DOW + (-666.75) = Opportunity

By David Bryan

Even though the market saw its biggest losses since 2016; were the Dow Jones Industrial Average fell some 665.75 % or -2.54%; moving under 26,000 on February 2, 2018; the stock market is resilient to the type of shocks that reverberated in 2008.

In the context, a 665.75 % point drop then; would not of garnered the same result now. In  2008 the market had all conditions for a perfect financial contagion. However, in 2018 analyst see last Friday’s drop as a minor correction and as a barometer for gauging the temperature for investor’s concerns about raising interest rates, inflation and a positive labour/wage sector.

The market is not sick as in 2008; but can be viewed as catching a slight infection;  which is strongly believed will be flushed out with the medicine of a return, to  the confidence of traders, seeking to invest – in the opportunity to buy stocks at a lower than available price index at the opening bell this week.

Continuation of a stellar year of investor confidence for the markets across the board is expected and will be reflected with gains throughout 2018.

Advertisements

Carillion: Too Many Jobs Too Lose

“The state also has a role to play when things go wrong and companies fail, as Carillion did last week. Not by bailing out the directors with a blank cheque – it will be the shareholders of Carillion, not taxpayers, who pay the price for the company’s collapse – but by stepping in and supporting those affected.”

Prime Minister Theresa May

By David Bryan

Carillion, the United Kingdom’s conglomerate found itself in dire financial straits because responsible banking institutions decided they will no longer fund the lifestyle of ‘the mind and management’ of the company. They therefore rejected a 300 million pound tranche of financing to sustain its operations in the short term. In simple terms, the maths did not add up at Carillion, especially taken into consideration; it held a large portfolio of the UK’s Government services.

It is obvious, that Carillion used its leverage and future generating contractual income in its fixed term contracts with the government to secure funding for its cash flow over time, but it’s quick fixes ran out as fast as the cash came in; creating a financial vacuum whereby,  coupled with its mammoth 900 million pounds debt the company operations became unsustainable.

By that, it meant in real terms, the company had no money to pay for its day to day operations, salaries,expenses,creditors and debt- enter liquidation. We have all seen this scenario before, during the Great Recession in the USA and Europe. To invoke the cliche: there is no need to re-invent the wheel; only to tweak it according to the particular circumstances as with the case of Carillion.

There are now many companies who can boast that they were in the same position as Carillion in that era, but have come out of the red and are enjoying healthy returns on investment and once again profitable. This success did not happen overnight. It was painstaking and laborious , diligent and industrious work put in on behalf of the stakeholders; the government and  the management.

It was a plan that saw companies in the automobile industry and financial sector recover from the brink of collapse , which too can be adopted by Carillion.

Prime Minister Theresa May has stated it correctly, that the state has a role to play, when companies like Carillion fail, by stepping in and supporting those effected. How far the state goes must be determined by not only whether the company is too big too fail but that there are too many jobs too lose, which would have a negative direct impact on the economy.

In the case of Carillion, indeed there are Too Many Jobs Too Lose. At present 43,000 jobs are at risk worldwide , 19,500 in the UK alone who work in public sector jobs, such as the NHS, as cleaners and in school catering ; in addition -small suppliers  are also exposed- perhaps, approximately some 250,000 jobs indirectly from 30,000 small businesses. The 13 Pension Schemes must be also taken into consideration in the event of insolvency.

It is agreed that there has to be accountability for the mismanagement of Carillion, and the Shareholders have to pay since government will not write a blank cheque to bail out the directors.

However the Government, in the circumstances, must consider ‘bailing out’ the company and not the directors; given the mass amount of lay-offs envisioned if Carillion is eventually  liquidated.

It is believed that the wrong approach is being applied to Carillion, and the overall strategy should be saving Carillion; if there is to be continuity of the company to pay back the government; which has already intervened by continuing to  pay directly UK’s Carillion’s staff, but what about the other ‘273,000 employees’?

The government intention must be therefore; to save the company from going under,to help retain as far as possible  all 293,000 jobs directly and or indirectly associated with Carillion.

