The Black Swan Ideas Gaining Momentum

After writing yesterday's post" First Nail In the Coffin.......", here is another article suggesting the death of traditional models of risk management, measuring the economy. I am very much looking forward to a whole new world of ideas.

"WHAT'S WRONG WITH MARKET ECONOMICS AND GDP?" by HAZEL HENDERSON: 24/04/2008

(MaximsNews Network)

UNITED NATIONS - / MaximsNews Network / 24 April 2008 -- The credibility of the economics profession and its macroeconomic and risk models has been shattered by the Wall Street-led financial meltdown. Many analysts see this worst crisis since World War II as the beginning of the end of market fundamentalism as the driver of globalization. Coming into focus is also the fact that the USA is no longer the world’s lone super power. Military force is giving way to the new weapons of choice in today’s geopolitics: currency and cyber-attacks.

Even US Treasury Secretary Henry Paulson (former head of one of the over-leveraged Wall Street investment banks – Goldman Sachs) now calls for regulation of these reckless, risk-taking, private banks. Former options-trader/mathematician Nassim Nicholas Taleb predicted their downfall in The Black Swan (2007), as did former hedge fund "quant" Richard Bookstaber in A Demon of Our Own Design (2007). Ivory tower mathematicians lured to Wall Street’s big bucks simply didn't understand the real behavior of markets – as was demonstrated back in 1998 when their faulty models led to the collapse of hedge fund Long-Term Capital Management and its bail-out orchestrated by the US Federal Reserve.

The Nobel Prize Committee shares some blame by its recognition of the faulty options pricing model, Black-Scholes Merton, with its Bank of Sweden Prize in 1993. In recent editorials, Taleb has called on the Nobel Committee to withdraw this prize while Peter Nobel himself says that the Bank of Sweden should de-link its prize in economics from the Nobels. As I have noted in my previous editorials for IPS, many other scientists agree, since economics is not a science but a profession.

Meanwhile, the long-simmering critiques of money-based GDP/GNP national accounts are coming to a head. These popular critiques, including my own, were summarized by the late Senator Robert F. Kennedy in 1968 in a speech delivered to the University of Kansas. Even GDP's creator, Simon Kuznets, worried about using GDP as an overall indicator of national progress and well-being, saying that “the welfare of a nation can scarcely be informed from a measure of national income.”

The cracks in GDP as a scorecard of national progress began appearing at the UN Earth Summit in Rio de Janeiro in 1992, followed by the European Parliament's conference in 1995 on "Taking Nature Into Account." In November 2007, the European Parliament again took up the issue at the urging of the European Commission (www.beyond-gdp.eu). Its “Beyond GDP” debate was keynoted by EU President José Manuel Barroso of Portugal before almost 700 parliamentarians and statisticians of sustainability and quality of life. Statisticians themselves also emphasized the need for better measures of national progress, with over 13,000 attending their conference in Istanbul, convened by the OECD (Organization for Economic Co-operation and Development) in June 2007. And, EU Commissioner of Economic Policy Joaquín Almunia noted that GDP “cannot distinguish between economic activities that have a negative or positive impact on wellbeing. In fact, war and natural disasters may register as an increase in GDP.”

By March 2008, the US Senate picked up these critical debates and the plethora of new, broader indicators of health, education and environment. The Senate's Committee on Commerce held its own hearing on "Rethinking GDP as a Measure of National Strength" – a low-key academic exploration on how all of these new measures of overall quality could be used to correct all the now-recognized errors in GDP that economic textbooks perpetuate.

In its March 13, 2008 issue, even The Economist weighed in with "Grossly Distorted Picture," criticizing the widespread focus on GDP-growth. This "growth fetish" has long been the subject of countless critiques by environmentalists and even a few economists. To see this journal of economic and free-trade orthodoxy now also criticizing GDP-growth signals a tipping point in this long debate. Echoing so many earlier critiques, The Economist pointed out that a better measure than rates of GDP-growth would be to compare GDP per head – a much more tangible sign of progress that takes into account the growth of population. For example, Japan's GDP growth has been about 2.1% over the past five years, while GDP in the USA has grown 2.9%.

