Zero percent interest rates?

With the Feds close to zero percent interest rates borrowing/lending between banks, it is actually doing so to jumpstart the economy by encouraging banks to lend to each other. With the ability to borrow without worrying about exhorbitant interest charges, this is close to what Islam encourages for lending/borrowing. Islam sees lending as an act of charity. In this particular case, this is charity amongst banks; between the better-off banks and their troubled counterparts. Cool.

Lost Worlds - Pagans (History Channel)

One thing I love (and miss) about cable network are the variety of channels; my clear favourites are Discovery and History Channels. You learn a lot from these two channels, especially if you are a techy or a history buff, of which I would like to think I am both.

So, months ago, I turned on the TV to the History Channel and lo and behold, it was showing "Lost Worlds - Pagans." The show basically took us to the ancient ruins around Britain, ruins that predates the Roman's conquest by several thousand years. I'm not even sure if these ruins might even predate some of the Celtic tribes like the Picts. It wasn't really stated in the show.

Anyway, cool theories about Stonehenge and Woodhenge, the very well preserved village at Orkney Island, and the connections between the various sites surrounding Sillbury (hope I'm spelling it correctly), really drew my attention. The village, for example, was built on a prehistoric landfill and the people at the time seemed to have some sort of recycling processes going on...and here I thought that recycling is a modern concept. Little do I know.

Of course, the technology that built Stonehenge and other henges boggles the mind. I am reminded of the Quran's insistance for us to travel through the Earth, for example, in Chapter 22, verse 46

"Do they not travel through the land, so that their hearts (and minds) may thus learn wisdom and their ears may thus learn to hear? Truly it is not their eyes that are blind, but their hearts which are in their breasts."

The Quran exhorts us to travel in at least ten different verses. Not for fun, work, or visiting love ones, but to learn wisdom by opening our eyes, ears, and ultimately our hearts. How is this related to the show? Today, we have the technology and the luxury of such learning without having to leave our homes as this show proves. What wisdom did I derive from this show? I cannot say that it is a wisdom that I currently fully appreciate but let me share and perhaps through the sharing better understand it.

Ancient civilizations, such as the Pagans of Britain, Egypt, Babylon, Rome, have long left their monuments and mark on the landscape of our world. Archeologists, historians, and others have researched and discovered new information about those eras. Yet, we never really ask the basic question: what happened to lead to their downfall and how does it pertain to us.

I'm sure the "technical" reasons for their downfall are well known or still being researched, but it is not the academic questioning that would lead to wisdom. Instead, it must be appreciated and manifested in our own lives. We really must learn from history and stop making the same mistakes. The Quran tells us so many stories of ancient civilizations now lost in time. This morning, one of my classmates asked why the Egyptians are no longer practising the old religion. It reminded me of Prophet Moses' (a.s.) exhortation to the Pharoah and his people and how Pharoah answered. How Pharoah ordered his priests to build the highest tower for him to "reach" God. Also of the other ancient communities mentioned in the Quran, especially in Chapter 11.

While it is given that these communities rejected the message that their prophets brought to them, it is not so much of that rejection that led to their destructions. It is in their deeds; the Ad whom God mentioned in the Quran as builders of lofty pillars, the Thamud who carved cities out of the mountains (probably where Petra is ??), the Madyan, and the Ancient Egyptians. Each of these people transgessed beyond measures. Take, for example, the Madyan in which Prophet Shu'ayb (a.s.) exhorted to "give just measure and weight nor withhold from the people the things that are their dues." (Chapter 11, verse 85). This reminds me of the current financial situation today.

Give just measure and weight - were the bankers fair in their dealings with those who are not credit-worthy, not to mention that interest itself is not just for it creates wealth without the necessary work/effort. The heavy interests charged to these people were themselves a burden, not to mention having to pay off the loans. Then, in restructuring the mortgages/debts, they sold each "parcel" off to unsuspecting investors. That is not giving just measure and weight.

