Thursday, July 9, 2009
Tuesday, June 23, 2009
The Cambridge University has introduced a new scholarship scheme for applicants for undergraduate admission from Pakistan for 2010 entry onwards. The 800th Anniversary Scholarships have been created with funding from Cambridge Assessment, parent of Cambridge International Examinations who provide school exams throughout Pakistan.
The scholarships to be held at the University of Cambridge are for school-leavers from Pakistan who meet the usual examination qualifications for admission to Cambridge. Applicants for all courses except Medicine and Veterinary Medicine are eligible to apply.
The scholarships are not available if you already have a degree and are therefore applying to Cambridge as an Affiliated applicant.The scholarships will cover the cost of your tuition fees and College fees together with a grant towards maintenance and travel costs for each year of your course. The maintenance element of the scholarship will take account of your financial circumstances.
The scholarships are competitive and are conditional on a College offer of a place tostudy at Cambridge, including meeting any immigration and English language requirements. Continuation of the scholarship from year to year will be conditional on satisfactory examination performance.
If you meet the conditions above and wish to be considered for an 800th Anniversary Scholarship should complete a scholarship application form (which will be made available on the Undergraduate Admissions website in due course) and apply for a place at Cambridge in the usual way, submitting a UCAS application and a Cambridge Overseas Application Form (COAF) together with your scholarship application form by 20 September 2009. Applicants for the scholarships will be interviewed in Pakistan in October/November 2009.
University of Cambridge
Cambridge Admissions Office
32 Trumpington Street
Cambridge CB2 1QY [Map]
Information provided by firstname.lastname@example.org
[ABUJA] A tea made from the leaves of an indigenous African tree and bitter oranges is showing promise as a treatment for type 2 diabetes.
The tea, prepared by boiling leaves from theRauvolfia vomitoria tree — known as 'asofeyeje' in the West African Yoruba language — with fruit from the bitter orange tree, appears to regulate blood sugar levels, according to principal investigator Joan Iyabo Campbell-Tofte, a postdoctoral researcher at the University of Copenhagen, Denmark.
Type 2 — or adult-onset — diabetes is a life-threatening condition characterised by high levels of sugar in the blood. Often associated with obesity, the disease occurs when the body doesn't make enough — or doesn't properly use — the hormone insulin. Insulin moves sugar into cells, where it is needed for energy.
For the Danish study, 23 patients with type 2 diabetes drank 750 millilitres of asofeyeje tea every day while a control group drank a placebo. After four months, there was a reduction in blood sugar levels among asofeyeje tea drinkers. The results of the study have yet to be published.
Campbell-Tofte, who studied and later lectured at the University of Nigeria, says the tea seems to work differently from conventional diabetes treatments. Existing drugs aim to rapidly clear excess sugar from the bloodstream, while the tea appears to reduce blood sugar over time.
The researchers speculate that the tea works by improving the ability of polyunsaturated fatty acids in muscle fibres to transport sugar into cells.
Campbell-Tofte told SciDev.Net that she learnt about the tea from family and friends, who harvested 50 kilograms of leaves from the asofeyeje tree and 300 kilograms of bitter oranges for the research in the Nigerian state of Edo, where she grew up.
But though Campbell-Tofte is optimistic about the tea's therapeutic potential, she warns that any new treatment for diabetes would come "years from now".
The asofeyeje tree is native to Cameroon, Democratic Republic of Congo, Ghana, Liberia, Senegal, Sudan and Uganda. Traditional healers also use it as a purgative and a treatment for psychiatric conditions, leprosy and arthritis.
Sorce: SciDev Net
Tuesday, June 16, 2009
The interviewer hopes that YOU are the right person for the job. They are under pressure to fill the position so that they can get back to their own work. Therefore you are in a greater position of strength than you think. Concentrate on what you have to offer in the way of qualifications and experience instead of feeling intimidated.
An interviewer has 3 aims:
1) To learn if you are the right person for the job.
2) To assess your potential for promotion
3) To decide whether you will fit into the company environment.
The key to a successful job interview is in preparation
Be prepared: For the types of interview questions you will be asked
Be prepared: To ask questions yourself
Be prepared: To research the company
Be prepared: To look the part
Be prepared: To turn up on time
Job interview questions you may be asked
Q - How would you describe yourself?
A - You should describe attributes that will enhance your suitability for the position. Have some ready in advance.
Q - What are your long-term goals?
