T-accounts in Turkey



I haven't posted for more than a week so this is overdue. I had a wonderful time on vacation in Izmir, Turkey. My friend Serkan along with his family, was nice enough to host me for 5 days in their home in Bornova, a suburb of Izmir.

Turkey is definitely a land of contrasts. Caught between Europe and the Middle east I experienced both sides of the culture in my short trip. The country is young, and the new generation is more western-oriented than you might think. There are numerous private colleges where only English is spoken (by the way, they are learning the same T-accounts that I learned in Accounting, I thought that was very amusing!), stores and restaurants use state-of-the-art wireless credit card readers to make payment by credit easier, a convenience store clerk is connected wirelessly to the Internet and is making phone calls to friends in Germany using Skype, a newly opened open-air shopping mall with prestigious stores that you would expect to see in Beverley Hills...I could go on.

The people are some of the most hospitable you will find on the planet. Everyone you talk to is excited that you came to visit their country. Also, the food is spectacular! I have never eaten so well for so little in my entire life! It's sad in a way, that westerners are so afraid of setting foot in Muslim countries just because of Iraq.

So far I have painted a very rosy picture of Turkey, but make no mistake, it is still a developing country. Poverty is around every corner: stray dogs and cats run rampant through the streets, poor children sell Kleenex on the street just to get by, parts of the city are cut off from power for hours at a time, public transportation is spotty (avg. transit time is about 1 hour to the city center and we were only 15 km away!, although the mini-buses were a very practical idea).

During my stay I was torn between feelings of hope and sadness for this enchanting country. I tried to weigh all of the good and bad things I had seen and although I witnessed points of extreme toil and suffering (I have a soft spot for animals), I have to say my overall impression is that of hope.

Changing the face of globalization
Consider this: Chinese company Lenovo bought the PC business of IBM two years ago. India’s Tata group bought the Boston Ritz- Carlton hotel chain two weeks ago. Malaysian road building companies are lso investing big-time in India. Even the UAE’s Emaar Properties is emerging as one of the largest global real estate players.
Clearly, a new breed of multinational company is rising on the world scene. These new contenders hail from seemingly the most unlikely of places - developing nations such as Brazil, China, India, Russia, even Egypt and South Africa. They are shaking up entire industries and in doing that, they are changing the rules of global competition.
Gone are the days when developing countries went around cap in hand, pleading for aid from rich nations. According to the World Bank, foreign direct investment (FDI) between developing nations is growing at five times the rate of investment into these economies from industrialised countries. South-south FDI (investment betweeen developing countries) now accounts for an estimated one-third of all FDI going into developing countries.
The main actors in this dynamic new trend are the ‘Southern Multinationals’ - companies from developing countries which are spreading their operations all around the world. Three factors are driving this trend: greater access to resources; easier access to financial markets; and access to strategic assets. After experiencing high economic growth in recent years, some of these firms are facing pressure to diversify their sources for raw materials, especially oil and gas. They are eyeing countries where there is no strong presence of the traditional MNCs.
China and India are cases in point, with growing investments in energy and mining in Africa, Central Asia and Latin America. While the investments right now are concentrated in energy and infrastructure, IT and services are soon expected to be included in that loop. Globalisation, as understood in the West until recently, was a one-way street. This explains the outcry against outsourcing in the US. Thanks to a handful of gutsy companies from emerging markets, international business is turning out to be a two-way street.

Article printed from 7DAYS: http://www.7days.ae

I had the occasion of visiting the WiMa Kongress at the University of Ulm, Germany this weekend with some friends who are current or former students. The event is a combination of a job fair, graduation ceremony for the Mathematical Finance students, and a conference on multiple topics related to Finance and Insurance. As for the job fair, nearly all of the top employers in the German market were present. The list of companies reads like a who-is-who of German Consultancies, Investment Banks, and Re-insurers: Deutsche Bank, Accenture, McKinsey, Roland Berger, Deloitte, Boston Consulting Group, KPMG, Ernst and Young etc.. Very interesting indeed! A Yale student's dream in little old Ulm Germany! I say that with a touch of sarcasm of course...

