The paper today is full of debauchery covering the cat-and-mouse chases of regulators vs. the regulated.
1: <Fund Managers Lift Results With Timely Trading Sprees >
Hedge funds, who make their money from fees tied to performance, exploit the illiquidity of micro-caps to 'window-dress' quarterly performance reports.
What's this mean?
*We will use a fictional hedge fund (Hedge Hog Hedging, Inc.==> HHH, Inc.) and use quarter end results of a real company suspected to have been manipulated by shareholders for the purpose of propping-up performance over the period; Iridex Corporation {IRIX: NASDAQ}. The reason for using a fictional hedge fund is because regulators are unable to pinpoint who made the trades which lead to inflated market prices.
OK,
HHH, Inc. owns 29% of Iridex's nearly 9 million shares outstanding, about 2.6 million shares. It is the last day before the end of the quarter, so HHH, Inc. Fund Manager, utilizing high speed trading technology, puts in buy orders for Iridex shares at a price higher than current market price, effectively (and artificially) inflating the share price of Iridex.
What happened in real life is Iridex's market cap went up nearly 20% in the last 5 minutes of the last trading day before the end of the quarter, adding $7 million to their market cap. A hedge fund, BlueLine, at the time owned 29% of Iridex shares. There is no evidence that BlueLine is responsible, but there is no question that they gained from the inflation.
BlueLine owns 29% of Iridex shares
Market cap increases by $7million
-------------------------------------------------
BlueLine sees $2.03 million added to market value of their shares
Investors in the fund on the quarterly report see a value of their position in Iridex seriously inflated from its true value. These investors likely are not tracking the performance of Iridex on a daily basis, hence them paying somebody else to do it for them, therefore they do know that value the assets is inflated by $2million dollars (not to mention possible inflation in any other holdings besides Iridex). Then the next day the propped-up shares lose value, usually falling below pre-manipulated prices.
2: <Global Cartels Fixed Display Prices for a Decade, EU Finds >
In matured 'cash cow' markets, companies meet in secrecy to fix prices. A good example of a "matured 'cash cow' market" would be TV's. Sales are relatively stagnant, market shares change little between competitors, margins are thin, and competition is strong (but consolidated to a strong few).
With basically no room for innovation coupled by a lack of funds, do to parent companies allocating most research and marketing money to 'the next big thing', players in these markets often are tempted to form allegiances. The theory is, if you can't increase your market share in the industry, increase the value of the market.
The TV display industry was run as a cartel with very familiar names involved.
-LG Electronics
-Panasonic
-Samsung
-Toshiba
-Phillips
-Technicolor
*If you asked me to name tv companies from the 90's-early 00's I don't think I could think of one that is not on this list.
These companies were meeting and playing golf together while setting up price floors they vowed not to breach in order to prop-up earnings, what a bunch of jerks. The difference between this case and the first one is that these guys were caught and fined.
***Oh sorry, no 'guys' were fined, only companies....which leads me to my next topic.
The make believe world where private citizen justice mirrors corporate justice.
I cannot stop thinking of how it would be if criminal justice for citizens was the same as it is for corporations.
example:
Corporate Scenario: Real people meet, representing their companies, and agree to fix prices; effectively swindling millions of dollars from consumers over a period in excess of 10 years. Consequence: The company is fined a couple million dollars.
Private Citizen Scenario: A real person is driving their car. They are going 100mph in a school zone at 7:30 am when the area is swarming with innocent little children. The car is pulled over by the local respectable policeman.
Consequence: The officer writes a ticket for the car. Pleasantly surprised the driver asks what this means for your car to have a ticket. It turns out the ticket is for $1,000 off the resale value of the car. Sweet, no direct punitive action on the individual for carelessly endangering the lives of schoolchildren. (I know this is an extreme analogy, but if you have any respect for money and the real hard work needed to create real equity in this world then deceiving people in an attempt extract extra cash from them should be viewed as an almost equally heinous act, deserving of harsher penalties than most commonly given today.
*I would love to hear opinions, arguments, and especially opposing views
-------------------------------------------------------------------------------------------------------------
<Iridex Financials>
<Global Cartels Fixed Display Prices for a Decade, EU Finds >
<Fund Managers Lift Results With Timely Trading Sprees >
Thursday, December 6, 2012
Tuesday, December 4, 2012
Flawed System: Cashing Out by Not Cashing In
The biggest companies in the U.S. are multinational corporations, Johnson & Johnson, GE, etc. When these companies make money overseas, more often than not, they do not bring this money back to the U.S., instead the money is translated onto their balance sheets.
