Africa is widely perceived as poor and corrupt – hardly a great investment opportunity. But appearances can be deceptive, says Merryn Somerset Webb
How do you make real money? Most investors answer this in much the same way Warren Buffett does. They say that if you put your money into brilliant companies, brilliant sectors and brilliant countries, then hang on, you’ll end up rich. Global Thematic Investors (GTI) disagrees. When something is that good, most people know about it already and your purchasing price is going to reflect that, which will limit your returns even if things go as well as the market expects. And what if things don’t go as well as the market expects? Then your investment is going straight to “Money Heaven”.
Instead, say the analysts at GTI, the key to wealth is to make investments “where outcome exceeds consensus expectations”. If the consensus is that something is a basketcase and it turns out instead to be merely mildly mad, or even a recovery candidate, “it’s a sure-fire way to garner riches”. The more widespread the pessimism about an asset class, the more the odds are stacked in favour of “the early and the brave”.
This brings us neatly to Africa, about which it is hard to find anyone saying anything optimistic at all. In the developed world, the entire continent is considered to be little more than one big failed state. The papers this week alone have been full of Robert Mugabe’s £30,000 birthday party, the plight of child soldiers in the Congo, the Aids crisis in South Africa and the way in which the war in Sudan is spilling over into Chad. On top of all this, we know the region’s infrastructure is unsatisfactory, that its economies are blighted by widespread, extreme poverty and that its politics leave a lot to be desired. Africa is by almost all accounts a complete basketcase.
But look a little closer and you will see that there is more than misery here. In fact, if you take India and China out of the equation, sub-Saharan Africa is actually growing faster than Asia – which everyone thinks of as being packed with investible emerging markets. And as Patrick Collinson points out in The Guardian, the number of African nations seeing a decline in growth has fallen from 17 in 2003 to just six in 2006. Overall, the region is forecast to keep growing by at least 5% a year. There will be huge variations between countries, but the general direction is encouraging: much of Africa may be a shambles, but progress is being made.
Chinese direct investment in Africa
A great deal of this growth can be attributed to the new love-in between China and Africa. Earlier this year, China’s president Hu Jintao set off on an eight-nation tour through Africa, carrying with him the promise of $3bn in soft loans (all to come “without political conditions”) and a doubling of Chinese aid by 2009. It was just another step in the methodical courting of Africa by China: in the last 12 months, China’s top leaders have managed to visit a massive 48 African nations and last November 43 heads of African states visited Beijing. “We in China,” said Hu in one of his many long speeches, “take great pride in our friendship with the African people”. No doubt. But it isn’t just friendship China is after.
As we have often discussed in MoneyWeek in the past, China’s path from developing country to super-power needs to be paved with commodities. China needs Zambian copper, Nigerian oil, Tanzanian timber and South African platinum if it wants to keep its stellar growth rates going. It also needs food – it buys prawns and cashew nuts from Mozambique and oranges from South Africa, for example – which is why president Hu and his colleagues are so often to be found donning their lightweight blue suits and heading West. The result? Last year, trade between China and Africa soared 40% to a record $55.5bn. Direct investment has reached a cumulative $6.5bn, and at the November Forum alone 16 contracts between Chinese firms and African governments were signed. A third of Chinese oil now comes from Africa and it has recently agreed a $1.4bn deal to open new oil fields in Angola.
Benefits of Chinese investment in Africa
The many grants and soft loans that have paved the way for these deals are also bringing benefits. The Chinese have paid for a road-building programme around Ethiopia, including the “China-Ethiopia Friendship Road”, which rings the capital; they are financing the rebuilding of 100 schools and 30 hospitals in Liberia; they have cancelled $100m worth of loans to Cameroon; they have helped rebuild Angola’s once-famous Benguela railway; and they have set up a road-building programme in Mozambique.
None of this comes without its problems, but right now it seems the net effect is positive. When Hu talks about Chinese investment bringing “mutual benefit and win-win progress”, he is actually making a perfectly reasonable point. The arrival of the Chinese and their money has revitalised large parts of Africa and already huge areas of the continent have much better infrastructure than they did just a few years ago.
The key for Africa is to ensure it structures the deals it does with China so that they end up bringing some long-term benefits – in particular, this means investing the money strategically to help diversify economies away from their total dependence on natural resources. Africa has some time to figure out how best to do this – the commodities boom, and hence the seemingly unlimited supply of cash, should roll in for many years to come – and if it can get it right, many think it will mark a long-term turning point for the region. Using commodity growth to drive non-commodity growth, says Julian Ozanne of Uganda-based New Forests, represents “the best chance Africa is ever going to get to kick-start its own development”. China is, after all, the first “interested party of a significant size” to be willing to engage with Africa “without force of arms”, says Kobus van der Wath in the African Analyst.
African growth is about more than commodities
There is also a case to be made that African growth is not just about commodities. Chris Derkson of Investec tells Collinson the revival was underway long before the commodities supercycle really took off and points out that Kenya, buoyed by tourism and agriculture, is one of Africa’s fastest growers, despite having no commodities. And in Zambia, while copper exports are a boon, agricultural exports are also booming (in part thanks to the efforts of farmers chucked out of nextdoor Zimbabwe by Mugabe).
There are also already signs of a middle class emerging. In Nigeria, mobile-phone penetration is 8% and rising fast, while each user spends around $20 a month. According to analysts at Investec, events of the last ten years – the debt forgiveness that is giving nations a “fresh start”, the rise in successful democratic elections, the arrival of the commodity cash with which nations are paying off sovereign debt, and improving infrastructure – have all created a “momentum” that could now keep going even without the input of the commodities cycle.
Still, good news as this all is, the macro-environment is not the only reason to think Africa is a fantastic investment, says a recent GTI newsletter. There is also the fact that “African companies are some of the most profitable and fastest growing in the world”. Not convinced? Consider this: between 1995 and 2005 the stocks that make up the Blakeney index of African stocks showed compound annual growth of 22%. This might seem unlikely, but it does make sense, says GTI. The very factors most cite as reasons not to invest in Africa – political uncertainty, corruption and so on – have also created a group of winning firms.
Payback time has to be “lightning fast” to protect an investment from greedy kleptocrats and cash flow has to be self-generated, given how dysfunctional the banking system can be. The firms – often subsidiaries of the world’s leading multinationals – that have adapted to these circumstances have prospered and “mostly ended up monopolies or duopolies”.
However, the best news is that they are also often cheap in both absolute and relative terms. Often, p/es are half those of Western firms, despite higher growth rates, for example.
A final point to bear in mind is that it won’t take much money to get African’s exchanges moving. The total market cap of Ghana, Kenya, Mauritius, Zimbabwe and Uganda is not much more than $30m and much of that is illiquid – owned as it is by multinationals that have no intention of selling.
There are more companies coming – Derkson points to an expected round of privatisations in Kenya and Tanzania – but if much more foreign money turns up in Africa any time soon, or if the emerging middle class of Africa develops its own share-buying culture, we can expect to see markets move fast. This is already happening in Kenya, which has gone share-crazy in the last five years.
The local index has risen nearly 800% in dollar terms, and when KenGen, the state’s electricity firm, listed last year, the offer was three times oversubscribed and the shares quadrupled in the first day of trading. Nearly a million Kenyans now own shares.
Kenya isn’t the only African market to have risen recently – in 2006, markets in Botswana, Uganda, Tunisia, Nigeria and South Africa all rose well over 20% – but its extraordinary outperformance may be a sign of things to come elsewhere. With China’s investments being very well publicised and the World Cup hitting South Africa in 2010, Africa is likely to keep attracting attention.
Overall, as far as GTI is concerned, Africa is “outstanding value” and offers “the thematic investor” one of the best opportunities there is to make “multi-year, multi-bagger profits, rather like tech in 1990, oil in 1999, commodities in 2001 or Japan in 2003”.
One final reason to buy Africa: figures from Investec show that it is largely uncorrelated to other investment markets. So if you think trouble lies ahead for the booming markets in the rest of the world, you might like to start thinking of Africa in a new way: as something of a safe haven.
African investment: Where to put your money
Many of Africa’s shares look so cheap it is tempting to suggest having a go at buying individual shares listed on some of the separate exchanges. They have low p/es, high return on equity, and higher-than-average profit growth driven by fast-growing demand for goods and services. Nigeria’s biggest investment bank, IBTC, is on a p/e of six times and yields 9%; BAT Kenya, one of the region’s main cigarette manufacturers, is on a p/e of 11 times and yields 8%; while Zambia’s National Breweries is on 12 times and 8%. However, not only will this be verging on the impossible (it’s hard enough to find a UK broker that will let you buy individual shares in Japan, let alone Nigeria), but it also probably comes with more in the way of transaction costs and risk than most of us really need.
Unfortunately, the alternatives are limited. There is the Investec Africa Fund, whose managers are particularly keen on Tunisia, Nigeria and Egypt over the next two to three years. Roelof Horne, one of the managers (based in Africa), points out that the fund is not leveraged just to China or a resources boom, but “rather to the structural economic and political improvement that we are seeing in many countries across the African continent”.
I like this fund and the way it is managed (it has risen 60% since launch in November 2005) and I agree with its managers that “the opportunities in Africa have barely been tapped”, but I’m afraid it isn’t much good for most of us: the minimum investment is $1m.
Another possibility might be Botswana-based Imara African Opportunities Fund, launched in 2005 to allow international investors access to Africa’s emerging stockmarkets (it has limited exposure to South Africa and heavy weightings in Kenya, Zambia, Eqypt, and Nigeria, with an average p/e across its portfolio of about nine times). See Imaraholdings.com for more on the fund, but note it comes with a similar problem to the Investec fund: the minimum investment is $100,000. Finally, commodity funds give big exposure to the African mining sector.
JP Morgan’s Natural Resources Fund is one possibility.
The alternative is to invest in firms that do business in Africa: 40% of soap, pharma and white goods firm PZ Cussons’s sales come from Africa and Anglo American does a tenth of its business there. I have tipped PZ in the past and still like the look of it. It isn’t cheap any more on a p/e of over 20 times, but given its growth rate and exposure to Africa, it could be a long-term hold.
More speculative is Lonrho. This small Aim-listed firm (which recently changed its name from Lonrho Africa), with its annual revenues of a few million pounds, is all that remains of what was once the main vehicle for controversial tycoon Tiny Rowland’s many corporate manoeuvres and one of the biggest and most diversified firms in the world. But not for long. Its new boss, David Lenigas, has plans.
“We had revenues of $3m in February (2006) and we will have revenues of $300m by the end of 2007,” he told the FT. He intends to to rebuild Lonrho into the diversified conglomerate it once was (minus the deals with corrupt dictators and the feud with Mohammed Fayed). He may well manage it.
When he joined in 2005, Lonrho was down to £20m in cash, a stake in a hotel in Mozambique and one employee. Since then, Lenigas has been making deals left, right and centre. He’s got a controlling stake in Luba Freeport in Equatorial New Guinea, a 43% stake in South Africa-based Norse Air, a 49% stake in Kenyan discount airline Fly540 (you have to fly in Africa he says, “there aren’t any bloody roads”), a 10% stake in uranium producer Brinkley Mining and a 17% holding in South Africa-based Nare Diamonds.
He has also entered the African water sector via a holding in a Swiss firm and Lonrho intends to invest in natural resources and infrastructure, as well as branching out into luxury hotels and tourism. The shares have risen 25% in the last 12 months, but I think they are still worth buying.
Problems with African investment
Not everyone is happy with the way the Chinese have infiltrated Africa’s economies. The first problem to Western eyes is that no Chinese lenders follow the so-called “Equator Principles”. This is a voluntary code setting out social and environmental standards for financing projects in developing countries.
They aren’t always applied well, but they do act as a “barrier to projects that do more harm than good”, says the FT. Another worry is the flood of imports now finding their way from China to Africa – might local industry be swamped under cheap Chinese manufactured goods?
There is also concern that Chinese cash threatens the direction of development policy in Africa. The two main tenents of this are debt forgiveness and the linking of aid to better governance. But what use is forgiveness if China just lends Africa more money, setting off the cycle of dependence and failed repayments again? And why should corrupt regimes bother with reform if Chinese aid comes with no strings? Consider Zimbabwe. President Robert Mugabe’s birthday party this week took place against the backdrop of a ruined economy.
The price of bread is rising 100% a day; it takes a farmworker two months to earn enough to buy a bag of maize meal big enough to feed a family of six for a month. Unemployment is at 80% and many of those who aren’t, including all junior doctors, are on strike. Mugabe should be holding elections next year. He is extending his tenure instead. China is “right to invest in Africa”, says the FT, and its willingness to take risks means “it has a lot to offer”, but giving to the likes of Mugabe isn’t helping anyone: with Chinese aid on hand there’s no need for him to reform.
(MoneyWeek)
Tuesday, June 12, 2007
Stock market stability
Market action since the end of February has been lacklustre, particularly for the Dow, the words ‘dead’ and ‘cat’ come to mind when viewing the bounce. The next key technical support level for the Dow is 12000, if it does not hold, expect big sell-offs. We would not be surprised if there is some more bad stuff to come. So far, in percentage terms, major markets are not down a huge amount; the long overdue correction of at least 10% is still overdue.
Economist, Andrew Smithers, of Smithers & Co. Limited who quite recently estimated that the US stock market is 77% overvalued and the UK 68% overvalued, wrote in his World Market Update published on 28th February:
“In view of the overvaluation of stock markets, yesterday’s break could be the start of the second leg of the major bear market which started at the end of March 2000. The rising credit spreads in the corporate market, following the problems with the sub-prime mortgage market is a signal which would cause us most concern.”
