Have you heard of fabricating the books? I can easily pay myself $$$trillions without consideration of performance

October 3rd, 2012
More than most professions, the pay of financial service professionals is or should be tied to their performance.  It is easy to quantify the returns the investments they recommend return and easy to compare their performance to other financial service professionals.  When executives perform well they frequently receive large bonuses.  However, should they receive large bonuses when they fail to meet their own internal targets and consistently underperform the market over many years?
Over the past few years Temasek Holdings senior management has awarded itself bonuses for consistently underperforming the market and even failing to meet its own internal hurdle rates.
A hurdle rate is the rate of return an investment manager must exceed before collecting a bonus.  Temasek states on its website that its risk adjusted hurdle rate ranges from 8-9% over the last few years.  They further state in the Temasek Review 2012 that:

“When we deliver returns above our risk-adjusted hurdle, we have a positive bonus pool to distribute, part of which is deferred to future years. When we deliver returns below our risk-adjusted hurdle, we share a negative bonus pool….the average risk-adjusted hurdle rates for Temasek were about 9% through the years.”

So now that we understand what the Temasek hurdle rate is and why it is important, let’s look at how often they have met the hurdle rate over the past few years.  Here is the total shareholder return as calculated by Temasek:

According to Temasek’s own numbers, since 2008 they have only beaten their own one year hurdle rate 1 out of the past 5 years.  Their 5 year total shareholder return is a paltry 3% while their hurdle rate is 9%.  This is not a good record.  Finally, the one year that Temasek beat its hurdle rate of through March 31, 2010 with a return of 43% the first full year after the financial crisis, the Strait Times Index returned 55%.  Not only is Temasek not beating its own hurdle rate, when it does beat its hurdle rate it isn’t beating the market.
Surely given this record of performance failing to meet its own internally established hurdle rates, Temasek should not be awarding senior managers bonuses especially given their statement above on how the creation of the bonus pool.  According to the Temasek annual report since 2006 every year included cash bonuses for the prior years work; bonuses in six of seven years for “wealth added” even though “wealth added” was negative in 4 of the 7 years according to Temasek; co-investment investment units awarded in 5 years out of 7 comprising a major portion of compensation which appear behave similar to a stock option.
In other words, senior management is given an ownership stake in Temasek Holdings for failing to meet their own hurdle rate, follow their own policy, and not beating the market the one year they do beat their hurdle rate!  The average Singaporean though gets 2.5% through their CPF account to fund Temasek.  Who is getting the better deal?
To try and get an idea of how big a bonus Temasek senior management is awarding itself for not beating its own internal hurdle rate, let’s compare the Temasek management costs to that of other investors that disclose their costs.  Temasek lists its operating expenses in its group income statements.  To make a fair comparison, I add up their Selling & Distribution, Administrative, and Other Operating Expenses but exclude their Finance costs.  You can see a simple comparison to other well known investment firms in USD below in Table 1.

Even though Goldman Sachs manages $762 billion USD more than Temasek while employing 31,900 more people its non-financial operating costs are only 34% higher.  To put this in perspective, the average operating cost of employing someone at Goldman Sachs is $864,181 SGD.  The average operating cost of employing those 400 employees at Temasek: $52,141,276 per employee!  It is 60 times more expensive to employ someone at Temasek Holdings than Goldman Sachs and 94 times more expensive than Morgan Stanley.
The enormous discrepancy in operating costs between Temasek and firms like Goldman Sachs matters for two very important reasons.  First, as financial firms primary non-financial cost is operational and administrative costs like employee compensation, office space, and overhead, this implies that Temasek is paying its employees well above industry norms.  According to the Wall Street Journal, the average salary at Goldman Sachs was $367,057 in 2011.  Unless Temasek is buying enormous amounts of printer cartridges and paper clips, these operational costs represent compensation costs.
Second, the excessive non-financial operating costs at Temasek represent an enormous drain on Singaporean public finances.  Temasek currently pays $21 billion SGD in non-financial operational costs.  If Temasek operational costs per employee were equal to Goldman Sachs, they would only spend $345 million SGD.  In other words, if Temasek spent money like Goldman Sachs rather than Temasek, total operational costs would fall by 98.3%!!  To put it another way, the difference between the amount of money Temasek would spend if it averaged Goldman Sachs cost per employee is equal to 34% of Singaporean government expenditure.  The excessive spending is directly taking money out of the Singaporean budget.
Maybe the discrepancies and costs at Temasek should become part of the National Conversation?
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Christopher Balding