(par example: A U.S. company has a subsidiary in Germany. They make €12 million at the subsidiary, instead of bringing the cash home, they leave it in Germany.)
All of the cash that is outside of the U.S. is translated into U.S. dollars in order to list it on the balance sheet for their annual/quarterly reports. So once again, the cash does not move and is not literally converted to US$; the current exchange rates lets investors know how much cash they have available total.
The reason this cash is not returned to the U.S. is because our corporate tax structure requires that the funds returned to the U.S. pay the standard corporate tax rate of 35% (after already being taxed in the host country). Leaving the cash overseas saves the 35% of those profits from taxes.
Company % Cash Overseas Amount of Cash Overseas
Johnson & Johnson 100% $24.5 billion
General Electric 66% $56.5 billion
Microsoft 87%
(This is just a snippet of data from *WSJ)
So what is the problem?
The problem is that investors when they see the amount of cash on the balance sheet, they are (mostly) unaware where the cash is being held.
For instance, Johnson & Johnson has $24.5 billion cash listed on their balance sheet (see link below). As an investor, you would see this information and utilize it in making your decision. The problem is that it is not adequately disclosed that this cash has not been repatriated, as seen above WSJ reports that 100% of that cash is overseas. What this means is that this cash cannot be used by the parent company in the U.S. to pay dividends or finance buy-backs unless it repatriates it, incurring a 35% tax (unfortunately, we are not delving into loopholes or true effective corporate tax rates here). In other words $24.5 billion is really closer to $16 billion after taxes. This is a problem concerning asymmetric information which could have adverse effects on share prices
Now,
Notice the problem discussed is not that the companies are not repatriating the capital back to the U.S. This is a problem which is the fault of the people responsible for electing the officials who are responsible for creating the corporate tax structure (uhm, uhm...you and me and other voters).
One of the most obvious flaws I saw with the Occupy Wall Street movement was that protestors seemed to want to blame individual companies for being "evil" or "unethical". Undoubtedly there are activists who would read the article in the WSJ and claim that these corporations are manipulating and taking advantage of our government for profits sake. Taking this side misses the point; misunderstands the way it works.
Companies work like an equation, they are not conscious beings. They do not play favorites, have political agendas, or hold grudges. They have one function: maximize shareholder returns.
To some this sounds evil and self-destructive, but what these people do not realize is that "they" (all of the customers as a whole) control how the firms operate.
Many companies are seeking "green" initiatives now. Although it sounds nice to assume that the company is just doing it for gratification, these initiatives are a product of attempting to maximize long-term shareholder wealth. ==>When the customer base shifts towards being more "green conscious", the company shifts with them; realizing that customers will be lost otherwise (hence, maximizing shareholder return through customer retention).
So what's the point? I'm sick of reading your long boring article....
The point is that if people are dissatisfied with the way companies function and would like changes,efforts need to be focused on changing the customers and the laws which regulate the companies. Awareness needs to be increased on the flaws of the corporate tax structure, hopefully leading to tax reform.
The Wall Street Journal, "Top U.S. Firms Are Cash-Rich Abroad, Cash-Poor at Home" B1, December 4th, 2012. -Kate Linebaugh
JNJ Annual Financial Statement
Finance.Yahoo.com
<http://finance.yahoo.com/q/bs?s=JNJ+Balance+Sheet&annual>
(par example: A U.S. company has a subsidiary in Germany. They make €12 million at the subsidiary, instead of bringing the cash home, they leave it in Germany.)
All of the cash that is outside of the U.S. is translated into U.S. dollars in order to list it on the balance sheet for their annual/quarterly reports. So once again, the cash does not move and is not literally converted to US$; the current exchange rates lets investors know how much cash they have available total.
The reason this cash is not returned to the U.S. is because our corporate tax structure requires that the funds returned to the U.S. pay the standard corporate tax rate of 35% (after already being taxed in the host country). Leaving the cash overseas saves the 35% of those profits from taxes.
Company % Cash Overseas Amount of Cash Overseas
Johnson & Johnson 100% $24.5 billion
General Electric 66% $56.5 billion
Microsoft 87%
(This is just a snippet of data from *WSJ)
So what is the problem?
