Short Selling

Writing about web page http://news.bbc.co.uk/2/hi/americas/7626613.stm

As per my basic finance knowledge, "short selling" is defined as selling a security, already being traded in any of the organised exchanges across the globe, without effectively owning it (hence it is usually borrowed from a market-maker/stock-broker), in the hope that it will fall in value, thereby allowing one to buy it back at a lower price at a later date to return the borrowed security to the broker/market-maker. Thus effectively hedging oneself from expected dips in the stocks being traded on any organised exchanges across the globe. 

The possibility of selling a particular stock via such a mechanism adds to liquidity in the market of the particular stock, thereby artificially increasing the supply and further exhaserbating the downward spiral in the value of this particular security. This is why we see a control on such instruments in the financial markets nowadays:

As a result of the financial debacles in the west, we see that the the Securities and Exchange Commission temporarily banned "short-selling" in the stocks of 799 companies as highlighted in the press release on BBC [linked here]

Does this mean that even the SEC Chairman knows that short selling does more bad than good in the market?

: 27 Sep 2008 12:00 |  Tags: Financial Stocks Wall Street |  Comments (1) |  Close comments |  Report a problem

Al–Salam Institute UK: New semester courses

Writing about web page http://www.al-salam.co.uk

An annoucement I thought I'd share with my viewership

: 26 Sep 2008 12:14 |  Tags: Annoucements Islam Shariah |  Comments (0) |  Close comments |  Report a problem

Rights of Women after Marriage in Islam

I just recently found about this fact and thought I'd share here:

A woman has the right to be maintained at the socio-economic status that she was accustomed to before she was married, unless she relenquishes that right herself. So if a woman is wealthy before and marries a wealthy man who can not maintain her at the status she was accustomed to before, she has the right on the grounds of shariah for divorce.

There is an understanding that women need help inside the house for domestic affairs, managing the children, etc. With regards to servicing the house, the scholars have said that she is not obliged to work within the house but is preferred if she is not working. In fact, it is not considered to be "disobedient" to be obliged to serve the guests of the man. These are the facts mentioned in the Shairiah in books of fiqh which were written centuries ago. Women get burnt out, tired and thus marriage gets deteriorated because of these things. But it works both ways, and the Prophet salalaualahywasalam warned us of the dangers of women as well refered to as Kufraan-al-Asheera that women can not appreciate what the man does. It works both ways, it is a two-way street, there is a type of women that you good to her all her life and then once you do something wrong, she will say "I never knew any good from you." In other words, that she forgets all what you have done your whole life. Thus caution must be from both sides of the relationship.

: 23 Sep 2008 11:00 |  Tags: Islam Shariah Women |  Comments (3) |  Close comments |  Report a problem

Belief in Devine Guidance

The foremost belief around which all the Islamic concepts revolve is that the whole universe is created and controlled by One, the only One God. He has created man and appointed him as His vicegerent on the earth to fulfil certain objectives through obeying His commands. These commands are not restricted to some modes of worship or so-called religious rituals. They, on the contrary, cover a substantial area of almost every aspect of our life. These commands are neither so exhaustive that straiten the human activities within a narrow circle, leaving no role for human intellect to play, nor are they so little or ambiguous that they leave every sphere of life at the mercy of human perception and desire. Far from these two extremes, Islam has a balances approach to govern the human life. On the one hand, it has left a very wide area of human activities to man’s own rational judgement where he can take decisions on the basis on his reason, assessment of facts and expedience. On the other hand, Islam subjected human activities to a set of principles which have external applications and cannot be violated on a superficial grounds of expediency based on human assessment.

The fact behind this scheme is that human reason, despite its vast capabilities, cannot claim to have unlimited power to reach the truth. After all, it has some limits beyond which it either cannot properly work or may fall prey to errors. There are numerous domains of human life where ‘reason’ is often confused with ‘desires’ and where unhealthy instincts, under the disguise of rational arguments, misguide humanity to wrong and destructive decisions. All those theories of the past which are held today to be fallacious, claimed, in their respective times, to be ‘rational’ but it was after centuries that their fallacy was discovered and their absurdity was universally proved.

It is thus evident that the sphere of work delegated to human ‘reason’ by its Creator is not unlimited. There are areas in which human reason cannot give proper guidance or, at least, is susceptible to errors. It is these areas in which Allah Almighty, the Creator of the universe, has provided guidance through His revelations sent down to His prophets. On the basis of this approach it is the firm belief of every Muslim that the commands given by the divine revelations through the last messenger (May God Be Pleased With Him) are to be followed in letter and spirit and cannot be violated or ignored on the basis of one’s rational arguments or his inner desires. Therefore, all the human activities must always be subject to these commands and must work within the limits prescribed by them. Unlike other religions, Islam is not confined to some moral teachings, some rituals, or some modes of worship. It rather contains guidance in every sphere of life including socio-economic fields. The obedience from servants of Allah is required not only in worship, but also in their economic activities, even though it is at the price of some apparent benefits, because these apparent benefits may go against the collective interest of the society.

