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theSun | MONDAY NOVEMBER 3 2008 19

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Volkswagen and the Why we should


switch to fibre optics
casino economy IT’S FRUSTRATING for
computer users to deal with slow
broadband connections during
peak hours. This happens on
weekdays, weekends and even
public holidays.
it. The loss of signal in optical
fibre is less than in copper wire.
Unlike electrical signals in
copper wires, light signals from
one fibre do not interfere with
those of other fibres in the same
ONE singular incident a development the appropriate role of stock While fibre-optic cable.
in Germany’s stock divorced from actual markets in an economy. systems are revolutionising This means clearer phone
market last week reality. As John Horvath notes in an telecommunications worldwide conversations or TV reception.
reinforces the belief that Tuesday’s panic article titled Casino Economy, we are still stuck with the Because signals in optical
increasingly, Europe buying in VW shares nowadays stock markets have conventional copper wire. fibres degrade less, lower-power
– like the United States was prompted by become nothing more than Granted the main transmitters can be used instead
– has become a casino iconic sports car glamorised betting shops that disadvantage of fibre optics is of the high-voltage electrical
economy. Wealth is maker Porsche are increasingly divorced that the cables are expensive to transmitters needed for copper
being created on both announcing it had from economic realities. Well- install and are more fragile than wires. This saves both provider
sides of the Atlantic, acquired 31.5% of VW established companies have been wire and difficult to splice, the and user money.
not through higher through cash-settled led to ruin, not because their advantages outweigh everything Because of these advantages,
economic output but MakingSens options; that is the products or services were bad, but else. you see fibre optics in many
through massive bets option would be because of speculative movements Switching to fibre optics has industries, most notably
in stock markets in by Tan Siok Choo settled through cash its advantages. telecommunications and
of their share prices.
the guise of financial rather than cash. Doug Henwood, editor of The cables have a much computer networks. For
engineering. Combined with Left Business Observer, notes the greater bandwidth which means example, if you telephone
For a brief moment last an existing stake of 42.6%, this marginal role of stock markets in more data can be carried with someone in Europe from the
Tuesday, Volkswagen (VW) brought Porsche’s shareholding in financing corporate activity. Since buffering reduced considerably. United States (or vice versa)
became the most valuable the German car maker to 74.1%. 1952, corporations have funded The cables are lighter than and the signal is bounced off a
company in the world. Panic And with Germany’s Lower 95% of their cost of expansions metal ones, are less susceptible communications satellite, you
buying by hedge funds to cover Saxony state accounting for internally, primarily through to interference and take up less often hear an echo on the line.
their short selling of VW caused another 20.2% of equity, this left retained earnings. And because space in the ground. But with transatlantic fibre-
the German car maker’s price to VW with a free float of 5.7%. News companies are increasingly Data can be transmitted optic cables, you have a direct
skyrocket to €1,005 (RM4,543) a of a minuscule free float coupled controlled by stockholders and digitally (the natural form for connection with no echoes.
share. with knowledge that about nearly managers, the bulk of corporate computer data) rather than Fibre optics is a particularly
At this price, VW was valued 13% of VW had been shorted meant profits tend to be spent on analogically. popular technology for local area
at €296 billion (RM1.3 trillion), there was a scarcity of shares dividends. Optical cables are cheaper networks. Telephone companies
slightly higher than US oil giant available for trading; a realisation In his indictment on stock than copper wires. elsewhere are steadily replacing
Exxon’s market capitalisation of that prompted short sellers to bid markets, Henwood wrote Because optical fibres are traditional phone lines with
US$359 billion (RM1.3 trillion) and up the German car maker’s share “throughout the late 1980s and thinner than copper wires, fibre-optic cables.
more than that of all American and price to stratospheric levels. early 1990s, the stock market more fibres can be bundled In the future, almost all
European car makers combined. News reports suggest the rewarded firms announcing into a given-diameter of cable communications will employ
VW ended last Tuesday at €945 magnitude of losses by fund write-offs and mass firings – a compared to copper wire. fibre optics.
(RM4,272) a share. The following managers who had short-sold VW bulimic strategy of management This allows more phone lines
day, it tumbled by more than 45% shares is estimated to be as high as – since the cost cutting was seen to go over the same cable or Noel F. D’Oliveiro
to close at €517 (RM2,337). Despite €30 billion (RM135.6 billion). as contributing rather quickly to more channels to come through Ipoh
the fall, Wednesday’s price was Additionally, share options have profits. Firms and economies can’t
more than double the previous another hidden, and potentially get richer by starving themselves,
Friday’s close of €210 (RM949).
By any yardstick, this price
lethal, potential. In countries like
Germany, investors aren’t legally
but stockmarket investors can get
richer when companies they own
One small step ...
performance over four trading days required to disclose their holdings go hungry – at least in the short I WENT to the Seksualiti beloved little country after all.
was a remarkable roller coaster. of share options. This enables an term,” he says. Merdeka event at The Annexe in Thank you for publishing
Short selling involves investors investor to mount a takeover of a Wall Street has been described August and left with a sense of “Me, my body, my mind” (Oct
– pessimistic about a company’s company by stealth. by a cynic as a street with a warmth and encouragement. 30). It meant progress to me.
outlook – selling shares that they Second, VW’s hyperventilating river at one end and a graveyard It was inspiring to know
do not own in the expectation share price also calls into question at the other. Unfortunately, as that there still are humane Ah Kit
of buying the shares before the the utility of stock markets VW’s experience shows, the Malaysians: those fighting Via email
delivery date at a lower price and in determining a company’s phenomenon of Wall Street has for basic rights, those who do
pocketing the profit from the price valuation. That VW’s share price been replicated across the Atlantic not demonise or criminalise THANKS for covering Seksualiti
differential. last week was determined solely and further afield. others with a different sexual Merdeka so fairly. The nation
VW’s share price fiasco by speculative activity rather than orientation, those who still have needs to learn to value people for
spotlights three major issues. First, corporate profits and earnings compassion towards individuals their contributions and abilities
it underscores the destructive outlook undermines the claim that Opinions expressed in this article different from themselves, and objectively and leave people’s
potential of financial engineering a listing status provides a superior are the personal views of the writer those who have the courage to private lives alone... sexism is
activity. Financial engineering via means of pricing a company’s and should not be attributed to any be what they really are. There equally serious as racism.
share options and short selling shares. organisation she is connected with. was a sense of liberation, a
helped boost the German auto Third, frenzied buying of VW She can be contacted at schoo@ sense that there might be a bit SM Phang
giant’s share price sky high, shares last week calls into question noordinsopiee.com of development and love in this Via email