M&A: a quick deal review

THIS POST is a bit different from my previous posts as I comment on and analyse a few recent M&A deals across various sectors that I've found interesting.

• June 11 2013: Google acquires Waze Inc., beating off competition from Facebook but now faces regulatory investigation.

Like a sporty kid who adds yet another trophy to their cabinet, Waze has become the latest high value internet brand to join the Google family. Waze, an Israeli real time traffic data service start-up has been acquired by Google for a cool $1.1 billion (which I think is slightly overvalued if you benchmark to something like Foursquare), beating off rival competition from Facebook. For the non-tech people among us, Waze's is an app that connects and allows its 47 million users to share information whilst on the road to alert other drivers of traffic congestion or road hazards. By doing so, Waze suggests alternative routes. But users need not to actively contribute as Waze picks up road conditions (driver speed, routes, location etc.) and alters i's maps to guide the whole Waze 'community', all in real time. There are also some social media functions on Waze, allowing users to track locations of Facebook friends or other colleagues. All-in-all, it is a GPS navigator, at the frontier of map app technology with extra frills. 

And what's in it for Google? Well, at the basic level, I would say that the acquisition of Waze and therefore its technology can help Google to enhance its already advanced mapping products with real traffic data time data. The acquisition means that Waze's services can be incorporated into Google Maps and perhaps other Google products, which do not currently have real time user traffic data. As well as this, Waze's social media functions can help Google make a stronger mark in this area; combining Google + functions into Waze is a plausible idea. Of course, Google is also an advertising company and Waze provides a huge stage for generating advertising revenues by attracting local businesses to market themselves on the map. Google's long term plans with Waze are unknown but for now, Google has stated that the two will be kept as separate units, amid regulator probing (see below). Given that consumers are increasingly adopting mobile devices and with the rise of 'phablets', location services/applications have become a primary area of focus for Google as well as other tech giants. 

Of course, the acquisition of Waze also gives Google a good wedge of the millions of consumers who already use Waze on iOS. More importantly for Google, the acquisition means that it can block competitors' use of Waze's data. For example, Facebook who is looking to develop its own mobile apps will have to use 3rd party data for any location based apps. To me, the value of this to Google is huge; maps form an integral component of the mobile ecosystem and mobile mapping heavily influences revenue generation by bringing in advertising and other social tools/apps. Google, with its huge cash reserves is playing a clever game by buying and blocking, rather than building upon Waze's technology to create its own real time mapping product. 

Waze's chief executive Noam Bardin noted that the firm explored many options (acquirers including Facebook and Apple) but found Google to be the winning choice. I would say that Google's weapon is likely to be cash, (who have a $50 billion spending power) whereas Facebook was offering stock. Terms of the transaction mean that $1.03 billion will be transferred in cash directly to Waze and its stockholders; an additional $100 million will be awarded to employees based on performance. These figures are something Facebook can probably not afford to afford. I think that Google is also a better fit for the company given that it has a large presence in Israel and therefore would not require Waze to relocate its R&D to California, as Facebook had wanted. 

This deal however is not all sweet for Google. In the last week of June, the US Federal Trade Commission (FTC) confirmed that the acquisition will be investigated to ascertain whether the deal will restrict consumer choice. It follows pressure from consumer groups that the deal should be blocked on antitrust grounds. Consumer Watchdog had raised the concern with the Department of Justice of Google becoming essentially a mapping and data monopoly.  The ruling will be made in due course but a block on the deal will be unlikely I feel since Waze and Google will remain as separate units (at least for now). The market share of Google Maps even merged with Waze is also unlikely to be astronomically high. 

All in all, both parties have got themselves a pretty good deal. Whatever Google's long term plans with Waze are, there is no doubt that into the near future, Google will add real time traffic technology onto its maps.

*****

• June 5 2013, Xerox buys LearnSomething Inc., expanding into health care.

