Monthly Archives: November 2015

Few Decades, changes in Demographics

As populations age, the base of taxpayers to support them must grow in proportion, or otherwise face huge obstacles to meet obligations. Unfortunately for most developed countries, this will not be the case and as a result already over indebted governments will need to incur more debt to pay for increased social obligations.  We are at the early stages of this aging society process, so the problem will only get worse.

 

japans-changing-population-Pyramid-08262013

 

 

 

 

The above chart demonstrates the phenomenon of an aging population in Japan since the 1960s. Through the years as the population has aged, and birth rates have failed to keep up, the balance of older citizens to youth is becoming increasingly top heavy. Having fewer workers to support the aging Japanese population has had serious implications for Japans debt load, which has increased from just 70% of GDP in the early 1990s to 245% today, the world’s highest debt/GDP ratio.

 

For More: http://www.financialpolicycouncil.org/fpcnew/articledetails.aspx?id=46/Demographics-and-Government-Debt-Destructive-Forces-That-Will-Compound-World-Challenges

 

Thank you,

Ziad K Abdelnour – Rebel with a Cause

Ziad K. Abdelnour is a Wall Street Financier, Author, Philanthropist, Activist, Lobbyist, Oil & Gas Trader & President & CEO of Blackhawk Partners, Inc., Blackhawk Partners, Inc., is a private “family office” that has two major lines of business. Blackhawk Partners, Inc., is also a firm that serves as both an advisor to and an investor in its clients

 

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My Best Advice for a Rookie Start-Up CEO

I have backed over 125 companies over my Wall Street career and can humbly say reviewed over 5,000 business plans… From startups to very established companies seeking financing.

 
These are my golden nuggets I thought I’d share with every bright-eyed rookie CEO starting his entrepreneurial career. Hope you will make the most out of it.

 
1. Contrary to the stereotype, startups are a marathon, not a sprint.
The truth is, you are not going to be a billion dollar company or be acquired in the next 18 months. The process always takes longer than you think.

 
2. Determination is the biggest predictor of long-term success: Nobody had an easy road. You can succeed, but often it is a matter of how badly you want to.

 

For More: http://www.blackhawkpartners.com/best-advice-rookie-start-ceo/

 

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MONEY, POWER, RESPECT: WHICH TRUMPS ALL?

We all know that man comes in the world alone and goes from the world alone. He is only remembered by his acts. Some do good for others while some spend their lives running after money.

 

One cannot deny the fact that Money is power. Money is though erratic, when in low positions, respect acts an important support. By the same token, money can’t buy respect but respect can help earn money. Besides, you can have all the money you want, but that doesn’t necessarily translate into power or respect. Money can buy power at times, but respect is hard to demand.

 

Power – You can be the most powerful person in the world, but respect is not easy to come …. even for Presidents of the United States. I would add in here that love is a critical component as well to achieve power because when you give and get love, and when you have people around to support you, becoming a powerful person and earning money becomes easier which automatically gets you respect.

 

For More: http://ziadabdelnour.net/money-power-respect-which-trumps-all

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The Activist Investor: A True Ally of Corporate Governance

Activist investors: Publicly listed companies fear them. Corporate governance pundits generally do not trust them. Retail investors quietly applaud them, and most laymen do not understand them. However, it is clear that in today’s complex corporate world, we need them. Activist investors may be the only players in the game that can effectively “Occupy Wall Street”.

 

We have entered the twilight zone when it comes to corporate governance. The zone where many Boards bury their head in the sand when it comes to breaches in compliance, as in the case of HSBC and the tax evasion scandal of February 2015. Certain Boards passively bow to the dictates of executive management, throwing all accountability on the corporation-as-entity, with no individual responsibility. All other stakeholders, from shareholders, to suppliers, to workers, to humble taxpayers are left to peck at what is left of net worth after the share price dives, and are left to fork out money for regulation and reconstruction.

 
To be fair, in the recent past activist investors have been noted for short-termism. Short-termism is the process by which an activist fund may coerce target companies to conduct strategies that may yield high profit in the short term, but that may be detrimental to company performance in the long term. For instance, it is common practice for activist funds to demand significant reduction in Research & Development activities; yet, R&D is needed for long term competitive and innovative advancement. Most activist fund activity increases the stock market price of the target company.

