Occupy Wall Street’s (OWS) idea of using charitable donations to buy up distressed consumer debt, and then simply forgiving it, sounds very appealing. I am very much in favour of pardoning debt that everyone knows can never be repaid. This allows overly-indebted people to get on with their lives, hopefully in a more productive way. One of those ways, OWS hopes, is eventually to make their own financial contribution to the project, thereby ‘paying it forward’. The impact of a test project was impressive: according to one of the organisers, OWS was able to buy $14,000 of distressed debt with an investment of just $500.
Tag Archiv: adaptation
Morality and Markets
5. November 2012
I was so impressed by a lecture on the fascinating subject of ‘Economics and Ethics’ by Julian Nida-Rümelin, a former German culture minister and currently professor of philosophy and political theory at the Ludwig-Maximillian University in Munich, I literally ran out and bought the book. Nida-Rümelin’s newest publication, entitled The Optimisation Trap[1], deals with the philosophy of a human economy.
In Praise of Good Things That Come to an End
9. July 2012
“If only days like this could last forever,” sang Die Toten Hosen. These are perhaps not the kind of romantic sentiments one might expect from a punk band, but they are certainly ones that almost all of us can identify with. Every now and again, those special moments in life come alone when we think how great it would be if we could only stop time.
Freedom or Broccoli
2. July 2012
“What are they going to force us to do next – eat broccoli?” raged one American TV commentator about the healthcare reform known as Obamacare. He considered it an impingement on his personal liberty to be obliged by law to buy health insurance. The decision by the US Supreme Court last Thursday to uphold the plan as constitutional has obviously ignited a wave a discontent across many parts of the country, not least in the campaign headquarters of Republican presidential candidate, Mitt Romney. He has already promised to repeal the law if he is elected in order to give the American people their freedom back.
Deterring Insider Traders
29. June 2012
The conviction of Rajat Gupta, (the former head of McKinsey and ex-board member of Goldman Sachs and Procter & Gamble) is being seen as a milestone in the long crackdown on insider trading by US prosecutors. Gupta was found guilty even though he did not personally benefit from the crime and the conviction was secured largely on the basis of circumstantial evidence. By setting the bar lower than the usual standard for conviction, the prosecutors hope to establish an effective deterrent for would-be insider traders. It could be working: the UK’s financial market regulator, the FSA, has revealed that there has been a dramatic decrease in unusual trading ahead of the London-listed M&As. Among other things, it attributes the decline to the much-debated Rajat Gupta trial.
The Fitness of Good
15. June 2012
The Bloomberg anchor-woman was to blame. She started it. Right at the outset of a TV interview with a Global Head of Economic Strategy, she decided to limit the scope of the discussion about the world’s ills to one region: Europe. She then further sub-divided the Europe issue into a simple question: “Will Greece exit the eurozone or not?” It was almost as if this binary yardstick could adequately measure the goodness or otherwise of future outcomes for investors or for viewers in general.
A Sacred Cow is Led to the Slaughter
11. April 2012
That Til Schweiger, the German actor and filmmaker of Hollywood renown, is to take over the role of detective in the German cult crime series ‘Tatort’ later this year is already big headline. But not big enough, it seems. Schweiger is causing an even bigger stir among fans of the long-running series – a kind of CSI: Crime Scene Investigation set in various parts of Germany, Austria and Switzerland – by suggesting that it scrap its title sequence. After 40 years without any change, Schweiger reckons the images and music are “outdated”
A Pound at Home is Worth Two in the Bank
9. March 2012
The discovery that some UK households keep more than £1,000 in cash at home – often because they distrust banks – is causing some concern for the Financial Services Compensation Scheme (FSCS). The body, which protects consumers from losses when financial institutions go bust, is worried because cash held in British homes, some £5.6bn in total, is not protected by the scheme. In many cases, it may not be covered by domestic insurance policies either. The FSCS also believes the distrust of banks, expressed by some 13 percent of households in their research, is unwarranted.
Happiness Planning
29. February 2012
This time tomorrow I will be embarking on a flight to an incredible Indian holiday. I love to travel and I have been looking forward to this trip for ages. As usual, I have already spent far more money than I originally planned. Although India is a relatively inexpensive country, I just had to choose the Andamans – a small group of islands in the Indian Ocean – as my holiday destination. There are fabulous hotels there, and waterfall showers. They even offer the possibility of snorkelling with elephants! Of course, this activity comes at a juicy price; for the same money, I could buy a very nice pair of shoes, and be able to wear them for much longer than the single hour I will ultimately spend plunging with the pachyderm.
