MetaFilter posts tagged with markets

Used for centuries, end of lifed October 31st 2018 - The Cheque

Mutant — Thu, 17 Dec 2009 03:55:21 -0800

They were first known as "Praescriptiones" and used by The Romans from around 100BC ¹. Employed by Perisans of the Sassanid Dynasty during the third century, they were then known as "Saqqs". They have been found in Egyptian ruins dating from the 12th century, about the same time as The Knights Templar bolstered their use by issuing written instruments, redeemable for cash to pilgrims bound for holy land bound. Even so, it took another five centuries for the cheque to be adopted by England. Closely related to Bills of Exchange, cheques were originally issued by Goldsmiths, who allowed depositors to issue negotiable claims - cheques - against gold held on deposit. Later codified by successive acts of Parliament, cheques have remained largely unchanged for centuries. In fact the last big innovation we've witnessed with cheques was the introduction of magnetic ink some 53 years ago. However with the rise of electronic payment systems cheque use has declined sharply, to the point where The Payments Council, the organisation responsible for operating the UK's interbank payments systems, will retire cheques effective 31 October 2018 . Pensioners and others critical of bankers were unimpressed by the move, while banks supported the idea, citing the high per cheque processing cost. ¹ as documented by Durant in The Story of Civilization, Vol 3, Caesar and Christ.

George Soros on the Way Forward

kliuless — Sat, 21 Nov 2009 19:42:21 -0800

Soros lectures
You can slog through the video, but I preferred the transcripts 1 | 2 | 3 | 4 | 5 + to me, it started off rather abstract* (admittedly on his part) and slow (covered ground; note soros tag) and doesn't really get interesting until 3 -- "The event that forced me to thoroughly reconsider the concept of open society was the re-election of President Bush..." [altho he can get a bit arrogant ("even I, who discovered—or invented—reflexivity, failed to recognize...")] -- and gets better from there... so i'd skip to that if you're so inclined :P kinda previously... and btw, as a bonus, also see... - Why Do We Hate? - What Makes a Nation Rich? - How Much Is Enough? - What the U.S. Long Bond Market Is Telling Us (cf.) - The G20 in 2050 (viz.) - Rare earth: The New Great Game [1,2,3,4,5,6] --- *in fleshing out his concept of reflexivity he goes thru (among other things and in other words) descriptive vs. prescriptive (or normative) theories, instrumental rationality and empiricism, false thinking and truthiness, the law of unintended consequences, &c. so if you're into that sort of stuff... have at it!

“He who controls the money supply of a nation controls the nation”: James Garfield

Mutant — Sat, 03 Oct 2009 04:31:04 -0800

The First Bank of the United States was Americas first attempt at forming a Central Bank. Inaugurated by Congress in 1791, it was followed by The Second Bank of the United States, which was dissolved in 1836.

And then The United States of America was without a Central Bank for 77 years. Those were hardly halcyon years; as US States and banks shared responsibility for printing money, inflation, asset volatility, market crashes and even depressions were common, for example The Financial Panic of 1837, The Panic of 1857, The Panic of 1873 (aka "The Long Depression"), The Panic of 1893, and the Panic of 1907. Central Banks serve two very important groups of customers: they provide banking services both to the government as well as retail, commercial and investment banks. Also, as recent events have shown, the importance of their role as "lender of last resort" in time of financial stress (systemic as well as specific) can not be underestimated. Regardless, suspicion of Central Banking is very high in post bailout America, leading to a variety of demands ranging from requests for an audit of The Federal Reserve, to more extreme views that The Federal Reserve should be abolished altogether. But if not The Fed then who would control the nation's money supply?

