[7UENf0w7]

This is an important subject seldom discussed by Muslims, our lives are ruled by corporations and their formation in secular laws as having limited liability. I believe the Shariah would prevent this type of corporation from operating and thus prevent Capitalist business from emerging.

From Wikipedia:

Limited liability is a concept whereby a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership with limited liability. In other words, if a company with limited liability is sued, then the plaintiffs are suing the company, not its owners or investors. A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of their investment in that company.


Corporations essentially exist to allow groups of people to act collectively, without taking personal responsibility if the entire thing goes down like a lead balloon. Sure, if an employee of a corporation behaves in a criminal manner, they are sometimes jailed. Yet corporations — ever since the birth of the modern corporation through Standard Oil — have created what is known as the agency problem. Corporations allow their owners to win, without the possibility of deep losses. And what does this mean in terms of responsibility? It means that things like the BP Oil spill are much, much more likely. Because if you can’t get hurt, you’re not going to exercise diligence in the same way you would if you could get more hurt. This is why the juggernauts of global industry — the titans of Wall Street in particular — blow up so frequently and so violently. Corporations are firewalls, spinning mammoth profits through risky bets, but allowing management and shareholders to hide behind them when their risky behaviour comes home to roost. And what happens if the house falls down? The creditors — or more frequently in recent years since we adopted this perverse bailout culture, the taxpayer — take the hit.

Either limited liability should be abolished — corporations could still exist, but their owners and management are personally responsible for any debts and destruction incurred — or their behaviour should be taxed punitively to encourage individual and small business initiatives — the real wealth creators, job creators and innovators — over large scale destructo-juggernauts. At the very least, we should completely stop bailing them out when they blow up. That’s responsibility.

Corporations are certainly not free market entities. Their very reason for existence — limited liability — is created through government fiat. Capitalism and markets existed long before the creation of limited liability, and surely will exist for a long time after its demise.

[hansen384cbh]

I can't comment on whether limited liability is Shariah compliant or not, but I would like to suggest that in context, limited liability laws aren't quite what you're making them out to be.

Firstly, you are implying the false assumption that limited liability means no liability. It doesn't. Exact laws vary from country to country, but its almost always the case that as the size of a company grows, so too does its legal liability

Also, limited liability never extends to cover criminal negligence. In such cases, the individual is still fully liable., while the company also incurs some liability.

I don't really understand what you meant about shareholders being able to hide behind limited liability, its generally the opposite. The limitation can provide short term relief to the bottom line for a month or a year, but it doesn't stop your share prices plummeting when you screw up. That means if anything that in the current structure shareholders are still exposed no matter how well protected the management may be.

Just to be clear, I'm heavily against stock markets, protectionism, and many other aspects of western financial modeling, but limited liability isn't on my list of things to object to.

[Vikonbarius]

I can't comment on whether limited liability is Shariah compliant or not, but I would like to suggest that in context, limited liability laws aren't quite what you're making them out to be.

Firstly, you are implying the false assumption that limited liability means no liability. It doesn't. Exact laws vary from country to country, but its almost always the case that as the size of a company grows, so too does its legal liability

Also, limited liability never extends to cover criminal negligence. In such cases, the individual is still fully liable., while the company also incurs some liability.

I don't really understand what you meant about shareholders being able to hide behind limited liability, its generally the opposite. The limitation can provide short term relief to the bottom line for a month or a year, but it doesn't stop your share prices plummeting when you screw up. That means if anything that in the current structure shareholders are still exposed no matter how well protected the management may be.

Just to be clear, I'm heavily against stock markets, protectionism, and many other aspects of western financial modeling, but limited liability isn't on my list of things to object to.

السلام عليكم

Why are you against stock markets? I was going to start to go into them.

[Smeaphvalialm]

@brother Abu Zakir

Maulana A S Desai of Mujlisul Ulama of South Africa has written books on the impermissibility of Limitied Liability and Corporations. Send him an e-mail with your address and he will gladly post out the books to you for free. If you wish to contribute then that is at your discretion.

