Pengamat Ekonomi dan Bisnis

Now is the Time to Give Assets to Heirs

2010-11-23T18:36:00.001-08:00

Low gift tax rates and weak asset values make 2010 an ideal time to transfer real estate and family businesses.

Home prices continue to be weak. Small businesses continue to suffer. Odd as it may sound, such bad economic news has created a golden estate planning opportunity in 2010 for small business and property owners to "gift" these assets to their heirs.

In fact, 2010 may be the best year ever from a tax perspective, to implement a business succession plan or to sign over a big piece of real estate to your children. That's because the transaction would be taxed at the current gift-tax rate, which is zero for the first $1 million of value, then 35% for everything in excess of that amount. If Congress does not extend the Bush tax cuts beyond this year, that gift tax is expected to jump up to a maximum of 55% in 2011. But even if Congress votes to extend the current 35% gift tax rate for another couple of years, it is unlikely that we'll ever see this combination of low taxes and low valuations synchronize so perfectly. If, for example, you were to gift a business valued at $5 million to your children this year, the tax would be $1.4 million. In 2011 the same gift could incur a tax of more than $2 million if the gift tax increases as the law now provides.

Gift-Giving Without Ceding Control

Despite the cold logic of the numbers, however, many small business and property owners are just not psychologically ready to cede control of their assets this year. It is possible to make the gift without fully letting go of the underlying asset.

We recently encountered this scenario in our work with the owner of a Long Island car dealership in his mid-70s. For several years he had been contemplating a succession plan to transfer the business to his son and daughter. But he still wasn't ready to give up control of the dealership he'd been building over the past 40 years. His biggest concern was passing the dealership on to his children in the midst of a serious downturn in the auto industry with the fate of his manufacturer hanging in the balance. Ironically, this uncertainty also made it the best time to make the gift because the total value of the dealership was down significantly, decreasing the amount that would be taxed at the 35% rate.

We found a happy medium by setting up a "his and hers" irrevocable trust. Put simply, we were able to place the business in trust for the business owner's children, but give control of the husband's half of the trust to his wife and the wife's half to the husband. By executing the trust in this manner, the business owner and his spouse were able to lock-in the current tax rates and stay at the helm of the dealership.

Family Limited Partnerships

Another important tool in this type of succession planning is the family limited partnership, which lets business and property owners make detailed provisions for the management of their assets once they are passed on to heirs. While some of these are purely operational--such as setting an organizational hierarchy or directing the allocation of profits--others minimize tax exposure by "devaluing" the estate.

We used this approach this year with another client who was ready to pass full ownership and control of his home-building business on to his children. In this case, we were able to decrease the taxable value of his business by setting specific ownership limitations, including land-use restrictions and a divided ownership structure among his three children. Because these restrictions limited the new owners' ability to sell or transfer the property, they dramatically decreased the appraised taxable value of the property beyond the lowered valuations the business was already experiencing.

The Gamble That Taxes Won't Get Lower

The gift issue is always a bit of a gamble for business owners who can't forecast future tax rates, but the current economic environment is tilting the odds in favor of gifting now.

With no official word from Washington on what's going to happen to the Bush tax cuts in 2011, all we have is speculation that taxes must likely eventually increase to pay for the largest budget deficit, as a percentage of gross domestic product, the nation has seen since WWII. While there has been talk of extending the 35% gift tax rate until 2013, it is highly unlikely that the tax will get any lower anytime soon. Given the government's increased monetary needs and the widely held view that the business cycle is at or near its bottom, it is a good bet that the next month will be the last, best chance to maximize the gift tax for estate planning purposes.

source : the forbes

Bankruptcies Hit Retirement Communities

2009-11-28T23:35:00.000-08:00

Elderly residents who thought they'd secured their futures are finding their homes and savings at risk.

The recession is hitting elderly people where they live, literally. Financial problems have been mounting at a number of assisted-living and continuing-care communities, forcing some facilities into bankruptcies and inflicting new worries on residents and their families who thought their life plans were comfortably set. In recent weeks, Erickson Retirement Communities, which manages 19 continuing-care retirement communities in 11 states, declared bankruptcy. Sunrise Senior Living Inc. posted a quarterly loss of $82 million and announced plans to sell off 21 of its assisted-living communities. Nationally, smaller retirement communities are raising their prices, changing the way they operate, selling themselves off to bigger chains, or getting out of the business altogether. Many companies say they can't make a profit—or even succeed on a nonprofit basis—in an environment that combines the high cost of caring for elderly residents, restrictive Medicaid budgets, tight credit markets and fewer residents willing and able to pay top dollar for their care.

When a facility fails, it can have myriad effects on the residents. The good news is that no one gets kicked to the curb–at least not right away. "Nobody has ended up on the street, which is a primal fear when you're dealing with these places," says Jason Frank, an elder-law attorney in Baltimore. "But their fees can skyrocket and they can become unaffordable. Then they can kick you out for nonpayment." In some cases, residents may find that the sizeable deposits they made to get their apartments in the first place have disappeared. (Continuing-care communities like Erickson's typically charge deposits of $150,000 or more, and assure residents that they can stay on the campus for the rest of their lives regardless of how their needs change, and that the deposits will be refundable to themselves or their heirs when they leave or die. But residents typically also have to pay monthly fees for care, and those fees can continue to increase. Assisted-living facilities like Sunrise generally require no deposits but charge a monthly pay-as-you-go-plan.) That's what happened to the 170 people who lived in Covenant at South Hills in Lebanon, Pa. Their deposits went up in smoke when their facility was sold in bankruptcy to Concordia Lutheran Ministries, which did not take on that liability. Several are now suing B'nai Brith Housing, the original operator of Covenant.

Erickson executives say that their bankruptcy filing will have no impact on residents. "We've refunded every single deposit in our 26-year history," says Tom Neubauer, the firm's executive vice president of sales. "People moving in are completely unaffected by all this." Erickson's corporate organization is complex, with each community (and that community's deposits) owned by a separate nonprofit entity that is not part of the bankruptcy filing.

But residents could face disruptions. Newer communities that haven't been completely built out yet may not have their assisted-living and nursing-home wings, so residents who need higher levels of care may end up being transferred to other facilities. Should various nonprofits not be able to resell units at the same price as the original buyers paid, those original buyers might not get their deposits back. And residents who run through their personal savings and their deposits paying for ever-higher levels of care will have to depend on an optional "benevolent fund" to cover their expenses.

Erickson has a solid reputation and good track record for keeping residents for the rest of their lives, but anyone shopping for retirement housing now should think thrice about the financial risks of their arrangements. "You've got to keep your eyes open," says Eric Carlson, director of the long-term-care project for the National Senior Citizens Law Center. "If you look at the agreements, sometimes what you're being promised is not that much. The provider may be reserving the right to force you to leave for various reasons." Often there's a generic "can't meet your needs" clause in the contract.

He recommends that refundable deposits be set aside in escrow accounts, and that anyone signing a long-term-care contract run it by an elderlaw attorney first. (They can be found at the National Academy of Elderlaw Attorneys.) His organization also has an online checklist of questions that should be asked before moving into a retirement or assisted-living community.

Carlson also says he generally prefers the financial advantages of the pay-as-you-go models, but even consumers who choose facilities that only charge rent on a monthly basis may not be saving their nest eggs for long. Sunrise has raised prices as it has gone through several quarters of financial trouble. It can cost $6,000 or more a month for quality assisted living and $9,000 for nursing-home care. At those rates, it's not hard to run through life savings in a hurry, and then not every assisted-living facility will keep you. Many don't take Medicaid or other subsidies, and some facilities that had taken Medicaid have switched to no-Medicaid policies. That leaves those residents who have no assets with no place to live. Nationally, discharge-related complaints about nursing homes and assisted-living facilities have doubled in a decade—to 12,237 in 2008, according to the U.S. Administration on Aging. It's now the second-most-common complaint at nursing homes, behind "failure to respond to requests for assistance". And it's the third-most-common complaint at assisted-living facilities, behind problems with medication administration and disappointment with the food.

