The next month the employee submits an expense report with a request for a reimbursement for a hat. The next month the employee submits an expense report with no request for a hat reimbursement. The boss comments that he is pleased that the employee understands that there is no reimbursement for hats.
All you can do is set policy and train your employees on their ethical responsibility. Next, you audit. When you find a breach, you act — advise that policy was not followed and give a warning. If the situation occurs again — terminate.
Toshiba Corp. Bowing deeply before flashing cameras at a news conference, CEO Hisao Tanaka kept his head lowered for nearly half a minute in a gesture meant to convey deep shame and contrition. The scandal highlights how Japan is still struggling to improve corporate governance despite recent steps to increase independent oversight of companies.
In , Olympus Corp. Loizos Heracleous, Professor of Strategy at Warwick Business School in Britain, said corporate Japan is still lacking in areas such as transparency and board independence compared with the global standard. Toshiba has repeatedly apologized to shareholders and customers. It has set up an outside investigation group to analyze why the scandal happened and propose what needs to be done to prevent a recurrence. In the Olympus case, the company eventually acknowledged it hid Woodford, the CEO, won some praise in Japan for his courage in bringing dubious old-guard company practices to light.
Japanese society is conformist and prizes team work so much it tends to frown upon whistleblowers, and their legal protection lags compared to those in the West. Long-established companies such as Toshiba tend to have a highly hierarchical structure, making it difficult for employees to challenge top-down decrees. Other systematic cover-ups at big-name companies have surfaced in Japan over the years.
Another example of questionable accounting was at electronics maker Sanyo Electric Co. Toshiba shares were up 6 per cent, recovering recent losses, as investors took the resignations as a sign the company might right itself. He stepped down to take responsibility for doctored books that inflated profits at the Japanese technology manufacturer. The company said that the fraud continued through the fiscal year that ended in March, and work on revising the accounts to show the complete and true financial picture is not yet finished.
It promised an emergency stockholder meeting for September, where it plans to deliver a genuine financial report. Lack of transparency. Toshiba shares were up six per cent, recovering recent losses, as investors took the resignations as a sign the company might right itself.
Opposition leaders hugged and cheered when the ruling was announced in Congress, though it was not clear how quickly they would move or whether they have enough support to impeach the president. He said the opposition has the votes to start proceedings in the lower house though perhaps not the two-thirds majority needed for an impeachment trial in the senate. Rousseff is also reeling from a ruling on Tuesday that cleared the way for a separate investigation on alleged irregularities in her re-election campaign last year.
Congress put off for a fourth time a session on whether to back or overturn her vetoes of two spending bills after her government was unable to obtain a quorum despite a cabinet reshuffle last week meant to bolster her support. The only good news Rousseff has had recently was the confirmation by Swiss authorities that her declared enemy in congress, lower house speaker Eduardo Cunha, holds bank accounts in Switzerland, which he had denied.
Cunha, who holds the key to starting impeachment proceedings in the lower house, already faces charges of corruption in the Petrobras bribery scandal. On Wednesday he said he had no intention of resigning. Today flyers still endure hidden fees, late flights, bruised knees, clapped-out fittings and sub-par food.
The profit bit of the picture, though, has changed a lot. After a bout of consolidation in the past decade the industry is dominated by four firms with tight financial discipline and many shareholders in common. And the return on capital is similar to that seen in Silicon Valley.
Profits have risen in most rich countries over the past ten years but the increase has been biggest for American firms. Coupled with an increasing concentration of ownership, this means the fruits of economic growth are being hoarded. The last year has seen a slight dip in aggregate profits because of the high dollar and the effect of the oil price on energy firms. But profits are at near-record highs relative to GDP see chart 1 and free cash flow-the money firms generate after capital investment has been subtracted-has grown yet more strikingly.
Return on capital is at near-record levels, too adjusted for goodwill. The past two decades have seen most firms make more money than they used to. And more firms have become very profitable. An intense burst of consolidation will boost their profits more. Unlike earlier acquisitions aimed at building global empires, these mergers were largely aimed at consolidating in America, allowing the merged companies to increase their market shares and cut their costs. Profits are an essential part of capitalism.
They give investors a return, encourage innovation and signal where resources should be invested. Their accumulation allows investment in bold new ventures. Countries where profits are too low-Japan, for instance-can slip into morbid torpor. But high profits across a whole economy can be a sign of sickness. They can signal the existence of firms more adept at siphoning wealth off than creating it afresh, such as those that exploit monopolies.
If companies capture more profits than they can spend, it can lead to a shortfall of demand. This has been a pressing problem in America. It is not that firms are underinvesting by historical standards. Relative to assets, sales and GDP, the level of investment is pretty normal. High profits can deepen inequality in various ways.
The pool of income to be split among employees could be squeezed. Consumers might pay too much for goods. By and large, they are not. Scholars typically have three explanations for this: technology, which has allowed firms to replace workers with machines and software; globalisation, which has made it easier to shift production to lower cost countries; and a decline in trade-union membership. After that new companies, inspired by these rich pickings, will pile in to compete away those fat margins, bringing prices down and increasing both employment and investment.
In America that hand seems oddly idle. The obvious conclusion is that the American economy is too cosy for incumbents. In the post-war boom American firms grew into mighty conglomerates; in the s J. But in the s deregulation opened some industries, such as telecoms and railways, to competition. And a new doctrine of shareholder value led big firms, such as RJR Nabisco, to be broken-up and sprawling conglomerates to become focused.
