The Absolute Wrong Way to Stop Ransomware and Hacking

 

Just when I thought the idiocy on this topic had reached its pinnacle, I was proven wrong yet again.

See today’s FT “White House implores businesses to strengthen ransomware defence”

The word “implores” particularly set me off.

Then I thought a bit more and remembered—or at least I think I do—how this sort of decisive approach has been successful in the past.

Here are just two examples:

1. Following an appeal from the SEC a few years back, the incidence of financial fraud and market manipulation in the USA has dropped dramatically. As has insider trading.
2. After both my wife and I implored the little ones who live with us to eat healthy for their own good, we’re no longer asked for cookies or ice cream. Both grandmothers have reskilled and are now bringing vegetables when they visit.

While there has been no reaction yet, I’m confident that my letter to the President Biden and Senator McConnell is about to usher in an era of bipartisanship not seen since “peace guided the planets and love steered the stars”.

Naysayers out there might comment that business with few exceptions has been asleep at the switch so long now, that it’s almost certain that they don’t have a clue where the switch is. Or what it does. Or how to operate it.

Or that imploring the habitually somnolent and negligent to “take action”--particularly when the action involves spending money—has not proven to be particularly efficacious.

They’re wrong as demonstrated above.

Though I will admit that it seems strange to call the addressees on the memo business “leaders”.

One final note.

If you’ve been inspired by this blogpost and want to establish peace in the Middle East, on the Korean Peninsula, or in the Gulf, please feel free to direct your own memo imploring the parties to take action.

I won’t mind.

I had intended to do all those things myself.

But currently I am focused on learning Romulan to write the memo that will "fix” any dangers to our way of life from UFOs. I think we’re not far enough into the season that it would be the Borg.

Kumbaya!

Bonus Gratuitous Snark

Some further thoughts that occurred to me after I first posted the above.

Additional rather sad conclusions that have to be drawn from this episode.

First, the memo contains 5 recommendations for action that might charitably be described as the blindingly obvious.  Things equivalent to lock your doors, don't run with scissors.

Hardly, the sort of advice that captains of industry should need to receive for two reasons.

• The advice given isn't rocket or computer science.  Just common sense steps. 
• The warning should not be necessary, they should know this already.

If they missed either or both of these points, it's pretty clear that they need to step aside for those with the aptitude and attitude required to do the job.

The memo is a damning assessment of the calibre of our business tycoons. 

Though to be fair that assessment is supported by successful ransomware attacks on companies who did not lock their doors, etc. and the woeful lack of preparation at other firms as noted in my earlier post.

Second, but it's not just the captains of industry who are in for criticism.  

What does it say about the US Government? 

As my mentor used to say "you can tell you're in a third world country, when problems are addressed through rhetoric rather than concrete action".  

Unintentional Investment Advice from the Chairwoman of the Federal Reserve

A Case of Goldilocks' Fever?

Earlier this week the Chairwoman of the US Federal Reserve System spoke at The British Academy President's lecture.

She was asked about the possibility of a new financial crisis, according to Reuters.

"Would I say there will never, ever be another financial crisis?" Yellen said at a question-and-answer event in London.

"You know probably that would be going too far but I do think we're much safer and I hope that it will not be in our lifetimes and I don't believe it will be," she said.

It's either a case of inadvertent investment advice or perhaps an indirect disclosure of health problems.

More likely the former. 

So it's an appropriate time to adjust your investment criteria to the side of more caution, if you haven't already given the new Administration in Washington..

US Elections: Nur Ein Wenig Harmloser Spass (Just A Little Harmless Fun)

Spot the Republican candidate for the Reichstag, sorry, Congress from the 9th District in Ohio.  Rich Iott.

He's not on the far right but second from the right which I guess might make him a moderate of sorts when you consider the wider context.

He explained that he participated as a history buff and as a way for a father to bond with his son.  If I remember correctly, there is an old saying "The family that goose steps together"  though I forget the rest of it.  I suppose that's the important bit, though, isn't it?