The Thamud, when given the she-camel of God, hamstrung her. Look again at what we're doing to the Earth today and to the other creations of God. Similar to the Thamud, we are given the responsibility of sharing the resources with them. How much have we "hamstrung" our fellow creatures with our pollutions, our destruction of their habitats, our exploitation of resources beyond bounds?

Coming back to the ancient Celtic race, much of their traditions and knowledge were lost. Why? Because theirs was an oral tradition and from here, too, can we learn. That there is a need for documentation and a repository of knowledge. That is why Islam puts much emphasis on transmission of knowledge through the written word; the Quran stands before us as part of that emphasis as the written word (kalam) of Allah.

(Only God knows best.)

The Blessings of Allah

Friendship is a blessing from Allah and I am therefore so grateful to Him for gifting me with the friendship of Shariffa. What can I say about this remarkable lady that can do justice to her impact in my life?

Yesterday, she helped me clarified my thoughts and set about to be more proactive. And subhanllah, today, there was another opening to help me...a study circle. It was really God's subtle Hand as I, upon Shariffa's advice, asked a friend if she knew of any such circle yesterday. Remarkably, this afternoon, I was praying Zuhur at the mosque when a stranger approached me to let me know that there was such a circle on Tuesdays (just the right timing as it is my only "free" day).

Everything in its time

The Warren Buffett Way, part deux

The more I read the book and keep up with the current financial news, the more impressed I am with Warren Buffett. In the current banking turmoil, Wells Fargo has done better than expected as it is not as burdened by the subprime mortgage paper pitfall. Recently Coca-Cola registered a profitable third quarter as compared to its rival PepsiCo. Coke and WF are some of the companies Buffett has a stake in.


These two companies were also featured in the book. These two companies illustrates some of Warren Buffett's strategies which I really admire:


1. Know the companies very well; its assets and core business, its record of consistency, and favourable long term prospects - so do your research
2. Place importance on trustworthy, honest, rational, independent thinking, and exellent managers.
3. Value of the companies - whether buying at under the value or a fair price, you need to know the intrinsic value of the companies. This is where Williams' model come into practice.

And recently, he was quoted as saying, "Be fearful when others are greedy, and be greedy when others are fearful" and advising people to buy stocks now. The editorial in the Financial Times (dated 21/10/08) said that it is not so easy for investors to follow as they are not sure when is the lowest.

However, if you were to follow the book, Buffett does not just buy indiscriminately but buys undervalued companies at bargain prices. Even if the prices were to go lower, it will not matter as much as he believes that these undervalued companies will sooner or later realise their actual values. Also, since he invests mostly long term, the subsequent returns over the long term will not be much different.

Of course, the editorial comment had a point, which is why I especially liked Bloomberg's advice following Buffett's. He mentioned that for small investors, best to invest in mutual funds and do it over certain period of time. For example, say do it monthly over a period of six months. Your investment would most likely have an averaging effect.

My zany classmates II

The last few days have been filled with laughter as I watch the antics of my classmates. The Yiota says jokes are pretty hillarious though if I write them here, one may not think so as it really depended on the context. However, she can say such outrageous stuff with a straight face. Of course, she and Nicole feed off each other to make me crack up.

Of course, there's Nicholas who has a sarcastic wit (something about the Frenchmen perhaps). And yesterday, for the first time, I found out that Andreas has a wicked sense of humour as well.

Crazy Edinburgh Weather part deux

Just five minutes ago, the sky is blue and the wind was blowing. Then the clouds roll in and now it is raining very heavily. I've always thought that Singapore's weather was fickle; it is nothing compared to Edinburgh's weather. Imagine being caught by the weather when you're up in the hills and mountains. Hmm...okay, tomorrow if the weather continues, I'm going to book the court and "try" playing squash instead.

