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- The Bursting Asset Bubbles
The recent implosion of the global equity markets - from Hong Kong to New York - engendered yet another round of the semipternal debate: should central banks contemplate abrupt adjustments in the prices of assets - such as stocks or real estate - as they do changes in the consumer price indices? Are asset bubbles indeed inflationary and their bursting deflationary?
Central bankers counter that it is hard to tell a bubble until it bursts and that market intervention bring about that which it is intended to prevent. There is insufficient historical data, they reprimand errant scholars who insist otherwise. This is disingenuous. Ponzi and pyramid schemes have been a fixture of Western civilization at least since the middle Renaissance. - Winners Of The 1997 Nobel Prizes In Economy
The Royal Swedish Academy of Sciences has decided to award the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel 1997, to Professor Robert C. Merton, Harvard University, and to Professor Myron S. Scholes, Stanford University, jointly. The prize was awarded for a new method to determine the value of derivatives.
This sounds like a trifle achievement - but it is not. It touches upon the very heart of the science of Economics: the concept of Risk. Risk reflects the effect on the value of an asset where there is an option to change it (the value) in the future. - The Process Of Due Diligence
A business which wants to attract foreign investments must present a business plan. But a business plan is the equivalent of a visit card. The introduction is very important - but, once the foreign investor has expressed interest, a second, more serious, more onerous and more tedious process commences: Due Diligence.
"Due Diligence" is a legal term (borrowed from the securities industry). It means, essentially, to make sure that all the facts regarding the firm are available and have been independently verified. In some respects, it is very similar to an audit. All the documents of the firm are assembled and reviewed, the management is interviewed and a team of financial experts, lawyers and accountants descends on the firm to analyze it. - Financial Investor, Strategic Investor
In the not so distant past, there was little difference between financial and strategic investors. Investors of all colors sought to safeguard their investment by taking over as many management functions as they could. Additionally, investments were small and shareholders few. A firm resembled a household and the number of people involved - in ownership and in management - was correspondingly limited. People invested in industries they were acquainted with first hand.
As markets grew, the scales of industrial production (and of service provision) expanded. A single investor (or a small group of investors) could no longer accommodate the needs even of a single firm. As knowledge increased and specialization ensued - it was no longer feasible or possible to micro-manage a firm one invested in. Actually, separate businesses of money making and business management emerged. An investor was expected to excel in obtaining high yields on his capital - not in industrial management or in marketing. A manager was expected to manage, not to be capable of personally tackling the various and varying tasks of the business that he managed. - Don't Hurry To Invest In Macedonia
In the near past, Macedonia seemed to have been bent on breaking its own record of surrealism. While politicians in other countries in transition from communism and socialism strive to be noticed for not stealing, their Macedonian counterparts, without a single exception, aim to steal without being noticed.
The previous VMRO-DPMNE government (1999-2002), in which Nikola Gruevski, the country's current Prime Minister, served as Minister of Finance, plundered the country shamelessly. The local papers accused then outgoing prime minister, Ljubco Georgievski - a virtual pauper when he attained power - of owning land and a residential building in the capital's most expensive neighborhood. The erstwhile Minister of Defense, Ljuben Paunovski, was recently sentenced to 42 months in prison for his pecuniary shenanigans during his tenure. Another leading figure, the former Minister of interior, Ljube Boskovski, is in the dock in the Hague on war crime charges.
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