Thirsty Rock

2007 has turned out to be a difficult year for anyone involved with subprime mortgage lending and most should be relieved that this Annus Horribilis is coming to a close. Seventy billion dollars in write-downs was announced in the first two weeks of December, all related to so called NINJA loans (No Income, No Job, No Asset). Experts expect more losses before the situation normalizes late into 2008. This week the Federal Reserve Bank plans to auction some USD 40 billion in an effort to lubricate credit markets. Earlier attempts involving several hundred billions of dollars failed to move markets. Some doubt that the puny auction is sufficient to steady a 12.7 trillion dollar industry. It would appear that credit markets have taken on a life of their own, completely outside the Fed's province. Will 2008 be an Annus Mirabilis ? Perhaps not. The current turmoil must play itself out before banks recover from a collective position of distrust.

There are many pretenders to the VoIP (Voice over Internet Protocol) throne. Skype is way ahead of the competition and has many a phone company worried sick. With an estimated 70 million users globally, Skype certainly punches above its weight. Users around the world enjoy free computer-to-computer calls over the internet while fixed-line phone companies look on helplessly. However Skype has failed to threaten the mobile telecommunications arena because of the non-standard (usually closed) operating systems embedded in mobile phones. In addition, Skype works best on broadband (high speed) internet connections such as Wi-Fi, a feature found only on the more expensive hand sets. The mobile phone market has largely been spared the onslaught from cheap VoIP calls. Until Fring showed up. What is Fring? This is what it says on the Fring website: Fring ‘s mobile VoIP application enables you to make voice calls, chat and check out who’s online before dialing (real-time presence), no ma

Trade between Africa and China has grown exponentially in the last decade breaching USD 40 billion in 2004. Most of this growth is fueled by commodity exports to China including oil and minerals. It helps that the Chinese government throws in the odd gift; a huge football stadium in Tanzania and a USD 150 million office complex for the African Union in Ethiopia are some of the recent signs of the benevolence of the People's Republic of China. Unlike financial aid from the West which is often laden with strings and is increasingly considered intrusive by most African governments, Chinese investments are unconditional. These investments are almost always targeted at infrastructure development. Compared with the seemingly endless workshops, seminars and consultancy services preferred by donors from the West, Chinese help brings meaningful relief to local communities and could be the reason why Chinese engagement is highly sought after in Africa. As a bonus, the Chinese do not tag

Investopedia defines money as "A commodity or asset, such as gold, an officially issued currency, coin or paper note, that can be legally exchanged for something equivalent, such as goods or services". Joe Plummer offers a more interesting definition: Fiat money is inherently worthless paper, backed by absolutely nothing, and because so, government must force people to accept it via legal tender laws. The last twelve months has seen the world's favourite fiat money, the United States Dollar, resemble more closely Joe Plummer's description of money. Oil exporters have taken note. Kuwait has quietly removed the dollar peg. It is rumored (and one-year forward contracts support this rumour) that Saudi Arabia is on course to unhinge the Riyal from the dollar hook. President Mahmoud Ahmadinejad couldn't agree more with Plummer. "They get our oil and give us a worthless piece of paper... the dollar has no economic value" complained the Iranian leader at th

In the ten months to October 2007, China Mobile added 55 million new subscribers to its mobile phone network. The company hosts 356 million users, over three times the subscription at the closest competitor, China Unicom . Equipment providers, from handset suppliers to switch manufacturers are clamoring for a piece of the action. In a move seen as discriminatory against foreign suppliers, the Chinese government adopted a home grown standard for third generation (3G) mobile systems despite downward pressure from European (Wideband Code Division Multiple Access) and US (CDMA 2000)) lobby groups. Beijing is one of ten test cities for the government sponsored time division synchronous code division multiple access (TD-SCDMA) standard. Excessive royalties to foreign companies and costly litigations arising from Intellectual Property rights violations are citied by Beijing as some of the reasons for pushing the Chinese 3G standard. Others argue that China is simply asserting its positi

Bluetooth technology is widely used to connect mobile phones with headsets, laptops, cameras, printers and other bluetooth enabled devices. For wireless local area networking Wi-Fi rules, OK? Not quite. Bluetooth may be the answer to small networks for which data transmission speed and coverage area are of no consequence. This technology consumes far less power at much lower cost than Wi-Fi. We set up a bluetooth network of three computers using Class 1 devices in under an hour. Class 1 devices can communicate up to 100m - coverage similar to a typical Wi-Fi installation at a fraction of the cost. Communication across solid walls was a breeze. Although Bluetooth networks are limited to eight devices per cluster (called a piconet), they can be extended by connecting two or more piconets to form a scatternet . Version 3.0 promises transmission speeds of around 480 Mbit/s.