Key threats to market stability
Credit spreads, the yield difference between the best quality bonds and the worst quality bonds, have widened a little; recently they were as narrow as they have ever been when J P Morgan’s High Yield Index was only 279 basis points above Treasuries. The increase so far has been to 323. At times of previous credit crunches, spreads have widened to 800, even 1000.
Two of the key threats to market stability are widening credit spreads and the rising value of the yen.
Widening spreads would impact considerably and put pressure upon the whole private equity business. Prices offered would have to fall to less attractive levels to compensate for increased debt servicing costs from rising corporate bond yields.
The “carry trade” would be severely damaged by a combination of a higher yen and lower assets prices. It is typically based upon borrowing yen and then investing in higher yielding non-yen assets with loads of gearing. Any rise in the yen would be a signal that the carry trade is probably unwinding, assets being sold to repay yen loans.
Another clue to developing conditions is provided by the stock market performance of companies such as Merrill Lynch and Goldman Sachs. These huge investment banks have, over recent years, profited massively from the liquidity driven financial business. If the market now perceives a slowing of such leveraged transactions, their share prices will be hit hard which, as you can see from the published chart of Merrill Lynch, is what has happened. Since its high in early 2007, Merrill Lynch’s share price has fallen almost 20%, indicating a current jaundiced market appraisal of their future earnings growth.
Other stock market indicators
Our Four Horses of the Financial Apocalypse have been snorting, whinnying and bucking. There is a real danger of them breaking into a wild uncontrollable gallop!
The white horse - false peace - The Volatility Index (VIX)
A sharp increase in volatility, but as yet not decisive. The previous VIX breakout occurred in May and June last year, the peak of that was 23.81. This recent breakout has so far peaked at 20.41. If this change is serious, then expect the VIX to head very much higher.
The unique economic conditions of global leverage, if unwound, could easily lead to a new all-time high being set for the VIX above 56.74. Fear has returned and suddenly the need for insurance is more important; except now insurance is a lot more expensive than it was only a week or two ago.
The red horse – war and destruction – The Philadelphia House Market Index
The US housing market news remains pretty grim. Sales of new homes in January fell by 16.6%, the biggest amount for thirteen years. House prices, year-on-year, fell 3.1%.
In the FT, Martin Wolf, recently wrote a piece headlined “Equities look overvalued, but where is the turning point?”
He identified some of the key dangers ahead:
• Markets will overreach themselves, so generating a destabilising correction (has this started?)
• Reduction in excess savings – outside the US and a tightening of the world interest rates (credit spreads have started to widen).
• Slowdown in US productivity growth (is already underway).
• A shift in global monetary conditions that threatens the soaring profitability of the US financial section (see Merrill Lynch chart).Of all the risks, he said that the biggest one is that the end of the US property boom will persuade US households to tighten their belts at last, thereby ending the US role as the world’s big spender before the big savers (Asia) are prepared to spend in turn.
Note: The words above in brackets are ours.
The sub-prime mortgage market goes from bad to worse, led by America’s second largest sub-prime mortgage provider, New Century Financial Corporation, whose share price has collapsed over 80% to 3.94. On 5th February it was 33.08.
The black horse – famine and unfair trade – Dow Theory
How quickly circumstances change. Two weeks ago we reported a very belated positive stock market confirmation using Dow Theory. The Transports had finally made a new high to confirm the new high achieved some months previously by the Industrials. Part of the theory does suggest that a long delayed confirmation is a weaker signal than a quick confirmation and this one certainly fell into that category.
The subsequent, simultaneous decline of both the Transports and the Industrials reverses the weaker positive signal into a new negative signal.
The pale horse – sickness and death – The Inverted Yield Curve
Where inverted yield curves exist in the US and the UK that situation has become more so rather than less so. The inverted yield curve is often an indicator of a future recession.
Alan Greenspan has recently spoken twice about the risk of a US recession this year. His latest statement said that there was a one-in-three likelihood. Merrill Lynch have economic models which suggest a 55% chance of a US recession this year. As we have said before, once a recession becomes official, which it does on two consecutive quarters of negative growth, the stock market should already have made its lows.
The probability therefore, is that this year, we are going to see much lower stock markets and that could happen quite soon if a US recession is to occur in before the end of this year.
On the other side of the coin, Hank Paulson, US Treasury Secretary and Ben Bernanke, Fed Chairman, have come out with market calming statements, but that’s no more than you would expect. Their job is to calm nerves not to stretch them.
We recently reported a modest purchase of Japanese stock market funds. These investments have weathered the storm quite well. Although the Japanese stock market has, like other markets, declined, the yen has appreciated so those new investments so far are under no threat.
The bear funds still being held have benefited.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
Economist, Andrew Smithers, of Smithers & Co. Limited who quite recently estimated that the US stock market is 77% overvalued and the UK 68% overvalued, wrote in his World Market Update published on 28th February:
“In view of the overvaluation of stock markets, yesterday’s break could be the start of the second leg of the major bear market which started at the end of March 2000. The rising credit spreads in the corporate market, following the problems with the sub-prime mortgage market is a signal which would cause us most concern.”
Key threats to market stability
Credit spreads, the yield difference between the best quality bonds and the worst quality bonds, have widened a little; recently they were as narrow as they have ever been when J P Morgan’s High Yield Index was only 279 basis points above Treasuries. The increase so far has been to 323. At times of previous credit crunches, spreads have widened to 800, even 1000.
Two of the key threats to market stability are widening credit spreads and the rising value of the yen.
Widening spreads would impact considerably and put pressure upon the whole private equity business. Prices offered would have to fall to less attractive levels to compensate for increased debt servicing costs from rising corporate bond yields.
The “carry trade” would be severely damaged by a combination of a higher yen and lower assets prices. It is typically based upon borrowing yen and then investing in higher yielding non-yen assets with loads of gearing. Any rise in the yen would be a signal that the carry trade is probably unwinding, assets being sold to repay yen loans.
Another clue to developing conditions is provided by the stock market performance of companies such as Merrill Lynch and Goldman Sachs. These huge investment banks have, over recent years, profited massively from the liquidity driven financial business. If the market now perceives a slowing of such leveraged transactions, their share prices will be hit hard which, as you can see from the published chart of Merrill Lynch, is what has happened. Since its high in early 2007, Merrill Lynch’s share price has fallen almost 20%, indicating a current jaundiced market appraisal of their future earnings growth.
Other stock market indicators
Our Four Horses of the Financial Apocalypse have been snorting, whinnying and bucking. There is a real danger of them breaking into a wild uncontrollable gallop!
The white horse - false peace - The Volatility Index (VIX)
A sharp increase in volatility, but as yet not decisive. The previous VIX breakout occurred in May and June last year, the peak of that was 23.81. This recent breakout has so far peaked at 20.41. If this change is serious, then expect the VIX to head very much higher.
The unique economic conditions of global leverage, if unwound, could easily lead to a new all-time high being set for the VIX above 56.74. Fear has returned and suddenly the need for insurance is more important; except now insurance is a lot more expensive than it was only a week or two ago.
The red horse – war and destruction – The Philadelphia House Market Index
The US housing market news remains pretty grim. Sales of new homes in January fell by 16.6%, the biggest amount for thirteen years. House prices, year-on-year, fell 3.1%.
In the FT, Martin Wolf, recently wrote a piece headlined “Equities look overvalued, but where is the turning point?”
He identified some of the key dangers ahead:
• Markets will overreach themselves, so generating a destabilising correction (has this started?)
• Reduction in excess savings – outside the US and a tightening of the world interest rates (credit spreads have started to widen).
• Slowdown in US productivity growth (is already underway).
• A shift in global monetary conditions that threatens the soaring profitability of the US financial section (see Merrill Lynch chart).Of all the risks, he said that the biggest one is that the end of the US property boom will persuade US households to tighten their belts at last, thereby ending the US role as the world’s big spender before the big savers (Asia) are prepared to spend in turn.
Note: The words above in brackets are ours.
The sub-prime mortgage market goes from bad to worse, led by America’s second largest sub-prime mortgage provider, New Century Financial Corporation, whose share price has collapsed over 80% to 3.94. On 5th February it was 33.08.
The black horse – famine and unfair trade – Dow Theory
How quickly circumstances change. Two weeks ago we reported a very belated positive stock market confirmation using Dow Theory. The Transports had finally made a new high to confirm the new high achieved some months previously by the Industrials. Part of the theory does suggest that a long delayed confirmation is a weaker signal than a quick confirmation and this one certainly fell into that category.
The subsequent, simultaneous decline of both the Transports and the Industrials reverses the weaker positive signal into a new negative signal.
The pale horse – sickness and death – The Inverted Yield Curve
Where inverted yield curves exist in the US and the UK that situation has become more so rather than less so. The inverted yield curve is often an indicator of a future recession.
Alan Greenspan has recently spoken twice about the risk of a US recession this year. His latest statement said that there was a one-in-three likelihood. Merrill Lynch have economic models which suggest a 55% chance of a US recession this year. As we have said before, once a recession becomes official, which it does on two consecutive quarters of negative growth, the stock market should already have made its lows.
The probability therefore, is that this year, we are going to see much lower stock markets and that could happen quite soon if a US recession is to occur in before the end of this year.
On the other side of the coin, Hank Paulson, US Treasury Secretary and Ben Bernanke, Fed Chairman, have come out with market calming statements, but that’s no more than you would expect. Their job is to calm nerves not to stretch them.
We recently reported a modest purchase of Japanese stock market funds. These investments have weathered the storm quite well. Although the Japanese stock market has, like other markets, declined, the yen has appreciated so those new investments so far are under no threat.
The bear funds still being held have benefited.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
Stock market rally last
The situation is that the stock market tops set in February remain secure. However, the markets, having fallen 7% (FTSE 100) and 8% (Dow Jones Industrials), are now enjoying a good rally. They have been helped this week by the latest Fed interest rate decision and the changes in their associated wording which point to a more likely easing than tightening. As the news was announced and the wording digested, so the Dow led markets higher, closing up 159 points on the day.
Why markets are destined for a correction
If stock markets have formed important tops, triggered by the US housing market slump and US sub-prime mortgage market woes, then they are destined to go much lower. In spite of the recent decline, it is still the case that a correction of at least 10% remains long overdue. We can but watch and wait for the market to deliver its decision. Either from below the February high, stock markets will turn over and test their recent lows (which for the Dow is 11940 and for the FTSE is 6000) or the recent rally from those very levels, will take stock markets higher and re-establish the bull trend.
Should markets recover and make new highs, we will consider closing the residual bear fund holdings and look to initiate small positions in one or two Asian markets, where the long-term future unquestionably lies. Alternatively, if, as we expect, stock markets head lower, the bear funds will do well and there will, almost certainly, be a very strong positive move by UK gilts.
The importance of the carry trade
The “carry trade”, which has been so important for stock markets, recently suffered a scary period as the yen rallied and put carry trade holdings under pressure – the carry trade is where investors borrow in a low interest rate currency, such as the yen, to invest in a high yielding currency, such as the New Zealand dollar – if the yen starts to rise, then those deals which are generally heavily geared will have to be sold. The yen, over the last two weeks, has given back some of its recent gains, bringing relief and renewed confidence to carry trade exponents. It is not likely that stock markets will do well if the yen returns to strength; for that reason, we are watching the Japanese yen/New Zealand dollar cross very closely.
Possibly by the time we write the next letter in two weeks, the market will have provided us with a clear message – we wait with baited breath.
What the stock market indicators are telling us now
Our Four Horses of the Financial Apocalypse were recently getting very boisterous but for the moment they feel reassured that the cause of their alarm, the sub-prime mortgage market, may have been overdone.
The white horse - false peace - The Volatility Index (VIX)
The VIX has pulled back to near its recent lows, having not reached the levels of June 2006. This renewed complacency would be shaken very quickly on any bad price action for assets.
The red horse – war and destruction – The Philadelphia House Market Index
No let-up on the grim news, the sub-prime mortgage market is in serious distress.
The resetting of the Adjustable Rate Mortgages that will be taking place this year and next year for mortgages set up last year, hangs over the market like the Sword of Damocles. Many US borrowers are going to face mortgage payments that are unaffordable, with no additional help available to them from the credit market. Large numbers of US sub-prime borrowers are probably financially doomed.
The 9% increase in US house building starts for February was a surprise, although it has to be borne in mind that this followed January’s grim 14% decline and a period of very bad weather. More important was the reported 2.5% decline in permits.
Donald Tomnitz, CEO at luxury house builder D R Horton, recently said “I don’t want to get too sophisticated here, but 2007 is going to suck, all twelve months of the calendar year.” And then Stuart Miller, CEO at Lennar Corp, said that they are writing off deposits and pre-acquisition costs for land it has under option. You don’t dump land if you are an optimistic house builder! Thanks to The Daily Reckoning for both of those recent quotes.
The black horse – famine and unfair trade – Dow Theory
This is the one that is going to carry the big message. The key lows and highs have been arrowed. If the coming price action takes prices below the arrowed lows for the Transports and the Industrials, then expect to see real problems for asset prices. Alternatively, if both arrowed highs are exceeded, markets might head higher quite quickly.
We think the levels we have highlighted are crucial. The good thing is they are quite close to current prices, so we should have a worthwhile signal soon.
The pale horse – sickness and death – The Inverted Yield Curve
This is the bogey-man – whilst the yield curve remains inverted, optimism must be low.
