Tag Archiv: risk-aversion

The Manipulators are Among Us

3. December 2013

In my previous blog I described how, if we are not careful, randomly-occurring reference points manage to hijack our decision-making. The case concerned a would-be stock market investor who wondered whether one could still buy the German DAX even though it trades at a new record high. He was obviously desirous to buy, but my introduction of a new, wholly irrelevant reference point (the index level at the start of the year) was enough to undermine this bullishness; it was even enough to provoke a desire to sell stocks!

read more

Fighting the Crisis with Canned Ravioli

7. September 2012
Erbsenzähler mini

In a column for the online edition of a popular financial publication, I recently told the tale of my friend K. He is a very forward-looking kind of person. Since years, he has anticipated the imminent break-up of the eurozone and the social unrest that would invariably follow. In preparation, he stuffed his home safe with gold coins and Swiss francs, and stocked his cellar with canned foods. It seems, however, the eurozone has taken a little longer to disintegrate than he had expected as much of his canned food has already reached the end of its shelf life. In order to avoid waste, he is now obliged to sit down to rather more tinned Ravioli dinners than he would like.

read more

Children of the Great Recession

4. July 2012
Anzugträger im Regen mini

Say you are driving down a highway, the day after getting your license, and pass a dreadful crash that has scared you out of your wits. In the rear-view mirror, you see the destruction scattered across the road. You promise yourself to never drive recklessly, as that driver obviously did. With the vivid image seared into your mind, you drive cautiously away. And so is the feeling of the younger American generation regarding financial markets, particularly stocks. 

read more

An Odd Notion of Hedging

7. March 2012

I read yesterday a financial market commentary suggesting that Japanese exporters, faced with a sharply rising US-dollar versus the yen over the last month, could have tried to unwind their currency hedges. This would mean rebuying the dollars they had already sold in anticipation of overseas sales. In all likelihood, this would also mean a loss on the hedge transaction, but given the anyway miserable performance of these firms due to the earthquake, tsunami and the eurozone debt crisis, who would know? They might as well kitchen-sink all the bad news into the current fiscal year which ends in March, argued the commentator.

read more

Has Gold Lost its Gleam?

26. August 2011

Full disclosure: I have a long-position in gold. Presumably just like many of my compatriots, I keep gold for security – not for speculation – in case something goes horribly wrong in the eurozone or out in the world.

read more

In Silver, Less is More

27. April 2011

Europe’s silver investors walked out of the door last Thursday feeling very satisfied. A long Easter weekend lay ahead, the weather forecast was for unseasonably balmy weather, and, most importantly, spot silver was at a new high just shy of $46. God was truly in His heaven.

read more

Saliency and the Nuclear Debate

4. April 2011

Would you risk riding your bicycle every day through the rush-hour traffic in a UK city in order to avoid being victim to a 7/7-style terrorist attack on the bus or Tube? In the immediate aftermath of the 2005 tragedy, many people would probably have answered in the affirmative; six years on, perhaps less so.  Yet, although the death toll of the terrorist attack was 52 dead and approximately 700 injured, more than twice as many cyclists are killed on British roads every year, and another 2,600 are seriously injured.

read more

License to Chill

10. February 2011

In a taxi this morning, I couldn’t help noticing how well my driver respected the speed limits and traffic signals. He drove just under 30mph in the city, carefully observed the 15mph speed limits in traffic restricted areas, applied the brakes at the hint of a yellow light, and cruised by a radar control at the prescribed speed. ‘You knew that trap,’ I complimented the law-abiding cabbie. ‘Yeah, they nailed me here when I was a greenhorn. It cost a lot of money and a penalty point on my license,’ he murmured.

read more

Goldman vs. Gold-women

16. September 2010

An ‘unchecked gender bias pervades Goldman Sachs’s corporate culture’ say three former employees in a legal action they lodged yesterday against the company. They want to turn the case into a class action suit, accusing the bank of underpaying and under-promoting women. The story prompted a little debate in our office this morning, which resulted in the question of who is better at decision-making. Who makes a better banker – women or men?

read more

The Pyongyang approach to fund management

26. August 2010

Fifa, world football’s governing body, has ended an investigation as to whether North Korea’s national team was sanctioned after its poor performance in this year’s World Cup tournament. A few weeks after the world championship games, news circulated that the team had been submitted to six hours of public humiliation and that the trainer was ‘rumoured’ to have been banished from the Worker’s Party and sent to break rocks at a construction site.

read more

Seasoned decision-making

15. July 2010

Is an 87 year-old capable of managing a $20bn fortune? The question is a crucial one for Liliane Bettencourt, the L’Oreal heiress and France’s wealthiest woman; her daughter is reportedly trying to have a judge declare her incompetent to manage her own affairs. It is intuitive to believe that elderly people are less able to make good money-related decisions, especially when one hears about the numerous scams targeting the aged. But is this really true?

read more