While I'm probably confusing a historical event, I believe the candidate was also heard to say:

1. Ich erkenne mich nicht schuldig.
2. Befehl ist befehl. 
3. Die Fahne hoch!

In any case, those familiar with this repulsive ideology  know the central importance of the Viking in the "Aryan" myth along with the Celtic Cross and Runic symbols.  That's why of course the SS Unit adopted the name  in the first place.  And why other later adherents of the ideology did.  The Wiking-Jugend.  Several "Aryan" rock bands  with variants of Wiking in their names. 

Just a little harmless fun, so they tell us.

Idiocy Knows No Borders: Mice with Human Brains

Hidden Camera Picture from Inside NIH Laboratories

Well, just when you thought you'd heard everything, something new pops up.

The Republican candidate (who else of course) for Senate from the great state of Delaware apparently rang the warning tocsin of a manifest danger to our nation back in 2007.  Sadly though it appears no one heeded her:

"They are -- they are doing that here in the United States. American scientific companies are cross-breeding humans and animals and coming up with mice with fully functioning human brains. So they're already into this experiment."

Now I suspect many of you out there are wondering if this could possibly be true.  I'd point out that Ms. O'Donnell made her remarks on Bill O'Reilly's show.  And if that doesn't settle the issue for you, I'm not sure what other arguments would.

One thing we can be sure of from this story though is that we have pretty conclusive proof that scientists have been successful in their efforts to cross-breed humans with mice brains.  I think Ms. O'Donnell's words speak for themselves.

You may also be wondering who "they" are.  I'd tell you but I'm pretty sure I can here the very faint "whump, whump" of the black helicopters circling overhead   I did ask the real estate agent if we were outside the range of the UN spy satellites.  She assured me we would be.  But I guess she didn't know or, perhaps, may have been in on the plot.  

 Outside my window, right now.

Additional posting may be delayed today.  I'm going to nip out to the local store.  While I did line my enormous tarboush with tin foil last week, I think it's time I put tin foil on the walls around the area in which I blog.  One can't be too safe. 

If  I don't post again, well you'll know what happened. 

And for God's sake keep your eyes open for mice on bicycles!

JPMorgan's Dimon Excoriates Hedge Funds Lack of Intelligence

Unnamed Senior Managing Director at Undisclosed Hedge Fund

JPMorgan's Chairman and Chief Executive Officer, known primarily for his "Fortress Balance Sheet", is also known for his suffer no fools, take no prisoners candor.

They say that many a senior officer of JPMC has been reduced to embarrassed impotence with a curt "If I want your opinion, I'll ask for it.  Just give me the facts".  Though to be fair, "they" are reported to say a lot of things.  Some of which others say are not true.

Today in characteristically blunt fashion, Mr. Dimon assailed Hedge Funds and their staff. 

Commenting on the new financial regulations (which his firm approves in principle but apparently not at the pesky level of implementation), Mr. Dimon was quoted by the Financial Times:

“It is highly ill-conceived, doesn’t reduce risk at all. As a matter of fact, it probably complicates it for some [customers]”.

He said hedge funds and other derivatives users would have to deal with two separate legal entities depending on the type of securities they trade.

As usual the most vulnerable members of our society are made to pay the price of poorly thought out rules.

As we have documented right here on this blog before, most employees of financial firms, including the most senior and highly paid, are really bad with maths. 

That seems to be the least of their problems.  Today we learn that they have trouble distinguishing between legal entities.  What might seem to those not familiar with the financial world a rather critical skill when buying bonds or equity.

It's unclear what shameful shortcomings are yet to be revealed.  Memory problems?  How does one remember which firm to call when there are so many?  Morgan Stanley, JPMorgan - is that one firm or two? Goldman Sachs, Sachs Fifth Avenue - one for socks, one for stocks, but which one for which? 

"I want to trade a bond. Do I call Goldman, Morgan or JPMC?  Or Staples?"  And imagine the plight of those poor souls who still have the Bear or Lehman on their speed dials.  Spending hours listening to the ring tone as they patiently wait for the answer that never comes.

To the many heartless critics who ascribed problems in the financial sector to greed. I hope you're ashamed of yourselves.  It turns out after all that these problems are all due to a lack of skills.  Rather basic skills.