The fact that the Fed have just this week changed their tune and signalled easing rather than tightening is a clear indicator of their concern for the US economy - the danger really does lie to the downside. Lower US interest rates this year will most likely be because asset prices are falling dangerously and the Fed are desperate to put a floor under them. The inverted yield curve is predicting that will happen.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
Why markets are destined for a correction
If stock markets have formed important tops, triggered by the US housing market slump and US sub-prime mortgage market woes, then they are destined to go much lower. In spite of the recent decline, it is still the case that a correction of at least 10% remains long overdue. We can but watch and wait for the market to deliver its decision. Either from below the February high, stock markets will turn over and test their recent lows (which for the Dow is 11940 and for the FTSE is 6000) or the recent rally from those very levels, will take stock markets higher and re-establish the bull trend.
Should markets recover and make new highs, we will consider closing the residual bear fund holdings and look to initiate small positions in one or two Asian markets, where the long-term future unquestionably lies. Alternatively, if, as we expect, stock markets head lower, the bear funds will do well and there will, almost certainly, be a very strong positive move by UK gilts.
The importance of the carry trade
The “carry trade”, which has been so important for stock markets, recently suffered a scary period as the yen rallied and put carry trade holdings under pressure – the carry trade is where investors borrow in a low interest rate currency, such as the yen, to invest in a high yielding currency, such as the New Zealand dollar – if the yen starts to rise, then those deals which are generally heavily geared will have to be sold. The yen, over the last two weeks, has given back some of its recent gains, bringing relief and renewed confidence to carry trade exponents. It is not likely that stock markets will do well if the yen returns to strength; for that reason, we are watching the Japanese yen/New Zealand dollar cross very closely.
Possibly by the time we write the next letter in two weeks, the market will have provided us with a clear message – we wait with baited breath.
What the stock market indicators are telling us now
Our Four Horses of the Financial Apocalypse were recently getting very boisterous but for the moment they feel reassured that the cause of their alarm, the sub-prime mortgage market, may have been overdone.
The white horse - false peace - The Volatility Index (VIX)
The VIX has pulled back to near its recent lows, having not reached the levels of June 2006. This renewed complacency would be shaken very quickly on any bad price action for assets.
The red horse – war and destruction – The Philadelphia House Market Index
No let-up on the grim news, the sub-prime mortgage market is in serious distress.
The resetting of the Adjustable Rate Mortgages that will be taking place this year and next year for mortgages set up last year, hangs over the market like the Sword of Damocles. Many US borrowers are going to face mortgage payments that are unaffordable, with no additional help available to them from the credit market. Large numbers of US sub-prime borrowers are probably financially doomed.
The 9% increase in US house building starts for February was a surprise, although it has to be borne in mind that this followed January’s grim 14% decline and a period of very bad weather. More important was the reported 2.5% decline in permits.
Donald Tomnitz, CEO at luxury house builder D R Horton, recently said “I don’t want to get too sophisticated here, but 2007 is going to suck, all twelve months of the calendar year.” And then Stuart Miller, CEO at Lennar Corp, said that they are writing off deposits and pre-acquisition costs for land it has under option. You don’t dump land if you are an optimistic house builder! Thanks to The Daily Reckoning for both of those recent quotes.
The black horse – famine and unfair trade – Dow Theory
This is the one that is going to carry the big message. The key lows and highs have been arrowed. If the coming price action takes prices below the arrowed lows for the Transports and the Industrials, then expect to see real problems for asset prices. Alternatively, if both arrowed highs are exceeded, markets might head higher quite quickly.
We think the levels we have highlighted are crucial. The good thing is they are quite close to current prices, so we should have a worthwhile signal soon.
The pale horse – sickness and death – The Inverted Yield Curve
This is the bogey-man – whilst the yield curve remains inverted, optimism must be low.
The fact that the Fed have just this week changed their tune and signalled easing rather than tightening is a clear indicator of their concern for the US economy - the danger really does lie to the downside. Lower US interest rates this year will most likely be because asset prices are falling dangerously and the Fed are desperate to put a floor under them. The inverted yield curve is predicting that will happen.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
Financial meltdown
Investors need to wake up – we may be heading for a financial meltdown. So says Niall Ferguson, the Scottish professor of history at Harvard, who draws an ominous parallel between today’s markets and conditions prior to the financial collapse triggered by the outbreak of World War I in 1914. It was the “first great age of globalisation”, he says in Time.
Trade was expanding rapidly, growth was steady amid low inflation and interest rates, commodities were up, emerging markets were booming and volatility was historically low. “Sound familiar?”
Stock and bond markets barely budged when Archduke Franz Ferdinand was assassinated on 28 June. Only three weeks later, when Austria demanded access to Serbia to investigate alleged Serbian sponsorship of terrorists, did financial markets twig that war was not just possible, but certain.
The selling happened so suddenly, and on such a scale, that only by closing stock exchanges could a complete meltdown be avoided; the London exchange was shut until January 1915. It should have been clear to investors what damage war could do to stocks and bonds, but “it’s as if investors didn’t want to factor in [the likely war between Germany and Britain] until it was upon them”, Ferguson told Barron’s.
And just as the smart money of 1914 was blind to looming disaster, so the smart money of 2007 seems to have tuned out geopolitical risk. Ferguson points to buoyant stockmarkets, minuscule spreads between US Treasuries and junk and emerging market bonds, and the recent trend of declining volatility in stock, bond and foreign exchange markets as signs of complacency.
While a world war may be unlikely, a major conflict in the Middle East is a possibility, given the disintegration of Iraq and ongoing tension between Iran and the US. A withdrawal from Iraq by the US – today’s overstretched global policeman, a role Britain was playing in 1914 – could make the country as violent and unstable as central Africa in the 1990s, reckons Ferguson.
A geopolitical shock, such as conflict in the Middle East, could well cause such a liquidity crunch that stockmarkets would have to close. Investors today are as complacent as their great-grandfathers. “We might one day look back and say ‘God, the origins of the great Middle Eastern War of 2007 were very obvious’.”
(Moneyweek)
Trade was expanding rapidly, growth was steady amid low inflation and interest rates, commodities were up, emerging markets were booming and volatility was historically low. “Sound familiar?”
Stock and bond markets barely budged when Archduke Franz Ferdinand was assassinated on 28 June. Only three weeks later, when Austria demanded access to Serbia to investigate alleged Serbian sponsorship of terrorists, did financial markets twig that war was not just possible, but certain.
The selling happened so suddenly, and on such a scale, that only by closing stock exchanges could a complete meltdown be avoided; the London exchange was shut until January 1915. It should have been clear to investors what damage war could do to stocks and bonds, but “it’s as if investors didn’t want to factor in [the likely war between Germany and Britain] until it was upon them”, Ferguson told Barron’s.
And just as the smart money of 1914 was blind to looming disaster, so the smart money of 2007 seems to have tuned out geopolitical risk. Ferguson points to buoyant stockmarkets, minuscule spreads between US Treasuries and junk and emerging market bonds, and the recent trend of declining volatility in stock, bond and foreign exchange markets as signs of complacency.
While a world war may be unlikely, a major conflict in the Middle East is a possibility, given the disintegration of Iraq and ongoing tension between Iran and the US. A withdrawal from Iraq by the US – today’s overstretched global policeman, a role Britain was playing in 1914 – could make the country as violent and unstable as central Africa in the 1990s, reckons Ferguson.
A geopolitical shock, such as conflict in the Middle East, could well cause such a liquidity crunch that stockmarkets would have to close. Investors today are as complacent as their great-grandfathers. “We might one day look back and say ‘God, the origins of the great Middle Eastern War of 2007 were very obvious’.”
(Moneyweek)
Spring Of Top stockmarket trends
We've just hit another stock market milestone…
It began in March 2003 and has galloped all the way through to the present day. But to see and hear the way some traders, investors, and the blowhards on television have reacted recently, you'd think the world was coming to an end.
But when you take a moment to think about it, the truth is… a four-year bull market is a pretty good thing!
And that's exactly what we've had on the S&P 500. If you take a look at a chart of the index, dating back to March 2003, you'll see a strong bull market over that time, interspersed with five healthy corrections along the way. The longest pullback lasted about five months - from March 2004 to August 2004.
But right now, everyone is asking the same key questions: What does the recent market volatility mean? And is it the trigger point for another one of those "healthy corrections" - or something bigger?
Let's turn to the technicals for some clues about this stock market milestone…
US stock market trends: hangover from the seven-month party
When the market began rising in July 2006, not many people thought it would blast its way through to the end of February.
Most economists believed the correction (which began in May 2006) would cruise through the summer months into what are historically the weakest months of the year for the market - September and October. And especially given the markets traditionally experience a down cycle during mid-term elections.
But after bottoming out, the S&P 500 bulldozed into mid-October - and ended up exceeding its May 2006 highs, along with the Dow Industrials and Nasdaq indexes.
Capitalizing on increased liquidity from hedge funds and private equity funds, the overbought market continued to rise through the end of 2006 and into 2007. During this impressive 7-month rally, the Dow Industrials, Dow Transports, and all the small-cap indexes made new all-time highs.But the party couldn't last forever…
US stock market trends: the market started in February
A 9% slump in China's Shanghai Composite Index triggered a mass selling spree, with the ripple effect felt around the world.
In just three days, the Dow, S&P, and Nasdaq indexes gave back all their gains for the year. Since then, they've sprung back and forth between gains and losses.
So what next? There are two scenarios from here…
A Short Slip Or A Drawn-Out Decline?
There are three indexes that didn't toss all their gains away during the market's swoon: The Russell 2000… the S&P Small-Cap… and the S&P Mid-Cap. As I write, all three are clinging onto modest gains.
• Scenario #1: If they can stay above their 2007 lows, this correction could be short-lived.
• Scenario #2: If the small-cap indexes sink into negative territory for the year, we could be set
for a lengthy correction, or a consolidation period within a long-term bull market.
The upper blue line is drawn from the highs of March 2004, and you can see the highs from May 2006 touching it. The lower blue line is a trendline drawn off of the lows in March 2003. The red line represents the 200-day moving average.
As you can see, the S&P 500 blasted through the upper trading channel last October, before retreating back to test it just a couple of weeks later. The index then took off again, making a series of successive new highs.But when the market collapsed at the end of February, the S&P plunged back down to the top of the trendline.
This means we're now at a decision point...
Because the trendline has proved to be pretty solid support for the index since October 2006, it's possible that the bull market can resume from here. However, the February selloff inflicted a lot of technical damage, and there's probably more to go on the downside.
Stock Market Milestones: A Key 30-Point Support Range
Simply put, to confirm that the indexes have further to go on the downside, they first have to close below the lows posted during the brutal week of February 26 to March 2. That would put the S&P 500 back inside the trading channel - and then we'll be looking at the next area of support for a potential reversal.
But before we start thinking about that scenario, there's a key 30-point support range that you need to keep an eye on.
My colleague D.R. Barton, Jr. and I have written here about the proven predictive power of Fibonacci retracements. As a quick refresher, Leonardo Fibonacci was a 13th century Italian mathematician who popularized a string of inter-related numbers called the Fibonacci Sequence. In investment circles, this tool is used to gauge support (downside) and resistance (upside) levels where markets and stocks could head next. Following a major move, there are three main retracement areas - 38.2%… 50%… and 61.8%.
And once you identify these, it allows you to time your investments better, since you're able to pinpoint the best times to buy and sell.
So here's what Senor Fibonacci is telling us right now for the S&P 500…A 38% retracement from the July lows comes in at 1,370.The 50% retracement is at 1,341. And the 200-day (40 week) moving average is currently around 1,350, so we have a cluster of support within that 30-point range.
If the major indexes drop below their March 5 lows, the best case for the bulls would be for the S&P 500 to drop down into that range and consolidate for a few weeks before reversing to the upside again.
As I've shown on the chart above, the trendline coming off of the March 2003 lows moves up to 1,320 over the next few weeks. This is a critical technical level, as it represents about a 62% retracement off of the July 2006 lows.
• Bottom line: If the S&P tests that level, it must hold in order for the long-term bull market to stay intact. If the index drops below that mark, it would be bearish over the longer-term.
Stock market trends: we're heading higher - but beware volatility
However, with the Dow Industrials, Dow Transports and all the small-cap indexes having all notched up new all-time highs over the impressive 7-month market rally, my pattern recognition system has projected higher targets.
And although these stock market milestones have yet to be reached, my intermediate to longer-term analysis tells me that the February highs will eventually be taken out.
The key question is "when?" This answer is a little more uncertain right now - and with the market having found some real volatility for the first time in months, this is not the time to be pumping too much money into an unpredictable market. Keep some powder dry for now, and remain patient until we see some signs of a bottoming process.
(Moneyweek)
It began in March 2003 and has galloped all the way through to the present day. But to see and hear the way some traders, investors, and the blowhards on television have reacted recently, you'd think the world was coming to an end.
But when you take a moment to think about it, the truth is… a four-year bull market is a pretty good thing!
And that's exactly what we've had on the S&P 500. If you take a look at a chart of the index, dating back to March 2003, you'll see a strong bull market over that time, interspersed with five healthy corrections along the way. The longest pullback lasted about five months - from March 2004 to August 2004.
But right now, everyone is asking the same key questions: What does the recent market volatility mean? And is it the trigger point for another one of those "healthy corrections" - or something bigger?
Let's turn to the technicals for some clues about this stock market milestone…
US stock market trends: hangover from the seven-month party
When the market began rising in July 2006, not many people thought it would blast its way through to the end of February.
Most economists believed the correction (which began in May 2006) would cruise through the summer months into what are historically the weakest months of the year for the market - September and October. And especially given the markets traditionally experience a down cycle during mid-term elections.
But after bottoming out, the S&P 500 bulldozed into mid-October - and ended up exceeding its May 2006 highs, along with the Dow Industrials and Nasdaq indexes.