*The writer is a professor of business and economics at the HSBC Business School at the Peking University Graduate School.  An expert in sovereign wealth funds, he has published in such leading journals as the Review of International Economics, the Journal of Public Economic Theory, and the International Finance Review on such diverse topics as CDS pricing, the WTO, and the economics of adoption and abortion.  His work as been cited by a variety of media outlets including the Wall Street Journal and the Financial Times. Prof Balding received his Phd from the University of California, Irvine and worked in private equity prior to entering academia. He blogs at http://www.facebook.com/baldingsworld.

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Everybody at UN refuses to contribute to IMF to bailout EU

WASHINGTON | Tue Oct 2, 2012 1:33pm EDT

(Reuters) – The euro zone debt crisis is pushing the International Monetary Fund into new, and at times, uncomfortable territory. The global lender is preparing to monitor some of Europe’s largest economies possibly without its biggest weapon – money.
The IMF lacks the financial heft to come to the aid of economies the size of Spain or Italy on its own, even though its monitoring and enforcement role would be in demand.
Can it impose sufficient conditions on a large European country to effect change and preserve its credibility, without any funds?
“One difficulty for the IMF is that, throughout the past two years, in order to maintain the political coalition for bailouts in Europe, they have been prepared to do things that they would never have accepted if they had vantage over it themselves,” said Fredrick Erixon, director of the Brussels-based European Center for International Political Economy.
European Central Bank chief Mario Draghi has said IMF help will be sought to both design conditions and monitor programs for euro zone nations that want the ECB to step in to buy their bonds to lower their borrowing costs.
Spanish Prime Minister Mariano Rajoy said last month he has no objection to IMF monitoring, but also insisted he did not want it making fresh demands for a further tightening of Spain’s budget. Spain is widely expected to be the test case for the ECB’s new euro zone rescue plan, and some investors think Italy could follow.
BITTER PILL
Until the euro zone crisis erupted, most of the IMF’s bailouts focused on emerging economies in Asia and Latin America. Europe’s crisis presents a case much larger and potentially more damaging to the global economy than anything the IMF has previously overseen.
IMF independent oversight offers Europe the credibility it needs to reassure investors that the region is taking the necessary steps to tackle its crisis and that the region is moving in the right direction.
But IMF involvement is politically toxic in Europe. Fund officials, who regularly descend with their European colleagues to check whether bailed-out governments are taking their medicine, have earned the moniker “Men in Black”.
“I don’t know of any example in history where the political leadership or the electorate have been pleased to see the IMF come in to review the books and find out what the governments are doing,” said Erixon.
“It’s even more difficult for Spain and Italy, which are large countries with a political culture or perception that their sovereignty should not be challenged by officials poking their noses into what they’re doing.”
It has escaped no one’s notice that the three governments that had to go cap in hand to the IMF – Greece, Portugal and Ireland – were soon turned out of office by their voters.
