We are going for gold!

Dear Followers,

One of the headlines in this week’s financial press was the recently new high of the gold price and the further decline of the dollar as a currency. On Monday the 23^rd of November 2009 the

gold price has reached a new record high while the dollar was down against the euro at $1.4965.

“Should I bet one the dollar or on gold”

I compared three articles from the Financial Times, The Times and the German Die Welt which all reported on the same topic using very different styles also covering different information with different focuses.

The article from the Financial Times where the synonym “Greenback” was used for the dollar was the shortest of all three articles. It is written without any form of bias and makes very clear that the FT is a financial newspaper, which is written for professionals with a large amount of market knowledge and understanding. It is more of a clear report of facts and numbers, which focuses on the development of currencies, the gold price and markets all over the world. There is very few to no explanation regarding the information. The reader has to already be well informed about the situation and has to be able to deal with abbreviations and raw information such as pure market movements and figures.

The article published in The Times on the other hand in my opinion is heavily biased and in my opinion almost gives the reader a recommendation what to do. This can already be identified by title and headline which say “ Be brave and buy the dollar; The dollar tumbled to a 15-month low against top currencies last Monday so it could be time to snap it up”. This will not necessarily influence someone who has market knowledge and can make up his own mind but for the uneducated reader this could clearly be seen as an instruction. I personally find the article very interesting and informative since it clearly reports the opinions and gives statements of well known individuals from the market for either side, the ones that see gold or dollar falling and vice versa. Another point that in my mind states that the article is biased is that in two examples it clearly states and directs the reader on how he could speculate, even giving examples of banks he could use, on the currency and commodity movements in order to make money and the author makes it sound relatively easy. I think the article is very good from an informative point of view since it gives the opinions of market insiders as well as basic information, but it has to be seen very different. I personally don’t like the idea of the heavy bias I can identify and the “advertisement” for market peculations and buying the dollar. In my opinion this is simply not good journalism since it should be plain informative and not guiding, this could almost be seen as a minor form of propaganda, which I consider journalistically unethical for an established newspaper.

The article from the German Die Welt focuses more on gold than the dollar and in my opinion is the best one this week. Even though it includes a lot of numeric and factual data it still makes interesting comparisons for the reader and includes historical and current information, which makes it easier to visualize and understand the topic. It includes historic information about the matter and draws very modest future predictions, which help the reader to analyse and prepare his own situation. There is no form of bias involved in the information and the writing and everything is clearly but briefly explained. It explains the significance of gold for private investors as well as banks, investment firms and governments and their participation and share in the market which I consider very interesting. It overall is highly informative and gives a good amount of factual data which is without any bias wrapped into interesting writing style and sarcasm.

Looking at the information given in the three articles it is hard for me to draw a conclusion. Looking at the current instable situation and the importance of gold and its purpose I definitely do not see the gold price drop in the close future, but I am not in the position to make predictions on either, the gold price or the development of the “greenback”. Even though the article from The Times tries very hard to convince me to invest in the dollar I would currently not believe them. I still strongly believe that

“The press should inform me so I can make my own decisions, the times where the press puts decisions in our heads should be long gone”

Bernie Madoff, the popular Criminal?

Dear Followers,

Last weekend the first one of a number of Auctions selling fraudster Bernhard Madoffs personal belongings took place in Manhattan, NY.
The goods, which ranged from valuables such as Jewels and Watches to personal items like jackets were auctioned to at least reimburse a fracture of the money stolen by Madoff to his victims.
Since Madoffs crime is estimated to have a total magnitude of at least $21billion, I think the auction has more of a symbolic than financial value but I will further explain this point later.

The auctioned goods brought a total of over $942,000 and therefore nearly twice the initial estimate and I was asking myself,
“Why are there premiums and not discounts on these stolen goods?”

As sources for my information I used 3 different articles which were published in the German Welt, the Guardian and BBC News.

The article from the German Die Welt in my eyes could not be any more boring in style even though it does include all of the necessary information regarding the matter.
There is no form of bias or opinionation but neither is there any form of humour or passion about the matter. I think since this is a weekend newspaper and this is a very significant and touching subject for thousands of people it should be written in another manner. It simply is a listing of facts, which in this case are items and prices and a little description of scenery and situation around it. It only lines out that low value personal items were sold for far more than expected while valuable goods remained below minimum bid. This means that people were souvenir hunting and not looking for value which the reader has to interpret himself.