Capitalizing on increased liquidity from hedge funds and private equity funds, the overbought market continued to rise through the end of 2006 and into 2007. During this impressive 7-month rally, the Dow Industrials, Dow Transports, and all the small-cap indexes made new all-time highs.But the party couldn't last forever…
US stock market trends: the market started in February
A 9% slump in China's Shanghai Composite Index triggered a mass selling spree, with the ripple effect felt around the world.
In just three days, the Dow, S&P, and Nasdaq indexes gave back all their gains for the year. Since then, they've sprung back and forth between gains and losses.
So what next? There are two scenarios from here…
A Short Slip Or A Drawn-Out Decline?
There are three indexes that didn't toss all their gains away during the market's swoon: The Russell 2000… the S&P Small-Cap… and the S&P Mid-Cap. As I write, all three are clinging onto modest gains.
• Scenario #1: If they can stay above their 2007 lows, this correction could be short-lived.
• Scenario #2: If the small-cap indexes sink into negative territory for the year, we could be set
for a lengthy correction, or a consolidation period within a long-term bull market.
The upper blue line is drawn from the highs of March 2004, and you can see the highs from May 2006 touching it. The lower blue line is a trendline drawn off of the lows in March 2003. The red line represents the 200-day moving average.
As you can see, the S&P 500 blasted through the upper trading channel last October, before retreating back to test it just a couple of weeks later. The index then took off again, making a series of successive new highs.But when the market collapsed at the end of February, the S&P plunged back down to the top of the trendline.
This means we're now at a decision point...
Because the trendline has proved to be pretty solid support for the index since October 2006, it's possible that the bull market can resume from here. However, the February selloff inflicted a lot of technical damage, and there's probably more to go on the downside.
Stock Market Milestones: A Key 30-Point Support Range
Simply put, to confirm that the indexes have further to go on the downside, they first have to close below the lows posted during the brutal week of February 26 to March 2. That would put the S&P 500 back inside the trading channel - and then we'll be looking at the next area of support for a potential reversal.
But before we start thinking about that scenario, there's a key 30-point support range that you need to keep an eye on.
My colleague D.R. Barton, Jr. and I have written here about the proven predictive power of Fibonacci retracements. As a quick refresher, Leonardo Fibonacci was a 13th century Italian mathematician who popularized a string of inter-related numbers called the Fibonacci Sequence. In investment circles, this tool is used to gauge support (downside) and resistance (upside) levels where markets and stocks could head next. Following a major move, there are three main retracement areas - 38.2%… 50%… and 61.8%.
And once you identify these, it allows you to time your investments better, since you're able to pinpoint the best times to buy and sell.
So here's what Senor Fibonacci is telling us right now for the S&P 500…A 38% retracement from the July lows comes in at 1,370.The 50% retracement is at 1,341. And the 200-day (40 week) moving average is currently around 1,350, so we have a cluster of support within that 30-point range.
If the major indexes drop below their March 5 lows, the best case for the bulls would be for the S&P 500 to drop down into that range and consolidate for a few weeks before reversing to the upside again.
As I've shown on the chart above, the trendline coming off of the March 2003 lows moves up to 1,320 over the next few weeks. This is a critical technical level, as it represents about a 62% retracement off of the July 2006 lows.
• Bottom line: If the S&P tests that level, it must hold in order for the long-term bull market to stay intact. If the index drops below that mark, it would be bearish over the longer-term.
Stock market trends: we're heading higher - but beware volatility
However, with the Dow Industrials, Dow Transports and all the small-cap indexes having all notched up new all-time highs over the impressive 7-month market rally, my pattern recognition system has projected higher targets.
And although these stock market milestones have yet to be reached, my intermediate to longer-term analysis tells me that the February highs will eventually be taken out.
The key question is "when?" This answer is a little more uncertain right now - and with the market having found some real volatility for the first time in months, this is not the time to be pumping too much money into an unpredictable market. Keep some powder dry for now, and remain patient until we see some signs of a bottoming process.
(Moneyweek)
Put your money in bonds
Why is everyone talking about US bond yields? Because they may “torpedo the stockmarket”, says The Wall Street Journal. On Friday last week, fresh job data pushed the yield on the 30-year Treasury up past 5% (a psychological hurdle for the “long bond”) to 5.1%. The yield on the ten-year Treasury went up to 4.9%, its highest level since June 2002, and the Dow Jones Industrial Index lost 0.9%, closing at 11,120.04.
A total of 211,000 new jobs and an unemployment rate of 4.7% in March indicate that the labour market is moving to full employment. This has prompted investors to fear that the Federal Reserve’s widely expected May interest-rate hike from 4.75% to 5% will not necessarily be its last.
At the beginning of this year, analysts were predicting rates of 4.75% mid-year, but now they could go as high as 5.25% in June. And even if there is a pause then, towards the end of the year interest rates could go higher still.
It doesn’t matter, says Jim Paulsen of Wells Capital Management in the US. He estimates that corporate profit growth might be affected by a 6% Fed target rate, but not by 5%. Janna Sampson of OakBrook Investments is equally optimistic on long-term Treasury yields.
It was surprising that long-bond yields didn’t rise when the Federal Reserve started raising short-term rates in 2004 to cool the economy. Now they’re just “playing catch up”. “The ten-year yield would have to rise to 6% before it put a serious dampener on stocks,” says Sampson.
Strong equity returns this year add fuel to the optimists’ arguments. The Dow Jones Industrial rose 3.6% in the first quarter, the S&P 500 rose 3.5% and the Nasdaq 6.1%. Not exactly emerging-market-size returns, but impressive given rising interest rates and record oil prices, two things that have historically dragged the US market down.
What about the rest of the year? Some analysts are expecting single-digit growth; others see a further 10%-12%. Opinions on Wall Street are mixed over whether this strong first quarter is “a sign of better things to come or the best the year has to offer”, says The Business.
(MoneyWeek)
A total of 211,000 new jobs and an unemployment rate of 4.7% in March indicate that the labour market is moving to full employment. This has prompted investors to fear that the Federal Reserve’s widely expected May interest-rate hike from 4.75% to 5% will not necessarily be its last.
At the beginning of this year, analysts were predicting rates of 4.75% mid-year, but now they could go as high as 5.25% in June. And even if there is a pause then, towards the end of the year interest rates could go higher still.
It doesn’t matter, says Jim Paulsen of Wells Capital Management in the US. He estimates that corporate profit growth might be affected by a 6% Fed target rate, but not by 5%. Janna Sampson of OakBrook Investments is equally optimistic on long-term Treasury yields.
It was surprising that long-bond yields didn’t rise when the Federal Reserve started raising short-term rates in 2004 to cool the economy. Now they’re just “playing catch up”. “The ten-year yield would have to rise to 6% before it put a serious dampener on stocks,” says Sampson.
Strong equity returns this year add fuel to the optimists’ arguments. The Dow Jones Industrial rose 3.6% in the first quarter, the S&P 500 rose 3.5% and the Nasdaq 6.1%. Not exactly emerging-market-size returns, but impressive given rising interest rates and record oil prices, two things that have historically dragged the US market down.
What about the rest of the year? Some analysts are expecting single-digit growth; others see a further 10%-12%. Opinions on Wall Street are mixed over whether this strong first quarter is “a sign of better things to come or the best the year has to offer”, says The Business.
(MoneyWeek)
Warren Buffett Moving
Which currency is Warren Buffett buying now?
We have no reason to expect the long-term decline of the dollar to end any time soon although, we are experiencing a period of short-term dollar consolidation. The US$ is just below $2 against the pound and is at a thirty-year low against the Canadian dollar. Fundamentally, the accepted reason to expect ongoing dollar weakness is their trade deficit.
Their current account deficit continues to stay at around 6% of GDP and as Jim O’Neill, Global Head of Economics at Goldman Sachs said in a recently published article, it is unlikely that turning bullish on the dollar would prove to be sensible until the current account deficit is closer to 3% of GDP.
The latest chink in the dollar’s armour was the Kuwaiti announcement that they have abandoned their peg to the sliding US dollar, instead they will peg to a basket of currencies for which the dollar is expected to make up about 75-80%. Other states such as Saudi Arabia, The United Arab Emirates, Bharain, Qatar and Oman are studying the move.
Whilst some oil producers may be considering a reduction in their exposure to the US dollar, led by Kuwait, Asian economies see things differently. The financial crisis that engulfed them in 1997 largely came about as a result of their currencies being overvalued. The memory of that disastrous period is now part of their DNA and will cause them to keep their currencies weak against the US dollar.
Their actions will, in turn, inflate their money supply further, fuel global liquidity and increase the risk of inflation. If and when that becomes an issue for them, they will have no alternative but to change their policy. In the end, currency manipulation inevitably creates distortions which sooner or later the market viciously corrects - it has always been thus.
Interest rate differentials continue to weigh heavily upon currency movements. The Bank of England and the ECB are tightening to bear down on the inflationary risk and are ignoring the threat to asset bubbles. Tightening will continue unless markets crash. Bernanke expresses similar concerns about inflation but so far has not acted, probably because of fears about the vulnerable US housing market.
There is a puzzle everybody wishes they could solve, Warren Buffet has said that he has recently made a significant bet on the currency markets but without disclosing which currency nor in which direction the bet is made. The popular guess is that he is long the Japanese yen. After all, it is only a matter of time before all of that Carry Trade reverses, the consequences of which will be a very sharply escalating yen and a weakening of high interest rate currencies, such as the New Zealand dollar.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets
We have no reason to expect the long-term decline of the dollar to end any time soon although, we are experiencing a period of short-term dollar consolidation. The US$ is just below $2 against the pound and is at a thirty-year low against the Canadian dollar. Fundamentally, the accepted reason to expect ongoing dollar weakness is their trade deficit.
Their current account deficit continues to stay at around 6% of GDP and as Jim O’Neill, Global Head of Economics at Goldman Sachs said in a recently published article, it is unlikely that turning bullish on the dollar would prove to be sensible until the current account deficit is closer to 3% of GDP.
The latest chink in the dollar’s armour was the Kuwaiti announcement that they have abandoned their peg to the sliding US dollar, instead they will peg to a basket of currencies for which the dollar is expected to make up about 75-80%. Other states such as Saudi Arabia, The United Arab Emirates, Bharain, Qatar and Oman are studying the move.
Whilst some oil producers may be considering a reduction in their exposure to the US dollar, led by Kuwait, Asian economies see things differently. The financial crisis that engulfed them in 1997 largely came about as a result of their currencies being overvalued. The memory of that disastrous period is now part of their DNA and will cause them to keep their currencies weak against the US dollar.
Their actions will, in turn, inflate their money supply further, fuel global liquidity and increase the risk of inflation. If and when that becomes an issue for them, they will have no alternative but to change their policy. In the end, currency manipulation inevitably creates distortions which sooner or later the market viciously corrects - it has always been thus.
Interest rate differentials continue to weigh heavily upon currency movements. The Bank of England and the ECB are tightening to bear down on the inflationary risk and are ignoring the threat to asset bubbles. Tightening will continue unless markets crash. Bernanke expresses similar concerns about inflation but so far has not acted, probably because of fears about the vulnerable US housing market.
There is a puzzle everybody wishes they could solve, Warren Buffet has said that he has recently made a significant bet on the currency markets but without disclosing which currency nor in which direction the bet is made. The popular guess is that he is long the Japanese yen. After all, it is only a matter of time before all of that Carry Trade reverses, the consequences of which will be a very sharply escalating yen and a weakening of high interest rate currencies, such as the New Zealand dollar.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets
payment protection
More properties were repossessed in 2006 than in any year since 2000. Why? A press release from British Insurance tells us: it is all down to “higher interest rates and first time buyers taking greater financial risks often borrowing in excess of five times their salary and opting for 25 year plus prepayment policies.” So what does the insurance company think we should do about these “disturbing” numbers? Buy fewer houses perhaps, or at least not take out such huge mortgages that we are almost guaranteed to get into trouble. Of course not. It wants us to carry on borrowing just as much money and taking just as much risk but to buy more expensive insurance from it at the sam e time. Never, says the firm’s spokesman Simon Burgess “has the need for Mortgage Payment Protection Insurance been so apparent.” Take it out and you’ll have a vital “safety net” if things go wrong.
Why banks love payment protection insurance?
Well, maybe, maybe not. Payment protection insurance (PPI) is a favourite of high street bank financial advisers and insurance salesmen across the country. Why? Simple. It is overpriced and hard to claim on, so they make an absolute fortune from selling it to you. Paymentcare estimated last year that of the £4 billion spent by borrowers on PPI every year a massive £2.5 billion is stripped out immediately in commission payments – they know they aren’t going to need it to pay claims.
The idea of PPI and MPPI - one of which you will be offered it every time you take out a mortgage, a credit card or a loan of any kind – is that if your circumstances change such that you are unable to repay your debt, the insurance will do it for you. The sales pitch will be that buying it is the sensible thing to do, that if you are made redundant, get very ill or have a serious accident you will need it.
Do you need PPI?
But even if you do need insurance you may find that PPI doesn’t fit the bill. It tends to come with a great many get-out clauses included - to the benefit of the insurer: you won’t be able to get a payout if you have a part-time not a full-time job, if you are self-employed, if you find you can’t work as a result of a health condition that was pre-existing or if you are working on a short-term contract. Many policies are also “any occupation” rather than “own occupation” meaning that they only insure you if you are incapable of working at any job rather than just at your own job.
You may also find that just because you think you have a serious illness doesn’t mean your insurers will. As Angus Maciver of Prudential pointed out in The Daily Telegraph last week “suffering from any of the big three – cancer, heart attack, stroke – will feel ‘critical’ to a consumer,” but now that diseases are diagnosed so much earlier than before and treated much more quickly a diagnosis won’t necessarily trigger a payout. Even if you think you might need some kind of income insurance this is not a good one to have. Only 4% of people who take out PPI ever claim on it and 25% of those claims end up being rejected. Look at it like that and it’s not much of a ‘safety net’, is it?
