Why Herbalife is a pyramid scheme: awesome presentation from Bill Ackman

Awesome. Basic summary of the MLM business model for those who are time-challenged (though we highly recommend at least one quick pass through so that you can piss off your friends or relatives who are trying to recruit you)

1. Herbalife (like many MLMs cough NuSkin cough) sells dreams, not products. Its main revenue model is recruitment of distributors, especially from demographics who are in financial need, and forcing these distributors to buy products to either consume themselves, or sell retail.
2. 93% of all distributors fail to make ANY gross money (in fact, many of these lose because of running costs that need to be spent simply to be part of the Herbalife family. Any distributor returning products are required to resign from Herbalife)
3. Markets become saturated within 3 years of entry, resulting in the classic “pop and drop” situation. Already, Herbalife is running out of countries to enter in order to make up for the drop in saturated markets.
4. Herbalife ticks all the boxes for a pyramid scheme.

But don’t just take it from us, since we obviously have an agenda against grinning psychopathic cultists who keep waving Kiyosaki bibles in our faces, and telling us how stupid and unfulfilled we are compared to their BMW-driving and Rolex-wearing lives. Read Ackman’s magnum opus below.

http://www.businessinsider.com/bill-ackmans-herbalife-presentation-2012-12

 

CAD investigates Genneva, new CEO says “You can’t take your money out”

The Genneva scam continues to unravel. As CAD detains the poor saps who were left behind in the company’s essentially defunct operations in Singapore (now that most of the money has been shifted elsewhere), investors are drawing up a tally of the number of time-delaying tactics in which the company can actually put up in lieu of actually paying investors what they are owed. How can we name thee?

1. “It wasn’t our fault, it was some previous unnamed employee-gone-wild. We’ve made police reports, and we’ve started internal investigations” – buys about 1 to 2 months
2. “We’re in the midst of talking to a white knight” – buys about 1 month (2 if some big names are leaked to the press or the blogosphere, e.g. more relatives of Malaysian royalty)
3. “Dialogue sessions with customers and agents” – buys about 10 days
4. “Setting aside legal judgement from customer and filing defense, even when there really is no defense to be filed because we don’t have money to pay back our obligations” – buys about 2 months

So far, we’ve counted about 5 months. QE3 may have come in just too little, too late for our friends at Genneva.

From BT (sub required): “CAD probes troubled gold trader Genneva”

Staff questioned as firm promises to honour obligations

[SINGAPORE] Genneva Pte Ltd, the gold trading company that has been the subject of a literal run by its customers, is under investigation by the Commercial Affairs Department (CAD) for alleged “financial improprieties”.

Its Orchard Tower offices were raided by CAD yesterday. The office is closed and its website is frozen. A number of employees were taken in for questioning. The police has confirmed that investigations are ongoing.

Matthew Kurian of Regent Law, who is retained by Genneva as its legal counsel, said that the firm is conducting its own internal investigation and has appointed forensic accountants. “The company intends to honour all its obligations. They are coming up with a plan.”

A letter by Lim Kieng Justin, who has just taken over as Genneva general manager, said that the discovery of financial improprieties “some time back” has led to a delay in the payment of discounts, commissions and fulfilment of buy-back guarantees. The letter, dated Sept 28, was posted on the Web.

Mr Lim is a director of an apparently related company, Genneva World Pte Ltd, which was registered for business in March this year. He is not a director of Genneva.

Mr Lim wrote that the directors have lodged the necessary police reports and put in place new management staff. “. . . the directors are in the midst of negotiations with an external party who is prepared to assist the company and see it through this financial crisis. The objective of the directors is to ensure that all obligations to the company’s customers and consultants are met.”

He also wrote that the company would organise dialogue sessions with customers and agents in 7-10 working days. He urged customers and agents to remain calm and “help us work out (an) amicable solution for everyone”.

Genneva is understood to have received several letters of demand from aggrieved customers who have entrusted gold to the firm or are owed the fulfilment of Genneva’s buyback undertaking.

BT reported last week that at least two customers have filed suits in the Subordinate Court for Genneva to fulfil the terms of its buyback. At least one has secured an interlocutory judgement pending an assessment of costs. Prior to the judgement, Genneva did not respond nor contest the suit. Mr Kurian said that Genneva was looking into making an application to the courts for the judgement to be set aside and to file a defence.

Goh Kok Yeow of De Souza Lim & Goh, who represents the plaintiff Lee Bee Ghok in the case, said: “We will not agree and will vigorously oppose the application because they have no legal reason to do so.”

