What does occupy wall street stand for? Thats what everyone keeps asking. We know they are against income inequality, but how exactly do they plan on fixing it. Well sitting around in downtown NYC is certainly not solving their problems. If they want to reduce income inequality it would be helpful to get jobs and start working long hours like the people that they resent.
In essence the OWS movement is a backlash against a financial system that most US citizens are not educated about. These protesters simply do not understand the complexity of our financial system, why it is fundamentally important to our way of life and our economy and why it was necessary to bail it out. The brightest and most capable people on Wall Street help keep our country successful and help power growth and prosperity around the world.
You have to place some blame on Barack Obama's speech to Congress laying out his revision plan for the tax system. I don't blame the policy of taxing the rich, but instead his delivery. To pit successful Americans against the masses as if they were a consolidated group that intentionally outmaneuvers the tax system to hurt America was divisive and ill advised. I think Obama is wishing he could get that speech back and try it again., because he unleashed an outpouring of misinformed sentiment against a group of Americans who keep our country going. Yes I believe that income inequality is a major problem in America, but traditionally it is the government's job to solve these issues through a graduated income tax system that taxes high income individuals at a higher rate. In sum, I am trying to say that these protesters should voice their opinions to Washington. They should not seek to disrupt our financial sector by surrounding office buildings and trying to prevent people from getting to work.
So how does this have anything to do with Mongolia. Mongolia would benefit greatly from securing investments from Wall Street's top investment banks. Investments from these banks into Mongolian railway projects, road projects and renewable energy projects would dramatically improve the standard of living and the quality of life here. Projects to build a hydroelectric station and windmill farm could reduce heavy air pollution in the capital city and help eliminate a considerable health risk to over a million people. A subway project in Ulaanbaatar could dramatically reduce traffic congestion and eventually bring down inflated rent prices by allowing urban sprawl and the development of suburban commuter areas. Railway projects to build a national railway network would dramatically increase the profitability of mining projects and generate jobs for thousands of Mongolians.
My point is that Mongolia needs investment banks to fund these projects and generate sustainable growth. So the argument that Wall Street never did anything for anyone is simply wrong. Investments from Wall Street power growth all over the world, creating jobs and improving lives.
Friday, November 18, 2011
Thursday, November 17, 2011
Diversification, Entrepreneurship and Wealth Creation
Because of its communist past, the Mongolian government has a predisposition for large scale economic projects. This is very useful for things like mining and infrastructure, but it doesn't help small businesses and little entrepreneurs who are finding it increasingly difficult to get started because of high inflation and the high cost of borrowing.
Mongolia is currently in need of diversification in its economy. It dependence on large-scale mining and agriculture (herding) make the economy extremely vulnerable to price shocks. It is important that Mongolia diversify vertically and horizontally, meaning that they encourage new businesses across many industries and at different scales. This kind of scaled diversification can be built from the bottom up, by encouraging the development of small businesses through micro-lending and by creating and educating entrepreneurs. If a small start up business is successful, then it can be scaled.
The U.S. Agency for International Development (USAID) has already initiated this process to some extent through its recent introduction of a Business Plan Initiative, meant to enhance the role of the private sector in Mongolia, to coincide with the observance of World Quality Day. Their program attempts to inspire and support government strategies to advance policies that benefit private sector businesses by increasing competitiveness and creating a favorable financial environment for borrowing.
Here is just one idea for a successful small-scale private industry and why it would work:
Textiles: Mongolia is well positioned to have a successful textile industry, but the country currently imports almost all its non-traditional clothing. Mongolia has domestic sources of wool and cashmere and there is already small scale cashmere and wool production. A Mongolian textile industry would benefit from its close proximity to northeaster China, which is the highest producing cotton region in the world. A close supply network for wool, cotton and cashmere would make raw materials cheap and easy to access. In the ger districts surrounding Ulaanbaatar, most people do not participate in the national economy. These districts are a good supply of affordable untrained labor and they have pockets of undeveloped land suitable for small textile factories. A factory would have to be located on the perimeter of a ger district and adjacent to a developed part of the city in order to get access to the city's electricity and water infrastructure. A Mongolian clothing company could easily access the retail market through one Ulaanbaatar's department stores, most likely the State Department Store, where a great number of the city's 1 million inhabitants buy their clothing. The business strategy can be scaled to produce for a larger national or international market. (If you want more information about this business plan, leave a comment with your contact information)
Mongolia is currently in need of diversification in its economy. It dependence on large-scale mining and agriculture (herding) make the economy extremely vulnerable to price shocks. It is important that Mongolia diversify vertically and horizontally, meaning that they encourage new businesses across many industries and at different scales. This kind of scaled diversification can be built from the bottom up, by encouraging the development of small businesses through micro-lending and by creating and educating entrepreneurs. If a small start up business is successful, then it can be scaled.