He discusses these entities indepth in the books and has explained them in light of the Shariah.

[cyslespitocop]

Have a read of this:

http://en.wikipedia.org/wiki/Criticisms_of_corporations


Share prices may drop and therefore adversely affect shareholders, but they have no control over the corporation generally in its day to day operations...managers can mismanage for their own short term gains hoping not to get caught, by the time they get caught it is too late, they have already benefitted and shareholders still holding the stock lose out. Shareholders (in joint stock companies) should be able to control the company like anyone else...I am not sure if this is shariah compliant either.

I can't comment on whether limited liability is Shariah compliant or not, but I would like to suggest that in context, limited liability laws aren't quite what you're making them out to be.

Firstly, you are implying the false assumption that limited liability means no liability. It doesn't. Exact laws vary from country to country, but its almost always the case that as the size of a company grows, so too does its legal liability

Also, limited liability never extends to cover criminal negligence. In such cases, the individual is still fully liable., while the company also incurs some liability.

I don't really understand what you meant about shareholders being able to hide behind limited liability, its generally the opposite. The limitation can provide short term relief to the bottom line for a month or a year, but it doesn't stop your share prices plummeting when you screw up. That means if anything that in the current structure shareholders are still exposed no matter how well protected the management may be.

Just to be clear, I'm heavily against stock markets, protectionism, and many other aspects of western financial modeling, but limited liability isn't on my list of things to object to.

[ElectraDupu]

Have a read of this:

http://en.wikipedia.org/wiki/Criticisms_of_corporations


Share prices may drop and therefore adversely affect shareholders, but they have no control over the corporation generally in its day to day operations...managers can mismanage for their own short term gains hoping not to get caught, by the time they get caught it is too late, they have already benefitted and shareholders still holding the stock lose out. Shareholders (in joint stock companies) should be able to control the company like anyone else...I am not sure if this is shariah compliant either.

Again, with all due respect, I think you're over simplifying it. If you invest in shares of a company, you are in one sense betting on the competence of that company's internal management. Yes, bad management decisions will bring down stock prices and shareholders will complain and file lawsuits which the company will defend with limited liability and an army of lawyers. However, when management make good decisions, the shareholders are merely happy with THEMSELVES for "picking the right stocks", and the managers live to get sued another day.

And again, criminal negligence is not covered by limited liability anywhere in the world that I'm aware of. That means that if management simply make bad decisions then they are covered, but if they make criminal decisions, they are just as liable as anyone else, often more so. You'd also be surprised as to what can constitute criminal negligence in some countries.

Why are you against stock markets? I was going to start to go into them

A couple years ago, I owned a company that built software for casinos. One of my main reasons for selling the business was the first hand insight it gave me into how such companies manipulate things as basic as revenue and cashflow in order to deceive regulators and investors, and how standard such malpractice seems to be.

Share prices rarely have anything to do with the actual monetary value of a company, and they are heavily manipulated to benefit a few at the cost of many.

Stock markets are a lot like a casino, except instead of fixed rules and well known house odds that anyone can work out with a calculator, the rules are continuously made up and modified by the house, and the odds are given to some, while deliberately hidden from others.

I also have a basic issue with the idea of businesses or even currencies that have purely speculative value that isn't based on legitimate revenues or physical backing (ie, fiat economies). It just legitimises the notion that the whole thing is made up to begin with.

[yarita]

This is an important subject seldom discussed by Muslims, our lives are ruled by corporations and their formation in secular laws as having limited liability. I believe the Shariah would prevent this type of corporation from operating and thus prevent Capitalist business from emerging.

From Wikipedia:

Limited liability is a concept whereby a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership with limited liability. In other words, if a company with limited liability is sued, then the plaintiffs are suing the company, not its owners or investors. A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of their investment in that company.