Yet, comparing the average growth of income per capita between the two countries, a different story emerges: the USA saw only a 1.9% increase while Japanese citizens’ income grew by 2.1%. This was among the reasons I have urged Japan to shift from GDP growth to quality-of-life indicators (Nikkei Ecology, August 2000). I pointed out that Japan had matured beyond the need for more material growth and could now concentrate on higher-level services and improving quality of life. Japan’s average income-per-head also was greater because Japan's population is shrinking while the US population is rising. India has enjoyed rapid GDP-growth, but its population has grown much faster, leaving more people to share that income.

The Economist is correct that the growth of average income per capita is the more realistic indicator. But, they omit another problem with these GDP measures: averaging per capita of growth in incomes masks how that income is distributed. Averaging incomes across the whole population could mean that a country might have a few billionaires while most of its citizens live in poverty.

Let’s agree that GDP has outlived its usefulness (started as a World War II measure of war production). There are now many new, better indicators, from the Canadian Index of Wellbeing (CIW), the UN's Human Development Index (HDI), the World Bank’s Wealth Index to Genuine Progress Index (GPI), Bhutan's Gross National Happiness (GNH) to the Calvert-Henderson Quality of Life Indicators I created with the Calvert Group of socially responsible mutual funds (the only private-sector effort so far, updated regularly at www.calvert-henderson.com).

Once again, the public is ahead of the experts and politicians on this issue. A GlobeScan survey in 10 countries in November 2007, in conjunction with the Beyond GDP Conference in the European Parliament, found large majorities in India, Russia, Germany, France, Italy, Britain as well as Australia, Brazil and Kenya favored broader scorecards of progress beyond money-based GDP, including indicators of health, education and environment. Real wealth and progress can never be quantified only in money. The economics textbooks are overdue for revision.

Hazel Henderson is author of Ethical Markets: Growing the Green Economy (2007) and other books. She co-organized the Beyond GDP Conference in Brussels, representing the Club of Rome. www.hazelhenderson.com

Sub Prime mess- A nail in the coffin of Traditional Risk Management

About three years ago when I was fascinated by Economists and used to read on daily basis a lot of economic commentary, almost every one focused on China as next epicenter of economic chaos. No one, not a single soul suspected the great USA. Now the mess seems to be getting out of control. The Black Swan by Nassim Nicholas Taleb offers explanation for such blindness. It was only after the sub prime crisis that people started agreeing with his ideas to a greater extent. The traditional risk management techniques failed comprehensively. Now, I think , the whole discipline of risk management needs to be rebuild and much of it would be based on Taleb's philosophy.

Here is the first indication:

Death of VaR Evoked as Risk-Taking Vim Meets Taleb
Jan. 28 (Bloomberg) -- The risk-taking model that emboldened Wall Street to trade with impunity is broken and everyone from Merrill Lynch & Co. Chief Executive Officer John Thain to Morgan Stanley Chief Financial Officer Colm Kelleher is coming to the realization that no algorithm or triple-A rating can substitute for old-fashioned due diligence.Value at risk, the measure banks use to calculate the maximum their trades can lose each day, failed to detect the scope of the U.S. subprime mortgage market's collapse as it triggered more than $130 billion of losses since June for the biggest securities firms led by Citigroup Inc., Merrill, Morgan Stanley and UBS AG.The past six months have exposed the flaws of a financial measure based on historical prices that securities firms use idiosyncratically and that doesn't anticipate every potential disaster, such as the mistaken credit ratings on defaulted subprime debt.``Finance is an area that's dominated by rare events,'' said Nassim Taleb, a research professor at London Business School and former options trader. ``The tools we have in quantitative finance do not work in what I call the `Black Swan' domain.''Taleb's book ``The Black Swan,'' published last year by Random House, describes how people underestimate the impact of infrequent occurrences. Just as it was assumed that all swans were white until the first black species was spotted in Australia during the 17th century, historical analysis is an inadequate way to judge risk, he said. for full articlehttp://www.bloomberg.com/apps/news?pid=20601109&sid=axo1oswvqx4s&refer=home

Netsol Technologies ; Netsol Akhter (Netsol Connect) the Broad Band Way

Here is first overview of Broad Band Technology, in order to enable layperson to better understand the hidden potential of Netsol Conect/ Akhter, a subsidiary of Netsol Technologies Ltd. The excellent summary has been prepared by my colleagues:

WIRELESS BROADBAND NETWORKS

Wireless broadband is a fairly new technology combining the two aspects i.e. “wireless” and “broadband”.