Xerox, a company that is typically known for its photocopying machines, printers, publishing and other related equipment and consulting services, acquired LearnSomething at the beginning of the month for an undisclosed sum. LearnSomething, based in Florida, is an e-learning service provider of industry information, training and educational programs to food, drug and health care industries. I have not heard of LearnSomething previously and was surprised to find that they supply industry information and educational programs to 110,000 retail pharmacists in the US (equivalent to 85% of US retail pharmacists). The Learner Community e-learning platform is used to deliver regulatory compliance courses for food and drug retailers. 

Whilst the terms of the deal weren't disclosed, a few interesting points can still be made. 

Xerox in recent years have been working to restructure and re-brand itself as a customer focused services business providing services such as document management, bill processing and IT outsourcing in the backdrop of decreasing sales of its traditional products of copiers and printers. This deal effectively allows Xerox to build on its mark and broaden its services in the healthcare industry following the purchase of TMS Health in 2010. 

Given that 500 new over-the counter medications and health/beauty products are introduced every year, and with LearnSomething being a leading provider of educational, training and regulatory services, it seems to me that there will be no shortage of business for Xerox in this area. In turn, this will contribute to an easier re-structuring as Xerox turns away from its traditional business into a more lucrative asset-lite business of customer services. 

*****

• June 2013, Billabong troubles rumbles on. 

I am no surfer and have never lived near a surfing community but Billabong and other surfing brands like Quiksilver, Rip Curl and O'Neill managed to merge itself into the mass fashion market when I was a kid. Not only were these brands hugely popular, but they were seen as the coolest, trendiest and the most 'it' thing to have. Bus fashions of course fade and go, as do businesses. The whole Billabong trouble is something I've been following fairly closely over the past few month due to my acquaintance with the brand when I was younger. 

In developments this month, Billabong is now looking to sell its retail units separately after 2 private equity firms and Billabong did not reach an agreement to buy the company outright. The three units to sell are DaKine Hawaii Inc., RVCA, and West49, and this could be a means of raising enough capital to repay the company's $350 million syndicated debt facility. 

Billabong rejected a $903.5 million bid from TPG Capital Management in Feb 2012 but the value of the company has really plummeted: Billabong's shares closed at $0.90 on Jan. 11, when Altamont submitted a $556 million bid. By April, Billabong received a bid of $284 million from Sycamore.  

Hindsight is a wonderful thing but Billabong is not a lost cause. I feel that still at the end of the day, Billabong is a nice brand image for surfers and beachwear. What it needs to do is lower prices and appeal to the mass market once again especially for its beachwear and accessories to reverse its revenue situation since management changes and any strategic restructurings have not turned fortunes around so far. Of course, the flip side of this may be that Billabong will lose appeal to surfers as they wish sport more obscure brands to differentiate themselves from mass culture, enforcing their own sub-culture. However, since nothing else is working, and if Billabong is desperate, clever global marketing campaigns to attract the brand once again to non-surfers is the best path to boost revenue. 

Billabong: not so cool for school anymore 

JH

Britian's new banker

HELLO ALL, 

This post will be a fairly brief one as I am currently quite busy organising graduation stuff such as clothes and shoes (being a girl and all..), but I promise a more in-depth analysis on the next topic is coming very soon!

*****

So if you're living in Britain, and if you read any news online or newspaper, it will be impossible to miss that Britain and it's central bank is about to experience a significant change-over. After 10 years of holding the position as Governor of the Bank of England, Sir Mervyn King (now Lord King) will step down and Canadian Mark Carney, currently the Governor of the Bank of Canada, will officially replace Lord King as of next Monday. 

Carney's total annual benefits package, including salary, housing allowance and pension contribution is at a very generous £874,000, more than that of Meryvn King. This more than generous figure reflects George Osborne's efforts to woo a once reluctant Carney from Ottawa to London, and also that Carney may just be worth it. After all, no one get's called a "financial rock star" or the "George Clooney of central banking" for no reason. 