The U.S. Agency for International Development (USAID) has already initiated this process to some extent through its recent introduction of a Business Plan Initiative, meant to enhance the role of the private sector in Mongolia, to coincide with the observance of World Quality Day. Their program attempts to inspire and support government strategies to advance policies that benefit private sector businesses by increasing competitiveness and creating a favorable financial environment for borrowing.
Here is just one idea for a successful small-scale private industry and why it would work:
Textiles: Mongolia is well positioned to have a successful textile industry, but the country currently imports almost all its non-traditional clothing. Mongolia has domestic sources of wool and cashmere and there is already small scale cashmere and wool production. A Mongolian textile industry would benefit from its close proximity to northeaster China, which is the highest producing cotton region in the world. A close supply network for wool, cotton and cashmere would make raw materials cheap and easy to access. In the ger districts surrounding Ulaanbaatar, most people do not participate in the national economy. These districts are a good supply of affordable untrained labor and they have pockets of undeveloped land suitable for small textile factories. A factory would have to be located on the perimeter of a ger district and adjacent to a developed part of the city in order to get access to the city's electricity and water infrastructure. A Mongolian clothing company could easily access the retail market through one Ulaanbaatar's department stores, most likely the State Department Store, where a great number of the city's 1 million inhabitants buy their clothing. The business strategy can be scaled to produce for a larger national or international market. (If you want more information about this business plan, leave a comment with your contact information)
Tuesday, November 8, 2011
European instability could bog down Mongolia
These days the entire world economy depends on those lazy and incompetent European PIGS (Portugal, Italy/Ireland, Greece and Spain)... I'm just kidding, they're not all lazy...but I don't think we can count on these European "siesta" countries to tighten their boot straps and get to work rebuilding competitive economies. Fortunately for them, the hard working and disciplined Germans shackled themselves to the Eurozone in 1999, meaning the Germans will likely pick up the tab and keep the bad eggs afloat.
On the other size of Euroasia, Mongolia is feeling the aftershocks from Europe. The crisis is making it more expensive for everyone to borrow money. Mongolia is on the verge of issuing its first ever government-guaranteed bond through the newly created Development Bank of Mongolia. Unfortunately, the European crisis has created a heightened level of anxiety when it comes to sovereign debt and and the risk of default. Thus, the interest rate on the new bond will be very high until the European debt crisis is settled. So now DBM is sitting on its hands waiting for Europe to sort out its sh**.
The bond is not the only problem. Europe happens to be China's largest export market. If Europe defaults and enters a severe economic recession then China's economy will certainly shrink as well. China's economic growth is already showing signs of a slow down. Home prices are dropping and auto sales are retracting. Reports today suggest that the special administrative region of Hong Kong entered a recession in the third quarter. China is Mongolia's biggest trading partner. If China experiences an economic slow down then the high projected growth that Mongolia is expected to enjoy over the next decade will be jeopardized.
China might also take matters into its own hands. With a large stake in Europe and enormous reserves of foreign currency, China might be tempted to join in on the European bailout. And for some reason European leaders are excited by the prospect. They apparently feel no shame in showing the world that Europe's decadent societies can no longer stand on their own two feet without assistance from global superpowers. But lets not get ahead of ourselves...the bailout from China might not even come. There is political pressure on the Chinese government to make good investments and the Communist Party would risk losing legitimacy if it is seen to be making a poor financial decision by investing in Europe. China might go for a bailout if other bargaining chips are brought to the table. For instance, if China was offered more influence in the IMF, something it has sought for a while now, then it might take the bait and assist Europe. But the long term solution for the global economy still rests on Europe's lap. In order to regain confidence, Europe must reign in government spending and reform its "siesta" economies so that they can become competitive again. Then China and the rest of the world might see twenty-first century Europe as a sound investment.
