Peter Phillips and the PNP are very disingenuous

Now opposition spokesman on Finance and former Finance Minister Dr Peter Phillips, worked with technocrats at the MOF for 4 years during which time he Dr Phillips was praised for his excellent work with the management of the country’s economy.

Dr Phillips work could not have been achieved without those folks employed to the MOF, given then he (Dr Phillips) had no formal training in either economics or Finance.

It therefore has come as a shocker to me than less than 2 months after he lost his job, Dr Phillips has the “gall” to question the capabilities of the very people who taught him the job and managed the affairs on the country on his behalf.

Are we to believe that in just two months, these once brilliant people have become idiots?

Dr Peter Phillips spent almost two hrs giving a presentation that was meaningless and offered nothing in terms of an alternative path for the economy. Dr Phillps during his time imposed in Jamaicans over $52B in new taxes in just 4 years and the country did not collapse.

To help fund the budget, the PNP took $44B from the NHT over the 4 years period, because there was simply no alternative and to now hear the man speak, cleary shows who was doing the real work at the MOF.

Without the folks of the MOF to help him Dr Phillips prepared a response to the budget without substance and provide zero ideas on moving Jamaica from poverty to prosperity. In fact it would appear that he thinks the country will fail because the PNP is now in power, oh the absolute temerity of this man.

What is clear is the PNP had no new plan for this country and so the people of Jamaica must be commended for their foresight in rejecting the PNP at the last election.

It is really hard to be a public servant in this country and its not wonder the best minds would rather go away vs working in the public sector.

 

 

 

Private Sector working group says Tax proposal unworkable

Once again I would like to throw out additional information for people to review and come to their own position.

A Private Sector Working Group has suggested that the proposal laid out by the JLP to increase the income tax threshold to $1.5m is unworkable and its unfair and equitable.

Now we all know we work off the British system and if one were to look at the British Tax System, all the things the PSWG say would not make it work are actually working in the UK.

One must therefore ask, why can it work in the UK but not in Jamaica.

Lets explore the income tax brackets in the UK

Band Rate Income after allowances 2015 to 2016
Starting rate for savings 10% (0% from 2015 to 2016) Up to £5,000
Basic rate 20% Up to £31,785
Higher rate 40% £31,786 to £150,000
Additional rate 45% Over £150,001

Looking at the above was is the income of the man/woman who falls in the 20% tax bracket, when he or she moved to GBP of 31,786

So one can say the British system is inequitable, but works.

There are no threshold level that would allow a system to be equitable, instead the question should be how many people would be impacted by this proposal. I would venture to say it no more that 1-1.5%.

We would therefore like to throw out a proposal that can benefit 98.5-99% because it is unfair to 1 -1.5%, does that really sounds logical, but I guess this is Jamaica so “no problem”

The biggest inequity in Jamaica is Snr Managers and CEO who earns on average of 15-20 X the average worker and get huge bonus, tax free allowance and perks, why don’t we go and try and fix that instead .

Why are the people who earn $5m and above so suddenly appears so  caring for those earning between $1.55 and $1.65m, who are the people said to be impacted.

The fact is folks No one earning $1.5m to $5m will be taking home less day the day after this is implemented and that message must be sent.

All the talking heads rallying against this are now low level income earners, but are those earning well over $5m.

You must therefore question why they have suddenly become champion of the poor?

What is there real motive, is it altruist or selfish, you decide

 

 

Jamaica’s debt still tops J$2 trillion

Local debt falls while international debt rises

BY BALFORD HENRY Senior staff reporter balfordh@jamaicaobserver.com

Friday, October 02, 201

JAMAICA’S total public debt, based on the government’s calculations, stood at just over $2 trillion at the end of July 2015.

The figure stood at $2,050,109.8 million at the end of July, which represented a 0.4 per cent increase over the $2,041,693 at the end of March

http://www.jamaicaobserver.com/business/Jamaica-s-debt-still-tops-J-2-trillion_19231672

So let me get this right domestic debt is 18.7% lower but external debt is 18.4% higher , or net 0.4% lower.

Here is the kicker, with the continued devaluation, the Jamaican equivalent of the external debt will continue to rise and will soon be on parity and then above the 18.7%  reduction in the local debt.

So in short order, we will see our total debt stock rising higher and higher as devaluation continues.

So the gains from the buy back would have only been a short term gain, unless the PNP Government is able to grow the economy, which is not something they have been good at after 24 yrs in power.

So the debt buy back was indeed a great deal for Jamaica, I get it !

No need for big wage increases if the government grows the economy

Jamaicans see anything less than a 10% increase in salary as a huge insult, but that is what obtains in the Easter Caribbean.

I lived in the Eastern Caribbean for close to ten years and the biggest pay rise I received during that period was 3.5%.

The average pay increase is between 1.5 % and 3.5% and this is normal.

They have been able to pay these rates for a number of reasons

  1. The dollars is fixed hence no devaluation vis a vis the US $ and no price increases as a result of this factor.
  2. Very low inflation rates as one is not subjected to any movement in the exchange rate
  3. There is robust Economic growth.
  4. Low unemployment rate.

The Jamaican economy does not see items 1 – 4 and hence the workers sees their dollar literally shrinking  by the hour and with it their purchasing power, hence they seek to raise hell when it comes unto negotiations to get  pay increases to compensate them for loss of purchasing power.

The failure of the party in power for the longest period to create economic growth is the main reason why we are here today.

I actually laugh when I hear that the PNP is now doing a great job to rescue the country. I laugh because they have been the main destroyers.