Complicated state rules can then force newly impoverished residents to go into nursing homes for at least a month so they can qualify for Medicaid and then back out into another assisted-living facility, says Beverley Laubert, the long-term-care ombudsman for Ohio and president of the National Association of State Long-Term Care Ombudsman Programs. She and her colleagues are called in when facilities declare bankruptcy or force residents to relocate because of policy changes, but usually they can't force facilities to keep residents. Instead, they spend much of their time helping residents who thought they'd found their final homes look for new places to live in a market where, now, nothing is certain.

Adopted from newsweek

Equity Online Trading

2009-10-09T21:15:00.000-07:00

After stocks exchange in Indonesia convert to scriptless trading, by using Jakarta Automated Trading Systems, equity trading in Indonesia has been improved sophisticatedly. Improvement of equity trading since remote trading introduced by members of Jakarta Stocks Exchanges (JSX).

After merged by government, JSX and Surabaya Stocks Exchanges united become Indonesia Stocks Exchanges (IDX). Because of unsatisfying of some investors and perhaps trading errors by some brokerage dealers, certain members of IDX improved their application systems that would make possible investors execute transactions by themselves anywhere and anytime. Systems which use interconnection network or internet commonly known as online trading.

Some of IDX members that use online trading : Indo Premier Securities by IPOT (Indo Premier Online Trading), e-Trading, BNI Securities by e-Smart, Anugerah Securindo. Recently, online trading not only use PC or notebook. By smart phone such as Blackberry, investors could buy or sell their equities. Beside that, beginning deposit of members of IDX that use online trading decrease significantly. Commonly, not more than 10 million IDR.

For further information, please contact representatives' offices of mentioned above at your town/city.

Diversifying Your Portfolio

2009-07-28T21:24:00.000-07:00

The goal of diversification is to reduce the risk involved in building a portfolio. Volatility is limited by the fact that not all asset classes or industries or individual companies move up and down in value at the same time or at the same rate. While this limits the rate of growth as well, it reduces the likelihood of substantial losses and allows for more consistent performance under a wide range of economic conditions.

Devising an asset allocation plan is the first step toward diversifying a portfolio. Dividing funds between different asset classes provides some protection against loss when one type of investment is underperforming. Because the values of different investments often move in opposite directions, investing in a range of securities reduces the risk that all assets will be decreasing in value at the same time. The process of diversification, however, does not end with asset allocation.

Within asset classes, it is important to purchase securities from a variety of industries, so that poor performance in one area will not send an entire portfolio reeling. Certain industries perform better under certain economic conditions, but a diverse portfolio should continue to build overall value under almost any conditions. Diversification should then continue even within industries by purchasing securities from a mix of companies that serve different roles within the industry. A single stock in a high-flying industry may still fail, but a group of ten diverse stocks within that industry will have lower volatility than just one would.

Learning enough about the many industries and companies that make up a diverse portfolio is no easy task. A great deal of research is required to make good decisions. For investors who wish to learn about a few specific areas to pick individual investments, mutual funds can fill in the gaps. Professionals design mutual funds to have a great deal of diversification built in. Even mutual funds that focus on a particular part of a particular industry will usually provide the chance to invest in a broad cross-section of that sector.

Index funds provide another option for diversification by giving investors the opportunity to invest in all of the stocks that appear in a certain index. While these funds vary widely in terms of the stocks they cover, they all provide the opportunity to tie the returns on invested funds to the performance of a large number of individual stocks. These funds differ from the actively managed funds discussed above in that the contents of the funds are determined independently by whoever maintains the index instead of relying on a fund manager who has the power to make decisions about where to invest the money.

adopted from businessweek

Recovery Requires A Revolution

2009-06-25T02:24:00.000-07:00

There’s plenty of talk about green stimulus plans around the world, but numbers tell a different story. A new report by the OECD, an organization of the world’s richest countries, shows that green efforts in many countries are being thwarted rather than encouraged by the economic crisis. In particular, lower oil prices have slowed the push to adopt alternative energy sources which seemed so urgent last year when oil was $147 a barrel. That will likely change now that oil prices are creeping back up ; what’s more worrisome is the sharp slow-down in research spending amongst businesses. Historically, R & D spending moves in parallel with GDP – it slowed down in the early 1990s recession, as well as after the dot-com bubble. Recent evidence based on first quarter corporate results from this year shows that it’s happening again. US venture capital is down 60 percent over the previous year and declines are similar in Europe and China. Patent applications are down almost everywhere.

This is bad news, because lots of smart economists believe that in lieu of the American consumer, who doesn’t seem likely to re-open their wallet anytime soon, only some sort of major innovation burst--something that really revolutionizes productivity or energy usage--is going to get the global economy back on track longer term. If that's the case, it would come from new technologies, the kind that people aren’t investing in these days. It’s ironic, because there are plenty of examples that show that when countries or companies do up their research investment in a downturn, it tends to pay off in spades. Finland boosted it back in the 1990s, grabbing large chunks of the global telecoms market and Korea did the same after 2001, increasing its ranking amongst rich countries. Likewise, Google and Samsung came out much stronger after spending in past recessions. Those that don’t, like Western Europe, tend to fall behind. Note to politicians : while you are busy bailing out banks and auto firms, don’t forget tax credits and research incentives for the smaller, more innovative firms that will create the next generation of jobs and eventually get us out of this crisis.

Taken & Adopted from newsweek.com

America's Car Company

2009-06-02T03:59:00.000-07:00

With its control over GM, the White House begins a risky chapter in its efforts to nationalize companies for the well-being of the economy.

As it takes a controlling stake in General Motors, the Obama administration is betting that it can rapidly bring the company out of bankruptcy, just as it has recently done with Chrysler.

"Our goal is to get GM back on its feet, take a hands-off approach and get out quickly," said President Obama at the White House Monday, just hours after GM filed for Chapter 11 bankruptcy in a New York court. In its 24-page filing, the company showed that it was encumbered with $173 billion in liabilities compared to $82 billion in assets.

Under the terms of the largely pre-arranged bankruptcy, U.S. taxpayers will own 60% of a new General Motors (GM-news-people) when its court-supervised restructuring is completed in 60 to 90 days. The Canadian and Ontario governments will own 12%, the United Automobile Workers union 17.5% and unsecured bondholders 10%.

In addition, the U.S government plans to pump an additional $30.1 billion into the company on top of the $19.4 billion it had already invested and to convert most of that into equity in the new GM, leaving the automaker with a healthier balance sheet. Senior administration officials have said they do not intend to invest any more money into the company.

GM Chief Executive Frederick "Fritz" Henderson called the bankruptcy filing a defining moment for the company. "The GM that let too many of you down is history. Today marks the beginning of what will be a new company."

GM's bankruptcy filing comes just as Chrysler is reemerging from its own government brokered bankruptcy. Sunday night, a New York judge approved the $2 billion sale of nearly all of Chrysler's assets to the Italian company Fiat (FIATY.PK-news-people). The restructuring took just 31 days.

But GM, the United States' largest automaker, is a far more complicated company than Chrysler, which the president also acknowledges. With its control over GM, the Obama administration begins a risky chapter in its efforts to nationalize companies for the well being of the economy at large. Although the administration is pushing the company into bankruptcy, it is effectively creating a new national champion, opening itself to criticism about how much influence the government will have in GM until it emerges as a public company again.

"Our biggest concern...is the potential for governments and unions to influence production, product, workforce and management decisions in ways that could jeopardize the automakers' chances for survival, put politics and special interests above sound business strategy, and disrupt our nation's trading relationships across the world," said U.S Chamber of Commerce President and Chief Executive Thomas Donohue in a statement Monday.

