Posted on 11/05/2007 7:50:59 AM PST by GQuagmire
LAST MONTH, two economists published a working paper suggesting an unusual way to diversify one's investment portfolio: buy something called sukuk, or bonds that conform to the demands of Islam.
(Excerpt) Read more at boston.com ...
Normally reading about finance puts me to sleep,but this one caught my eye.
Not my money. Not now, not ever.
One of the problems are the inherent inefficiencies built into financial arrangements that evade the reality that you are being payed “interest” on an investment - and that interest is a relatively efficient method of allocating risk.
I would suspect the longer term much of Islamic world will reach an uneasy accommodation with the more pragmatic portions of their society rather like that in Israel: religious conservatives will have substantial but far from total influence over social and economic arrangements, and maintain their own parallel social and economic structures to conduct many aspects of lives in accordance with traditional rules and restrictions.
In the meantime if you want to invest in their societies, you largely have to play by their rules - and don’t kid yourself; sophiciated Western investment pursues risk-adjusted return, and if such investment improves expected portfolio performance, it will be made.
There are several thing going on: Islamic restrictions on interest, Islamic prohibitions on alcohol, pork, etc., and the general principle of ethical dealing in business.
While it may seem irrational, it does appear that many people have to commit themselves to silly restrictions on manners, dress, diet, etc., in order to commit themselves to being honest; and, to communicate their commitment to others.
Jesus said, “let your ‘yes’ be yes, and your ‘no’ be no,” and, it seems to me, downplayed the superficiality of manners, dress, diet, etc.; and, ostentatiousness in one’s religiousity. In the parable of the Good Samaritan, he taught that a person should be judged by his actions and not by religious or ethnic differences. In his teaching on giving, he said that God prefered the widow’s mite, offered in humility, to the show-off contributions of others. He said, “many who cry ‘Lord, Lord,’ will not enter the kindgom of heaven, but those who do my heavebnly father’s (will enter).” So, I am generally opposed to overt displays of religiouslity, but I have to admit that there appears to be something to it.
Part of this Islamic banking thing is a commitment to be being abedient to God, or being self-disciplined (which, after all, is the meaning of Islamic). And, this little acts of odiedence in manners, dress and diet may be helpful.
The other part, involving a prohibition against interest, is in some ways good. I can say that excess indebtedness is bad. But, that’s not at all the same thing as saying that indebtedness is always bad.
Again, I think it’s that I’m not a prohibitionist but a moderationist in just about everything, in interest as well as in alcohol. I don’t think you need to be a prohibitionist in order to avoid excess. But, maybe some people do.
In London, or certain places in Washington DC, it is spelled "Suk Up".
Actually OPEC doesn’t want exceptionally high prices.
As a low cost producer, OPEC is smart enough to recognize that they lose market share and pricing control when other sources of oil come online. Additionally, high petroleum prices lead to increased nuclear power plant construction and R&D into competing non-petroleum sources of energy.
OPEC is not a monopoly and has lost almost all of their pricing power, which isn’t to say that you should love them. But OPEC is not nearly as relevant as they once were.
jas3
Yawn
Lets see, take financial transaction instruments that have been around for thousands of years, that look a lot like our existing instruments, call them “Islamic” to add to the hype on the story.
Folks, there is nothing new here. It is the same thing that we do just dressed up in different terms. Islam does not like the term interest, so they use the term “utility fee” or some other nonsense.
A couple of interesting things about these bonds:
- There are a way (minor at the moment, but growing) way for western companies (including some here in the US) to gain access to capital in Islamic countries.
- Typically the companies that issue then have some aspects that might be attractive to financially conservative investors: for example they usually limit debt to a third of current assets and interest income is restricted (typically, to 10%) so they have to invest income back into operations.
- Some of these are *big* transactions (I believe the largest so far has been around 3 billion US), and they are being designed by some very financially sophisticated people - this is not a bunch of old men sitting around in a street market smoking hookahs and trading camels.
- We are giving these people - some of whom wish us ill, and most of whom believe the Islamic world has been on the losing end of their financial relationship with the West since WWI - a *pile* of our money in return for their oil, and as long as we continue to do so we are IMO in a poor position to pride ourselves on the superior rationality of our arrangements.
Middle Eastern investors “are a very large and wealthy population, and managing their money the way they want it to be managed has become much easier,”....Good for you! Do you ever think some of that money from Islam bonds might be going to make Islam bombs used against our troops? but hey! you go ahead Mr. money bags and make the big bucks managing blood money!
Do you have to pay taxes on long-term decapitation gains?
They really worry about this nonsense and about meat from pigs. Chopping heads off innocents and raping women doesn’t bother them.
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