On the other size of Euroasia, Mongolia is feeling the aftershocks from Europe. The crisis is making it more expensive for everyone to borrow money. Mongolia is on the verge of issuing its first ever government-guaranteed bond through the newly created Development Bank of Mongolia. Unfortunately, the European crisis has created a heightened level of anxiety when it comes to sovereign debt and and the risk of default. Thus, the interest rate on the new bond will be very high until the European debt crisis is settled. So now DBM is sitting on its hands waiting for Europe to sort out its sh**.
The bond is not the only problem. Europe happens to be China's largest export market. If Europe defaults and enters a severe economic recession then China's economy will certainly shrink as well. China's economic growth is already showing signs of a slow down. Home prices are dropping and auto sales are retracting. Reports today suggest that the special administrative region of Hong Kong entered a recession in the third quarter. China is Mongolia's biggest trading partner. If China experiences an economic slow down then the high projected growth that Mongolia is expected to enjoy over the next decade will be jeopardized.
China might also take matters into its own hands. With a large stake in Europe and enormous reserves of foreign currency, China might be tempted to join in on the European bailout. And for some reason European leaders are excited by the prospect. They apparently feel no shame in showing the world that Europe's decadent societies can no longer stand on their own two feet without assistance from global superpowers. But lets not get ahead of ourselves...the bailout from China might not even come. There is political pressure on the Chinese government to make good investments and the Communist Party would risk losing legitimacy if it is seen to be making a poor financial decision by investing in Europe. China might go for a bailout if other bargaining chips are brought to the table. For instance, if China was offered more influence in the IMF, something it has sought for a while now, then it might take the bait and assist Europe. But the long term solution for the global economy still rests on Europe's lap. In order to regain confidence, Europe must reign in government spending and reform its "siesta" economies so that they can become competitive again. Then China and the rest of the world might see twenty-first century Europe as a sound investment.
Mongolian Sandwich
Being a landlocked country between Russia and China is a huge disadvantage for Mongolia. Chinese and Russian influences are growing, sparking concerns among investors and the Mongolian people. The Chinese already dominate Mongolia's exports, having bought 90 percent of Mongolia's exports in the first half of 2012. According to Mine Web, Mongolia needs to expand its trade with China in order to ease its long-term dependence.
Dependence on Russia and China also poses a risk to the mining sector. Mongolian mines rely on Russian and Chinese fuel, power and transportation to operate. If a major disruption occurs in Russia or China, then Mongolian mines could shut down. Furthermore, if Mongolia wants to export to other countries like South Korea or Japan it must rely on Chinese and Russian transportation. In theory, Russia and China could coordinate their policies by limiting Mongolia's access to their railway networks in order to keep the Mongolian extraction economy under Russian and Chinese control.
Corruption is also a major issue. Chinese and Russian businesses are viewed as some of the most corrupt in the world. With their increasingly overbearing influence in Mongolia, it is not unlikely that corruption could spill across the boarder and into the Mongolian economy.
For these reasons, the Mongolian government has pursued a third neighbor policy, trying to build strong relationships with Japan, South Korea and the US. In July, the government rejected a proposal that gave the development rights of the Tavan Tolgoi coal project over to Shenhua of China, Peabody of the United States and a Russian-Mongolian consortium. The government is now trying to devise new deal that would include Japanese and South Korean partners. This move, though disruptive to the launch schedule of TT, will probably pay off in the long term by promoting economic relationships with fellow democratic market economies in the region.
Dependence on Russia and China also poses a risk to the mining sector. Mongolian mines rely on Russian and Chinese fuel, power and transportation to operate. If a major disruption occurs in Russia or China, then Mongolian mines could shut down. Furthermore, if Mongolia wants to export to other countries like South Korea or Japan it must rely on Chinese and Russian transportation. In theory, Russia and China could coordinate their policies by limiting Mongolia's access to their railway networks in order to keep the Mongolian extraction economy under Russian and Chinese control.