And I for one, believe that Carney can bring fresh thinking and perspectives at the Bank of England. This in turn, can lead Britain on to a stronger and long lasting path of growth and employment. For example: 

Carney was the governor of the Bank of Canada throughout the financial crisis. Canada, unlike most other industrialised nations and G7 countries, was weakly affected by the 2007-9 episodes in comparison. Its banks also did not need to seek government bail-outs. Carney has been described as "effective" and "helpful" during this period and his clear record of success, which not many central bankers can claim, is certainly reassuring to Britain - we can look forward to a replication of such success over the next 5 years. 

And given that Canadian banks are relatively conservative, risk-averse (only 5% of Canadian mortgages were sub-prime) and more willing to lend especially during the crisis due to a better managed banking system comparatively to US and UK counterparts (which is another reason Canada remained generally unaffected), Carney is also likely bring this conservative ethos or even related reforms into Britain's banking system. Carney's past as a banker (of Goldman Sachs) can help him to leverage any policies related to reigning in banks to banks' management - he effectively understands how such policies could be at a huge cost to banks' profit and capital structures, inevitability affecting contribution to national GDP. At the same time as a central banker, he can engage in a viewpoint for the good of the general economy. 

Further, there is some heavy hinting that Carney will adjust QE packages to revert to the 2% target inflation in order to achieve GDP growth. Could we finally see a interest rate increase? I believe so, but not immediately. Radical changes is likely to attract opposition from Carney's colleagues of the Bank. 

So while monetary policy, fiscal policy or other structural banking system changes won't be immediate, he has already brought in 'new thinking'  and a new tone of communication by appointing key staff. Those among several include a female banker - Charlotte Hogg - for COO and Jeremy Harrison, Carney's current press spokesperson from the Bank of Canada. 

And of course, Carney's new job is no easy job as he himself has recognised. I can think of a handful of challenges and big 'to do' things on his list:

• Monetary policy - more QE with the £375 billion available? Or raise interest rate? Or both?
• Supporting a path of higher and longer lasting GDP growth. How to effectively do so?
• What to do about a ~2.7% inflation rate, or a ~7.8% unemployment rate? 
• How to reform the banking system, beyond incoming regulatory changes such as Basel III or Dodd-Frank?
• Assessing effectiveness and managing the newly formed PRA.
• Undoubtedly playing a role in the near-future privatisation of RBS and LBG.
• How to reform the Bank of England itself? Only 35%-40% of British households are satisfied with their central bank at present. 

Obama was hailed very much as the 'messiah' of political change probably after the Bush years were so dark and also for being the first black president. Carney has certainly been portrayed as a face of change, but to a much less extent than Obama. The next 5 years under Carney will be different and possibly exciting. How different it will be and whether Carney will really deliver remains to be seen. I don't expect radical changes over the next few months but his style will bring in a new culture at the Bank of England to start with. We can only look forward to the August MPC meeting - the first under Carney - and also Carney's first quarterly inflation report. 

The 2Cs that lie ahead for Mark Carney 

JH

President Xi's 'Chinese dream'

I RECALL that the front page of 'The Economist' in early May (last month) was a rather amusing one. It was a clever illustration of Chinese President Xi Jinping, as an imperial Chinese emperor sporting some 'modernised' golden robes, a glass of champagne and a party popper that is said to have deeply offended the Communist Party: 

©The Economist

The headline was even more amusing: "Let's party like its 1793", alluding to more glorious times for China, where the country's GDP represented a third of the world's total (now represents 11%; represented 5% during mid-20th century). This triumph was not long lasting. China underwent 'the century of humiliation' that involved foreign invasion, occupation and immense suffering to Chinese citizens in their homeland, then an interim of civil war between the Communists and Nationalists and finally Maoism, where economic policies under Mao failed spectacularly - abject poverty was prevalent and tens of millions died of starvation as a result. But China, now the world's second largest economy after the USA, managed to turn itself around in 1978 beginning its path to modern economic glory under Deng. Deng's motto was in fact, "to get rich is glorious". 