Communication channels (paths) are grouped into 2 basic categories- narrow band and broadband, depending on their transmission speeds:

Narrowband or baseband are used for handling low data volumes since they provide low speed transmission rates and hence are adequate for low-speed devices like telegraph lines and low speed terminals. Commonly used for telephone voice communications and for data communications by the modems of PCs and other devices.

Broadband or wideband channels are used when large volumes are to be transmitted at high speed. This data communication system handles high volume of data and can be used for high speed computer to computer communication or for simultaneous transmission of data to several different devices. There are different types of broadband access technologies, such as cable, DSL, powerline, satellite, and wireless.

Data can be transmitted through wired or wireless media. Wireless networks can cover wide geographic areas efficiently. Wireless is being adopted for many applications: to connect computers, to allow remote monitoring and data acquisition, and to provide a solution for environments where wires may not be the best solution. Wireless systems are typically slower than land-based, wire-line networks.

Broadband Wireless (BW)

Broadband means 'having instantaneous bandwidth’. This means that Wireless Broadband offers speeds roughly equivalent to wired broadband, such as that of DSL or a cable modem.

BW is an emerging wireless technology that allows simultaneous wireless delivery of voice, data, and video. It provides high-speed wireless internet and data network access over large distances. BW is considered a competing technology with Digital Subscriber Line (DSL). It is generally implemented in metropolitan areas and requires clear line of sight between the transmitter and the receiving end. What is "high" speed is always a changing number.

Through BW, networks of varying sizes can be deployed in places where it would be expensive to run wires. Because trenches do not have to be dug, there may be less overall disruption and visual impact to communities. Particularly for rural areas, wireless technologies may enable less burdensome service at lower cost.

BW falls into local and wide area categories:

Wireless Local Area Networks (WLANs), such as the Wireless Fidelity (Wi-Fi) that is a high frequency network, transmit their signals within several hundred feet. WLANs are implemented as an extension to wired LANs within a building and can provide few meters of connectivity between a wired network and the mobile user. A person with a Wi-Fi enabled device such as a PC, cell phone or PDA can connect to the internet when in proximity of an access point.

Wireless Wide Area Networks (WWANs) such as WiMAX span several miles ensuring interoperability between devices, networks, and regions. WiMAX is defined as Worldwide Interoperability for Microwave Access.

Besides BW, Bluetooth is another wireless technology for low-cost, short-range wireless links and transmission of digital voice and data between mobile PCs, mobile phones, and other portable handheld devices, and connectivity to the internet. Bluetooth is widely used for hands-free cell phone operation, including wireless headsets. It can also be used to transfer data between cell phones and computer.

NETSOL CONNECT- WHAT LIES BENEATH

Just a few days my post here referred to Netsol's plan of becoming biggest Broad Band Company. At firs I didn't pay much attention and thought of it as just another publicity stunt. Thanks to Google I believe this broad band thing could get even bigger than the $150 Million Land Record Management Information System (LRMIS). Here are some bits and pieces of information:


Akhter Group, a United Kingdom Company, Acquires 49.9 Percent of NetSolConnect, a Subsidiary of NetSol Technologies, Inc.; Acquisition to Bring Potentially $20 Million in Investment for F
see addition of companies' URLs
Distribution Source : Prime Newswire
Date : Thursday, August 07, 2003
CALABASAS, Calif., Aug. 7, 2003 (PRIMEZONE) -- NetSol Technologies, Inc. (Nasdaq:NTWKC), a developer of proprietary software applications, today announced that it has entered into an agreement with United Kingdom-based Akhter Group PLC. Under the terms of the agreement, Akhter Group acquired 49.9 percent of NetSol Technologies' wholly owned subsidiary, Pakistan-based NetSolConnect (Pvt) Ltd., an Internet Services Provider in Pakistan. Akhter, one of the longest established computer companies in the UK, is well recognized as a provider of managed Internet services, integrated networks, both local area networks and wide area networks as well as metropolitan area networks within the UK.
"Akhter owns proprietary broadband technologies and solutions that will provide NetSolConnect a technologically strong platform for strengthening its telecommunications infrastructure within Pakistan with a goal of becoming a leading provider of broadband Internet access to both residential and commercial users," said NetSol CEO Naeem Ghauri. "This untapped market presents a significant opportunity to NetSol and Akhter as Pakistan's telecommunications infrastructure predominantly supports dial up access to the Internet."