The article published by BBC News is basically exactly the same thing just that it was translated into English and summarized a little bit. It is simply an alignment of the facts without any form of bias or passion about the topic. I would personally say its better than the article from Die Welt since it is more compact. If it isn’t interesting but just informative there is no need for anything but the basic information in my opinion.

The article which was published in The Guardian is by far the best one in my opinion especially taking into account it is a weekend article. Most likely the reader does not just look for information but also for reading entertainment which the author does provide in this case. The article includes the main important data about the happening such as the goods sold and the prices achieved for them but other than the other two it also includes informative and important background data. It does not include any bias but for example outlines the severity and consequences of Madoffs crime by stating that it was the cause for at least 2 suicides. Another aspect I find highly interesting is that it includes the statements and therefore opinions of some of the bidders, because I was asking myself what would be the incentive for people to acquire a criminals personal belongings. One person said that its like a piece of the modern titanic to have souvenir from Madoffs yacht, another bidder said he unites investment with good cause for the victim.

Coming to the writing and reporting style of the articles first in think the only one out of the three that is good is the one from the Guardian. One should not forget that a weekend newspaper for many readers is not just source of information but also entertaining occupation. Therefore there should be some kind of humour about how the things are written. Especially for a topic like this, which affected people all around the world or at least touched their feeling of justice, the author could try and make it interesting and include the opinion and situation of people it affected. Reading should also entertain and not just inform.

Regarding the event as such I think that it is more of a symbolic value to this auction than a real purpose behind it. The fraud committed by Bernie Madoff over the past 4 decades caused investors a total damage of at least the estimate of $21 billion, at least 2 suicides and a lot of tears and destroyed careers, fortunes and existences. Auctions which are estimated to bring a total revenue of $500,000 are hardly going to cover that. I think it’s more of the symbolic value to show the people what will happen to someone who behaved like Madoff. He is destroyed as a consequence of his acting, he will die in prison and even his personal life is for sale.
The message that is being sent is;
“America does not tolerate this behaviour, there are consequences.”

What I myself find very surprising is how much for and that people even buy Madoffs items. The fact that for example his Baseball Jacket with “Madoff” on the back goes for 29 times the estimated $500 but a vintage Rolex of real value remains unsold shows me that people want Madoff memories and not goods at bargain pricing as usually at an auction. I find this very confusing since he in my mind, and on paper, is a criminal. This person caused a lot of personal failures for others and even suicides, so I ask myself are it even politically correct to sell his belongings?
It has no positive effect for the victims since the financial results are simply too low to make up for the damage caused and people see it more as a joke than a tragedy which can be told from bidders statements.
The question that remains for me and I really don’t understand is

“Why do people want the belongings of a criminal as if he is a hero?”







Sources:

http://www.guardian.co.uk/business/2009/nov/15/bernard-madoff-auction-sheraton


http://news.bbc.co.uk/1/hi/business/8361024.stm


http://www.welt.de/finanzen/article5220779/65-000-Dollar-fuer-eine-Luxus-Uhr-von-Bernie-Madoff.html

Whats the final price for British Chocolate ?

Dear Followers,



A major topic in the international financial press this week once again was the takeover of British Cadbury by the US food giant Kraft. I personally find the situation very interesting since it is an extremely large deal taking into consideration that we currently have a global financial crisis and this deal is worth about $17 billion.


This acquisition battle has been going on and has been of extremely high interest for the financial world for a while now, but due to UK takeover rules is coming to a determining point on Monday the 9th of November 2009. If Kraft does not make a formal offer by 5pm English time, they loose the right to make any offers for the following 6 months.


The article from the Financial Times basically just reports clearly and not very precise what is happening and why that is the case. The author included some figures and described the situation of the bidding and the two companies. Even though there is no bias and this article in not opinionated in any way, I myself find two things in this article very surprising. The first is that the author almost does not mention at all the UK takeover law is what is pushing and putting Kraft in a difficult situation now. I find that extremely important and determining for the entire process and therefore clearly see a lack of that information. The second thing is that the author clearly seems to find it remarkable that the Kraft CEO is a woman, Irene Rosenfeld, since other than the Cadbury CEO her name is in bold letters in the text. He must see that as something special which could be interpreted as a form of bias. Overall the article is easy reading but it is not too informative if one is not already familiar with the matter and story. For the information and help it gives it is rather long and could be seen as waste of space.