A - These should be career orientated. Make sure you have goals to discuss.
Q - Why did you leave your last job?
A - This could be for more responsibility; a better opportunity; increased income. Do not be detrimental to your previous employer. He could be the interviewer’s golfing partner.
Q - Why do you want this job?
A - Your answer should be: more responsibility or better opportunity or similar. Not: because it is closer to home or the gym.
Q - What are your strengths?
A - You should highlight accomplishments and experiences that relate to the position for which you are applying. Also, give examples of situations where your strengths have been demonstrated.
Q - What are your weaknesses?
A - This should not be a list of deficiencies. Don’t mention anything that could make the interviewer question your ability to do the job, for example “I am always late for everything.” Instead, discuss a weakness that could also be a strength such as “I am a workaholic!”
Last but not the least!
You should show interest in all aspects of the job and the company especially if shown around the premises.
Do your homework on the company and the nature of its business.
Take care in how you dress for the interview. First impressions still count!
Wednesday, June 10, 2009
The increasing power of computers, speed of networks, and the reducing cost of memory has enabled multimedia information to be handled as readily as numbers or text. One frame of an animation 1,000 by 700 pixels requires 700 kbyte of storage. For 30 frames per sec and 24-bit colour this would need 500 Mbyte. For a 5 minute animation this would require 150 Gbyte (not to mention backups, various revisions etc). Digital cinemas can receive films via the network and save the production costs of traditional film reproduction – typically $ 5millionfortheworld-widereleaseofamovie.
The Digital Media Alliance, Florida, defines digital media as "the creative convergence of digital arts, science, technology and business for human expression, communication, social interaction and education". Many traditional media companies now generate their content in digital form for distribution via CD, DVD, or the Internet. Marketing strategies for content increasingly utilize multiple media channels to hit different markets simultaneously. New media forms such as wikis, blogs, podcasts, and the distribution of user-generated content(e.g. YouTube) are all changing the nature of information and how it is stored, accessed, and distributed. Filtering, accreditation, and synthesis of content are created through new hierarchies of peers and information affinity groups on the Internet.
Source: Digital Convergence - Libraries of the Future
Tuesday, June 9, 2009
Monday, June 8, 2009
Nan Levinson speaks primarily to business writers in her book 'How to Sharpen Your Business Writing Skills', but her advice resonates with any writer who needs to share information or perspective about a subject.
Usually business writers, says Levinson, are trying to accomplish one of three things: “To present ideas, recommendations, or decisions; to explain something, or to persuade someone to agree with you or to join you in taking some action.” When you’ve decided what you need to accomplish, you’re ready to ask yourself such questions as “Who are my readers? Usually,” she adds, “there are several” including “higher-level readers, lower-level readers, peer-level readers, and external readers.”
Levinson offers these suggestions to help you tailor your message to your audience:
Consider the Reader’s Point of view
Your first piece of psychology involves identifying the benefits to your readers. Your second is to present your message with their perspective clearly in mind. Focus on readers’ concerns rather than on your own, and make your language reflect that focus. A good place to start is with the word you. Advertisers and salespeople have long understood the value of writing in the second person (you and your)…
Use an Appropriate Tone
Tone is the writer’s attitude toward the reader and subject matter as expressed – intentionally or unintentionally – in the way a message is written. Chances are, you’ve received memos or letter than annoyed or angered you by their tone. They may have been patronizing, intrusive, snobbish, demanding, or too familiar, and your response may well have been to crumple them up and toss them out.
Since an appropriate tone depends on an appropriate attitude, the psychology of persuasive writing begins at home. The key to controlling the tone of your writing is to imagine how the reader will respond and to choose words that will create the mood you desire.
Saturday, June 6, 2009
In a short column "Getting to Done", written by Keith Robinson gives some advice of self development. As I read through the points he made, it occurred to me they are good personal-development tips, useful for just about any kind of situation.
Choose to change
Glenda Cloud says, “Change is inevitable, growth is intentional.” We prefer the comfort of where we are to the perceived risk in change. However, if we want to grow, we have to choose to change.
Work harder and smarter
As an employee it can be easy to show up, do what you’re told, then go home. While that is the easy approach, there is a lot of reward in being an extra-mile worker.
Don’t make excuses
Take responsibility for things that go wrong. It puts you in a position to change or correct them.
Master your time
Work smarter; get organized; manage your time and priorities; focus on what matters; plan.