The coming months are critical for addressing the euro zone’s problems. IMF and World Bank meetings that kick off in Tokyo next week will focus on whether or not Europe has a handle on the crisis and what more needs to be done.
SHIFTING ROLE
Until now, the IMF has operated alongside the European Union and ECB as part of a “troika” of emergency lenders to Greece, Ireland and Portugal. Together, the troika has demanded fiscal and structural changes in exchange for rescue funding, and it has jointly overseen implementation of these bailout programs.
The IMF’s role in this next phase of the euro zone crisis is less clear and a subject of some internal concern. European countries are some of the IMF’s biggest and most influential member countries and speaking truth to power may be challenging.
IMF Managing Director Christine Lagarde, a former French finance minister, said last week the IMF had to remain an independent broker.
“We are not the yes-man of the euro partners, nor are we the yes-man of the European Central Bank and we do our job as we should do our job,” she said. “We should do our job as rigorously and vigorously as we have.”
Lagarde does not act alone. She reports to a board that represents 188 countries that want to ensure the IMF’s credibility is not damaged and its funds are not squandered.
The biggest IMF shareholder is the United States, which has been pressing Europe to get ahead of the crisis with a strong financial firewall. Its clout in the Fund gives it a big stick to wield to influence loan conditions.
The IMF, however, has already shown that it is able to adjust its role. When Spain negotiated a 100 billion euro bank bailout with Europe in June, the Fund separately reached an agreement with Madrid on ways the fund could monitor implementation of the plan to reassure markets.
Domenico Lombardi, a senior fellow at the Brookings Institution in Washington, said the IMF had little choice but to get involved to prevent the problems in Europe from destabilizing the global financial system.
“We are very close to a full blown systemic crisis of the euro area and it is the IMF’s duty to make sure the situation is stabilized,” said Lombardi.
“The conditions in which the IMF involvement will take place are extremely challenging and unprecedented. It puts the IMF at the heart of the euro area policymaking machinery.”
THREE WAYS FORWARD
Conversations with officials with knowledge of the situation show three likely scenarios emerging if larger European countries should turn to the IMF – all of them with a more limited role than the IMF has been used to elsewhere.
In one scenario, the IMF could enforce an agreement even though it had no role in formulating or funding it. However, such a setup would leave the IMF vulnerable to being held responsible for a plan created by others.
In a second approach, the IMF could be asked to negotiate conditions for a bailout and to enforce the program, which would ensure investors a country’s foot is being held to the fire.
A third scenario could involve some IMF bailout money, and the institution would help negotiate the program’s conditions and ensure its implementation, similar to what it is doing in Greece, Ireland and Portugal.
The IMF’s work in African countries may offer some clues about the Fund’s likely approach. In 2005, it began a program for countries in Africa that did not need IMF money but wanted its stamp of approval on policies to reassure investors and markets.
(Additional reporting by Alan Wheatley Editing by Tim Ahmann and Leslie Gevirtz)