1. Excessive bonuses.  A case of greed?  No.  The chap who calculated  them messed up the transformation of the bonus percentage to a decimal.  "Do I move decimal point two spots to the right or the left?   Must be to the right because who but a socialist or worse would go to the left?" "From each according to his ability, to each according to his cupidity" turns out to have been a simple math error.
2. The Great Recession (almost a Depression).  Again it was a question of not understanding the maths.  "You mean a guy with zero income can't pay back a loan?  Who'd have thought?  I figured that 20 years x 12 months x 0 equaled the loan principal plus interest."

Now, while Sarah Palin isn't my President yet, I have written her pleading that her Administration make its first priority doing something for the most vulnerable among us:  those who work in finance.  I call it the "No Banker Left Behind" Act. 

Threat to Capitalism Warning Notice: Expansion of Shareholder Rights

If you weren't scared by my earlier post, you w'll be by this one!

They say that courage is like a potato chip.  Try one and you're likely to be back for more.

After reading my earlier warning on the appearance of yet another manifest danger to the free market system, one of our readers has called my attention to an even greater danger.  And one frankly I had been avoiding mentioning.  But fortified with yesterday's "first chip" of courage, here I am today confronting another manifest imagined danger.

How much fear can one human bear?  I suppose with courage more than one initially thought.  If you're feeling brave, read on.

I know that many of you out there will be saying what could be a greater danger than more disclosure of CEO pay packages?  Socialists on motorcycles?  Disclosure of senior officers' expense reports?  You had how many "massages" in a single night at the Pen in Manila?  Just how many scotches do you have to drink to run up a $750 bar tab in five hours?  By the way what were you doing in a bar for five hours on a business trip?

No this time the danger is an expansion of shareholder rights.  And again we have the FT to thank for making us all aware of the stealth assaults on our way of life, though I would note  more in sadness  than malice that they did also give a forum to those who support the measure.   Fringe individuals and groups like two former SEC Chairmen, Calpers, self-appointed corporate governance experts.  So we may have to mark the FT down as a waverer in the fight to preserve our way of life. 

The proposed SEC rule on "proxy access" would allow shareholders to nominate up to a quarter of a company's board members. It would allow shareholders to nominate directors if they own 1 per cent to 5 per cent of stock, depending on the company's size, and amend a federal measure that allows management to exclude shareholder proposals that nominate directors.

Sounds simple.  And even good.  Who could argue with an expansion of democracy?  Of shareholders' rights?   

The rule under discussion is "probably the most flawed and unworkable proposal" the SEC has issued on proxy access, the US Chamber of Commerce, the business lobby group, wrote in its letter. Tom Quaadman, its executive director for capital markets, said yesterday that the group was keeping all of its options open, including a lawsuit against the SEC.

Wachtell, Lipton, a big Wall Street law firm, said the proposal would have "negative consequences" for US companies and competitiveness.

When a distinguished firm like Wachtell Lipton or the US Chamber of Commerce weigh in, you know you should listen seriously.  No doubt they're remembering just how well the boards of Citigroup, Lehman, Bear Stearns, Enron, and others - selected, I would remind you, without shareholder interference -  enhanced "competitiveness" to know that the system works just fine as it is.

Threat to Capitalism Warning Notice: Disclosure of Salary Metrics

I was just recovering from the warning that bicycle riding socialists were invading our great land to impose mandatory recycling, when a new danger to the free market system has apparently appeared on the horizon. 

It is the provision in the Dodd Frank financial "reform" legislation that requires financial firms to publish the ratio between their CEO's pay package and that of the average worker. 

It doesn't sound like much of a danger but it must be because I read it in the Financial Times where the article was placed prominently  on the first page.  Clearly a reflection of the seriousness of this mortal threat.  

It is I suppose human nature to avoid confronting the hard truth.  And AA is no exception.  Yesterday I said nothing.   But today in a rare display of personal courage, I've decided to post on this so that those of you out there who may have missed the warning, will be alerted.   I'm not sure what you or I can do to stop this pernicious danger to our very way of life.  How we might "Restore Honor to America".

Two quotes illustrate the danger.