Corporations essentially exist to allow groups of people to act collectively, without taking personal responsibility if the entire thing goes down like a lead balloon. Sure, if an employee of a corporation behaves in a criminal manner, they are sometimes jailed. Yet corporations — ever since the birth of the modern corporation through Standard Oil — have created what is known as the agency problem. Corporations allow their owners to win, without the possibility of deep losses. And what does this mean in terms of responsibility? It means that things like the BP Oil spill are much, much more likely. Because if you can’t get hurt, you’re not going to exercise diligence in the same way you would if you could get more hurt. This is why the juggernauts of global industry — the titans of Wall Street in particular — blow up so frequently and so violently. Corporations are firewalls, spinning mammoth profits through risky bets, but allowing management and shareholders to hide behind them when their risky behaviour comes home to roost. And what happens if the house falls down? The creditors — or more frequently in recent years since we adopted this perverse bailout culture, the taxpayer — take the hit.

Either limited liability should be abolished — corporations could still exist, but their owners and management are personally responsible for any debts and destruction incurred — or their behaviour should be taxed punitively to encourage individual and small business initiatives — the real wealth creators, job creators and innovators — over large scale destructo-juggernauts. At the very least, we should completely stop bailing them out when they blow up. That’s responsibility.

Corporations are certainly not free market entities. Their very reason for existence — limited liability — is created through government fiat. Capitalism and markets existed long before the creation of limited liability, and surely will exist for a long time after its demise.

The above is not entirely from wikipedia. Only the first paragraph. The latter portion is from http://azizonomics.com/2011/08/13/ar...ations-people/

That said, Maulana AS Desai's book on limited liability is probably the best writeup on the issue. Just ignore the writing style and focus on the academics of the writeup.

Mufti Yusuf bin Yaqub wrote a brief 25 page writeup on shares and stocks which should be available here : http://daruliftaa.net/Islamic-Financ...eswriteup.html

There is a further discussion on the issue between Mufti Vawda Saheb and few other Ulama on the issue : http://www.scribd.com/doc/94644849/Debate-on-Shares

[sportsbettinge]

Again, with all due respect, I think you're over simplifying it. If you invest in shares of a company, you are in one sense betting on the competence of that company's internal management. Yes, bad management decisions will bring down stock prices and shareholders will complain and file lawsuits which the company will defend with limited liability and an army of lawyers. However, when management make good decisions, the shareholders are merely happy with THEMSELVES for "picking the right stocks", and the managers live to get sued another day.

And again, criminal negligence is not covered by limited liability anywhere in the world that I'm aware of. That means that if management simply make bad decisions then they are covered, but if they make criminal decisions, they are just as liable as anyone else, often more so. You'd also be surprised as to what can constitute criminal negligence in some countries.



A couple years ago, I owned a company that built software for casinos. One of my main reasons for selling the business was the first hand insight it gave me into how such companies manipulate things as basic as revenue and cashflow in order to deceive regulators and investors, and how standard such malpractice seems to be.

Share prices rarely have anything to do with the actual monetary value of a company, and they are heavily manipulated to benefit a few at the cost of many.

Stock markets are a lot like a casino, except instead of fixed rules and well known house odds that anyone can work out with a calculator, the rules are continuously made up and modified by the house, and the odds are given to some, while deliberately hidden from others.

I also have a basic issue with the idea of businesses or even currencies that have purely speculative value that isn't based on legitimate revenues or physical backing (ie, fiat economies). It just legitimises the notion that the whole thing is made up to begin with.

Who determines how much a company is worth? It will vary from analyst to analyst. If people speculate, thats entirely upto them, you cannot stop a man from paying £10 for something you would only value at £4. All you can do I guess is implement tougher conditions.

Stock markets are like Casino's in this day and age where the big institutions virtually rig the market through various contacts, a whole network built-up from long ago. They use Algo-trading programmes (high-frequency trading programmes) where, just like counting cards at a Casino, they can virtually tip the market one way or another based on their trading executions and what will make them the most money.

But the single biggest probelm is the use of leverage, whi8ch totally distorts normal market trading patterns with liquidity that simply does not exist in reality. For example, I have £1000 to invest, but the bank allows me to leverage that ten times. So any trading I do is worth ten times as much or any losses are ten times as big. .....Where did the bank get the extra money from to lend to me? It did not, it simply created it out of thin air and present it as a figure on your screen (fractional reserve banking).

