Technology and financial whiz kids have made stock trading not what it was before. High speed computers and how they are being applied to the stock trading system are a recent development that is more a curse rather than light at the end of the tunnel. Then there is high speed communication and the ability to move huge funds across borders to effect trading makes stock trading very precarious.
The war chests of big funds today are so huge that many could dominate the trading activities of small stock markets. And when operating in concert, several funds could execute transactions many times the size of the normal daily trading volumes of a small market. The implication is that they could corner not only several stocks but virtually take control of all the trading activities in a market. They could churn stocks up and down to their advantage.
Such a situation is made worst by small stock markets with fewer stocks and smaller capitalisation, and lesser number of investors. The small traders become easy preys to the big funds. And with the permission and connivance of stock market regulators, the funds could muscle their way into the system with their computers plugged in and extracting whatever information on buy and sell in their favour.
The rationale that the same thing is being done in New York is invalid. In a big market, with many similar big funds, there is a possibility of them cancelling each other’s action. In a small market, it is like a big fish in a small pond, it can cause big waves and rule the pond.
To make matters worst, some small exchanges are in a hurry to grow, to show results, and are tempted by the big funds’ presence. The big funds took advantage of the greed and impatience of small exchanges by dangling the carrot of bringing in their war chests to increase trading volumes to a small market. In return they dictated to the small exchanges how the trading system should operate, reducing bid sizes, reducing trading fees, and applying a lighter touch through deregulations, and of course allow their computers to plug into the system. The big funds thus were able to manipulate the trading systems and rules and regulations for easy profits.
Rules could be bent to accommodate the needs of the big funds, for instance, while short selling is not allowed in many exchanges, the big funds could circumvent this through scrip borrowings. The exchanges could be easily convinced, and being a willing partner that is dependent on the patronage of big funds, they would create a scrip lending systems for the big funds to cover their short positions. The convenient excuse is that it is another business for long term investors to enjoy some income, and for the exchange too.
The truth is that these innocent and ignorant long term investors would earn a pittance in scrip lending but end up facilitating the big funds to drive down the value of their long term investments.
Under normal circumstances, most exchange regulators would not condone to such violations to the integrity of the trading system. But exchanges are hungry for income and business. The higher the trading volume the more clearing fees they will collect to boost their bottom line. And they could justify to their stakeholders with the good returns, and keep a close eye while the big funds clean up the small investors in the market. And they can claim that it is caveat emptor, that the investors came in with their eyes open. No one is forcing the investors to trade.
A more convenient situation will be an exchange that is self regulating. It can then do anything it wants, provides whatever flimsy excuses, to run a flawed system, a system that allows the big funds to take advantage of the small traders. The outcome is quite clear when only the big funds are making profits and the general investors are all losing their pants. This can only happen when the authority ignores the risk of conflict of interests, when an exchange is profit seeking and allowed to regulate itself.
The govt or authority is the ultimate arbiter of the conduct of an exchange. It is the authority of last resort to ensure that stock exchanges are properly run and not run solely for its own benefits at the expense of other stake holders. But the ultimate authority can also fall asleep, thinking that if they have the best men in charge, an exchange will be properly and fairly managed.
There are many other reasons for a govt to give an exchange a free hand to do as it likes. It can be a matter of convenience, or a matter of incompetence, that they are dumber than the exchange management and are afraid to question what the exchange is doing.
There could also be a higher objective, to want to build up a big exchange at all cost, at the quickest time. Such wild ambition, and without full knowledge of how the exchange is being run, how destructive the big funds and their high speed computers can be to an exchange, things can go very wrong. As long as the exchange management can claim that what they are doing is to achieve the objective of a big and vibrant stock market, they could be easily left off the hook.