Genneva operates under a police licence that allows it to deal in second-hand gold. Its model is to sell gold to customers at a hefty premium to the market. As at August, it listed a price of $96 per gram on its website. The indicative retail gold price at UOB yesterday was about $70.15 per gram or $70,149 per kilobar.

Genneva customers buy gold at a 1.5 or 2 per cent so-called discount off its list price. Genneva undertakes to buy back the gold in one or three months, at the list price, and customers pocket the 1.5 or 2 per cent discount. Assuming a monthly rollover, they stand to earn as much as 24 per cent year. Lately, some customers have been offered a discount of as much as 2.5 per cent.

The last few weeks have seen Genneva grapple with its worst case market scenario – that of a rush among customers for the exit. In that time, it has imposed a limit on the daily buyback of gold that it can do – reportedly five kilobars a day. Agents are also reportedly owed commissions for more than six months.

Three Genneva directors – Marcus Yee Yuen Seng, Ng Poh Weng and Chin Wai Leong, who are also directors of Genneva Sdn Bhd – are being sued by Bank Negara in Malaysia for alleged illegal deposit taking and alleged offences under anti-money laundering laws. The case is ongoing.

Genneva is in the Monetary Authority of Singapore’s Investor Alert list, which tells investors to be on guard against unlicensed entities. Other gold companies such as The Gold Guarantee and Asia Pacific Bullion are also on the list.

Investors learning that “Genneva” is not a place in Switzerland

This sad conclusion, which we highlighted as the most likely outcome of gold trading schemes several months ago, has unfortunately come to pass. Bet your bottom dollar that money is now being siphoned out of this current entity, and into another one innocously titled “Zurrich Holdings”. The customers have now realized the true value of the “paper gold” aka SKRs that they are holding on to. Good luck getting any money from that piece of asswipe value-backed asset.

From AsiaOne “Gold trading firm taken to court by customer”

SINGAPORE – Genneva Pte Ltd, a gold trading company offering a “buyback” scheme, appears to be in hot water.

At least one customer has recently won an interlocutory judgment against it in the Subordinate Court, pending an assessment of damages.

It remains to be seen, however, whether she will recover her claim of about $190,000. Genneva failed to respond to the writ of summons or to contest the case. The plaintiff, Lee Bee Ghok, is represented by Goh Kok Yeow of De Souza Lim & Goh. A second writ of summons has also been filed in the Subordinate Court claiming a total sum of roughly $86,000.

A number of other customers are also looking into launching a lawsuit against the firm for its alleged failure to honour its part of the agreement to buy back gold.

One group of about 60 customers, representing a total of roughly $10 million in gold purchases, is understood to be consulting lawyers.

Genneva is on the Monetary Authority of Singapore’s Investor Alert list of unlicensed entities. Its scheme basically sells gold to customers at a hefty premium of 20-30 per cent. Customers, however, are told that they enjoy a “discount” of about 2 per cent off the headline price. They are given the option to sell back the gold after a pre-agreed term of one month or three months. The gold can be sold back at the headline price and customers get to pocket the so-called discount.

Assuming monthly rollovers, this could mean a return of as much as 24 per cent a year. Genneva’s website lists a price of $96 per gram as at August. This is the equivalent of about $96,000 per kilobar of gold. UOB, which offers gold investment services, sells gold to the public at about $74,500 per kilobar.

Sources said that the firm had also offered a “safekeeping receipt” (SKR) scheme some years ago, where the customer does not take delivery of physical gold. The gold is held by the company for safekeeping, and customers can exercise the option to withdraw via a “sellback”. Genneva director Leow Wee Khong could not be reached. Calls and e-mail to the company were not answered.

JPM US$2B “error” demonstrate how little banks learnt from the GFC

Never mind the fancy theories about how JP Morgan’s CIO value-at-risk models failed to take into account Bruno Iksil’s massive tail risk on synthetic derivatives. Ignore the press releases about how ‘self-inflicted stupidity’ resulted in this shocking loss.

The only thing any sane taxpayer should care about is that banks have learnt fuck-all from the GFC, and are still operating on the old, business-as-usual model, i.e.:

“If we blow up, taxpayers will STILL have no choice but to bail us out”

From Bloomie “JPMorgan Loses $2 Billion as ‘Mistakes’ Trounce Hedges“

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said the firm suffered a $2 billion trading loss after an “egregious” failure in a unit managing risks, jeopardizing Wall Street banks’ efforts to loosen a federal ban on bets with their own money.