Re-calibrate  Carillion’s plan of liquidation and the selling off its assets, by maintaining the company as a going concern, return it too profitability and or sell it to a new entity thereafter. By so doing it will preserve the company, its employees, contracts, assets and pension schemes.

The State has already intervened by paying salaries, the question here, is quantum. The state therefore needs to secure any future injection of taxpayers’ money, which at the end of the day will be lost on the company being  made insolvent.

Thus, the government should seek a comprehensive plan to inject the require liquidity, but not before the removal of all current directors of the Board of Carillion, appointing a new Board and management, the issuance and allocation of  shares in favour of the government, securing the ‘loan’ by way of debenture over the assets of the company until such time the company is able to repay all monies invested by the government.  At that juncture, the state will have a option to sell its shares back or to a new entity.

Such an arrangement can be facilitated by independent management agreements which can go hand in hand with any judicial actions by the government appointed ‘liquidator’ whose primary focus now is not to sell the family silver but preserve it in order for the company to:-

  1. keep the current jobs of all the employees including those of the suppliers;
  2. pay outstanding creditors;
  3. return the company to profitability through disciplined management; (i) Quarterly reporting of company’s performance (ii) Monthly financial reports etc
  4. carry out a forensic audit;

Directors

Prime Minister May alluded to her government’s stance on the fat cat syndrome which no doubt has plagued Carillion. Mrs May stated:-

And, for the first time, businesses will have to demonstrate that they have taken into account the long-term consequences of their decisions. Too often, we’ve seen top executives reaping big bonuses for recklessly putting short-term profit ahead of long-term success. Our best businesses know that is not a responsible way to run a company and those who do so will be forced to explain themselves.

The English common law provides numerous examples were directors are obliged to refund that part of money paid which was not a ‘genuine award of remuneration’ but a disguised gift out of capital’ and as unauthorised return of capital, a sale of land made at undervalue by a company to another company controlled by its principal shareholders. [Aveling Barford Ltd. Perion Ltd (1989)]

Finally, any action of government intervention during this time “effects the best prospects for preserving the company’s future and maximising the realization of the company’s assets for the benefit of its” employees, creditors[Re: Harris Simons Construction Ltd (1989) 1WLR 368] and the economy of the United Kingdom.

 

 

 

 

‘Compassion’ is the “Bill of Love’ Needed to Protect DACA Immigrants.

By David Bryan

The epitome of the DACA program can be summed up in the story of Jorge Garcia, who came to the USA when he was 10, married , became a father of a 15 year old daughter and 12 year old son. The Michigan resident, being 39 years old was too old to qualify for the DACA and as a consequence was deported this week back to his country Mexico.

The story doesn’t end there, but really starts when Garcia was faced with a removal order in 2009, but his deportation was stayed and extended under the Obama administration. For the Garcias; the program for his extension was halted under the new administration of President Trump.

On the surface of it, it is easy for the critics to apportion that it is the current administration who is at fault. But who is really to blame for Mr. Garcis’s predicament? Is it the Democrats or the Republicans? The law enforcement officials? The judges; the lawmakers?

It was and is the entire system that failed Mr. Garcia. The system of patch-work; that defies common-sense; continuity and the ability to be rationale on behalf of DACA receipts and their parents in order for them to have a peace of mind in 2018. Note: Mr Garcia was in the USA for 30 (Thirty) years and he is too old for the program.

For a system to demand the removal of an undocumented immigrant after he was allowed an extension under a previous government but now deport him, separate him from his family-together with the fact that it is presumed he paid taxes, reported to the immigration officials indicating his whereabouts and had no criminal record- after three decades is cruel and inhumane.

Such a system requires overhaul from top to bottom.

I crave the indulgence of the reader; but Mr. Garcia’s story reminds me of a criminal case I heard about earlier in my legal career, and which has always remained with me until this day.