Another condition is that there is no whistle blower. No one wants to assume the leadership to point out the flaws in the system. Everyone is watching, knowing that things are going wrong, but not willing to rock the boat. All the institutions that claimed to look after the interests of the investors just looked the other way. Maybe they could not see anything wrong. Maybe they are waiting for things to happen to play safe. Doing nothing is the safest thing to do. And the govt or authority continues in their ignorant bliss. No complains, so everything is fine.
In reality, exchanges are normally managed wisely by competent managers. There could be some misses now and then, and some of the above conditions may exist at one time or another. But it is unlikely that all the conditions will exist at the same time. When there is a confluence of all these conditions existing, the failure of the stock exchange is imminent.
All govts and regulators must be alert and watch how their exchanges are being operated, and to look out for such warning signs and to take preventive actions early. Failing to do so is being negligent and irresponsible.
12/02/2011
Let’s scoot to Sydney
From flying super first class in specially designed cabin to San Francisco, lying in cosy beds in wide bodied aircraft while crossing the Pacific Oceans, SIA is now trying a new business in budget airlines. It is like Shangri La going into foodcourt business. With this downstream business strategy, SIA’s business will be complete if it takes on food catering for the airline as well. It reminds me of DBS going back into post offices to serve the customers better.
The greatest achievement perhaps is the acquisition of another foreign talent as its CEO. Such talents are rare, exceptionally rare to find in this island. We have more than 40 years of aviation business history, but producing aviation professionals is something that is just simply difficult, like producing CEOs for our banking industry. Our locals just would not have the experience and the X factor to be CEOs of banks and airlines. The only chance to be one is by setting up a family business.
I believe this Australian CEO must come from the best Australian university, like all talented Australians. Singapore also has sent many of our local talents to Australian universities to study under the same lecturers and courses. Shouldn’t they be at par or similar in talent or knowledge acquired?
I read in the blog that an Australian university graduate of Singapore origin is driving taxi here. He has been replaced by foreign talents from, possibly Australia, could be the same course mate he studied together in university. And very likely their grades could be similar, but the Australian will be here as foreign talent, and may be his boss as well, enjoying all the perks and first class treatment as foreign talent.
There seems to be something missing. Why should two graduates from the same foreign university ended differently, one driving taxi and another as a top executive. One seen as non talent, another as super talent? Maybe their grades were different. Maybe the Singaporean was the average student of our system and the Australian the cream of their students. The truth is difficult to find out unless we can put their education records side by side for comparison.
Maybe there is something else. The X factor that Sinkies or most Asians just don’t have. Sinkies just don’t have that something to be suitable for top positions except in the civil service or as politicians. Put them into the private sector, they somehow don’t look good enough for the top jobs. Even foreign talents from third world countries look more desirable, and better, to fill top positions than Sinkies.
Maybe Singaporeans still look like their coolie parents and grand parents, somehow they don’t have that charisma to front the organization. Some say you need to look good in those high level positions. Some say it is a kind of aura, either one has it or doesn’t.
Blame it on the coolie stock. Until our coolie stock don’t look like Ah Seng or Ah Hock, until they are given the chances and exposure to be in those top positions, let’s keep them at the second level and leave the top management positions to foreigners with that special oomph. They really look good and possibly have straight As degree from the top Ivy League foreign universities. Our Sinkies may have straight As also, but ….
No wonder our taxi drivers are speaking quite good English and perfect to every inch as a butler. Many are probably graduates from foreign universities. Their fault is probably because they are Sinkies. If they hold a different passport, they could be here and welcomed as foreign talents.
The greatest achievement perhaps is the acquisition of another foreign talent as its CEO. Such talents are rare, exceptionally rare to find in this island. We have more than 40 years of aviation business history, but producing aviation professionals is something that is just simply difficult, like producing CEOs for our banking industry. Our locals just would not have the experience and the X factor to be CEOs of banks and airlines. The only chance to be one is by setting up a family business.
I believe this Australian CEO must come from the best Australian university, like all talented Australians. Singapore also has sent many of our local talents to Australian universities to study under the same lecturers and courses. Shouldn’t they be at par or similar in talent or knowledge acquired?