The initial stage of the agreement provides NetSol with an investment of up to $1 million in cash to launch a broadband infrastructure in Karachi, the largest business hub in Pakistan. The initial infrastructure will provide a 155MB backbone and a 5MB broadband to customer premises using a proprietary broadband technology and an infrastructure consisting of 20 hubs. After the successful launch of the initial six-month beta program to Karachi's residential and commercial customers, additional rollouts of the hubs are scheduled in Lahore and Islamabad within a 12-month period.
The second investment into the program could provide up to $20 million to create the first Terabit backbone in Pakistan. This will allow NetSol to provide data, voice, video and other multi-media services to major cities within Pakistan.
"Akhter and NetSol's partnership provides both companies with significant opportunities within Pakistan," commented Ghauri. "Pakistan's major cities must be supported with a fast, efficient and cost effective communications infrastructure to maintain the significant growth currently being experienced. Our investment and technical expertise can provide a broadband communications program that will be efficiently replicated throughout each major city within Pakistan."
"After two decades in the technology industry, we have learned to invest our time and money in our customers, the continued growth of our company and our partnerships with well respected companies such as NetSol," said Akhter Computers Chairman and CEO Humayun Mughal. "Our partnership with NetSol strengthens our collective footprint within Pakistan and gives us the opportunity to substantially improve our competitive position as we have the experience and the technologies to cost effectively provide a wide range of broadband Internet and data services to the populace. We look forward to expanding our services to provide the much needed voice, data, and multimedia broadband services -- all from a single provider.
About Akhter Group PLC
Electronics expert Humayun Akhter Mughal founded Akhter in 1979. Through its 24 years as a high technology company, the $30 million company's dedication to providing the very best value for its customers has become the hallmark of Akhter's business. Akhter has a large UK customer base within defense, education, health and the public sector including major corporations. The company is a recognized provider of a wide range of computer products and related services as well as wireless broadband communications services including managed internet services and integrated networks whether local area networks, wide area networks or metropolitan area networks. For additional information, please visit www.akhter.com.
About NetSol Technologies, Inc.
NetSol Technologies is a leading end-to-end solution provider for the lease and finance industry. Headquartered in Calabasas, CA, NetSol Technologies, Inc. operates on a global basis with locations in the U.S., Europe, East Asia and Asia Pacific. NetSol helps its clients identify, evaluate and implement technology solutions to meet their most critical business challenges and maximize their bottom line. By utilizing its worldwide resources, NetSol has been delivering high quality, cost-effective IT services ranging from consulting and application-development to systems integration and outsourcing for years. Their commitment to quality is demonstrated by achieving both ISO 9001 and SEI (Software Engineering Institute) CMM (Capability Maturity Model) Level 3 assessment. For additional information, please visit www.netsoltek.com.
Securities Exchange Act of 1934
This release is comprised of inter-related information that must be interpreted in the context of all the information provided; accordingly, care should be exercised not to consider portions of this release out of context. This release is provided in compliance with Commission Regulation FD and contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumption or future events or performance, are not statements of historical fact and may be "forward-looking statements." Forward-looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties, which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through the use of words such as "expects", "will", "anticipates", "estimates", "believes", or statements indicating certain actions "may", "could", or "might" occur. Such statements reflect the current views of NetSol Technologies with respect to future events and are subject to certain assumptions, including those described in this release. Should one or more of the underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed or expected. NetSol Technologies does not intend to update these forward-looking statements prior to announcement of quarterly or annual results. CONTACT: Investor Relation Resources LLC
Marty Tullio
Investor Relations
949.566.9860
marty@investorRR.com
NetSol Technologies
Najeeb U. Ghauri
Chairman
818.222.9195
najeeb@netsoltek.com