In the s American firms faced a wave of competition from low-cost competitors abroad and, reciprocally, focused their energy on expanding overseas. Since then the pendulum seems to have swung back. Huge companies, long the focus of American worries about competition, have not actually got any bigger.
Instead they, and other companies, have become more focused. The strategy can be seen as an amalgam of the philosophies of two deeply influential business figures. Jack Welch, the boss of General Electric for two decades at the end of the 20th century, advised companies to get out of markets which they did not dominate. One way American firms have improved their moats in recent times is through creeping consolidation.
Two-thirds of them became more concentrated between and see charts 2 and 3. These data make it possible to distinguish between sectors of the economy that are fragmented, concentrated or oligopolistic, and to look at how revenues have fared in each case. And just under a tenth of the activity takes place in industries in which the top four firms control two-thirds or more of sales.
This oligopolistic corner of the economy includes niche concerns-dog food, batteries and coffins-but also telecoms, pharmacies and credit cards. Concentration does not of itself indicate collusion. Other factors at play might include regulations that keep competitors out. Business spending on lobbying doubled over the period as incumbents sought to shape regulations in ways that suited them. The rising importance of intangible assets, particularly patents, has meant that an ability to manage industry regulators and the challenges of litigation is more valuable than ever.
The ability of big firms to influence and navigate an ever-expanding rule book may explain why the rate of small-company creation in America is close to its lowest mark since the s although an index of startups run by the Kauffman Foundation has shown flickers of life recently. Small firms normally lack both the working capital needed to deal with red tape and long court cases, and the lobbying power that would bend rules to their purposes.
In the s adventurers from abroad piled into America, with the share of output from foreign-owned subsidiaries rising steadily. But foreign firms seem to have lost their mojo. Another factor that may have made profits stickier is the growing clout of giant institutional shareholders such as BlackRock, State Street and Capital Group.
Claims that they rig things seem far-fetched, particularly since many of these funds are index trackers; their decisions as to what to buy and sell are made for them. But they may well set the tone, for example by demanding that chief executives remain disciplined about pricing and restraining investment in new capacity. The overall effect could mute competition. Profits are not the whole picture. In some industries-banking is a case in point-rent-seeking will result in high pay to an employee elite instead.
The excess on top of that-which may reflect brilliant innovations, wise historic investments in intangible assets such as brands, or, perhaps, a lack of competition-is the exceptional bit. Returns on capital, concentration and prices have risen in many pockets of the economy. The cable television industry has become more tightly controlled, and many Americans rely on a monopoly provider; prices have risen at twice the rate of inflation over the past five years.
The proposed merger of Dow Chemical and DuPont, announced last December, illustrates the trend to concentration. After combining, the companies plan to split into three specialist companies each of which will have a higher share of its market than either original company had before the deal. Few firms that are not regulated utilities have public plans to pass these gains on to consumers. Concentration is contagious. As firms become more powerful those elsewhere on associated chains of customers and suppliers bulk up in response.
Google now dominates internet searches for flights and hotels. This has led Expedia, the leading internet travel-agent, to beef up by buying two of its main rivals over the past two years. The spectre of very big online travel sites dominating the purchase of hotel rooms has led the hotel firms to consolidate, too, with Marriott agreeing to buy Starwood this month. A Chinese firm, Anbang, may make a counter-bid. The industry is riddled with special interests and is governed by patent rules that allow firms temporary monopolies on innovative new drugs and inventions.
Much of health-care purchasing in America is ultimately controlled by insurance firms. Four of the largest, Anthem, Cigna, Aetna and Humana, are planning to merge into two larger firms. Firms such as Uber and Airbnb are a rare source of disruption in the economy, competing fiercely with incumbents. But many of these arguments can be spun the other way. Alphabet, Facebook and Amazon are not being valued by investors as if they are high risk, but as if their market shares are sustainable and their network effects and accumulation of data will eventually allow them to reap monopoly-style profits.
A fall from grace in the tech world is not as bad as you might imagine. The large mountains of cash they are burning today can only be justified if they eventually mature to enjoy very high market shares and margins. In the past, periods of high and stable profits have ended. Just three years after Mr Galbraith made his prediction of a cosy, collaborative business world, it was already toast: profits had collapsed by a third relative to GDP as recession struck.
If wages finally pick up it could crimp margins. The earnings-per-share of listed firms have fallen slightly in the past few quarters, though a strong dollar and declining oil revenues explain much of that. Some observers of the stockmarket argue that it is already signalling more decline. The gap between the real yield on equities and that on government bonds suggests that either firms are riskier than ever, bond yields are freakishly low, or that profits face a cyclical downturn.
Even so, it is hard to identify a mechanism by which profits might fall to more normal levels. The cable television industry is supposedly under pressure from the likes of Netflix and Amazon Prime. When Heinz part-controlled by Mr Buffett bought Kraft Foods in , it paid 31 times the free cash flow and promptly slashed spending to boost margins, suggesting it felt the threat from rival makers of cheese slices was rather small. Perhaps antitrust regulators will act, forcing profits down.
The relevant responsibilities are mostly divided between the DoJ and the Federal Trade Commission FTC , although some industries, such as railways and telecoms, also have their own regulators. Together the two bodies have roamed far and wide. The FTC spends a big chunk of its time looking at health care. The DoJ is casting a beady eye over the airlines. Yet the system suffers two limitations. One is constitutional.
This leaves them admirably free of overt political interference and lobbying but it also limits their scope. Lots of important subjects are beyond their purview. They cannot consider whether the length and security of patents is excessive in an age when intellectual property is so important.