This economic progress has seen hundreds of millions of the peasant class lift themselves out of poverty and another hundreds of thousands becoming a wealthy middle class citizen. China's GDP boomed and expanded by 7-15% per annum since Deng's 'open door policies' began. China's is continuing to grow at around 6-7% despite the challenges of the current global macroeconomics. Nevertheless, all this is not quite enough for Xi.

The Chinese Dream 

(Political) slogans are big in China. Xi, who took office in March 2013 recently launched his slogan as the 'Chinese dream'. And no doubt even in the West, we will be hearing these two words over and over again as Xi progresses deeper into his ten year rule. Xi's slogan is a play on the 'American dream'. But unlike the American dream (that anything is possible with hard work), the definition of the Chinese dream is more blurred partly because of the overt political spin: 

"national rejuvenation, improvement of people’s livelihoods, prosperity, construction of a better society and military strengthening...that young people should dare to dream, work assiduously to fulfill the dreams and contribute to the revitalization of the nation...the Chinese dream is about Chinese prosperity, collective effort, socialism and national glory"

To me, at its basic meaning, the Chinese dream is about reverting and rejuvenating the country back to its former 1793 glory. It is understandable that in a country with a proud 5000 year civilization and one with a century of humiliation and pain, Xi (and also undoubtedly Chinese people) wants the country to rise strong again. Thus, the Chinese dream emphasises collective efforts and uniting Chinese citizens to achieve so. 

With effective propaganda and in a country where slogans matter, it is little surprise to me that the Chinese dream notion is big in China already. Firstly, Xi's doctrine of the Chinese dream and even the concept of 'dreams' has  hardly been out of national newspapers and the general media. 'Dream walls' have appeared in universities and public spaces for people to share their dreams and hopes for the future. Research into the 'Chinese dream' by the Chinese Academy of Social Sciences is due to be undertaken and believe it or not, the slogan has even inspired a chart topping song, entitled 'Chinese dream'. These effects are probably a passing fad but I for one, am concerned about where this dream can take China. 


Dreams fulfilled or nightmares created? 

The launching of the Chinese dream took place with an exhibition entitled the 'Road to Revival' at the National Museum next to Tiananmen Square, Beijing. A display of the oppression of Chinese people under colonial powers in the 19th-20th century and the (continued) restoration of China under communism in 1949, the exhibition is designed to evoke strong senses of nationalism. There is nothing wrong with nationalism and also nothing wrong with Chinese nationalism but given that both this centrepiece launch and that the Chinese dream itself is founded on nationalist principles, there is a real danger for China of losing sight of solving internal problems and instead focusing all efforts on battling for world domination. 

Further, whereas the American dream focuses on the individual and achieving individual wealth, the Chinese dream is focused on achieving national wealth thereby aggregating over individuals. The trouble with this is that the poorest or those citizens who are not benefiting from growth and national wealth, are not helped, much like the present situation.  

With the slowing economy, widespread and (increasingly reported corruption with the likes of Weibo), graduate unemployment, food safety scandals, pollution (a solution to these are far more likely to be the actual dreams of Chinese people), it seems like this slogan launch is plausibly an effort for Xi to win over some public affection and popularity for the time being. Xi, known for being straight talking and a 'man of the people', should have taken this opportunity to address directly and in plain language the real dreams and hopes of many Chinese people as individuals and not collectively as a nation. Doing so could leave Xi the same level of legacy akin to that of Deng. 

In the meantime, despite all the fuss, there isn't that much detail or policy unveiling on how Xi will go ahead to fulfill this Chinese dream. Apparently it will be fulfilled by the mid-21st century. It is not clear whether this means China becoming the world's largest economy or becoming a nation with the most advanced army, or even if Chinese Mandarin will become the new international language. Whether Xi can do so remains another interesting question. If Xi can successfully do so, the Communist Party would enjoy its cling on power for longer. But this Chinese dream, given it has no sincere objectives to benefit the individual, and that Chinese people are growing increasingly dissatisfied with pollution, corruption, social injustice and food safety scandals, won't this Chinese dream spark a wave of eventual backlash against the party who should be given credit to make China the way it is today? 