The quality of the companies really reflects the quality of the program at Ulm. It really is a bastion for German WiMa's (German abbreviation for someone who studies Mathematical Finance or Actuarial Sciences). As I sat in on the naming of the Master's Candidates and the title of their theses (about 60/40 written in English/German) I couldn't help but notice the global reach of the topics and candidates. While the vast majority of the candidates were Germans, the topics ranged from the derivatives market in Austria to predicting the insurance claims from Hurricanes in the Atlantic. I did however notice many papers on commodities and financial engineering topics. Logical I suppose. I sort of feel sorry for the dean though, who really gave it his best trying to read through the all the thesis titles. Not easy when some of the words are 10 syllables long and can be in German or English. His closing remarks brought this to a humorous end, "And now ladies and gentlemen I finally have one more degree to to add to my repertoire, the Master of Science in diploma thesis pronunciation."

All in all it was a great weekend with great friends, great festivities and of course lots of great German beer as well :)

Walmart can't match this discount!

I recently came across some research on middle eastern markets by one of the multinational asset managers. One graphic in particular caught my attention. A scattergram with trailing PE on the x-axis and 2005 earnings growth on the y-axis plotted selected MENA (Middle East and Northern Africa) countries. Basically the farther down and to the right, the more expensive and the cheaper for the inverse (upper left). Most markets were within +- 20% of the trendline. However, what caught my eye was UAE which was extremely high up the earnings growth axis (>100% growth) AND low on the PE axis (13x). Tell me where I can find a similarly priced security in the US? You won't find one! So why the discount? My guess is the whole fog of war that surrounds the entire Middle East. When the situation in the middle east calms down I think the discount will shrink, how much is the question.

Not a bad boat!

Here's the artictle about it:

Extreme Superyacht

Did you know...

Skype is illegal in Dubai.

Googazon?!
According to recent podcast by Gartner Analyst Hung LeHong we could see a major consolidation in web commerce, with only a few megaplayers a la Google & Amazon surviving. In addition, he believes that in the future consumers will be able to engage in "pretailing". In English pretailing means researching about products consumers will then later buy either online or in store. So how is this different than now? In 5 years when I go to froogle.com and type in "Sony digital camera" (sarcastic note: that is if Sony is still around). I will see a Google map with all the stores in my town that have the item, the prices at each location, and the inventory status. Think about it, no more rushing between stores on Christmas Eve chasing that impossible gift, just froogle it!!

Mr. LeHong did mention a possible downside in that Googazon may become too large for its own good, "The danger, however, is that Googazon could become a dominant market force, not unlike Wal-Mart Stores in conventional retailing today. The marketing muscle that such a company could exert on buyers and sellers could limit consumer and vendor choices." In other words, with such a monopoly, Google could theoretically shut out (i.e. not display their products)vendors who do not advertise with them. Hopefully as Google grows, it will not get a big head. What should Google do? Listen to Spider man of course!-- "with great power comes great responsibility" Google needs to build trust among its users and be transparent. Another analyst in the podcast, Tom Austin, remarked that consumers already don't trust Large Corporations. Google is lucky in that so far it is perceived as a positive company; any negative news and all that accumulated goodwill is gone (along with probably 10% market worth I would guess).

Here is the Podcast

Good News and Bad News:

Merrill Lynch will be/has launched an index that tracks domestically listed companies in Dubai. The bad news: I can't find more info ANYWHERE!! Here is the link to the article at least.

Merrill launches index on Dubai
By Paul J Davies from The Financial Times
Published: October 31 2006


This month UBS will be releasing an instrument that claims to be the world’s first sharia-compliant investment product linked to commodity prices.

Rush to tap into Islamic market
By Farhan Bokhari, Kevin Morrison and Gillian Tett from The Financial Times
Published: October 2 2006

Graphic of the Day: Corporate Tax rates over the last 14 years.

Here is the Full Report from KPMG

Their findings reveal that coutries with low tax rates benefit directly through increased FDI e.g. Ireland. Scandinavian coutries have also made substantial progress. Here is the bad news: my beloved land of Germany is the highest taxed EU country and with the VAT hike at the beginning of 2007 I don't see things improving anytime soon. Throw in a propensity to save (savings rate of 14% compared to ~-1% in USA) and you've got a bleak outlook. I still have hope however. Here are some positive factors:
1. Privatization of higher education (also the recent establishment of "Elite" Universities).
2. German companies will benefit more than any other european country from globalization.
3. Reforms in Health Care and social security are on the horizon.

Here is a list of the 2005 & 2006 results of selected companies in the UAE. I'll let the numbers do the rest of the talking here.