They may not dwell deeply on whether the business model of large technology platforms such as Google has a long-term dependence on the monopoly rents that could come from its vast and irreproducible stash of data. They can only touch upon whether outlandishly large institutional shareholders with positions in almost all firms can implicitly guide them not to compete head on; or on why small firms seem to be struggling. Their purpose is to police illegal conduct, not reimagine the world.
They lack scope. The second limitation is intellectual. By the s the Chicago school of free-market thought was ascendant. Its insistence that the efficiency benefits of big mergers should not be dismissed had a big influence on the courts. Who does not prefer the rifle to the blunderbuss, the scalpel to the axe?
Such sophistication allows regulators to demand clever remedies, such as the disposal of subsidiaries. But with their heads deep in data and court rulings that set fine precedents, the scientists of antitrust are able to sidestep some troubling questions. If markets are truly competitive, why do so many companies now claim they can retain the cost synergies that big deals create, not pass them on to consumers? Why do investors believe them? Why have returns on capital risen almost everywhere?
These legal and intellectual limitations of the antitrust apparatus raise the question of competition to the political sphere-currently, alas, a realm well supplied with blunderbusses and axes wielded haphazardly and at the wrong targets. Free trade should be limited. Health-care firms should be more regulated. Foreign firms-particularly Chinese ones-should be discriminated against.
Wages should be forced up. Taxes on companies should be raised. Nowhere has the alternative approach been articulated. It would aim to unleash a burst of competition to shake up the comfortable incumbents of America Inc. It would involve a serious effort to remove the red tape and occupational-licensing schemes that strangle small businesses and deter new entrants. It would examine a loosening of the rules that give too much protection to some intellectual-property rights.
It would involve more active, albeit cruder, antitrust actions. It would revisit the entire issue of corporate lobbying, which has become a key mechanism by which incumbent firms protect themselves. New firms would invest more, employ more staff, and force incumbents to invest more in order to compete. If this sounds pie in the sky, consider the shale revolution over the past decade.
Although the industry is now suffering from low oil prices, it is a rare example of entrepreneurial spirit taking on a stodgy industry to the benefit of all. A new commitment to competition could be the source of optimism that America is desperately searching for. After all, it is only a healthy dollop of greed and a belief in a better future that prompts people to start from scratch and try to cross the moat that has been dug around corporate America.
Audit regulators have seen enough altered documentation lately that they felt the need to formally remind auditors that doctoring work papers is a no-no. The Public Company Accounting Oversight Board published a staff audit practice alert indicating its inspectors have seen cases even at firms affiliated with the global networks where auditors are adding to or altering audit files and passing off the alterations as original documentation.
The PCAOB says its inspection rules require audit firms and all their associated individuals to cooperate with the board in regulatory inspections. Audit standards on documentation also come into play, the PCAOB points out, and they make no provision for adding to or altering an audit file after the fact. The board says it has issued enforcement orders in past cases where it found improper documentation or lack of cooperation with inspections.
The article got front-page play. State claimed the money was not lost, just not accounted for. These stories are basic Journalism , the kind of bread-and-butter reporting on government that one expects from a major news organization. Even if this were just an outrageous accounting error, it would certainly seem to merit a news article. As a result, the data used to prepare the FY AGF third quarter and year-end financial statements were unreliable and lacked an adequate audit trail. Furthermore, DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions.
For clarification, these numbers reflect changes made in Fiscal Year …. These adjustments do not adjust the budget amount for the Army. The dollar amounts are possible because adjustments are made to the Army General Fund financial statement data throughout the compilation process for various reasons such as correcting errors, reclassifying amounts and reconciling balances between systems.
The general ledger data that posts to a financial statement line can be adjusted for more than the actual reported value of the line. It turns out that the same kind of indecipherable, fantastical and unauditable accounting is being done by the Navy, the Air Force and the Marines.
One news outfit that did report on this scandal is Reuters. Journalist Scot J. He went to a major Defense Department critic to explain:. The significance of the accounting problem goes beyond mere concern for balancing books, Spinney said. Both presidential candidates have called for increasing defense spending amid current global tension.
An accurate accounting could reveal deeper problems in how the Defense Department spends its money. The thing is, the Pentagon has been at this dodgy game for decades. In , Congress passed a law requiring all federal agencies to comply with federal accounting standards, to produce budgets that are auditable and to submit an audit each year.
At this point, two decades later, the Pentagon has yet to comply with that law, and therefore cannot be audited. One would think that would be newsworthy, but apparently for the major newsrooms of the US, not so much. The failure to take up this important story reflects, at a deeper level, the power of the Pentagon and the unwillingness of the media or politicians to challenge it. Only power and the derived conflicts of interest can explain this remarkable ability of the Pentagon to avoid a legally required audit.
He is a founding member of ThisCantBeHappening! The bosses of its biggest building firms have landed behind bars for padding contracts with Petrobras, the state-run oil company. At least, governance gurus joke, all the imbroglios-and a three-year-old law against bribery-have prompted companies to replace what people used to call corruption departments with compliance offices. Deloitte is the first of the Big Four to be accused of failing to co-operate with a probe by the PCAOB, created by the Sarbanes-Oxley act of , itself a response to a massive accounting scandal at Enron, an energy giant.
The firm will also have to pay 5. A subsequent probe unearthed systematic attempts by managers and partners to doctor paperwork, conceal evidence and withhold information from inspectors. A dozen now former partners and auditors have been banned from working at any of the accounting firms the PCAOB oversees, all but one of them for life.