Get out of your comfort zone
This goes along with choose to change. Learn new things. Develop new skills. Learn from the past and use it as a stepping stone to new experiences.
This is good advice for any kind of relationship. Go out of your way to make sure people understand what you are saying.
Lead by example
Just because you communicate well doesn’t mean the message is always accepted. It’s easier to motivate and encourage by actions than by words.
Don’t worry about failing or making mistakes. It happens to everyone. If you’re not risking anything, you’re probably not accomplishing much.
With your time, with your attitude, with your support, with everything except your principles.
Be confident. Make decisions and stick to them. Own up to your mistakes.
Don’t settle for average
Always work to your very best. Hold yourself to a higher standard. No one goes far by just doing the minimum.
Stick up for your passions
You will always encounter people who try to boost themselves up by pulling you down. Ignore them! Your mind will question your actions or decisions. Ignore it! Is there something that you are passionate about? Listen to that!
Friday, June 5, 2009
There is no single "correct" way to write and present a CV but the following general rules apply:
- It is targeted on the specific job or career area for which you are applying and brings out the relevant skills you have to offer
- It is carefully and clearly laid out: logically ordered, easy to read and not cramped
- It is informative but concise
- It is accurate in content, spelling and grammar
Two Personnel Managers answered this as follows.
A CV should be quick and easy to read
The information must be honest and relevant
The CV should tell the reader about the applicant
It is hard to write a CV. It is technically difficult to condense many years of work into few paragraphs. Most people get much more criticism than praise in their lives. This can carry over into self-criticism and make it hard to be positive. We then undersell ourselves when writing a CV.
Wednesday, June 3, 2009
Resume Is a French word meaning "summary", and true to the word meaning, signifies a summary of one's employment, education, and other skills, used in applying for a new position. A resume seldom exceeds one side of an A4 sheet, and at the most two sides. They do not list out all the education and qualifications, but only highlight specific skills customized to target the job profile in question. A resume is usually broken into bullets and written in the third person to appear objective and formal. A good resume starts with a brief Summary of Qualifications, followed by Areas of Strength or Industry Expertise in keywords, followed by Professional Experience in reverse chronological order. Focus is on the most recent experiences, and prior experiences summarized. The content aims at providing the reader a balance of responsibilities and accomplishments for each position. After Work experience come Professional Affiliations, Computer Skills, and Education
CV. CURRICULUM VITAE
C.V Is a Latin word meaning "course of life". Curriculum Vitae (C.V.) is therefore a regular or particular course of study pertaining to education and life. A C.V. is more detailed than a resume,
usually 2 to 3 pages, but can run even longer as per the requirement. A C.V. generally lists out every skills, jobs, degrees, and professional affiliations the applicant has acquired, usually in chronological order. A C.V. displays general talent rather than specific skills for any specific positions.
Bio Data the short form for Biographical Data, is the old-fashioned terminology for Resume or C.V. The emphasis in a bio data is on personal particulars like date of birth, religion, sex, race, nationality, residence, martial status, and the like. Next comes a chronological listing of education and experience. The things normally found in a resume, that is specific skills for the job in question comes last, and are seldom included. Bio-data also includes applications made in specified formats as required by the company.
A resume is ideally suited when applying for middle and senior level positions, where experience and specific skills rather than education is important. A C.V., on the other hand is the preferred option for fresh graduates, people looking for a career change, and those applying for academic positions. The term bio-data is mostly used in India while applying to government jobs, or when applying for research grants and other situations where one has to submit descriptive essays.
Resumes present a summary of highlights and allow the prospective employer to scan through the document visually or electronically, to see if your skills match their available positions. A good resume can do that very effectively, while a C.V. cannot. A bio-data could still perform this role, especially if the format happens to be the one recommended by the employer.
Personal information such as age, sex, religion and others, and hobbies are never mentioned in a resume. Many people include such particulars in the C.V. However, this is neither required nor considered in the US market.
Thursday, May 7, 2009
Recent reports of international media especially US media confirm that they look at Pakistan as a state that is collapsing. The grave situation is that Pakistani media is following this trend without considering the cultural ingredients and indigenous social, political and economical landscape of the country.
Ejaz Haider, the Consulting Editor of The Friday Times and OP-ed Editor of Daily Times, considered the hypotheses of this trend and wrote a wonderful article in the Friday Times in this context. Ejaz considered the reports currently having place in international media biased as they can not pass the test of sound analysis.