You may also not need insurance at all. Note that most employers (85%) offer more than the statutory sick pay: many pay your salary for six months or so after you become ill before reassessing things so you should be able to cover any loan payments from that. Furthermore, while if you are taking out an ordinary loan odds are you won’t have much in the way of savings (or I suppose you wouldn’t need the loan), if you are thinking of a big mortgage you really should have a good six months’ worth of income in a savings account to provide for emergencies anyway.
Why you should think carefully before insuring your loans?
PPI is also outrageously expensive, particularly if you get it from one of the high street banks – they can charge up to five times the level of premiums of the discount insurance groups (www.Britishinsurance.com, is, to be fair, one of these). The banks also often have a nasty habit of ‘frontloading’ the cost of PPI. They calculate the cost of the insurance but instead of demanding a monthly premium they simply add the full amount to the value of your loan and have you pay interest on the whole lot over the term of the loan. There’s no logical reason for this. It is just a way to get more money out of you.
The Mail on Sunday last year pointed to a case where someone had borrowed £16,000 from HSBC. The insurance was calculated at £5,150 (about a third of the value of the loan!) making a total of £21,150. The borrower paid off about £6,000 of the debt in instalments and then came up with the cash to pay off the rest early, only to find that she was to get no refund on the insurance at all. Over £5,000 had disappeared for nothing. Which? magazine has warned very strongly against PPI, pointing out that it can double the cost of a £5,000 loan. So it can only be good news then that the PPI industry has now been referred to the Competition Commission for a full investigation and that the Office of Fair Trading has announced an investigation into the sale of MPPI.
It will take a while for these investigations to be completed but in the meantime it is worth thinking very carefully about insuring your loans. Or perhaps about not borrowing so much money in the first place. If you must borrow at least remember this: the UK banks are dead set on what they call cross-selling, which means always trying to sell you more than one product. Open a current account and they’ll try to sell you a credit card, take out a mortgage and they’ll have a go at pushing critical illness insurance on you, pay a bill over the phone and they’ll be selling you contents insurance. The drive to sell PPI is just one example of this. But as long as you are aware of this passion to find ever new ways to separate you and your cash you should be OK.
You can, you see, figure out for yourself if you need it or not and then just say no.
Why banks love payment protection insurance?
Well, maybe, maybe not. Payment protection insurance (PPI) is a favourite of high street bank financial advisers and insurance salesmen across the country. Why? Simple. It is overpriced and hard to claim on, so they make an absolute fortune from selling it to you. Paymentcare estimated last year that of the £4 billion spent by borrowers on PPI every year a massive £2.5 billion is stripped out immediately in commission payments – they know they aren’t going to need it to pay claims.
The idea of PPI and MPPI - one of which you will be offered it every time you take out a mortgage, a credit card or a loan of any kind – is that if your circumstances change such that you are unable to repay your debt, the insurance will do it for you. The sales pitch will be that buying it is the sensible thing to do, that if you are made redundant, get very ill or have a serious accident you will need it.
Do you need PPI?
But even if you do need insurance you may find that PPI doesn’t fit the bill. It tends to come with a great many get-out clauses included - to the benefit of the insurer: you won’t be able to get a payout if you have a part-time not a full-time job, if you are self-employed, if you find you can’t work as a result of a health condition that was pre-existing or if you are working on a short-term contract. Many policies are also “any occupation” rather than “own occupation” meaning that they only insure you if you are incapable of working at any job rather than just at your own job.
You may also find that just because you think you have a serious illness doesn’t mean your insurers will. As Angus Maciver of Prudential pointed out in The Daily Telegraph last week “suffering from any of the big three – cancer, heart attack, stroke – will feel ‘critical’ to a consumer,” but now that diseases are diagnosed so much earlier than before and treated much more quickly a diagnosis won’t necessarily trigger a payout. Even if you think you might need some kind of income insurance this is not a good one to have. Only 4% of people who take out PPI ever claim on it and 25% of those claims end up being rejected. Look at it like that and it’s not much of a ‘safety net’, is it?
You may also not need insurance at all. Note that most employers (85%) offer more than the statutory sick pay: many pay your salary for six months or so after you become ill before reassessing things so you should be able to cover any loan payments from that. Furthermore, while if you are taking out an ordinary loan odds are you won’t have much in the way of savings (or I suppose you wouldn’t need the loan), if you are thinking of a big mortgage you really should have a good six months’ worth of income in a savings account to provide for emergencies anyway.
Why you should think carefully before insuring your loans?
PPI is also outrageously expensive, particularly if you get it from one of the high street banks – they can charge up to five times the level of premiums of the discount insurance groups (www.Britishinsurance.com, is, to be fair, one of these). The banks also often have a nasty habit of ‘frontloading’ the cost of PPI. They calculate the cost of the insurance but instead of demanding a monthly premium they simply add the full amount to the value of your loan and have you pay interest on the whole lot over the term of the loan. There’s no logical reason for this. It is just a way to get more money out of you.
The Mail on Sunday last year pointed to a case where someone had borrowed £16,000 from HSBC. The insurance was calculated at £5,150 (about a third of the value of the loan!) making a total of £21,150. The borrower paid off about £6,000 of the debt in instalments and then came up with the cash to pay off the rest early, only to find that she was to get no refund on the insurance at all. Over £5,000 had disappeared for nothing. Which? magazine has warned very strongly against PPI, pointing out that it can double the cost of a £5,000 loan. So it can only be good news then that the PPI industry has now been referred to the Competition Commission for a full investigation and that the Office of Fair Trading has announced an investigation into the sale of MPPI.
It will take a while for these investigations to be completed but in the meantime it is worth thinking very carefully about insuring your loans. Or perhaps about not borrowing so much money in the first place. If you must borrow at least remember this: the UK banks are dead set on what they call cross-selling, which means always trying to sell you more than one product. Open a current account and they’ll try to sell you a credit card, take out a mortgage and they’ll have a go at pushing critical illness insurance on you, pay a bill over the phone and they’ll be selling you contents insurance. The drive to sell PPI is just one example of this. But as long as you are aware of this passion to find ever new ways to separate you and your cash you should be OK.
You can, you see, figure out for yourself if you need it or not and then just say no.
Insurance bill
How to knock 30% off your car insurance bill
I’ve heard endless complaints recently from people shocked who’ve just got their car insurance renewal notices. Last year most of them spent some time on the internet making sure they got the best possible deal.
I’ve heard endless complaints recently from people shocked who’ve just got their car insurance renewal notices. Last year most of them spent some time on the internet making sure they got the best possible deal.
But now they are finding that the cost of their policy has gone up massively – sometimes by well over 50%. And they’re shocked.
They shouldn’t be. Outraged, yes. But not shocked. No adult who has ever dealt with a financial institution of any kind should ever be remotely surprised to be hit by this kind of thing. It is standard stuff for the industry.
The aim of most banks and insurers is basically this: to lure customers in with great deals and then to exploit their apathy. Take mortgages.
You get a great deal for two years with a discount to the Standard Variable Rate or a low fixed rate. Then when the two years are up you are automatically moved over to start paying your lenders SVR which is usually about 2% above the best deals on the market. The banks’ plan? To hope you don’t notice or that if you do you never get round to doing anything about it.
The same is true of credit cards. When you switch to a new one you get an interest free period for 6 months, maybe even a year. Then when the teaser period is over, wham: you get hit with the usual whopping credit card interest rates. Instead of paying 0% you’re suddenly paying 20%.
Again, the bank has its fingers crossed that rather than bother to do the admin to move again you’ll just pay up and they’ll make good any losses they might have made on you during the interest-only period.
Car insurance is no different. It’s a hugely competitive market and all the providers are desperate to get themselves on to the best buy tables in the newspapers and on the internet. To do this and so as to get new clients in they slash their prices – often down to levels that make them no money at all – for the first year you are with them. Then when renewal time comes around they just hike the price and hope for the best.
If you can’t summon up the energy to change insurers they’ll make a killing on your new premium and recoup the losses they made on you in year one. And if you can, at least they’ll stop losing money on your overly cheap policy.
The solution to this is obvious – eternal vigilance. Never just pay up when you get your renewal notice. Instead, when it arrives or even before (the insurers often send them out quite late in the day in order to give you as little time as possible to respond before the next direct debit goes out) go straight to the price comparison sites on the internet (www.confused.com and www.insuresupermarket.com are good)
Put in your details and find out what the best deals are. Then go back to your current insurer and ask them to meet it or beat it. If they can’t or won’t, just move providers: doing so will not only give the pleasure of thwarting your current issuer’s plan but should also cut your bill by an average of about 30%.
If even after this you are paying more than you would like for your insurance (and prices have been going up across the board thanks to general inflation and to the rise in uninsured drivers), you need to approach things from a different angle.
For starters, make sure you never agree to pay for your insurance in monthly instalments – this is just asking to be ripped off: on average it costs about 20% more to pay for insurance monthly than it does to pay for it all in one go. Given that most credit cards charge interest rates below 20% this means you’d actually be better off paying for your insurance on your credit card and then paying that off over the year! Who’d have thought there’d be something out there so expensive that it would make a credit card look like value?
The next thing to bear in mind is that insurance is all about risk. The higher risk the industry perceives you as being the higher your premium is going to be. So to cut your costs you need to be seen as low risk.
This means keeping your car off the street, fitting an alarm or an immobilizer, driving carefully (the more speeding tickets you get the more your insurance is going to cost) and picking a car with a reasonably small engine (to your insurer anything sporty just spells danger).
Being a woman or adding a woman to your policy as a named driver also helps. Whatever the male population might like to think the truth is that we have fewer accidents than men and are lower risk for it….
Making Money Online With A Website Without Selling
Creating a website to generate income online is one of the most common methods these days. You can earn money from a website by:
a) Marketing your own merchandises/products and services.
b) Joining affiliate programs to promoting other companies products or merchandises.
c) Participating in Google AdSense Publisher Program to start generating AdSense commission from your website.
Option (a) & (b) require a lot of time, effort and advanced Internet marketing knowledge before you start generate profit from your site. The third choice is much simple and faster to profit online with a website. To launch an AdSense campaign you must first sign up to become a publisher of Google AdSense program. You are going to submit your website for review when applying an AdSense account.
The first step of building a website is deciding the content of your website, your content can be related to any subjects as long as they comply with AdSense program policies. Google AdSense policies can be found at https://www.google.com/adsense/policies. Your interest, hobby, past experience and area of expertise may help you decide what topic or subject you are going to write. You can provide helpful content like advice, educational articles and so on to others on your website if you are an expert at something. If you like to travel you may write about the places and countries you have visited and share your traveling experience and tips in your website.
There are plenty of online companies providing web design service but it is expensive using the service of a web design company. Hiring a web designer to build a website via freelance marketplace like guru.com is much cheaper than using a company. However this is still not the most effective way to cut your cost to minimum. The cheapest way to create a website is by using a free web development tool or software. There are getting more and more free web development tools on the Internet and I recommend Bluevoda website builder. You can download Bluevoda website Builder at http://www.vodahost.com/partner/idevaffiliate.php?id=2662_1_3_9. Bluevoda allows user to create websites without technical knowledge. Users can create almost any kinds of website with little limitation. Create websites using Bluevoda is free. You only pay for the domain name and website hosting.
After you finish designing your website, it is time to publish it on Internet and promote your
website to earn AdSense revenue. There are a number of ways to promote your website to bring traffic (visitors) to your site.
Pay-per-click (PPC) Advertising
Pay-per-click (PPC) advertising companies let you advertise your website on search engines using keywords-bidding system. When a visitor enters a keyword you bid on in search engines to find something, the visitor will see your ad and if the visitor clicks your ad, you will be charged based on the amount you bid. The two most common PPC advertising programs are Google Adwords and Yahoo Search Marketing but they are quite expensive to advertise with due to tough competition in the keywords-bidding system. You might encounter the problem of your PPC cost higher than your AdSense revenue and lead to a loss. Luckily, there are low cost alternatives such as Bidvertiser.com, searchfeed.com, Bidclix.com and so on. These PPC companies allow you to drive instant targeted visitors to your site with less than $0.15 per visitor.
Provide free content
Creating articles and sending them to content websites like online article directories is a no cost way to gain further exposure for your website. You will promote your website and get traffic by writing about yourself and your website with a live link points to your website in the author’s bio of each article published on content websites.
RSS advertising
RSS advertising is another free method to increase your website’s traffic. There are people reading information and news online using RSS readers or news aggregators. This has created another opportunities for webmasters to boost the websites traffic. By creating your own RSS file and submitting it to search engines and RSS directories, the links to the content in your website will appear in front of those who read information using news aggregators and as a result driving free visitors to your website.
a) Marketing your own merchandises/products and services.
b) Joining affiliate programs to promoting other companies products or merchandises.
c) Participating in Google AdSense Publisher Program to start generating AdSense commission from your website.
Option (a) & (b) require a lot of time, effort and advanced Internet marketing knowledge before you start generate profit from your site. The third choice is much simple and faster to profit online with a website. To launch an AdSense campaign you must first sign up to become a publisher of Google AdSense program. You are going to submit your website for review when applying an AdSense account.
The first step of building a website is deciding the content of your website, your content can be related to any subjects as long as they comply with AdSense program policies. Google AdSense policies can be found at https://www.google.com/adsense/policies. Your interest, hobby, past experience and area of expertise may help you decide what topic or subject you are going to write. You can provide helpful content like advice, educational articles and so on to others on your website if you are an expert at something. If you like to travel you may write about the places and countries you have visited and share your traveling experience and tips in your website.
