not to act).

What will happen of course is the instant devaluation of Euro, Yen, British Pound and Yuan, exactly equal to the devaluation of the US$. In this way (practically) nobody will be worse off, everything stays the same (financially) and the US still has to think of a better way to deal with the fact that they overconsumed, overspent, undertaxed etcetera for the last 50 years. It would be pathetic if their answer would be: Yes, we can...

The long and winding road

It is time,

to get the show on the road. To go where no man has ever gone before.

In short: I'm starting my own public consultancy endeavour. Anyone wants to join? Email or message me, it's as simple as that. Starting January 2nd 2010 (because of the January 1st holiday) I'm starting my own vigilante consultancy regarding financial economics. I'm done with the commercial financial advisory firms that put their clients into more trouble than they had before entering the premises. I'm done with (extra specially paid) finance wizards that find the 'best' financial product available that will solve their clients' problems where in fact they only burden their clients with unnecessary loans, cost and whatever.

Instead I go for facts:

• You do NOT understand financial gibberish: ask me and you will be enlightened
• You want another type of (cheaper) mortgage: I will show you the way
• You want to save/invest but you're scared: I'll explain and (re-)direct you
• Your pension is too low: I'll show you a way to increase it
• and more...

I'm cheap (not sheep!!), at least cheaper than all the rest. I will do without the fancy marblestone offices including fancy (black+white) dressed receptionists. You will find me in a bar (where else). No strings attached. You will buy me a drink when I so desire. You will show me your problems and I will help you to the best of my ability (internet included).

I present my credentials:

• 35 years of financial experience (academic as well as 'down-to-earth')
• No commercial ties that may hinder objective conclusions and solutions
• No bonus (except for free drinks)
• Clear and comprehensive advice

The firm (to be established) will be named: DoctorJohn Inc. Further info will be posted here.

I'll see ye...

Sadness

It is sad.

Banking in general has committed numerous crimes against humanity. First of all by showing their own incompetence and -within the bank- the incompetence of wizz-kids that invented their 'own' high risk newly invented financial products, based on the ideas their econometrically inclined professorini (measured by their brain potential: small professors) bestowed upon them. These professorini are too stupid to dance in the presence of demi-gods like Markowitz, Black (R.I.P.), Scholes and Rubinstein to name a few. They (the professorini) are like collegues of yet unconvicted criminals like Julio P. or Demjanjuk, or Maxima Z. or Willem-A of O-N and others who await their judges for charges of crimes against humanity. Banking is collectively guilty of fraud, riskfull actions that lead to the (near) death of their employers financial institutions and more.

It is sad.

Governments all over Europe and beyond have seen the light (or the lack of it) and are massively promoting the end of workers' rights. In the UK, in France, in Germany, in the Netherlands and elsewhere public Pay-as-you-Go pensions are restricted to those that have been working till ages between 66 and 70. These plans do not result in future budgets governments can spend on yet a series of other useless endeavours, but -by mere stupidity- will result in losses (a too long story to tell now) and higher state deficits. But in the media these government plans receive much applause -sadly- because of the fact that it 'shows' their plans on how to correct (=inhibit) socially accepted minimum security arrangements.

It is sad.

To see that stupid actions by a few result in even more stupid actions that will impoverish millions. A few Democratic members of US Congress stand in the way of health insurance for ALL Americans where nowadays 40 million of them live (and die) without such insurance. In the Netherlands the government in power presents plans to restrict state pensions to those that worked untill 67 instead of 65, based on the fact that harsh conditions (a recession) demand harsh measures....

It is sad.

That this happens in a political system that most of us define as democracy, where I define it as democracy for the few and at the same time dictatorship for the masses. As long as governments present plans to rob millions of their rights, fascism is nearer than god.

Shareholders

Shareholders. I once called them the suckers of the capital market. I must admit, it's even worse. Shareholders are a nail in a banker's coffin, be they (the bankers) greedy and guilty of the current financial crisis or be they victim of prices 'the market' supposedly sets.