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It's now 1816 hours. Went to have lunch with the girls - cooked Chicken Rice, Bahar cooked a barley soup, Yiota came up with a Greek salad and dzatziki (not sure if I got the spelling right), Amy and Shuyuan brought desert while Nicole made her superb ginger tea. We were teasing Yiota that I should create a" Yiota says" column on my blog. She's great fun and a good sport. Definitely loved lunch and overate I think.

From the right: Shuyuan, Yiota, Nicole, Bahar, and Amy. Cheers, girls.

Holyrood Park & the royal mile

Last Sunday was overcast and cold but it was still too beautiful a day to spend indoors. (Unlike this week where it's raining.) So, since I went up to Salisbury Craig below in Holyrood Park the past weekend for a read, I thought I'd go and do a little climbing and photography.

Picture taken from in front of the Scottish Parliement of the Salisbury Craig. The view from the Craig is lovely.

Then, there's the famous Arthur's Seat. Here's the route going up to the highest part of Holyrood Park.

Like most of Scotland, Holyrood has its ruins, from the various time periods - this one was an abbey, I think.

The view of Arthur's seat from the ruinned abbey.

As you go further up the hills, you can definitely see the city skyline and the sea beyond as seen above and below.

I took my tripod along and so managed to take a picture of myself (Arthur's seat is behind me) on this trip.

And on the way back, I took a stroll along the Royal Mile (the road linking Holyrood Palace and Edinburgh Castle) because I wanted to buy a rug for my room. Below are some of the snapshots I took of the Royal Mile.

Indulging

Okay, those who know me well know that I rarely splurge on clothings. Other than my indulgence on books and IT stuff, I don't really spend much. But today, I did. I've already bought a good winter jacket plus my older stuff which are good enough. However, today (or yesterday) I was window shopping and found this velvetish jacket (suede, I think) costing 15 pounds. Okay, couldn't resist and I threw away 15 good (and crucial) pounds just for vanity sake. But I'm definitely satisfied because I tried it later in the night and it kept me really warm, even my hands.

My zany classmates

Just a small note. Absolutely adore my classmates - they are fun and completely zany. With the Greeks and Chinese being the majority and the rest are made up of Singaporean (me), Taiwanese, Barbadoan(??), Canadian/Camaroonian, Vietnamese, Thai, German, Nigerian, Mexicans, Irish, British, Polish and a few others, it's really an international class. I've not laughed so much as with this group, especially with Yiota around.

The Warren Buffett Way (second edition)

This book is one of the five "optional" books that we've to read (and testable) for Financial Markets. I've just read the first four chapters and I'm already impressed! His strategy makes sense. If I may summarise the first four chapters:

Buffett's investment strategy is shaped by four men: Graham, Fisher, Williams, and Munger. From them, he synthesized the following - a need for margin of safety, control of his emotions and therefore use market fluctuations to his advantage, have as complete understanding and knowledge of the company as possible, investing in companies with above average potential and capable management, a good model for the intrinsic value of the business, and paying a fair price for quality companies.

Based on these, his strategy puts forward the following criteria:
1. Simple, undertandable business
2. Consistent earning power and possess good economics
3. Little debt as possible
4. Trustworthy managers/management team

And of course, the fundamental idea behind his strategy is basically that he is the owner of the business whether he buys a business or buy stocks in the business. Long term commitments instead of short term holding.

As I was reading, I recalled how my father lost a lot of his savings when he was playing the stock markets in the 80s. Part of the fault lies in the little understanding of the companies and dangerous strategy to make money from any arbitrage opportunities. I'm also wondering how I could apply to my own investment strategy. Given that my investments are mostly in mutual funds, it's definitely not easy to know who the managers of these funds are and my knowledge is limited to the prospectus and annual reports given out. Well, I've got more chapters to go. So, perhaps the answer will come along the way.