There was a particular prisoner warder who come down every morning and visit the inmates on death row. The warder; would ceremoniously walked up and down the hall; bringing a terrible fear to the inmates; who were wandering if today was their day, that the warder would read out their death warrant for them to be hanged on the gallows.

It was determined by the court that this conduct by the warder amounted to cruel and inhumane punishment for the prisoners and rightfully so,since the prison warder should of known his actions would of tormented the already condemned men.

Without any reasonable doubt, it is certain to say that the  decision, to deport undocumented immigrants like Mr. Garcia, whose life was terminated  with his family in the USA by being deported back to his country, was cruel and inhumane.

This brings me to another point; as to why the Democrats, who say they are genuinely for the DACA recipients have not rushed to sign a deal with the GOP? Why,if the DACA immigrants are central , and are a priority have they not conceded to President Trump’s request to fund the border wall?

Some put forward the legitimate excuse that it was the words uttered at last Thursday’s meeting by President Trump that derailed the bipartisan talks. Any comment from anyone were the allegation is true, of any such language, cannot be condoned, but however, it is still important for the elected representatives to return to the business of governing the country in order to :-

  1. Ensure protection to the DACA or ‘Dreamers’ in the USA.
  2. Fund the border wall.
  3. Extend the Children Health Insurance Program.
  4. Health Care Taxes.
  5. Avoid at all costs a government shutdown in the short-term so that the government would be running uninterrupted.

It is unfortunate that the talks were sent in another direction and went off-topic but as Chester Karass stated :-

“even when things are not going well, maintaining the initiative under adverse conditions is a common but difficult problem in negotiation. People are taken aback by unfavourable statements and arguments from the other side. Most become reluctant to assert themselves when caught in a mistake or when aggressively challenged by another person. Few like to be contradicted in daily life. Unfortunately, negotiation is one part of life fraught with contradiction and , all too often, intense confrontation.”

But negotiation is also about granting concessions, Senator Lindsay Graham((R.S.C) put in practically when he said :-

 it was clear that both President Trump and Democrats, particularly Sen. Dick Durbin (Ill.), wanted to strike a deal, but that both sides would have to compromise to get there.”

The South Carolina Republican said that

there appeared to be “two Trumps”: one who spoke with compassion at an initial meeting with lawmakers from both parties as cameras rolled; and the other who at a closed-door meeting rejected a bipartisan proposal later in the week … So Tuesday, we had a president that… who understood immigration had to be bipartisan, you had to have border security as essential, you have border security with a wall, but he also understood the idea that we had to do it with compassion,” Graham said.

The Senator added “I don’t know were that guy went, but “I want him back”.

 

The Economic Model of the The Invisible Chest: The Role of Social Media, the Internet, Technology and Virtual Forces in Today’s Market.

“No one sews a patch of unshrunk cloth on an old garment, for the patch will pull away from the garment, making the tear worse.  Neither do people pour new wine into old wineskins. If they do, the skins will burst; the wine will run out and the wineskins will be ruined. No, they pour new wine into new wineskins, and both are preserved.”

Matthew 9:16-17: New International Version

by David Bryan

Broadly, the invisible chest contains a combination of  the new gems of the economy consisting of social media,  the internet,  technology and virtual forces which guides individual actions in today’s market. This invisible chest is connected to the invisible hand: the economic forces.  The invisible hand is Adam Smith’s metaphor and has been a central one in economics since 1776. “It’s a neat metaphor” but it is not the only economic forces guiding the direction of society.

There are also two other forces at play;  “the invisible handshake” encompassing social and historical forces and the “invisible foot” representing political and legal forces.

It is posit that the theory of the invisible chest is just as important as the invisible hand, invisible handshake and the invisible foot in modern day economics.

Bitcoin and Crypto-currencies

The invisible chest theory was borne out of this author’s struggle to crystallize the right definition and explanation for the rise of crypto-currencies, such as the ever popular Bitcoin and place it in its proper perspective of the new economic dynamic of today’s society.

The argument is that  the invisible chest gives insight into the economic phenomena of not only Bitcoin, but the stories relating to the Amazon effect, the #MeToo movement, Uber, Netflix and even Angry Birds.