The Unforgiven
20. February 2012
“There was a period of remorse and apology for banks; that period needs to be over,” implored Barclay’s boss Bob Diamond before a parliamentary committee in January 2011. Well nobody seems to have been listening because, a year later, banker-bashing persists. Mr Diamond seems determined to remain the lightning rod for public fury but he is far from alone. In the last few weeks Stephen Hester, the head of the state-owned Royal Bank of Scotland has been publicly badgered into giving up a one-million-pound bonus. The figure seems large, but it is modest by bankers’ standards. Also RBS’s former CEO, Fred Goodwin, the man who presided over the bank’s collapse, was stripped of his knighthood. To put that into context, the last person to be so unceremoniously defrocked was the Zimbabwean dictator Robert Mugabe.
Our Inner Pinocchio
8. February 2012
Have you lied yet today? According to some studies we lie about three times in every ten minutes of conversation[i], which means that unless you just woke up you have already let a few lies slip. Perhaps you told your neighbour how good she looks this morning, even if that wasn’t strictly the case.
Heavenly Values
31. January 2012
At a church in Frankfurt I recently had the opportunity to listen to a debate between Professor Paul Kirchhof, a former Federal Constitutional Court judge, and the former chairman of the Evangelical Church in Germany (EKD), Professor Wolfgang Huber. The topic was the gradual destruction of church and state and the eventual end of institutions. Almost inevitably, the conversation turned to the ‘crisis’ – nowadays, an empty catchphrase for all social problems.
A Gilded Trap is Still a Trap
6. January 2012
A personal shopping advisor – now that is what I call luxury. No need to battle with the masses in the busy boutiques and department stores. Instead, a personal shopping advisor identifies the most stylish, exclusive, and typically the most expensive items from the collection for the store’s most demanding guests and presents in a private showroom, preferably over a flute of rosé champagne.
Debt Cancellation
5. December 2011
I have been repeatedly asked over the last few weeks what could be the worst-case scenario for the eurozone debt crisis. It is not a question I like to answer; there are large number of possible paths the crisis could take, which means that there is no single worst-case, but many. And this ignores the effect of the government policy responses those paths would undoubtedly encounter along the way. I do not attach any meaningful probability to it, but when one thinks about any worst-case, it is easy to conjure up images of a total collapse of the economic system as we know it – money, banks, financial markets, growth-based priorities – and some kind of new beginning.
The Rogue Within
18. November 2011
“Most of the people in this room have it in them to become a rogue trader.” This is how I challenged a large group of institutional investors at one of my recent behavioural finance seminars. The suggestion raised numerous titters, but there was not a single word of opposition. They understood that loss-aversion is a powerful human motive and, in addition, that the passage of time dulls a person’s perception of the enormity of the damage.
No Heroes, Lots of Zeros
18. October 2011
A little while ago, I had the opportunity to see the obscurely-titled movie, ‘Margin Call’. Those familiar with the expression will not be surprised to discover that the story revolves around a US investment bank. The year was 2008, just ahead of the Lehman collapse. The tale begins when analyst Eric Dale finds himself victim of one of the typical rounds of employee layoffs.
Greece’s Suffering is Not Only True, But Sad
30. September 2011
The latest happiness statistics from Greece show that, since 2007, the proportion of citizens who rate themselves as ‘unhappy’ has more than tripled. Currently, a quarter of all Greeks describe themselves as ‘suffering’ and do not expect any significant improvement in the coming months. According to the same Gallup poll, only 16 percent are happy with their lives, a figure that puts Greece very close to the bottom of the European happiness league table. Only the citizens of Hungary and Bulgaria are glummer.
The Behavioural Parable of the Prodigal Son
27. June 2011
I was recently reminded of the Parable of the Prodigal Son, from the Gospel of Luke. That’s the one where the younger of two boys asks his father for his portion of the inheritance and then goes on to squander it in wild adventures abroad. Later, penniless and repentant, the profligate begs his father to take him back in as a hired-hand.