The rules’ complexity means multinationals face a “logistical nightmare” in calculating the ratio, which has to be based on the median annual total compensation for all employees, warned Richard Susko, partner at law firm Cleary Gottlieb. “It’s just not do-able for a large company with tens of thousands of employees worldwide.”

It's hard to disagree, I suppose, with learned counsel Susko.  I mean after all there'd be the initial compliance puzzle of distinguishing among median, mean and mode.  Then the onerous data collection (no doubt by hand) of salary and compensation data which of course companies don't bother to keep as they don't need it to calculate pensions, raises, bonuses, payments to local social security schemes,  etc.  "Fred, would you mind bringing in your paystubs from last year?  You won't believe this but some pointy headed bureaucrat in Washington requires that we figure out what we're paying you!"  And what if it were a foreign employee, a Jacque in Paris, a Sanjay in Mumbai, how on earth can banks be expected to figure out what a Euro or Rupee is worth in good old American money?

But beyond that there would be the number crunching.  And if one thing is crystal clear, it's that banks have a real devil of a time working with numbers.   Imagine the difficulty this calculation poses in contrast to more pedestrian things such as valuing Level III assets, determining VaR, running Monte Carlo simulations to mark to market trading positions in exotic instruments, running credit portfolio risk models, keeping track of all those credit card transactions for  their millions of customers, etc.   

When you reflect on all of the above, you'll understand why financial firms are just not equipped to do this sort of thing.  And why imposing it on them is not only unfair but another step on the road to serfdom!

And

“We’re not debating the concept of disclosure – we think it’s a good thing,” said Larry Burton, executive director of the Business Roundtable, which represents chief executives of the biggest US companies. “But you can do more harm than good if you take a well-intended piece of policy and implement it badly. That’s the risk here.”

Another eminently sensible position.  Of course, we agree with the concept of disclosure.  Where we part company is on actually implementing the principle.  In an earlier time, I suppose the refrain was:  "Of course, we hold that all men are created equal.  But just don't ask us to free our slaves.  It would lead to all sorts of harm." 

As would disclosing this data.  First, there would be dissension within firms.  The old collegial spirit of the group broken down.  Then imagine what might happen if shareholders used a metric like this to  determine the value added by the Chairman or CEO.   One hopes that the more enlightened members of our legislative branch are already working to eliminate not just this foolish idea but any disclosure of senior officer compensation.  Or if not now, maybe in November.

Haven't banks and bank CEOs suffered enough unjustified persecution?

Idiocy Knows No Borders: Terrorist Babies

You may recall, if you're prepared to think some very scary things, how Dan Maes revealed that his opponent in the Republican primary for Governor of Colorado was under the influence of the United Nations and promoting programs (bicycle riding and recycling) which posed a manifest danger to our very way of life. Luckily for our embattled Republic, Mr. Maes will be representing the Republican Party in the general election - the UN's plan in Denver having been dealt a hopefully fatal blow.

But dangers abound.  Stepping forward with the latest warning is Representative Louie Gohmert, Republican, Texas who asserts in the following clip future terrorist babies are being born right here in America by illegal aliens, spirited back home for the necessary training and indoctrination, and then to be later infiltrated back to conduct their nefarious operations.   

While the good Representative did not provide conclusive proof of his warning, I think he did conclusively demonstrate that Idiocy Knows No Borders - a perhaps even more imminent and critical threat to the USA.

You Said What?: Tomalin Reveals Why There Will Always Be Banking Crisis

Taking a leaf from Charlie Prince's notebook, Michael Tomalin, CEO, of NBAD revealed why there will always be bad loans and banking crises in this article from The National:

“The problem if every bank is name lending and you are not is that it puts you in an awkward position,” Mr Tomalin said.

Dance to the music.  And pay the piper later.

Or perhaps, "But, Mom, all the kids were doing it".

You Said What? Subervsion Alert: The Bicycle Conspiracy

Communist Bicyclists on the Way to Your Town!

In a saying wrongly attributed to Sinclair Lewis we're told that "When Fascism comes to America it will be wrapped in the flag and carrying a cross".

But have you ever wondered how Collectivism and eventually Communism will come to America?  And perhaps to your own country, if they haven't already?