There are plenty of online companies providing web design service but it is expensive using the service of a web design company. Hiring a web designer to build a website via freelance marketplace like guru.com is much cheaper than using a company. However this is still not the most effective way to cut your cost to minimum. The cheapest way to create a website is by using a free web development tool or software. There are getting more and more free web development tools on the Internet and I recommend Bluevoda website builder. You can download Bluevoda website Builder at http://www.vodahost.com/partner/idevaffiliate.php?id=2662_1_3_9. Bluevoda allows user to create websites without technical knowledge. Users can create almost any kinds of website with little limitation. Create websites using Bluevoda is free. You only pay for the domain name and website hosting.
After you finish designing your website, it is time to publish it on Internet and promote your
website to earn AdSense revenue. There are a number of ways to promote your website to bring traffic (visitors) to your site.Pay-per-click (PPC) Advertising
Pay-per-click (PPC) advertising companies let you advertise your website on search engines using keywords-bidding system. When a visitor enters a keyword you bid on in search engines to find something, the visitor will see your ad and if the visitor clicks your ad, you will be charged based on the amount you bid. The two most common PPC advertising programs are Google Adwords and Yahoo Search Marketing but they are quite expensive to advertise with due to tough competition in the keywords-bidding system. You might encounter the problem of your PPC cost higher than your AdSense revenue and lead to a loss. Luckily, there are low cost alternatives such as Bidvertiser.com, searchfeed.com, Bidclix.com and so on. These PPC companies allow you to drive instant targeted visitors to your site with less than $0.15 per visitor.
Provide free content
Creating articles and sending them to content websites like online article directories is a no cost way to gain further exposure for your website. You will promote your website and get traffic by writing about yourself and your website with a live link points to your website in the author’s bio of each article published on content websites.
RSS advertising
RSS advertising is another free method to increase your website’s traffic. There are people reading information and news online using RSS readers or news aggregators. This has created another opportunities for webmasters to boost the websites traffic. By creating your own RSS file and submitting it to search engines and RSS directories, the links to the content in your website will appear in front of those who read information using news aggregators and as a result driving free visitors to your website.
Top Bank Literature
What Makes A Good Bank Good?
Jack Milligan
As our Board Performance Scorecard show, high profitability, a strong balance sheet, and outstanding asset quality are what it takes to be become a high-performance bank.
In an industry that has undergone a tremendous amount of consolidation over the past two decades, it’s important to remember that bigger is not always better when it comes to gauging the performance of a bank. With the objective of identifying the top performers among the 150 largest publicly owned banks and thrifts in the U.S., Bank Director—with assistance from New York-based investment banking firm Sandler O’Neill & Partners—created the Bank Performance Scorecard, which measures each institution across three important categories: profitability, capital adequacy, and asset quality.
The objective was not to use a single yardstick—such as return on average equity (ROAE)—but instead to measure bank performance across all three categories. What makes a good bank good? Because these are all public companies, one defining characteristic is consistent profitability. Since banks and thrifts exist for the purpose of taking on economic risk, they also must be well capitalized—although not so well capitalized that they penalize shareholders by dragging down their investment returns. And since the vast majority of banks and thrifts still make most of their money by making loans, they must demonstrate their skill in that regard by having excellent asset quality.
The calculations in Bank Director’s 2005 Bank Performance Scorecard were based on publicly available data over four linked quarters—the third and fourth quarters of 2004 and the first and second quarters of 2005 (see below for a full explanation of methodology). The winner was Honolulu-based Bank of Hawaii Corp., a $10 billion commercial bank that did not garner a first-place finish in any single performance metric but scored quite high in both the profitability and asset-quality categories. [See story on page 30.] Finishing second was S&T Bancorp of Indiana, Pennsylvania—one of the Scorecard’s smallest institutions with assets of just under $3.1 billion. Third place went to Newark, Ohio-based Park National Corp., a $5.6 billion bank that has adopted an unconventional operating structure. Rounding out the top five were Los Angeles-based City National Corp., which has thrived in the highly competitive California market, followed by $3.5 billion Glacier Bancorp in Kalispell, Montana.
The highest-placed institution with assets of $50 billion or more was 17th-ranked U.S. Bancorp in Minneapolis, which decided a few years ago to suspend its aggressive acquisition program and focus instead on maximizing its financial performance, a move that certainly seems to have paid off. The highest-placed thrift was sixth-ranked Westcorp in Irvine, California—an auto finance specialist that agreed last September to be acquired by Wachovia Corp. in Charlotte, North Carolina.
The ultimate accountability for the performance of any bank or thrift rests with its board of directors, and as such, the Bank Performance Scorecard strives to look beyond singular performance metrics to identify institutions that are superlative in all critical areas. The Scorecard should not be interpreted as an endorsement of any institution’s prospects as an investment since stock performance is ultimately determined by many more factors than the ones isolated here. But it is also highly likely that over the course of time, banks and thrifts with strong balance sheets, superb credit skills, and consistent profitability will be judged as successful public companies by most accepted standards.
The Scorecard uses six performance criteria, beginning with return on average assets (ROAA) and ROAE. The two capital adequacy metrics were the Tier 1 capital and leverage capital ratios. And the institutions’ asset quality was measured by calculating their ratio of nonperforming assets (NPAs) to total loans and Other Real Estate Owned (OREO), and also their percentage of loan loss reserves to total loans. On the theory that profitability is the most important performance criteria for a public company, ROAA and ROAE have been given a greater weight in the Scorecard’s final calculation than the four other metrics.
One trend that is immediately apparent in the Scorecard’s results is that smaller banks and thrifts routinely outperform their larger competitors. There are exceptions to this rule—beginning with U.S. Bancorp., which had the second-highest ROAA and seventh-highest ROAE among the 150 institutions. Pittsburgh-based Mellon Financial Corp., which has assets of $36.9 billion, took the No. 1 spot in the ROAA category and finished ninth overall. And right behind it in the 11th spot was $26.7 billion Synovus Financial Corp. in Columbus, Georgia. But Mellon sold off its retail banking franchise several years ago and now concentrates on investment management and a variety of institutional and corporate services like global custody and benefit consulting. And Synovus augments its four-state regional banking franchise in the Southeast with an electronic payment processing business that operates nationwide.
Most very large institutions that are highly diversified across geographic and product lines did not measure out particularly well on the Scorecard. For instance, the largest bank—$1.5 trillion Citigroup in New York—finished in the 101st spot. Bank of America Corp. in Charlotte, which has assets of $1.24 trillion, finished 62nd. New York-based JP Morgan Chase & Co., which is nearly as large at $1.17 trillion, limped in at the 147th spot. The fourth-largest U.S. bank—Wachovia, with $511 billion in assets—finished 108th. San Francisco-based Wells Fargo & Co.—the fifth-largest bank with assets of $434 billion—did much better coming in at the 38th spot. Although every bank and thrift has its own unique set of circumstances that help determine its performance, it may be that greatly increased size tends to have a ratcheting-down effect when it comes to profitability and asset quality, two of the Scorecard’s key determinants.
This year’s top-ranked institution—Bank of Hawaii—is perhaps an unlikely winner based on its recent history. It was only a few years ago that the bank tried to expand well beyond the Hawaiian Islands, but loan quality ended up deteriorating so badly it was placed on a short leash by its primary regulators, the Federal Reserve Bank of San Francisco and the Federal Deposit Insurance Corp. But former Chief Executive Officer Michael O’Neill engineered an impressively quick turnaround, and O’Neill’s successor as CEO—Alan Landon, previously the bank’s chief financial officer—now has the company focused on the lush Hawaiian market. Bank of Hawaii scored particularly well in both the profitability and asset quality categories. Its highest finish in the individual metrics was for ROAE, where it ranked third.
The second-place finisher, S&T, does business in a part of the country that could hardly be more different from Hawaii. Headquartered in Indiana, a small community of 15,000 people located about 60 miles northwest of Pittsburgh, S&T must scratch and claw for its revenue growth. It’s an area where the median household income level is below the state average—and unemployment is above the state average. For the most, part it is not a market where top-line growth comes easily, yet S&T scored well across the board—particularly on ROAA, where it ranked seventh.
S&T operates a 51-branch network in a 10-county area, and also has both an investment management and insurance agency operation. Chairman and CEO James C. Miller says the bank is particularly focused on servicing small and medium-sized businesses. “The driver for us continues to be commercial lending, particularly family-owned businesses and entrepreneurs,” he says. “We think we bring a little higher level of service to the customer.” Andy Borrmann, an analyst with SunTrust Robinson Humphrey in Atlanta, says S&T’s relationship focus is particularly distinctive. “I would call it a pure community bank,” he says. “It is as relationship-focused as any management team I’m familiar with.”
In recent years S&T has tried to accelerate its top-line growth by expanding into faster-growing Allegheny and Westmoreland Counties to the south, which are driven primarily by the large Pittsburgh market. The bank also does a considerable amount of commercial real estate lending and in recent years has followed some of its best customers when they’ve developed projects well out of S&T’s normal territory—including upstate New York, Florida, Arizona, and California. The bank currently has approximately $250 million in such loans. While banks can sometimes get themselves in trouble by going out of market, Miller is comfortable with the strategy because S&T knows its customers so well. “It comes down to people doing business with people,” he says.
This year’s third-place finisher, Park National, also sits in a part of the country that does not offer abundant growth opportunities. “A lot of the MSAs (Metropolitan Statistical Areas) it’s located in are projected to decline in the next few years,” says Sandler O’Neill analyst Brad Milsaps. Yet the bank still managed to notch high rankings in each individual performance metric except for its nonperforming asset ratio, where in came in 114th. In fact, overall, Park National finished just one-half of a point behind S&T.
Park National focuses primarily on small Ohio communities where it operates 11 subsidiary banks that each trade under a different name. The bank has done nine acquisitions since 1987, and in each instance, it has centralized many of the core service, administrative, and back-office functions while allowing the new subsidiary to operate semi-autonomously under its old name. Chairman and CEO C. Daniel DeLawder believes that strategy makes sense given that Park National is essentially a large community bank that emphasizes personal service. “We do a reasonably good job relative to the rest of the industry, which suggests to us that that is still the right strategy,” says DeLawder—who is only the fourth CEO to run the company since 1927.
While Park National offers a full range of commercial and trust banking services, most of its subsidiaries are located in small towns—in many cases, the country seat—where there is not much organic growth. This has led the bank to slowly expand into such larger Ohio cities as Columbus, Dayton, and Cincinnati where the opportunities for revenue growth are much better—and where DeLawder figures Park National’s strong service culture will be especially well received.
“Our intention is to be the bank of choice in all the communities we operate in,” says DeLawder.
How the Scorecard Works
The Bank Director Bank Performance Scorecard is determined by using six performance criteria that measure profitability, balance sheet strength, and asset quality. The criteria are:
Return on average assets, which measures a bank’s profitability relative to its total assets. This metric was given a full weighting in the Scorecard calculation.
- Return on average equity, a second measurement of profitability that focuses on shareholder returns. This metric also received a full weighting in the Scorecard calculation.
- Tier-1 capital ratio, which is comprised of shareholders’ equity, retained earnings, and convertible preferred stock divided by total assets. This received a half weighting.
- Leverage ratio, which is shareholders’ equity divided by total assets. This received a half weighting.
- Nonperforming asset ratio, which is the ratio of nonaccrual loans and foreclosed assets to total loans and Other Real Estate Owned. This received a half weighting.
- Reserve coverage, which is loan loss reserves divided by total loans. This received a half weighting.
The institutions received a numerical rating in each individual category, with the highest ranked bank getting a score of one and the lowest ranked bank a score of 150. Each bank’s and thrift’s scores were then added across and the bank with the lowest score won. In the four categories that received a half weighting, the institutions’ actual scores were divided by two before they were added up. For example, a bank that finished 20th in the leverage ratio category only received 10 points for scoring purposes.
Sandler O’Neill & Partners, a New York-based investment banking firm that focuses on the financial services sector, helped Bank Director devise the Scorecard formula and performed the calculations.
Tuesday, June 5, 2007
Windows Vista build 5381.1 Beta 2
Not a week goes without us mentioning the five letter word, Vista.
Yes people, its times for another Windows Vista update.
No we are not going towrite about another imminent delay or some unfortunate bugs! In fact the Windows Vista Beta 2 is now available for testing.
A number of beta testers contacted one of the IT websites in the cyber world and to tell them this good news.
According to these testers Microsoft has developed 32-bit and 64-bit versions of Windows Vista build 5381.1 , a preview of the Beta 2 version of Vista .
The company is planning to ship this version to millions of users (or guinea pigs) by the end of the month.
The users would test and run them on their systems and report back to the Microsoft headquarters.
Source Vista :
http://www.windowsitpro.com/windowspaulthurrott/Article/ArticleID/50221/windowspaulthurrott_50221.html
Sourced By T.P
Yes people, its times for another Windows Vista update.
No we are not going towrite about another imminent delay or some unfortunate bugs! In fact the Windows Vista Beta 2 is now available for testing.
A number of beta testers contacted one of the IT websites in the cyber world and to tell them this good news.
According to these testers Microsoft has developed 32-bit and 64-bit versions of Windows Vista build 5381.1 , a preview of the Beta 2 version of Vista .
The company is planning to ship this version to millions of users (or guinea pigs) by the end of the month.
The users would test and run them on their systems and report back to the Microsoft headquarters.
Source Vista :
http://www.windowsitpro.com/windowspaulthurrott/Article/ArticleID/50221/windowspaulthurrott_50221.html
Sourced By T.P
Recover Data
Have you ever experienced a sudden hardware failure? Have you ever accidentally deleted an important computer file? Have you ever been unable to recover lost data? Now there's an answer for these problems: data recovery software from File-Recovery.Net. File recovery is more critical to your daily computer use than you might think.