I explain the last remark: Banks need money to lend. After loss write-offs as a result of the real estate crisis, there is so much less money in the bank, but worse, their complete balance sheet is in disorder. The regulators (the bankers' nightmare book keepers) simply state: what do you have as collateral and they use a very important yardstick to measure this collateral, and it is called market value. Once there was a ruling (in FASB-look-up-the rulings-number-yourself) that stated that banks have to report their possessions in terms of market value. So whenever market prices for listed securities drop, it immediately shows in these banks' reports (the same phenomenon -but reversed- shows when market prices rise). This drop is reflected in the amount of (equity and equity-alike) capital that banks' reports show. Simple enough: market price down -> equity down.... And equity (broadly defined) is the lever the bank uses to calculate how much can be lended to outside parties. In short market prices determine how much a bank may lend.

And who decides on market prices... Yes, the shareholder. We take a side step here and look at pension funds. The same FASB rule goes for them: lower market price -> lower coverage for outstanding pension obligations. In the Netherlands this means that a pension fund, suffering from lower market prices sees their surplus of assets above (future) pension obligations sink below certain margins (105% or less) and consequently they may have to sell off part of their (low market value portfolio) in order to make amends or ask sponsor firms to pay larger premiums.

Again, who decides on market prices... Same answer as above: the shareholder (in its combined form well known as 'the market'...).

Back to these suckers. What do they do in times of crisis, which we now experience: They overbid each other, meaning a Dow Jones Industrial Average (or DJIA) has risen the past few months (it has, look it up) or -to stretch our time frame here- they underbid each other resulting in a lower DJIA, meaning lower market prices (they were really low last March).

I say the following: the market is too sophisticated to be left to these suckers aka as shareholders.

What do they know? Practically nothing in times when institutional investors leave the market and only the real suckers determine market prices: the John Does of the market I mean. Panicky as they always are they flee in herd behaviour and -in times of crisis- sell (meaning lower prices afterwards) or they buy in self fullfilling prophecy times (meaning higher prices afterwards). In the mean time the institutional investors did not move an inch. They did not buy or sell but sit on their portfolios and leave the sucker to their market.

BUT, banks are not happy, nor are pension funds. They lose lending potential (banks), they must engage in rescue plans (pension funds)....

It all has to do with Quantity again, yes friends here we go again. In my view a price must not be counted as a set price when only minimalistic parties engage in securities trading. I mean of course the end-of-the-trading-day price. What happens in between is the sucker's (mis)fortune and nobody else's.

Suppose we set the limit at 10%, meaning that prices will only be seen as such when 10% (or more) of a stock's number of shares are traded on a given day. Only in these situations a price is to be regarded as a MARKET's price. I bet you: most securities prices will not change during a full year of trading. Banks and pension funds can breath again and nobody is worse off.

Stiglitz and Size

During my active academic years I often told my students that enlarging the size of a financial enterprise, is not a good idea.

Mergers and take-overs, MBO's and otherwise, upscaling the size of a financial giant ALWAYS (give or take a few percentage points) results in financial disaster. Reasons for the mergers, including acquisitions or take-overs (= M&A's) were newsed as being efficient, profitable or otherwise positive, while two years later management had to confess it did NOT work out as planned. The source of this is Stiglitz (http://jessescrossroadscafe.blogspot.com/2009/09/stiglitz-on-financial-crisis.html)

No surprise.

Normally ANY (M or A) buy-in is NOT profitable. More than 70% of any M&A activity fails to produce what their godfathers predicted it would result into. 70%, yes indeed, a sizeable amount, implying that most M&A's are delivering S H I T for the buying party and deliver G O L D for the selling party.

So why is this M&A thing so popular. The answer is as simple as it is dangerous: It is consultants! Consultants drive managements mad (which demonstrates the incompetence of management).

These (consulting) people stress the need for change on a quantative scale: big(ger) is (more) beautiful... meaning management acquires more prestige, the company gets a higher mark in the Fortune top 500, you get more noticed in the financial (duhhhh) press, and so forth.

SURE...?

In reality the combined lean, mean sex machine of a merged company gets burdened more and more with bureaucratic overhead, shows no more swift and time-related management actions, quadruples its consulting fees and loses money every day of its existence. How nice indeed....