As part of its settlement with the agency, Deloitte Brazil also faces the humiliating presence of an independent monitor until at least mid Critics of auditors will cite the Deloitte case as further evidence that the world is suffering from an outbreak of accounting fraud. Still, the overall trend around the world has been for accounting to get cleaner.
In America one good measure of this is the size of the biggest accounting restatement in a given year. Standards outside America have improved, too, partly because Europe and many emerging economies, including those of Latin America, have adopted common international accounting standards. Make no mistake. That a large listed company, and a law firm with a fierce reputation for holding corporate Australia to account, could find itself in this position in unfathomable.
In there were the accounting errors in its cash flow statement. A consumer law firm with key practices in asbestos litigation, personal injuries litigation, commercial litigation, wills, probate and estate litigation, industrial and employment law, family law and advisory services.
That controversial deal has deflected much attention away from other problems that seemed to pre-date the acquisition. WIP is the accounting term for cases that had been partially completed but for which payment had not been collected. In the interim it must account for the future payment based on the amount of work completed, the probability of success and the expected pay-out. But short sellers, and it seems the regulator, have doubted whether the WIP on its balance sheet was actually worth what the accounts said.
The first public suggestion of questionable bookkeeping came in June , when The Australian Financial Review revealed that ASIC was taking a closer look at its accounts. At the time, the Financial Review argued that the variances, were a convenient mistake at the very best. Even though the overstatement of the cash inflows receipts and outflows payments netted out, the higher inflows presented a law firm that was collecting more WIP than it actually was.
What does that mean? How much of its WIP, which is presented as an asset, is simply revenue they have failed to collect? And what did they do about it? We can only speculate at this stage, but the wording of the statement, and the specific date range, suggests ASIC knows exactly where to look. The decisions made by management has destroyed the wealth of thousands of investors, left ambitious and good intentioned legal minds facing an uncertain future, and has done little to enhance the credibility of our market.
If ASIC is able to uncover falsification, they would have succeeded where a board of directors, partners at an audit firm and unsuspecting investors failed. LAST week, Meikles lifted the cautionary it had issued on the trading of its shares after Albwardy Investments informed the group that it was withdrawing its interest in acquiring a majority stake in the company. It is not often that a suitor walks away from an asset he covets. Often, prospective buyers get rejected for offering low prices, or because the subject of the take-over is not interested in selling.
In some instances, this triggers hostile bids, an inevitable consequence of saying no to a deep-pocketed buyer. But what if the price being offered by a suitor is tempting? That is the part minorities may never get to know about the now abandoned acquisition of Meikles by Dubai billionaire, Ali Albwardy, since his company never lodged a formal offer. The first cautionary statement from Meikles in March had indicated that Albwardy wanted to buy out minorities.
That offer was to result in the delisting of the company from the Zimbabwe Stock Exchange. In that announcement, Meikles indicated that the proposed transaction could not be made until the audited financials for the year to March 31, became public. This, apparently, was achieved from the excellent performance of supermarkets, hotels and agriculture business.
The wholesaling and departmental stores businesses chalked up losses. Materially, the financial statement may only have helped reinforce the view that Meikles was still a business to bargain for, but if the expectation had been that the major shareholders wanted to gain more from the billionaire bidder by using the net asset value NAV rather than the share price, the financials did little to pull the figures.
That route, however, would have required a delisting first. Considering that the Meikles share is selling at a price below its tangible asset value, it can clearly be said that the Meikles share price is undervalued.
But whatever the price, there is no chance this could have been beyond what the billionaire Arab sheikh could pay for. If efforts to strike a friendly deal had been rebuffed by the Meikles family, Albwardy would have certainly made a hostile bid that may have found favour with minorities. That bid may not necessarily have been an all-share hostile takeover, but an offer to minorities that could have given the company entry into the conglomerate.
Old Mutual Life Assurance Company Zimbabwe, with 17 shares, holds a 6,91 percent shareholding, while Clayway Investments Pvt Ltd has 12 shares accounting for 5,05 percent of the company. The top man needs good brains around him. This amount, according to John Moxon, would have tipped the scales if it had been paid in full by now, with the net effect that almost, if not all the borrowings, would have been wiped out thereby boosting all the value metrics one can think of.
The Arabs must have said to themselves, as newcomers, will we be able to recover this amount from the government if we make an offer and it is accepted by all the shareholders. Meikles would be a good investment for him in his scheme of things, and Meikles too including minorities, and especially the long suffering small fish like the writer, would greatly benefit from such an offer especially given that the current economic landscape in Zimbabwe is too politicized, very unpredictable and volatile such that there are always vultures circling around and ready to pounce on the group — wanting to reap where they did not sow.
Talking about dynasties, John Moxon is a steely guy, always swimming against the tide but age is not on his side. The American stockmarket may be hitting new highs, but currency markets have lost faith in the Trump rally. The euro fell and the dollar rose between election day and the end of But then came a turning point. The euro has been climbing and the dollar retreating for much of For dollar-based investors, that means European shares have been a much better bet this year.
The two markets interact. A shift in the markets is also noticeable on a micro level. In the initial aftermath of the election, the big gainers were American stocks with high tax rates or those exposed to infrastructure spending; they were seen as benefiting from a fiscal stimulus. But no detailed plan for stimulus has yet been proposed, in part because the administration devoted its energy to repealing Obamacare.
Those stocks have lost the ground they made. Instead the big winner of the first half was the tech sector, which has not always been a favourite of the new president. Earnings generally have been strong and forecast revisions are the best that has been seen in the last six years, according to Bank of America, with multinationals leading the way.
