Tag Archives: financial

Communist party in China facing public anger as corruption gets exposed

Even more interesting considering that both this Economist article and the Bloomberg exposé are currently blocked in China.

 

In recent years China’s leaders have become increasingly concerned that the public’s awareness of the growing wealth gap could lead to social instability. In Beijing, displays of gratuitous overcompensation are a daily reminder that some people, in keeping with a famous dictum of Deng Xiaoping’s, have indeed got rich first. Officials last year even went so far as to try suppressing ads that promote “luxury lifestyles”—lest the have-nots be inspired to rise up and storm the local Lamborghini dealership.

Perhaps even more troubling for the Party is the surge in scepticism over how such wealth seems to find its way into the hands of officials and their families, not to mention into those of their beloved Swiss bankers, English boarding schools and Australian estate agents. Particularly galling are the reports about the great number of officials who have taken to working “naked”. That is to say, many officials are working in China while their wives, children and, presumably, a chunk of the motherland’s money take residence overseas. A report released last year estimated that as much as $120 billion may have been transferred abroad by corrupt officials.

The Chinese media have been given greater freedom to report on corruption and the financial shenanigans of large companies of late. Which makes it all the more striking that reporting on the business activities of the Central Committee’s wives and offspring is still strictly forbidden.

So one can only imagine the consternation caused by yesterday’s sensational exposé by Bloomberg, which details the financial assets belonging to the family of China’s president-in-waiting, Xi Jinping…

More on this storyWealth and power: It’s a family affair

 

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Wanna stay competitive in today’s cell phone market? – Then buy 24 million iPhones

Earlier this morning, mobile phone carrier Sprint released its 10-K filing with the SEC for the fiscal year ending in December. In the filing, it revealed that it had made a commitment with Apple to purchase a minimum number of iPhones from Apple amounting to $15.5B in outlay.

Horace Dediu of Asymco makes a good case that Sprint’s commitment is somewhere around 23.8 million iPhones.

Sprint previously said that it needed to buy some 30.5 million iPhones over the next few years in order to stay competitive with rival carriers.

T-Mobile even attributed its recent financial troubles directly to it not carrying the device.

via The Next Web

Wanna stay competitive in today's cell phone market? – Then buy 24 million iPhones

Earlier this morning, mobile phone carrier Sprint released its 10-K filing with the SEC for the fiscal year ending in December. In the filing, it revealed that it had made a commitment with Apple to purchase a minimum number of iPhones from Apple amounting to $15.5B in outlay.

Horace Dediu of Asymco makes a good case that Sprint’s commitment is somewhere around 23.8 million iPhones.

Sprint previously said that it needed to buy some 30.5 million iPhones over the next few years in order to stay competitive with rival carriers.

T-Mobile even attributed its recent financial troubles directly to it not carrying the device.

via The Next Web

The definition of investment banking and its lines of business

An investment bank is a financial institution that:

  • Assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client’s agent in the issuance of securities.
  • Assists companies involved in mergers and acquisitions.
  • Provides ancillary services such as market making, trading of derivatives, fixed income instruments, foreign exchange, commodities, and equity securities.

Unlike commercial banks and retail banks, investment banks do not take deposits. From 1933 (Glass–Steagall Act) until 1999 (Gramm–Leach–Bliley Act), the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G8 countries, have historically not maintained such a separation.

There are two main lines of business in investment banking.

- The sell side which involves trading securities for cash or for other securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.).

- The buy side which involves dealing with pension funds, mutual funds, hedge funds, and the investing public (who consume the products and services of the sell-side in order to maximize their return on investment) constitutes the “buy side”.

Many firms have buy and sell side components.

An investment bank can also be split into private and public functions with a Chinese wall which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas such as stock analysis deal with public information.

An advisor who provides investment banking services in the United States must be a licensed broker-dealer and subject to Securities & Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulation.

via Wikipedia

MF Global shows Wall Street is ready for the good old days

If you don’t think Wall Street is chomping at the bit to get back to the good old days, take a look at MF Global. This financial services company was taken over by John Corzine, the former governor of New Jersey, a 24 year veteran of Wall Street, and the CEO of Goldman Sachs for 5 years.

The company was involved in a wide range of services and doing well for itself. Then Corzine came in with support from its leaders and promptly leveraged it to the max. Including a $6.3 billion dollar wager on European debt.

That obviously went south but that’s not what is interesting here. Rather, it’s that MF Global made the bet with its own money. A process called proprietary trading that is highly controversial.

Mostly because banks are not supposed to use their financial wizardry for themselves, but for us the customers. When they do start making their own bets it puts our money at risk. If one of those bets goes sour and the entire bank goes down, so do we.

It also makes the FDIC step in and we are back to square one with Wall Street making bets and Main Street cleaning it up.

Obama’s financial reform, called the Dodd Frank Act, largely ignored proprietary trading. Only at the last-minute did Paul Volker fight for some legislation on this, which is why the result is called the Volker Rule.

For the past year, U.S. Regulators and the major banks have been negotiating on the terms of this important rule. A spicy topic because proprietary trading accounts for up to 25% of all bank profits.

The rules are expected to go into effect next year (2012). Which is why I think Corzine went so fast, he was only CEO for 19 months, and went so huge. He wanted to get into the game before the rule set in.

I think he figured that if his bet worked then he would have turned MF Global into a Wall Street powerhouse to compete with Goldman, Citi, JP Morgan, etc.

Of course, he failed and now regulators have a fresh example to guide them in drafting the rules. This collapse rattled many of them and the rules will certainly be tightened.

The whole situation is like a throwback to the pre-recession days. It shows that firms will still take massive risks with other people’s money (and their own). We just have to hope that, going forward, those who do will be small enough to not take down our whole system.

source: Bloomberg