Well, I certainly have!

One brave man (pictured below) Dan Maes has broken the silence and dared to tell the shocking truth.  It will come on bicycles bearing re-cycling bins! 

Dan Maes, Patriot, Profound Thinker and Proud SUV Driver

If you're faint of heart or a sun-shine patriot read no further.   But if you love your country, read on, brave citizen.   From the Denver Post.

"Republican gubernatorial candidate Dan Maes is warning voters that Denver Mayor John Hickenlooper's policies, particularly his efforts to boost bike riding, are "converting Denver into a United Nations community."

"This is all very well-disguised, but it will be exposed," Maes told about 50 supporters who showed up at a campaign rally last week in Centennial.

Maes said in a later interview that he once thought the mayor's efforts to promote cycling and other environmental initiatives were harmless and well-meaning. Now he realizes "that's exactly the attitude they want you to have."

"This is bigger than it looks like on the surface, and it could threaten our personal freedoms," Maes said.

He added, "These aren't just warm, fuzzy ideas from the mayor. These are very specific strategies that are dictated to us by this United Nations program that mayors have signed on to."

You Said What?: Apparently Time is Running Out

Sorry to be the bearer of bad tidings. But here at Suq Al Mal we don't shrink from telling it like it is.

Damas Extends Standstill To September - Business Model Apparently Validated Yet Again

From Nasdaq Dubai 22 July:

Damas International Limited (the Company) announces today that the Company has signed an extension to the standstill agreement signed with a majority of its bank lenders. 

 

The standstill agreement has been extended until 30 September 2010 in accordance with its terms in order to allow the Company to finalize its restructuring plan and having regard to the Ramadan period. The Company has agreed a term sheet with the steering committee of its bank lenders and which has now been sent to the entire lender group for approval.  

The Company is pleased to announce that a majority of its bank lenders have approved the extension which proves once again the confidence of the Company's bank lenders in the strength of the underlying business model of Damas, a Company spokesman stated.

With respect to latter comment, I was surprised that Damas neglected to mention their lenders' confidence in Damas proven corporate governance model.  So I will mention it here.

Some commentators might remark that the lenders are making the best of a bad situation in the hopes of securing their recovery.  But those with Vision (like AA) know this can't possibly be right.  Can it?

Abdullahs Roll in Recovery for Damas

This is the actual headline in The National, though I suppose at some point the editor will change it to "role".  But the original headline is forever immortalized above.

Some quotes from the article which are just too good to pass up.

The three Abdullah brothers, whose family founded Damas jewellers and were held responsible for unauthorised transactions including about 50 property deals and two tonnes of gold borrowed from the company, are back at the firm – in charge of recovering money owed to the company.

Someone is definitely getting "rolled" here.  I suspect it's the hapless shareholders once again.

Though in light of this explanation from Damas' new CEO, shareholders will probably have a better understanding of the Abdullah Brothers' transactions.

“Not everything was well documented, which was very normal in the jewellery business. Most of the business was done on the basis of a handshake and based on the personal relationship between the management and the business partners … One of the three brothers was in charge of that file. Without his assistance, any progress on the recoveries front would have been impossible.”

An interesting explanation for what might charitably (and AA is always charitable) be described as theft.  It's always very important to be sure the documentation is properly prepared when you take someone else's assets.

In any case it's pretty clear from the above quote that the new CEO has an apparent keen understanding of  the intricacies of corporate governance.  There isn't the slightest doubt in my mind that he will be looking out carefully for their interests.  And making sure any related documentation is in tip top shape.

You Said What?: Sue Myrick "The Iranians are Coming"

Well the thing that concerns me, and you mentioned this briefly, Iran is working with Venezuela. And they're transiting through Venezuela, taking Spanish for maybe six months. They're getting the false documents that they need, coming up through Mexico and if they're stopped, they just say well I'm Spanish. And it, oh I mean Mexican, and it only takes a smart border agent who knows the difference in the accents. He can tell, but if he doesn't have that, there's no way to know.