The Credit Crunch

First, it was the subprime market that fell, then it was investment banks failing, now it has spread to many major banks all over the world...leading to (possibly) the Bankruptcy of a sovereign country - Iceland. Next, they say, will be the economic downturns and recessions. In a global economy where credit and debt are the underlying forces moving it, this is definitely a recipe for disaster as the banks are hoarding their capital and interbank loan rates skyrockets. In the cycle of credit and debt, the economy is basically fueled by consumer spending - the more you spend, the more you need to borrow and therefore the more "profit" is made from the credit. This unchecked spending/lending has led to the credit crunch where even large banks are defaulting on their own debts. From a book I'm reading, it highlight two very important deficiencies of the present system:


1. A debt-based system needs an effective lender of last resort and right now, it's been proven that we don't have one. The banks are looking to the Governments to bail them out but as Iceland proved, even sovereign countries may go bankrupt.


2. A debt-based system need debt restructuring and workout mechanism which as can be seen currently, even the US is grappling with this issue.


Right now, there is talk of needing a new model or better regulation. However, without changing the fundamental and here, I mean, the debt-based system itself, I seriously don't think the economy can sustain itself in the long run even if we get out of this crisis unscathed.


An economy that can sustain itself, I believe, has to be founded on justice and equitability. Justice in such that the gap between the poor and the rich do not widen but instead will close. What constitute a just economy? Well, based on what I've read:
1. equality in opportunities for all and in utilizing the natural resources (no hoarding of resources by a few or due to "national" interest)
2. just exchange and distribution of goods (was thinking of how in the zero-sum "game" economy I wrote in my blog earlier, this just/equitable exchange is unlikely to occur.)

Definitely, a debt-based system where the poor gets poorer as they get further into debt fail this test of being a just system. With the kind of economy founded on justice, there has to be a regulatory body (global) to ensure justice is served. Perhaps, our leaders are brave enough and will take this opportunity to change the current system...not that I'd hold my breath on it.

Time heals all wound...

I really believe that. I can testify to its truth from my own experiences. Taken four years, two jobs, avoidance of all things familiar, and finally a move back to school, but I think I'm finally over it. I can let JC go now and let my nephew play with him. Bye JC.

Model Risk - Illiquidity

Being Sunday and a brilliant day to boot, I decided to go to Holyrood Park. Climbed the first hill (well, midway) and because it was almost 1 pm, decided to have lunch and enjoy the sun there. With a view over the park, most of Edinburgh and the sea (well I think it is the sea), I finished lunch and started to enjoy my book on quantitative risk management. Amidst VaR and loss functions, the chapter I was reading discussed the importance of model risk in risk management. One of these is actually the ability (or inability) to capture the illiquidity of the situation. It gave the example of LTCM but I was thinking of the current situation of the bailout and the challenges the Fed face in pricing the bad assets when the market's liquidity is almost nil. The book gave a few references of works done to include this liquidity/illiquidity as a risk factor. Managed to get two of the papers and hopefully read them soon. Very interesting, indeed.

Loch Ness trip and other stuff

As I mentioned, the weather in Edinburgh is crazy. Yesterday was a beautiful, sunny day and yet, this morning, I woke up to the winds howling and hurling rain at my window. Just when I was supposed to meet Jenni. But at least the weather got us to have a good chat for almost 2 hours. She is just a lovely lady.
Okay, as I promised my brother, here's the pictures from my Highland trip to Dunkeld, Loch Ness, Culloden, etc. The right order (chronologically) should be from bottom up. So, you're actually seeing the pictures from the end of my tour first.

Just before we headed back, someone requested to meet Hamish, so here he is:

Hamish is really a "Hairy Coo" as my guide, Alan, calls them. Which means that he is actually a highland cattle. Note the sunny and clear blue sky.

Just before we saw Hamish, we stopped here (I forgot the Glen's name) which reminded me of the scene where Harry flew with Buckbeak over the Loch and Forbidden forrest. As you can see, crazy Scottish weather struck again and it was raining.

