Argentina teetering towards default

I’ve been working with a few insurers and reinsurers on credit risk recently. We’ve had plenty of reasons to think about it, what with new regulations (SAM, Basel III) and South African government downgrades. However, sometimes I get the impression that credit risk is viewed as an academic risk, as something that happens to others, …

Chinese debt a serious worry?

I’m not really that close to developments in the Chinese economy. It is a large, complicated beast that is quite different from our own. Over the last year or so I’ve heard more and more from people who generally speak sense that the debt levels in China and the awful investment projects used to show …

Education, CAs and how long is long to study

A recent Moneyweb article poses the question of whether Chartered Accountants in South Africa should study longer. The problem is that high schools are failing learners and many accounting students start out with significant literacy and numerical weaknesses in their learning. Now, as it turns out, I’m not a supporter of increasing the required length …

When is revenue lost?

In respect for Nelson Mandela’s death and funeral, many retailers closed yesterday for the day. This Business Day article claims a R300m loss for the retail industry as a result. Except, no. Some fraction of those sales might be permanently lost, but the income hasn’t been spent and the cash still sits in shoppers’ pockets. …

Sewing seeds of manufacturing growth

The NY Times has a fascinating article on the increasing demand for American made goods, particularly textiles, and the limited supply of labour with the relevant skills. There is plenty more to the story than just manufacturing increasing in the US – it also includes an historical perspective on the sources of labour in the …

Why equity matters

Income inequality is a bad thing. It’s a suboptimal scenario. This isn’t something that is debatable. It follows from a few fairly fundamental principles: Wealth demonstrates diminishing marginal returns.  This is evidenced through risk aversity and other empirical studies Happiness does generally increase with wealth, but at a decreasing rate. There’s plenty of evidence that …

Intrade and the Prisoner’s Dilemma

Ok, it’s not exactly the Prisoner’s Dilemma, but it tastes the same.  Members of prediction market Intrade, have to decide whether to cooperate or be selfish. The exchange is insolvent. It seems like the operator didn’t separate member money from its own money and then spent it. This basically makes it a ponzi scheme. It …

Summary of Cypriot capital controls

From a number of sources (CNN, USAToday, FT) No Eurozone country, since the creation of the Euro, has ever instituted capital controls. It’s not really allowed, except in exceptional circumstances. Which goes to show the value of rules with exceptions for “exceptional circumstances”. Which is to say, not much. The cost to large depositors Deposits …