Extract from “An Introduction of Islamic Finance” by Muhammad Taqi Usmani

Some great words of Muhammad Taqi Usmani, one of the great scholars of our present day time, who has worked extensively in the field of Islamic Financing.

Thus the question then arises: even though we know that our rational reasoning may be affected by our desires, how do we control them?

: 22 Sep 2008 14:00 |  Tags: Financial Islam Islamic Finance |  Comments (2) |  Close comments |  Report a problem

Tripple Filter

During the golden Abbasid period, one of the scholars in Baghdad, the capital of Muslim caliphate at that time, was reputed to hold knowledge in high esteem.

One day an acquaintance met the great scholar and said,

"Do you know what I just heard about your friend?

Scholar: Hold on a minute, before telling me anything I'd like you to pass a little test. It's called the Triple Filter Test.

The Man: Triple Filter Test?

Scholar: That's right, before you talk to me about my friend it might be a good idea to take a moment and filter what you're going to say.

That's why I call it the triple filter test. The first filter is Truth. Have you made absolutely sure that what you are about to tell me is true?

The Man: No, actually I just heard about it and ...

Scholar: All right, so you don't really know if it's true or not. Now let's try the second filter, the filter of Goodness. Is what you are about to tell me about my friend something good?

The Man: No, on the contrary...

Scholar: So, you want to tell me something bad about him, but you're not certain it's true. You may still pass the test though, because there's one filter left:

The filter of Usefulness.

Is what you want to tell me about my friend going to be useful to me?

The Man: No, not really.

Scholar: Well, if what you want to tell me is neither true nor good nor even useful, why tell it to me at all?

The following is a quotation from the Holy Qur'an Chapter 49 (Al-Hujurat) Verse 12:

يَا أَيُّهَا الَّذِينَ آمَنُوا اجْتَنِبُوا كَثِيراً مِّنَ الظَّنِّ إِنَّ بَعْضَ الظَّنِّ إِثْمٌ وَلَا تَجَسَّسُوا وَلَا يَغْتَب بَّعْضُكُم بَعْضًا أَيُحِبُّ أَحَدُكُمْ أَن يَأْكُلَ لَحْمَ أَخِيهِ مَيْتًا فَكَرِهْتُمُوهُ وَاتَّقُوا اللَّهَ إِنَّ اللَّهَ تَوَّابٌ رَّحِيمٌ

Rough english translation:

_O you who believe!  Avoid much suspicions, indeed some suspicions are sins.  And spy not, neither backbite one another.  Would one of you like to eat the flesh of his dead brother?  You would hate it (so hate backbiting).  And fear Allah (God).  Verily, Allah is the One Who accepts repentance, Most Merciful [Chapter 49 (Al-Hujurat) Verse 12]_

: 21 Sep 2008 10:00 |  Tags: Islam |  Comments (4) |  Close comments |  Report a problem

Worst Week for Wall Street

This is perhaps the worst week that Wall Street's experienced since the Great Depression. We have seen 

1.      Lehman Brothers go bankrupt. The biggest bankruptcy ever! 

2.      Fannie Mae and Freddie Mac bailed out by US Treasury - Together Fannie, Freddie provide nearly 50% of mortgages in US (4 Trillion dollars of mortgages outstanding) 

3.      Merill Lynch forcefully merged with Bank of America

4.      AIG, the biggest insurance company in the world bailed out by US Treasury. 

5.      Washington Mutual on verge of bankruptcy

6.      Yields on the 3 month US Treasury are a mere 3 basis points practically nothing

7.      Morgan Stanley considering merging with Wachovia!

8.      Already we have seen Bear Stearns collapse

What does this all mean to us? Reduced liquidity in the markets. Distressed selling and perhaps reduced appetite for risk. A spill over effect is already on its way towards the GCC countries as the markets are showing early signs of loss of stocks most notably property companies that have fallen by 50% in the last few weeks (Emaar, Aldar, Sorouh etc).

What this effectively means is that the US dollar will suffer tremendously. US dollar did recover recently against all other currencies, but for a brief respite as these events will trigger another recessionary period for the US and most likely the World economoy because of its interconnectedness in the global sphere.

: 19 Sep 2008 10:52 |  Tags: Crisis Financial Wall Street |  Comments (0) |  Close comments |  Report a problem

Midnight prayers (Taraweeh) shelled with grenades!

Writing about web page http://www.dawn.com/2008/09/11/top4.htm

If this starts to happen across the country, I don't know if people will even turn to the mosques for obligatory prayers during Ramadan, let alone after it ends.

I just hope this country recovers from the turmoils of this so-called "War on Terror"

God save Pakistan

: 11 Sep 2008 22:12 |  Comments (0) |  Close comments |  Report a problem