Here's a quick tip: When you delete a file, it's not really gone forever. Your hard drive still stores the information - only now, it marks the space allocated for the file as "available" to be overwritten. All you need is a good software recovery program to get back your deleted data!
You can get free file recovery tips from the File Recovery website, too!
If you accidentally delete a file, stop and take a deep breath. Don't panic! Whatever you do, just don't save anything on to the hard drive you're using - saving new data to the hard drive might overwrite the existing file you just deleted. Neither should you install any new software - not even data recovery software! There are a couple of things you can do.
First, you can simply install the file recovery software to another hard drive on your computer. Second, you could move the affected hard drive to a computer already running file recovery programs.
I know how awful it is to lose an important project, a bunch of music or image files, or even personal videos due to any number of random occurrences or (heaven forbid) intentional deletion by another person.
Who knows how much time I could have saved on school work or stuff for my job if I had only known about file recovery software programs like the ones discussed at File Recovery site!
Thanks to File-Recovery.Net for these tips and much more!
Here's a quick tip: When you delete a file, it's not really gone forever. Your hard drive still stores the information - only now, it marks the space allocated for the file as "available" to be overwritten. All you need is a good software recovery program to get back your deleted data!
You can get free file recovery tips from the File Recovery website, too!
If you accidentally delete a file, stop and take a deep breath. Don't panic! Whatever you do, just don't save anything on to the hard drive you're using - saving new data to the hard drive might overwrite the existing file you just deleted. Neither should you install any new software - not even data recovery software! There are a couple of things you can do.
First, you can simply install the file recovery software to another hard drive on your computer. Second, you could move the affected hard drive to a computer already running file recovery programs.
I know how awful it is to lose an important project, a bunch of music or image files, or even personal videos due to any number of random occurrences or (heaven forbid) intentional deletion by another person.
Who knows how much time I could have saved on school work or stuff for my job if I had only known about file recovery software programs like the ones discussed at File Recovery site!
Thanks to File-Recovery.Net for these tips and much more!
Wireless Security
Wifi known as Wireless Fidelity allows a user to connect to the internet without using network cabling. Whether it’s from your bedroom, couch, indoors or outdoors data can be sent and received within the range of a wireless base station. Wifi uses 802.11a, 802.11b or 802.11g technologies to provide a very reliable connection that is also fast and secure.
Just as vendors prepare the first generation of dualmode cellular and WiFi mobiles for launch later this year, the wireless security community is starting to turn up threats to 802.11 VOIP handsets in the field. So how safe is VoIP on WIFI networks ?
For instance, independent security consultant Shawn Merdinger, who focuses on WiFi vulnerabilities, claims on the WV&E site that the UTStarcom phone is open to break-in from a hacker logging in remotely (a method known as rlogin). "Once an attacker has connected to the device through the rlogin service they have full access to the phone," says Merdinger.
(itechtips)
Just as vendors prepare the first generation of dualmode cellular and WiFi mobiles for launch later this year, the wireless security community is starting to turn up threats to 802.11 VOIP handsets in the field. So how safe is VoIP on WIFI networks ?
For instance, independent security consultant Shawn Merdinger, who focuses on WiFi vulnerabilities, claims on the WV&E site that the UTStarcom phone is open to break-in from a hacker logging in remotely (a method known as rlogin). "Once an attacker has connected to the device through the rlogin service they have full access to the phone," says Merdinger.
(itechtips)
Monday, June 4, 2007
Good Hacker (3)
Setelah cracker berhasil mengidentifikasi komponen jaringan yang lemah dan bisa di taklukan, maka cracker akan menjalan program untuk menaklukan program daemon yang lemah di server. Program daemon adalah program di server yang biasanya berjalan di belakang layar (sebagai daemon / setan). Keberhasilan menaklukan program daemon ini akan memungkinkan seorang Cracker untuk memperoleh akses sebagai 'root' (administrator tertinggi di server).
Untuk menghilangkan jejak, seorang cracker biasanya melakukan operasi pembersihan 'clean-up' operation dengan cara membersihkan berbagai log file. Dan menambahkan program untuk masuk dari pintu belakang 'backdooring'. Mengganti file .rhosts di /usr/bin untuk memudahkan akses ke mesin yang di taklukan melalui rsh & csh.
Selanjutnya seorang cracker dapat menggunakan mesin yang sudah ditaklukan untuk kepentingannya sendiri, misalnya mengambil informasi sensitif yang seharusnya tidak dibacanya; mengcracking mesin lain dengan melompat dari mesin yang di taklukan; memasang sniffer untuk melihat / mencatat berbagai trafik / komunikasi yang lewat; bahkan bisa mematikan sistem / jaringan dengan cara menjalankan perintah 'rm -rf / &'. Yang terakhir akan sangat fatal akibatnya karena sistem akan hancur sama sekali, terutama jika semua software di letakan di harddisk. Proses re-install seluruh sistem harus di lakukan, akan memusingkan jika hal ini dilakukan di mesin-mesin yang menjalankan misi kritis.
Oleh karena itu semua mesin & router yang menjalankan misi kritis sebaiknya selalu di periksa keamanannya & di patch oleh software yang lebih baru. Backup menjadi penting sekali terutama pada mesin-mesin yang menjalankan misi kritis supaya terselamatkan dari ulah cracker yang men-disable sistem dengan 'rm -rf / &'.
Bagi kita yang sehari-hari bergelut di Internet biasanya justru akan sangat menghargai keberadaan para hacker (bukan Cracker). Karena berkat para hacker-lah Internet ada dan dapat kita nikmati seperti sekarang ini, bahkan terus di perbaiki untuk menjadi sistem yang lebih baik lagi. Berbagai kelemahan sistem di perbaiki karena kepandaian rekan-rekan hacker yang sering kali mengerjakan perbaikan tsb. secara sukarela karena hobby-nya. Apalagi seringkali hasil hacking-nya di sebarkan secara cuma-cuma di Internet untuk keperluan masyarakat Internet. Sebuah nilai & budaya gotong royong yang mulia justru tumbuh di dunia maya Internet yang biasanya terkesan futuristik dan jauh dari rasa sosial.
Pengembangan para hobbiest hacker ini menjadi penting sekali untuk keberlangsungan / survival dotcommers di wahana Internet Indonesia. Sebagai salah satu bentuk nyatanya, dalam waktu dekat Insya Allah sekitar pertengahan April 2001 akan di adakan hacking competition di Internet untuk membobol sebuah server yang telah di tentukan terlebih dahulu. Hacking competition tersebut di motori oleh anak-anak muda di Kelompok Pengguna Linux Indonesia (KPLI) Semarang yang digerakan oleh anak muda seperti Kresno Aji (masaji@telkom.net), Agus Hartanto (hartx@writeme.com) & Lekso Budi Handoko (handoko@riset.dinus.ac.id). Seperti umumnya anak-anak muda lainnya, mereka umumnya bermodal cekak - bantuan & sponsor tentunya akan sangat bermanfaat dan dinantikan oleh rekan-rekan muda ini.
Mudah-mudahan semua ini akan menambah semangat pembaca, khususnya pembaca muda, untuk bergerak di dunia hacker yang mengasyikan dan menantang. Kalau kata Captain Jean Luc Picard di Film Startrek Next Generation, "To boldly go where no one has gone before".
(Onno)
Untuk menghilangkan jejak, seorang cracker biasanya melakukan operasi pembersihan 'clean-up' operation dengan cara membersihkan berbagai log file. Dan menambahkan program untuk masuk dari pintu belakang 'backdooring'. Mengganti file .rhosts di /usr/bin untuk memudahkan akses ke mesin yang di taklukan melalui rsh & csh.
Selanjutnya seorang cracker dapat menggunakan mesin yang sudah ditaklukan untuk kepentingannya sendiri, misalnya mengambil informasi sensitif yang seharusnya tidak dibacanya; mengcracking mesin lain dengan melompat dari mesin yang di taklukan; memasang sniffer untuk melihat / mencatat berbagai trafik / komunikasi yang lewat; bahkan bisa mematikan sistem / jaringan dengan cara menjalankan perintah 'rm -rf / &'. Yang terakhir akan sangat fatal akibatnya karena sistem akan hancur sama sekali, terutama jika semua software di letakan di harddisk. Proses re-install seluruh sistem harus di lakukan, akan memusingkan jika hal ini dilakukan di mesin-mesin yang menjalankan misi kritis.
Oleh karena itu semua mesin & router yang menjalankan misi kritis sebaiknya selalu di periksa keamanannya & di patch oleh software yang lebih baru. Backup menjadi penting sekali terutama pada mesin-mesin yang menjalankan misi kritis supaya terselamatkan dari ulah cracker yang men-disable sistem dengan 'rm -rf / &'.
Bagi kita yang sehari-hari bergelut di Internet biasanya justru akan sangat menghargai keberadaan para hacker (bukan Cracker). Karena berkat para hacker-lah Internet ada dan dapat kita nikmati seperti sekarang ini, bahkan terus di perbaiki untuk menjadi sistem yang lebih baik lagi. Berbagai kelemahan sistem di perbaiki karena kepandaian rekan-rekan hacker yang sering kali mengerjakan perbaikan tsb. secara sukarela karena hobby-nya. Apalagi seringkali hasil hacking-nya di sebarkan secara cuma-cuma di Internet untuk keperluan masyarakat Internet. Sebuah nilai & budaya gotong royong yang mulia justru tumbuh di dunia maya Internet yang biasanya terkesan futuristik dan jauh dari rasa sosial.
Pengembangan para hobbiest hacker ini menjadi penting sekali untuk keberlangsungan / survival dotcommers di wahana Internet Indonesia. Sebagai salah satu bentuk nyatanya, dalam waktu dekat Insya Allah sekitar pertengahan April 2001 akan di adakan hacking competition di Internet untuk membobol sebuah server yang telah di tentukan terlebih dahulu. Hacking competition tersebut di motori oleh anak-anak muda di Kelompok Pengguna Linux Indonesia (KPLI) Semarang yang digerakan oleh anak muda seperti Kresno Aji (masaji@telkom.net), Agus Hartanto (hartx@writeme.com) & Lekso Budi Handoko (handoko@riset.dinus.ac.id). Seperti umumnya anak-anak muda lainnya, mereka umumnya bermodal cekak - bantuan & sponsor tentunya akan sangat bermanfaat dan dinantikan oleh rekan-rekan muda ini.
Mudah-mudahan semua ini akan menambah semangat pembaca, khususnya pembaca muda, untuk bergerak di dunia hacker yang mengasyikan dan menantang. Kalau kata Captain Jean Luc Picard di Film Startrek Next Generation, "To boldly go where no one has gone before".
(Onno)
Good Hacker (2)
Dijelaskan oleh Front-line Information Security Team, "Techniques Adopted By 'System Crackers' When Attempting To Break Into Corporate or Sensitive Private Networks," fist@ns2.co.uk http://www.ns2.co.uk. Seorang Cracker umumnya pria usia 16-25 tahun. Berdasarkan statistik pengguna Internet di Indonesia maka sebetulnya mayoritas pengguna Internet di Indonesia adalah anak-anak muda pada usia ini juga. Memang usia ini adalah usia yang sangat ideal dalam menimba ilmu baru termasuk ilmu Internet, sangat disayangkan jika kita tidak berhasil menginternetkan ke 25000 sekolah Indonesia s/d tahun 2002 - karena tumpuan hari depan bangsa Indonesia berada di tangan anak-anak muda kita ini.
Nah, para cracker muda ini umumnya melakukan cracking untuk meningkatkan kemampuan / menggunakan sumber daya di jaringan untuk kepentingan sendiri. Umumnya para cracker adalah opportunis. Melihat kelemahan sistem dengan mejalankan program scanner. Setelah memperoleh akses root, cracker akan menginstall pintu belakang (backdoor) dan menutup semua kelemahan umum yang ada.
Seperti kita tahu, umumnya berbagai perusahaan / dotcommers akan menggunakan Internet untuk (1) hosting web server mereka, (2) komunikasi e-mail dan (3) memberikan akses web / internet kepada karyawan-nya. Pemisahan jaringan Internet dan IntraNet umumnya dilakukan dengan menggunakan teknik / software Firewall dan Proxy server. Melihat kondisi penggunaan di atas, kelemahan sistem umumnya dapat di tembus misalnya dengan menembus mailserver external / luar yang digunakan untuk memudahkan akses ke mail keluar dari perusahaan. Selain itu, dengan menggunakan agressive-SNMP scanner & program yang memaksa SNMP community string dapat mengubah sebuah router menjadi bridge (jembatan) yang kemudian dapat digunakan untuk batu loncatan untuk masuk ke dalam jaringan internal perusahaan (IntraNet).
Agar cracker terlindungi pada saat melakukan serangan, teknik cloacking (penyamaran) dilakukan dengan cara melompat dari mesin yang sebelumnya telah di compromised (ditaklukan) melalui program telnet atau rsh. Pada mesin perantara yang menggunakan Windows serangan dapat dilakukan dengan melompat dari program Wingate. Selain itu, melompat dapat dilakukan melalui perangkat proxy yang konfigurasinya kurang baik.
Setelah berhasil melompat dan memasuki sistem lain, cracker biasanya melakukan probing terhadap jaringan dan mengumpulkan informasi yang dibutuhkan. Hal ini dilakukan dengan beberapa cara, misalnya (1) menggunakan nslookup untuk menjalankan perintah 'ls' , (2) melihat file HTML di webserver anda untuk mengidentifikasi mesin lainnya, (3) melihat berbagai dokumen di FTP server, (4) menghubungkan diri ke mail server dan menggunakan perintah 'expn ', dan (5) mem-finger user di mesin-mesin eksternal lainnya.