The firm’s chief investment office, run by Ina Drew, 55, took flawed positions on synthetic credit securities that remain volatile and may cost an additional $1 billion this quarter or next, Dimon told analysts yesterday. Losses mounted as JPMorgan tried to mitigate transactions designed to hedge credit exposure.

“There were many errors, sloppiness and bad judgment,” Dimon said as the company’s stock fell in extended trading. “These were grievous mistakes, they were self-inflicted.”

The chief investment office was thrust into the debate over U.S. efforts to ban proprietary trading when Bloomberg News reported last month that the unit had taken bets so big that JPMorgan, the largest and most profitable U.S. bank, probably couldn’t unwind them without losing money or roiling financial markets. Dimon, 56, had transformed the unit in recent years to make bigger and riskier speculative trades with the bank’s money, five former employees said.

Dimon had defended the unit as a “sophisticated” guardian of the bank’s funds on an April 13 conference call, calling news coverage “a complete tempest in a teapot.” On May 2, he led fellow Wall Street CEOs in a closed-door meeting to lobby the Federal Reserve about softening proposed U.S. reforms that might crimp their profits.

‘Egg on His Face’

Yesterday, he said the timing of the trading blunders “plays right into the hands of a bunch of pundits out there” who are pushing for a strict version of the proprietary trading ban named for former Federal Reserve Chairman Paul Volcker.

Given Dimon’s resistance to the ban and new regulations, “he’s got a lot of egg on his face right now,” said Craig Pirrong, a finance professor at the University of Houston. “Any chance they had of getting a relative loosening of Volcker rule, anything of that nature, that’s out the window.”

The chief investment office’s push into risk-taking was led by Achilles Macris, 50, according to three former employees, Bloomberg News reported on April 13. He was hired in 2006 as its top executive in London and led an expansion into corporate and mortgage-debt investments with a mandate to generate profits for the New York-based bank, they said. Dimon closely supervised the transition from its previous focus on protecting JPMorgan from risks inherent in its banking business, such as interest-rate and currency movements, they said.

‘Wall Street Hubris’

“I wouldn’t call it ‘more aggressive,’ I would call it ‘better,’” Dimon told analysts yesterday. “We added different types of people, talented people and stuff like that.” Until recently, they were careful and successful, he said.

“It’s classic Wall Street hubris, which we’ve seen so many times before,” said Simon Johnson, a former chief economist at the International Monetary Fund who now teaches at the Massachusetts Institute of Technology. “What’s particularly ironic here is that Jamie presents himself, and is believed by others to be, the king of risk management.”

Bloomberg News first reported April 5 that London-based JPMorgan trader Bruno Iksil had amassed positions linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market.

No Firings Yet

The $2 billion loss occurred in London under multiple traders, according to an executive at the bank, who spoke on the condition of anonymity. Dimon wasn’t immediately told about their shift in strategy and didn’t know the magnitude of the losses until after the company reported earnings April 13, the executive said. As the position deteriorated rapidly, the bank gathered internal analysts and examiners to investigate, and Dimon grew more distressed by the day, the executive said.

While no one has been fired yet, Dimon told analysts he will take “corrective actions.” The bank is keeping employees involved on hand while it deals with the transactions, and some are likely to lose their jobs afterward, said an executive with knowledge of the situation. The bank is also reevaluating its risk-monitoring team within the chief investment office, the person said.

JPMorgan risks losing more money now because other market participants will figure out what the bank has to do to unload its position, said Charles Peabody, an analyst with Portales Partners LLC in New York. Costs from the trades may affect earnings through the end of the year, he said.

Sharks to Blood

“When there’s blood in the water, the sharks are going to attack that animal,” said Peabody, who downgraded his recommendation on the stock in March to sector perform. “It could make it very difficult for them to unwind a trade.”

JPMorgan shares, which closed at $40.74 yesterday in New York, fell 7 percent to $37.91 by 11:33 a.m. in Frankfurt trading. The stock had advanced 23 percent this year before the losses were disclosed.

The cost of insuring debt of JPMorgan from default rose. Credit-default swaps insuring the bank’s debt climbed 17 basis points to 124, the highest since Feb. 16, according to data compiled by Bloomberg. A basis point is equivalent to a hundredth of a percentage point.