And the other thing that we're seeing, and we're seeing it in your state in particular in the prisons is Farsi tattoos. Farsi is basically a Persian language, which Iran is, and we know we've seen Arabic tattoos in our prisons for a long time, but we haven't seen Farsi tattoos in a long time. That's a pretty good indication that these people coming across our border are not just coming from Mexico and other countries that are looking for work. And that's what scares me. Being on Intelligence, we know there are people who are are here who do want to do us harm who are already in the country and it's not a matter of will they get in anymore, it's a matter of they're already here because of our lax border laws.

Well, as I'm sure you'll agree, this is mighty disturbing.  Rather sophisticated Iranians - capable of learning Spanish in six months - are infiltrating our country.  The only thing that stands between "them" and "us" are the language skills of our border patrol.  If they can't tell a Mexican or Spanish accent from  a Farsi  one, we're in for big trouble.

Of course, if they have those "Farsi tatoos", I suppose that would be another way to catch them.  Though I have to admit it's unclear why they would have these tattoos.  Wouldn't that undermine their clever disguises?

And if they're in jail, haven't we already caught them? Or is this a diabolical plan to take over our prisons?  And what greater threat to our nation?  For what more symbolizes a nation than its prisons? 

Perhaps, convenience stores?  And there's another threat lurking there.  And it isn't Apu.

After all this AA is pretty scared but not more than by two chilling facts:

1. Representative Myrick has represented the 9th Congressional District in North Carolina since 1995 .
2. She has a seat on the House Intelligence Committee.

I'm hoping the name signifies the Committee works to raise the intelligence level of its members.  No Representative left behind, no matter how far back he or she starts out.

Dubai: Self Made Challenge

HH Shaykh Mohammed Bin Rashid AlMaktoum set the record straight in an interview with CNN.  Or more precisely will do so next week when the interview airs.

Like Global Investment House in Kuwait, Gulf Finance House in Bahrain and several other careful students of the market, he's identified the sole cause of current problems - the global financial crisis.  As we always note here at Suq Al Mal out of an abundance of caution to prevent anyone from drawing the wrong conclusion, that's global with a lower case "g".

"The recession is a global phenomenon and I do not think that we in Dubai fear it, but instead we consider it a challenge."

It's often said that true progress and development comes by challenging oneself.  Sadly, other members of the GCC, like Qatar, apparently don't feel up to challenging themselves in quite the way that Dubai is challenging itself.

While in reference to Dubai World, he adds: "I'm not worried about the company, the company has got the wealth. So they have something, and they will come back very very quickly."

You Said What?: No, Really You Did? The "Nonsense" of Transparency

Indeed you did as this extract from a BIS publication shows.

Cross-border investment flows should be welcomed by recipient countries and encouraged by source  countries, as many countries in our Area need to set rules to enable the establishment of large projects for  the purpose of creating jobs. That will also enhance peace and stability on the national level, which will certainly improve the prospects for the regions in this vast Area. Any help by the World Bank in improving and unifying investment laws in addition to watching their implementation, will go a long way in achieving this important regional objective.

Sovereign Wealth Fund source countries should also be interested in investing in mega projects in the region for three reasons, as follows:
1. The Global Financial Crisis proved that investments through Industrialized Advanced Countries’ investment banks are not totally risk free.
2. There is a need within SWF source countries to safe guard flow of food imports at reasonable prices, and the possibility for incorporating companies as direct investment projects in countries in the region is a realistic possibility, when investment laws are enacted and maintained at international standards.
3. SWF source countries should be interested in the maintenance of social order, peace and stability in the regions of this Area.

Another reason that makes me think that SWFs from our region might change the flow of their direct investments, is that once we see the proposed Regulations re Sovereign Wealth Funds in the Industrialized Advanced Economies start being implemented, when economies in the West start doing well, more questions will be asked and more forms will become necessary to fill and more disclosure and transparency will be demanded. This behavior will signal that there is no strong need for foreign capital in the West, and that the political mood has changed.

Therefore, we might see gradual tightening of the scrutiny on capital flows from SWF countries, at one stage, especially funds that are destined for direct investment in certain companies.

