Adonis Diaries

Posts Tagged ‘financial crisis

Revised economic fundamentals for enterprises (November 29, 2008)

Revisiting the essential criteria in financial sheets for stock evaluation

Within a month of the Wall Street financial crash, major EU industries (excluding the financial, real estates, and insurance institutions) have laid off over 62, 000 jobs and the USA over 77, 000 jobs.

There is no end in the forthcoming months and the jobless rate has broken all record high.  The communication, auto, computer hardware, retail stores, airline, and chemical companies are the hardest hit so far.

As the jobless rate increases then society would drift into unstable climate of insecurity in individual health and safety and retention of their properties.

Without a climate of security no influx of investment can repair the long-term malaise in the slow moving society to recovery. It is a definite pattern that in any downturn the workers, elderly and new employees, are the first to be laid off. 

As if it is the manpower was the culprit and not the management.  Consequently, a revised understanding of what constitute the worst case impact on a society should be evaluated.

Economical models for the productivity of enterprises need to be revised to include the sustainability of enterprises under fluctuating and cyclical financial crisis that is fast becoming the norm.

The working capital should be able to remain intact for the demand cycle and the value added in manpower quality of the main industry units unaffected by the flux of capitals.  Consequently, I suggest tackling two fundamental concepts.

First, the working capital should be managed differently from the general acceptable accounting procedures to resist fluctuation in central rate and money devaluation.

It is very reasonable that the retirement funds of the manpower and the stocks purchased in the company by the manpower be within the working capital management.  The manpower should then feel highly active to evaluating and discussing how the working capital is allocated and invested.

Second, we need to start a new field for defining added-values and how to measure it concretely instead of rationalizing it as a proxy ratio.

Added values should be measured accurately because it is intrinsically related to the quality of manpower.

Added-value is what makes an industry viable economically to the workers, stakeholders, and society in general.  It would not be a piece of cake to operation value-adding parameters; otherwise I would not be suggesting a new economic field for the characterization of what we mean by value-adding economy.

Every industry would have to define its value adding element such as in the service industry, hardware products, software products, chemical, car, heavy duty machineries, tourism industry, commercial banking, and financial investment banking, and so on.

Every industry has it proper cyclical market demands and its competitors, localized or multinational, dependent or not on cyclical supplies of raw materials or manpower.

I am afraid that the first criterion that would jump to mind is for the concept of value-added economy to be represented in monetary terms, which is not the proper criterion.

Value-added economy is the investment in the manpower; for example, programs in continuing education, acquiring new skills, versatility and flexibility to fill vacancies, knowledge of the competition, the products, the tools, and the equipment.

Value-added economy is raising the quality of the manpower so that a large company would aid in subsidizing private complementary companies, from among its qualified personnel, when the tough gets going.

Value-added economy is elevating the knowledge of the personnel and assisting them to find new jobs during harsh downturns.  The only monetary value or ratio associated with added value would be the expense (value added capital) invested for manpower quality relative to working capital (VAC/ WC) for raising the quality and professionalism of the manpower.

When this ratio diminishes then a company has gotten lax and is turning away from the new fundamentals.  Obviously, an independent team should be hired to prepare, control, manage, and evaluate the effective progress in manpower quality at all levels of skills.

Quantifying the quality of workers and employees is the main task in measuring value-added industries; it is feasible and its time has finally come and it should be the optimizing factor in equations instead of rates in profit, shareholders equity, return on capital and so forth.

Inevitably most of the variables used in current optimizing model of financial and economic problems would still be effective, many with significant re-definitions, but when the re-orientation is based on the added value of manpower then a new picture would emerge and standard financial analysis re-discovered. 

The quality level of the manpower can be defined as the potential added value (PAV) in time of crisis and the working added value (WAV) in normal business cycles.

WAV is the criterion that stocks in the market are valuated in addition to other financial criteria; PAV would have critical significance in times of hardships, especially, if the company recorded the events when this potential was managed and directed in previous situations to overcome serious market or natural conditions.

As armies conduct maneuvers to test the readiness of its effective so companies have the duty to conduct maneuvering re-organizations of potentials to test and evaluate its field readiness and re-evaluate its programs for value adding quality in manpower. 

I think that the more credible and frequent the organizational maneuverings the higher the market value of the company.  The more frequent the maneuverings the more evident would be the needs for downsizing and decentralizing and retaining coherent and manageable number in work force.