Bonds of JPMorgan declined the most in six months, widening the gap in yield between the lender’s $6 billion of undated 7.9 percent junior subordinated notes and the 0.875 percent Treasury due 2018 by 16 basis points to 392.2 basis points, according to Bloomberg Bond Trader prices at 10:10 a.m. in London. The price of the note, callable in 2018, fell 2.2 cents on the dollar to 107.84 cents, pushing up the yield to 6.3 percent.

Can’t Estimate Losses

Dimon declined on the call to discuss the specific transactions or people involved. Synthetic credit products are derivatives that generate gains and losses tied to credit performance without the owner buying or selling actual debt. JPMorgan used the instruments to hedge exposure on loans and other credit risks to corporations, banks and sovereign governments. The losses emerged after the firm tried to reduce that position and unwind the portfolio, Dimon said.

The bank said losses were partly offset by gains from the sales from its available-for-sale credit portfolio, resulting in a net loss for the firm’s corporate division, which includes the CIO, of about $800 million after taxes. Dimon said losses could widen or narrow in coming weeks and months, and that he can’t estimate potential costs.

Confirming Fears

As the bank repositions the synthetic credit portfolio, the chief investment office “may hold certain of its current synthetic credit positions for the longer term,” the firm said.

“Hopefully, this will not be an issue by the end of the year, but it does depend on the decisions and the markets,” Dimon said.

JPMorgan also changed how it calculates so-called value at risk, or VAR, a measure of how much the company estimates it could lose on securities on 95 percent of days. The company restated its VAR for the first quarter, previously disclosed at $67 million, at $129 million. The bank used a new model for calculating its trading risk in the first quarter that Dimon said was “inadequate.” It is reverting to the old model.

“It’s a major event that confirms a lot of investors’ worst fears about bank risk,” said Frank Partnoy, a former derivatives trader who’s now a law and finance professor at the University of San Diego. Concern is “that at a large, supposedly sophisticated institution, even something called a ‘hedge’ can contain all kinds of hidden risks that the senior people don’t understand.”

Difficult Exit

Iksil may have amassed a $100 billion position in contracts on Series 9 of the Markit CDX North America Investment Grade Index, counterparts at hedge funds and rival banks said in April. They based their estimates on the trades and price movements they witnessed as well as their understanding of the size and structure of the markets. The positions amounted to tens of billions of dollars, under the firm’s own math, a person familiar with its view said at the time.

The trade on the index probably wasn’t a one-way bet, the market participants said. Iksil may have offset it by buying protection on the same index with contracts that expire about seven months from now, the people said. That strategy would pay JPMorgan the difference between the long-dated contracts and the short-dated ones, and the trade would gain when the gap narrows. The hedge would end in December unless another trade is made to replace it.

Satyajit Das, the author of “Extreme Money: Masters of the Universe and the Cult of Risk,” compared the publicity around JPMorgan’s situation to losses that spiraled at hedge funds like Long-Term Capital Management in 1998 and Amaranth Advisors LLC in 2006.

“A $2 billion loss suggests a position of considerable size,” Das said. “I think you remember LTCM and a few other people like Amaranth that have had the exact same problem and have learned it’s a bit like hell — easy to get into, not so easy to get out of.”

BT: Beware “Gold Buy Back” companies

It’s obvious the writers at BT did not get the memo on gold buy-back investment schemes. But, in case anyone out there actually wants to know HOW gold buy-back schemes work, the following articles spell out the equation. And if you’re still too lazy to read them, here’s the summary:

1. Company X buys gold at Market Price

2. Company X sells gold to  investors at Market Price + roughly 25% markup (let’s call this M+25), but tells you that you’re getting 1.5% “discount” off the M+25

3. Company X promises to buy back your gold from at the same M+25 price in a month’s time, but allows you to keep your 1.5% discount

4. Behind the scenes, Company X hopes your gold price rises at least 1.5%, nett of commissions and holding costs, in order for them to make money. Meanwhile, because it bought at M, and sold to you at M+25, directors will make advance booking for Ferraris before you can.

So, can you make money from this? Yes, IF the market continues to go up. If market comes down, and every gold investor asks for the principle M+25 back, Company X will be faced with a simple liquidity crunch. So timing is everything, people. But then, it’s the same when you’re juggling grenades too. Hopefully you’re the FIRST  juggler.

Business Times – 09 Apr 2012
New gold player emerges with ‘buyback offer’

But customers may be buying overpriced gold

By KENNETH LIM

(SINGAPORE) Another gold trading company marketing an ‘offer to buy back’ has emerged even as others have folded or come under regulatory scrutiny.