I read in the blog that an Australian university graduate of Singapore origin is driving taxi here. He has been replaced by foreign talents from, possibly Australia, could be the same course mate he studied together in university. And very likely their grades could be similar, but the Australian will be here as foreign talent, and may be his boss as well, enjoying all the perks and first class treatment as foreign talent.
There seems to be something missing. Why should two graduates from the same foreign university ended differently, one driving taxi and another as a top executive. One seen as non talent, another as super talent? Maybe their grades were different. Maybe the Singaporean was the average student of our system and the Australian the cream of their students. The truth is difficult to find out unless we can put their education records side by side for comparison.
Maybe there is something else. The X factor that Sinkies or most Asians just don’t have. Sinkies just don’t have that something to be suitable for top positions except in the civil service or as politicians. Put them into the private sector, they somehow don’t look good enough for the top jobs. Even foreign talents from third world countries look more desirable, and better, to fill top positions than Sinkies.
Maybe Singaporeans still look like their coolie parents and grand parents, somehow they don’t have that charisma to front the organization. Some say you need to look good in those high level positions. Some say it is a kind of aura, either one has it or doesn’t.
Blame it on the coolie stock. Until our coolie stock don’t look like Ah Seng or Ah Hock, until they are given the chances and exposure to be in those top positions, let’s keep them at the second level and leave the top management positions to foreigners with that special oomph. They really look good and possibly have straight As degree from the top Ivy League foreign universities. Our Sinkies may have straight As also, but ….
No wonder our taxi drivers are speaking quite good English and perfect to every inch as a butler. Many are probably graduates from foreign universities. Their fault is probably because they are Sinkies. If they hold a different passport, they could be here and welcomed as foreign talents.
12/01/2011
SDP’s pay recommendation for political office
Briefly, the SDP’s recommendation looks pretty reasonable with cabinet ministers getting 40 times the mean wage of the bottom 20% of the workforce. This works out to be $42k pm for ministers, with the PM getting $50k and the President $63k. Yes, very reasonable, minus the big bonuses!
What the recommendation amounts to is a pay cut for the ministers of about 90% or more. Now isn’t it ridiculous? My theory of RAR applies here. Things can look reasonable but can instantly become ridiculous when look at from another perspective.
The only misgivings I have, actually it is an observation, is how people’s mindset can be conditioned to an extent that it is so difficult to change. After all the publicity and discussions about the role of the president and how little he really does compares to a minister, the SDP recommendation still pegs the President’s salary higher than the PM. Beats me.
This kind of conditioning is very typical in Sin. Even people whose thinking are more than the average layman are affected by it. I will say, give the President an honorarium, a respectable amount given the role that he is doing. To me the President should not be getting even 50% of what a minister is getting. He should not even get what an MP should be getting, but conceding a higher amount is a respect for the high office.
I think anyone recommending the new salary package for the political office must bear in mind that it is reasonable and not ridiculous. But I must qualify that being reasonable and ridiculous is relative. The recommendation could be really very reasonable. It only look ridiculous when comparing to the current salaries of political office. Or put it another way, the current salaries look very ridiculous compare to the recommendations. Anyway both look ridiculous.
If the recommendation is to be adopted, which is another ridiculous thought, one good thing will happen. Property prices will fall as there will be lesser people able to throw their millions freely at properties.
What the recommendation amounts to is a pay cut for the ministers of about 90% or more. Now isn’t it ridiculous? My theory of RAR applies here. Things can look reasonable but can instantly become ridiculous when look at from another perspective.
The only misgivings I have, actually it is an observation, is how people’s mindset can be conditioned to an extent that it is so difficult to change. After all the publicity and discussions about the role of the president and how little he really does compares to a minister, the SDP recommendation still pegs the President’s salary higher than the PM. Beats me.