Ejaz emphasized that a state can not be considered "Fail" if its 30% population is under poverty line, or its corruption level is high. Hence poverty, poor governance, corruption, a broken court system, etc. are nothing new to Pakistan or, for the matter, to much of the developing world, including shining India. Author considered these reports “rely on simplistic rendering of facts presented out of context or as a montage of sorts for cumulative impact. . . Most of these reports rely on email contacts, interviews or phone conversations”.
The current problems are owed to US presence in Pakistan and roots may be linked with US role in Soviet occupation of Afghanistan.” The current problem was created by the eight years of Musharraf’s dictatorship; the army in cahoots with the Taliban; the violence is owed to India’s perfidy; because of poverty; use of force has compelled these people to retaliate, etc.”
Ejaz questioned that ‘why did no one talk about Pakistan as a failing state with all indicators of poverty, poor political and economic conditions, etc. before the insurgency?” There is just one issue “the insurgency”. “Can Pakistan deal with it ?” This is the thinking that lurking behind this doomsday scenario for the west. Narrow it down and it would read: “Can Pakistan deal with it on our terms.”
Author considered that we can face the current challenges with Dialogue, rule of law, and strengthen judiciary. He further wrote: "Pakistani State and Society is far more complex and multilayered for it to come apart in the way reports in the US press predict".
Saturday, May 2, 2009
Thursday, April 9, 2009
Gina wrote "Busy people have two options when they decide how their workdays will go: they can choose to be reactive to urgent demands on their time, or proactive about focusing on what they decide is important. The only way to actually get things done is to mitigate the urgent to work on the important".
She further differentiate between urgent and important tasks: "Urgent tasks include things like that frantic email that needs a response RIGHT NOW; a sudden request that seems like it'll only take two minutes but often ends up taking an hour; a report you've got to write up before a meeting . . . Urgent tasks are usually short-term and we're drawn to them because they keep us busy and make us feel needed. But dealing with a constant stream of urgent tasks leaves you wrung out at the end of the day, wondering where all the time went, staring at the undone actual work you've got to complete”
She further considered “Important work moves you and your business towards your goals. The important stuff doesn't give us that same shot of adrenaline that the urgent requests do. It can involve thinking out long-term goals, being honest about where you are and want to be, and just doing plain hard work that feels boring and tedious".
Finally, She provides the following points and conceded that an awareness of the difference and a few simple techniques can help:
Choose three important tasks to complete each day. Write them down on a slip of paper and keep it visible on your desk. When you have a moment, instead of checking your email, look at the slip, and work on an item. Keep the list to just three, and see how many you can complete.
Turn off your email client. Shut down Outlook, turn off new email notifications on your BlackBerry, do whatever you have to do to muffle the interruption of email. When you decide to work on one of your important tasks, give yourself an hour at least of uninterrupted time to complete it. If the web is too much of a temptation, disconnect your computer from the Internet for that hour.
Set up a weekly 20-minute meeting with yourself. Put it on your calendar, and don't book over it — treat it with the same respect you'd treat a meeting with your boss. If you don't have an office door or you work in an open area that's constantly busy, book a conference room for your meeting. Go there to be alone. Bring your project list, to-do list, and calendar, and spend the time reviewing what you finished that past week, and what you want to get done the following week. This is a great time to choose your daily three important tasks.
Friday, March 27, 2009
NEW YORK -- Is this the worst economy since the Great Depression? And what are the chances of the economy falling into another depression?
The answer to the first question is fairly clear. In most ways that matter to economists and average Americans, this is the worst economic crisis since the Depression.
The answer to the second question is not as clear. While the National Bureau of Economic Research officially declares the beginning and end of recessions, nobody does that for depressions.
Still, the general consensus of economists is that another depression is not likely. But the risks are greater than they were only a few months ago.
First things first: Even though it may seem obvious to most that this is the worst downturn since the Great Depression, the economy has experienced other serious recessions in the past, particularly in the mid-1970s and early 1980s.
But this recession dwarfs those two for several reasons.
In terms of length, the longest post-Depression economic decline was 16 months, which occurred in both the 1973-75 and 1981-82 recessions. This recession began in December 2007, which means that it will enter its 17th month next Wednesday.
The current recession is also more widespread than any other since the Depression. The Federal Reserve's readings show that 86% of industries have cut back production since November, the most widespread reduction in the 42 years the Fed has tracked this figure.