The Gold Guarantee, an outfit headquartered in Boat Quay, claims that it will buy back gold at a premium to the original sale price, becoming the latest to offer such a product.

This newest entrant comes in the wake of Genneva Pte Ltd, whose Malaysian arm is under investigation, and The Gold Label Pte Ltd, which has since shut down. Those two older companies have been placed on the Monetary Authority of Singapore’s Investor Alert List, a cautionary document of parties whose activities are not regulated by MAS.

This, or some variation, is what such companies typically offer: They will sell investment-grade gold to you today and give you the option to sell it back to them at a premium after a fixed period of time.

If gold prices have gone up significantly, you can potentially sell on the open market instead and make an even better return.

The typical marketing language can lead customers into thinking they are getting a cheap, low-risk deal. In fact, customers may be buying overpriced gold and a promise whose real strength is not known.

The Gold Guarantee’s brochure cites an example where a customer can buy ‘gold bullion at market price ($80/gram) with 1.7 per cent discount’, suggesting that it is selling the gold at a discount to current ‘market’ prices.

In reality, ‘market’ price may turn out to be a premium.

The Gold Guarantee founder Lee Song Teck initially said that the company sets its market price off the Singapore Jewellers Association’s recommended gold prices. But a check with the trade association revealed that the SJA has not been recommending prices for quite a while to comply with competition laws.

Confronted with this, Mr Lee clarified that his prices were benchmarked on ‘goldsmith prices’ that are gathered from sources on the ground.

But goldsmith prices come with quite a hefty premium, which means that The Gold Guarantee may be selling investment-grade gold at a more expensive price than a straight seller, like a bank, for example.

Buying overpriced gold could still make sense for the customer who can get a minimum positive return from the buyback option.

But what is the real value of that ‘offer to buy back’? The promise to buy back the gold is only as good as the promisor’s credit.

The quality of The Gold Guarantee’s credit is anyone’s guess.

Mr Lee said The Gold Guarantee maintains some capital to meet its obligations, but did not say how much capital the company holds. The company was set up with just $1 million in paid up capital, according to filings with the Accounting and Corporate Regulatory Authority in Singapore.

How the business can withstand the test of mass buyback demands is another question. Mr Lee said The Gold Guarantee does not hedge its exposures using ‘fancy financial stuff’, sticking to physical gold and a ‘buy low, sell high’ strategy. He told BT that if the price of gold drops, he will buy more gold and that will drive down the average cost of his stocks.

But such a strategy could backfire if prices go down for a sustained period, because The Gold Guarantee will face both a depreciating inventory and a wave of buyback demands.

These gold companies are similar in more than just business model. The Gold Guarantee’s website lists four core corporate principles – honesty, loyalty, trust and integrity – that are described almost word-for-word as on Genneva’s website.

Mr Lee said The Gold Guarantee and Genneva are unrelated, and any similarity is coincidental.

Genneva director Leow Wee Khong declined to comment, citing the regulatory spotlight that has been cast on the company.

The attraction of the two selling points – gold at a discount and an offer to buy back – has helped The Gold Guarantee, which Mr Lee said targets ‘middle class’ customers, to grow extremely fast.

Mr Lee said that since it started in July and August 2011, The Gold Guarantee has sold about 2 tonnes of gold to about 500 customers, and has about 35 in-house staff and about 300 ‘sales consultants’.

The company already has a marketing presence in Malaysia, and Mr Lee, a self-proclaimed savvy investor, even shared his hopes to expand regionally, to Japan, Hong Kong and Taiwan.

It is not clear who regulates such companies, which usually say that they only need a licence from the police to deal in second-hand gold. Mr Lee took pains to stress that he was not selling an investment product. If he was, it would put him under the purview of the MAS.

One gold industry veteran said such businesses have found a foothold because of the rising price of gold over the past decade and the lack of easy access in Singapore to investment-grade gold. All three companies began after 2008. ‘I hear about this all the time from my friends,’ the veteran said. ‘I tell them, you go and do the calculations and see if it still makes sense.’

Financial planner Eddy Cheong, head of financial planning at Providend, said investors have to ask a few questions when faced with a product that seems incredibly lucrative. ‘How are they going to pay you?’ he asked. ‘What are the terms and conditions? Are there any guarantees? If there’s a complaint, is there a channel I can go through?’

Mr Cheong added that people should also not feel pressured to rush into such products without thinking it through. ‘You don’t have to rush into it,’ he said. ‘If it’s a good product it will stand the test of time and it will still be there later.’

