Monday, April 30, 2012

Barclays Accused of "Reckless Disregard"

An independent report prepared for Guardian Care Homes (GCH), which operates 30 care homes, by derivatives experts at JC Rathbone Associates accuses Barclays of "reckless disregard" over its sale of a set of complex derivatives to GCH.

GCH are suing Barclays for £36M, and the report will be used in its case against the bank.

The Telegraph notes that the report alleges that the terms of the loan posed "a risk of breach of covenant", while also claiming that the hedges sold to GCH were never likely to have protected it against rising interest rates.

Barclays in a statement last week said:
"This action is completely without merit and we will contest it vigorously. Barclays is satisfied that it provides sufficient information to enable a client to make an informed, commercial decision about the products it offers."
On Friday, Bob Diamond, CEO of Barclays, said the number of complaints was "very small", but admitted "mistakes" were likely to have been made.

The banks marketed these products as protection against potential higher future costs, the products do not do this. It would have been in the hapless purchasers' interests to take out a simple to understand fixed rate loan. Unfortunately, for the hapless customer, the commission earned by the banks on these complex financial products were higher.

I will leave you with the thoughts of Bob Diamond, 3rd November 2011:
"The only way that banks will win back the public's trust is to become better citizens. That starts with how we behave, and in demonstrating we act with trust and integrity. 

At banks this means the interests of customers and clients must be at the very heart of every decision made."
How very true!  

Friday, April 27, 2012

Spanish Youth Unemployment Soars

As our EU overlords seek to impose further austerity measures on their subjects, whilst at the same time seeking an increase in their own budget for 2013 of 6.8%, it is worthwhile remembering that the EU financial straitjacket is having real consequences for real people.

Spanish unemployment figures have hit a record level of 5,639,500 at the end of March (24.4%), with youth unemployment at a shocking level of 52%.

The EU may care to pause and reflect on those figures for a moment, before it continues with its self destructive quest to fill its bloated coffers with a 6.8% increase in budget.

Thursday, April 26, 2012

Britain Back in Recession?

According to figures released by the ONS, the UK is back in recession.

However, as with all figures produced by the ONS, the data needs to be taken with a pinch of salt. ONS figures are notoriously unreliable and as with all previous figures they will be revised upwards in the coming weeks, thus taking Britain out of recession.

Wednesday, April 25, 2012

Useless Gobshites - The EC



Here are threes sets of figures:

- Total cuts in public spending in Greece: -20% (as share of GDP)
- Total cuts in government spending in Latvia: -22%
- Proposed increase in the EC’s 2013 budget: 6.8%

Notice something odd?

Yes, that's right, the body that is imposing austerity packages on EU countries is asking for an increase in the budget of the European Commission of 6.8%!

The EC has lost touch with reality, and is quite clearly a threat to stability and well being of Europe itself.

Target Singapore Stock Portfolio

My target Singapore stock portfolio will consist of:

STI ETF
Singpost
Starhub/Singtel
SMRT
ST Engineering
Boustead
Ascendas Reit
OCBC/DBS/UOB
Keppel Corp

Tuesday, April 24, 2012

Shackled To Debt

Britain (like every other significant national economy) is shackled to debt.

The UK public sector net debt has risen to £1.022 Trillion, that is the equivalent to 66% of GDP and the highest since records began.

Some are questioning how this can happen, given that the politicians have launched an austerity programme designed to cut back on on debt.

The answer is simple.

The "planned" cuts and austerity drive will never cut the actual level of debt, at best the cuts will reduce the rate of increase of debt.

We are destined to be shackled to debt for the rest of our lives!

Monday, April 23, 2012

"Free" Money - The Great PPI Giveaway

Courtesy of the greed and lack of ethics of our tainted financial services industry, there are billions of pounds to be "given away" by the recalcitrant banks and lending institutions that conned people into buying the now widely derided Payment Protection Insurance (PPI) policies.

Simon Gompertz has published the headline figures:
"The extraordinary scale of the PPI compensation grab:

£5bn compensation still to be paid out


12 million policies may have been mis-sold


800 claims management companies  trying to get a slice of the money


£2m a month being spent on advertising by these claims companies


They charge 25% or more in fees, plus VAT


Banks are making 50,000 compensation payments a week


That's around £400m a month being paid out


The payments average £2,750, some are £16,000 or more


Some say this massive cash payout could give a boost to the economy


How to claim compensation? Contact your bank, or the 
Financial Ombudsman Service"
Given that the banks showed no ethics in selling these now widely derided products onto their naive customers, there is no shame in asking for them to pay the money back (but don't waste money on using a claims company).