High Frequency Trading

manny_calavera — Wed, 05 Aug 2009 04:06:25 -0800

High Frequency Trading The Algorithmic Trading animals have been let loose. (via) A look at the various strategies used in High frequency trading and the hardware used. "it's ironic that the hardware that HFT platforms are using to battle it out over stocks, bonds, commodities, and other assets is essentially the same as the technology that PC gamers are using to play their own games with much lower stakes. "

a new politics of the common good

kliuless — Sun, 14 Jun 2009 07:11:35 -0800

Markets and Morals -- "without quite realising it, without ever deciding to do so, we drifted from having a market economy to being a market society" -- is the first of the 2009 Reith Lectures delivered by Michael Sandel. (previously) cf. Yglesias on free markets... which kinda reminded me of clay shirky's LSE lecture (mp3; 43 mb; approx 93 minutes) esp the bit in the Q&A around 56.50 wrt money, motivation and ed deci :P bonus!

it's good to be a banksta

kliuless — Sat, 14 Feb 2009 09:19:06 -0800

Simon Johnson on Bill Moyers [1] (and, prolifically, making the public media rounds on npr [2]) tackling the bailout of the American Oligarchs, a.k.a. banksters... BONUS LISTENING :P Economic Contagion - "Listen to this interview with former Goldman banker John Talbott for some refreshing straight talk (Leonard Lopate Show)." and peripherally related... clay shirky on, essentially, 'change.gov' (42 mb; approx 92 minutes) and bill moyers with nikki giovanni, which was (and whois) also awesome! --- also recently related moyers on the blue 1 2

All predictions are wrong. Or are they?

Mutant — Wed, 07 Jan 2009 02:13:13 -0800

Every year the Strategy Team at Saxo Bank, a Danish virtual bank, publishes a list of ten black swan class market events. Some of the more dramatic possibilities Saxo advance for 2009: crude trading down to $25 a barrel causing severe social unrest in Iran, the S&P 500 falling to 500, Chinese GDP approaching zero and several member states dropping the Euro. The complete 2009 list is here and for completeness their 2008 [ .pdf ] , 2007 [ .pdf ] and 2006 lists [ .pdf ] are also available. Popularised by Nassim Taleb's The Black Swan: The Impact of the Highly Improbable, black swan events are by definition statistical outliers. Low in probability but potentially high in impact, even in the best of times prudence would dictate market participants at least be aware of - if not plan for - all possibilities.

Enjoy Risk? Then you may like 300% Leveraged ETFs

Rafaelloello — Fri, 14 Nov 2008 21:10:00 -0800

Enjoy Risk? Then you may like 300% Leveraged ETFs ETFs (Exchange Traded Funds) trade just like stocks, but may (and often do) employ leverage to obtain the desired investment objective. These particular offerings (less than two weeks old ) are summed up well here. I especially like "if you like to go skydiving, keep a pet alligator in the bathtub, and dream of a winter king crab fishing in the Bering Strait, then you will be right at home with the Direxion ETFs."

Money for nothing: a new era of zero interest rates?

Mutant — Wed, 12 Nov 2008 03:27:18 -0800

The Fed cut 100 bps. BOE cut 150 bps. ECB cut 50 bps. India, Vietnam, The Czech Republic, Switzerland, Denmark, South Korea and other nations have all cut interest rates in recent weeks, with many Central Banks cutting more than once. The G20 is now discussing the possibility of further, coordinated interest rate cuts. As interest rates globally plummet, we are observing what some analysts are calling "The Race to Zero". Today almost every nation in both the developed and developing worlds is deeply in the territory of negative real interest rates. In other words, savings kept dormant in the bank loses, rather than gains, value. As the long anticipated great unwinding continues Central Bankers seem to be hoping that low interest rates will force consumption, pushing economies forward at the same time monetary policy pulls. Given this backdrop, a natural question would be how low can interest rates go? The answer may lie in an unpublished Federal Reserve research paper, "Monetary Policy when the Nominal Short-Term Interest Rate is Zero.” (Clouse, J., et al, 2000) [.pdf] Bonus street cred: Two of the authors are architects of some of the unconventional mechanisms currently deployed by The Fed to fight this crisis (Clouse, J., Small, D., 2004) [.pdf]. No time for lengthy pdfs, no problem! The New York Fed published a single page, very accessible summary [.pdf] of unconventional tools currently in use. Full citation of research papers cited: Clouse, J., Henderson, D., Orphanides, A., Small, D., Tinsley, P., 2000, "Monetary Policy when the Nominal Short-Term Interest Rate is Zero”, unpublished, Federal Reserve Board, Finance and Economics Discussion Series, 2000-51 FEDS Papers, Board of Governors of the Federal Reserve System Clouse, J., Small, D., 2004, "The Scope of Monetary Policy Actions Authorised Under The Federal Reserve Act", Federal Reserve Board, Finance and Economics Discussion Series, 2004 FEDS Papers, Board of Governors of the Federal Reserve System