The problem is that investors when they see the amount of cash on the balance sheet, they are (mostly) unaware where the cash is being held.
For instance, Johnson & Johnson has $24.5 billion cash listed on their balance sheet (see link below). As an investor, you would see this information and utilize it in making your decision. The problem is that it is not adequately disclosed that this cash has not been repatriated, as seen above WSJ reports that 100% of that cash is overseas. What this means is that this cash cannot be used by the parent company in the U.S. to pay dividends or finance buy-backs unless it repatriates it, incurring a 35% tax (unfortunately, we are not delving into loopholes or true effective corporate tax rates here). In other words $24.5 billion is really closer to $16 billion after taxes. This is a problem concerning asymmetric information which could have adverse effects on share prices
Now,
Notice the problem discussed is not that the companies are not repatriating the capital back to the U.S. This is a problem which is the fault of the people responsible for electing the officials who are responsible for creating the corporate tax structure (uhm, uhm...you and me and other voters).
One of the most obvious flaws I saw with the Occupy Wall Street movement was that protestors seemed to want to blame individual companies for being "evil" or "unethical". Undoubtedly there are activists who would read the article in the WSJ and claim that these corporations are manipulating and taking advantage of our government for profits sake. Taking this side misses the point; misunderstands the way it works.
Companies work like an equation, they are not conscious beings. They do not play favorites, have political agendas, or hold grudges. They have one function: maximize shareholder returns.
To some this sounds evil and self-destructive, but what these people do not realize is that "they" (all of the customers as a whole) control how the firms operate.
Many companies are seeking "green" initiatives now. Although it sounds nice to assume that the company is just doing it for gratification, these initiatives are a product of attempting to maximize long-term shareholder wealth. ==>When the customer base shifts towards being more "green conscious", the company shifts with them; realizing that customers will be lost otherwise (hence, maximizing shareholder return through customer retention).
So what's the point? I'm sick of reading your long boring article....
The point is that if people are dissatisfied with the way companies function and would like changes,efforts need to be focused on changing the customers and the laws which regulate the companies. Awareness needs to be increased on the flaws of the corporate tax structure, hopefully leading to tax reform.
The Wall Street Journal, "Top U.S. Firms Are Cash-Rich Abroad, Cash-Poor at Home" B1, December 4th, 2012. -Kate Linebaugh
JNJ Annual Financial Statement
Finance.Yahoo.com
<http://finance.yahoo.com/q/bs?s=JNJ+Balance+Sheet&annual>
Monday, December 3, 2012
Fracking: The Rest of the World Resists, Leaving U.S. with a Competitive Advantage
Countries in Europe have banned hydraulic fracking altogether and other countries have banned the use of BTEX compounds essential in the fracking process.
In the U.S. there is no ban and the barriers are low for new fracking operations giving companies drilling in the U.S. a competitive advantage.
"A key, but often overlooked, ingredient to the success of shale development in the U.S. is private ownership of much of the underground gas. That means that environmental concerns about drilling are countered by a built-in constituency of landowners looking for profit.", "It is a marvellously elegant system that ensures that all natural resources are fully developed."
-Rex Tillerson CEO Exxon Mobil
This quote is beautiful. It shows the mechanism which has brought America great success in the past. But, does the average layman or even science have all of the answers needed to prove the lack of adverse effects from fracking. Given such widespread continued debate I'd say no. Unfortunately the American system is set-up to "make money now, ask questions later"....
i.e. It is hard to disagree with allowing a company to frack on your property when you are underwater on your mortgage and they offer you $25,000 cash and profit payouts on findings.
