Saturday, April 25, 2009

Glimpses of recession

Across the front page of the FT…. left to right:

1.  Samsung first quarter profits down……. 72%

2. Spanish unemployment  jumps 800,000 for the quarter to 17.4%

3. Indian arranged marriage market now rejecting quants, bankers and IT types in favour of civil servants and SOE employees

Wednesday, April 22, 2009

Schizoid Policy???? The IMF

In its most recent uttering the IMF chastises governments for having not yet “done enough” in the banking sector. They appear to want three things to be done:

  1. “deal” with toxic assets on banks’ books; and,
  2. shut down insolvent financial institutions; and,
  3. provide additional capital to cushion balance sheets against further loan losses.

which might be fine but finding the dividing line in here is like drawing a knife through a bowl of marbles.

With enough “additional capital” any insolvent bank can be made solvent. If “toxic assets” are the measure of what should be closed then most banks  could be shut down. Bad loans are part of doing business.

Some of these incentives fight one another. If there is a prospect of capital coming to “cushion” bad loans there is a lower incentive to foreclose. If insolvency can be staved off in the same way there is little incentive to close institutions.

The tough part is that some measure of acceptable risk must be developed, bad loans shed down to that level – and if shedding is not enough then closure. Such govt funds as exist might be better targeted at softening the transition costs for consumers of bank services rather than for banks – the producers.

Sunday, April 19, 2009

Is this the beginning… or just the end of time

Equity markets in Hong Kong have done 37.2% since March 09. Mood seems to be gentle optimism but with expectations of volatility.

Friday, April 17, 2009

Tight or loose….?

Ironic is it not that today's low inflation figure follows some months of falling interest rates – in an effect which appears to be quite the opposite of the standard prescription of raising interest rates to lower inflationary expectations.

Could it be that the link between monetary policy aspirations and real world outcomes is not as robust as we once might have liked to think?

Wednesday, April 15, 2009

A bottom line on development for indigenous people

“President Barack Obama courted the Indian vote. During the campaign, he visited Montana's Crow Reservation last May and was adopted into the tribe under the Crow name "One Who Helps People Throughout the Land." There he said, "Few have been ignored by Washington for as long as Native Americans," and vowed to improve their economic opportunities, health care and education.

Two vital steps in this direction are to strengthen property rights and the rule of law on reservations. Virtually every study of international development shows that both of these are crucial to prosperity. Indian country is no different. The effect of insecure property rights is evident on a drive through any western reservation. When you see 160 acres overgrazed and a house unfit for occupancy, you can be sure the title to the land is held by the federal government bureaucracy. In contrast, when you see irrigated land in cultivation with farm implements, a barn and well-kept house, you can be sure the land is held in fee simple, whether by an Indian or non-Indian.”


From Terry Anderson, economist… in the WSJ

Sunday, April 12, 2009

Bags NOT me for the $0.10

In a flash of environmental inspiration retailer The Warehouse decided to ignore this and to begin charging ten cents a bag in the near future.

Fat versus Normal Cats

Fat tails versus Gaussian normality in equity returns here on my website.

The Baroness

April 11, 2009

The secret life of the Jazz Baroness
She was the Rothschild beauty who scandalised the dynasty by walking out on her family to become muse to the jazz demi-monde of New York. Now her great-niece has pieced together the extraordinary story of Nica de Koenigswarter.

Hannah Rothschild's search for her great aunt Pannonica has taken her the best part of ten years. The result is a moving film and - due next year - a book about the life of this extraordinary woman. Not just extraordinary because she decided to leave her husband and five children at a time when women simply did not do such things, but extraordinary because of the role that she played in the lives of the jazz giants of New York in the Fifties and Sixties, who were struggling not only to establish their own brand of new, passionate music but also against a racist culture. Pannonica fell in love with the music and then with the players: she bailed them out of jail, tended their wounds, gave them shelter when they were broke and coped with their drug habits.

Tuesday, April 7, 2009

The search for irrationality

The great love of declaring people to be irrational whenever we can’t understand things strikes again… or maybe because it makes us feel rational goes on – and it’s ignorant, intellectually lazy and dangerous.

Latest victim – Garesh Nana from BERL declares this morning that the high level of volatility in currency rates arises because people are irrational in the face of extreme uncertainty. I can think of nothing more rational than to change your mind and expectations – quickly -  when faced with uncertain and rapidly altering circumstances.

Increased volatility is the result of absolutely rational behaviour.

Declaring this to be irrational boosts peoples “feel cute” quota I suppose. The implication is deadly - “these people are irrational and need some elite doing stuff for them”. Yeah right. And further if people are irrational and government is full of people why on earth would you advocate their involvement?

Wednesday, April 1, 2009

Integrity and company value

This is a great little lecture from Michael Jensen on the impact of integrity on company value.

The numbers are truly scary.

Bad economist pun….

From Dan Finkelstein via Marginal Revolution….

f(x) goes into a bar and asks for a drink. "I'm sorry," the barman says. "We don't cater for functions."

What a speech ought to sound like…

This is an excellent speech of great relevance at present and only three minutes long:

Shortcut to:

it shows all too clearly the difference between the standards in some Parliaments versus ours.