Yesterday saw markets tumble across the globe on renewed sentiment that the credit squeeze which shrunk third quarter profits at major banks is still at play. Despite a Federal Reserve Bank rate drop from 4.75% to 4.5% which would normally favor stock, fear of the credit crisis still looms. In fact, by lowering rates Ben Bernanke may have fallen on his own sword. Investors are increasingly concerned about the return of their investment thus perpetuating seizure in the credit market. One must wonder at the effectiveness on the markets of a monetary policy based largely on interest rate administration. The evidence so far suggests that the credit markets have paid scant attention to central banks' attempts to encourage interbank lending at moderate rates. Mitsubishi UFJ Financial Group Inc., Japan's largest bank, is rumored to be short of capital and the bank was punished by the markets. Bloomberg reports that this morning UFJ stock fell the most for three months. With No

A nervous Mervyn King appeared before the Treasury committee to defend his performance in the weeks leading to the near collapse of Northern Rock, a mortgage lender. Legislative shortcomings, pleaded King, prevented him from acting swiftly in dealing with liquidity problems at the Rock. That single stroke of a masterpiece diverted the committee's attention to the Financial Services Authority, the UK financial services watchdog. Earlier, Ben Bernanke had his day before a House committee to explain the ongoing turmoil in the financial markets. Whereas King had sat back to wait out the markets at the height of the liquidity crunch, Bernanke intervened with large dollops of cash to oil market machinery. Neither stance appears to have calmed the markets. King opted for hands off crisis management to avert moral hazard, preferring tough love to bailing out wayward lenders. In the event the Bank of England Governor inadvertently left a marker unattended at a kindergarten. Bernanke

A mobile phone is a miniature telephone exchange. It accepts incoming calls, initiates outgoing calls and can act as a repeater by forwarding calls or as a switch through teleconferencing. These are the basic features of a telephone exchange. TerraNet , a Swedish firm, has exploited these features to facilitate free mobile-to-mobile calls. Using peer-to-peer technology, a cluster of mobile phones can communicate without the need to go through a base station (switch) provided they are within 1,000m of each other. This technology, being trialled in Ecuador and Tanzania, is perfect for developing countries where infrastructure is as limited as disposable income. Because mobile phones can forward calls, the effective communication distance can be extended from a 1 kilometer radius to about 20 kilometers. That is sufficient to cover most rural communities and, for example, university campuses. Like Skype , this is a subvertive, effective and disruptive technology. While manufacturers

Central banks across the world have pumped billions of dollars into money markets to limit the damage inflicted by the subprime mortgage woes. To date more than USD 300 billion has poured in from central banks in Asia, Europe and the US. By contrast Mervyn King, Bank of England Governor, has sat back, relaxed and watched the markets panic. How come? A year or so ago the BoE set a threshold at which it may intervene in a credit crisis. In a nutshell, unlimited funds are available to those banks prepared to pay one percent (100 bp) above a target rate set by the BoE. The current target rate is 5.75%. Since the start of the current market turmoil, overnight interbank rates in the UK have peaked around 6.5% or 75 bp above the target rate. The banks have not gone bowl in hand to the BoE. For good reason. The more illiquid the markets get, the higher the rates bank charge each other. However as soon as the rates breach 6.75%, limitless funds are immediately available to the big banks

Heads of state of the Southern African Development Community (SADC) meet next week in the Zambian capital, Lusaka. SADC is a group of countries whose leaders meet every so often to discuss what went wrong since the last time they met. A lot has gone wrong in Zimbabwe. The Zimbabwean economy is in tatters, held together by Band-Aid and Scotch Tape. Pump readings at fuel stations are unable to keep up with inflation. While the SADC meeting may offer a sympathetic ear to President Robert Mugabe, attempting to fix his economy is akin to picking nickels in front of a steam roller. That said, the economic fortunes of the other members of the group have been good. Economic growth is at its best in years with GDP averaging 5% over the last five years. Triple digit inflation no longer haunts governments. Commodity prices have soared, with copper taking the lead. Interest rates are down along with the cost of borrowing. Despite the drought in South Africa, corn (a regional staple) is in abund

In an attempt to settle investor nerves the European Central Bank injected some USD 131 billion into the European money markets. The Federal Reserve Bank chipped in with USD 24 billion followed by the Bank of Japan which pumped USD 8.5 billion into the Japanese financial system. According to the BBC the Australian central bank also moved to calm their market. As with any fall, the further down the markets go the faster the descent. What triggered the current mayhem in the markets? When did markets tip over? In my opinion the wheels came off shortly after the two hedge funds set up by Bear Stearns took a knock from investments in collaterized debt obligations (CDOs). Thereafter ailing funds have stepped forward, one after another, to announce fantastic losses. IKF, the German lender, and more recently BNP Paribas (a huge French bank) added further momentum to the flight of investors away from risky assets. It is interesting that the Fed injected funds into the markets on t

On Sunday 29 July 2007 the German government reportedly intervened in what some consider the worst banking crisis since 1931. IKF, a bank based in Düsseldorf, is on the skids thanks to the havoc wreaked by subprime mortgages. Jochen Sanio, head of financial regulation, is reported to have called senior banking executives to help plot a strategy to bail out IKF. Only a few months ago many believed the subprime lending problems afflicting the US to be noncontagious. However last week saw stock markets tumble on both sides of the Atlantic with investors fleeing from risky assets and seeking refuge in assets such as US treasuries. While some lenders writhe in agony, Deutsche Bank is laughing all the way to the bank. Deutsche bet on a credit crunch two years ago and their results published Wednesday show a massive increase in earnings thanks in part to the subprime upheaval.