"Zoback and other scientists surveying existing data generally have concluded that there are dangers associated with fracking but that existing technologies, regulation and serious enforcement could resolve them. Such regulations would include minimizing the local environmental footprint of setting up the well site and trucking in water and sand, monitoring the integrity of steel casings and cement, swapping out toxic chemicals from the fracking fluid, and collecting seismic and other geologic data." -ScienceNews.org (Respected weekly magazine contributed by top scientists since 1922)
A research company, contracted by the U.S. government, conducted a study on 32 countries estimating that the reserves available through fracking in these countries could supply current global consumption for 50 years. (WSJ )
Considering the statement regarding the dangers of fracking while considering the amount of fuel available through fracking, it seems as though the risks outweigh the potential benefits. With only 50 years of natural gas available (remember: 50 years at the current level, which increases exponentially every decade), we should take the dangers to heart and be realistic about the potential gains:
-Increase regulation on method of extraction
-Require full education on the subject for landowners before agreeing to allow fracking on their land
-Realize that finite fossil fuel supply makes it critically essential to develop renewable sources or energy
The Wall Street Journal, "Global Gas Push Stalls", p. A1 December 3rd, 2012. -Russell Gold, Marynia Kruk
ScienceNews.Org: The Facts Behind the Frack
<http://www.sciencenews.org/view/feature/id/343202/title/The_Facts_Behind_the_Frack>
In the U.S. there is no ban and the barriers are low for new fracking operations giving companies drilling in the U.S. a competitive advantage.
"A key, but often overlooked, ingredient to the success of shale development in the U.S. is private ownership of much of the underground gas. That means that environmental concerns about drilling are countered by a built-in constituency of landowners looking for profit.", "It is a marvellously elegant system that ensures that all natural resources are fully developed."
-Rex Tillerson CEO Exxon Mobil
This quote is beautiful. It shows the mechanism which has brought America great success in the past. But, does the average layman or even science have all of the answers needed to prove the lack of adverse effects from fracking. Given such widespread continued debate I'd say no. Unfortunately the American system is set-up to "make money now, ask questions later"....
i.e. It is hard to disagree with allowing a company to frack on your property when you are underwater on your mortgage and they offer you $25,000 cash and profit payouts on findings.
"Zoback and other scientists surveying existing data generally have concluded that there are dangers associated with fracking but that existing technologies, regulation and serious enforcement could resolve them. Such regulations would include minimizing the local environmental footprint of setting up the well site and trucking in water and sand, monitoring the integrity of steel casings and cement, swapping out toxic chemicals from the fracking fluid, and collecting seismic and other geologic data." -ScienceNews.org (Respected weekly magazine contributed by top scientists since 1922)
A research company, contracted by the U.S. government, conducted a study on 32 countries estimating that the reserves available through fracking in these countries could supply current global consumption for 50 years. (WSJ )
Considering the statement regarding the dangers of fracking while considering the amount of fuel available through fracking, it seems as though the risks outweigh the potential benefits. With only 50 years of natural gas available (remember: 50 years at the current level, which increases exponentially every decade), we should take the dangers to heart and be realistic about the potential gains:
-Increase regulation on method of extraction
-Require full education on the subject for landowners before agreeing to allow fracking on their land
-Realize that finite fossil fuel supply makes it critically essential to develop renewable sources or energy
The Wall Street Journal, "Global Gas Push Stalls", p. A1 December 3rd, 2012. -Russell Gold, Marynia Kruk
ScienceNews.Org: The Facts Behind the Frack
<http://www.sciencenews.org/view/feature/id/343202/title/The_Facts_Behind_the_Frack>
Saturday, December 1, 2012
Israel, Playing by the rules (well, given its in their best interest)
-The wall Street Journal, "Israel Pushes Housing After U.N. Vote" -Joshua Mitnick
p. A8 December 1st, 2012
-Reuters, "Israeli air strike kills 11 civilians in Gaza: Hamas". -Nidal al-Mughrabi and Jeffrey Heller
November 18th, 2012 <http://www.reuters.com/article/2012/11/18/us-palestinians-israel-hamas-idUSBRE8AD0WP20121118>
*I am in no way thoroughly informed on the whole situation with Israel/Palestine, so my opinions reflect this limited knowledge.
What I've read recently about the situation in Israel and their relations with Palestine leaves me wondering why the U.S. seems to 'blindly' back Israel.
An unquestionable majority of the U.N. voted in the first steps towards full recognition of a Palestinian state, with the U.S. in the minority (not a 50% minority, not a 25% minority, not even a 10% minority, but rather a less than 5% minority.)
In the most recent Gaza Strip struggles, Israel bombed Palestinian news headquarters with the intent of disabling antennae used for "terrorist activities"...i.e. broadcasting news? Unfortunately this evil, terrorist weapon of mass destruction (news antenna) was also shared and used by British Sky News, so when they heartlessly bombed the building, in a Nazi-esque maneuver to stymie opposition media, they killed non-palestinian reporters....oops.