Obama has vowed that the administration will take a hands-off approach. "What we are not doing--what I have no interest in doing--is running GM," he said. The company will continue to be run by a private board of directors, some of which are on GM's current board, though the administration retains the power to remove board members if necessary. Henderson is expected to remain as the company's chief executive, at least for now.

But Obama warned that the company's restructuring will take a 'painful toll' on many Americans. "More jobs will be lost, more plants will close," he said.

GM says it will shutter 11 factories and put three others on 'standby status' to reopen when industry sales rebound. The plants slated to close include two assembly plants in Michigan and Delaware; three stamping plants in Michigan, Indiana and Ohio ; and six power train factories, including three in Michigan and one each in Ohio, Virginia and New York. The total number of employees affected was not known. GM is expected to begin offering buyouts to some 21,000 GM hourly workers shortly.

The company's manufacturing plan reduces its total number of assembly, powertrain and stamping facilities in the U.S. from 47 in 2008 to 34 by the end of 2010 and 33 by 2012. The plan will allow GM to achieve full capacity utilization of its assembly operations in 2011, two years ahead of what it had earlier proposed to the government, resulting in lower fixed costs per vehicle sold.

One of the plants on standby notice will gear up to produce about 160,000 new subcompacts a year, most likely the Chevrolet Spark, which GM had originally intended to import from China. In the past, GM could not make small cars profitably in the U.S, but new labor concessions ratified last week, in advance of GM's bankruptcy filing, enable GM to close the wage and benefit gap with its foreign-based rivals.

"With these agreements, there's no excuse for these companies not to build in the U.S," says United Autoworkers Union President Ronald Gettelfinger.

As part of the bankruptcy agreement, the U.S government will hold $8.8 billion in GM debt and preferred stock. The Canadian governments will lend GM $9.5 billion, most of which will be converted into equity. Canada will wind up with $1.7 billion in debt and preferred stock.

The UAW agreed to forgive $20 billion that GM owes to a trust fund to pay retiree health care benefits. In exchange, the union will receive a 17.5% stake in the new GM, plus $6.5 billion in preferred shares, a $2.5 billion note and a warrant to purchase a further 2.5% of GM in the future. In total, the changes will save GM $13 billion, the union said.

But some groups are concerned that the administration is trampling bankruptcy law by giving the UAW trust a greater stake in the new company than secured creditors receive. That criticism was also levied at the administration after a UAW trust received a 55% stake in the company, while secured creditors took $2.25 billion for the $6.9 billion they were owed.

Riding Out the Recession With Repairs

2009-05-11T05:55:00.000-07:00

Shelly Investments, which owns two California car dealers and other businesses are keeping the cash register ringing with repairs

Last year the management at Shelly Investments, which owns a pair of car dealerships and an auto repair service, Spectrum Collision, in Irvine, Calif., worried that the stalling economy would send their new car sales screeching to a halt.

In order to prepare, the company turned to a Pepperdine University program in which MBA students offer consulting advice over the course of a semester. Their recommendation ? Try to make up for the drop in new car sales with a greater focus on the repair shop.

Shelly quickly stepped up its marketing of fix-it services, placing signs in its dealerships and positioning Spectrum employees in the dealers' service departments to recommend repairs. The shift has paid off : Business at Spectrum has remained steady, with the company continuing to pull in about $800,000 a month. "It's a survival game right now," says Spectrum's business manager, Susan Spadier. "We'll do anything we can to retain the customers."

Taking the Initiative

If there's ever been a time to promote your company's repair or refurbishment services, it's now. As the economy has sputtered, frugal customers are spending less on new goods and fixing up or maintaining what they already own. Small companies like Shelly Investments are hoping to capitalize on the trend, turning to outside consultants or public-relations agencies, boosting advertising budgets, or using search engine marketing to target consumers hunting for repair services. "Business owners have to be pro-active, not reactive [in this economy]" says Dr. Dave McMahon, associate professor of marketing at Pepperdine University. "Don't react to what competitors may be doing," he says. "Carve your own niche."

That's what Cliff Spencer, who runs his own furniture and cabinetry shop in Marina del Rey, Calif., has done —literally. As the economy turned, he saw orders for large cabinetry projects in homes "go out like a match," so now he's promoting his reclaimed wood and refinishing capabilities. Customers can bring in older furniture or a reclaimed piece of wood, and he can craft it into something new. With help from his wife Leigh, he's spread the word about the service through blogs, industry newsletters, and a new Web site. Demand for such projects has quadrupled over the past six months. "The economic downturn is frustrating, but the benefit of it is you see more people wanting to live a little more efficiently and give a second look to what they already have around them," he says.

Some experts feel that this may be more than a recession-driven trend, and advise that small business owners should prepare to focus on repairs over the longer term. "In the last 15 to 20 years we've become a much more throw-away, as opposed to repair-oriented, society," says David Urban, professor of marketing at Virginia Commonwealth University. "I've got a feeling that the severity of this economic downturn may have some long-lasting implications and get people to re-examine their behavior."

Lots of Appliance Questions

That would suit JustAnswer, a San Francisco firm that allows customers to ask questions of experts in any field for a small fee, just fine. The company has been in business for more than five years, but didn't experience acute growth until the economy soured. Anticipating a demand for fix-it services, JustAnswer spent five times more on appliance repair advertising than any other area, buying up key words on Google and other search engines.

The results of their efforts ? JustAnswer has seen a 57% boost in traffic related to appliance and auto repair services over the past year. Some of the sharpest jumps have come in the number of questions asked about common—but expensive—household items. Refrigerator and computer repair questions have risen 409% and 780%, respectively. "It's been remarkable; we're seeing tons of growth," says CEO Andy Kurtzig. "We're spending a lot of time and money bringing in new customers."

Taken & Adopted from BusinessWeek

Mengapa Perlu Investasi ?

2009-05-06T04:13:00.001-07:00

Setiap orang perlu berinvestasi karena nilai uang yang dimiliki akan selalu menyusut tergerus inflasi. Nah, agar uang selalu bertambah, harus dicari instrumen-instrumen investasi yang bisa mengalahkan inflasi itu. Karenanya, jangan berpuas diri jika hanya menempatkan uang di deposito. Sebab, deposito sering tak bisa mengalahkan inflasi.

Yang pertama, kita perlu melakukan investasi karena kita pasti memiliki kebutuhan-kebutuhan (needs) maupun keinginan-keinginan (wants) yang jumlahnya sangat banyak. Nah, sebagian kebutuhan atau keinginan itu tak akan bisa terpenuhi jika kita hanya mengandalkan arus dana dari gaji saja. Kebutuhan atau keinginan inilah yang sering disebut sebagai tujuan investasi.

Tujuan investasi ini bisa berupa hal yang sangat sederhana, tapi bisa juga hal yang sangat muluk. Sebagai contoh, ambil tujuan yang tengah-tengah saja. Misalnya, ingin membeli sebuah mobil baru seharga Rp 100 juta. Jika gaji sebulan sekitar Rp 6 juta dan hanya bisa menyisihkan dana Rp 1 juta per bulan, artinya membutuhkan waktu 100 bulan untuk bisa mengumpulkan Rp 100 juta. Dengan menginvestasikan uang itu, misalnya di instrumen reksadana, mobil itu kemungkinan besar akan terbeli lebih cepat. Soalnya, uang yang diinvestasikan itu tidak mandeg, tapi terus bertambah.

Nah, agar investasi Anda lebih fokus, para perencana keuangan sering menganjurkan agar menetapkan tujuan investasi terlebih dahulu sebelum benar-benar melakukan investasi. Tujuan investasi itu harus dirumuskan secara jelas ; termasuk juga jangka waktunya. Misalnya : "Saya ingin membeli rumah seharga Rp 150 juta lima tahun lagi." Jika tujuan investasi sudah jelas, tinggal mencari instrumen investasi yang paling pas untuk mencapai tujuan investasi itu.