Faced with all this nonsense, SWFs will certainly come to the conclusion that it is time to change strategy. This could make SWFs avoid direct investment in certain companies, or even avoid direct investment in all companies, and become more of passive investment vehicles in the West. As, SWFs have large sums to  invest, this might make them direct part of their investments to existing or newly created companies in the region. This situation, if it happens soon, will lead to creating a new regional developmental cycle.

You Said What?: Europe Can Learn Debt Management from Dubai

The following was reported in The National on 26 May.

European countries grappling with Greece’s financial crisis could learn from Dubai’s handling of its own debt problems, Sultan Ahmed bin Sulayem, the chairman of Dubai World, said yesterday.

The Dubai Government had intervened positively to provide a solution to the emirate’s debt problems and ensure no banks were in financial danger, Mr bin Sulayem said.

Dubai’s response to the financial crisis “should be adapted and learnt by the European countries in facing and tackling the crisis in Greece”, he said during a speech in Dubai yesterday.

From the Gulf News 27 May: "DIC Seeks Three-Month Repayment Delay".

"It is not a standstill. It is a request for extension of maturity,"  "The extension period would allow the implementation of a consensual longer term plan that would enable DIC to maximise the value of its business for the benefit of all its stakeholders,"

From the Financial Times 9 May:  Dubai Holding Advisers Engaged".

From Trade Arabia 26 May:  Dubai Holding Debt Restructuring "Risk Mounts"

"Dubai Holding is seen as the next subject of the emirate's debt restructuring programme which started with Dubai World in November, Saud Masud, head of research for the Middle East and North Africa at bank UBS, said in an interview.
'We believe Dubai Holding has roughly $15 billion in loans and bonds but this does not include any off balance liabilities arising from investor or end-user default on properties that have dramatically declined in 18 months,' Masud said."

From the Financial Times 27 May, Simeon Kerr reporting.

"Government cash flows remain meagre and analysts worry about its ability to raise more debt in the current environment. The banking system remains tight and in need of more liquidity to finance businesses and real estate projects.

UBS, for example, has said Dubai developers may need to raise another $11bn to finish semi-complete the real estate projects that haunt the city.

More hard work is necessary for Dubai to turn the corner."

If you decided to swim the Channel and had to be pulled out by the scruff of your neck in order to save your life, it's probably not a good idea to boast about your aquatic and athletic prowess.  If other members of your family are still flailing around in the water, it's probably an even better idea to avoid making similar comments about your family's skills.

Global Investment House - Returns to Sound Principles of Investment, Corporate Governance, Asset Valuation and Strengthening of Management with New Competencies

As part of its campaign to repair its brand and image, GIH held a two day seminar /training session for members of the Kuwaiti press on how to read financial statements (clearly a very needed and worthy goal) earlier this week.  At the closing ceremonies in which the participants were presented certificates, both Ms. Maha Al Ghunaim, Chairperson and Managing Director, and Mr. Bader Al Sumait, CEO spoke.  Both AlWatan and AlQabas have articles in their 27 May editions.

Let's start with a quote from Ms. AlGhunaim - which incidentally was the headline used by AlWatan for its article.

مها الغنيم: «جلوبل» تعلمت من الدروس الماضية ورجعت إلى القواعد السليمة في الاستثمار والحوكمة وتقييم الأصول وتعزيز الإدارة بكفاءات جديدة

The above quote can be roughly translated as:

Maha AlGhunaim:  "Global learned from the past lessons and has returned to sound principles in investment, corporate governance, asset valuation, and strengthening of management with new capabilities."

Which I suppose we can take to be an admission that at some point it was operating with unsound or no principles in those rather key areas in running a business.  Sadly, the reason for that lapse wasn't addressed.  Or wasn't reported.  In any case it is, I suppose, comforting that this is a "return" rather than a "first encounter".

As you'd expect, both GIH's Chairperson and CEO sounded themes designed to put a positive spin on the firm, though frankly my head is still reeling from the quote above.