This kind of conditioning is very typical in Sin. Even people whose thinking are more than the average layman are affected by it. I will say, give the President an honorarium, a respectable amount given the role that he is doing. To me the President should not be getting even 50% of what a minister is getting. He should not even get what an MP should be getting, but conceding a higher amount is a respect for the high office.
I think anyone recommending the new salary package for the political office must bear in mind that it is reasonable and not ridiculous. But I must qualify that being reasonable and ridiculous is relative. The recommendation could be really very reasonable. It only look ridiculous when comparing to the current salaries of political office. Or put it another way, the current salaries look very ridiculous compare to the recommendations. Anyway both look ridiculous.
If the recommendation is to be adopted, which is another ridiculous thought, one good thing will happen. Property prices will fall as there will be lesser people able to throw their millions freely at properties.
The Art of RAR
I have developed a photography technique to capture images and turn them into photo paintings. The technique is called The Art of RAR, short for Reflection and Refraction. Basically the technique would not do away with all the reflection and refraction that would mess up an otherwise clean and clear image. Some of the details are in my Art of RAR blog.
Here I am talking about a different kind of RAR, the Art of being Reasonable and Ridiculous. When things are reasonable, seen or believe as reasonable, the people will accept them, some grudgingly, but life goes on. They will just shrug their shoulders and say what to do, it is the normal. When things become unreasonable or ridiculous, there will be under current, tension and anger, or more. The gap between being reasonable and ridiculous can be very wide and quite recognizable. Sometimes the two can be fused and confused. Sometimes what was reasonable, believed or thought to be reasonable can become ridiculous when there are conditions to magnify the differences.
When price of public housing was in the $30k or $50k level, it was reasonable. No argument about that. When they went to the $70k or $100k, still reasonable. People were happy to see their property prices appreciated. When the price moved up to the hundreds, $200k, $300k, still reasonable. Everyone feeling so much richer. Now the prices are $500k or more, still reasonable and affordable. Though the pain level has gone up, the threshold moves up as well. The frog in the boiling jar will get use to it. It will not spring up, no spring, unless it realizes that things have changed dramatically.
Everything is still reasonable. The young couple working through the prime of their lives to pay up a mortgage of 30 years for a public flat will not have any adverse feelings. Everyone is doing it. It is normal. This is the way things are supposed to be.
Would they ever change their perception that the normal is not really normal, not reasonable but ridiculous? It is just a matter of perception. While they are working their guts out to pay for the working class flat which is getting smaller and smaller, a retired minister could buy a much better flat quite easily with his pension, without working. And he need not have to take a 30 year mortgage, not 20 years, not even 10 years. No, he need not even have to take one year to pay. He could pay cash, in one day, instantly, with his pension.
When one compares this with the 30 year mortgage for a HDB flat, reasonableness becomes ridiculous, I think. But no, the Singaporeans would never think it that way. They would not have time to think, or would not even think about it. For the small minorities who think and are unhappy, they can get lost, be a quitter. They would not be missed. For every unhappy and unappreciative Singaporean there are thousands of hungry and appreciative foreigners waiting to take his place. It will be good riddance, a grouchy and potential trouble maker less if he quits.
For those who refuse to quit, all it needs is good communication to reach out to them, to tell them that things are so good. Everything is reasonable. Where got ridiculous? This is the Art of RAR, to be able to keep an even keel, to explain and ensure that everything is seen, believe and accepted as reasonable, even if they are plain ridiculous.
Here I am talking about a different kind of RAR, the Art of being Reasonable and Ridiculous. When things are reasonable, seen or believe as reasonable, the people will accept them, some grudgingly, but life goes on. They will just shrug their shoulders and say what to do, it is the normal. When things become unreasonable or ridiculous, there will be under current, tension and anger, or more. The gap between being reasonable and ridiculous can be very wide and quite recognizable. Sometimes the two can be fused and confused. Sometimes what was reasonable, believed or thought to be reasonable can become ridiculous when there are conditions to magnify the differences.