Netsol :Twinkle, Twinkle.......Like a Diamond In the Sky

Another Feather in Netsol's Cap:
Press Release Source: NetSol Technologies BMW Financial Services Hong Kong Ltd. Goes Live With NetSol Technologies' LeaseSoft SolutionThursday November 1, 8:30 am ET NetSol's LeaseSoft Offering the De Facto Standard for Vehicle Finance Accounting and Portfolio Management System in the Region CALABASAS, CA--(MARKET WIRE)--Nov 1, 2007 -- NetSol Technologies Inc. ("NetSol") (NasdaqCM:NTWK - News), a multinational provider of IT services and enterprise software to the financial services industry, announced today that its Asia-Pacific division has successfully implemented its LeaseSoft retail product suite for BMW Financial Services Hong Kong Ltd. BMW Financial Services Hong Kong Ltd. has gone live with the NetSol's LeaseSoft solution including the LeaseSoft Contract Management System (CMS) and Credit Application System (CAP) components.Mr. Najeeb Ghauri, chairman and CEO, commented, "We commend the efforts of our Asia-Pacific division in becoming the de facto standard for vehicle finance accounting and portfolio management systems in the region. LeaseSoft is the premier software suite for automotive finance in the Asia-Pacific region. We anticipate that this mission critical application has the potential to manage all of BMW Financial Services' expanding business in Hong Kong. We look forward to working with BMW and implementing applications to provide fast and convenient solutions for their most sophisticated vehicle finance and leasing software needs."About NetSol Technologies Inc.NetSol Technologies (NasdaqCM:NTWK - News) is a multinational provider of IT services and enterprise solutions to the financial services industry. By utilizing its worldwide IT design, development, quality assurance (QA), and project management resources, NetSol delivers high-quality, cost-effective portfolio management solutions for equipment and vehicle finance, as well as IT services ranging from consulting and application development to systems integration and development outsourcing. NetSol's commitment to quality is demonstrated by its achievement of both the ISO 9001 and SEI (Software Engineering Institute) CMMi (Capability Maturity Model) Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. NetSol Technologies' clients include Fortune 50 manufacturers, global automakers, financial institutions, technology providers, and governmental agencies. Headquartered in Calabasas, California, NetSol Technologies has operations and/or offices in London, San Francisco, Adelaide, Beijing, Bangkok and Lahore, Pakistan.To learn more about NetSol Technologies Inc, visit http://www.netsoltek.com/http://biz.yahoo.com/iw/071101/0322632.html

Netsol Results:

Netsol Technologies, NETSOL:PK, a subsidiary of Netsol Technologies Inc., NTWK:US , announced its first quarter 2008 financial results today. Before the announcement of 2007 annual results i tried to estimate the EPS. I worked out Rs 11-12 per share. I was wrong by 30%. Now comes the first quarter of 2008, I expected an EPS of Rs. 2/ share. This time the shock was on upper side. I was wrong by 80%.

QTR 1,2008 diluted EPS is Rs. 3.59/share- an astronomical growth of 425% compared to the same period last year!

I am leaving the job of forecasting to the Analysts and Astrologists.

Indus Dyeing Mills Limited another neglected Star?

Recently I have started looking into an investment opportunity in Indus Dyeing Mils Ltd (IDYM:KSE).

An EPS of 22 and Book Value per share of Rs. 120+ apparently makesit an excellent buying opportunity @77. I wanted some 30,000 shares yesterday but could get only 5000. It is again on upper circuit breaker today.

THE RISE OF NETSOL ( NTWK:US) , NETSOL:PK IS IT ANOTHER BLACK SWAN LIKE GOOGLE?

Netsol continues rise beyond imagination. In early 2007 our group of friends spotted it struggling for life in 20s. A little research gave us the confidence to go and empty our pockets and bet on it. Today its cum bonus price is above 200. 8 times increase in value in just a matter of eight months. We thought there wasn't nothing much left in it in terms of capital gains unless and until it gets the Land Record Automation Contract which is worth $300,000,000. But now out of no where it has bolted another positive surprise. Just Take a look:


NetSol iReady launches the most powerful ISP in karachi. With the largest bandwidth in the country, NetSol iReady has created a new benchmark in Internet access speed. The ISP is backed by round-the-clock / 365-days-a-year technical support system run by qualified IT proffesionals. With NetSol iReady, you can be assured of instant and the most reliable Internet connectivity available. So switch to the fast lane now and experience the Internet like never before!Akhtar Group, a United Kingdom Company, Merger with NetSol Connect,a Subsidiary of NetSol Technologies, Inc.; Acquisition to Bring Potentially$20 Million in Investment for First Nationwide Broadband Infrastructure in Paksitan.We have provided the most powerful and state-of-the-art web access system all over as compares to our competitors, for NetSol iReady accounts holders for there account maintenance as well as to NetSol iReady Dealers and Franchises network for online transactions, metropolitan wide and to the areas where NetSol iReady is providing services. Our existing system can handle multiple packages and hundreds of thousands users at a time and billing, creating, disabling them on a real time basis. We have introduced more enhanced and attractive tariffs for our customers and companies as compares to other service providers.
Source: http://www.netsolir.com/