Dutch Government Resigns

In a display of irony, probably lost on them, the Dutch government (which in the past has berated other nations for failing to implement austerity measures) has resigned this morning.

For why?

Talks about implementing austerity measures broke down.

Not so easy is it, when you have to implement cuts in your own country?

The Netherlands now faces a general election, which of course will further destabilise the EU's attempts to pull itself out of its self created financial crisis.

Unfortunately, for the citizens of the EU, the financial structure of the EU (ie the Eurozone) is not "democracy friendly". One or the other has to give way, either financial dictatorship is imposed in order to try to resolve the crisis or the current structure (ie the Eurozone) will fail as democracy once again reasserts itself.

The latter option is infinitely preferable, as the former will lead to civil and social chaos.

Saturday, April 21, 2012

Greece Oil Shock

In January I warned that the EU embargo on Iranian oil would cause Greece problems:
"There has been much hype and sanctimonious puffing of chests from the EU about its agreement "in principle" to ban imports of oil from Iran.

However, as
Paul Stevens economist and emeritus professor at Dundee University in Scotland notes, Greece currently imports 30% of its domestic oil from Iran on favourable terms.

Were Iranian oil imports to be banned, where would Greece get its oil from?


Saudi Arabia?


Maybe, but at an economy busting $150+ per barrel.


As with all EU "plans" this one has not been thought through
."
In February I noted that:
"They are currently negotiating for supplies of oil from elsewhere, any admission that their supplies have been cut will negatively impact those negotiations and cause panic buying in Greece."
As predicted, things are not going well; as reported by News.AZ:
"The EU has postponed an April deadline to review the impacts of the bloc’s embargo on oil imports from Iran due to Greece's concerns on finding new oil suppliers."
As ever with all EU "plans", no one has bothered to think through the consequences of them.

Friday, April 20, 2012

Oh The Irony - Panic Buying Saved Britain

In a twist of irony, it seems that the panic buying of petrol caused by the government mishandling of the tanker drivers' dispute may have helped pull Britain out of recession.

Figures from the Office for National Statistics (ONS) showed a 1.8% month-on-month increase in retail sales volumes and a 3.3% year-on-year rise. The increase was above economist forecasts, and were partly helped by a 4.9% increase in petrol purchases.

Thursday, April 19, 2012

French Downgrade Rumours

The Twittersphere is awash with rumours that France is to be downgraded.

Sacrebleu!

HomeServe Fined £750K For Cold Calling

HomeServe have been fined £750K by Ofcom for cold calling during the period 1 February 2011 and 21 March 2011:
"HomeServe confirms that it has been notified that Ofcom has imposed a fine of £750,000 pursuant to section 130 of the Communications Act 2003 in relation to Ofcom's finding, that between 1 February 2011 and 21 March 2011 ('the Relevant Period') a number of outbound marketing calls made on behalf of HomeServe by one outsourced supplier, did not meet Ofcom's rules regarding silent, abandoned or repeat calls. HomeServe is reviewing the detailed determination.

HomeServe identified the issue and promptly reported it to Ofcom, following an internal audit of all of HomeServe's telemarketing operations. The problem was identified as having resulted from the incorrect use of Answering Machine Detection (AMD) technology via an outsourcer. HomeServe can confirm that it no longer works with outsourcers on its outbound marketing and that AMD is no longer used in any calls made by the company.

HomeServe can also confirm that all of its dialler systems have been fully compliant with Ofcom regulations since 22 March 2011, following the rectification of the errors identified during HomeServe's audit.

HomeServe is providing goodwill gestures of £10 to customers who received a silent, abandoned or repeat call from the referenced outsourcer over the Relevant Period. Anyone who believes they were subject to these over the Relevant Period should contact the company before 31 May 2012 on 0800 389 5280 and the claim will be investigated.

The above details will not have a material impact on HomeServe's financial results and the Company’s financial guidance remains consistent with the pre-close trading update of 29 March."
That's all very well, maybe.

However, why did Ofcom only fine HomeServe for that period and what about the people (such as myself) who were bombarded with cold calls in 2010?

UPDATE

To HomeServe's credit I have just received a call from them, and have been promised £10 for my poor experience of their cold calls.

Wednesday, April 18, 2012

Greece Stares Into The Abyss

As the Greek election on the 6th of May approaches, the voters of Greece have been afforded an opportunity to see their future and stare into the abyss (courtesy of the IMF).