Finally, the Chinese dream very much also has a goal of revival to the past, to what China sees as its rightful position on the international stage. The Chinese dream is flawed because it should be a consideration of the future and the new challenges present and ahead in China's bid to become the greatest nation of the 21st and into 22nd century...and beyond?


JH

The 2010s for Japan: comeback like Sinatra or lost decade round two?

The future: the volatile road ahead for the world's 3rd largest economy.

JAPAN, LIKE a phoenix rising from the ashes, ascended from its knees after the Second World War into one of the world's major economic superpowers and industrialized nations in a generation. By the mid 1970s - early 1980s, Japan had effectively 'caught up' with the USA and Europe technologically and economically, especially in its key export sectors of ICT, automobiles, consumer electronics and other heavy industry. Its conglomerates posed as a major threat and competitor to Western counterparts. But unlike its Asian neighbours of South Korea or Taiwan, Japan never fully managed to shake off the detriment of the bursting of the bubble in the early 1990s, the Asian financial crisis of 1997 and the collapse of semiconductor prices at the end of the 20th century. The fact that many Japanese firms are particularly dependent on the domestic Japanese market (such as firms in the telecommunications and semiconductor sectors) also exacerbates the problem for them. 

From an economics perspective, the central bank  - Bank of Japan  -  was partially to blame. Interest rates still remained high during the late 1990s and Bank of Japan's failure to lower the interest rate fast enough resulted in a liquidity trap - a cause of stagnation. In an attempt to stimulate the economy, Japan (unsuccessfully) during this period of time ran into large budget deficits on public works projects. Japan then suffered several episodes of deflation into the new millennium; the success of Bank of Japan's quantitative easing program which began in 2005 only proved to be short lived as far as GDP growth figures of the period show.

The 1990s, what was in fact an American decade, was the lost decade to Japan. The country, which exhibited miracle growth was now in a state of crisis and decline. 

Fast forward to 2013, little has got better for Japan overall. 

This week, Japan's economic woes has been hitting the financial press headlines again. At the beginning of the week, the Bank of Japan after a 2 day meeting announced that it will implement no new quantitative easing, other monetary policy tactics or offer bond buys. Disappointed and left volatile, the Nikkei fell 6.5% entering a bear market territory while global markets also responded negatively to the news; markets were further not convinced by Bank of Japan's governor Kuroda's insistence that growth is coming and that no imminent tool is needed as a result. The yen rose nearly 2% against the dollar. It seems to me that Japan's lost decade is far from over. 

Could 'Abenomics' give Japan a comeback like Sinatra? 

PM Shinzo Abe, who came into power last year, is an advocate of going 'all out' to stimulate economic growth, private investment and battle the Japanese economic plague that is deflation.  His vision, consisting of the 3 arrows approach -  dubbed as 'Abenomics' -  involves the Bank of Japan playing more of a monetary policy role. It is also entails more fiscal policy moves including heavy government spending and the Bank of Japan engaging in aggressive  asset buying. The third arrow involves structural reforms, seen as the foundation to Japan's comeback. Abe believes that the mobilisation of an aggressive monetary policy and fiscal policy will stimulate growth, triggering a round of private investment into plants and people. In turn, expectations of growth and prices will start to rise, successfully combating inflation. 

Since a landslide victory in November 2012 that resulted in Abe becoming Japan's 6th leader in 7 years, Abe has been following through with what was on his manifesto. He forced through a 10 trillion Yen increase in government spending on infrastructure  healthcare, education and other spending- this is believed to boost Japan's growth by 2%.  This week, Japan's cabinet is voting on the '3rd arrow policies' under 'Abenomics' involving income raises, attracting foreign investment and a reduction on investment tax to help companies boost their capital spending. 

But, the Bank of Japan's actions, or rather, lack of actions this week does not concur with 'Abenomics', casting some doubt on whether 'Abenomics' is actually plausible in reality. 

Of course, it is too early to judge the long term effects of 'Abenomics' and whether any growth (such as the 1% growth of Q1 2013) is here to stay. 