Chinese premier issues debt forgiveness to Wenzhou businessmen aka speculators borrowing from loan sharks

Really, you can’t make this stuff up. There has been a steady news stream about Wenzhou businessmen who – not being able to get funding from banks thanks to recent clampdowns by the government – borrowed to the hilt from loan sharks to “keep daily business operations going” (aka speculate on property) are either a) running away or b) committing harakiri after coming to the realisation that  either option is better than being paid a visit by the local Ah Loongs, many of whom are linked to local officials.

But now, the crowning glory is that the Premier himself has issued an emperor’s edict from the mountain: that ALL business debt from informal lending sources (aka Ah Loongs) can now be considered fully forgiven (i.e. They will now be hunted down and killed by the government). Better yet, the Premier has also re-opened the funding taps from local banks, so that the speculative party can get started again, at lower interest rates.

If we were betting men living in Wenzhou and all and any other cities in China for that matter, we would now be borrowing double the amount from BOTH loan sharks and local banks, because we know that we will get solid-gold government guarantees that a) we will never have to pay back the loan sharks and b) the local banks are going to keep the taps open for the indefinite future.

Risk on, baby!

From ChinaDaily “China ensures bank loans to help private sector“

WENZHOU, Zhejiang — Authorities in Zhejiang province have sent 11 work groups to oversee a bank bailout of private firms suffering from a liquidity crunch in a coordinated move to tackle the Wenzhou debt crisis.

A spokesman with the provincial government said on Tuesday that 25 banks in Wenzhou city have pledged to increase lending to bolster private firms to weather the debt crisis.

During a visit to Wenzhou on Oct 5, Premier Wen Jiabao asked banks to lend more money to small firms and tolerate higher levels of debt. He also requested a crackdown on the high-interest informal lending market.

By Tuesday, three of more than 90 private entrepreneurs who had gone into hiding in recent weeks to avoid repaying high-interest informal loans returned home.

The local business community said the Wenzhou debt crisis is an extreme case of small- and mid-sized private companies (SMEs) struggling to survive the liquidity crunch resulting from the country’s current macroeconomic control policies, which have been designed to cool inflation and rein in the runaway property market.

Under the government’s coordination, banks have also increased the lending ratio to SMEs.

Tao Lingfu, head of the Wenzhou branch of the Bank of China, promised the bank would continue to issue loans with interest rates lower than 30 percent to corporate borrowers that are having liquidity problems but able to sustain production.

Meanwhile, industry associations have also taken measures to provide financial assistance.

Zhou Dewen, chairman of the Wenzhou SME Development Association, said the association has prepared an emergency fund worth 900 million yuan ($141 million) to help private firms in urgent need of cash to sustain operations.

“The association’s member companies would make donations to the fund,” he said.

Zhou said about half of SMEs in Wenzhou have difficulties in borrowing from bank and are forced to obtain capital from the unofficial lending market, despite the danger of high interest.

“Many of the firms are labor-intensive manufacturing firms making narrow profits from the mass production of small commodities such as eyeglasses, clothing, shoes and lighters,” he said.

Among the three returned absconders, Hu Fulin, president of China’s largest eyeglasses manufacturer, the Zhejiang Center Group, is the biggest debtor. He fled to the United States from Wenzhou on Sept 21, leaving 1.5 billion yuan ($236 million) in debt owed to both Chinese banks and individual creditors.

Hu said upon arriving at an airport in Wenzhou on Monday that he hopes his company can overcome the current difficulties with the government’s support.

Chen Derong, vice-governor of Zhejiang province, pledged that the government will ensure Hu’s personal safety, as well as that of his assets.

“The government will provide support to help companies that are trapped in the financial crunch but have the ability to survive these difficulties,” Chen said.

Another runaway company leader Sun Fucai, chairman of the board of the Aomi Fluid Equipment Co Ltd, also returned to Wenzhou on Monday.

“I don’t want to spend the rest of my life living in the dark,” he said.

Hu Jianjin, an official in Dongtou county, Wenzhou, said Sun’s firm, which makes high precision sanitation pumps, valves and pipe fittings, has great market potential. The county government will help the company get enough loans to emerge from its current plight.

Sun’s company, founded in 2003, has 100 million yuan in debt to banks and informal lenders. As banks limited the lending amid the country’s current macroeconomic control policies, the company’s capital chain broke. He went into hiding on Sept 11, when he sent his staff on a vacation trip to a scenic spot.

“I will be more cautious in maintaining the cash flow if I can resume the company’s operation,” Sun said.