The failure to pass a stimulus has also weighed on the dollar. The hope was that a strong American economy would prompt Janet Yellen pictured, right at the Federal Reserve to push interest rates up quickly. So far, America had a weak first quarter, followed by a better second quarter but only in line with euro-zone growth.
The IMF cut its growth forecast for America for and , to 2. That means Ms Yellen may proceed more slowly with monetary tightening and may be replaced by a Trump loyalist next year when her term expires; that means there is less reason to buy the greenback. The euro zone in contrast has enjoyed a pick-up in growth and the European Central Bank will be cutting back on its easing of policy.
That creates more reasons to buy the euro. But the year might not have seen its last twist with the possibility for America to escalate its trade dispute with China and its political pressure on North Korea, each of which might lead to risk aversion. That could push the dollar back up and equities down. But on the contrary, they could be a sign that things have been going profoundly wrong with the way the system is working.
As the chart shows, relative to GDP, profits seem to be regaining their levels of recent years. And those levels are much higher than they have been in much of the post-war era see chart. Jim McCaughan of Principal Global Investors says he is not too concerned about this since the nature of capital has changed; no longer is the economy dominated by manufacturing where businesses have to invest in heavy equipment, blast furnaces and the like.
But that argument, which has been knocking around since the dotcom boom, strikes me as unsatisfactory. In essence, the argument boils down to the return on capital having risen. But if that is the case then entrepreneurs round the world should be piling in, creating new businesses and expanding existing firms-especially in the light of low interest rates. The resulting competition should drive profits back down. One reason could be that certain sectors are now in the hands of effective monopolies, particularly in technology where network effects favour incumbents see our coverage of this issue.
Creative destruction may not be happening any more. And that may explain why economic growth and productivity improvements have been sluggish in recent years. It is possible, of course, although three big caveats are needed. There have been several cases in the last 20 years when companies have thought they had an enduring advantage AOL, Nokia and Blackberry, for example , only for events to overtake them. Secondly, big business was dominated by monopolies in the early 20th century, only for populism to strike back in the form of trust-busting measures.
The same could happen today; barely a day goes by without a tech company facing public controversy. Third, the marginal cost of many tech products tends towards zero which suggests that price competition eventually ought to bite hard. The tech giants may yet be cut down to size. When it comes to the stockmarket, Jeremy Grantham of GMO has a new note pointing out that investors tend to award high valuations to shares when, like now, profit margins are high and inflation is low and stable.
When profits are high, investors should fear that they will fall and pay a low multiple of current profits; instead valuations have only been higher in and the late s. Mr Grantham thinks that any shift to lower valuations would have to be accompanied by a sustained fall in margins or a rise in inflation or both.
And neither is going to happen soon. He may be right on both counts. But that should worry those who are hoping for a return to healthy economic growth. Ten years on Where might the next crisis come from? Many people treat this as the start of the credit crunch but one can trace it back to the need for Bear Stearns to rescue hedge funds that invested in mortgage-backed securities in June, or the signs of home loan defaults and failing mortgage lenders that emerged in late The subsequent tightening of credit and loss of confidence in the banking system eventually led to the collapse of Lehman Brothers, when the crisis reached its height in the autumn of see picture.
The inevitable question on the occasion of such anniversaries is: could it happen again? But the debt is differently distributed from ; more of it is owed by governments and more of it is owned by central banks. Since these banks have no incentive to hassle countries for repayment, the air of crisis has dissipated. Banks have more capital, making them more secure. And low interest rates have made servicing debt more affordable for both consumers and companies.
Given all this, where might the next crisis come from? Clearly, the two obvious possibilities are a sharp rise in defaults causing lenders to lose confidence or a signficant increase in interest rates which would trigger the same process. Defaults can occur without a rate rise if the economy goes into recession. That could result from war with North Korea apparently God has authorised President Trump to do this or a less frightening but still significant trade dispute with China.
It could result from internal Chinese debt problems since that is where recent debt growth has been concentrated. Or perhaps it will happen in the corporate bond markets, which are less liquid than they used to be, and could suffer a panic sell-off by investors in bond funds. Other possibilities include student debt or car-loan debt, where consumers may have become overstretched again. The more likely possibility is a monetary policy mistake.
The inflation never occurred but there is the risk that in the unwinding of policy, all will seem calm until the market suddenly breaks. Something similar happened in when the bond market was badly affected by an earlier round of Fed tightening. The next crisis may come from Washington.
JPMorgan Chase finally read this message on 14 December Bite the hand that feeds, you are fired! It is a simple math and logic. JP Morgan Chase is not immune to such betrayal behaviour. Some can call it subtle, in either positive or negative ways. It was the second bold move of JP Morgan to encourage investors to sell Indonesian securities. Both seemed too afraid for negative consequences by firing JP Morgan. To see how big JPMorgan is, we can employ the data provided by Dealogic.
Ranked as one of the most powerful woman in the world by Forbes, the highest one was in , ranked at 23rd, SMI was re-appointed for the second time as the Finance Minister in July In , SMI was ranked by Forbes at 37, downed from 31 in , and a bit higher in which was ranked at Totaling at IDR3t, the auction did not include new issuance, but reopening. Totaling at IDR6. Arrangers also function as the dealers. The dismissal of JP Morgan Chase case as the lead underwriter and primary dealer of Indonesian government debt securities is not barely new.