What's more, every state reported an increase in unemployment this past December, the first time that has happened in the 32 years that records for unemployment in each state have been kept.
"This is important because there's nowhere you can move to find a job," said Gus Faucher, director of macroeconomics for Moody's Economy.com.
Finally, during the past nine months, the drop in household wealth has been larger since anything on record in the post-World War II period.
So far during this recession, the nation's gross domestic product, the broadest measure of economic activity, has dropped about 1.7%. Forecasts of experts surveyed by the National Association for Business Economics work out to about a 3.4% decline in GDP over the life of this recession.
To be sure, there already have been some quarters where the drop was much more severe. The government will report its final revision of GDP for the fourth quarter of 2008 and economists are expecting that report to show an annual rate of decline of 6.6%. And some economists think the drop in the first quarter could be even greater.
But measuring the drop in economic activity from top to bottom is how economists judge a recession's depth. And a 3.4% drop would be the worst since World War II, and far worse than the average recession in that period.
Still, that's a long way from the 26.5% drop in GDP that took place between 1929 and 1933.
One of the main reasons why economists think another depression could be avoided is that it will take more than just a sharp decline in consumer spending and household wealth to spark a depression.
Even though household net worth has fallen a record $11 trillion, or 18%, during the course of this recession, the broader economy can weather such a shock.
Historically, stock market crashes and bursting housing bubbles haven't necessarily led to depressions. It takes a variety of economic factors and policy decisions to turn a recession into something even more serious.
"I don't know if you can make a causal link between a loss of wealth and a depression," said Lakshman Achuthan, managing director of Economic Cycle Research Institute.
Significant policy changes since the 1930s will also cushion the blow.
Unemployment insurance, Social Security payments and larger government at the federal, state and local levels keep money flowing into the economy even as consumers and businesses pull back on their own spending.
"There's a lot more safeguards in place," said Keith Hembre, chief economist at First American Funds.
Hembre said the $787 billion stimulus bill passed by Congress in February will also spur more economic activity down the road.
In addition, the Federal Reserve, led by Great Depression expert Ben Bernanke, has pumped trillions of dollars into the economy with new lending programs the central bank has never tried before. That has swelled the supply of money. By way of contrast, the money supply tightened during the Great Depression.
There were many other policy mistakes made in the 1930s that economists say are not being repeated today, including stiff tariffs that killed international trade and government imposed limits on prices and production levels.
Even if Congress imposed "Buy American" provisions in the public works paid for by the stimulus bill, there is no call to move back to the strict protectionism of the 1930s or production and price controls.
"I'd like to think we've learned something, so in terms of policy we're doing better," said Achuthan.
Still, even if the United States does not enter another depression, that doesn't make the current economic crisis any less painful for many Americans. Also, few economists are predicting an end to the recession anytime soon.
Hembre said he is worried that the country could be in a period of prolonged economic stagnation similar so the so-called lost-decade that Japan suffered starting in the 1990s. He said continued weakness in housing and high debt levels by households and governments could hold the economy back for some time.
And some economists aren't completely ruling out another depression.
In a paper for the National Bureau of Economic Research last month, Harvard University professors Robert Barro and Jose Ursua put the chance of a minor depression (which they defined as a GDP decline of at least 10%) at about 20% and a 3% chance of a major depression (defined as a GDP drop of at least 25%). Moody's Economy.com is forecasting a 10% chance of a depression.
Thursday, March 26, 2009
A wave of troubled loans threatens to send weak ones into the arms of Uncle Sam.
(Fortune Magazine) -- On Friday, Feb. 20, investors watched in horror as shares of Bank of America plunged below $3 and Citigroup's stock broke $2, giving the two pillars of U.S. banking a combined market value of $26 billion - far below that of Kraft Foods.
Fear is spreading that if all that rescue money can't revive these stumbling giants, only one road remains. Everyone from former Fed chief Alan Greenspan to Senate Banking Committee chairman Chris Dodd is warning that the sole solution may be the once unthinkable one: nationalization.
How can it be that the banks are tottering after the government fortified them with hundreds of billions in bailout cash and guarantees on their troubled assets? For the past 18 months, the banks' problems with toxic securities, especially collateralized debt obligations (CDOs) and other exotic products that packaged subprime mortgages, attracted most of the attention - and alarm. Now the storm is entering an entirely new phase that's potentially even more dangerous: a historic meltdown in the bread-and-butter businesses of credit card, home-equity, and mortgage lending.