 

However, best practice professionals argue that the temporary increase in share price is misleading and cannot offset long term business hazards that occur if the activist investors short the target company’s stock. There is truth in this belief. However, we need to take a closer look at activist investors’ strengths when it comes to financial strategies and business growth.

 

For More: http://www.financialpolicycouncil.org/fpcnew/articledetails.aspx?id=52/The-Activist-Investor:-A-True-Ally-of-Corporate-Governance

 

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When Will We Stop Blindly Pissing Away Money Down R&D Rat Hole?

Let me start by saying that I am a physicist and have been involved with many of the leading U.S. research facilities over the years — Los Alamos National Laboratory, Sandia Laboratories, just to name two.  I also directed the Socrates Project under the Reagan administration.  So the quick knee-jerk reaction to the title that “I don’t understand research and development or the value of technology” holds no water at all.  Please don’t even try to argue this point.

 
Research and development (R&D) does not equate to a competitive advantage in the marketplace or on the military battlefield.  Knowledge for knowledge’s sake is a worthwhile pursuit.  Totally agree.  But it is conceptually flawed and detrimental to the objective — being competitive — when companies and governments use the need to increase economic and military might as justification for higher expenditures on R&D.  But yet this is the rapidly rising battle cry among the leading thinkers in Congress, the Pentagon, academia, think tanks, and the press — “Raise R&D funding levels, and America’s future will be secured.”  How so far from the truth.

 
One highly critical set of decision makers who suffers from this R&D is the key to competitiveness thinking is the leadership in the office of the Secretary of Defense.  But this was all avoidable.

 
In the late 1980s, I “assisted” in writing legislation that would force DoD out of this R&D is the key to competitiveness thinking.  As a member of the intelligence community, working directly with the U.S. Congress was considered a hanging offense.  But I was willing to risk it because I foresaw that DoD thinking in this manner would lead to the massive dilemma that DoD is now at a loss to address — the rise of China as a military threat and the almost total erasure of U.S technology leadership on which our military strength is based.

 
The legislation mandated that the Secretary of Defense develop and present a Department of Defense technology strategy to Congress every year.  It was a process that would force DoD out of its R&D is the key to competitiveness thinking.  The legislation passed, and for all intents and purposes, lies dormant and unexecuted to this day.

 
But let me go back to the beginning of the story — The Socrates Project.

 

For More: http://www.financialpolicycouncil.org/fpcnew/blogdetails.aspx?id=1106/When-Will-We-Stop-Blindly-Pissing-Away-Money-Down-the-R&D-Rat-Hole

 

Thank you.

Event Driven Investing – A Review of the State of the Art

One investment strategy we at Blackhawk Partners have been particularly been involved in over the last few years is “Event Driven Investing”.

 
Event-driven investing is an investing strategy that seeks to exploit pricing inefficiencies that may occur before or after a corporate event, such as a bankruptcy, merger, acquisition or spinoff.

 
To illustrate, consider what happens in the case of a potential acquisition. When a company signals its intent to buy another company, the stock price of the company to be acquired typically rises. However, it usually remains somewhere below the acquisition price—a discount that reflects the market’s uncertainty about whether the acquisition will truly occur.

 
That’s when we enter the picture. We will analyze the potential acquisition—looking at the reason for the acquisition, the terms of the acquisition and any regulatory issues (such as antitrust laws)—and determine the likelihood of the acquisition actually occurring. If it seems likely that the deal will close, we will purchase the stock of the company to be acquired, and sell it after the acquisition, when its price has risen to the acquisition price (or greater).

 

For More: http://ziadabdelnourblackhawk.com/event-driven-investing-a-review-of-the-state-of-the-art/

Thank you,

Financial Collapse or Recovery Ahead? Watch out closely the Saudi-Russian power play

I believe the American economy’s fate near term will be mainly determined by the Saudi-Russian power play in the making. If Saudi Arabia drifts out of America’s orbit, our ability to avoid financial collapse will be difficult if not impossible.