Looking holistically, the Nikkei has gained more than 70% since mid-November and the Yen lowered by 22% to the dollar and the euro. Also in this time period, the difference in yields between 5-year Japanese government bonds and their inflation-indexed equivalents has increased by over 1 percentage point. This could be indication that Japan is on an overall path to growth and inflation, leading to a rebound in consumer spending, hiring and other private investment.  Further, earnings predictions for Japanese firms are higher than compared to 6 months ago, but only based on the belief that Japan's GDP figures will continue some form of growth. 

For the Japanese economy, inflation is good news. There has been a surge of inflation in recent month, but this is actually driven wholly by a planned increase in consumption taxes that will begin in 2014. Similarly, data from the Tokyo Stock Exchange shows that the Japanese have been selling shares to foreigners for months. For me, this would say that any inflation/price increases is due to foreign demand and not changes in the the portfolio allocations of Japanese savers. 

Another point to suggest that there has been no real economic progress (since Abe's election) is that Japanese households and firms, who own more than $6.7 trillion worth of non-Japanese assets (37% are bond investments), are not moving their money out of these foreign assets into domestic ones. They would surely do so if Japanese savers genuinely believed that Japan's prospects had improved. A lack of investment by foreign investors in Japanese assets is also a sign that Kuroda and Abe are not convincing many. 

To me, Abenomics has not made a modest reversal, but a minute one. This is because what is needed is more fundamental structural changes to the economy that accompanies aggressive monetary and fiscal tactics to pull Japan out of a lost decade, such as:

•  Public sector debt. Japan’s ratio of government debt to GDP is around 2.28 (and increasing), the highest out of all the industrialised nations by far. To put into perspective, it is almost double that of Greece and Italy. Further, the combined costs of interest on debt and welfare are equal to total government tax revenue. Reducing its public debt can spark some consumer and business confidence. Raising tax is not a good option but Abe believes that economic growth as a result of 'Abenomics' can make public debt appear more manageable. Impression management is no good - it is the doing that counts. 

• Demographics. Japan's working age population has shrunk every year since 1995. Because working age people are the biggest spenders, an ageing population has inevitably reduced overall demand in the economy. A vicious but not virtuous cycle appears - the lower retail sales lead to businesses engaging in cost cutting (common in  Japanese firms) which lead to lower wages and lower prices. Japan can begin by boosting the work force such as creating incentives for more women to re-enter work after employment, encouraging more marriage and couples to have more children or relaxing its immigration policy; immigrants can also change expectations of growth and inflation.

• Deflation mindset. As well as the above, Abe has the challenge of convincing inflation expectations beyond financial markets and into households and firms; many agree that there is a deflation mindset in Japanese households and businesses who all hoard cash and other assets rather than spend.

Japan may not have a comeback like Sinatra in this decade, nor perhaps the next. But there is a sense of optimism about Abenomics, and this, coupled with some fundamental structural changes, Japan can steer itself back on to the road to growth. This needs political will. In the mean time however, Japan is still trapped in a lost decade. 

JH

University and I

JUST IN case you don't like anything to do with the economy or markets, this post is for you. Two of my friends' younger sisters are starting university this autumn and wanted some tips on university and on how to be a successful student from someone who's been there and done that (!)

Since I am a blogging newbie and the novelty of Blogger hasn't quite worn off, I will blog my tips to them and to you. Hopefully, from my tips below, this can spark some inspiration and ideas in your exciting forthcoming student life!

Freshers' week

I found Freshers' Week a great time to meet new friends, get to know your flatmates, explore societies/sports/other clubs and also for getting freebies (mugs, stationery, key rings, canvas bags etc) from fairs. Looking back,  I never really found a good use for the free stash other than to brighten up my room but I still enjoyed having and hoarding! 