Having said all of that, you can be a shareholder without ever having traded on the stock market at all. Many folk forget the stock market is merely a big shop window where companies looking to expand or attain a valuation, come and raise funds by selling equity in their common stock to ordinary folk. There are thousands of companies and corporations that are not on the stock market but are just as successful remaining private. Stocks markets are high-risk in general and should be avoided in this day and age simply because of the corruption that is rife within them and the huge instability everytime there is any crisis.

There are alternatives, direct business partnerships. Business syndicates - people who work together for the same common goals. Private equity investment - as much as some maybe against this, it can be a good partnership if the right kind of people can be found.

Allahu A'lam

[spounnypneups]

I think the views of the stock market here are a bit too harsh. To say its rife with corruption seems to be a bit of an overstatement. I'd like some more proof before believing that. No doubt, there is some foul play with insider trading but that is illegal and there is foul play in many aspects of life.

Most people who trade in the stock market either go in blind, follow analysts like it's Haq, or give their money to professionals to invest. The first will almost guarantee you a loss, the second and third require you to actually pick a worthy candidate and not just any Tom, **** and Harry that seems to know what they are on about. Otherwise you risk someone playing around with your money and losing it.

Those people who invest themselves usually do it without much knowledge and suffer big. And when they do they sometimes unfortunately have a tendency to think foul play is going on. A lot of people will see a stock rise, buy based solely on that and expect it to continue to rise. When it falls and they lose they can't understand what bucked the trend. Others who are a bit more well versed will actually look into a companies quarterly reports and see what the state of the company is. Unfortunately many people even then lack the ability to pick out the necessary information.

For example. By law a company has to provide correct information on all their earnings, assets liabilities, profits etc etc. false information will cause in legal backlashes against the company. However, even by telling the truth companies can hide their failings by using language and figures which a laymen can't recognise as meaningless waffle.

Have you ever heard a report from a company saying:

"we had a terrible 3 months. Profits have decreased substantially due to a mix up in the management."

Instead what you'll see is:

"we had a great quarter. Sales have breached a record amount. Up 20% from our previous high. As a result profits of £12m were earned"

All that might be true but it's waffle. Record sales and record profit alone don't tell you anything about whether a company is struggling or doing well. Of the people who bother to read these reports, they see a glowing report and invest heavily, and when the company fails and their shares fall they can't understand what went wrong and they automatically think there is foul play.

Making money from stocks is not an easy thing. It required hours worth of research and analysis of companies before you can decide who to invest in.

The only issue is whether it's halaal or not as some say it's halaal and there's haraam. Jazaakallah Abu Hajira for providing some links on this. I'm slowly working my way through them.

[illerlytoindy]

When the American (Central Bank) Federal Reserve Bank and the British Central Bank do Quantitative Easing, some of this new created money goes onto the stock market raising the prices of stock...giving the appearance that things are getting good again and pulling in suckers to be conned. People who have access to this new created money rig the game and control it.

[giDdfezP]

I think the views of the stock market here are a bit too harsh. To say its rife with corruption seems to be a bit of an overstatement. I'd like some more proof before believing that. No doubt, there is some foul play with insider trading but that is illegal and there is foul play in many aspects of life.

Most people who trade in the stock market either go in blind, follow analysts like it's Haq, or give their money to professionals to invest. The first will almost guarantee you a loss, the second and third require you to actually pick a worthy candidate and not just any Tom, **** and Harry that seems to know what they are on about. Otherwise you risk someone playing around with your money and losing it.

Those people who invest themselves usually do it without much knowledge and suffer big. And when they do they sometimes unfortunately have a tendency to think foul play is going on. A lot of people will see a stock rise, buy based solely on that and expect it to continue to rise. When it falls and they lose they can't understand what bucked the trend. Others who are a bit more well versed will actually look into a companies quarterly reports and see what the state of the company is. Unfortunately many people even then lack the ability to pick out the necessary information.