They bombed Gaza's Association for Disabled Athletes, an arena and rehabilitation center for Gaza's less handicapped persons. (Taking for granted the expectation that Israel has 'top-of-the-line' missile tech, thanks to their faithful backers, the U.S., could this really have been an accident?)
Today, it has been reported that Israel is now beginning building on key disputed territory, effectively saying "Screw-You U.N. you're not the boss of me, we will do whatever we want!" To paint a better picture for you what building on this land means; Palestine was granted the first steps toward globally recognized statehood, so Israel still having 'effective' control over the land starts plopping down buildings.
What I see in Israel, is a group of people who want to remove themselves from an Israeli state and be granted independence. Do you really blame them? Israel is basically a military state, forcing everyone of their citizens to serve in the military (off course there are exemptions).
I guess I just don't understand.
p. A8 December 1st, 2012
-Reuters, "Israeli air strike kills 11 civilians in Gaza: Hamas". -Nidal al-Mughrabi and Jeffrey Heller
November 18th, 2012 <http://www.reuters.com/article/2012/11/18/us-palestinians-israel-hamas-idUSBRE8AD0WP20121118>
*I am in no way thoroughly informed on the whole situation with Israel/Palestine, so my opinions reflect this limited knowledge.
What I've read recently about the situation in Israel and their relations with Palestine leaves me wondering why the U.S. seems to 'blindly' back Israel.
An unquestionable majority of the U.N. voted in the first steps towards full recognition of a Palestinian state, with the U.S. in the minority (not a 50% minority, not a 25% minority, not even a 10% minority, but rather a less than 5% minority.)
In the most recent Gaza Strip struggles, Israel bombed Palestinian news headquarters with the intent of disabling antennae used for "terrorist activities"...i.e. broadcasting news? Unfortunately this evil, terrorist weapon of mass destruction (news antenna) was also shared and used by British Sky News, so when they heartlessly bombed the building, in a Nazi-esque maneuver to stymie opposition media, they killed non-palestinian reporters....oops.
They bombed Gaza's Association for Disabled Athletes, an arena and rehabilitation center for Gaza's less handicapped persons. (Taking for granted the expectation that Israel has 'top-of-the-line' missile tech, thanks to their faithful backers, the U.S., could this really have been an accident?)
Today, it has been reported that Israel is now beginning building on key disputed territory, effectively saying "Screw-You U.N. you're not the boss of me, we will do whatever we want!" To paint a better picture for you what building on this land means; Palestine was granted the first steps toward globally recognized statehood, so Israel still having 'effective' control over the land starts plopping down buildings.
What I see in Israel, is a group of people who want to remove themselves from an Israeli state and be granted independence. Do you really blame them? Israel is basically a military state, forcing everyone of their citizens to serve in the military (off course there are exemptions).
I guess I just don't understand.
Friday, November 30, 2012
Palestinia
The United Nations yesterday voted in favor of granting Palestine status as a non-member observer state.(non-member observer state is the same status Vatican City holds)
"The U.S. and Israel denounced the vote as an "unilateral" move.." -WSJ
Curious about this unilateral, rogue, anarchist vote in favor of a Palestinian state; I felt compelled to find the exact tally of who voted and how they voted (the link can be found above). Finding this tally was not as easy as it should have been for some reason...
Here is a synopsis of the tally:
138 vote YES
9 vote NO
41 abstentions =====> (abstention means the country refused to vote either yes or no)
No wonder the U.S. and Israel are so pissed...73% of the U.N. directly opposes them and 22% are 'too scared' to vote no (probably not wanting to piss us off) leaving only 5% of the U.N voting with us.
Since only 9 people voted no I might as well list them:
Canada, Czech Republic, Israel, Marshall Islands, Micronesia, Nauru, Palau, Panama, and United States of America.
(It turns out that Nauru and Palau were only raising their hands to ask the question "Where the hell is Nauru and Palau?!?! And how were we given a vote?")
In light of the statement that the vote represented unilateral interests....it seems that the U.S. and Israel opposition for a Palestinian state is the true unilateral interest. (P.S. Unilateral interests = interests which only consider the interests of one side; where multilateral interests = interests where all sides are considered)
So what interests do we have in preventing a Palestinian state that the rest of the world does not share?