I would also say spend each day constructively. For example, you should: 

• Really familiarise yourself with you library (very important place!!) as you will be here a lot over the course of your studies. Academic books are expensive costing around £35-50 each so think twice about buying books when you have a well stocked library! I mean...do you really need to spend over £300+ in one go on textbooks? If you don't get your hands the book you need straight away because somebody else has just been that bit faster than you, consider requesting them from other borrowers via librarian help-desks. I bought 3 books at the beginning of university costing about £45 each. I didn't end up using them very much and later discovered that there were numerous copies in the library, for example!

• If you are lucky enough to avoid the most dangerous and long-lasting disease known at university (Freshers' flu), still register with a university GP.  I would especially recommended to those unfortunate enough to contract this illness to visit a doctor; it saves yourself from embarrassing coughing fits during lectures that also keep your flatmates awake at night (speaking from personal experience). 

• Begin to get to know your city, local supermarkets, bookstores and attractions. 

• Get a supermarket loyalty card if you haven't got your own already for pretty good coupons and money-off vouchers. 

• Many people don't bring really important things like laundry basket, enough clothes hangers, cooking oil, kitchen knife, some food you can cook with on the first day(!) or a desk lamp.

• A general tip from me is to take advantage of the fact that you are now a student by always asking for student discounts in shops. You'll be surprised to know how many shops/ eateries offer 10-20% off for students! 

Lectures and Lecturers 

Lectures aren't compulsory but you should go to them, even the 9AMs. If you are too lazy to go - ergo, not valid excuse! - then you should make an extra effort to go to them. If you really can't, I would advise you to learn the lecture yourself in good time, and follow up with your lecturer to clarify any misunderstandings. Its not a good habit to let your problems build up!

Lecturers are mostly nice, happy, helpful and helpful & happy to help. They are easily accessible by email or by designated Office Hours. Make use of them to your needs. Before handing in the essays you've spent days toiling over, you could also to ask them what makes a good essay (or an exam answer) since they're the one marking your work!

Readings 

For subjects with huge reading lists such as the non-maths-y and science-y ones...read, read, read, read round your subject to be a book-worm or a journal-worm. This just means reading some of the prescribed reading's bibliography and so on. Especially when writing essays, bibliographies can be a goldmine of knowledge and ideas. I have actually exclaimed "GOLDMINE!!!" in a busy computer lab once, when I got overly excited at the treasure of relevant journal articles I found.  Embarrassing? A little. Needless? Very. 
Undertaking extra readings to make use of their ideas and forming your opinions on them in your work is what distinguishes YOU from a student gaining a mid 2.1 grade or lower.

Be your own teacher 

University is different from school since there is far more teaching yourself at university and learning on your own, so make sure you bear this in mind early. 

Revision and exams 

Revision times compared to school revision times are tough. Enough said. For me, these are the worst and the most dreaded time of a semester. But really, with hard work, the results (no pun intended) can be thoroughly rewarding. I feel that university revision times are difficult as there is little guidance from lecturers about the specifics of what you need to know and also due to the volume of material/readings for each module. At many universities, there is not a hugely long study break so plan you revision carefully.

I am not advocating this risky tactic but all-nighters the day before the exam work really well for me. Weirdly, a diet of water and plain cream crackers keep me going all through the night and into the exam. Even more weird, I find this time to be the most effective for re-capping. 

Last words 

University is a wonderful life and learning experience - getting a good grade obviously requires effort and hard work from the start. But, university is more about study study study. Make use of your careers service from day 1 and begin to career plan and research. A good thing is also to be proactive extra-curricular wise. 

The bottom line, I would say, is don't spend the next 3/4 years at the library, and don't spend the next 3/4 years in the pub! 

Last last words

I didn't want to finish this post without a spot of economics and markets. Here's two good videos that will assist and entertain the economists among you:  

Last last last words

I bet you are clicking through related videos on YouTube now. From my personal experience, such procrastination  at university is a terrible terrible thing. Don't go down that route!

JH

Some thoughts on microfinance

MICROFINANCE IS the umbrella term encompassing microcredit, microinsurance, microsavings, remittances and other financial services for the poor in primarily developing regions of  South Asia, Latin America, South East Asia and Africa. 