The article from Manager Magazin, a German financial newspaper, in my eyes is a lot better and a lot more informative for the reader without any extra complexity. It is very pleasant to read since they use a rather entertaining sarcastic language in some cases and it is very well structured. They include some figures as well as a little bit of background information and also give some suggestions on how the two companies could behave and make their moves taking Into account the framework of the deal and the legal situation England provides. One thing I have to point out Is that they also mention in a special way that the Kraft CEO is female and see this as something special apparently so the FT is not alone. Overall it is a very easy reading but very informative article which is interesting and informative reading for a broad range of people.


The third and in my eyes by far the best article about this topic is from The Guardian. It already has two bullet points right under the title which give the reader a basic but clear idea of what the matter and the problem is. The article does not just briefly describe the situation but also clearly mentions legal framework, the financials of the deal, Kraft’s situation and strategy as well as background info about both organisations. This obviously is not of interest for every reader, but in my eyes since it was cut short was very informative and interesting. The article is in no form biased or opinionated and gives everybody, even people that previously had no idea about the topic or the matter, a very good insight and entertaining story and information.


I myself see this especially at the current point in time as a very interesting topic and deal. This is an acquisition between two more or less healthy companies during a global financial crisis and it is a very big deal looking at the value. Kraft is trying to further increase its global power during the financial crisis by bringing another very strong make into their conglomerate, but they try to get it as cheap as possible.

“Is the giant winning in rough weather”?


The problem they have now is the UK takeover law which does not any longer allow them to gamble slowly and approach their target in a subtle way. They had their time and now they either have to
“take it or leave it”.


This makes it a tough call for Kraft as also analysed by their main shareholder Warren Buffet. They have to make an offer where they are more certain not to get declined since now it is formal, but they still then run the risk of overpaying. The law puts them in a very difficult situation where they either win or loose but they have to make the call now, their time has run out. If Kraft would have time to keep on informally negotiating the situation would be completely different, but they now have to make their final decision. If they don’t make the winning offer they loose and have to wait, if they do not make an offer they walk empty handed. We will see today and in the following weeks how things are continuing and if Kraft is a winner in this game, but we have to always keep in mind


"Getting what you want may not make you the winner if the price you paid was too high"













Sources:
http://www.ft.com/cms/s/0/8cda0890-cb1d-11de-97e0-00144feabdc0.html
http://www.manager-magazin.de/unternehmen/artikel/0,2828,660062,00.html
http://www.guardian.co.uk/business/2009/nov/08/kraft-cadbury-takeover-deadline/print

What has really happened with our money?

Dear Followers,

One of the major topics this week in the international financial press was the arrest of yet another hedge fund owner, Helmut Kiener, for the suspicion of fraud and malpractice. He was arrested this week in Germany in his hometown Aschaffenburg for the suspicion of having misused funds obtained through agreements with a number of English and French banks and FBI as well as German officials are investigating. After what has recently happened in the world the question we should ask ourselves is
“Can we trust hedge funds and banks with our money?"


An article from the Wall Street Journal and therefore from America clearly states the story and the current assumptions of what has taken place. It also gives some brief explanation about Kiener himself and the assumptions of what has taken place including some figures regarding the investments and the losses from the fraud. Overall it is very brief though and doesn’t really go into depth, it is easy to read and every reader will easily be able to understand the story and the problems. In my opinion there is no bias of any form involved.

The article published in the German Die Welt is a lot more in depth and explanatory which is caused by the fact that the case and problems are far closer. It also involves the legal questions and the problems the German officials reportedly had with the case. The author clearly states that the officials try to declare themselves not responsible for what has happened and in my opinion he clearly doesn’t agree, which means he shows a clear bias against them. The article states facts and figures very clearly, but is in general more precise and more explanatory than the WSJ. Overall its easy to read and understand and seems to sum the whole story, background and scenario up very well.