It was not that Bitcoin was an anomaly confounding analysis and market regulators as to how to properly define Bitcoin, whether as a money or as an asset; it was there was a need “to expand the dimensions of economic analysis” to encapsulate Bitcoin.

Bitcoin is part of the invisible chest. Bitcoin, indeed; has no rival. But so too was the steel pan- the last musical instrument to be created in the 20th century; but it was still classed as a musical instrument, just like the guitar, the drum, the piano, and the violin- all made by specific manufactures.

So the point is this:  there is absolutely no correlation between Bitcoin and the steel pan. But both are defined within there specific groupings. The question is then: Is Bitcoin money?

Bitcoin is part of the money market ecosystem, where there are clear rules defining the difference between “issuance”,  “printing” and “regulation” when it comes to money and the creation of money.

Money is issued from the governing authority, printed under authority and regulated by the authority. Financial  institutions operate on the same money spectrum even though they loan “money”, there are still under and are regulated by the authority.

Bitcoin, crypto-currencies and those computer financial institutions using block chain technology issuing “bitcoin money” are unregulated.

Bitcoin and crypto- currencies cannot be considered “money”, but are rightfully designated in the same class of stocks and bonds, categorizing them therefore as financial assets.

All assets currently operating, buying and or selling on the market are under supervised regulation and regulated. Crypto- currencies and Bitcoin cannot be the exception given the amount of money, risk, volume and values in the trading of these crypto assets.

Action by the authorities  to regulate crypto currencies must be immediate and decisive in order to protect any foreseeable contagion to investors and any possible fallout from the crypto currencies market.

If we know of the realistic possibility of ‘tulip fever’ every thing must be done to prevent the break out and spread to harm the population. Panic and and melt down must be avoided; as far as possible; so as to quarantine any attempt of a  massive sell-off which may infect and cause any sudden market crashes in traditional arenas.

Bitcoin, first general mis-conception is that because people do not understand or like it , does not mean other capitalist cannot enjoy it. By that, is meant to say ;if Bitcoin is a financial vehicle which allows others to capitalize on the creation of wealth, that is all well and good and shows the working of a free market economy.

There are those who prefer to drive a particular model car but all vehicles are subject to rules and regulations once they are on the road.  Bitcoin  will have to adhere to those laws which govern the sale and purchase of financial asset vehicles in order to protect the safety of the market.

Secondly,  the fact that Bitcoin can be accessed at ATM machines does not make it money. You can also get any type of snack at a vending machine, but that doesn’t make the snack an asset. If some one made an ATM for gold, it will still dispense gold, and gold is not money.

Bitcoin at its premium, therefore is now considered an important element in the invisible chest that is guiding the invisible hand of economic forces and cannot escape regulation; since it has a great influence on individual action in the market. But it is not alone.

The Invisible chest can be divided but not limited to the following:-

(1) Social Media -: consist of companies such as Facebook, Google, Instagram, SnapChat, Telegram, What’s App, Twitter etc;

(a) Subdivided into #MeToo, #Times Up, #BlackLivesMatter etc

(2) Internet: On-Line companies:- consist of Amazon, Alibaba, Netflix, Paypal, Uber etc

(3)Technology: consist of companies, Microsoft , Apple, Smart phones, Cloud base technology, etc

(a) sub-divided Message Apps: Texts eg. Angry Birds; Candy Cush, Uber etc

(4) Virtual specialized Cyber; Reditt, drudgereport, HuffingtonPost, TripAdvisor

The above are just a few of the examples and are not exhaustive and some companies can overlap such as Uber.

The invisible chest fits right into the micro and macro theories of economics. To demonstrate the relationship of the invisible chest in today’s market and society one has to apply the economic theory to reality.

This author took a random unscientific selection of stories on Saturday January 13, 2018 from the internet in an attempt of objective analysis of the workings of the invisible chest.

1.Social Media

Facebook: Share price drops 4.4 per cent after news feed change announcement wiping $3.3 billion off website founder’s fortune.