Let me take you back a bit... (theory wise)

Perfect competion, as we were told while we were students, is theory's bliss. If every company would have an insignificant contribution to total 'production' of goods and/or services they ALL benefit. If parties collude or cartellize this benefit is jeopardized. Meaning: no good.

So, all parties within any industry would be better off on their own. Simple message, simple answer, simple solution. So what did companies decide?:

GROWTH

especially external growth (= M&A's ).

Illogical, of course, but all the more any day's reality.

Theory against practice. Theory says: stay as you are, grow INTERNALLY where you can and where your strengths show. Practice (apparently) says: grow where you can EXTERNALLY , eliminating competition where you can in order to be the 'big player' in the field you entered....

Empirical evidence shows that M&A activities lead to losses and bad results.

ANYWHERE.

So, also in the financial community (as in the rural, production and any other form of activity oriented business).....

D O N O T M E R G E,

I beg you.

EXTERNAL growth is inferior to INTERNAL growth...

R E M E M B ER TH A T...

My love

2B continued

The door

You all know about dimensions. 3 to 4 is the limit of our thinking....

Suppose you live in a 2-dimensional world and you had brainy people like a 2-dimensional Newton, a 2 dimensional Einstein and so forth. Would THEY be capable of transgressing their reality by assuming there are more than 2 dimensions, suppose 3? (Stupid of course because 2-dimensional thinking implies 3 dim. things, because 'ad infinitum' the third dimension of 2-dim. thinking involves a 3rd dimension, cause 2 dim. pictures have a depth of at least 1 atom, which makes them 3-dim people.... although they may think of themselves as 2-dim. people...)

(re-read the last sentence and STOP when the () appear.....). Sure they can, but they do NOT experience 3 but only 2 dimensions. Then came the theorists. They imagined more than 2, even more than 3, they imagined N (N > 3) dimensions. They had computers, they had IT specialists, they even had math wizards that projected N dimensions (where N > 3).

Now what.

There come the neurologists.

They had their own ideas. They said: we treat patients that experience 6 dimensions (although we have a hard time finding out what it is that they think the 4th, the 5th and the 6th dimensions are all about.....)....

Suppose, we -in our three-to-four (including time)- dimensional neuroframe thought about entering the 4th/5th/6th dimension.....

Could we cope?

Are we ready to comprehend?

Is our mind sane?

I think it has to do with doors..

Our mind is accustomed to a certain number of dimensions. To introduce a 5th dimension (never mind the record), we have to invent dreams.... A 5th dimension will only come into existance in dreams... and in dreams..... everythig is possible...

OK, we dream......

Even in our dreams we think in (a maximum of) 3 dimensions...

But ....

Our minds are not fully explored or exploited...

We have a lot to learn about our own functionality....

Suddenly, we find ourselves bumping against the limits of our own (3dim.) understanding,

and,

THERE IS A DOOR.

Which we do not know about,

But it is there....

Let us -all together- try to open that door.

It may be the one we're looking for....

CU

New Panic Signals?

There is a sort of down spiralling, 'we are not there yet', doom scenario spirit going on in the periphery of the financial world that has bothered me a lot lately. For example: Precious metals hoarding is supposed to be skyrocketing, where today (090909) I only see precious metals (or to be more correct: the value of precious metals measured in US Dollars!!!) depreciate in value. What I DO see is nothing more than could be expected, i.e. a slow but steady downfall of the US Dollar (1.45 US$ = 1 € as measured today. A week ago this was 1.41 US$ = 1€, so the US$ is losing ground).

A year ago (about) I predicted a US$ fall to 3 US$ = 1€. Ridiculous right? Well, we're nearly halfway there, but do not despair and keep remembering 'I told you so'.

As the US$ depreciates, the price of gold will rise, as will the price of oil and all other -traditionally- $-denominated commodities. To then conclude that 'everybody' flees into (precious) metals or into other simply marketable commodities is -IMHO- a too hasty conclusion. There is not enough gold to hide in anyway and investors will be the wiser to remember that while 'fleeing'.