The Secret of Marriage
20. June 2011
I was a guest at yet another wedding last Friday – the third in as many weeks. Wedding fever is everywhere around me, so much so that I feel like a deviant for not having already had a wedding dress fitted or for not having browsed any brides’ magazines. How many times in these three weeks have my boyfriend and I had to suffer someone coming up and asking: ‘Do I hear wedding bells for you two?’
Stop-Loss Aversion II
27. May 2011
We make investments because we believe they will bring profits, not losses. Just thinking about the prospect of a loss is already pretty unpleasant. This is because human beings have an intense aversion to losses, and this is why decisions made after losses have been incurred are so prone to bias. To start with, investors tend to believe, with a little time and patience, that the loss can be made good.
What’s in a Reputation?
19. May 2011
I’ve heard Dominique Strauss-Kahn variously described as a philanderer, a womaniser, a seducer or, more euphemistically, as someone ‘with a reputation’. This had me wondering: what is a reputation? It appears to be nothing more than a norm, a reference point that is associated with an individual. One can imagine that a reference point will ultimately crystallise around the typical behaviour pattern of the individual. Hence ‘a reputation’ could be thought of as some rough average of the behaviour an individual exposes observers to over time. Remember, all reference points only exist in the mind of the observer; we cannot therefore perceive our own reputation, only other people’s.
Stop-Loss Aversion
10. May 2011
I am always astounded by the number of investors who operate in the financial markets without loss limits. Of course, planning for a stop-loss in one’s strategy means admitting the prospect of a loss at the outset, and investors are understandably reluctant to do so.
Perceptions Fade With Time, Political Urgency Too
5. May 2011
A little over a month ago the Fukushima catastrophe was on round-the-clock television and Geiger counters sold out in Germany and in California. The whole world seemed panicked, fearing that the worst was still to come. Meanwhile the situation in Japan hasn’t changed all that much, but one would have to look long and hard to find any current news on the disaster. For instance, most of the world never even heard that another atomic power plant leak was reported in Tsuruga, some 360 kilometres away from Fukushima, at the beginning of May.
Hopelessly Happy
11. April 2011
‘Hope springs eternal’, they usually say when you’re standing with your back against the wall. In truth however, this well-meant observation describes a tendency – hoping endlessly for an exit from a miserable situation – that can be counterproductive and even debilitating. Studies show that patients manage to do better when they feel certain about health and sickness.
Tokyo’s Shifting Tolerance for Atomic Crisis
28. March 2011
Had someone informed Tokyo’s residents on the day of the earthquake and tsunami that, in less than two-weeks, their city would be engulfed in a cloud of fallout, their water-treatment plants would be compromised, and their food supplies would soon be contaminated by radioactivity, it’s possible that we would have witnessed the largest mass exodus in the history of mankind. Yet, although all of these things have subsequently taken place, there has been no evidence of any mass departure.
Distasteful Business
18. March 2011
The Fukushima disaster was upgraded to Level 5 today, in other words, a ‘nuclear accident with wider consequences’. The news sent me scurrying to dig up an e-mail I received on Monday morning from InTrade, the spread-betting website. They had just opened a betting market on the Japanese accident, and were already quoting prices for the probability of further explosions as well as the probabilities of future upgrades to Levels 5, 6 and 7.
Japan Shockwaves Reach Europe
14. March 2011
Shockwaves from Japan reached Western Europe this weekend – not the earthquake, but the fear of an accident at a nuclear reactor closer to home. Demonstrations took place in France, calling for the government to review its energy policy. With 58, France has even more nuclear reactors than Japan, for half the population.
Deepest Sympathy for Mortgage Payment Day
21. January 2011
Last month I recounted the tale of a friend who had decided to move his family to the suburbs because his flat in town had become too small. He and his wife bought a beautiful cottage in the country, far away from the hustle and bustle of the city. Of course, the price of living in the suburbs carries several little sacrifices that aren’t written into the cost of the home
Vitriolic Politics
10. January 2011
I do like boxing – the endurance, the punishment, the knockout. But when a boxer stays on the canvas longer than a few seconds, I start to worry. By the time medics crowd the ring around the still motionless body of yet another prize-fighter, my enthusiasm for this sport has completely vanished; it is pointless, barbaric.
How Much Austerity Can You Stand?
16. December 2010
People can stomach a lot more economic pain than they think. Cuts, concessions and sacrifices are tolerable for the average person if he/she is convinced that it is for the greater good.