When price of public housing was in the $30k or $50k level, it was reasonable. No argument about that. When they went to the $70k or $100k, still reasonable. People were happy to see their property prices appreciated. When the price moved up to the hundreds, $200k, $300k, still reasonable. Everyone feeling so much richer. Now the prices are $500k or more, still reasonable and affordable. Though the pain level has gone up, the threshold moves up as well. The frog in the boiling jar will get use to it. It will not spring up, no spring, unless it realizes that things have changed dramatically.
Everything is still reasonable. The young couple working through the prime of their lives to pay up a mortgage of 30 years for a public flat will not have any adverse feelings. Everyone is doing it. It is normal. This is the way things are supposed to be.
Would they ever change their perception that the normal is not really normal, not reasonable but ridiculous? It is just a matter of perception. While they are working their guts out to pay for the working class flat which is getting smaller and smaller, a retired minister could buy a much better flat quite easily with his pension, without working. And he need not have to take a 30 year mortgage, not 20 years, not even 10 years. No, he need not even have to take one year to pay. He could pay cash, in one day, instantly, with his pension.
When one compares this with the 30 year mortgage for a HDB flat, reasonableness becomes ridiculous, I think. But no, the Singaporeans would never think it that way. They would not have time to think, or would not even think about it. For the small minorities who think and are unhappy, they can get lost, be a quitter. They would not be missed. For every unhappy and unappreciative Singaporean there are thousands of hungry and appreciative foreigners waiting to take his place. It will be good riddance, a grouchy and potential trouble maker less if he quits.
For those who refuse to quit, all it needs is good communication to reach out to them, to tell them that things are so good. Everything is reasonable. Where got ridiculous? This is the Art of RAR, to be able to keep an even keel, to explain and ensure that everything is seen, believe and accepted as reasonable, even if they are plain ridiculous.
11/30/2011
The world is black and white
Maldrid Braut Hegghammer, an assistant professor of the Norwegian Defense University College, Oslo has his article printed in the New York Times and republished in Today. The title of his article is ‘The real lesson of Iraq.’ His main argument is that the invasion of Iraq was a mistake for two reasons. One, the IEAE’s report was not reliable, and two, Iran’s effort to hide information about its nuclear facilities.
In his view, it was right for America to invade Iraq if the IEAE’s report was accurate and Iraq had the nuclear facilities to make nuclear weapons. This is the white countries logic that the black countries are bad, and will use nuclear arms if they have them, and it is the right thing for the white countries to attack black countries to prevent them from having nuclear weapons.
It is right and normal for white countries to possess nuclear arms and to use it or threaten to use it on black countries.
I must thank the Today paper to reveal this kind of black and white logic in the western world. That it is their right to have nuclear arms and to use nuclear arms. The black countries cannot be allowed to have nuclear arms. Black countries are dangerous while white countries are not. And it is alright to attack another black country using this justification.
Can Asean countries use this logic to attack one another should one country decides to go nuclear? This is White Rule. And the author and all white thinking readers will accept this Rule without question. One rule for the white and one rule for the black.
In his view, it was right for America to invade Iraq if the IEAE’s report was accurate and Iraq had the nuclear facilities to make nuclear weapons. This is the white countries logic that the black countries are bad, and will use nuclear arms if they have them, and it is the right thing for the white countries to attack black countries to prevent them from having nuclear weapons.
It is right and normal for white countries to possess nuclear arms and to use it or threaten to use it on black countries.
I must thank the Today paper to reveal this kind of black and white logic in the western world. That it is their right to have nuclear arms and to use nuclear arms. The black countries cannot be allowed to have nuclear arms. Black countries are dangerous while white countries are not. And it is alright to attack another black country using this justification.
Can Asean countries use this logic to attack one another should one country decides to go nuclear? This is White Rule. And the author and all white thinking readers will accept this Rule without question. One rule for the white and one rule for the black.
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