Corruption is also a major issue. Chinese and Russian businesses are viewed as some of the most corrupt in the world. With their increasingly overbearing influence in Mongolia, it is not unlikely that corruption could spill across the boarder and into the Mongolian economy.
For these reasons, the Mongolian government has pursued a third neighbor policy, trying to build strong relationships with Japan, South Korea and the US. In July, the government rejected a proposal that gave the development rights of the Tavan Tolgoi coal project over to Shenhua of China, Peabody of the United States and a Russian-Mongolian consortium. The government is now trying to devise new deal that would include Japanese and South Korean partners. This move, though disruptive to the launch schedule of TT, will probably pay off in the long term by promoting economic relationships with fellow democratic market economies in the region.
Friday, November 4, 2011
Dutch Disease in Mongolia?
How does a country like Mongolia convert its natural resource wealth into sustainable economic growth and prosperity? In economics, Dutch Disease refers to the decline in manufacturing that tends to occur when natural resource extraction increases. The increase in revenue from natural resources will make a nation's currency appreciate in value relative to foreign currencies, thus making it more expensive for other countries to buy the nation's exports. This makes the manufacturing sector less competitive in the global market. This phenomenon was first documented in the Netherlands after a large natural gas field was discovered there in 1959, thus the name Dutch Disease.
So how can Mongolia develop its manufacturing sector while its mining sector grows exponentially? I don't think it should be difficult to manipulate the value of Mongolia's currency because Mongolia has only a few major export markets, namely China and Russia. The Mongolian central bank could control the value of the Mongolian currency by deploying the same method that China uses to manipulate its own currency with its major trading partners.
Mongolian example: China pays a Mongolian mining company 1m RMB (Chinese currency) for some amount of coal. The mining company will go to the Bank of Mongolia and exchange the 1m RMB for however many Mongolian Tughriks. The Bank of Mongolia could then use a healthy portion of that 1m RMB to purchase Chinese bonds, essentially injecting the RMB back into the Chinese economy. This way the Bank of Mongolia will not accumulate an excess reserve of Chinese y, keeping the exchange rate between the Chinese and Mongolian currencies relatively stable. This will keep Mongolian manufacturing competitive relative to Chinese competitors. With Chinese consumption growing, Mongolian manufacturing should seek to export its finished goods to China. This would allow Mongolia to develop a modern industrial economy as opposed to a undiversified extraction economy.
Mongolia's coal and copper resources are highly desired by Chinese companies. This gives Mongolia a considerable amount of leverage when dealing with China. For this reason, I think it is not unreasonable to think that this monetary policy would be tolerated by China. Currently, Mongolian people are very weary of Chinese influence in their country. In fact, in a poll asking who is the best partner for Mongolia, Mongolians put China last behind the United States, Russia, Japan and Korea. But still, I think China remains the most promising partner for Mongolia, namely because of its proximity, its hunger for Mongolian exports and its increasing influence in World affairs. What Mongolia needs is a trade agreement with China that acknowledges Mongolia's desire to develop its own domestic manufacturing, intended for sale in China. Only then will both sides be equally served by the relationship and Mongolians can sleep soundly at night knowing that the big brother of Asia is not taking advantage of them.
Cash handouts and why they don't work
The Mongolian government has acquired the nasty habit of giving universal cash handouts to its citizens in accordance with a pledge that said that the country's mineral wealth would be shared with all the Mongolian people. But the cash handouts don't help anyone, they just creates inflation. They increase the money supply without adding any real value to the economy. Yesterday I met a young Mongolian guy who recently graduated in economics from Hunter College in NYC. When I asked him if he got his cash hand-out he laughed and said, "No but it was worth 66 US dollars, so I don't care, it wouldn't have made a difference. It just made everything more expensive." We were sitting in a restaurant in Ulaanbaatar, a city where rent prices are comparable to New York City. Here prices are rising continuously while fifty percent of people continue to live in overcrowded ger districts and do not participate in the national economy.