Microfinance is different from conventional consumer banking products as the underlying aim is one of financial inclusion, targeting the financially undeserved.  Microfinance is provided by ‘microfinance insitituions’ (MFIs), credit unions and through rural/village banks.

Take microcredit (often used interchangeably with 'microfinance' and confused together). Microcredit is different from plain money-lending as it targets the poor (who are traditionally excluded from formal financial markets due to high transaction costs from banks’ perspective) and female clients (who have difficulties accessing loans in often patriarchal societies). Many MFIs require no collateral, lends in small doses -between $100-$1000  - and often has a social function; there is the aim of lending to micro-entrepreneurs, promoting literacy, children’s health and education it’s among clients.

Microcredit, pioneered in 1978 by Muhammad Yunnus (founder of the Grameen Bank) in Bangladesh, typically lends using a group lending mechanism so that social assets and local knowledge improves screening, enforcement and monitoring. In reality, loan default still occurs under group lending and some empirical studies have proved default under group lending to be just as common as individual lending. Some MFIs such as Bank Raykat Indonesia, who serve the ‘richer of the poor’ have reverted to using an individual based lending serves as a testament that group lending is not all designed to minimise what it is supposed to minimise. Individual lending is also less cumbersome and can allow wealthier (but still poor) clients to access more credit without the burden of their poorer counterparts who are more likely to default.

As microcredit targets entreprenuers, microcredit at face value clearly encourages self-initiative and self-sufficiency, potentially and hopefully for the long term.  It is no surprise that for some, microcredit is the savior of all the developing world’s problems and poverty eradicator.

For me, the impact of microcredit and also microfinance is more arguable. Like everything in this world, there is no such thing as ‘perfect’ and microcredit is not without it’s problems, some more serious and others. Just off hand, I can think of several: 

• Microcredit is focussed on lending to entrepreneurs but often, there is no strict enforcement by loan officers to spend loans for the purpose of building up their business. Effectively, this reduces the impact of promoting long term self-initiative.
  
  
• The vast majority of smaller MFIs are not financially sustainable – they rely on donors, government grants and ‘soft loans’ rather than securer customer deposits.
  
  
• No doubt have MFIs been affected by global macroeconomic difficulties. The financial crisis of 2008 reduced lending to MFIs from western commercial and investment banks. For such banks, regulatory changes such as Basel III and its national equivalents can also increase the cost of  holding some loan portfolios (such as in terms of regulatory capital) as lending to an emerging market is more risky. This effectively endangers the funding of MFIs.
  
  
• Over- indebtness: A lack of stringent regulation on MFIs has caused a MFI explosion in many developing countries. Individuals therefore have the chance to take on several loans by several MFIs resulting in own over-indebtness. The direct result is default and the tragic human cost can be exemplified by the Andhra Pradesh crisis.
  
  
• Last but not least, microcredit to some has been crowned as the solver of world poverty. The logic behind this is understandable; giving the poorest access to credit for starting a micro-business provides them with the initial capital.  Earnings from their micro-business provides income that can be used initially for basic everyday essentials. Further lending gives the client the scope to expand on the size of business and grow self-initiative/dependency and so on. Development economists through randomised control trials have proved microcredit to reduce poverty in a household and also have shown that there are positive spillover villiage effects compared to households/villages not in receipt of microloans.
  
  
  The big question is that, if microcredit can make households wealthier, why is aggregate is the take up so small at only ~5% of the world’s poor?  The main answer to this question lies in the fact that what is desired by the poor is an actually more stable and long term borrowing instrument(s) as well as opportunities to save, transfer remittance funds  and also to insure against the inherently risky nature of developing nations.
  
  
  It is important to remember that microcredit is NOT the sole champion in eradicating poverty. It is one tool, but other we need to mobilise microsavings and microinsurance and remittance services to help the ‘microfinance movement’ go down in history as something that helped to fight one of the world’s most prolific humanitarian problems – poverty.

Microcredit is not the golden bullet, but I wonder still, without it, wouldn’t the lives of poor households in developing countries be even more bleak?

JH