The scale of potential losses in consumer and business loans swamps what's left from the securities debacle by a factor of three or four to one. And the next wave, the looming defaults on commercial real estate loans financing the likes of half-leased retail malls, will soon cause a fresh round of pain. "We've now moved from the securities phase to the lending phase of the banking crisis," says Tanya Azarchs, a managing director in S&P's financial services ratings group. "For 2009 we expect that loan losses will be much worse than for 2008 and that securities write-downs will be much less."
Those looming losses make it inevitable that the government will shower the banks with more bailout billions - and get big ownership stakes in return. But that will fall far short of what most people think of as nationalization.
Speaking before Congress, Federal Reserve chairman Ben Bernanke said that nationalization means that the government takes 100% ownership, wipes out the shareholders, and runs the bank. "I don't think we want to do that," he said. He added that talk of nationalization misses the point. And he's right: The government already exerts tremendous influence over the industry, requiring banks that take federal money to limit compensation and modify mortgages, among other restrictions.
Moreover, the government seizes banks all the time. Since the beginning of 2008, the FDIC has shut down 39 insolvent institutions (leaving shareholders with nothing), reselling the branches, loans, and bad assets as quickly as possible. In the rare cases when it can't find a buyer, the FDIC will run the bank, as it is doing with Indy-Mac, which it took over in July. (A sale of Indy-Mac is now in the works.) And the agency is likely to be busy for some time to come: During the last banking crisis, from 1989 through 1992, it seized 1,368 banks.
The big banks, however, will get all the help they need to avoid that fate. The administration plans to put the 19 banks with assets of more than $100 billion through a rigorous financial analysis called a stress test. The banks will have to calculate their losses under severe conditions, including increased unemployment and continued home-price declines. The goal is to establish which institutions are so short of capital that they can't sustain current loan books, let alone expand credit.
Washington won't let those big banks fail: It will boost their capital by purchasing preferred stock that will pay a 9% dividend. If a bank has trouble paying the hefty dividend, it can convert the preferred shares into common stock. Hence, the weakest big banks may well end up with the government as their largest shareholder.
To understand the forces that will drive some banks into the arms of Uncle Sam, let's take a deep dive into their balance sheets. We'll concentrate on the four biggest U.S. institutions - Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), and Wells Fargo (WFC, Fortune 500) - because they hold almost half of U.S. consumer and business loans and account for most of the problem securities that haunt the industry.
First, let's examine the banks' securities portfolios. According to brokerage FBR Capital Markets, the four big banks hold almost $2 trillion in investment and trading securities such as collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), and commercial and residential mortgage-backed securities - including the subprime paper that started the whole debacle. Accounting rules require the banks to mark almost all such assets to market-adjust their value according to prices brought by comparable securities in recent sales. But the markets for many of these assets are frozen, making it difficult or impossible to value them accurately.
That doesn't mean, however, that they are necessarily being carried on the banks' books for much more than they are worth, as is widely believed. In fact, banks have been marking the securities down for well over a year. According to Azarchs of the S&P, three types of debt are fairly valued or undervalued on banks' books: bundles of home loans backed by Fannie Mae (FNM, Fortune 500) and Freddie Mac, the notorious subprime CDOs that started the problem, and leveraged loans that shops like Blackstone (BX) and KKR used to finance buyout deals. The loans backed by Fannie and Freddie are essentially government guaranteed. Banks are carrying them at about 90 cents on the dollar, so they are fairly valued. The banks have marked down many subprime CDOs to 25 cents, and they are carrying the leveraged loans at around 75 cents. But Azarchs contends that a fair portion of those loans are producing income and will be paid back. "In both categories the potential losses in many cases, in my opinion, are a lot lower than their prices on the banks' books," she says.
Other securities are still overvalued: for example, mortgage-backed securities based on jumbo home loans, those too big to be guaranteed by Fannie and Freddie. Azarchs says that these securities at the four big banks are now marked at around 78 cents, probably an inflated number given the soaring mortgage default rates. Another area where the marks are too high is packages of commercial real estate loans. "Even if they're still paying full interest, many of the buildings backing them are worth a lot less than the loans," says Tom Barrack, CEO of Colony Capital, a private equity firm specializing in real estate. "They're really worth around 50 cents, and they're marked at 70 cents."