Similar cases have already happened in the past. Recall the cases of Morgan Stanley MS. What JPMorgan has lost is not limited to its function as the primary dealer, but also its status as the perception bank, the highly respected bank in Indonesian banking industry structure. JPMorgan also lost its function as the receiving bank of state revenue not related to imports, including tax, onshore excise, non-tax revenue, and penalty payments in regard to the tax amnesty programme.
The following is their assessment. Dealers in government securities So far, there are no dealers for government securities, just 14 brokers 7 brokers for capital markets and 7 brokers for money markets. System evolution over time In , primary dealers were needed to help develop the SBI secondary market. As the SBI secondary market developed, the primary dealer system was seen as unnecessary and therefore discontinued in Access to SBI was then opened to all market participants, i. The new regulation on SBI auction, which will be effective in October , states that only banks and brokers have access to the SBI primary market.
Relation between the size of public debt and the desirability of PDs The need for primary dealers may become imminent should the government issue treasury bills and government bonds under the new Government Securities Law passed by the Parliament in September Recapitalization bonds were issued through private placements.
Market supporting infrastructure has also been developed. Indonesia already owns two stock exchanges, i. Based on this infrastructure and a Scripless Securities Settlement System currently being developed by Bank Indonesia, the Ministry of Finance and Bank Indonesia are developing a secondary market for government securities.
Advantages PDs can develop a secondary market for government bonds and create market liquidity. Disadvantages A minor disadvantage might be that with primary dealers, the price of a trade might not reflect the market price, so not many participants would do securities transactions. The price seems determined only by primary dealers. Permenkeu No. Permenkeu No…. Both series were reopening issues.
The auction system was operated by Bank Indonesia. JPMorgan was not registered as one of the primary dealers. ISBN Banyak politisi, pengamat politik, ahli di bidang komunikasi politik beralih peran dan profesi menjadi kusir yang sering berdebat satu sama lain untuk hal-hal yang nyeleneh dan tidak perlu. Objek yang diperdebatkan pun biasanya terkait masalah pelanggaran etika, tata tertib, prosedur, dan segala hal terkait nilai dan norma.
Kusir sebagai penunggang kereta kuda memang doyan menjadi bunglon yang sangat mudah berubah warna ketika tempat berpijaknya berbeda warna situasi dan kondisi berubah. Tidak jarang pula mereka sering menunggangi kepentingan terselubung dalam implementasi dan eksekusi berbagai agenda.
Wujudnya sangat jelas terartikulasi dalam setiap kata dan ucapan serta perbuatan yang sangat penuh propaganda. Penunggang gelap, penumpang gelap, free rider. Dalam kalimat yang sederhana, mereka merupakan salah satu pihak yang pasti berpotensi mendapat untung dan diuntungkan bila propaganda mereka bisa diwujudkan. Just follow the money. Di sisi lain, pasti ada pihak yang buntung dan dibuntungkan sebagai tumbal dan menjadi korban dan dikorbankan.
Beberapa korban bersifat pasif. Ada pula yang reaktif dan aktif. Beberapa pihak yang reaktif karena merasa dikorbankan akan memberi perlawanan. Beberapa reaksi diaktualisasi dalam bentuk ucapan curhat atau curcol ke peer group yang tidak hostile, melainkan memberikan perlindungan dan menawarkan comfort zone.
Beberapa reaksi diaktualisasi dalam bentuk penggalangan kekuatan, minimal dalam bentuk moral. Beberapa reaksi diaktualisasi dalam bentuk pengumpulan massa, terorganisir dan tidak. Massa yang terorganisir pun biasanya mengalami pengerucutan pada segelintir kelompok kunci dan kelompok inti. Di dunia finansil, kelompok inti ini biasa disebut Primary Dealer. Di AS, mereka mendapat fasilitas kredit yang nilainya fantastis dan berbagai akses non-finansil lainnya yang memiliki nilai moneter jauh lebih besar dari nilai fasilitas kredit yang mereka terima.
Di tahun , 22 investment banking dipilih sebagai dealer utama dan kepanjangan tangan The Fed di pasar finansil dunia. Juni Di Indonesia, di tahun , 18 primary dealer atau agen utama perdagangan Surat Utang Negara SUN terdiri dari 14 bank dan 4 perusahaan efek. Lippo Bank yang pernah berjaya dan penuh dengan skandal akhirnya dilebur ke Bank Niaga pada pertengahan Juli Eksekusi peleburan dilakukan efektif per 1 Oktober dan diharapkan selesai pada kuartal keempat di tahun Jumlah primary dealer pun bertambah menjadi A CMB.
Anak perusahaan dari kedua perusahaan induk itu pun melebur juga. Menurut Rahmat Waluyanto, fungsi terpenting dari primary dealer ini adalah menjadi penggerak pasar atau market makers di pasar sekunder. Dealer ini diberikan hak akses eksklusif sebagai peserta lelang di pasar perdana dan sekunder, hak eksklusif untuk mendapatkan informasi pertama tentang program pengelolaan SUN oleh pemerintah. Di sisi lain, dealer wajib menyerap SUN di pasar perdana, memperdagangkan seri SUN yang sudah ditetapkan pemerintah sebagai benchmark, membuat kuotasi harga dua arah atau bid-offer dengan kisaran spread tertentu.
Pemerintah juga menyediakan fasilitas securities lending kepada dealer utama untuk menjamin likuiditas pasar. Sejak akhir Agustus , Bloomberg ditetapkan sebagai platform resmi untuk perdagangan obligasi primer di Indonesia. Platform fixed income electronic trading FIET mulai digunakan sejak awal kuartal keempat di tahun Adapun pokok-pokok materi perubahan PMK tersebut antara lain memuat : 1. Pasal 5 menyatakan kewenangan Menteri Keuangan c.