For example. By law a company has to provide correct information on all their earnings, assets liabilities, profits etc etc. false information will cause in legal backlashes against the company. However, even by telling the truth companies can hide their failings by using language and figures which a laymen can't recognise as meaningless waffle.

Have you ever heard a report from a company saying:

"we had a terrible 3 months. Profits have decreased substantially due to a mix up in the management."

Instead what you'll see is:

"we had a great quarter. Sales have breached a record amount. Up 20% from our previous high. As a result profits of £12m were earned"

All that might be true but it's waffle. Record sales and record profit alone don't tell you anything about whether a company is struggling or doing well. Of the people who bother to read these reports, they see a glowing report and invest heavily, and when the company fails and their shares fall they can't understand what went wrong and they automatically think there is foul play.

Making money from stocks is not an easy thing. It required hours worth of research and analysis of companies before you can decide who to invest in.

The only issue is whether it's halaal or not as some say it's halaal and there's haraam. Jazaakallah Abu Hajira for providing some links on this. I'm slowly working my way through them.

I think you touch upon an important issue - one needs to have a good understanding of the sector and business they get involved in. Because essentially, this is all about business and how well a business is performing. If you research a sector or are a proffesional in a particular field, you will know what trends and stats to lookout for in the particulars of this sector. If you can do this yourself or take the advice of someone who is considered an expert in the sector, then you are better informed before taking the risk. One othe rthing is to have a longterm outlook, not the riches over night approach. Otherwise, you leave yourself open to the whims of market forces.

What many do not understand is just how corrupt the city and many financial centres are. It does not get out until something really bad happens and insiders start spilling the beans. Take for example the Libor scandal, that has virtually effected most households in western Europe and America, loans and anything esle tied to the London banking system. There were rumuors about it before, buts only now has the extent of the scandal become clear. These are the same institutions and financial houses who are bulwarks of the markets and some of the most important constituents thereof.

Anyone who understands what card-counting is in Casino's - basically, the equivalent is done by all the big institutions in London and New York (and beyond). They do it using extremely powerful programmes to effect the price how they would like it. They have leveraged financial instruments which on face value are promoted as being safety tools should markets become adverse - what they really do, if you elect to take them up, is give over what you intend to do to the very companies that set the spread when you sell.

Also, it is not right that financial houses that are (in reality) virtually broke, continue risky market trading activities while they are getting bailed out by the taxpayer. Just look at JPMorgan, losses growing bigger and bigger from its trading arm, but no doubt a bailout will ensure they can carry-on as usual and get into even more of a mess. Its the height of arrogance and corruption, but they are immensely powerful as a group and little we can do to change that. In the US, UK, there have been finacial troubles for a few years now, yet not a single law has been passed to properly regualte these people and what activities they can get involved in. Such is their stranglehold on government, while they hold the taxpayer to ransom.

What they need to start looking at is the regulators, former bankers and market people. These need to be chnaged to atleast start doing a decent job. It would be better for Muslims to avoid the markets in current times. There are so9 many better ways to use your money.

As for whether it is halal or haram, I believe Mufti E Desai has issued a Fatwa on this issue with great insight. Its somewhere on this topic in the forum.

Allahu A'lam

[Olphander]

I agree with almost everything you said there. But I would like to point out that the Libor scandal you mentioned, as well as the problems with JPMorgan are all regarding banks. As Muslims we should not even be concerned with these institutions from a stock market perspective in that we shouldn't be owning any shares in them. This is my own opinions on the matter I should point out by the way, so take them with a pinch of salt, but purely from a stock market view what happened to these banks and their shares should not affect us as we shouldn't own shares in institutions who almost entirely deal in riba. Personally, I see this is the will of Allah SWT that after so many years the Libor scandal broke out, shares plummeted (Barclays for eg went down by 8% in one day) and these banks faced heavy backlashes from their customers and are now under pressure. To me, those who invested in such companies will have been hit and that is a punishment for having invested in institutions so immersed in Haraam.

From a non stock perspective, I also agree that when these institutions mess up they should face severe consequences, and I agree with you that many times they get away with it or are bailed out by the taxpayer.