Code name for the timing of the Wall Street crash: rule China (part 2, November 23, 2008)

The code name for the precise timing of the financial crisis was:

 Artificial oil price increases or (AOPI) and the messenger was the multinational financial brokerage firm Lehman Brothers.

All the members in the cartel of the financial multinationals received the order to activate the countdown for the Wall Street crash: they sold out their shares to invest in anything that has real value.  The little people who invested their life savings in stocks paid the price.

The FED, the Treasury and all the US multinational financial institutions knew the theory of Money Trade Cycle that when the trend of inflation is continuously on the rise then the outcome is a financial crisis.

The theory established that businesses and economy follow a pattern of upswings and downturns, and if the government refrains from meddling with the normal interest rates of doing business then the market economy based on real value-added economy will adjust to the changes.

The problem was that the USA was no longer producing any real value-added economy for decades: the US consumers were enjoying low priced items imported from China and the manufacturing bases were exported overseas to benefit from cheap manpower and limited legal constraints.

The world had already experienced a vivid advance taste of financial crisis in 1989 in the south-east Asian markets, Japan and Latin America.

The fundamental problem was tackled by the Asian States and they worked harder to produce value-added economy.

The successive US Administrations and politicians had no guts to tell the American people the hard facts, that a recession is as sure as the sun rises, and that getting back to work harder on producing what people need to buy is a must.  Instead, the US multinationals resorted to creative embezzlement fiduciary schemes (secondary and tertiary worthless paper money gimmicks) to resume world financial market hegemony

The FED knowingly, through political pressures, kept lowering the interest rates below the healthy level of a normal market economy which overextended credits for a decade and thus generated inflation rates that could no longer be controlled or stabilized.

The US Bush Jr. Administration decided, unilaterally and without a UN resolution, for a pre-emptive war on Iraq.  The US Administration invaded Iraq on the basis that the military expense will generate many folds in profit through the control of oil distribution and blackmailing the neighboring Arab rich sovereign funds of the potential threat of Iran.

The Arab rich States were no fouls of that strategy but they went along.  They are mere small States of oligarchies and monarchies with no national identity. If these States were nations then the citizens would have taken stands; any stand would have cost much less than the trillions of dollars injected for the US citizens to resume their lavish spending on consumerism, new gas guzzling cars, stocks, and overvalued Real Estates.

The FED, the Treasury and the cartel of multinational financial institutions knew that the normal scheme of siphoning in the sovereign funds of the oil rich States and the small stock investors had reached a plateau.

It reached a plateau because the investors realized that a crisis is in the offing and the scheme could not function normally unless the same level of increase in junk paper investment is maintained.

Since the scheme reached a plateau then it was time to decide on the appropriate timing to activate the financial crisis: it was much better for the crash to take place at the very end of an administration and then to pressure the politicians to agree on a financial rescue package.

The timing was perfect: since no more foreign financial rescue is coming in then the financial rescue will happen under duress from all rich States.

The motto was: either you caught up under duress or you will all have to suffer a global economic recession.

The world lauded the US for its timely energetic reaction of rounding up 700 billion dollars to rescue the failing commercial banks.

Wrong; the package was already decided upon before the crash and the bold figure of 700 billions dollars was psychologically marketed as covering the 60% of the unsolvable Real Estates: the US people would gladly preserve its homes and pay for it.  The trick: this package is a first installment and other packages are waiting in the queue pending the appropriate political conditions.

Well, financial rescue came from everywhere but this didn’t stop recession anyway. How can you stop recession when the USA is not producing any value that people are ready to purchase?

The worst part is that President Obama is not willing to challenge the US citizens with the hash facts, at least not for a long time to come.

The US people has preferred the lax attitude since the Reagan Administrations: most of the US citizens wanted to believe in an illusory wealth assuming that the worldwide acceptance of the dollars as the currency of choice is more than sufficient to keeping the illusion alive and kicking.

The hard facts are in; tackling decades of myopia and dependence on the hard work of the other people has to be grabbed by the horns.

The world recession is the making of the lazy, faint hearted US people who failed, in their cockiness, to recall what made them a great nation!

Only one giant Nation is winning: China.

China got the USA by the throat. The US is totally dependent on China in cheap import products and the purchase of US treasury bonds for many decades to come. China can direct the US financial policies and foreign policies. It had done it already. The US had been doing it with the Latin American States and everywhere else for decades. Rule China, rule!


adonis49

adonis49

adonis49

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