The banks also face losses on the insurance contracts they bought to protect against losses on many of these securities from monoline insurers such as Ambac and MBIA. Those insurers have run into trouble and seen their credit ratings cut, which forces the banks to take reserves against potentially uninsured losses, a trend that's bound to accelerate.
If the securities held by the banks do indeed contain plenty of bargains (alongside the overpriced merchandise), why aren't buyers lining up to take them off the banks' hands? The reason is threefold: First, buyers who have jumped in so far have been badly burned because of gyrating prices. In the fourth quarter, just when it looked as if once-toxic securities were raving bargains, prices collapsed as rates on everything from junk bonds to triple-A corporate debt exploded. Second, the buyers are financing their purchases with short-term loans, so they typically can't hold the assets until they mature. Instead, they're getting killed by margin calls from lenders. Third, potential buyers are sitting on the sidelines while Washington designs a plan for dealing with toxic assets that may give them a better deal.
The buyers' strike won't last. In early February the Treasury announced that it would provide up to $1 trillion in financing for private buyers to purchase illiquid assets. That program is bound to stir the vultures. A few investors are ready to pounce: "We see lots of fabulous bargains, with good assets often selling at 60 cents," says Michael Tennenbaum of Tennenbaum Capital Partners, an investment firm specializing in distressed debt. And Colony Capital has raised a $1 billion fund to purchase beaten-down bonds.
As more transactions occur, we'll get a better idea of how overvalued or undervalued various securities really are. According to estimates by FBR, the banks will end up writing down around 4.5% of their trading and investment portfolios, mostly over the next three years. For the big four, that would mean losses of $90 billion, or around $30 billion a year. That's a large number, but it's far less than the $150 billion the four (and the banks and firms they have acquired recently) have written down since late 2007.
Now let's examine the second, far more dangerous menace lurking in the loan portfolios. The big four hold $3.6 trillion in credit card, home-equity, mortgage, commercial real estate, and other consumer and business loans. Those loans are deteriorating with shocking speed: Default rates will soon surpass the worst of any recession in decades. Since mid-2007, for example, the charge-off rate for credit card loans has jumped from 3.8% to 7%. Overall, the four big banks suffered charge-offs of around 1% of their portfolios through the middle of 2007. For the fourth quarter of 2008 the figure jumped to 2.6%. And things are getting worse - delinquencies in all categories are rising. Star analyst Meredith Whitney predicts that credit card losses will climb above 10%, far higher than in any recent recession.
How high will the losses mount? FBR predicts the banks will eventually write off about 9% of their loan portfolios, with the vast bulk of losses coming in the next three years. That would hit the big four with around $300 billion - or $100 billion a year - in credit losses, more than three times the projected damage from their toxic securities.
And that explains the talk of nationalization. The challenge for the banks now is to earn enough money from normal operations that they can avoid taking additional government aid - which is not an impossible dream. Unless the U.S. falls into a near depression, it's likely that the majority will succeed. Among the big four, J.P. Morgan and Wells Fargo have the best prospects. They boast relatively strong capital ratios and are striving to stay ahead of the government by raising capital on their own. J.P. Morgan just announced a steep dividend cut that will save $5 billion annually and greatly strengthen its balance sheet. By concentrating on consumer banking, Wells Fargo mostly avoided the securities mess. It's likely to raise additional cash by selling the East Coast branches it inherited from its merger with Wachovia to concentrate on its powerful Western U.S. franchise.
And even BofA, saddled with the disastrous purchase of Merrill Lynch (see "Divorce - Bank of America Style"), could find a clear path out of the muck, although that's far from certain. The smart money is betting that Bank of America will soon launch a big asset sale, including Merrill Lynch's prime brokerage, which caters to hedge funds; reportedly, it has already put private bank First Republic on the block. That could give BofA sufficient capital to sidestep a bailout. Then the bank could rely on its powerful nationwide low-cost consumer franchise to rebuild its balance sheet. "Investors underestimated BofA," says Whitney. "BofA should be able to start building capital by the middle of 2009."
The true basket case among the biggest banks is Citigroup. Citigroup's core businesses in areas like credit cards, branch banking, and international corporate lending are so weak that it cannot generate enough revenue to compensate for the deluge of losses. That means its puny equity capital is destined to keep shrinking or disappear entirely. Citi executives are already asking Washington for additional aid in exchange for as much as 40% of Citi's common stock. And after the stress test, it will probably need more cash, making it all but certain that the government will end up with a majority stake.