The only thing I didn't understand is why you said Muslims should avoid the market at these times. Because your entire post was regarding banks and then you switch back to the markets? I apologise but I couldn't quite see the link. I don't know if you were changing the subject and referring to the current recession and hence not to invest or if you were linking this to the banks? If it's the latter, then we shouldn't be buying shares in banks anyway, if it's the former then I understand what you mean.

In a recession (known as major bear markets sometimes) to invest in companies requires a different approach to investing during a bull market when the market is on the rise and in good ground. I think it would be wise for Muslims in general to avoid the stock market whether it's a bull or a bear market unless they really know what they are doing, otherwise you will either lose big, lose small or gain small. To gain big really requires a lot of work.

[Beriilosal]

Who determines how much a company is worth? It will vary from analyst to analyst. If people speculate, thats entirely upto them, you cannot stop a man from paying £10 for something you would only value at £4

In theory that's OK. But the problem comes when things like revenue and cash flow, and especially future revenue forecasts are deliberately misrepresented by the company (often in ways that are not illegal). It's an inherent part of how the system works.

I think the views of the stock market here are a bit too harsh. To say its rife with corruption seems to be a bit of an overstatement. I'd like some more proof before believing that.

If you can be more specific about what kind of proof you are looking for, I'll be happy to do my best in pointing you in the right direction.

I've been very careful during my time on this site not to state things of which I have little knowledge as being fact, but I do feel this is one subject where my opinions are adequately qualified. I mentioned before that I had built up a company shortly before the Cambodian stock market was launched, which is where much of my opinion and experience on the subject comes from. If you want "proof" of that, here's article written around that time: http://i290.photobucket.com/albums/l...4/scan0005.jpg ).

As for actual evidence of widespread malpractice, I think the latest UK banking scandal is a pretty good indication of how widespread the issues are. If bankers were openly patting each other on the back for illegally manipulating interest rates, just imagine what goes on behind closed doors at private equity firms.

[jhfsdhf]

Things like future revenue forecasts etc is a case were people put too much weight on what professionals say and so can fall prey to incorrect advise or worse, fixed advice. The case is stocks and shares all follow trends, and top companies all have things to look out for in their quarterly reports which show you whether its failing or on the brink of success. Maybe I'm not as familiar with things like misrepresented future forecasts because that's not something we are taught to put too much emphasis on when deciding the stocks. I can understand what you mean more now though when you talk about corruption. The bank I don't rate as I wouldn't invest in them anyway, but again I understood what you meant by your last line of if banks are doing it why not other companies.

I do firmly believe though, that unless a company blatantly lies in its report about how much it's earned, it's assets and liabilities etc, then you are fine. You just need to know what to look out for. The idea of misrepresenting future revenue is similar to what I mentioned about companies tailoring their reports to make them look like big winners. All their figures are correct but they don't mean much at all. At the end of the day companies want you to invest and they will sweet talk you as much as it takes, but, unless they lie about their current situation with incorrect figures (current not future projections) a good investor will be able to see the company's true worth.

[Mereebirl]

I do firmly believe though, that unless a company blatantly lies in its report about how much it's earned, it's assets and liabilities etc, then you are fine. You just need to know what to look out for.

These sound like famous last words. A company doesn't need to "blatantly lie" about how much it's earned in order to create deliberate misconceptions about it's financial state. For example, it can get creditors to hold off on payment demands without informing shareholders, giving the impression that profits have been generated when in fact there will only be bigger losses when the creditors come knocking. These are things that you can only find out by hiring a small army of accountants.

This really isn't a matter of due diligence.

I'd also like to note that the article I linked to was written at a time when I was a very different person from the man I am today. Back then I was all about world domination and pursuing selfish goals. I like to think I've changed a bit since then

[tobia]

Which is why I said people shouldn't be taken in just by the profits. There are many things to look out for. If a company has done what you say and made it seem like they have made more money (which they have in the hope that they can deal with the future payments they owe) you will see hints of signs of things not seeming as they are. For example, their earnings per share may not have risen much, which should do if they have made more money which suggests profit hasn't increased much. Or dividends may have not reflected the supposed increase in profit.