The article released in the Financial Times is similar to the WSJ article a lot briefer and more or less only states some facts and numbers. It is easy-reading financial press that does not include any form of bias and is easily understandable for any reader with basic knowledge. Another point it has in common with the WSJ article is that it is written from a quite distant perspective and therefore completely different to the German Welt.

Overall comparing the three, one could say that the WSJ and FT articles are very similar whereas the Welt article is far more involved, in depth and biased which I see caused by the geographical distance to the problem. One thing that surprises me is that the figures in the three articles all vary and don’t really match. The volume for the hedge fund capital varies from €600 million to €800 million for example while possible losses vary from €220 million to €400 million.
“How severe is the damage really?”

As it can be read in the articles the banks and officials did not really want to comment on the problems and scenario, if they did it was very brief, which in my mind shows that they’re well aware that what happened was not just and also partially their fault.
Also with regards to the current Madoff case I think that there has been a lot of fraud and malpractice involved in the hedge fund industry which now comes to light in the financial crises where organisations and people demand their invested money back or some proof of where it went.
“What have funds and banks REALLY been doing with our money?”

I think it is very doubtful what some of the funds and investment vehicles did since they gamble or even steal people hard earned money they rely on. The problem is that due to special models they can still get around regulations and restrictions as done by Kiener’s K1 fund with the British Virgin Islands.
The situation we currently have with crashed global markets just reveals what has been going wrong for far too long. As Warren Buffet very correctly stated some time ago in an interview;
“Only when the tide goes out you learn who’s been swimming naked.”

Bankers should not get a "Government Bonus"

Dear Readers,

The distribution of bonuses for bankers and peoples resentment about it has been an upcoming topic in the international financial press this week. Hedge fund guru George Soros has commented on the situation in newspaper interviews and has given his opinion and concern.

The Financial Times Weekend as well as Reuters and City A.M have released articles about the situation and the concerns and comments Soros has made regarding the matter. All three sources are from the London base and therefore quite close to the market. The abroad press has at this point in time not really mentioned this subject, most likely cause it is about the London market and still very new. In my mind the topic is still very important, which is also underlined by the fact that the article was on the cover page of the FT Weekend, because it influences peoples behaviour and their belief in justice in the financial system.

Whereas Reuters and City A.M. just commented and reported on the Soros interview the FT Weekend actually added a little bit of background information about the matter and about Mr Soros, but still not a lot. All is very brief and needs to be read by someone who is already informed and in “the know” about the current situation. The FT and Reuters also write about Soros opinion regarding the dollar and stock market movement, which is not at all the case for City A.M. which just sticks to the bonus discussion. All three articles clearly report the statements Soros has given but there is no point of bias in any kind of way from their side.

As stated in all of the articles Mr Soros addressed that the funds which are now distributed to the bankers are actually not their own achievement and fruit of their hard work and risk taking, but hidden gifts from the government so he can understand why people see it unjustified.

People all over the world that were involved with the financial markets in any kind of way lost confidence in some of the institutions and the people working for them when they suffered from the financial crash which was mainly caused by them. The governments and tax payers had to stand up for the gamble some bankers and institutions took, which caused anger and broke trust. The question that arises for people now is “can we trust the governments and banks with our hard earned money”?

The worry some of the banks mention is that they do not think they can keep and maintain some of their most talented risk-takers without giving them their high bonuses which would make them loose out on an important sources of income if they change companies and go to hedge funds. Soros answer to this is that this would only be the best option due to the fact that there they deal with own capital and not customer deposits or taxpayers money. People know what they’re dealing with when investing in hedge funds and they do it by choice.

Especially at this point in time where trust in markets, institutions and their drivers has to be regained and recovered this is a very delicate situation. Investors and the people in general feel tricked by the system since they lost out from the behaviour and decisions of bankers while many of them still won and earned big with far lower consequences.

Many of the institutions and their members only survived the situation as a result of government and therefore taxpayer support and therefore we should ask ourselves

“should this be rewarded with another round of bonuses”?

At the current point in time with a lot of disbelief in justice in the financial systems and on top of that a lot of people and organisations in severe financial trouble, it is important to regain the trust and the belief in the systems to create and support investment. I can, as Soros, understand the resent and anger people have, since it just seems like they’re loosing again while the people that caused the misery win. The question arises “Is there justice in the financial markets?”

