Your Mortgage, Their Business

  1. You, the borrower, work with a broker or directly with a lender to get a home-purchase loan or a refinancing.
    • Get: money needed for a house purchase or cash from refinancing.
    • If the loan goes bad: house can be repossessed
  2. Broker: Finds a lender who can close the loan. They usually have a working arrangement with multiple lenders.
    • Get: Takes fees for doing the preliminary sales and paperwork.
    • If the loan goes bad: May get cut from lender’s approved broker list.
  3. Lender: Often funds loan via ‘warehouse’ line of credit from investment bank. Then sells loan to investment bank.
    • Get: Take up-front fees for making the loan
    • If the loan goes bad: Can be forced to take back loan if there’s an early default or documentation is questionable.
  4. Investment Bank: Package the loans into a mortgage-backed bond deal, often known as a securitization. Sells the securitization sorted by risk to investors. Lower-rated slices take the first defaults when mortgages go bad, but offer higher returns.
    • Get: Collects fees for packaging the loans into bond deal
    • If the loan goes bad: May push back loan to lender, or be forced to eat any loss.
  5. Investors: Choose what to buy based on their appetites for risk and reward.
    • Get: Earn intesests on the bonds and absorb any gain or loss in price of the bond.
    • If the loan goes bad: May have legal recourse against bank if they can show the quality of the loan or loan documentation was misrepresented.
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Castes in India –front page

Rooted in Hinduism, India’s complex caste system includes 3000 castes and 25000 sub-castes, all traditionally related to occupation. They fall under four basic “varnas” or categories:

  • BRAHMINS: priests, scholars and teachers. Famous members include: Jawaharlal Nehru, first president of independent India; Rahul Dravid, captain of India’s cricket team.
  • KSHATRIYAS: warriors and rules. Famous members include: Vasundhara Raje Scindia, chief minister of the India state of Rajasthan.
  • VAISHYAS: traders. Famous members include:Lakshmi Mittal, chief executive of Arcelor Mittal steel company; Mohandas Gandhi, Independence leader, the “father of the nation”.
  • SUDRAS: manual workers and servants
  • and the DALITS: formly known as ‘Untouchables,’ Dalits perform unpleasant jobs like cleaning or leather tanning. Famous members include: KR Narayanan, former president of India; BR Ambedkar, political leader and chief architect of the India constitution.

DDT controversy — Opinion

I have never imaged people are still debating about DDT, something disappeared for about 20 years as I remember. Well, I don’t know malaria is still killing thousands of people in poor countries, either.

DDT is the first modern pesticide and was used with great effect to combat mosquitoes spreading malaria, typhus, and other insect-borne human diseases after the discovery in early World War II. With the help of DDT, US and Europe eradicted malaria by 1960. In 1962, American biologist and environmentalist Rachel Carson published Silent Spring, which questioned DDT for the environmental impacts and human health concerns. US banned DDT usage in 1972 after the large public outcry stirred by the book. Many countries around the world followed the ban.

DDT is still the single most effective pesticide to fight malaria, the mosquito-borne disease. And it’s one of the cheapest, too. In 1960s, Uganda tested DDT in the Kanungu district and reduced malaria by 98%. But the poor country lacked the resources and public health infrastructure to sustain the program. Now, with the help from foreign organizations, Uganda resumed the DDT spraying operation in households and reduced the malaria parasite dropped from 30% to 3% of local populations in the test regions.

The author is complaining that international environmentalists are undermining Uganda’s anti-malaria effect by discouraging G-8 leaders from supporting DDT usage.

Update: According to National Geographic Magazine, malaria is the leading disease killing human being, more than HIV-related disease and cancer. In Africa, 3000 people die everyday from malaria, primarily pregnant mothers and children under five.

Wal-Mart’s A Series of Unfortunate Events

Five years ago, Businessweek’s cover story asked “Is Wal-Mart Too Powerful?” The answer seemed to be yes then. Now, Businessweek’s cover tells us “Wal-Mart’s Midlife Crisis”. Wal-Mart lost its winning momentum. In 2006 its U.S. division earned only a 1.9% gain in same-store sales, the worst performance ever. And there’s no sign of recovery yet for this year.