Cash handouts pose the greatest threat to the government's pledge to honor its Fiscal Responsibility Law. Moody's Investors Service: "Election promises by the ruling coalition have compelled the government to distribute cash payments in its Human Development Fund amounting to 250,000 tughriks (about $210) per citizen this year. Such transfers may account for almost two-thirds of the projected budget deficit in 2011." With an election coming up next year, there is increased pressure on the government to honor its revenue-sharing commitment. Economists are expecting more cash handouts and for this reason they predict inflation will reach a crippling 18%. President Ts.Elbegdorj has acknowledged that the practice is harmful and must stop, but few believe he will be able to stand up to public pressure.
Instead of cash handouts, the Mongolian government should expand their foreign currency reserves to demonstrate to investors that Mongolia is a safe place to invest because it has the ability to withstand shocks to commodity prices without foreign aid (not even Europe can say that). They should also invest in transportation, health-care and education, rather that diminish the Mongolian people's purchasing power with ill-advised cash handouts.
Cash handouts pose the greatest threat to the government's pledge to honor its Fiscal Responsibility Law. Moody's Investors Service: "Election promises by the ruling coalition have compelled the government to distribute cash payments in its Human Development Fund amounting to 250,000 tughriks (about $210) per citizen this year. Such transfers may account for almost two-thirds of the projected budget deficit in 2011." With an election coming up next year, there is increased pressure on the government to honor its revenue-sharing commitment. Economists are expecting more cash handouts and for this reason they predict inflation will reach a crippling 18%. President Ts.Elbegdorj has acknowledged that the practice is harmful and must stop, but few believe he will be able to stand up to public pressure.
Instead of cash handouts, the Mongolian government should expand their foreign currency reserves to demonstrate to investors that Mongolia is a safe place to invest because it has the ability to withstand shocks to commodity prices without foreign aid (not even Europe can say that). They should also invest in transportation, health-care and education, rather that diminish the Mongolian people's purchasing power with ill-advised cash handouts.
Gold digger
Found this linked to Chinee's facebook today:
"A Reply From CEO of J.P. Morgan To A Pretty Girl Seeking A Rich Husband".. !
A young 'n pretty lady posted this on a popular forum:
... --------------------------
Title: What Should I do to Marry A Rich Guy?
--------------------------
I'm going to be honest of what I'm going to say here. I'm 25 this year. I'm very pretty, have style 'n good taste. I wish to marry a guy with $500k annual salary or above.
You might say that I'm greedy, but an annual salary of $1M is considered only as middle class in New York.
My requirement is not high. Is there anyone in this forum who has an income of $500k annual salary? Are you all married?
I wanted to ask: what should I do to marry rich persons like you?
Among those I've dated, the richest is $250k annual income,'n it seems that this is my upper limit.
If someone is going to move into high cost residential area on the west of New York City Garden(?), $250k annual income is not enough.
I'm here humbly to ask a few questions:
1) Where do most rich bachelors hang out? (Please list down the names 'n addresses of bars, restaurant, gym)
2) Which age group should I target?
3) Why most wives of the riches are only average-looking? I've met a few girls who don't have looks 'n are not interesting, but they are able to marry rich guys.
4) How do you decide who can be your wife, 'n who can only be your girlfriend? (my target now is to get married)
Ms. Pretty
A Philosophical reply from CEO of J.P. Morgan:
Dear Ms. Pretty,
I have read your post with great interest. Guess there are lots of girls out there who have similar questions like yours. Please allow me to analyse your situation as a professional investor.
My annual income is more than $500k, which meets your requirement, so I hope
everyone believes that I'm not wasting time here.
From the standpoint of a business person, it is a bad decision to marry you. The answer is very simple, so let me explain.
Put the details aside, what you're trying to do is an exchange of "beauty" 'n "money" : Person A provides beauty,'n Person B pays for it, fair 'n square.
However, there's a deadly problem here, your beauty will fade, but my money will not be gone without any good reason. The fact is, my income might increase from year to year, but you can't be prettier year after year.
Hence from the viewpoint of economics, I am an appreciation asset, 'n you are a depreciation asset. It's not just normal depreciation, but exponential depreciation. If that is your only asset, your value will be much worse 10 years later.
By the terms we use in Wall Street, every trading has a position, dating with you is also a "trading position".
