Repo rate raised 50bps to 11.5%

The South African Reserve Bank increased the Repurchase Rate today by 50 basis points. As usual, all the talking heads are out explaining why this was exactly the right thing, exactly the wrong thing, exactly the right thing for the wrong reason and several other combinations. Historical levels of Repo updated graphs – Short memory […]

Optimism and flawed decision making

Behavioural finance is no longer a “new idea”. It has entered mainstream finance education through CFA, Business Schools, even actuarial exams (ST5 for UK and South African actuaries). Some of the biggest lessons revolve around how bad we as a species are at making decisions in the face of uncertainty. Emotional biases, overconfidence, loss aversion, […]

Nick & Jerome

Jérôme Kerviel, a 31 year-old banker at Soc Gen is blamed for losses of €4.9 billion incurred through rogue trades spanning over a period of some months. The story has a remarkable similarity to Nick Leeson, the Original Rogue Trader who is blamed for the demise of Barings Bank in 1995. Unfortunately for Soc Gen, […]

It’s not just us – the cost of (electric) power

South Africans have been lamenting the state of our power infrastructure and Eskom’s inability to keep infrastructure up with demand.  Now there’s plenty of useful debate left there (so many of the points I hear made are irrelevant and serve to distract everyone from the real issues. Past sins For example, why are so few […]

Anyone left to argue? Rudco liquidated, CLIENTS LOSE MONEY

It’s peaceful around here this morning. I’m in Stellenbosch running a financial modelling course for the Faculty and Institute of Actuaries, in conjunction with the Actuarial Society of South Africa. The sun is shining, the skies are blue and although the wind is getting up, it is still a pleasant day. But that has nothing […]

Directors’ Dealings – Information, Noise and the role of Randomness

I was reading an article about the directors of Imperial and Steinhoff purchasing shares in their respective companies. Steinhoff directors made the news when the CEO originally used Single Stock Futures to gear his exposure to a significant position in the company. (This position has since been converted into a direct position with about the […]

The wheels (of justice) turn. Just too slowly for Rudco.

“E.s.” commented on my earlier post: Too Good To Be True about the ridiculous proposition for turning lead into gold (offering fixed rates home loans in the South African Rand at 6% interest). The interesting thing here is that since Rudco’s initial plans were announced, interest rates have ticked up several points, and are likely to increase further in December (consensus from the market is currently around 50bps) and quite possibly again early next year. I’m sorry E.s., you clearly haven’t been reading the blogs and comments here and other places. To repeat the four themes: The business model is not viable therefore you should expect problems sooner or later. Rudco are in contravention rules, regulations and judgements, […]

Solvency II makes another milestone – QIS3 out

Apparently the results for QIS3 are now available.  QIS3 (“Quiz 3”) is the third Quantitative Impact Study along the path to rolling out Sovlency II for insurance companies between 2010 and 2012. It provides further light on what capital requirements will actually be when Sovlency II comes into effect. Perhaps a warning is required for […]