The most obscure but perhaps the most important economic indicator we've got

Mutant — Fri, 31 Oct 2008 04:25:25 -0800

How best to take the pulse of the global economy? While market driven rates such as LIBOR or US Government T-Bills reveal the state of fixed income and Credit Default Swaps tell the observer much about possible default rates, many analysts prefer a more basal view. The Baltic Dry Index is one such indicator. For over 250 years member companies of the Baltic Exchange have tracked the cost of shipping goods across the globe. Everyday they produce The Baltic Dry Index, which is nothing more than "...a daily average of prices to ship raw materials". The performance of this index is unbiased as speculators do not participate in this market; hence we consider this an effective forward looking indicator of the expected state of the global economy, and presently the Baltic Dry Index is tanking. Looking for the bright side? The Baltic Dry Index tells us its now over 90% cheaper to ship goods and material across the globe than it was a year ago. At least until bankruptcies in the shipping sector reduce capacity to fit demand.

In praise of small banks

up in the old hotel — Thu, 30 Oct 2008 12:43:40 -0800

The nine biggest US banks aren't using $125 billion in federal bailout money to make loans. They're going to use taxpayer dollars to buy other banks. That's not what we were led to believe when Henry Paulson forced the nine banks to take the money. Turns out the banks could do as they wished with the money. What about small banks? We seem to have forgotten about the thousands of local, community banks. They have functioned well in the crisis, and reports suggest that they have even benefitted. A veteran banker who works for one of the big US banks says it's time we did something to help them. Smaller banks, he says, are part of the community and have a better understanding of who their customers are. "If we make the bailout funds available to the community bankers, I promise they will know what to do with the money. They will lend it and they will make prudent lending decisions, based on direct and comprehensive knowledge of the borrower. So what are we waiting for?" The big banks -- BofA, Citibank, JPMorgan -- aren't lending because they don't know their customers. They have depersonalized lending by relying on inaccurate credit scoring to make loans. Sometimes lenders don't even do that. This got the banks into trouble. They wound up with toxic assets of dubious value on their balance sheets. It seems that this depersonalization goes to the heart of the global financial crisis. In finance, it's sometimes referred to as the "principal-agent problem." It means looking at numbers instead of people.

You don't really own the shares you think you own

Mutant — Fri, 24 Oct 2008 06:30:10 -0800

All the stocks and bonds you think you own are actually owned by a company you've probably never heard of, a company owned by the same people who own the US Federal Reserve. Originally paper stocks certificates were issued as evidence of ownership by companies to investors purchasing shares. But as trading volume exploded in the late 60's this manual system didn't scale. As an increasing number of trades failed due to paper processing backlogs The New York Stock Exchange took the unprecedented steps of closing on Wednesdays in 1968. [.pdf] In response to the crisis The Central Certificate Service (CCS) was created to electronically settle trades and eliminate the need for share certificates. Although intended as a temporary measure, it is still with us. Financial assets purchased today aren't registered in your name; rather they are held in what's known as street name. Regardless of the assets purchased or the broker used, this name is almost always a successor of CCS, namely The Depository Trust & Clearing Corporation (DTC), or some anomalous sounding variant of "Cede & Co". Holding assets in excess of $40T (yes, trillion), DTC is the single largest private trust in the world - in fact the largest company you've probably never heard of. While DTC no doubt provides a critical service - standing behind and insuring the performance of hundreds of thousands of broker / dealers, institutional investors, banks, mutual funds, insurance companies and hedge funds, many people are critical of this quasi-monopoly. While some say a system like DTC facilitates short selling, and and other forms of market manipulation, others claim the interests of American shareholders have been superceded by this system of indirect stock ownership, and the technology now exists to revert to direct ownership of stocks [.pdf]. But, as the business of big business is indeed, big business, whether or not these temporary measures will ever be removed is anyones guess.