As it can be concluded from the articles banks see themselves forced to give those bonuses in order to keep their most important employees satisfied and loyal. They do not see the option of making the “just” decision since the risk for them loosing out in the scenario is too high.

As I see the situation there should be government intervention in this to create a higher level of satisfaction for investors and taxpayers and to restrain the banks in their way of acting.

The current situation has shown, that there are too little regulations, which has caused the crash and the misery. The government has distributed those funds and should therefore also have the power and a say in terms of their distribution. In the end of the day there has to be a certain level of justice and the adequate distribution of funds. The trust by people and investors in governments, markets and institutions has to be rebuild and regained. In my eyes bankers can get a bonus for their success and work, but taxpayers money and government support should by no means be used as bonuses for people that caused this global financial distress.

Sources:

http://www.cityam.com/news-and-analysis/qzp2vdhqgz.html

http://www.reuters.com/article/businessNews/idUSTRE59M5K720091023?feedType=RSS&feedName=businessNews

hardcopy of the FT weekend 24.10.2009

“Can the Germans beat fear and pessimism to create growth?”

Dear Followers,

If we can believe what the Bild, the Deutsche Welle and Die Welt, three German news mediums of different intellectual level report, the German economy has reached the troph and will come back and return to growth in 2010. The question regarding current circumstances is if they are trying to create a more positive vibe about the future of Europe’s biggest economy or “Is Germany actually coming back?”

According to an article from Die Welt which is a very serious and intellectual German business newspaper that could be compared to the financial times on an international level, there are factors that would cause upswing as well as there are problematic influences. They also report that according to leading German business institutes one can expect an economic growth of 1.2% in 2010 after a decline of over 5% in 2009.
The factors that make economic growth more difficult are that unemployment will continue to increase over 2010 and that they expect an increase in energy prices which will make households expenditure more cautious.
On the other hand there still are low interest rates and cheaper credits which will encourage business and spending. The worldwide economy is expected to grow again which in the long run will have a positive influence on German exports which are still of very high importance for the national economy.
On their homepage Die Welt also has a poll where the readers can vote if they believe in the return to growth in 2010 where the result for 68% of the readers was negative.
This in my opinion is not really helpful since the growth of an economy is caused by the people in it.
“Don’t we have to believe in growth to cause it?”

http://www.welt.de/wirtschaft/article4855242/Regierung-rechnet-mit-1-2-Prozent-Wachstum-2010.html

The Deutsche Welle which is a purely informative radio station and homepage about news for Germany published an online article which is a lot more pessimistic.
They report that the major factor for Germany being in this “sharp recession” is the high, increasing, unemployment which currently is at 8.5% but expected to increase by another 2%.
They say that the decline will be of more than 6% for 2009 but they also give a prediction from the German Central Bank which is 0.5% growth in 2010.
Overall the situation according to them seems difficult regarding the main factor unemployment but the long run outlook is better which is also caused by a falling level of inflation.
What they are very realistic about, is the worry I have as well reading the article because the question;
“Can we have a change from negative to positive growth when the unemployment rises another 2%?”

http://www.dw-world.de/dw/article/0,,4306735,00.html


Die Bild which is more comparable with the English Sun and could therefore better be described as a tabloid paper reports that leading business institutes predict a growth of 1.3%. They also make very clear that we have not made it yet and that this is a prediction in a very uncertain and shaky situation which makes it hard to predict anything at all. The major problem as stated by them is also the level of unemployment in the economy which they see with continuous growth. The advantage they see for the German economy is that the Asian countries will recover soon which will help the level of Exports which still is the strongest level of income for the German economy.
One point they also have mentioned which has to be taken into account is that the German State as such will have to deal with extremely high deficits this year which also causes difficulties and will spread a kind of “sour” mood in the business environment.
“Can we somehow think positive?”

http://www.bild.de/BILD/politik/wirtschaft/2009/10/12/diw-prognose-1-komma-3-prozent/wachstum-2010-kein-grund-zur-euphorie.html


All three articles more or less share the same opinion. They report that institutions are projecting and expecting a small level of growth and therefore a return of the German economy in 2010, but they also clearly address that there is a number of problems that cannot be underestimated. Whereas Die Welt and the Bild are real descriptive and story like articles, which are on completely different intellectual levels though, the Deutsche Welle article is more of a factual report.
There is no form of bias in any of the articles but in every single one of them the reader can identify a very high level of doubt about the information that is being reported.