As for not telling shareholders how would the manage that? It would still be listed under the liabilities section although probably moved under the long term liabilities. The agreement to withhold payment for a whole would have to be reflected under the liabilities otherwise it is incorrect information which should be illegal.

I dont know. I'm not an expert in this field. I'm trying to learn more about this as I'm interested in investing in the future. It's seems a good way to make money. I might end up disappointed and agreeing with you that it's all corrupt after experience.

And hey, world domination isn't too bad. If you ever have thoughts of world domination again, I could do with a sidekick haha.

Back to the topic, I am thinking of investing some money in a few months time if I manage to pass into my second year of uni. So im trying to learn as much about them as I can.

[Kilsimpaile]

As for not telling shareholders how would the manage that? It would still be listed under the liabilities section although probably moved under the long term liabilities.

I can count the number of financial investments I currently have on one hand. However between them, they generate a total of somewhere in the region of 200,000 pages of financial documents per year. That is not because they are all needed, it's to ensure that it is literally impossible for one individual to read and fully understand every line that they contain.

That means that the only way for you to perform a legally recognized level of due diligence in buying shares, is to do it through a broker who can hire a bunch of people to read the documents for you. Except, that broker and his agency have an inherent conflict of interest from the moment you walk through their door. The more money they can persuade you to gamble (and make no mistake, gambling is what this is, albeit with varying odds), the more they stand to profit. And as the original poster mentioned, if it all goes wrong, they have protections that you don't.

You just need to know what to look out for

Brother, I apologize for quoting this a second time, and I also apologize in advance for what I am about to say if it offends you. It's not my intention, but I want to be absolutely clear about my experience of this:

It is arrogant and naive to think that you, I, or most likely anyone that either of us know, "knows what to look out for" to any reliable degree of accuracy with regards to the stock market. I say this after having seen people who have worked in the industry for decades end up losing their homes and destroying their families simply because they thought that they "knew what to look out for" better than the other millions of investors who also lost money. It's just a giant casino, some people win, some people lose, but if you keep gambling for long enough, it will take everything you have in the end. It's best simply not to start.

I doubt I have persuaded you, so instead please just consider this: Do not invest anything that you can't afford to lose. Sounds like simple advice, I know, but it's something many people end up forgetting, and it's of crucial importance.

And hey, world domination isn't too bad.

You're right, it could be wonderful, but it depends on the motives of the person doing the dominating. In my case it was simply greed, and fortunately for the world, I didn't end up getting that far in my efforts

[pipojambo]

I will take your advice. Of the money I will have, I will probably be investing maybe £500-£1000. It's small enough that I can risk losing half if I invest the bottom end, and just over 20% at the top end (unless I really mess up and hit a company that fails miserably), but the book I am currently studying on shares says not to go past 10% so inshaa Allah it'll be fine.

I am wary and will certainly be cautious when I invest, but the book I am currently reading is by an author who has a lot of credibility behind his name and his book has got nothing but extremely positive reviews so I am keeping some hope open that this is a possible.

Allahu A'lam, I look forward to giving it a shot, if it doesn't work out I will quit, I don't have suicidal tendencies to continue putting money on a failing prospect. If it works then Alhamdulillah we will see how it goes.

[gghrdfffhfyj]

I agree with almost everything you said there. But I would like to point out that the Libor scandal you mentioned, as well as the problems with JPMorgan are all regarding banks. As Muslims we should not even be concerned with these institutions from a stock market perspective in that we shouldn't be owning any shares in them. This is my own opinions on the matter I should point out by the way, so take them with a pinch of salt, but purely from a stock market view what happened to these banks and their shares should not affect us as we shouldn't own shares in institutions who almost entirely deal in riba. Personally, I see this is the will of Allah SWT that after so many years the Libor scandal broke out, shares plummeted (Barclays for eg went down by 8% in one day) and these banks faced heavy backlashes from their customers and are now under pressure. To me, those who invested in such companies will have been hit and that is a punishment for having invested in institutions so immersed in Haraam.