-------------------------------------------------------------------------------------------------------------------------------
UN Watch "Results of U.N. vote to grant PLO non-member state status" November 30th, 2012.
<http://blog.unwatch.org/index.php/2012/11/30/results-of-u-n-vote-to-grant-palestine-non-member-observer-state-status>
The Wall Street Journal "U.N. Gives Palestinians 'State' Status" November 30th, 2012 Pg. A7
-Jay Lauria, Josh Mitnik, Jay Solomon
"The U.S. and Israel denounced the vote as an "unilateral" move.." -WSJ
Curious about this unilateral, rogue, anarchist vote in favor of a Palestinian state; I felt compelled to find the exact tally of who voted and how they voted (the link can be found above). Finding this tally was not as easy as it should have been for some reason...
Here is a synopsis of the tally:
138 vote YES
9 vote NO
41 abstentions =====> (abstention means the country refused to vote either yes or no)
No wonder the U.S. and Israel are so pissed...73% of the U.N. directly opposes them and 22% are 'too scared' to vote no (probably not wanting to piss us off) leaving only 5% of the U.N voting with us.
Since only 9 people voted no I might as well list them:
Canada, Czech Republic, Israel, Marshall Islands, Micronesia, Nauru, Palau, Panama, and United States of America.
(It turns out that Nauru and Palau were only raising their hands to ask the question "Where the hell is Nauru and Palau?!?! And how were we given a vote?")
In light of the statement that the vote represented unilateral interests....it seems that the U.S. and Israel opposition for a Palestinian state is the true unilateral interest. (P.S. Unilateral interests = interests which only consider the interests of one side; where multilateral interests = interests where all sides are considered)
So what interests do we have in preventing a Palestinian state that the rest of the world does not share?
-------------------------------------------------------------------------------------------------------------------------------
UN Watch "Results of U.N. vote to grant PLO non-member state status" November 30th, 2012.
<http://blog.unwatch.org/index.php/2012/11/30/results-of-u-n-vote-to-grant-palestine-non-member-observer-state-status>
The Wall Street Journal "U.N. Gives Palestinians 'State' Status" November 30th, 2012 Pg. A7
-Jay Lauria, Josh Mitnik, Jay Solomon
Thursday, November 29, 2012
Breaking U.S. sanctions is a Win-Win
The Wall Street Journal, November 29th,2012; C3
"Standard Chartered Nears Iran Settlement" -Liz Rappaport
Standard Chartered is an U.K. parented bank with broad foreign operations. The U.K. is a member of the United Nations. Iran is currently under U.N. sanctions; these sanctions make it illegal, under international law, for a U.K. bank (or any institution whose host country is a U.N. member) to provide services to the Iranian government or multinationals.
Ok, now that that is clear.....
Investigations have shown that Standard Chartered illegally made over $250 billion worth of transactions with Iran. Court proceedings are coming close to a compromise, with S.C. bank expected to pay roughly $300 million dollars in fines. Now, let's do some math....
-$250 billion dollars worth of transactions with Iran
-Thanks to Yahoo! Finance, I have found that Standard Chartered's return on assets is 0.88%...that means that for every $100 of assets S.C. Bank makes only 88cents..bummer!.
-.88% sounds worse than it is, especially when you consider the volume of business.
BUT, people will argue this measure should not be used, so....let's use the avg. LIBOR rate for the past 3 years: roughly .30%.
$250,000,000,000 in transactions with Iran
@ .30%
-------------------------------------------------
$750,000,000
*I personally do not believe that it is an outrageous assumption that, at least, this spread (LIBOR) was achieved in dealing with Iran. In Fact, I would argue that an even higher spread could have easily been attained given Iran sanctions and lack of access to capital, (they are not in a good position to negotiate for lower terms, being cut off from the rest of the world and all...)
Let's finish this math,
$750,000,000 in potential profit
-$300,000,000 in fines
----------------------------------
$450,000,000 net after fines
So why not deal with Iran....Banks need only to adjust the premium on loans to Iran to account for the risk of fines equaling roughly $300 million, now that precedent is set. If you are familiar with our legal system then you are familiar with the principle of precedent. Because S.C. was fined $300 million, similar allegations will not bring about charges much farther from this amount.
So, when we are told that the U.N. has placed sanctions on Iran, I picture a metaphorical "Road-Block" complete with orange barricades, barbed wire fences, and do not enter signs preventing access to capital for Iran.