If the trade value dropped we will sell it 'n it is not a good idea to keep it for long term - same goes with the marriage that you wanted. It might be cruel to say this, but in order to make a wiser decision any assets with great depreciation value will be sold or "leased".
Anyone with over $500k annual income is not a fool; we would only date you, but will not marry you. I would advice that you forget looking for any clues to marry a rich guy. 'n by the way, you could make yourself to become a rich person with $500k annual income.This has better chance than finding a rich fool.
Hope this reply helps. If you are interested in "leasing" services, do contact me.
signed,
J.P. Morgan CEO...
(Thanks Chinee)
"A Reply From CEO of J.P. Morgan To A Pretty Girl Seeking A Rich Husband".. !
A young 'n pretty lady posted this on a popular forum:
... --------------------------
Title: What Should I do to Marry A Rich Guy?
--------------------------
I'm going to be honest of what I'm going to say here. I'm 25 this year. I'm very pretty, have style 'n good taste. I wish to marry a guy with $500k annual salary or above.
You might say that I'm greedy, but an annual salary of $1M is considered only as middle class in New York.
My requirement is not high. Is there anyone in this forum who has an income of $500k annual salary? Are you all married?
I wanted to ask: what should I do to marry rich persons like you?
Among those I've dated, the richest is $250k annual income,'n it seems that this is my upper limit.
If someone is going to move into high cost residential area on the west of New York City Garden(?), $250k annual income is not enough.
I'm here humbly to ask a few questions:
1) Where do most rich bachelors hang out? (Please list down the names 'n addresses of bars, restaurant, gym)
2) Which age group should I target?
3) Why most wives of the riches are only average-looking? I've met a few girls who don't have looks 'n are not interesting, but they are able to marry rich guys.
4) How do you decide who can be your wife, 'n who can only be your girlfriend? (my target now is to get married)
Ms. Pretty
A Philosophical reply from CEO of J.P. Morgan:
Dear Ms. Pretty,
I have read your post with great interest. Guess there are lots of girls out there who have similar questions like yours. Please allow me to analyse your situation as a professional investor.
My annual income is more than $500k, which meets your requirement, so I hope
everyone believes that I'm not wasting time here.
From the standpoint of a business person, it is a bad decision to marry you. The answer is very simple, so let me explain.
Put the details aside, what you're trying to do is an exchange of "beauty" 'n "money" : Person A provides beauty,'n Person B pays for it, fair 'n square.
However, there's a deadly problem here, your beauty will fade, but my money will not be gone without any good reason. The fact is, my income might increase from year to year, but you can't be prettier year after year.
Hence from the viewpoint of economics, I am an appreciation asset, 'n you are a depreciation asset. It's not just normal depreciation, but exponential depreciation. If that is your only asset, your value will be much worse 10 years later.
By the terms we use in Wall Street, every trading has a position, dating with you is also a "trading position".
If the trade value dropped we will sell it 'n it is not a good idea to keep it for long term - same goes with the marriage that you wanted. It might be cruel to say this, but in order to make a wiser decision any assets with great depreciation value will be sold or "leased".
Anyone with over $500k annual income is not a fool; we would only date you, but will not marry you. I would advice that you forget looking for any clues to marry a rich guy. 'n by the way, you could make yourself to become a rich person with $500k annual income.This has better chance than finding a rich fool.
Hope this reply helps. If you are interested in "leasing" services, do contact me.
signed,
J.P. Morgan CEO...
(Thanks Chinee)
Thursday, November 3, 2011
Deposits and liability
Today I came across this sentence:
"A deposit which has been pledged with (some bank) for securing a loan granted to a non-bank costumer should also be excluded from the calculation of qualifying liabilities to the extent of the outstanding balance of the loan."
When the bank calculates its liabilities it excludes the deposit in its calculation until the deposit becomes more than the outstanding balance of the loan. As long as the outstanding balance exceeds the value of the deposit then the bank is not obligated to return the deposit, so it shouldn't be considered a liability.
"A deposit which has been pledged with (some bank) for securing a loan granted to a non-bank costumer should also be excluded from the calculation of qualifying liabilities to the extent of the outstanding balance of the loan."