We appear to be a nation who revel in mediocrity, because the PNP has done such a poor job over the last 22 years and has finally been pushed not by Jamaicans but by the IMF , have now begun to take steps to repair the damage they have done to the Jamaican economy.

Once upon a time a man took a hammer and decided to wreck a chair at his home. Having calmed down he decided he would now take steps to repair the damage that was done. Someone who was passing by said ” hey man you are doing great job, with that chair”, he smiled and said ” Thank you very much”. Under his breath he said : ” If you only knew the full story”

It remains me of the PNP, having wrecked the country, they are now being congratulated for attempting to put it back together. 😦

Had the PNP been a party that was focused on growing the economy vs distributive politics, Jamaica would have been at least 20 years ahead of where it is today.

I have no applause when someone fixes the damage the have created in the first place.

Very poor display of analytical skills by local financial analyst on Petro Caribe deal

It has been almost three weeks since the GOJ announced it had arrived at a deal to buy back Petro Caribe debt at a discount of about 50%. (I used the word about advisably).

Since the announcement, there has been a lot of opinion being promulgated by all and sundry on the merits of the deal.

We have had financial people on interviews giving their opinion of the deal albeit without the requisite calculations to support their point.

After all this time, we have had only one financial analysts penning a report about the deal with actual numbers, but Ralston choose to do his calculations in Jamaican dollars, thus confusing the issue even further.

Up to this point in time, no two analyst has arrived at the same conclusion and show actual figures to prove their position. The conclusions range from a stroke of genius in the deal, to one of being a bad and costly mistake by the government, how can this be ?

What I have seen been passed on as rigorous financial analysis is  not only shameful, its a total embarrassment to the financial profession and leads me to really question the capabilities  of the local financial analysts.

I have seen financial analyst who appears to have created their own version of financial modeling to arrive at a number that supports or justifies their position. So what happens is they choose a position, then run a set of numbers to support their initial position, which is not only unethical under Certified Financial Analyst ( CFA) charter, but grossly dishonest and self serving.

In the absence of good financial analysis a local pastor  Rev Garnet Roper decided to get involved and did his only calculations to support his position, that this debt buy back is a stroke of genius.

I am not only very disappointed that the local financial experts have failed the country miserably and once again and take issue with those at the University of the West Indies, University of Technology and the UCC who have all collectively failed the Jamaican people once again and have left the political hacks to control the numbers and spurt garbage to the people, while calling it financial analysis.

Frankly, I am disappointed to the core about the farce that have been presented so far under the guise financial analysis and reinforces  my position, that this country is made of too many intellectually dishonest people, who are self serving and are doing great disservice to the country.

Last week Ralton Hyman wrote that the PDF is set to generate in the region of $13b and so would be in a position to service the debt, but in today’s Gleaner the man in charge of the PDF, Dr Wesley Hughes was of a completely different view. His position is that the $4b that is going to be removed from the fund, would not allow the PDF to generate the income it was projected to, at the start of the fiscal year. Yet another contradiction, by gosh its numbers we are working with not an opinion based project

The daily newspapers have given some people  the freedom to push their flawed financial calculations, flawed reasoning and incorrect conclusion  on the people and those professors who lectures in these fields and who are supposed to be proficient and are training the next batch of financial gurus, remains silent, fails to challenge the info and in so doing allows incorrect information to be disseminated around the country.

It really begs the question, what is really being taught to our students at the local universities.

You tell me how irresponsible is that !

Is this what we can now come to expect ?

A yr examination question for a 2nd year finance student at a University.

You are the financial analyst for a large firm and is faced with a number of option as outline below.

You are required to complete a financial analysis and determine if the project is worth considering using a set of financial  ratios and data point as describe below.

Scenario

You currently have on the books US$3B worth of debt, which are due in 25 years on which you are paying 1% per annum.

Your creditor has made you an offer to discount the debt by 50% if you pay up today ie you only pay US$1.5b should you decide to take up the offer.

You do not have all that cash available so you decide to the go to the market and seek financing to determine if it would make financial sense to take up this offer.

The MARR for your firm is 8% 

. You could borrow the entire US$1.5 in two tranches as follows via bond issues.

  1. US $1.35b at a rate of 6.75% due 2028 or a 13 yr bond
  2. US$150m at a rate of 7.875% due 2045 or a 30 yr bond

Using the following economic analysis metrics would you recommend that you institution take up this offer.

  1. Net Present Value (NPV)
  2. Life Cycle Cost (LCC)
  3. Benefit to Cost Ratio(BCR)
  4. Internal rate of Return ( IRR)

This is UWI, UTECH and UCC challenge. I would  also welcome responses from any other University

PetroCaribe deal is a real game changer !

I have never seen such a confusing interpretation of a financial deal in a very long time.

Something which should have been a rather simple matter has turned out to be a financial analyst nightmare .

  1. Depending on who you ask the debt/gdp ratio is different
  2. Depending on who you ask, the reduction in debt to gdp ratio is different
  3. Depending on who you ask the debt buy back is NPV negative
  4. Depending on who you the debt buy back is NPV positive
  5. Depending on who you ask the debt by back is bad
  6. Depending on whp you ask the debt buy back is good.

What a game changer.

This changes the way I look at financial calculations .

When you have a pastor commenting and spewing forth financial calculations and arriving at a conclusion based on his modelling, you know that Jamaica is the financial mecca of the Caribbean and Latin America.

We are blessed with some of the most skillful financial analyst on this wide of the hemisphere.

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