(a) Sub group: Hashtag Twitter:

Washington Post headline:’ Sexual Harrassment Inc.” How the #MeToo movement is sparking a wave of Start-ups: The article quoted one start-up eEquitable; to help companies and employee address issues of bias,discrimination, harassment and the uncomfortable situations that fall in between.”

One another example from the random selection was

Technology: Smart -phone;Texts:

” Mobile phone users received a message saying “Ballistic missile threat inbound to Hawaii seek immediate shelter. This is not a drill”. Hawaii text message alert was ‘false alarm’.

It must be noted that the #MeToo movement effected society and deal with an issue which required urgent attention for women in every sphere; the media, film, sports and music to the extent it created real change ; that Time magazine voted the hashtag #MeToo;  Person of the year for 2016.

Not to be outdone; is the fact that for the very first occurrence in the history, a  President of the United States has used Social Media through his Tweets to circumvent established media outlets to go directly to the American people in order to inform Americans in real time his thoughts, policies  which cover all aspects of the political economy of the USA; the Executive,the Legislature, the Judiciary and the security forces.

Equally, President Donald Trump’s Twitter account @realDonalTrump featuring his ‘Tweetside Chats’ can influence the markets almost instantaneously as seen from some of his tweets and provide important insights for economic purveyors as seen recently with the important Tax cuts legislation, which resonated with many Fortune 500 companies granting pay raises, bonuses to their employees and declaring new multi-billion dollar investments in the country.

Other real-life examples can be gleaned are for instance:-

Internet: Amazon

If ever there was a company that proves the fact that invisible chest theory is connected to the invisible hand it is Amazon: It has also created the world richest man Jeff Bezos.

In streamlining the retail industry it  Amazon by fault or design; has restructured the brick and mortar giant retailers such as K-Mart, Sears, JC Penny and now; Wal-Mart;

Netflix‘s rise was Blockbuster’s demise.

Technology: Message Apps

Some companies can offer an IPO based on the strength and popularity of the App.  It has been seen  that the  Angry Birds game owned by Rovio Entertainment; the Finnish parent of the popular smart phone game had a valuation for their IPO for the Helsinki NASDAQ for $1 billion. Another example is that What’s App was sold to Facebook for $1 billion.

Negative Impact

No doubt, the invisible chest has had a real impact on the  market -both positive and negative as the case of Tweets which highlight injustice or wrongs.

The same is true that the invisible foot and the invisible handshake work against the invisible hand and the invisible chest for example:

Silk Road were this site was used to masked the distribution of illegal drugs, by users hiding their identity to evade law enforcement and order the drugs online and have them delivered to their door-step. The political and legal forces terminated this site because it was against the law.

In virtual technology, countries are susceptible to cyber attacks such as the one carried out on Sony . Now, some nations have dedicated whole cyber military units to counter this threat.

Even the company Uber has had their licence not renewed and in France the company has come under greater scrutiny because of the need for stricter regulation of  that company- again the workings of the invisible foot.

Th problem of cyber hacks where thieves steal massive amounts of on-line data for sale or compromised the privacy of users such as in the case of Ashley Madison or were highly classified information is leaked on the internet compromising law enforcement as in the case of Wikileaks.

Conclusion

The new economic reality is controlled and directed by not three but four invisible forces: the invisible hand, the invisible foot, the invisible handshake and the invisible chest.

The invisible chest is yet another dimension of economic analysis to explain its force in real-world events and the inter-relationship of economics, history, sociology and politics.

I have provided the economic framework of the theory of the invisible chest but it is not limited but open to the practical assumptions of economics in today’s market.

Comfort Women.

The issue of “comfort women” is a highly emotive and sensitive  between South Korea and Japan. History is replete with similar examples were apologies would never seem to remedy the injustice that was carried out, for example the Jews and the Holocaust, Africans and slavery, genocide in Rwanda and Bosnia-Herzegovina.

The truth is that apologies cannot remove the stain of transgressions committed in the past, what it does is : it acknowledges the wrongs committed.