When the bank calculates its liabilities it excludes the deposit in its calculation until the deposit becomes more than the outstanding balance of the loan. As long as the outstanding balance exceeds the value of the deposit then the bank is not obligated to return the deposit, so it shouldn't be considered a liability.
Action Planning
Today I am brainstorming an action plan format for DBM. Action plans are important because they relate the daily activities of employees to the organizations strategic goals. The design and implementation of the action planning depends on the nature and needs of the organization. Action plans are developed from the top down. They start by defining each of the company’s strategic goals. Then they generate a plan that depicts how each strategic goal will be reached. Each strategic goal has a list of objectives. An objective is a statement of what must be achieved in order to meet a strategic goal. Sometimes action plans are developed for each major function of the organization, e.g. marketing, development, finance, etc. In this case, it is important the action plan relate to an overall, top-level action plan. Action plans can also be written at different scales, e.g. for the entire organization, a specific department or even a single employee. In each case it is important that the strategy, objectives and responsibilities of each unit relate directly to the organizations strategic goals.
A good action plan would relate each strategic goal of the organization to a list of objectives, delegation of tasks, department or departments responsible for implementing specific tasks, employees responsible within each department, a timeline for when each task will be carried out, and a list of resources required for each task. Furthermore, a general top-level action plan can be reformated for each major function, each department manager and each employee of an organization. Each employee could be given a personal action plan, the action plan of his or her department or an action plan for their department's function within the bank. This will ensure that employees activities are consistent with the organization's strategic goals.
Possible Action Plan formatting:
Strategic Goal 1 > Objective 1 > Task 1 > Timeline
Responsibility
Resources
Task 2 > Timeline
Responsibility
Resources
Objective 2 > Task 3 > Timeline
Responsibility
Resources
A good action plan would relate each strategic goal of the organization to a list of objectives, delegation of tasks, department or departments responsible for implementing specific tasks, employees responsible within each department, a timeline for when each task will be carried out, and a list of resources required for each task. Furthermore, a general top-level action plan can be reformated for each major function, each department manager and each employee of an organization. Each employee could be given a personal action plan, the action plan of his or her department or an action plan for their department's function within the bank. This will ensure that employees activities are consistent with the organization's strategic goals.
Possible Action Plan formatting:
Strategic Goal 1 > Objective 1 > Task 1 > Timeline
Responsibility
Resources
Task 2 > Timeline
Responsibility
Resources
Objective 2 > Task 3 > Timeline
Responsibility
Resources
Strategic Goal 2 > Objective 3 > Task 4 > Timeline
Responsibility
Resources
Economic vulnerability of Mongolia
Mongolia's economy is vulnerable to a considerable amount of risk. Moody's investors service writes:
"Mongolia's rating has been constrained by susceptibility to destabilizing boom-bust cycles stemming from (1) an undiversified, dual mining/agricultural economy subject to mineral price vulnerability on one front and occasional extrememely severe winters on the other, and (2) pro-cyclical monetary and fiscal policies."
Although Mongolia's mineral resource sector is growing rapidly, livestock and agriculture still comprise 20 percent of the economy and is the key driver of economic growth. The recent dzud (exceptionally severe winter) destroyed 20 percent of the countries livestock and forced thousands of rural herders to the ger districts of Ulaanbaatar where they still reside. The severe winter weather conditions will continue to pose a considerable risk to development as long as the economy remains undiversified and infrastructure remains underdeveloped. However, once the countries infrastructure is transformed to that of a modern economy then growth and diversification should come naturally.
The mining sector is vulnerable to commodity price shocks. In 2008 the price of copper collapsed and growth was severely impeded as a result. According to Moody the price shock on copper would likely have resulted in a balance of payments crisis had not the IMF provided external liquidity support. But the government has enacted a fiscal stability law that includes a balanced budget law, a cap on government debt and a Fiscal Stability Fund. Once the FSF grows to a considerable amount Mongolia will be able to withstand commodity price shocks without outside assistance. Also, if the government honors its fiscal responsibility pledge then the country's finances will be strengthened considerably. Risk will be lowered for investors, which will allow DBM to issue securities with lower interest rates, making it easier for us to fund new development projects.