Essential Credit Crunch Reading

Mutant — Mon, 13 Oct 2008 01:29:39 -0800

Afraid to read the daily news? Need some broader perspective on The Credit Crunch? There are lots of different ideas by lots of different authors floating about ... One idea is we simply pay up! In The Trillion Dollar Meltdown, Charles Morris advises that we take the hit in one lump sum. A TRILLION DOLLAR lump sum. And what if that impressive lump sum isn't impressive enough? Morris covers that possibility in The TWO Trillion Dollar Meltdown (someone please stop him before he writes another book!) Embrace the destruction. William Fleckenstein and Fred Sheean in Greenspan's Bubbles argue that we've been saved from bubbles one too many times. Let nature take it's course! Simplify the system seems to be a theme several writers have raised. Both George Soros in The New Paradigm for Financial Markets or Richard Bookstaber in A Demon of Our Own Design argue that we should simplify financial instruments, and stop market participants from employing excessive leverage. While simplification is attractive, in The Subprime Solution Robert Shiller not only outlines the causes of the subprime mess, he argues that this crisis shows us the desire to own a home is a problem calling out for a solution. He suggest the creation of a new class of financial product is needed, something he is calling "continuous-workout mortgages", where payments are dynamically adjusted according to an individuals ability to pay. Back to basics. In Bad Money, Reckless Finance Kevin Phillips argues that we've let Wall Street and financial services dominate the US economy, and now it's time to revert to our roots, manufacturing. He is busily writing a follow up, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism which seems to cast a wider net of blame. A crash is inevitable. In Wealth, War and Wisdom Barton Biggs notes that we see systemic crashes about one a century. Its gonna, no, GOTTA happen! And in the end, keep in mind that we're all in this together. In The Panic of 1907: Lessons Learned from the Markets Perfect Storm Robert Bruner & Sean Carr looked at one of the lesser known (but still very severe crashes), and showed how "collective action by leaders can arrest the spiral" . Everyone pitched in, pulled together and reduced the impact. So fight, simplify, surrender, pay up, create new instruments, no matter how you're planning to weather the storm, you'll have plenty of reading to while away the time.

"...market fundamentalism for the last 25 or so years. And now that world is collapsing... "

[expletive deleted] — Sat, 11 Oct 2008 17:24:00 -0800

Bill Moyers interviews George Soros on the financial crisis. Soros discusses market fundamentalism and the causes of the current crisis, as well as what can be done, and how this meltdown will change the global economy. (via The Big Picture) It begins with Moyers violating the behavioral norms of modern journalism:

In the interest of full disclosure, you should know that I served three years on the board of George Soros' foundation, the Open Society Institute, dealing with such issues as a free press, the rule of law, and human rights. But I've had no involvement in his political activities and nothing to do, with his business interests unfortunately.

Another potentially huge settlement day for CDS contracts ...

Mutant — Fri, 10 Oct 2008 02:32:15 -0800

Credit Default Swaps (CDS) are derivative instruments providing the purchaser with protection against default on an underlying financial asset. When Fannie Mae and Freddie Mac technically defaulted on September 7th there was much speculation that the CDS market would collapse as a result of protection being invoked on $1.4 trillion dollars worth of debt. On October 6th these derivative contracts settled, and the CDS market didn't collapse with recovery rates of 92% being observed. Today CDS contracts protecting against the default of Lehman Brothers settle. The problem? Because industry lacks a central clearinghouse for these derivatives, nobody is really sure how many CDS contracts were written either by Lehman or by other banks providing protection against a Lehman default. Next on the list are CDS' covering Washington Mutual, which are due to settle October 23rd.