Pasal 7A menegaskan kewajiban Dealer Utama untuk menjaga hubungan kemitraan dengan Pemerintah Rl yang berlandaskan pada asas profesionalitas, integritas, penghindaran benturan kepentingan dan memperhatikan kepentingan NKRl;. Pengecualian diberlakukan terhadap Surat Perbendaharaan Negara tenor 3 tiga bulan dalam perhitungan kewajiban aktivitas Dealer Utama pada lelang SUN di pasar perdana termaktub dalam Pasal 7B. Dengan penyempurnaan peraturan Dealer Utama tersebut diharapkan peran Dealer Utama dalam pengembangan pasar Surat Utang Negara semakin efektif dan meningkat, termasuk dalam peningkatan likuiditas, efisiensi dan transparansi di pasar sekunder Surat Utang Negara.
Indonesian Primary Dealers, 1 September 1. Citibank N. Deutsche Bank AG 3. HSBC 4. PT Bank Panin, Tbk. PT Bank Permata, Tbk. Standard Chartered Bank Bahana Securities Danareksa Sekuritas Mandiri Sekuritas Trimegah Securities, Tbk. Cambridge Idioms Dictionary, 2nd ed.
To repay generosity or kindness with ingratitude and injury. You may need that hand one day. Terrence L. Trezvant September 28, Do not scorn or treat ill those on whom one depends or derives benefit, for to do so is to risk losing those benefits altogether. In politics, you learn quickly not to bite the hand that feeds, because benefactors can just as quickly crush your political future. Farlex Dictionary of Idioms. Like being nice villagers in remote country who then attack you and as it suits them to receive aid and simultaneously fight you.
Bank of Indonesia Bl B. Primary Dealers 1. ORI Sellers No. Bank Maybank Indonesia, Tbk 8. HSBC Bank BRISyariah Bank Negara Indonesia Syariah Bank Syariah Mandiri Why did they downgrade Indonesia and Brazil? Post the US elections year bond yields moved from 1.
Bond markets are starting to price in faster growth and higher deficit. This spike in volatility increases EM risk premiums i. It is tactical in that both economies are improving supporting EPS growth, and lower policy rates support valuations for full-year We think you will get a better buying opportunity. US and EM fixed income stability is a key condition to add back to these market.
While JP Morgan has moved Indonesia to a technical Underweight, the bank has a structurally positive view on Indonesia. But now that Trump is President-elect, things could look ugly. They accused the ethnic Chinese politician of committing blasphemy against Islam. Purnama said in a public gathering that Islamic groups were using a passage of the Koran, interpreted by some as prohibiting Muslims from living under the leadership of a non-Muslim, to urge people not to vote for him.
Purnama has apologized for that remark. This morning, the Jakarta Index tumbled another 2. Morgan is one of the largest foreign banks operating in Indonesia. In a Nov. An underweight rating means the bank expects an investment to underperform others over the next six to 12 months. The bank also downgraded Turkish equities to underweight and Brazil to neutral. The bank said its business in Indonesia continues to operate as usual and that the effect on clients is minimal.
It said it is working with the Finance Ministry to resolve the issue. On Nov. Yields rise as prices fall. The moves came amid a sharp selloff in government bonds around the globe after Mr. Mulyani has been attempting to bring more credibility to the Finance Ministry, including by cutting spending and implementing reforms to increase tax collection.
Write to Ben Otto at ben. Gary Parsons, 8 days ago Question is, how many times in the past has the threat of dropping ties led to an improved rating by the financial institution? Fred Fraenkel, 8 days ago Time will pass before the analysts judgement is either proved to be correct or incorrect.
However, the notion that censure best deals with criticism was, is and will be incorrect. Instead of really considering what they said, they ban them. The biggest U. Any tax payments by Indonesian companies which were previously routed through JPMorgan will now be passed to the government via other banks, according to Bank Indonesia Governor Agus Martowardojo. That drove the rupiah lower, forcing policy makers to intervene to stabilize the currency. It obtained an Indonesian banking license in in the name of Chase Manhattan, and opened a branch in Jakarta, followed by a representative office in In other cases, banks have altered research reports, lost lucrative contracts or parted ways with analysts following controversies about their negative opinions.
JPMorgan did the right thing by not backing down from its report, said Roy C. The bank stands to lose relatively little in Indonesia, where it does not have much financial exposure. Global banks made changes to how they perform research in , after a sweeping settlement with then-New York Attorney General Eliot Spitzer and U. They erected hard barriers between analysts and bankers and altered compensation structures to prevent conflicts of interest from affecting research.
But the conflicts persist. MC in Brazil have faced similar rows with governments in emerging markets. They cited higher risk premiums for emerging markets after Donald Trump won the U. They noted that economies in both Indonesia and Brazil are improving, with lower policy rates likely to support valuations for A government decree says perception banks are appointed by the finance minister to receive transfers of state revenue not related to imports, including tax, onshore excise and non-tax revenue.
A JPMorgan spokeswoman said on Tuesday that it continued to operate its business in Indonesia as usual. UL] in after one of its analysts issued a sell recommendation on the shares. That drove local markets and the rupiah lower, forcing policy makers to intervene to stabilize the currency. JPM , citing the U. The government said that the downgrade has the potential to disrupt the stability of the national financial system.