"Mongolia's rating has been constrained by susceptibility to destabilizing boom-bust cycles stemming from (1) an undiversified, dual mining/agricultural economy subject to mineral price vulnerability on one front and occasional extrememely severe winters on the other, and (2) pro-cyclical monetary and fiscal policies."
Although Mongolia's mineral resource sector is growing rapidly, livestock and agriculture still comprise 20 percent of the economy and is the key driver of economic growth. The recent dzud (exceptionally severe winter) destroyed 20 percent of the countries livestock and forced thousands of rural herders to the ger districts of Ulaanbaatar where they still reside. The severe winter weather conditions will continue to pose a considerable risk to development as long as the economy remains undiversified and infrastructure remains underdeveloped. However, once the countries infrastructure is transformed to that of a modern economy then growth and diversification should come naturally.
The mining sector is vulnerable to commodity price shocks. In 2008 the price of copper collapsed and growth was severely impeded as a result. According to Moody the price shock on copper would likely have resulted in a balance of payments crisis had not the IMF provided external liquidity support. But the government has enacted a fiscal stability law that includes a balanced budget law, a cap on government debt and a Fiscal Stability Fund. Once the FSF grows to a considerable amount Mongolia will be able to withstand commodity price shocks without outside assistance. Also, if the government honors its fiscal responsibility pledge then the country's finances will be strengthened considerably. Risk will be lowered for investors, which will allow DBM to issue securities with lower interest rates, making it easier for us to fund new development projects.
Wednesday, November 2, 2011
Leverage and risk
Someone in the office asked me about leverage in reference to the global financial crisis and how governments can induce commercial banks to lend money. So I did a little bit of research about it.
Leverage is a general financial term that refers to a variety of ways to multiply profits. For most cases this means borrowing. Leverage also means multiplying risk. So say you have enough money to buy one cow for 400,000 tugriks. Instead of buying one, you decide to borrow 3,600,000 tugriks from your bank and buy ten. Now you can make ten times more milk from your cows. At the same time, you become vulnerable to ten times more risk... if the winter is very cold, which is very possible in Mongolia, then you could lose all ten cows. You could be left with no cows, no money and you owe the bank 3,600,000 tugriks.
Now consider the financial crisis. During the boom years banks used mortgage backed securities to leverage their profits. But they undervalued risk and did not maintain enough equity capital to act as a buffer in the event of a crisis in the market. In fact, instead of keeping significant amounts of capital they bought insurance to cover the possibility of large scale defaults. When the housing crisis hit, insurance companies like AIG were not able to cover the large volume of filings from the banks. Many banks did not have enough capital to survive and either failed or needed large scale bailouts to stay afloat. Now that the crisis is over banks are choosing to grow their capital reserves instead of lend out money. They now have to factor in the possibility of a financial crisis in their spread sheets. The government has tried to induce lending using quantitative easing (this is the process of lowing interest rates in order to allow banks to barrow cheaply from the government) but banks continue to be reluctant to take advantage of the low interest rates and leverage their profits.
Day one on the job
Just got to the office for my first day about two hours ago... So far its very quiet. I have been researching about Mongolia's economy, reading a lot documents about Mongolia's equity market, economic growth, political system, currency performance, IPOs (initial public offerings), FDI (foreign direct investment), M&A, (mergers and acquisitions), exports and geopolitical relations. Did you know that Mongolia has the second best performing currency in the world? Last year Mongolia's tugrik outperformed all the world's currencies for most of the year until the Australian dollar (AUD) surpassed it with only a few weeks left before year's end. When I say it was the best performing I mean that it appreciated in value relative to other currencies. That would mean that Mongolian purchasing power in the global market increases, but it became more expensive for other countries to trade with Mongolia...right?
Mongolia is also the second fastest growing economy globally and it is expected to be the fastest growing economy in 2013 with a projected growth rate of 20% when the Oyu Tolgoi copper and gold mine comes into operation. If I had a lot of money I would definitely invest in Mongolia.
Mongolia is also the second fastest growing economy globally and it is expected to be the fastest growing economy in 2013 with a projected growth rate of 20% when the Oyu Tolgoi copper and gold mine comes into operation. If I had a lot of money I would definitely invest in Mongolia.
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