I do not claim to be the world's foremost predictor, I only try to reason out my thoughts:

• fact is that the US$ is overvalued given its nearly immeasurable debt,
• fact is that China is more and more hesitant in financing US debt,
• fact is that US mass production industry is nearly bankrupt,
• fact is that older US citizens need to be employed. There pensions have evaporated,
• fact is that the US financial system is still very unstable,
• fact is that US debt is (still) steadily rising and wars are still fought,
• fact is that not one of the items above applies to Asia and/or for Europe.

So,

The US$ depreciates and I honestly think the IMF has to raise its voice and has to restrict the US economic policies as they did for all other countries that got entangled in similar positions.

Obama will not like this, not with all his reforms to be introduced this fall season. He will need a lot of persuasion capabilities, nationally as well as inter- and supra-nationally.

Sheer Size

My most favourite
subject is SIZE.

In economics
better known as:

QUANTITY or Q.

In most microeconomic 'models' we encounter 'quantity' in relation to 'price'. We -historically- came to understand these models to represent 'supply and demand' models. The intersection between 'supply' and 'demand' came to be known as the equilibrium state, where supply meets demand at a given price and a given quantity.

In financial economics, especially the 'Eugene Fama-Efficient Markets Hypothesis/Theory'-variant aka the EMH, 'price' against 'risk' (however defined), has become (until recently) the only dinner financial economists have learned to eat and get used to.

Within this EMH-world, prices have been set by the all encompassing market, given the measure of (financial) risk, through a process of arbitrage. The market for any security which is traded, so the new-born legend tells us, has come to rest (=equilibrium) given a certain price and an accompanying (measure of) risk, given a specific set of 'known' or market-wide information. Noone in his right mind (so the legend continues) would pay more or less for that given security than this 'equilibrium' price (given the risk).

The current financial crisis has everything to do with the above!

During the nineties and the first decade of the 21st century, real estate (mortgages) and every financial product related to it, has become (and in many cases still IS) the primary security traders within the financial community have favoured. The origin of this 'faith' has always been the historical 'proof' that real estate was a hedge against inflation and a safe way to invest in.

Banks are the primary sellers of mortgages. House owners and owners of commercial real estate have turned to banks for mortgages on their property. In turn banks were very willing to underwrite these loans, because of the 'real' value of real estate (the bricks-have-value religion).

Because of regulatory restrictions banks could only sell so-many mortgages. But they found a trick to circumvent this restriction: they sold their portfolios of real estate mortgages to the market and insured the risk of this portfolio defaulting. In short they sold against cash and could start selling mortgages with this received cash (flow). This procedure -which is called 'securitization' went on numerous times with the same money being invested dozens of times and (re-)insured dozens of times. All went went well for decades.

Remember one thing: although banks (re-)insured their securitized mortgages every time they sold mortgages to the market, the risk for the bank remained. That is: in case the (re-)insurer defaulted, security owners could claim the value of their securities (=shares) at the securitizing bank. This proved to be very important, so take good notice of this!

Given the size of real estate (mortgage) portfolios within the, or any, bank, the resulting situation dramatically tilted the bank towards a very substantial default risk. As more and more money within securitized portfolios was (re-)insured the portfolios of the (re-)insurer also got tilted towards real estate risk.

And then real estate prices did not rise anymore....or even declined..

The home and office owners could not pay their debts (interest and amortization payments) anymore. In short the (re-)insurers went broke, which in turn made the originating banks the owners of these risks (which of course they could not bear), in short the banks also defaulted or at least had to write-off many defaulted loans and or related securities. To their relief, governments stepped in and bailed them out (with different bail out plans per country involved).

The CDO's, the CDS's and all the other financial products related to this real estate drama suddenly had no price anymore. The market, the Heaven of traders, exploded into nothingness. Simply because nobody was interested in them anymore, in fear of defaulting themselves if they would be the responsible party....