Selain karena ada tujuan investasi, yang kedua, juga perlu berinvestasi karena uang selalu terpapar kepada inflasi. Selama ada inflasi atau kenaikan harga-harga, nilai uang akan selalu merosot. Nah, agar nilai uang tidak tergerus inflasi, harus melakukan investasi.

Idealnya tentu saja harus dicari instrumen investasi yang bisa memberikan keuntungan yang lebih tinggi dibandingkan dengan inflasi. Dengan begitu, nilai uang akan selalu tumbuh.

Karenanya, para pakar menilai deposito di bank tak masuk kategori investasi. Sebab, setelah dipotong pajak, bunga deposito itu biasanya belum mampu menutup inflasi. Ini berbeda dengan saham, obligasi, reksadana, atau properti yang sering bisa mengalahkan inflasi.

Taken & adopted from Kontan Online

The 50 Most Innovative Companies

2009-04-09T22:18:00.000-07:00

#1 Apple from USA known its most innovative from products (47%)
#2 Google from USA known its most innovative from customer experience (26%)
#3 Toyota Motor from Japan known its most innovative from process (35%)
#4 Microsoft from USA known its most innpvative from process (26%)
#5 Nintendo from Japan known its most innovative from products (48%)
#6 IBM from USA known its most innovative from process (31%)
#7 Hewlett-Packard from USA known its most innovative from process (39%)
#8 Research In Motion from Canada known its most innovative from product (53%)
#9 Nokia from Finland known its most innovative from product (38%)
#10 Walmart Stores from USA known its most innovative from process (49%)
#11 Amazon.com from USA known its most innovative from customer experience (41%)
#12 Procter&Gamble from USA known its most innovative from process (27%)
#13 Tata Group from India known its most innovative from product (44%)
#14 Sony from Japan known its most innovative from product (40%)
#15 Reliance Industries known its most innovative from business model (35%)

for further information, please check below
http://bwnt.businessweek.com/interactive_reports/innovative_50_2009/?chan=magazine+channel_in%3A+inside+innovation

taken and adapted from business week

The World's Youngest Billionaires

2009-03-25T05:56:00.000-07:00

This year the world's youngest billionaires are a little older--and a lot poorer.

The world's youngest tycoons may have sprouted a few gray hairs over the last year.

Amid the global recession, the Forbes list of the World's Billionaires is smaller--and poorer--this year. As a result, the tiny club of billionaires age 40 and younger just got a whole lot smaller too.

Last year, the world's 20 youngest plutocrats were all under the age of 36. In 2009, their ages range from 25 to 40. The average age of the world's 20 youngest billionaires is 35 this year, up from last year's average of 32.

The average net worth of billionaires age 40 and under is $2.9 billion, down 30% from last year's average of $4.1 billion.

The youngest billionaire in the world is 25-year-old German Prince Albert von Thurn und Taxis, who is worth $2.1 billion. Von Thurn und Taxis first appeared on our list of the world's billionaires at age 8, but he officially inherited his family's fortune in 2001 on his 18th birthday.

He attended high school in Rome, and studied economics and theology at Edinburgh University in Scotland. The car racing bachelor's fortune fell nearly 10% after the housing crisis crushed real estate and forestry prices.

The prince regains his title as the world's youngest tycoon thanks to the economic meltdown, which pushed 24-year-old Facebook founder Mark Zuckerberg off our ranking. While Facebook is gaining millions of users each week, revenues haven't followed just yet. It's hard to imagine the privately held company being worth nearly as much as it was a year ago.

There are still a few Silicon Valley billionaires on the list of young moguls, including Google (nasdaq: GOOGLE - news - people ) guys Sergey Brin and Larry Page, who share the distinction of being the richest billionaires under 40. Each has a $12 billion fortune.

But like the rest of us, Brin and Page have endured serious financial pain over the last year. Their fortunes have each dropped more than $6.5 billion since last March, as a sputtering advertising market pushed shares of Google down 30%.

Another tech billionaire with a dwindling fortune is former Yahoo ! (nasdaq: YAHOO - news - people ) Chief Executive Jerry Yang. The 40-year-old, who is worth $1.1 billion these days, has lost half of his money in the past 12 months--and control of the famous search engine outfit he co-founded more than a decade ago. Yang quit as chief executive in January, after the company named Carol Bartz as his replacement.

The departure capped off a rough 2008 for the tech titan. Last February, Yang famously turned down Microsoft's (nasdaq: MSFT - news - people ) $44.6 billion offer to buy Yahoo !. A few months later, billionaire Carl Icahn launched a proxy fight for control of Yahoo!'s board in an attempt to force the Microsoft sale. Icahn stopped his attack in July after Yang conceded three seats on the company's board to the activist investor. Yahoo ! shares are down nearly 55% since rebuffing the original Microsoft offer

Despite the economic chaos, there is a newcomer to this year's young billionaires club: 39-year-old Sheik Mansour Bin Zayed Al Nahayan. Worth $4.9 billion, the member of Abu Dhabi's royal family stepped into the spotlight last September after buying the Manchester City soccer team for $300 million.

A month later Al Nahayan, who heads Abu Dhabi's sovereign wealth fund, swooped in to rescue British bank Barclays (nyse: BCS - news - people ) with a $5 billion cash investment. The young royal also serves as minister of United Arab Emirates Presidential Affairs.

A few young tycoons were able to make money this past year in the face of financial turmoil. American energy trader John Arnold added more than $1 billion to his fortune in a chaotic oil market, and Indian pharmaceuticals kings Malvinder and Shivinder Singh added $100 million to their combined net worth.

taken & adopted from forbes/bussines

Subsidy surplus ‘temporary’

2009-03-08T21:04:00.000-07:00

The government denies lawmakers’ accusations of violating state budget law by having a Rp 3.3 trillion (US$300 million) surplus from the fuel subsidy.

“It’s inaccurate to say the government has breached the law on the state budget, as the surplus only occurred in two months and the state budget should be seen as a full one-year term,” Energy and Mineral Resources Minister Purnomo Yusgiantoro told a press conference Thursday.

The surplus was announced by Finance Minister Sri Mulyani Indrawati in February when speaking before a House of Representative’s special committee, saying there was a budget subsidy surplus for gasoline Premium between December last year and January amounting to Rp 3.3 trillion as fuel prices were cut three times during the period.

The surplus was accumulated because the budgeted subsidy amount for Premium was underspent. On Wednesday, twenty lawmakers filed for an inquiry requesting an official explanation from the government about the surplus.

The lawmakers represented The Golkar Party, National Mandate Party (PAN), United Development Party (PPP), National Awakening Party (PKB), Indonesian Democratic Party of Struggle (PDI-P), Prosperous Justice Party (PKS), and the Democratic Pioneer Star (BPD) party.

There is speculation that this move was possibly politically motivated in the pre-election period. In response, Purnomo said Premium gasoline prices were lower in December and January while this was combined with a high level of supply during the particular period.

“But, now the price is going up and we begin to subsidize the Premium gasoline again,” said Purnomo without elaborating on amounts.

According to Purnomo, prices of Premium gasoline and other fuels are rising again in accordance with the movement of crude oil prices.

He said the average Indonesian Crude Price (ICP) in the first week of March had reached US$43.37 a barrel, or higher than the average ICP in January of $41.89 per barrel and the ICP in February of $43.10 per barrel.

“The increasing ICP will affect the fuel prices,” Purnomo said.

He predicted the ICP might continue to increase as the Organization of Petroleum Exporting Countries (OPEC) has indicated that it would take steps to reduce oil production.

Asked whether the government would increase subsidized fuel prices following the ICP trend, Purnomo did not provide a firm answer.

He only said that the government had capped the price of subsidized Premium gasoline at Rp 6,000.

Premium gasoline currently is sold at Rp 4,500 a liter.

On the temporary Rp 3.3 billion surplus, Purnomo said it would go to the total fuel subsidy for 2009.