Why everybody’s suddenly googling Slovakia, and what it means to the Eurozone and EFSF

When the fate of the entire Eurozone (and of the world economy itself) hangs on the outcome of a vote of a minnow like Slovakia (which produces less than half of Singapore’s GDP), you just know that micro is so dead.

For those of you who are asking why Slovakia is being such a pain in the derriere, and why those grass-chewing retards from a half-nation just get their act together to save Greece and its lenders from a cocaine-induced gambling spree during the good old days, you might just want to read (further down in this post) Die Spiegel’s interview with Richard Sulik, head of minor Slovak party in the coalition government, on his take on the Greek tragedy. Then ask yourself: who’s the actual retard here? In fact, let’s go one step further: Richard Sulik for POTUS 2012.

From Today “Euro bailout fund foiled by Slovakia“

WARSAW – Europe’s efforts to stem the sovereign debt crisis suffered an embarrassing and potentially costly setback last night when the Slovak Parliament failed to approve the expansion of the euro rescue fund, a development that appeared likely to bring down the government but not to derail the measure.

In a vote of 55 for, nine against and 60 abstaining, the Slovak governing coalition failed to muster the necessary votes to pass the plan that would have required them to contribute roughly US$10 billion (S$12.8 billion) in debt guarantees.

But the country’s leading opposition party said it would be willing to discuss support for the fund after the government fell, pointing to eventual approval of the deal. Officials in Brussels were counting on a political solution, but weighing the possibility of some kind of messy workaround if Slovakia failed to pass the measure.

Prime Minister Iveta Radicova had made the issue into a vote of confidence to try to prevent one of her coalition partners, the liberal Freedom and Solidarity party, from opposing the bailout fund – known as the – European Financial Stability Facility (EFSF), but in vain.

If nothing else, the unwieldy process underscored how the entire US$590 billion euro stability fund, approved by the 16 other members of the euro currency zone, could be held hostage to the domestic politics of one tiny country. It also showed how a measure intended to increase confidence in the euro zone could instead emerge as a telling example of the shortcomings of a system that relies on an unwieldy group of nations to make and execute difficult decisions.

Politicians in capitals across Europe watched the developments in Bratislava closely. An agreement to expand the fund was reached in July by the leaders of the 17 countries that use the euro. Malta approved the plan on Monday, leaving Slovakia as the last to take up the accord for formal consideration.

The possibility that Slovakia, with a population of just 5.5 million, could scuttle an agreement endorsed and passed by European powers like Germany and France had seemed inconceivable.

One European official speaking on condition of anonymity because of the fluidity of the situation, said that, ultimately, it would probably be possible to go ahead with the bailout without Slovakia if necessary.

The rules of the EFSF were laid down in a “framework agreement”, rather than being written into the bloc’s governing treaty. As an inter-governmental agreement this benefits from “a certain flexibility”, said the official. “In these sorts of cases, where there’s a will, there’s a way.”

Still, most observers believe Slovakia – having made its point with yesterday’s hiccup – will eventually approve the EFSF. While few Slovaks want to foot the bill for other countries’ overspending, surveys show that the EU is popular in Slovakia, and people are very proud of having adopted the euro while neighbours like Poland and their former compatriots, the Czechs, have not.

“The image of Slovakia has already been damaged,” said Slovakia’s Finance Minister Ivan Miklos. “Slovakia shouldn’t be viewed as the unreliable member of the euro club.” THE NEW YORK TIMES

And to provide the “balanced” view, here’s the Richard Sulik interview in Die Spiegel:

Only two countries, Malta and Slovakia, have yet to ratify the expansion of the euro bailout fund. Its fate may be in the hands of a minor Slovak party headed by Richard Sulik. In an interview, the politician explains why he hopes the fund will fail and what he sees as the only way to save the euro.

SPIEGEL ONLINE: Mr. Sulik, do you want to go down in European Union history as the man who destroyed the euro?

Richard Sulik : No. Where did you get that idea?

SPIEGEL ONLINE: Slovakia has yet to approve the expansion of the euro backstop fund, the European Financial Stability Facility (EFSF), because your Freedom and Solidarity (SaS) party is blocking the reform. If a majority of Slovak parliamentarians don’t support the EFSF expansion, it could ultimately mean the end of the common currency.

Sulik: The opposite is actually the case. The greatest threat to the euro is the bailout fund itself.

SPIEGEL ONLINE: How so?