Now, this is a historic site - Glencoe...the site of the massacre of the MacDonald Clan by the Campbells during the Jacobite era. Look at how tiny the group was when compared to the mountains. Alan was telling them the gruesome story in the biting rain. It was literally freezing!

Similarly, I was struck by the majesty of the mountains when I saw how tiny our bus was. See that speck of yellow?

What can I say? Subhanallah!

Again, what can I say? In the freezing rain, I just had to take a picture of this wild flower. My favourite picture of the hundreds I've taken on this trip.

Now, before we went to Glencoe, we went to Glen Nevis at the foot of Ben Nevis (the tallest mountain in Scotland). Note that it wasn't raining here. Glen Nevis was the site where they shot the first three minutes of Braveheart and also the site of Hagrid's house. Cool, ain't it?

Hmm...we were supposed to stop at this town near Loch Ness to buy lunch but since I was fasting, I used the time to snap some photos. This was one of the pictures of the river running through the town down to Loch Ness.

Okay, the quality ain't that good here coz we couldn't stop and I actually took it from the moving bus. But this is the birthplace of Never Neverland and Peter Pan.

Mid morning of the second day. We visited this ruined castle at the bank of Loch Ness where Robert the Bruce once conquered.

We got to Loch Ness early morning and the sun was shining even though it was cold. Here's Melanie, my French flatmate who came on the trip with me. Did we spot Nessie? Well...see for yourself:

So, any guess?

Bright and early, Alan got us down to Loch Ness. The night before, we stayed in Inverness. Jenni told me this afternoon that Inver actually means, inlet. So Inverness is actually located at the mouth of the River Ness which comes from Loch Ness. Alan told us the Loch Ness is the largest body of fresh water in all of Britain and deeper than we can imagine (Trillions litre of water).

On the first day, the weather wasn't any better. Here, Melanie and I posed at the Cairne in Culloden where the last Jacobite uprising led to the historic battle there. Bonnie Prince Charlie fought against the English and was defeated. Thousands of Scots died that day.

The cairne is a traditional way for the Scots to remember and honor their dead.

Again, I really couldn't resist experimenting. Any comments?

Okay, the first thing came to mind when I saw this hut was Hagrid's! But no, this was a replica of the hut in which some of the Scottish men took cover in and were burnt alive by the English army.

A clear view of the battleground.

Before Culloden, we visited Ruthven Barracks, where the Scottish army stayed in before the battle. Here's what the view was like from the barracks. And below is the ruins of the barrack seen from the road.

This waterfall is the second stop of our trip. Beautiful place. Unfortunately, this is the place where I broke the camera hood. Ouch!

I played with the shutter speed and got this lovely effect. I was really pleased even though it may not have been worth the broken hood. Now, below is the beautiful River Tay in the town of Dunkeld, our very first stop. The weather was lovely and the scenery was just breathtaking.

The cathedral behind me (and seen below) is one of the oldest in Scotland. It was built in the sixth century when Christianity first arrived in Scotland. A good start to a very interesting trip.

Crazy Edinburgh Weather

I love Edinburgh, really I do. It has a charm of its own, quite like Boston/Cambridge. A big city, yet, it has its own personality. But one thing I am not crazy about is the weather. Someone mentioned today that it's been said that you can get the four seasons all in one day, here. I totally agree. Just take today...When my classmates and I set out for Uni of Edinburgh this morning, it was sunny (a perfect summer's day). Then it started to rain (while the sun is shining) in the afternoon. Autumn's weather, perhaps? Now, it's night and it is about 5 or 6 degree out there, plus the rain and the wind...if it were Sydney, this would be considered winter. No wonder, several of us are falling ill, including yours truly.

I've been eating my cold medicine plus the home remedy of honey for the cough. Not appetite today so I'll put off the carrot-ginger soup to tomorrow. Hopefully I'll get better by the weekend and the weather will cooperate. Looking forward to meeting Jenni finally this Saturday.