Upon reading this, I see a different picture; not a barricade, but a toll booth. $300 million is not damaging enough to dissuade these types of dealings. But, if our government sets a precedent making it very detrimental to be caught in similar allegations then we would stop seeing so many $300 million dollar checks for "damages"...
CONCLUSION:
S.C. makes (>/=) $450 million (theoretically)
U.S. gets a check for $300 million
*Let's keep it up and we can all make a lot of money!
*I encourage someone to add commentary to contradict my claims here. I know there are people smarter than me and I would love insight into why the way this was analyzed here is wrong or missing a major point. SO LET ME KNOW!
"Standard Chartered Nears Iran Settlement" -Liz Rappaport
Standard Chartered is an U.K. parented bank with broad foreign operations. The U.K. is a member of the United Nations. Iran is currently under U.N. sanctions; these sanctions make it illegal, under international law, for a U.K. bank (or any institution whose host country is a U.N. member) to provide services to the Iranian government or multinationals.
Ok, now that that is clear.....
Investigations have shown that Standard Chartered illegally made over $250 billion worth of transactions with Iran. Court proceedings are coming close to a compromise, with S.C. bank expected to pay roughly $300 million dollars in fines. Now, let's do some math....
-$250 billion dollars worth of transactions with Iran
-Thanks to Yahoo! Finance, I have found that Standard Chartered's return on assets is 0.88%...that means that for every $100 of assets S.C. Bank makes only 88cents..bummer!.
-.88% sounds worse than it is, especially when you consider the volume of business.
BUT, people will argue this measure should not be used, so....let's use the avg. LIBOR rate for the past 3 years: roughly .30%.
$250,000,000,000 in transactions with Iran
@ .30%
-------------------------------------------------
$750,000,000
*I personally do not believe that it is an outrageous assumption that, at least, this spread (LIBOR) was achieved in dealing with Iran. In Fact, I would argue that an even higher spread could have easily been attained given Iran sanctions and lack of access to capital, (they are not in a good position to negotiate for lower terms, being cut off from the rest of the world and all...)
Let's finish this math,
$750,000,000 in potential profit
-$300,000,000 in fines
----------------------------------
$450,000,000 net after fines
So why not deal with Iran....Banks need only to adjust the premium on loans to Iran to account for the risk of fines equaling roughly $300 million, now that precedent is set. If you are familiar with our legal system then you are familiar with the principle of precedent. Because S.C. was fined $300 million, similar allegations will not bring about charges much farther from this amount.
So, when we are told that the U.N. has placed sanctions on Iran, I picture a metaphorical "Road-Block" complete with orange barricades, barbed wire fences, and do not enter signs preventing access to capital for Iran.
Upon reading this, I see a different picture; not a barricade, but a toll booth. $300 million is not damaging enough to dissuade these types of dealings. But, if our government sets a precedent making it very detrimental to be caught in similar allegations then we would stop seeing so many $300 million dollar checks for "damages"...
CONCLUSION:
S.C. makes (>/=) $450 million (theoretically)
U.S. gets a check for $300 million
*Let's keep it up and we can all make a lot of money!
*I encourage someone to add commentary to contradict my claims here. I know there are people smarter than me and I would love insight into why the way this was analyzed here is wrong or missing a major point. SO LET ME KNOW!
Define Global Warming....
The Wall Street Journal, November 29th, 2012; A12
"Climate Change; U.N. Says 2012 to be Among the Warmest on Record" -Alex Delmar-Morgan
United Nations reports that 2012 is set to be the warmest year recorded in history. More alarming is a study found that an area the size of India has melted in excess of the average yearly ice melt from 1979-Present. This means that when you analyze the average amount of ice that melts a year, this year an area the size of India melted in excess of the average.....seems pretty substantial, wandering why the article is only 3 sentences long (they are rather long compound sentences, but still).
"Climate Change; U.N. Says 2012 to be Among the Warmest on Record" -Alex Delmar-Morgan
United Nations reports that 2012 is set to be the warmest year recorded in history. More alarming is a study found that an area the size of India has melted in excess of the average yearly ice melt from 1979-Present. This means that when you analyze the average amount of ice that melts a year, this year an area the size of India melted in excess of the average.....seems pretty substantial, wandering why the article is only 3 sentences long (they are rather long compound sentences, but still).
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