I have arrived at the point I wanted to make with this story: Whenever specific securities are dominating the financial community, as was the case with the internet bubble at the turn of the millenium, the market gets out of its 'equilibrium state'. The 'buy-buy-buy' interest that parties show whenever a specific (financial) industry is promising good returns is extremely dangerous. The reason is that the whole market gets focused on this specific industry, by selling securities that do not bear any resemblance to e.g. 'internet' and buying securities that DO! A so-called 'tilting' or 'quantity' effect overwhelmes the market. Everybody wants 'in' and prices rise as a consequence of this. We've seen this numerous times. From the dutch 'tulipmania' via the 'itc-mania' to the 'real estate-mania'. It is all the same.

Finance theory should finally recognize that this lemming behaviour of market parties is an immanent factor they MUST give weight to in their models. If there is anything that can be learned from the current financial crisis, it is the FACT that financial models since Fama, do not pay ANY attention to sheer size, or quantity.

In my view the finance Nobel Prize winners should return their prizes, enter monasteries, never to be heard form again, beginning with Eugene Fama,

for their utter stupidity of forgetting the simplest of economic laws:

prices relate to quantities.

Hope to meet you again tomorrow.

Laura

Ja inderdaad (idd), het is te lang geleden: juni vorig jaar en we beginnen meteen met een nieuwtje: voortaan is de voertaal engels.

So here we go.

I've got a lot to tell y'all, but I'm patient, as long as you are. A lot has happened the past year+ and I'll cover it all if you give me some of your time. Just tune in to 'Jan's Blog Theme Hour' and you'll be satisfied.

So, it's about LAURA today. Laura Dekker to be precise. This evening I watched a rather sentimental movie about Amy, who flew (YES she flew!) her self raised geese from Canada to Florida in a mockup Mother Goose-like plane. She was 13/14 years old when she planned/started this trip (BTW, the movie is called: FLY AWAY HOME, and you can find more info here:

http://www.imdb.com/title/tt0116329/

A rather sentimental story as said, but it tells a story about a young girl that planned to raise her orphaned geese the best way she could think of....

Now we in Holland have our own contemporary heroine: Laura Dekker, also 13/14 years of age. She wants to sail around the world solo in her boat 'Guppy' (what's in a name).

The Dutch Child Protection Agency (Kinderbescherming...) won a law suit where the verdict was that such a young girl (=Laura) must not be allowed to persue her dream. She might get robbed, pirated or worse and so she was temporarily found insane (for 2 months) untill doctors could evaluate her case in order to find out if she WAS sane (or NOT).

I read a commentary on this story/news that had the following message (I adapted it a bit):

Is a parent qualified to be a qualified parent in one or more of the following cases?:

• allow your 13/14 year old (dutch) daughter to go to a beach party in -let's say- Hoek van Holland on a bright summer's day (remember the riots there only a week ago: 1 killed, a dozen wounded)?

• allow your 13/14 year old (dutch) daughter to visit and spend the evening/night in a disco in downtown Rotterdam (fill in your own -distrusted- domicile and/or metropole)?

• allow your dearest youngest daughter to fly to Ibiza, Sitges, Lloret del Mar, and other places, on her own, or only accompanied by her dearest girl friend, to spend a fortnight of holidays among drunken british, scandinavian or other hooligans, in order to be raped (90% probability), killed (2% probability) or be happy (5% probability)?

• allow your daughter to fulfill her dearest wish to go sailing solo around the world, including frequent stopovers at well-known harbours to catch up on her school homework, pass (or fail) exams, but continue the trip?

We have come so far as to only wish our children to grow up H.A.P.P.Y.... whatever that means. As I experience it, happy means 'without any worry in the world' which, I would like to stress, is the most harmful way to raise your baby. As if the world consists of H.A.P.P.Y..

Laura will raise a lot of money. Her father planned well. He knew/forecasted the child Protection authorities to do what they did. He received the bonus of global news attendancy for his little girl. Sponsors will now pay millions for their brand to be printed on the boat GUPPY. Laura, be she 13 or 14 years of age, is already a very rich woman.

I hope she will show insight in the choices of life that count: spend that money well.

I bid you: sleep well and wake up same time tomorrow for more of the same.