“The surplus will not go anywhere, because we look at the subsidy and the state budget within a one year framework,” he said.

Alvin Lie, a legislator from the PAN who also signed the inquiry request, said the request had nothing to do with the elections.

“We previously have warned the government several times about this matter, but there was no favoable response. Thus, we are forced to take this action,” he said.

Taken & Adopted from the jakarta post

The Richest People You've Never Heard Of

2009-01-29T03:27:00.000-08:00

Meet the not-so-famous people behind some of the biggest fortunes on earth.

When you think of the richest people in the world, the name Riley Bechtel probably doesn't come to mind.

It should. Bechtel is a member of the exclusive billionaires club. We valued his net worth at $5.5 billion when we calculated our Forbes 400 list in late August--that's above Yankees owner George Steinbrenner III, television hostess Oprah Winfrey and Hollywood king Steven Spielberg.

He's the head of the engineering titan Bechtel Corp., the seventh-largest private company in the U.S. with annual sales of $27 billion. His family has owned it for four generations.

But while you might not be familiar with Bechtel's face, you're probably familiar with his company's work, projects like the Hoover Dam and the Chunnel they carved out between Britain and France.

Our last census of the world's wealthy last March found more than 1,000 billionaires throughout the world. While they're hardly household names themselves, their companies make products that are pretty hard to miss.

Take Kjeld Kirk Kristiansen. If you liked building things as a child, there's a good chance you'll recognize his family's business.

Kristiansen's grandfather founded the Danish company Lego in 1932. At first, his grandfather crafted wood toys in a carpentry shop but in 1949 the company invented what would become its most famous product. At the time, the stackable plastic pieces with studs on top were called the Automatic Binding Brick.

Today, we simply call them Legos and the company is the world's sixth-largest toymaker by sales. The company's success led us to peg Kristiansen's net worth at $6.5 billion in March.

Another unfamiliar name who made billions with popular products: Jorge Paulo Lemann. The former competitive tennis player is now a major shareholder in the world's largest brewer, InBev.

In 1989, Lemann was a successful Brazilian investment banker when he and some banking partners bought a stake in his country's largest brewery. A string of mergers followed and now that brewery is part of beer-making behemoth Anheuser-Busch InBev.

The company's impressive roster of beers includes well-known brands like Budweiser, Stella Artois, Beck's and Michelob. Thanks to his success in the beer world, we estimated Lemann's net worth at $5.8 billion in March.

Some of the world's tech titans are as publicized as a celebrity, like Bill Gates and Steve Jobs. But what about David Sun and John Tu ? Their combined net worth of $8 billion is certainly worth noting.

They are co-founders of Kingston Technology, the 79th-largest private company in the U.S. Annual sales run over $4 billion.

Any time you buy a cellphone, camera or MP3 player there's a chance you're lining the pockets of Sun and Tu. That's because Kingston makes the memory devices often used in those gadgets.

Sun and Tu aren't typical billionaires. They reportedly sit in cubicles with the company salespeople at the Kingston offices. They don't even have assistants. No wonder you haven't heard of them.

Rates : When Zero Is Way Too High

2009-01-20T03:02:00.000-08:00

Interest rates still aren't low enough to stimulate the U.S. economy. Washington needs to engender more inflation so 'real' rates turn substantially negative

Can an interest rate of zero be too high ? Unfortunately, yes. A new analysis by Goldman Sachs (GS) concludes that the Federal Reserve's cut in the federal funds rate to a record low of zero to 0.25% on Dec. 16 isn't going to be nearly enough to get the economy going again. The report says the Fed would need to reduce the federal funds rate to negative 6% by the end of 2010 to supply the needed amount of monetary stimulus.

The problem: It's literally impossible to cut interest rates below zero. As a result, "we are entering a world with interest rates that are far too high for the economy's good," Goldman Chief U.S. Economist Jan Hatzius wrote in a Jan. 16 research note.

That's a big negative for a U.S. economy that's already in a deep slump, with retail sales, industrial production, and exports all plummeting. Citigroup (C), Bank of America (BAC), General Motors (GM), and Chrysler, among others, are struggling to keep their heads above water. Circuit City, the second-biggest U.S. electronics retailer, announced on Jan. 16 that it was going out of business and closing all its stores by the end of March. Meanwhile, homebuilders like Lennar (LEN) and D.R. Horton (DHI) are getting squeezed by a record decline in home prices.

Inflation Headed to Zero ?

Ordinarily when the economy slows, the Federal Reserve can juice it up by cutting short-term interest rates to below the rate of inflation, meaning that in inflation-adjusted terms, rates are actually negative. For example, if inflation is running at 6% per year and interest rates are at 4%, the 'real' rate is negative 2%. Negative real rates entice people to borrow money for consumption or investment, which gets the economy going again and soaks up unemployed workers and equipment.

Right now, zero is about right for interest rates. But the economy is continuing to soften, so it will soon be too high, according to Goldman. Hatzius bases his calculation on Goldman's own version of the so - called Taylor Rule, which is named after Stanford University economist John Taylor. Taylor says the Fed needs to lean against the wind by raising rates when the economy is overheating and lowering them when there's a lot of slack.

Trouble is, the Federal Reserve can't cut interest rates below the rate of inflation if inflation falls to zero, which many economists expect to happen soon. Clearly the Fed can't take in $1,000 and pay back only, say, $950 a year later. Rational investors would simply keep their money in cash outside the banking system to preserve its value.

The solution is obvious : The Fed needs to deliberately raise the rate of inflation — maybe not all the way to 6%, but significantly above zero.

One way to do that is to print lots of money. The Fed can create money from thin air by purchasing assets such as Treasuries and mortgage - backed securities and paying for them by crediting the seller with newly created reserves at the central bank.

'Usual Rules No Longer Apply'

That way today's zero interest rates would be negative in inflation-adjusted terms and the economy would get the boost it needs. Fed rate - setters would need to swallow hard, since 99.99% of the time they try to quell inflation, not raise it. But most of the voters on the Federal Open Market Committee are aware that deflation can be an even greater nemesis than inflation.

Even generating negative real rates won't be enough to turn the economy around. So the government will also need to strengthen the banking system and give the economy a fiscal stimulus by cutting taxes and increasing government spending, as the Obama Administration proposes to do. To rescue the banks, Hatzius favors more purchases of bad assets that are on banks' balance sheets as well as lending by the Fed against consumer asset-backed securities.

Princeton University economist Paul Krugman favorably cited Hatzius' research in his New York Times blog on Jan. 17. No surprise there, since Krugman himself pinpointed a similar problem in Japan during its 'lost decade' of slow economic growth in the 1990s. Wrote Krugman: "This is why we need a huge fiscal stimulus, unconventional monetary policy, and anything else you can think of to fight this slump. Quite literally, the usual rules no longer apply."

Taken from Businessweek

Low Prices Are Not Always Your Friend

2009-01-09T02:32:00.000-08:00

Cutting prices might seem reasonable given the state of the economy, but doing so could backfire over the long run.

The economic news has not been good of late, and that may lead you to believe you should find a way to lower your prices. After all, consumers will be looking for ways to cut back. But while lower prices may make sense from a short - term perspective, they may not be as strategic as you think. Let me explain.

The other day I saw an ad for a convenience store trumpeting the virtues of its affordable, freshly brewed coffee. The headline said "Because your morning coffee shouldn't cost more than your lunch." The obvious dig at Starbucks (SBUX) made me chuckle.

But it also made me think. Why shouldn't it ? Is paying $3, $4, or even $5 for a cup of coffee really so irrational ? Perhaps so if all you're buying is coffee, but if along with it you enjoy a relaxing, pleasant experience it may be quite a bargain. In today's fast-paced culture, how much is 10 minutes of bliss worth ?