From a non stock perspective, I also agree that when these institutions mess up they should face severe consequences, and I agree with you that many times they get away with it or are bailed out by the taxpayer.

The only thing I didn't understand is why you said Muslims should avoid the market at these times. Because your entire post was regarding banks and then you switch back to the markets? I apologise but I couldn't quite see the link. I don't know if you were changing the subject and referring to the current recession and hence not to invest or if you were linking this to the banks? If it's the latter, then we shouldn't be buying shares in banks anyway, if it's the former then I understand what you mean.

In a recession (known as major bear markets sometimes) to invest in companies requires a different approach to investing during a bull market when the market is on the rise and in good ground. I think it would be wise for Muslims in general to avoid the stock market whether it's a bull or a bear market unless they really know what they are doing, otherwise you will either lose big, lose small or gain small. To gain big really requires a lot of work.

Brother, appreciate your comments. I think you have misunderstood me, I am not talking about investment in banks, rather their corrupting influence on the overall market. Mufti E Desai has mentioned the companies business to be a key factor in determining whether you can invest in them or not. Banks and most finacial houses are off limits for Muslims.

The reason I have singled out banks quite ruthlessly is because most banks, be they high street or investment banks, tend to have an investment trading arm that dabbles with the financial-markets. All the big banks have a trading arm, some have reduced the size of their trading arm in the last few years, but they are still there. This is where vast sums of money is ploughed into the market, putting not just their companies at risk but even the savings of their savings-account holders (were the bank to go under from the pressure of write-downs). In order to prevent that possibility, they have forced government (taxpayer) to bail them out with vast funds to buy-up their overpriced assets, that would never happen in 'normal markets'. The knife they hold to the taxpayers neck is complete ruin in the financial system - virtually blackmail.

They are abusing their position and have turned it into a weapon to garuantee they can continue as they wish. They are the single most influental players in the stock markets because of the leveraged products they create, that adds in massive liquidity and also removes it at a stroke. That distorts any kind of reality from the markets as they are. Look at the big corporations of the world - go to their home pages and look at the disclosure on ownership of these corporations in the stock markets, you will find the top shareholders in most of these corporations includes several banks & investment banks. Banks and stock markets are attached at the hip. Most of their other operations are similarly linked.

I pray Muslims pursue alternatives to the stock market casino.


Allahu A'lam

[RozzyLiu]

I will take your advice. Of the money I will have, I will probably be investing maybe £500-£1000. It's small enough that I can risk losing half if I invest the bottom end, and just over 20% at the top end (unless I really mess up and hit a company that fails miserably), but the book I am currently studying on shares says not to go past 10% so inshaa Allah it'll be fine.

I am wary and will certainly be cautious when I invest, but the book I am currently reading is by an author who has a lot of credibility behind his name and his book has got nothing but extremely positive reviews so I am keeping some hope open that this is a possible.

Allahu A'lam, I look forward to giving it a shot, if it doesn't work out I will quit, I don't have suicidal tendencies to continue putting money on a failing prospect. If it works then Alhamdulillah we will see how it goes.

Brother, hope it goes well for you. But I would urge you again to refrain from investing. You cannot learn how to invest in stock markets buy reading books. It will give you a picture of what to lookout for and an idea of the different financial instruments out there. But unless you have an expertise on a particular sector or are involved in this sector yourself, the 'odds' are stacked against you/us.

Its not neceassarily the share that matters, its the the business and the structure of the business behind it which the share represents. How many shares are in issue - how many are on loan - how many are there fully subscribed? What are the clauses in place, largely hidden away to smallprint in some cases, that could trigger the full subscription (and dilute your holding making it worth less after exercize of warrants). What classes of share and what other liabilities are sitting somewhere dressed-up in jargon?

The amount of stuff they were doing back in the arly 00's was rather shocking (experience with a few like-minded friends), I can only imagine the web is even more tangled now. Judging by the the key players (banks, investment banks, finacial services firms) they are much more sophisticated at their deception now.

Allahu A'lam