Meanwhile efforts to create a clearing house continue, as some folks speculate that the settlement of Credit Default Swaps is a major reason why banks are hoarding cash.

This is not your FDIC. This is the Rich White Man's FDIC.

Mutant — Fri, 26 Sep 2008 02:47:19 -0800

A private FDIC?

The Certificate of Deposit Account Registry Service, or CDARS, is a way to conveniently spread bank accounts across multiple banks. CDARS, run by privately held Promontory Interfinancial Network, offers its customers up to $50 million of deposit insurance, or exactly 500 times single account limit mandated by the FDIC. Promontory does this by arranging to distribute client funds nationwide in $100K increments to over 2,300 banks. Promontory is nothing if not well connected: while founders Mark Jacobsen previously served as Chief of Staff at the FDIC, co-founders Alan Blinder was Vice Chairman of the Federal Reserve and Eugene Ludwig was Comptroller of the Currency, several former members of the FDIC currently serve on Promotory's board.

Not surprisingly, some folks are openly critical of Promotory, some going so far as to state "It undermines a lot of the safeguards around the FDIC deposit fund."

teh free markets, ur doin it wrong

Asparagirl — Mon, 22 Sep 2008 16:46:37 -0800

LOLFed. Doan cry, emo banker! If you hate the latest financial crisis news, but love image macros, then this is the site for you. It's like I Can Has Cheezburger meets the Wall Street Journal.

Saturday night poker night is about to get a lot more interesting ...

Mutant — Mon, 22 Sep 2008 02:40:56 -0800

Hedge Funds employ many different strategies to make money. There are long/short funds, event driven funds, emerging markets funds [.pdf], funds looking to profit from global macroeconomic trends and a large number of funds employing a wide range of arbitrage techniques to make money.

But these techniques are the tried and the true. As both assets under management and market turmoil have grown significantly, hedge funds are rapidly branching out into domains far, far detached from finance: art, litigation funding and now even poker.

Banking shares: New Day or False Dawn?

Mutant — Tue, 09 Sep 2008 03:39:42 -0800

A bottom for banking? Buying or selling shares in a company one manages - insider trading - is legal in The United States, provided the relevant forms are filed with The SEC. This information is then made available to the general public via EDGAR, Sec Form 4, or high level aggregators. Investors scour web sites for such filings, as purchases or sales of a companies shares by insiders are public evidence of managements private opinions regarding the future prospects of the firm they are running.

Even before yesterdays relief rally insider buying in banking shares hit a two decade high. So does this surge in buying indicate the worst is over in banking? When trading its best to pay close attention to a broad range of signals, because sometimes even the insiders get it wrong.

Those markets? Well, it seems they work like they are supposed to ...

Mutant — Thu, 28 Aug 2008 04:14:50 -0800

Are funds calling a bottom to the US housing market? Even as house price declines are beginning to slow, home sales may have stablised and resales look healthy, big money - $5B here, $3B there, over there $2B and lots and lots of smaller amounts - is being deployed to take housing assets off banks balance sheets.

Meanwhile, Fannie Mae and Freddie Mac are actually booking the biggest profits on new mortgages since 1998. It ain't over 'til it's over, but in the markets you take what you can get.