Price as an Indicator of Value

That thought reminded me of another shopping experience, this time revolving around jewelry. I recently inherited a ring from my grandmother that was somewhat dated, but featured a beautiful aquamarine, my wife's birthstone. I knew she would love the stone, so I set out to find a jeweler who could redesign the ring into a pendant in time for her birthday.

I visited three or four different jewelry stores, trying to find one that would offer design talent, a personal touch, and a willingness to work within my budget. And as I evaluated my own decision process, I observed something interesting and somewhat surprising — I gravitated toward the most expensive option.

I can't say that the jeweler I chose was definitively better than the others, but for some reason I felt more comfortable with it, not in spite of its higher prices, but because of them. I felt that by paying a little extra I would be more assured of ending up with a piece my wife would love.

These are good examples of how price is a product feature, regardless of whether it's intended to be. For all I know, Starbucks might use the same coffee beans as the convenience store, but its higher price suggests a more valuable blend. The gold and diamonds my chosen jeweler sells may be identical to those found at other stores, but the fact it charges a little more gives me the sense that the quality of its work is better. Both are rational conclusions for me to draw, because thousands of previous purchase decisions have taught me price isn't merely a reflection of product quality, it's an indicator of it as well. If something is more expensive, it's usually for good reason.

For Long - Term Success, Higher Prices

Say you were in an electronics store evaluating two TVs that had similar features and design characteristics, but were significantly different in price. Which would you choose ? Many people would choose the lower-priced option, but some would go with the more expensive model. Would the latter group be acting irrationally ? Not at all — even those who bought the cheaper TV would most likely agree the more expensive option is somehow of higher quality. It would have to be ( goes the reasoning ) to justify its higher price.

Higher prices may lead to lower sales volume in the short term, but they also provide the margins companies need to invest in brand - building or to expand their distribution networks. The chief executive of national chain Ultimate Electronics serves as the company's spokesperson, and in his advertising he insists Ultimate always has the lowest prices. He boasts they continuously shop the competition, and when Circuit City (CC) or Best Buy lowers the price on something, Ultimate Electronics lowers it even further.

Whether or not most consumers believe this is beside the point ( I suspect they don't believe it — we've all learned that lowest-price promises are often empty ). What I can't figure out is how Ultimate Electronics expects to build long - term success with this strategy. The chain will tend to attract price - driven shoppers who are likely to have zero brand loyalty. That might sell a razor - thin - margin TV today, but won't build equity for tomorrow. Even in the cutthroat world of consumer electronics, low prices are not always your friend.

Nor are low prices a winning strategy in the ultimate not-for-profit organization —where you wouldn't think pricing strategy is even a consideration — a church. One of the churches in my community was advertising a stage performance of The Messiah in the weeks leading up to Easter. In the spirit of its mission, it offered tickets to the event for free, which is what you might expect from a ministry. But we all know the truism that you get what you pay for. I think the church's outreach might have been more effective if it charged at least a minimal fee for the tickets — not to make money, but to communicate that the performance is of high quality and worth attending.

Face It, You're Not Wal - Mart

Sending a quality signal via higher pricing is an undervalued, and often overlooked, tactic. An architect friend of mine is incredibly talented, and as a result is very busy. He's under stress from managing all of his commitments and worries about the effect it is having on the quality of his work and his reputation ( not to mention his family ). Counsel to him ? Raise his fees. Doing so will enable him to bring on more staff to relieve some of his load, ensuring he can maintain his high standards in all that he does. It will also chase away his more price-sensitive customers, allowing him to devote the time necessary to do better work for the clients that remain. He's coming to the understanding that until he loses a fair number of clients due to price objections, his fees are too low.

The same goes for any product or service. It can be odd to feel good about losing customers because of price, but if you're not, you may be backing yourself into a low - margin corner. And don't kid yourself — other than Wal - Mart (WMT), very few companies can truly sustain a low - price positioning.

Experiment with your prices. Find a way to test a higher price point in a select market or with a certain group of customers. You may find the margin improvement offsets any revenue losses you experience. And you may even find your overall volume increases due to the halo effect of a higher price.

Remember, consumers will always ask for lower prices, but they don't always want them. Sometimes knowing they paid a bit more for something reinforces their choice and makes them feel better — about the purchase and about your brand.

Adopted and Modified from businessweek

Central Bank Cuts Interest-Rate to 8.75 %

2009-01-07T05:38:00.000-08:00

Bank Indonesia (BI) cut its benchmark interest rate by 50 basis points to 8.75 percent on Wednesday on the back of growing deflation following the fall in commodity prices.

"We made the decision considering the country's monetary condition and the economy prospect in 2009. We believe in 2009 the monetary authority needs to be more cautious," BI Governor Boediono said.

Boediono predicted the rate of inflation in 2009 would continue to slow allowing for BI to further lower its rate.

He even predicted economic conditions in 2009 could surpass this year's, saying, "I feel that 2009 could be better".

Last month, BI had lowered its key interest rate to 9.25 percents to help stabilize the country's macroeconomy. The central bank has estimated that global economic declines may cause global economic growth to rise by only 2.2 percent, significantly below the previous 3 percents.

Is it possible to mobilized Indonesian economy through this policy ???

Adopted and modified from the jakarta post.

Subsidized Fuel Consumption Exceeds Quota

2009-01-05T06:05:00.001-08:00

Following soaring global oil prices in the first nine months of 2008, consumption of subsidized fuel exceeded the allocated quota by more than 3 million kiloliters (kl).

State oil and gas company PT Pertamina, the sole distributor of the fuel, announced recently that consumption reached 39.40 million kl last year, higher than the earmarked quota of 35.54 million kl provided for in the state budget.

The government provides subsidies for three oil-based fuels ; Premium gasoline, diesel and kerosene, as well as the 3 kilogram containers of liquefied petroleum gas (LPG).

Achmad Faisal, Pertamina's director for marketing and trading, said Premium consumption reached 19.61 million kl, higher then the 16.98 million kl quota, while consumption of diesel reached 11.89 million kl which also exceeded the quota of 11.00 million kl.

Kerosene consumption reached 7.90 million kl, higher than its 7.56 million kl quota.

Pertamina said the consumption of Premium and diesel exceeded the initial quota because of the increasing numbers of vehicle users which grew around 6 percent last year.

"We predicted Premium and diesel consumption would surpass the allocated quota as happened in 2007," he said.

Faisal added the over target consumption of subsidized kerosene during 2008 was due to Pertamina's decision to halt the kerosene-to-LPG conversion program during the Islamic fasting month of Ramadan.

For 2009, the state budget has capped the subsidized fuel quota at 36.85 million kl -- 19.40 million kl for Premium, 5.80 million kl for kerosene and 11.61 million kl for diesel.

Downstream oil and gas regulator BPH Migas said it expected that actual consumption would not exceed those forecast.

"We will strengthen our supervision to avoid irregularities in subsidized fuel distribution. As the price gap between subsidized and non-subsidized fuels is narrowing, we expect to see less smuggling attempts and more use of non-subsidized fuel by motorists," BPH Migas chairman Tubagus Haryono said.

He added BPH Migas had carried out feasibility studies in several cities to establish integrated gas distribution which was expected to help reduce oil-based fuel consumption.

However, the agency has yet to implement this to promote greater energy efficiency in fuel consumption.

Tubagus said the 'Smart Card' program aimed at motorists purchasing subsidized fuels was unlikely to be implemented during 2009, as the agency was still making feasibility studies.

Markets Can’t Rule Themselves

2009-01-02T20:30:00.001-08:00

A 'made in the U.S.A.' financial crisis highlights the need for more global — and more robust — oversight.

For years, there has been an ongoing discussion among world leaders and thinkers about deficiencies in the international financial architecture and about economic imbalances, including the widening U.S. trade deficit. Many worried about a disorderly unwinding of these imbalances. Nothing was done.