Sulik: It’s an attempt to use fresh debt to solve the debt crisis. That will never work. But, for me, the main issue is protecting the money of Slovak taxpayers. We’re supposed to contribute the largest share of the bailout fund measured in terms of economic strength. That’s unacceptable.

SPIEGEL ONLINE: That sounds almost nationalist. But, at the same time, you’ve had what might be considered an ideal European career. When you were 12, you came to Germany and attended school and university here. After the Cold War ended, you returned home to help build up your homeland. Do you care nothing about European solidarity?

Sulik: If we now choose to follow our own path, the solidarity of the others will also crumble. And that would be for the best. Once that happens, we would finally stop with all this debt nonsense. Continuously taking on more debts hurts the euro. Every country has to help itself. That’s very easy; one just has to make it happen.

SPIEGEL ONLINE: Slovakia’s parliament is scheduled to vote on the bailout fund expansion on Oct. 11. How do you predict the vote will turn out?

Sulik: It’s still open. The ruling coalition is composed of four parties. My party will vote “no”; the other three coalition parties intend to say “yes.” What the opposition says is decisive.

SPIEGEL ONLINE: The Social Democrats have offered your coalition partners to support the reform in return for new elections. Do you think the coalition is in danger of collapse?

Sulik: I don’t see any reason why it would.

SPIEGEL ONLINE: What will you do should the EFSF reform pass despite your opposition?

Sulik: For Slovakia, it would be best not to join the bailout fund. Our membership in the euro zone, after all, was not conditional on us becoming members of strange associations like the EFSF, which damage the currency.

SPIEGEL ONLINE: If the euro only causes problems, why doesn’t Slovakia’s government just pull the country out of the euro zone?

Sulik: I don’t see the euro as the problem. It’s a good project. Everyone involved can benefit from it — but only if they stick to the ground rules. And that’s exactly what we’re demanding.

SPIEGEL ONLINE: Which ground rules should we be following?

Sulik: We have to observe three points: First, we have to strictly adhere to the existing rules, such as not being liable for others’ debts, just as it’s spelled out in Article 125 of the Lisbon Treaty. Second, we have to let Greece go bankrupt and have the banks involved in the debt-restructuring. The creditors will have to relinquish 50 to perhaps 70 percent of their claims. So far, the agreements on that have been a joke. Third, we have to be adamant about cost-cutting and manage budgets in a responsible way.

SPIEGEL ONLINE: Many experts fear that a conflagration would break out across Europe should Greece go bankrupt and that the crisis will spill over into other countries, including Portugal, Spain and Italy.

Sulik: Politicians can’t allow themselves to be pressured by the financial markets. Just because equity prices fall and the euro loses value against the dollar is no reason for giving in to panic.

SPIEGEL ONLINE: But do you really believe that politicians can calm the financial markets by stubbornly sticking to their principles?

Sulik: Let’s just ignore the markets. It’s ridiculous how politicians orient themselves based on whether stock prices rise or fall a few percentage points.

SPIEGEL ONLINE: You’re not afraid that a Greek insolvency could mark the beginning of the crisis instead of the end?

Sulik: No. There’s not going to be a domino effect along the lines of “first Greece, then Portugal and finally Italy.” Just because one country goes broke doesn’t mean the other ones automatically will.

SPIEGEL ONLINE: Nevertheless, banks could run into significant problems should they be forced to write down billions in sovereign bond holdings.

Sulik: So what? They took on too much risk. That one might go broke as a consequence of bad decisions is just part of the market economy. Of course, states have to protect the savings of their populations. But that’s much cheaper than bailing banks out. And that, in turn, is much cheaper than bailing entire states out.

SPIEGEL ONLINE: Does one of your reasons for not wanting to help Greece have to do with the fact that Slovakia itself is one of the poorest countries in the EU?

Sulík: A few years back, we survived an economic crisis. With great effort and tough reforms, we put it behind us. Today, Slovakia has the lowest average salaries in the euro zone. How am I supposed to explain to people that they are going to have to pay a higher value-added tax (VAT) so that Greeks can get pensions three times as high as the ones in Slovakia?

SPIEGEL ONLINE: What can the Greeks learn from the reforms carried out in Slovakia?

Sulik: They have to make cuts in the state apparatus. The Slovaks could also give them a few good ideas about the tax system. We have a flat tax when it comes to income taxes. Our tax system is simple and clear.

SPIEGEL ONLINE: One last time: Do you honestly believe the euro has any future at all?

Sulík: I believe the euro has a future. But only if the rules are followed.