"A national debt will be to us a national blessing." Alexander Hamilton, Secretary of Treasury,1780

Mutant — Tue, 26 Aug 2008 02:30:39 -0800

Even as I.O.U.S.A, a documentary looking at the United States' $53T national debt, is to be shown at both the Democratic and Republican conventions, economists are beginning to openly discuss the previously unthinkable - should America should default on some or perhaps all it's obligations? Although some argue a sovereign default by the United States would not be the end of the world, with political fallout more severe than financial, most overlook the obvious: America has been quietly, slowly, but most certainly defaulting on much of it's outstanding debt since 2002, when the most recent Great US Dollar collapse began. A similar "soft default" occurred in the late 1970's when The United States, faced with apparently insurmountable foreign debts, engineered a US Dollar decline in cooperation with the Group of Seven Industrialised Nations. Apparently when deciding between reducing the US debt or maintaing a strong US Dollar, those in charge decided to sacrifice the greenback. Tough one if you're holding long term US Treasury bonds.

While this is timely information bank failures are normal part of life.

Mutant — Mon, 14 Jul 2008 06:58:14 -0800

Worried about bank failures? First step: check if your bank is insured by the Federal Deposit Insurance Corporation (FDIC). If so, then your first $100K is insured against loss so no worries.

Got more than $100K? Well then, you'd better speak with EDIE. EDIE (the Electronic Deposit Insurance Estimator) will tell you exactly how much FDIC insurance coverage you've got. The maximum coverage is $100K per depositor per savings account per institution. So one approach would be to distribute one's money at multiple financial institutions. But by enlisting the entire family, the apparent FDIC limits for deposits at a single institution can be circumvented. Assuming we're talking about a married couple with two children, here's how it works. Husband and wife each maintain separate savings accounts, gaining FDIC coverage on an aggregate amount greater than $100K but less than $200K. The children can help out here as well; by opening accounts in their name, and using either a living trust or what is called a Payable On Death account another $100K per child will gain FDIC protection. And IRAs, are insured to a max of $250K per account holder, regardless of other funds on deposit. Using this approach, a family of four can gain FDIC coverage totaling almost one million dollars of deposits at a single institution. What ever you do, don't make these mistakes. Troubled by trusts? Confused by all these accounts? Well, the simplest approach would be to deposit your money into one of the 73 Massachusetts based banks which is a member of both the FDIC and The Depositors Insurance Fund (DIF). After FDIC coverage has been exceeded, this private insurance covers any shortfalls. The last time we saw a large number of bank failures, the DIF covered uninsured losses of some 6,500 depositors at 19 failed member financial institutions. Since it's inception "no depositor has ever lost a penny in a bank insured by both the FDIC and the DIF".

Sir John Templeton, 1912-2008, RIP and thank you for the investing lessons.

Mutant — Wed, 09 Jul 2008 03:48:25 -0800

The simple phrase "it's different this time" are the four most expensive words in the English language. Sir John Templeton, 1912-2008, we thank you for this lesson and countless others. One of modern finance's greatest pioneers, in 1954 Sir John Templeton launched what was one of the first globally oriented mutual funds, Templeton Growth Fund. At that time, almost nobody invested outside The United States. However Templeton argued that by restricting choices to domestic securities, investors were denying themselves of the chance to markedly increase portfolio diversification, lower volatility while increasing overall returns. Today Templeton's approach to portfolio diversification is textbook at business schools. Ideas and theories he devised and put into practice decades ago led to such stunning performance that in 1999 Money Magazine called Sir John “arguably the greatest global stock picker of the century”. Over a period of forty years, Templeton Growth Fund returned an average of 14.5% per annum. In 1992, a month before his 80th birthday, Templeton sold his mutual fund empire for a reported $440 million to Franklin Resources Inc. of San Mateo, California. While still was active in the fund's strategic management, Templeton next turned his attention to religion and charitable endeavours, founding the John Templeton Foundation which he intended to "serve as a philanthropic catalyst for research on concepts and realities such as love, gratitude, forgiveness and creativity." Sir John did, however, leave those of us still learning how to invest with one final gift: Sir John Templeton's 16 Rules for Investment Success. [.pdf] Sir John Templeton, 1918-2008, RIP and Godspeed.

Is Ben Bernanke a finally coming out of the closet?