Wal-mart tried to learn from Target’s stragety and cater to the middle class shoppers. Target’s clothing department is especially successful, which gives customers brand name quality and design at relatively low prices. Wal-Mart rolled out its own design label and renovated the clothing section for better shopping experiences. However, the practice was not successful as expected. Perhaps, the change didn’t get much middle class shoppers they wanted but at the same time, lost the low income groups, who have been Wal-Mart’s major target.

Other companies are learning from Wal-Mart and differentiating from it. American major grocers, like Kroger, Safeway, Supervalu and etc were able to find the niche markets Wal-Mart couldn’t cover. Their price is still higher than Wal-Mart, but the products are fresher and more exotic. You may find walnut oil on Kroger’s shelf but not in Wal-Mart. Some shoppers tend to stock a week’s groceries in one shopping trip, while other shoppers may just walk into the store shopping for today’s dinner. Safeway added a lot more fresh but ready-to-serve products. Wal-Mart is still the indisputable champ in groceries, but it’s no longer invincible.

Meanwhile, Wal-Mart’s “everyday low prices” and the smooth logistics behind stopped working. The price differences between Wal-Mart and other retailers are shrinking. A recent survey found that Kroger’s prices were 7.5% higher on average than Wal-Mart’s, compared with 20% to 25% five years ago. Wal-Mart’s executive decision to lower its product stocking may lead shoppers find their favorites out of stock so often in Wal-Mart and switch to other stores.

Other factors make Wal-Mart situation even worse. For example, high gas price hits Wal-Mart’s loyal, low income shoppers harder than higher income dollars other stores aim for.

Still, Wal-Mart is a solid company. After five decades of fast growing, it finally slowed down, but not stopped.

Private Banking in China — C1

With the booming economy, mainland China now has about 320000 “super-rich”, those (defined by Merrill Lynch) who have at least $1 million of financial assets. Among them, 4540 people have a net worth of $30 million, estimated by Merrill. According the same report, the average net worth of the group of wealthy is about $5 million, a number only lags behind Hong Kong in the Asia-Pacific region. Chinese and foreign banks are now chasing this rising class of wealthy for private banking service. CitiGroup Inc.’s Citibank(China) Co. and Bank of China now offer separate programs to cater to China’s upper crust, providing them wealth management service with their own bankers. Citibank(China), with its branches in Shanghai and Beijing, targets clients with a net worth of at least $10 million. BOC’s privating backing threshold is $1 million. Now BOC says it has about 100 to 200 private banking clients.

For now, one of the urgent issue for BOC is the lack of talents and experiences in private banking. BOC is now partnered with Royal Bank of Scotland to get financial planning expertise and management advice. The partnership may become a joint venture once they get regulatory approval, probably in next 12 or 18 months. BOC also views its newly opened wealth management service as a training ground for its private bankers.

The Art of (Selling) Rice Cookers — frontpage

Toshiba’s latest “Vacuum Pressure Cooker” is not that sort rice cooker you commonly see in Wal-Mart. The cooker features a powerful vacuum pump the suck air out of the cooker to cause the rice to absorb water more quickly while it soaks. The vacuum can also help preserving flavor while keeping rice warm in the pot for as long as 32 hours. The steel case holds high pressure to make it water in the cooker to boil at a higher temperature, thus making for fatter, shinier and sweeter grains of rice. The cooker  heating vessel is coated with silver and diamond dust to distribute heat evenly, so every grain of rice has the same texture.

Surprised by all these fancy technologies on a small rice cooker? Hold until you see the price tag. $830.

Toshiba sold 70000 units of the rice cooker in Japan since its launch in last September, making it the best-seller in the ultra high-end  category. Toshiba is not alone in the market. The first upscale rice cooker is from Mitsubishi Electric Corp, which has an inner cooking bowl made of graphite for better and even heat up. The bowl is so difficult to make that the company can only make 50 a day.  The company sold 20000 of this pioneering product since March 2006 at the price of $1000.  The $600 rice cooker from Matsushita Electric Industrial Co. promises to give rice 2.4 times as much oligosaccharide — a kind of sugar — as its previous model. Zojirushi Corp.’s rice cooker is able to adjust the cooking process automatically according to the seasonal differences in air and water temperature, thanks to the built-in  artificial-intelligence chips.

All these super expensive rice cookes are only available in Japanese market because they believe only Japanese, who are obsessed with plain white rice will appreciate the differences in taste and pay such a high premium for a rice cooker. It’s pretty hard for me imagine the taste of rice from Vacuum Pressure Cooker is 83 times better than from my $10 one.