JP Morgan has multiple business partnerships with the government of Indonesia. Bank Indonesia Governor Agus Martowardojo reportedly said that tax payments by Indonesian companies that were earlier routed through JP Morgan will now be passed to the government through other banks. For comments and feedback: contact editorial rttnews.
But the row highlights how ratings and economic outlooks have become a tricky issue for governments, banks and rating agencies around the world in recent years. The HSBC report originally cited the wave of political protests by Occupy Central as the main reason for the downgrade.
Hours later, after receiving criticism on Twitter and other social media, the bank bumped Occupy Central to the bottom of a list of reasons for the downgrade. Banks have no incentive to reward independent research. Mr Xie left his position at the US bank after an internal memo was leaked containing disparaging comments about Singapore. In August , the bank drew the ire of the then-finance minister Bambang Brodjonegoro and central bank governor Agus Martowardojo for a similar downgrade. The Indonesian government has been sensitive to ratings from global banks since the US Federal Reserve signalled it would start raising interest rates in This story has been amended since publication to reflect that the downgrade was to Indonesian equities, not bonds.
The Scrutineer, 7 days ago Therein lies the rub, all this talk about regulating our way to in independent bank research is nonsense. It has zero bearing right now. Remember banks need publicity and profits. Governments need good news and jobs.
KSA, 8 days ago Oh dear! Image copyright AFP. It is surprising, to say the least, to hear these sorts of comments from Ms Indrawati. Investment banks regularly make calls or recommendations on equities or stocks. The fact that Brazil was given a better weighting than Indonesia has got finance ministry officials in Jakarta up in arms. Meanwhile, JPMorgan has said in an emailed statement to the BBC that its business in Indonesia continues to operate as usual, and that the impact on clients is minimal.
The bank has also said it is working with the Ministry of Finance to resolve the matter. It is true that JPMorgan has a plum spot in Indonesia — it is one of the largest foreign banks operating in the country, and has been responsible for collecting penalty payments for the tax amnesty programme the government has launched.
It is also one of the biggest distributors of Indonesian government bonds overseas — and this may be one of the biggest reasons why the government was so irate. JPMorgan is completely within its remit to provide independent research reports to clients about a country that it is also advising. Research and investment arms of banks are supposed to be separate and operate independently. But part of the problem, as independent analyst Andy Xie told me, is that the balance of power between emerging markets governments and Western financial institutions has shifted over the last decade.
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You add Skills mostly because they can help your profile show up in searches more effectively, since LinkedIn search results are partially based on what you list there. The rest of your profile tells them who you are. Hi Brian, thanks for tips, as always very helpful.
Do you think it is beneficial also to actively participate in various groups e. Do HR pay attention to it? I have been treating my LinkedIn more as my profile page getting connections and not really being active in terms of starting discussions and commenting. I think group participation is a bit overrated, actually. If you have a few spare minutes, sure, it helps to post reasonable and helpful responses, but it should be lower priority than contacting people via LinkedIn, email, your alumni network, and so on.
The social media cautions are unfortunately very true. The examples given are ones that would be universally considered inappropriate, but the scary thing is what happens when you take a certain position on a current event or political topic? It has been written about many times that one of the worst things you can do in business is hire people who think exactly like you do.
In banking I have worked with people who have strong beliefs in different religions and in pseudoscience. Sometimes these beliefs need to be challenged and brought out into the open outside of work of course , especially by young people who will be the ones shaping our policy in the future. Perhaps a young person has an opinion on the keystone pipeline, or they feel that the anti-vaccine movement is dangerous. They use social media to get those conversations going, which is a good thing.
But then what happens when the VP or HR person who is a climate change denier or anti-vaxxer sees it, disagrees, and passes on that person who may be a very good employee and highly skilled. We need to really remove the social media aspect from the talent acquisition process. It does nothing but make young people scared to voice their opinions on important topics unfortunately to the detriment of society. I love to see social media comments on ballot initiatives.
Very true. So if you have a unique name, someone can google you, see the fake Twitter, and then attribute everything said to you. I have seen numerous times where people have an axe to grind or an ex-wife or ex-girlfriend just wants a little vengeance.
There is another IBD forum online where I saw about 6 or 7 years ago some guy made a post, identified himself via first and last name, and proceeded to make an ass of himself. Every response was people saying they would put that name on a black list and call every MD they knew and would tell them do not hire this guy. Now who knows if that was done, but it seemed no one at all had the idea that maybe that guy was intentionally smearing the one that was named?
I think as the younger generation moves up the ladder, this common sense will apply more and more though since they grew up with the technology whereas their older counterparts merely were exposed to it after a long period of already being in the work force. So I do have hope even though I make some parts sound bleak. Yeah, agreed. I think I actually remember that incident vaguely.
Hi Brian, You are have simply not given the right advice to any individual. Regards, M. Sorry, what? Sorry, not sure I understand your question. I would say not more than a year, otherwise it may look a little odd so come up with a new one past that. Or are you asking when you should change your title on LinkedIn after changing jobs? You can change it as soon as you start working in the new role. Your email address will not be published.
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What is Investment Banking Networking? Networking Email Templates. Informational Interviews. Guide to Cold Emailing. Cold Calling Tutorial. Weekend Trips. Information Sessions. International Student Networking. Last-Minute Networking Tips. How to Conduct Informational Interviews. Set Up the Call — Confirm the date and time and do minutes of additional research beforehand.
The steps in the process are very similar to the ones above for informational interviews, but there are a few differences: In your initial email, you ask directly about internships or jobs.
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