We are now paying the price for our failure to act. Ten years ago, the fear was that financial turmoil in the developing world might spill over to the advanced industrialized countries. Today, we are in the middle of a 'made in the USA' crisis that is threatening the entire world.

If we are going to address this worldwide crisis and prevent a recurrence, we must reform and reconfigure the global financial system. There are simply too many interdependencies to allow each country to go its own way. For example, the United States benefited from its export of toxic mortgages ; had it not sent some of them to Europe via complex securitization, its downturn would have been far worse. But the resulting weaknesses in Europe's banks are now ricocheting back to the United States.

Better regulation would have helped prevent such a situation. But the reform of the global financial system must go much further. For example, there must be better monetary-policy coordination around the world. Europe's current slowdown is due in part to the fact that while the European Central Bank spent the past year focusing on inflation, the United States was ( rightly ) focusing on the impending recession. The resulting difference in interest rates led to a strong euro and weak exports. That hurt Europe. But a weak Europe eventually hurts the United States, as Europe is forced to reduce its imports of American goods. With better coordination, perhaps America would have been able to convince Europe of the risks of recession, and that would have led to moderation of Europe's interest rates.

There is also a need for internationally coordinated stimulus programs to help jump - start growth. It is good news that China, the United States and Japan have now all instigated major programs of fiscal expansion. But they are of vastly different sizes, and so far, Europe's is lagging behind. Its growth and stability pact imposes constraints that may have global consequences.

Beyond this, confidence in financial markets will not be fully restored unless governments take a stronger role in regulating financial institutions, financial products and movements of capital. Banks have shown that they can't manage their own risk, and the consequences for others have been disastrous. Even former Fed chairman Alan Greenspan, the high priest of deregulation, admits he went too far.

What we need now is a global financial regulatory body to help monitor and gauge systemic risk. If financial rules are allowed to vary too widely from nation to nation, there is a risk of a race to the bottom — some nations will move toward more lax regulation to capture financial business at the expense of their competitors. The financial system will be weakened, with consequences that are now all too apparent.

What should this new set of global financial rules encompass ? For starters, it should ensure that managerial incentive schemes are transparent and do not provide perverse encouragement for bad accounting, myopic behavior and excessive risk taking. Compensation should be based on returns not from a single year but over a longer time period. At the very least, we should require greater transparency in stock options, including making sure that they receive appropriate accounting treatment. And we need to restrict the scope for conflicts of interest — whether among rating agencies being paid by those they are rating, or mortgage companies owning the companies that appraise the properties on which they issue mortgages. We need to restrict excessive leverage, and other very risky behavior. Standardization of financial products would enhance transparency. And financial - product safety and stability commissions could help decide which products were safe for institutions to use, and for what purposes. We have seen what happens if we rely on bankers to regulate banking.

Beyond better global coordination of macroeconomic policy and regulation, there are at least two other actions governments should take. First, we need a reform of the global reserve system. More than 75 years ago, John Maynard Keynes, the greatest economist of his generation, wrote that a global reserve system was necessary for financial stability and prosperity; since then the need has become much more dire.

Keynes' hope was that the International Monetary Fund would create a new global reserve currency that countries would hold instead of sterling ( the reserve of the time ). Today, such a currency could be used to replace the dollar as the de facto reserve currency. Because it would not depend on the fortunes of any one country, it would be more stable. Supply could be increased on a regular basis, ensuring that reserves kept up with countries' needs. Issuance could be done on the basis of simple rules — including punishment for countries that caused global weaknesses by having persistent surpluses. This is an idea whose time may have finally come.

The other major reform should be a new system of handling cross - border bankruptcies ( including debt defaults by sovereign states ). Today, when a bank or firm in one country defaults, it can have global ramifications. With various national legal systems involved, the tangle may take years to unwind. For example, the problems arising from Argentina's 2001 default are still not resolved, and bankruptcy complications plagued South Korea and Indonesia during their crises a decade ago, slowing down the process of recovery. The world may soon be littered with defaults, and we need a better way of handling them than we have had in the past.

This crisis has highlighted not only the extent of our interdependencies but the deficiencies in existing institutions. The IMF, for instance, has done little but talk about global imbalances. And as the world has focused on problems of governance as an impediment to development, deficiencies in the IMF's own governance meant its lectures had little credibility. Its advice, especially that encouraging deregulation, seems particularly hollow today. Many critics in Asia and the Middle East, where pools of liquid capital dwarf the IMF's own, are wondering why they should turn over their money to an institution in which the United States, the source of the problem, still has veto power, and in which they have so little voting power.

This is a Bretton Woods moment — a time for dramatic reforms of existing institutions or, as was done at the end of World War II, the creation of new ones.

Until now, Washington has consistently blocked efforts to create a multilateral global financial system that is stable and fair. It exported the deregulatory philosophy that has proved so costly, both to itself and to the world. President Obama has an opportunity to change all this. Much depends — now and for decades to come — on his response.

Adopted and Modified from Newsweek

30 state firms on stream to go private, mostly via IPOs

2009-01-01T23:58:00.000-08:00

Companies Logo's

The government plans to sell shares in 30 state owned companies next year, most of them through the initial public offering (IPO) scheme, Deputy State Minister for State Enterprises Muhammad Yasin says.

"Most of the firms will be privatized via an IPO, except those companies in which the government has only a small proportion of shares," said Yasin.

The privatization program will include several carried-over programs from this year, including IPOs of steelmaker PT Krakatau Steel, flag carrier Garuda Indonesia and Bank Tabungan Negara.

Yasin said the government expected to generate close to Rp 10 trillion (US$906 million) from selling around 30 percent of the shares in each of these companies.

"Before we offer the stake to the market, we will first offer current companies' stakeholders the chance to buy them," he said, adding proceeds from the IPOs would be used to restructure the companies.

Construction firms PT Pembangunan Perumahan and PT Waskita Karya are currently waiting for House of Representatives approval for their IPOs, according to Yasin.

The ministry initially planned to privatize 44 companies next year, but decided to postpone several of them due to the recent stock market collapse as a result of the financial crisis following the Wall Street crash in the United States.

Indonesia has 139 state-owned firms engaged in energy, mining, utilities, telecommunications, banks, services, and commodities.

Could it be done in this un-certainty circumstances ?

Adopted and modified from Jakarta Post

Slow Start to OPEC Cuts (another story of oil)

2008-12-28T23:03:00.000-08:00

The UAE details its agreed curb to production, but the cartel's other members have yet to comply.

The United Arab Emirates said loud and clear Friday that it was deepening its cut of oil production, which seemed to highlight the deafening silence from some of the cartel's other members in complying with an OPEC agreement to reduce oil output by a record amount earlier this month.

Oil futures rose $1.17 to $36.52 in Asian trading on the New York Mercantile Exchange, following three days of declines.

The UAE's Abu Dhabi National Oil said Thursday that customers who bought its Murban and Upper Zakum grades would no longer have the option to load an additional 5.0% above normal volumes on each cargo, a standard industry practice known as "operational tolerance." With no word from other producers of deeper cuts about January Gulf crude supplies, however, refiners in Asia are likely to be expecting the next wave of reductions to come only for February.

The UAE is the first OPEC member after Saudi Arabia, the largest oil producer and lead figure in the cartel, to have detailed how it will comply with the record 2.2 million barrels-per-day cut announced on Dec. 17. If other members do not follow suit, the market will be all the more skeptical about whether the group can comply with its agreement.

Saudi Arabia had already been informing its customers (half of whom are in Asia) of sharper curbs to supply than for December. But one North Asian refiner was quoted by Reuters as saying Wednesday that it had not received any similar notices from other producers.

On Dec. 17, OPEC announced its largest-ever single cut to production, leaving total quotas for the 11 active members at 24.845 million barrels per day, from 27.3 million barrels per day back in November; the cuts were to be effective from Jan. 1, taking the total output removed since September to 5.0% of world output.