Therefore the apologies offered by Japan previously does not mean they were not made genuinely to South Korea.  On the contrary, the evidence is confirmed by Japan signing the historic Agreement with South Korea in 2015.

Let’s be clear; apologises cannot replace atonement. The Agreement was the first step by Japan in its attempt to make amends for the wrong doing against comfort women.

For South Korea to request a further apology from Japan- thereby unilaterally going behind the final 2015 Agreement – does nothing but set the process and progress achieved between the two countries two steps backwards.

Other ways for international cooperation and agreement must be found to enhance the relationship between Japan and South Korea, so as to incorporate further support to the comfort women within the discretion of Japan.

It is understandable, that for South Korea that ‘apologies’ really cannot right all the wrongs. But, forgiveness of those wrongs will help heal the awful scars left behind by what was done by the Japanese military.

One is not asking the people of South Korea to gloss over the inglorious conduct of the Japanese soldiers or forget history , but South Korea must not allow the old wounds to remove a constructive relationship with its neighbor Japan, who has indicated before, it is prepared to do more for the ‘comfort women’.

Net Neutrality means Net Neutrality.

By David Bryan

The debate on net neutrality involving the Federal Communications Commission (FCC) decision, to deregulate the rules governing the neutrality of the internet vis-a-vis internet service providers, telecommunications companies and consumers in the United States of America, is an important one.

The argument put forward by the FCC that deregulation will allow more ” competition, investment and innovation” are the wrong reasons why the specific rules regarding the services provided are to be removed; especially given the  reality that such a move will ultimately grant a small majority of telecom corporations the power over hundreds of millions of internet consumers to raise their rates; however and whenever it pleases them.

The FCC’s mandate is to regulate communications and entities involved in communications; as soon as the FCC ventures into the jurisdiction of “competition” it does so in error. If, the decision by the FCC opens up the consumers to an unfair advantage by a few large communication conglomerates; the oversight rests in the domain of the Fair Trading Commission (FTC).

The role of the FTC cannot be understated, given the fact there are over 60% of internet users who have only one telecom service provider and the others have only two options. This  scenario  should immediately trigger an anti-competitive trade investigation on the impact of such a decision.

The decision to deregulate net neutrality -cannot be done on an ad hoc basis, just only after the implementation of 24 months or appears to be carried out in a nonchalant cavalier manner without properly addressing the genuine concerns of the millions of internet users.

The FCC  has the right to remove regulations on the internet; but it does not have the right to allow monopolistic, unfair trade business practices, price discrimination or policies by its own actions that would harm the regulation of the internet -so that the said ISP’s and telecom companies are now able to self-regulate the very internet- in which the FCC is suppose ensure such a situation does not happen.

Put another way, ignoring the symptoms and treating the patient with the wrong cure will still harm the patient. The FCC decision which will adversely affect hundreds of millions of users of the world wide web must not be implemented until properly reviewed and or challenged.

 

If, no bona fide Presidential winner in Honduras -New Elections have to be Called.

By David Bryan

There can be no proper reason why the Tribunal’s recount results of the Honduran election has been inordinately delayed. With each passing hour, the credibly on the veracity and soundness of the recount will be called into doubt.

The process or lack thereof, will obviously be  seen as deliberate and calibrated, not only to stall the declaration of a bona fide winner but cause irreparable harm to the integrity of the the Honduran electoral system.

The only viable solution regardless of the outcome, so as to remove any perceived questionable variances between both Presidential candidates Jan Orlando Hernandez and opposition leader Salvador Nasralla, appears to be : is to hold fresh elections.

The ensuing statement by the Organisation of American States; Secretary General Luis Almagro, call for, inter alia, new Honduran elections if any “irregularities” undermine the credibility of the results in the instant, is therefore well founded and cannot be easily dismissed.

The people of Honduras have every reason to ask why the excessive delay in the recount in declaring  a winner and to seek redress via legitimate and peaceful means in order to protect their right to choose a leader by the process of  one person one vote.