How the government proceeds from there will say a lot about the future of the banking sector. The fear is that Washington will continue to prop up Citi and other wounded banks in their current form. The best course would be to force battered banks to sell enough assets to restore their financial health - if that's possible - or to dissolve. That would demonstrate that Washington is serious about reviving the industry - the one that is absolutely essential to the nation's economic recovery.
Wednesday, March 25, 2009
Is the death of the euro possible? As the global recession deepens, investors are certainly starting to worry that Europe's most ambitious integration project to date, the common currency shared by 16 sovereign nations, could break apart under the strains. The fact that the euro zone, far from decoupling from a U.S. recession, is now contracting at least as fast as the U.S. and the U.K. has added to the concerns. But the notion of a full-scale euro breakup looks vastly overblown.
The key reason the euro zone is not doing well is external, not homemade. Because companies around the world can slash their investment plans in times of uncertainty much faster than households can scale back their expenditures, the traditional exporters of top-quality machinery such as Germany are now suffering the brunt of the global downturn. This, in turn, weakens the euro. At some point, however, the worst of the global crisis will be over—with luck, sometime later this year. Once that happens, trading nations with a focus on investment goods, like Germany, should be able to recover lost ground.
The medium-term outlook for core Europe is still encouraging. German consumers had never joined in the credit-fueled party thrown by U.S. and U.K. consumers. While these consumers will probably need to restrain their consumption for years after the crisis, core continental Europe, as well as China and Japan, could enjoy an almost normal consumer upswing once the crisis is over.
Of course, we have to get to the medium term first. The global turmoil has hit the euro zone as a symmetric shock. All economies in the region are now contracting. In this sense, the euro area looks more and not less cohesive than it did a year ago, when regional real-estate booms were already turning to busts in some euro-member countries such as Spain, Greece and Ireland, while Germany was still enjoying strong export growth.
That said, markets are still shunning all kinds of perceived risks, and thus drawing a much clearer distinction between supposedly strong countries such as Germany and supposedly weak euro members such as Greece, Ireland, Italy and Spain, whose governments now have to pay much more than Germany to borrow on global capital markets.
This has led to speculation that some weaker nations might drop out of the euro, perhaps even solving funding problems the Zimbabwean way, by printing all the money the government wants in a new national currency. But Zimbabwe, which has taken this tactic to its extreme and is now reeling under hyperinflation and economic collapse, proves that this strategy doesn't work. Any country leaving the haven of the euro would risk devaluing its new national currency, and bond markets would demand very hefty risk premiums. These countries would thus find it much more expensive to borrow.
The occasional speculation in corners of the financial markets that a strong country like Germany might abandon the euro makes little sense either. Just imagine what would happen if Germany reintroduced its old Deutsche mark amid the current turmoil. Foreign-exchange markets would probably bid the independent German currency up quickly and strongly, further crippling the growth prospects of a country that exports half of what it produces. Given the extreme economic environment, a German currency might soar even more than in past crises.
The political logic also argues very strongly against a demise of the common currency. All member countries have invested a lot of political capital into the European venture. European leaders meet almost once a month to discuss a huge range of issues. If one country had to ask for urgent help in a particular financial crisis, it would be very difficult for its partners to refuse such a request. After all, that country's vote may soon be needed again in decisions on other matters.
Skeptics have expressed doubt that the euro zone has a pot of money large enough to bail out multiple European member states simultaneously. Yet there are various ways in which euro-zone members could help each other. For example, some European institution backed up by the member states may temporarily guarantee issues of new government bonds by a euro country in trouble. In a similar way, many national governments are already guaranteeing new bank bonds against a fee and for a limited number of years. A similar guarantee to another euro nation would give that member time to ride out the crisis and put its own house in order.
The bottom line: global investors have bigger things to worry about at the moment than a breakup of the euro zone. In the medium term, the crisis may even enhance the position of the euro. Many European countries outside the euro, like Poland and Hungary, are now suffering as their currencies are battered badly. They are trying to get as close as they can to the protective umbrella offered by the euro. The lesson for them is that they should work harder to qualify for Europe's most exclusive club. If they can meet the requirements, their entry will eventually strengthen the common currency.
Schmieding is chief European economist at Bank of AmericaMerrill Lynch.