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Sep 13
If you have spent any time following the story playing out in Europe you know that many of the Eurozone countries are experiencing the same crisis that the United States went through in 2009. If we strip away all of the economic and political chatter, the story is simply this: Because of a whole lot of bad financial decisions, many Eurozone countries are on the brink of disaster and no country is closer to financial Armageddon than Greece.

greece eurozone crisisStill, although Greece is essentially bankrupt, Americans in large numbers have no idea the tragedy that continues to unfold in this small country. Why is Greece in this position, what happens if they default on their debts, and what can we learn from these events?

The Story
The story is full or drama and history but much of the problem comes from the fact that Greece hasn’t done a good job of taxing its citizens. The New York Times reports that Greece has allowed large amounts of citizens and companies to evade their tax liabilities. The same report says that if these taxes were collected, Greece would be able to meet much of their liabilities but suddenly raising taxes on their citizens isn’t practical either. Others note that in Greece’s own budget, government spending now exceeds 50% of GDP, the total value of all goods and service sold in the country.

This means that half of the total production of goods and services funds current spending. The rest of the budget, which includes a lot of uncollected revenue, pays on the debt but it’s not nearly enough. The European Central Bank has been left with the task of paying for Greek debt which is mounting fast largely because the interest rates they have to pay to borrow money is so high. Recently the interest rate Greece has to pay has passed 50%. Eurozone countries no longer want to let Greece borrow money so they are left to pay their debt with money they don’t have.
Jun 9
Martin Wheatley, who is the former head of the Hong Kong’s Securities and Futures Commission (SFC), recently stated that “China is the new dot.com of the investment world, and that the books of any individual company should be thoroughly examined before purchasing their stock.”

He went on to clarify his statement by saying “The world has been rushing into China without asking the normal questions they would do before investing in any firm.” This of course is very similar to the dot.com boom in the late 1990,s that later went bust, and left investors holding the bag.

china financial newsWheatley has been on the job since 2005, prior to that he spent 18 working at the London Stock Exchange. He believes that brokerage firms and investment banks based in Hong Kong which help bring Chinese companies public, must raise their standards when it comes to fully investigating a firms financial statements before listing their stocks.

For many years now there have been major concerns over the accuracy of the books of Chinese companies listed outside of the country, particularly on Wall Street. Presently, the US Securities and Exchange Commission are in the process of investigating many Chinese firms that are trading on US stock exchanges. In fact, a few of these companies have already had their shares suspended over allegations of accounting abnormalities and other improprieties.
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Jun 3
For the week ending June 3, 2011, Wall Street dropped sharply on news out of the US, mainland China, and Hong Kong. Many investors are worried about the slowdown in these economy’s and the effect it is going to have on earnings.

The Chinese stock market witnessed a 9% correction, which in turn sent the US markets lower and caused the Dow Jones industrials to lose more than 120 points.

china financial newsMore than one stock analysis believes that there is a major correction coming sometime in the near future, if the worldwide economies do not show an improvement soon. The former Feb chairperson Alan Greenspan, also released a statement, where he stated he “believed the US economy could be headed for a recession”, which did not help the stock markets.

The shares of stocks listed on the Hong Kong stock exchange also dipped last week, and that was started by the shipping firm China Merchants Holdings. They issued a statement that said, ‘they believe the worldwide economic forecast would lead to slower growth than they initially expected in the near future”. The Hang Seng Index dropped 1.6%, or 372.59 points to finally close the day at 23,253.84.
May 27
The Chinese firm Alibaba Group Holding Ltd., recently sold Alipay.com Co. Ltd. Alipay is China’s largest online payment processor, and was 100% owned by Alibaba. The sale went through without the knowledge or approval of the board of directors or shareholders.

alipay yahooYahoo, who owns a staggering 43% of Alibaba, saw its share price drop almost 12% since the announcement of the sale. Alibaba stated “That in order for it to get the Chinese governments approval for an operating license for Alipay, its shares must be owned 100% by Chinese citizens.”

Doing business in China kinds of reminds one of the wild, wild, west, where anything goes, at anytime. The first question that comes up when you read these kinds of statements is, “Since Alipay already had an operating license, why did it need to spin off from its parent company?”

Of course, they didn’t, but the people behind this extremely shady deal, could have not made the kind of money they did, without some kind of excuse.
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Jul 12
This is a news tip that might be of interest sent by Anthony Goldbloom, thanks.

In the lead-up to the world cup, Kaggle invited statisticians and data miners to take on the big investment banks in predicting the outcome of the World Cup. Now that the final has been decided, we can take a look at how Kagglers stacked up against the quants at JP Morgan, Goldman Sachs, UBS and Danske Bank in forecasting the World Cup.

In total, 65 teams participated in the Take on the Quants challenge. JP Morgan finished 28th, Goldman Sachs 33rd, UBS 55th and Danske Bank 64th. The betting markets fared better, finishing 16th.

The winner of the competition was Thomas Mahony, an Australian economist. His approach relied on Elo ratings with an adjustment for home country/continent advantage. His strategy correctly tipped Spain to win, the Netherlands to finish second and Germany to finish in the top four. The investment banks all had their top picks bow out early (UBS, Goldman Sachs and Danske Bank picked Brazil and JP Morgan picked England), hurting their overall performance.

The next big question is whether Kagglers can also outperform the quants in forecasting financial markets (we won’t have to wait long to find out, as Kaggle is currently hosting a competition to predict stock price movements).
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