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As I have already warned you, UN needs to be totally independent from it’s members, the work done by the UN is so important that there should not be any interference from members, and I am going to make sure of that. I will support UN fully so that it is able to print it’s own money thru IMF and World Bank. EU is too important to forget about and I will not let EU sink. I will ask my lawyers Rajah & Tann to prepare the contracts to transfer my inventions to the UN, but you need to pay the costs as I got no money, get someone with proper credentials from the UN to approach me.
– Contributed by Oogle.

Datamining with Interactive Ads targeting the right clients will give you the highest ROI

Interactive Advertising. It’s never easy to stand out in a crowd, but successful Interactive Advertising does just that. Evolving from static banners to fully engaging rich media experiences, show how a great idea and solid technical execution can successfully work hand-in-hand on the Internet, TV and other media where it is possible to have the highest ROI by correctly targeting your audience. Examples : http://www.webbyawards.com/webbys/current.php?media_id=98
These are all award winners in their relevant categories where it is possible to learn from their experiences.

Re-targeted Ads only form part of the story, what you want to do is really find out exactly what the consumer wants and match it. Only with a massive database can you achieve it. That is why data-mining comes to the picture. But who in the market is able to provide such knowledge? If I am able to, my ROI is more than 50X your 3X. http://www.businessinsider.com/facebook-fbx-2012-9

Why understanding your present customers needs can help you bring in new customers.
It will help you understand your customer’s demographics, the catchment areas and the potential of your existing customers so that you are able to target new customers and new products.
Presently most do not invest in data-mining to break up the info into something so valuable it can be termed as goodwill. With an indepth knowledge of your market you can easily exploit your ROI, which normal Ads can never achieve. 
If I want, I can easily push Interactive Ads to smartphones and tablets when a person comes within range, and cover my scope of target audience in the most crowded mrt trains and stations, creating revenue for both SMRT/SBS and a whole bunch of work for Interactive Ad agencies. I can even setup kiosks in MacDonalds to run promotions and contests, and also get Ad revenue when advertisers target MacDonald’s customers all over Singapore in MacDonald’s branches via WiFi. I do not see why Wireless@SG does not make money if they are able to collect simple data like name, sex, and age with their phone numbers and use it to create a good experience for advertisers to target their right audience. If MacDonalds were to provide it’s own WiFi worldwide, and use it to promote it’s own advertisements, and sell it’s media to other advertisers, I am sure it is able to cut it’s advertising budget by half because of effective marketing thru Interactive Ads. It is value for money because these are the people who have already become customers, you just need to provide incentives for them to come back again, TV Interactive Ads are for branding and new customers.
Due to advertising ethics, it is possible to provide a demography of the profile of your customers, but the collection of customer data cannot be resold, or there will be backlash.
– Contributed by Oogle.

Iran does not have a nuclear capability at present

AFP
Tuesday, Oct 02, 2012

JERUSALEM – International sanctions against Iran are biting but are not slowing the country’s nuclear programme, Israel’s strategic affairs minister Moshe Yaalon said on Tuesday.
“The sanctions and the pressure in place against Iran for around the past two years are effective, but the centrifuges continue to turn,” Yaalon told Israeli public radio.
“There is a sanctions clock, and the Iranian nuclear programme is getting closer and closer to the red line,” he added.
“We think it is necessary to impose harsh sanctions, economic, political or otherwise, again Iran, and we retain the military option,” Yaalon said.
“But the fact is that diplomacy is not working and the sanctions have not had the desired effect because Iran is continuing its nuclear programme.”
Israel, the Middle East’s sole if undeclared nuclear power, and much of the international community, believe Iran’s nuclear programme masks a weapons drive.
Tehran says the programme is for peaceful energy and medical purposes, but has been slammed with increasingly harsh sanctions that have squeezed the country’s economy.
On Monday, Iran’s currency plummeted at least 17 per cent in trading, prompting the US State Department to describe the freefall as evidence that sanctions were putting pressure on the Iranian government.
“From our perspective this speaks to the unrelenting and increasingly successful international pressure that we are all bringing to bear on the Iranian economy. It’s under incredible strain,” State Department spokeswoman Victoria Nuland said.
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Iran is years away from developing it’s nuclear capability to threaten Israel, and there is no danger at present, I will personally defend Israel if anyone tries to be funny because I know everything in this world, however,

there is a real risk of a nuclear weapon stolen by terrorists in an establishment because not every facility in the US is full proofed,

and unless this problem is resolved, the world will face a threat from nuclear weapons and there will not be peace on earth.The most important festival needs increased security as there are extremists planning to cause trouble, especially from die-hard muslim groups which I do not need to tell you who, I have nothing against muslims, but if you disturb the peace in Israel I will get the government to come after you.
Clamp down hard on these people if they are armed, but I am sure their target is not Israel but the US. US interests will all be hit if it does not back off from playing big brother and give up nuclear weapons, until the debt problem is resolved(I can easily solve it), within Obama’s new term, causing a collapse of their economy, I am here to give you prior warning, don’t blame me if you do not listen.

Reuters reported on September 12, citing U.S. government officials, that the attacks may have been planned and organized in advance, and that members of Ansar al-Sharia and AQIM may have been involved in the Libya embassy attack.”

– Contributed by Oogle.