 
Low oil prices have indeed kept inflation today down, allowing the Fed to continue stalling on a normalization of U.S. interest rates. A rise in oil prices likely would result in increased inflation. This would remove a crucial public excuse, enabling the Fed to justify zero interest rates.

 
I have been arguing for many years now that the Fed will not normalize interest rates, other than a possible token 0.25 percent, until forced to do so by market forces. I think those market forces are already in play and will be more so with a Russian – Saudi close collaboration on oil prices.

 
How dependent are Russia and Saudi Arabia from each other?

 
It is clear to everyone today that Russia’s finances have been devastated by the drop in crude prices and by the U.S.-led NATO sanctions imposed for the Ukraine incursion. To maintain its viability, Russia must seek to push up the price of oil by any means at her disposal.

 

For More: http://ziadabdelnourfinance.com/financial-collapse-or-recovery-ahead-watch-out-closely-the-saudi-russian-power-play/

 

Thank you,

How Likely World War III?

Predicting what is most likely to cause World War III is, frankly, an impossibility. It could be sparked in 10 years or in 50 years and we have no certainty over what exactly could set everything off. That being said, I am of the belief that, eventually, the world will enter into a Third World War at some point.

Fundamentally, I think a world war would result from several simultaneous regional conflicts which somehow become linked — some combination of e.g. North Korea/South Korea, China vs. Taiwan, some kind of crisis in Burma, various Middle East wars, Africa, Mexico/etc.

The US used to be able to fight multiple parallel wars, but has demonstrated it can fight at best 1.5 wars — delay/hold on one while fighting the other. It’s possible that in an all out situation, the US could focus more on winning vs. casualties (civilian or own-forces), and maybe fight 1-2 simultaneous conflicts while holding down a few others, but that would be a stretch politically and logistically.

Almost no other countries maintain force projection capabilities (strategic airlift like C-17s and tankers, global sealift and sea control), so it’s highly likely the US would be the only combatant in each sphere of operation, augmented by regional or local allies (e.g. Australia for SEA conflicts; Japan in East Asia; France in North Africa). The UK, maybe Canada would make some effort to contribute in some randomly selected conflicts, but fundamentally the US would be doing the majority.

The turning point would be these multiple parallel conflicts going from de facto enemy alliance (splitting the resources of the US) to some kind of overtly coordinated strategy like the Axis in WW2. The scenario where the US is already tied down in e.g. Iraq, Afghanistan leaves the opportunity open for an adversary to test the limits of US response, making conflicts more likely.

The high peak destructiveness of modern warfare suggests that any conflicts will be short and very destructive, or long and insurgency-focused, but in the multiple-wars scenario, some could be “hot” at any given time, and others could be simmering.

A major shift since the end of the cold war has been a shift from purely proxy wars to direct involvement by the US, and the rise of non-state actors. In Korea and Vietnam, the US faced Russia/China proxies; in virtually every other conflict, one or both sides was a proxy for the US or USSR. This at least prevented conflicts from escalating to all-out nuclear war. Now, the US gets involved directly, but is fighting local enemies (Taliban, Al Qaeda, Iraq and then domestic insurgents, …).

The major factor tempering all of this is the global economy and economic interconnectedness. As long as trade is more beneficial than war, there is a strong bias toward resolving conflicts peacefully. If mercantilism/protectionism or economic collapse (perhaps precipitated through NBC terrorism, or some kind of plague) turns back the clock on globalization, the odds of a war increase dramatically.

At the end of the day, we don’t really need complex political conflict to get us into WWIII. A silly mistake might be all it takes.

Possible scenarios which could spark World War III

Scenario 1: Fanatics get hold of biological warfare and use it on other fanatics in a hate – revenge cycle and people start accusing each other and defending against their accusations until everyone takes sides

Scenario 2: We run out of water, everybody fights to control it

Scenario 3: Accidental launch of atom bombs trigger wipe out mode

Scenario 4: BRICS gets enough allies they decide the communist revolution needs to take over the low population rich US, taking down the world economy

Scenario 5: A group of super government sponsored hackers decide to take over the world and wreck it all by control of human, financial and natural resources

Time to wake up world and face reality… Check this out https://www.youtube.com/watch?v=HP7L8bw5QF4 and see for yourself

It is as explicit as can be

Share your thoughts….