I personally can only rely on the information I get from media since I have not been in Germany for quite some time and can therefore hardly experience the national economic climate myself. The problems and difficulties I just see is that, other than the British for example, the Germans are rather cautious about their spending and like to save up money and be financially secured. This is why another increase in the already high unemployment will cause further worries for members of the economy and will heavily discourage spending.
My personal judgement from how I see the situation is that Germany could have growth in 2010, but it would have to be caused from abroad and by exports since the level of negativity and discomfort for the German people are currently too high to change the situation themselves.
The question that remains in my opinion is not if Germany will have growth, but
“Can the Germans beat fear and pessimism to create growth?”

Soros goes large in green tech

This weeks blog is about the news that were released the weekend 10th of October 2009 announcing that US investor George Soros is planning to invest $1 billion (£625) in green technology.

The 79 year old with Hungarian roots who also lived in the UK for a period of his life and attended university here is one of the main individual players in global financial markets. He has managed to establish a big name and reputation for himself in the business world which is why these news will have an impact and an influence on markets and investments.

As sources the following 4 articles from the Financial Times, Yahoo Finance, Reuters and The National Business Review were analysed.
http://www.ft.com/cms/s/0/1407371a-b657-11de-8a28-00144feab49a.html
http://uk.biz.yahoo.com/10102009/325/soros-aims-invest-1-bln-green-tech.html
http://www.reuters.com/article/newsOne/idUSTRE5992BJ20091010
http://www.nbr.co.nz/article/soros-invest-1-billion-clean-tech-112967

The FT article only briefly mentions that Mr Soros is planning to invest $1 billion and provide a climate protection organisation with $10 million a year over the next decade. It goes more into depth and actually explains why he will do so and what his objectives are. It explains a little more about Mr Soros himself and his occupations and interests rather than the actual investment, which makes it very easy and interesting informative reading for anyone with the slightest interest in the business world.

The Yahoo Finance article is more of a simple report of facts. It gives clear information and answers all the important questions as in What, When, Where, Who but unlike the FT article it is not pretty to read. It just sums up what Mr Soros announced he is intending to make this investment over the next years and what his intentions are. It briefly describes the situation and the necessary facts around, but doesn’t go into depth or give any background information at all. It is more for the reader that browses through the news and needs factual business information, precise and quick, without any nice or pleasant reading.

The Reuters article gives a very good mix of actual news information and facts as well as background data. They explain what Soros announced he will do, who he is, and why this might be in his interest to do.
It is very nice to read since it describes the matter in an interesting but factual way; it is a very good mix between a story and just a list of facts.
One thing that has to be mentioned is that other media actually use Reuters as a source and reference for their own articles.

The National Business Review article can in my eyes not even be described as a real article but more of a quick “note”. It uses Reuters as their source and reference and more or less as briefly as possible wraps up the facts. For someone who just wants to read and know the minimum this could be described as sufficient but there is no background information of any kind. It is technical and not very interesting, not even from a factual point of view.

I personally like the Reuters article best since it describes the whole situation and gives some informative and interesting background data about both, the matter and the person behind it. It is very informative and interesting to read, without anything unnecessary that would be a waste of time, which I consider very important.

For this matter and this cause I think the media and the reporting are of enormous importance. I strongly believe that George Soros has a very big influence on international financial markets due to the reputation and name he has achieved from his actions over the past decades. There will be a lot of people following him and his investment, and even if that is not the case it will create higher awareness.

What he is trying to achieve here in my opinion is a move towards green technology. He wants to use his name and his power together with the media to make people invest and consider green technology and support it.
Green technology is a growing market, but Mr Soros, who is 79 years old and worth $11 billion, has a minor personal interest in this I think.
What he actually wants to achieve is raise investment and awareness for climate and green tech for the future of the world.

He is investing in a good cause and advertising it and making it public through the global news. He is using his money name and power for the good cause which I consider as a very clever and honourable move. On top of that he uses the international media to distribute his ideas and his aims to the people around the world, which once again shows their power, influence and importance.