Langkah selanjutnya, cracker akan mengidentifikasi komponen jaringan yang dipercaya oleh system apa saja. Komponen jaringan tersebut biasanya mesin administrator dan server yang biasanya di anggap paling aman di jaringan. Start dengan check akses & eksport NFS ke berbagai direktori yang kritis seperti /usr/bin, /etc dan /home. Eksploitasi mesin melalui kelemahan Common Gateway Interface (CGI), dengan akses ke file /etc/hosts.allow.
Selanjutnya cracker harus mengidentifikasi komponen jaringan yang lemah dan bisa di taklukan. Cracker bisa mengunakan program di Linux seperti ADMhack, mscan, nmap dan banyak scanner kecil lainnya. Program seperti 'ps' & 'netstat' di buat trojan (ingat cerita kuda troya? dalam cerita klasik yunani kuno) untuk menyembunyikan proses scanning. Bagi cracker yang cukup advanced dapat mengunakan aggressive-SNMP scanning untuk men-scan peralatan dengan SNMP.
(onno)
Nah, para cracker muda ini umumnya melakukan cracking untuk meningkatkan kemampuan / menggunakan sumber daya di jaringan untuk kepentingan sendiri. Umumnya para cracker adalah opportunis. Melihat kelemahan sistem dengan mejalankan program scanner. Setelah memperoleh akses root, cracker akan menginstall pintu belakang (backdoor) dan menutup semua kelemahan umum yang ada.
Seperti kita tahu, umumnya berbagai perusahaan / dotcommers akan menggunakan Internet untuk (1) hosting web server mereka, (2) komunikasi e-mail dan (3) memberikan akses web / internet kepada karyawan-nya. Pemisahan jaringan Internet dan IntraNet umumnya dilakukan dengan menggunakan teknik / software Firewall dan Proxy server. Melihat kondisi penggunaan di atas, kelemahan sistem umumnya dapat di tembus misalnya dengan menembus mailserver external / luar yang digunakan untuk memudahkan akses ke mail keluar dari perusahaan. Selain itu, dengan menggunakan agressive-SNMP scanner & program yang memaksa SNMP community string dapat mengubah sebuah router menjadi bridge (jembatan) yang kemudian dapat digunakan untuk batu loncatan untuk masuk ke dalam jaringan internal perusahaan (IntraNet).
Agar cracker terlindungi pada saat melakukan serangan, teknik cloacking (penyamaran) dilakukan dengan cara melompat dari mesin yang sebelumnya telah di compromised (ditaklukan) melalui program telnet atau rsh. Pada mesin perantara yang menggunakan Windows serangan dapat dilakukan dengan melompat dari program Wingate. Selain itu, melompat dapat dilakukan melalui perangkat proxy yang konfigurasinya kurang baik.
Setelah berhasil melompat dan memasuki sistem lain, cracker biasanya melakukan probing terhadap jaringan dan mengumpulkan informasi yang dibutuhkan. Hal ini dilakukan dengan beberapa cara, misalnya (1) menggunakan nslookup untuk menjalankan perintah 'ls
Langkah selanjutnya, cracker akan mengidentifikasi komponen jaringan yang dipercaya oleh system apa saja. Komponen jaringan tersebut biasanya mesin administrator dan server yang biasanya di anggap paling aman di jaringan. Start dengan check akses & eksport NFS ke berbagai direktori yang kritis seperti /usr/bin, /etc dan /home. Eksploitasi mesin melalui kelemahan Common Gateway Interface (CGI), dengan akses ke file /etc/hosts.allow.
Selanjutnya cracker harus mengidentifikasi komponen jaringan yang lemah dan bisa di taklukan. Cracker bisa mengunakan program di Linux seperti ADMhack, mscan, nmap dan banyak scanner kecil lainnya. Program seperti 'ps' & 'netstat' di buat trojan (ingat cerita kuda troya? dalam cerita klasik yunani kuno) untuk menyembunyikan proses scanning. Bagi cracker yang cukup advanced dapat mengunakan aggressive-SNMP scanning untuk men-scan peralatan dengan SNMP.
(onno)
Good Hacker (1)
Hacker dengan keahliannya dapat melihat & memperbaiki kelemahan perangkat lunak di komputer; biasanya kemudian di publikasikan secara terbuka di Internet agar sistem menjadi lebih baik. Sialnya, segelintir manusia berhati jahat menggunakan informasi tersebut untuk kejahatan - mereka biasanya disebut cracker. Pada dasarnya dunia hacker & cracker tidak berbeda dengan dunia seni, disini kita berbicara seni keamanan jaringan Internet.
Saya berharap ilmu keamanan jaringan di tulisan ini digunakan untuk hal-hal yang baik - jadilah Hacker bukan Cracker. Jangan sampai anda terkena karma karena menggunakan ilmu untuk merusak milik orang lain. Apalagi, pada saat ini kebutuhan akan hacker semakin bertambah di Indonesia dengan semakin banyak dotcommers yang ingin IPO di berbagai bursa saham. Nama baik & nilai sebuah dotcom bisa jatuh bahkan menjadi tidak berharga jika dotcom di bobol. Dalam kondisi ini, para hacker di harapkan bisa menjadi konsultan keamanan bagi para dotcommers tersebut - karena SDM pihak kepolisian & aparat keamanan Indonesia amat sangat lemah & menyedihkan di bidang Teknologi Informasi & Internet. Apa boleh buat cybersquad, cyberpatrol swasta barangkali perlu di budayakan untuk survival dotcommers Indonesia di Internet.
Berbagai teknik keamanan jaringan Internet dapat di peroleh secara mudah di Internet antara lain di http://www.sans.org, http://www.rootshell.com, http://www.linuxfirewall.org/, http://www.linuxdoc.org, http://www.cerias.purdue.edu/coast/firewalls/, http://www.redhat.com/mirrors/LDP/HOWTO/. Sebagian dari teknik ini berupa buku-buku yang jumlah-nya beberapa ratus halaman yang dapat di ambil secara cuma-cuma (gratis). Beberapa Frequently Asked Questions (FAQ) tentang keamanan jaringan bisa diperoleh di http://www.iss.net/vd/mail.html, http://www.v-one.com/documents/fw-faq.htm. Dan bagi para experimenter beberapa script / program yang sudah jadi dapat diperoleh antara lain di http://bastille-linux.sourceforge.net/, http://www.redhat.com/support/docs/tips/firewall/firewallservice.html.
Bagi pembaca yang ingin memperoleh ilmu tentang jaringan dapat di download secara cuma-cuma dari http://pandu.dhs.org, http://www.bogor.net/idkf/, http://louis.idaman.com/idkf. Beberapa buku berbentuk softcopy yang dapat di ambil gratis dapat di ambil dari http://pandu.dhs.org/Buku-Online/. Kita harus berterima kasih terutama kepada team Pandu yang dimotori oleh I Made Wiryana untuk ini. Pada saat ini, saya tidak terlalu tahu adanya tempat diskusi Indonesia yang aktif membahas teknik-teknik hacking ini - tetapi mungkin bisa sebagian di diskusikan di mailing list lanjut seperti kursus-linux@yahoogroups.com & linux-admin@linux.or.id yang di operasikan oleh Kelompok Pengguna Linux Indonesia (KPLI) http://www.kpli.or.id.
Cara paling sederhana untuk melihat kelemahan sistem adalah dengan cara mencari informasi dari berbagai vendor misalnya di http://www.sans.org/newlook/publications/roadmap.htm#3b tentang kelemahan dari sistem yang mereka buat sendiri. Di samping, memonitoring berbagai mailing list di Internet yang berkaitan dengan keamanan jaringan seperti dalam daftar http://www.sans.org/newlook/publications/roadmap.htm#3e.
(Onno)
Saya berharap ilmu keamanan jaringan di tulisan ini digunakan untuk hal-hal yang baik - jadilah Hacker bukan Cracker. Jangan sampai anda terkena karma karena menggunakan ilmu untuk merusak milik orang lain. Apalagi, pada saat ini kebutuhan akan hacker semakin bertambah di Indonesia dengan semakin banyak dotcommers yang ingin IPO di berbagai bursa saham. Nama baik & nilai sebuah dotcom bisa jatuh bahkan menjadi tidak berharga jika dotcom di bobol. Dalam kondisi ini, para hacker di harapkan bisa menjadi konsultan keamanan bagi para dotcommers tersebut - karena SDM pihak kepolisian & aparat keamanan Indonesia amat sangat lemah & menyedihkan di bidang Teknologi Informasi & Internet. Apa boleh buat cybersquad, cyberpatrol swasta barangkali perlu di budayakan untuk survival dotcommers Indonesia di Internet.
Berbagai teknik keamanan jaringan Internet dapat di peroleh secara mudah di Internet antara lain di http://www.sans.org, http://www.rootshell.com, http://www.linuxfirewall.org/, http://www.linuxdoc.org, http://www.cerias.purdue.edu/coast/firewalls/, http://www.redhat.com/mirrors/LDP/HOWTO/. Sebagian dari teknik ini berupa buku-buku yang jumlah-nya beberapa ratus halaman yang dapat di ambil secara cuma-cuma (gratis). Beberapa Frequently Asked Questions (FAQ) tentang keamanan jaringan bisa diperoleh di http://www.iss.net/vd/mail.html, http://www.v-one.com/documents/fw-faq.htm. Dan bagi para experimenter beberapa script / program yang sudah jadi dapat diperoleh antara lain di http://bastille-linux.sourceforge.net/, http://www.redhat.com/support/docs/tips/firewall/firewallservice.html.
Bagi pembaca yang ingin memperoleh ilmu tentang jaringan dapat di download secara cuma-cuma dari http://pandu.dhs.org, http://www.bogor.net/idkf/, http://louis.idaman.com/idkf. Beberapa buku berbentuk softcopy yang dapat di ambil gratis dapat di ambil dari http://pandu.dhs.org/Buku-Online/. Kita harus berterima kasih terutama kepada team Pandu yang dimotori oleh I Made Wiryana untuk ini. Pada saat ini, saya tidak terlalu tahu adanya tempat diskusi Indonesia yang aktif membahas teknik-teknik hacking ini - tetapi mungkin bisa sebagian di diskusikan di mailing list lanjut seperti kursus-linux@yahoogroups.com & linux-admin@linux.or.id yang di operasikan oleh Kelompok Pengguna Linux Indonesia (KPLI) http://www.kpli.or.id.
Cara paling sederhana untuk melihat kelemahan sistem adalah dengan cara mencari informasi dari berbagai vendor misalnya di http://www.sans.org/newlook/publications/roadmap.htm#3b tentang kelemahan dari sistem yang mereka buat sendiri. Di samping, memonitoring berbagai mailing list di Internet yang berkaitan dengan keamanan jaringan seperti dalam daftar http://www.sans.org/newlook/publications/roadmap.htm#3e.
(Onno)
Error XMS dan Himem.sys
kadangkala sebelum kita masuk ke jendela windows terdapat tulisan (pesan) error XMS dan error pada himem.sys ini merupakan masalah pada hardware. langkah perbaikannya adalah coba buka CPU anda dan bersihkan jalur memori dengan penghapus dan bersihkan tempat memory dipasang, setelah itu anda pasang kembali dan coba hidupkan cpu kembali jika masih terdapat pesan tersebut diatas berarti terdapat kerusakan pada ic memory anda. maka memory harus diganti. anda tidak perlu kuatir dengan biaya penggantian memory karena memory biasaya garansi seumur hidup. anda bisa membawa ke tempat dimana anda membeli memory. selamat mencoba semoga bermanfaat.
Baliku.net
Baliku.net
No Dial Tone
Apabila anda mengalami permasalahan dimana sewaktu koneksi ke Internet, dan pada saat anda dial terdapat pesan error no dial tone, ini bukanlah kerusakan pada hardware anda coba anda cek line telpon apa sudah benar terhubung dengan modem dan yakinkan telpon anda tidak terblokir. untuk line telpon masukkan pada modem yang terdapat tulisan Line atau gambar line telpon. jika tetap tidak bisa anda mesti cek kabel line telpon yang terhubung ke internet apakah ada yang putus atau tidak biasanya putus dikarenakan digigit tikus, terpotong oleh benda tajam, langkah selnjutnya adalah coba anda gunakan pesawat telpon dan dial ke nomber 080989999 atau isp yang anda pergunakan jika terdapat nada koneksi berarti sudah Ok. selamat Mencoba.
Baliku.net
Baliku.net
Sunday, June 3, 2007
Update Anti Virus
Dengan ini kami ingin berbagi informasi alamat update anti virus secara manual. khusunya bagi yang tidak mempergunakan internet dirumah maupun kantor. Bagi user yang mempergunakan anti virus :
1. Avira dapat download pada alamat ini :http://www.avira.com/en/support/vdf_update.html
2. kaspersky versi 5 dapat download pada situs ftp://ftp.downloads1.kaspersky-labs.com/zips/av-i386&ids-cumul.zip
3. Norton (symantec) dapat download pada situs http://www.symantec.com/avcenter/download/pages/US-N95.html
(www.baliku.net)
1. Avira dapat download pada alamat ini :http://www.avira.com/en/support/vdf_update.html
2. kaspersky versi 5 dapat download pada situs ftp://ftp.downloads1.kaspersky-labs.com/zips/av-i386&ids-cumul.zip
3. Norton (symantec) dapat download pada situs http://www.symantec.com/avcenter/download/pages/US-N95.html
(www.baliku.net)
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