1. To my surprise I learned from Ms. Maha that the putting of GIH's assets into the Global Macro Fund and the Real Estate Company was designed to protect their value of the assets and preserve the rights of the shareholders.  Mistakenly, I had thought this was done to facilitate creditors' ability to seize the assets in case of a failure by GIH to perform.  You'll recall hat these assets (some US$1.7 billion equivalent) are pledged to the banks.  In the event of default, instead of having to go through the laborious and legally risky step of registering a host of individual assets in their names, all they need do is take the equity in the two companies.  Presumably, with documents of transfer already signed by GIH - whose shareholders confirmed the transfer and the restructuring in their Ordinary General Meeting.  So that all the legal steps apparently have been well covered.  In any case, when you're wrong, you're wrong and it's good to be set straight.
2. Global's asset management business is large - US$6 billion in assets under management - and the firm is at the top (literally summit) of the regional asset management cohort.
3. Global's research and analysis is rigorously impartial and professional.

There was also a tour d'horizon on local and international affairs to reinforce the image of expertise of GIH. 

1. There was some discussion on the crisis - global in nature.  You'll note that that's "global" not "Global".  Unprecedented distress requiring unprecedented government action.
2. Some criticism of the Kuwaiti Government's efforts to deal with the crisis.  Not enough done.  The USA's program was held up as a model.  The KG needs to start buying assets to alleviate the problems as clients wallets are empty and the banks sit on their liquidity.
3. A  prediction that some of the distressed Kuwaiti companies are probably going down this year.  Those that didn't face their problems with "courage".  I wonder who Ms. Maha might be  thinking about when she mentions courage.  Perhaps, Mr. AlMusallam? Mr. Al Janahi?
4. The loan market is likely to be tight and not improve before 2011.  
5. The Kuwaiti Government pumped a lot of money into the banks but they're not lending.  Rather they're asking the Government to issue bonds so they can employ their liquidity.  Considering all the excellent lending opportunities in Kuwait that the banks don't have, I guess this is surprising to some.
6. It will be wise to give listed firms time to get ready for the new Capital Markets Authority Law.  And the KSE should not try to be an interim CMA.   The experience in Egypt, Dubai, Oman and Saudi is good and should be studied. 
7. The Government's privatization scheme may founder on its desire to make a profit.  Conditions are not conducive to trading.  The Government should bear in mind the benefits to both itself and the private sector from privatization. 
8. The GCC states plans to intervene to prop up the Euro (and thus their foreign investments denominated in the Euro) were criticized.  Government money should be spent in Kuwait solving the crisis at home. 
9. Apparently, there is a rumor that she and Mr. Al Sumait are being considered for the CMA Board!  Though it seems that she and Badr have only one thought and that is to preserve and protect the rights of GIH's shareholders.  How very lucky that is!   I trust they saved a seat for Dherar.  Or Ali. 

You Said What?: The Nonsense of More Transparency and Disclosure

As reported in The National.  One hopes erroneously.

"At the same time, Mr al Suwaidi said, increased regulations of sovereign wealth funds by the West may deter the funds from making foreign investment. “More questions will be asked, more forms will become necessary, and more disclosure and transparency will be demanded. Faced with all this nonsense, sovereign wealth funds will certainly come to the conclusion that it is time to change strategy.”"

Gulf Finance House Responds on Auditors' Matter of Emphasis on "Going Concern"

Update:  GFH denies issuing this statement.  Let's see if AlQ replies.

According to AlQabas GFH has issued a statement on its auditors' matter of emphasis on management's assumption of GFH as a going concern.

GFH's well reasoned argument is reported to consist of the following:

1. This sort of thing is a part of internationally accepted auditing principles.  Unspoken apparently is the idea that auditors are always doing this sort of thing - making a mountain out of a mole hill because of some silly "principle".
2. 1Q10 results demonstrate clear improvement.  
3. And the results are really "distinguished"  ( نتيجة مميزة )  given the difficult times.
4. The improvement reflects the hard work of executive management who have reorganized operations without the need for additional provisions.

I glad that GFH has taken the time to set the record straight.  

After hearing these powerful arguments, I'm sure many of you will have a hard time taking the auditors'  apparent "box-ticking" quibble about lack of liquidity or weak capital adequacy seriously.  I know I don't.

In any case, in the interest of fairness, I'll be looking for additional commentary from GFH tomorrow on this topic - though I don't know how much piling on of logical firepower GFH's poor auditors are going to be able to withstand.