There has already been some skepticism about the credibility of the cartel's latest reduction agreement, though. The group's deliberations over the cut took longer than normal, and it released no details on individual quotas, leaving the market guessing who would cut what. (A cut of 1.5 million barrels per day in November had come with a clear division of reductions, with a cut of 5.2% across the board.) Finally, a lack of firm support from non-OPEC producing nations, Russia and Azerbaijan meant that the shared burden between the cartel's members would be heavier.

Oil futures traders thus seemed far from convinced that OPEC could genuinely implement its cut, when they pushed down the price of oil immediately after the Dec. 17 by as much as 10.0% in one day. With core members like the Saudis and UAE complying with the cut, it is now up to other members, including Iran, Kuwait and Nigeria to follow suit. Unfortunately it is some of the biggest producers--Iran, Nigeria and Venezuela--that may find it more difficult to reduce production because of increasingly tight state budgets.

Adopted and modified from Forbes

Investors' Wish List

2008-12-28T02:49:00.000-08:00

What, in a perfect world, would investors like to see under the tree ?

1. A promise that stocks will move higher in January.
The Stock Trader’s Almanac argues for the importance of its January Barometer : ... the most crucial indicator will be the full-month January Barometer, which states as the S&P 500 goes in January, so goes the year. Devised in 1972 by Yale Hirsch, this gauge has provided an accuracy ratio of 91.4%. It will be especially indicative with the market reacting to the agendas and priorities being set by the new Obama administration and a new Congress convening in addition to regular slew of economic data releases, earnings announcements and market forecasts.

The barometer was correct in 2008, when stocks tumbled almost 8% in January, then dropped more than 40% the whole year.

2. An end to crazy volatility.
Since the start of the financial crisis — and particularly since the collapse of Lehman Brothers — investors have gotten used to wild swings in the stock market. These moves occur not just from day to day, but from hour to hour, often apparently in reaction to no news at all.

It’s all a sign of investors’ confusion about where the market (and the economy and financial system) are headed. Volatility also has scared away investors who might otherwise have jumped into this market. Why buy now if later this afternoon stocks might be down another 3% ?

3. More confidence for executives and analysts about where earnings are headed.
Lately, corporate executives have sounded as confused as everyone else about the state of the economy and their own businesses. Analysts are predicting S&P 500 earnings fall 8.5% in the first quarter of 2009, but analysts have been rapidly adjusting their estimates all year. Few investors take them seriously anymore. If investors could have more confidence analysts’ and executives’ predictions are right, they could consider buying stocks based on their fundamentals. But with the future so fuzzy, it’s hard to be sure that stocks are indeed priced cheaply.

4. Unemployment that stays near 7%.
It seems likely that the jobless rate is going up (from 6.7% in November), as demonstrated by news that initial jobless claims rose 30,000 to 586,000 for the week ending Dec. 20. More job cuts may be planned for the New Year as well. However, the unemployment rate can’t jump too high or consumer spending will plunge and prospects for a 2009 economic recovery become bleak.

5. An end to scandals, collapses and other confidence-shaking events.
The Bernard Madoff debacle is the latest of the big financial headlines to shock investors this year. It started with the collapse of Bear Stearns, continued with the demise of Lehman Brothers, the trouble at AIG and the Bush Administration’s request for a $750 billion bailout.

All these big headlines have rattled investors. It’s important to the stock market’s psychological health that conditions quiet down for a bit.

But if the bad news won’t stop, perhaps investors would settle for a more aggressive Securities and Exchange Commission. An aggressive federal regulator could help assure people their money is safe from the unscrupulous investment managers.

If you put together an investing wish list, what would be on it ?

Adopted and modified from businessweek

Crude Prices Rebound, Most Believe It's Temporary

2008-12-27T04:33:00.000-08:00

Oil prices rebounded Friday in what some market analysts believed was only a brief pause for steadily declining crude prices.

Awful holiday retail sales, job uncertainty and shrinking global trade all suggest that demand for energy from both businesses and consumers will continue to fall into next year.

"By Tuesday or Wednesday, we could easily see crude oil roughly $3 below what it is right now," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

New evidence that OPEC members had cut production and a weaker dollar boosted crude prices Friday in light trading.

Light, sweet crude for February delivery rose $2.36, more than 6 percent, to close at $37.71 a barrel on the New York Mercantile Exchange. Trading was closed Thursday for Christmas.

In London, February Brent crude rose $1.76 to settle at $38.45 a barrel on the ICE Futues exchange.

Tumbling crude prices have led to enormous declines in the price of retail gasoline.

At the pump, retail gas prices fell six-tenths of a penny overnight to a new national average of $1.642 a gallon (43 cents a liter) Friday, well below the year-ago average of $2.981 a gallon, according toAAA and the Oil Price Information Service.

"We're paying about a billion dollars per day less than we were in July" for gasoline, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. "We could probably bail out some banks and maybe even some of the auto companies with the saings."

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, has announced crude production cuts totaling more than 4 million barrels per day as it tries to stop the decline in prices. OPEC members, however, have a history of ignoring announced quotas andcrude traders waited for concrete evidence that the 13-nation group was tightening the spigot.

Analysts pointed to a release from the United Arab Emirates advising clients that it would reduce supply almost immediately. The state-owned Abu Dhabi National Oil Company said it would cut production of some gades of crude by as much as 15 percent next month.

"For now, at least Saudi Arabia and the United Arab Emirates seem to be fully complying with the cuts," said analyst Olivier Jakob of Petromatrix in Switzerland.

OPEC may meet again in Kuwait City on Jan. 19 to discuss further production cuts. The oup's next official meeting is March 15 in Vienna.

Investors in recent months have ignored supply cuts from OPEC, with demand issues clearly driving the market. What's kept crude prices at four-year lows is the steady drumbeat of gloomy economic news that shows consumers aren't spending like they used to. The latest comes from a preliminary report by MasterCard SpendingPulse, which said retail sales fell between 5.5 percent and 8 percent during the holiday season, compared with last year. Excluding auto and gas sales, they fell 2 percent to 4 percent, according to SpendingPulse.

SpendingPulse is a division of MasterCard Advisors that tracks total sales paid for by credit card, checks and cash.

Crude has given up 70 percent of its value since July, and this month alone it has fallen by more than $17 per barrel, a 30 percent decline.

Kloza said he'll know that crude prices are poised for a sustained rbound when global demand matches last year's levels for several weeks in a row.

"Before you turn the corner, you need to get to the corner," Kloza said. "And right now we're seeing gasoline demand running about 3 to 5 percent behind year-ago levels.

Investors eyed more evidence that plummeting consumer demand from the U.S. and Europe is undermining growth in export-dependent Asia, as production at major Japanese manufacturers fell by its largest margin ever in November.

Japanese industrial production fell 8.1 percent in November from a month earlier, the largest drop since the government began measuring such data in 1953, the Ministry of Economy, Trade and Industry said Friday.

The decline followed a 3.1 percent drop in October, and the government expects another 8 percent plunge in December.

"These are pretty ugly figures that show the recession deepened in Japan," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "I don't see any catalyst to bring crude higher. We'll likely test $30."

Many companies will likely report dismal earnings for the fourth quarter and may use the lowered expectations to include massive writedowns or one-time charges, Moltke-Leth said.

"I think a lot of CEOs want to put everything bad into the fourth quarter because the market expects it to be bad so why not put everything you can in there," he said. "There's going to be a lot of bad corporate news during the next few weeks, and that's going to reinforce the demand destruction theme for crude."

In other Nymex trading, gasoline futures rose 5.17 cents to settle at 88.4 cents a gallon. Heating oil gained 4.67 cents to settle at $1.245 a gallon while natural gas for January delivery fell 8.4 cents to settle at $5.826 per 1,000 cubic feet.

What would happen to Indonesia, our beloved country, if oil prices raise higher again ? Let's pray and hope Indonesia could through this circumtances...