Mutant — Mon, 09 Jun 2008 04:01:36 -0800

While the wild crowd call it "Woodstock for Central Bankers", others get festivities off on a sour note, referring to it as "Understanding Inflation and the Implications for Monetary Policy". Regardless of what your invitation to this party reads, it starts today, Monday June 9th on the 50th anniversary of The Phillips Curve, a previously discredited forecasting tool which may be revived by Ben Bernanke at The Federal Reserve. The Phillips Curve models an inverse relationship between unemployment and the rate of inflation. Specifically, as inflation increases unemployment decreases, and vice versa. Adherents of The Philips Curve argue for a monetary policy accepting relatively high rates of inflation as a trade off for low unemployment. While we have seen The Phillips Curve hold during long periods of both American and British economic history we have also seen 1970's style stagflation invalidate this theory, and today many believe the purest form of this model to be flawed. However variants of The Phillips Curve exist and are still in use by a variety of market participants to help forecast interest rates. It was long suspected Alan Greenspan used what is known as "The Fed Model" - a comparison of the ratio of stock's earnings to prices¹ against the yield on a 10 year Treasury bond - to help guide decisions regarding monetary policy. Knowing precisely what models are used by The Fed is highly valued information to those hoping to anticipate - and thus profit from - changes in interest rates. Until now, Fed watchers could only speculate about the tools Ben Bernanke would deploy as part of his decision making process. But with his keynote address at this conference, and considering other times he's mentioned this model, it's now obvious - Ben Bernanke is a closet Phillips Curver. No doubt a large number of market participants are busily building their own Phillips Curve models. ¹That is, a ratio calculated as earning divided by price, not to be confused with the more commonly known price to earnings ratio, or PE.

Islamic Banking - a compelling mix of religion and finance

Mutant — Fri, 06 Jun 2008 08:40:00 -0800

While western banking institutions continue to reel from the credit crunch, Islamic banking, with assets approaching one trillion dollars, is growing at roughly 20% pa by offering Sharia compliant - and only Sharia compliant - financial products. But compliance to Sharia law in matters financial is not easy (previously). Sharia law, derived from The Koran, is central to all aspects of Islamic life including, of course, financial affairs. Devout Muslims are forbidden from investing in businesses dealing in alcohol, tobacco, pornography, weapons or pork. Further constraining Islamic Bankers, financial products offering interest (making money from money, "riba") or allowing the holder to profit from speculation (uncertainty or gambling, "gharar") are expressly forbidden by The Koran. Considering such restrictions one might think cash is the only Sharia compliant investment. But such thinking is deeply rooted in the mindset of Anglo American capitalism. Indeed, Islamic Banking - ethical investment by definition - offers devout Muslims a wide range of Sharia compliant, financial products. Murabaha is a transaction where all profit earned by the seller must be revealed to the purchaser. Sharia compliant Ijara mortgages are structured in this manner, where a property, acquired and owned by a bank, is paid off by the purchaser via fixed monthly payments broken down as rent plus equity. And lest one think Islamic banking incapable of recognising business realities, Tawliyah or Wadiah - selling at cost or at loss respectively - are Sharia compliant transactions. Sukuk is a Sharia compliant bond. It works by, for example, purchasing then leasing out land with capital paid in. Profits are returned to the Sukuk holder instead of interest. Such vehicles allows investors to realise regular return on their capital, but not by the receipt of interest. Sukuk is superior to many Western fixed income products, as there are always physical assets underlying the structure. Takaful - Sharia compliant insurance - pools the financial resources of a group of Muslims, and allowing them to claim benefit when needed. The five principles of Takaful encourage mutual cooperation, personal responsibility and foster community. With these basic structures almost any retail financial product can be offered in a Sharia compliant manner. And Islamic banking is big business; HSBC, Barclays and many other western insitutions now offer Islamic financial products. Finally, western governments have caught on as well - England and Hong Kong both have plans to issue Islamic bonds, hoping to tap into offshore oil wealth.