Whoever is elected, on the assumption that Greece remains within the Eurozone, the soul destroying austerity that Greece is experiencing is set to be ratcheted up:

- There will be more cuts in social benefits and healthcare.

- There will be cuts in the public sector.

- Wages and pensions will be reduced by 15%.

According to The Slog, the EU are even trying to influence the result of the elections by placing their preferred candidate in pole position to become Prime Minister.

Greece is staring into the abyss, if it chooses to remain in the Eurozone it will be pushed into the abyss. The choice that the Greek people need to make is whether they wish to be pushed into the abyss, or leave the Eurozone of their own accord.

Tuesday, April 17, 2012

Jim Yong Kim New World Bank President

Jim Yong Kim, the president of Dartmouth College, has been chosen as the next president of the World Bank. He will take over the World Bank in June this year.

Obama Demonises Oil Speculators

President Obama has today castigated oil speculators for manipulating the oil market, and has proposed new measures to limit speculation in the oil markets,.

This is rather ironic, as only a month ago the Whitehouse manipulated the oil market by leaking rumours (and then denying them) of a release of strategic reserves which of course sent the price of oil down.

Utter Madness - EU's Demands of Greece

In a leaked document due to be published tomorrow, the EU will tell Greece to reduce "nominal unit labour costs in the business economy by 15% in 2012-2014".

Applying severe austerity measures to an economy that is already imploding is utter madness.

Troika Visit Ireland

"Lucky" Ireland is on the receiving end of the sixth visit of Troika inspectors.

Officials from the International Monetary Fund, the EU Commission and the European Central Bank have begun their 10 day long inspection to see how Ireland is performing under the bailout programmes

The Irish Times reports that promissory notes would be a central focus, as the issue of restructuring of the Euro30BN promissory note issued primarily to Anglo Irish Bank and Irish Nationwide has yet to be resolved.

Monday, April 16, 2012

China Loosens Currency Controls

The People's Bank of China (PBOC) has announced that it is loosening currency controls over the Yuan. As from today, the Yuan can fluctuate up to 1% (the previous limit being 0.5%) in trading against the US dollar from a fixed price set by the central bank.

The move will please the USA, which has been banging on about the Yuan being "undervalued" for years. Ironically, the Yuan finished weaker against the Dollar at the end of today's trading.

Here is the full text:
"The People’s Bank of China Announcement [2012 No.4] 

Along with the development of China’s foreign exchange market, the pricing and risk management capabilities of market participants are gradually strengthening. In order to meet market demands, promote price discovery, enhance the flexibility of RMB exchange rate in both directions, further improve the managed floating RMB exchange rate regime based on market supply and demand with reference to a basket of currencies, the People’s Bank of China has decided to enlarge the floating band of RMB’s trading prices against the US dollar and is hereby making a public announcement as follows:


Effective from April 16, 2012 onwards, the floating band of RMB’s trading prices against the US dollar in the inter-bank spot foreign exchange market is enlarged from 0.5 percent to 1 percent, i.e., on each business day, the trading prices of the RMB against the US dollar in the inter-bank spot foreign exchange market will fluctuate within a band of ±1 percent around the central parity released on the same day by the China Foreign Exchange Trade System. 

The spread between the RMB/USD selling and buying prices offered by the foreign exchange-designated banks to their customers shall not exceed 2 percent of the central parity, instead of 1 percent, while other provisions in the Circular of the PBC on Relevant Issues Managing the Trading Prices in the Inter-bank Foreign Exchange Market and Quoted Exchange Rates of Exchange-Designated Banks(PBC Document No.[2010]325) remain valid.

In view of the domestic and international economic and financial conditions, the People’s Bank of China will continue to fulfill its mandates in relation to the RMB exchange rate, keeping RMB exchange rate basically stable at an adaptive and equilibrium level based on market supply and demand with reference to a basket of currencies to preserve stability of the Chinese economy and financial markets."
The fact that it is a rarity that the PBOC issues statements in English demonstrates that this move is targeted at foreign markets.

Must Read of the Week

Great lineup of papers from the Russell Sage Foundation and Century Foundation conference on the financial crisis on Friday.

Behavioral finance, efficient market theory revisited ... your inner finance wonk will rejoice. (The only one so far that I've found head-wagging is "Shadow Finance" and its theory of "cream skimming," which seems way out in left field -- more on that later, I hope.)

The "talker" of the set is this paper that, fundamentally, questions the intrinsic value of financial innovation by showing that, over the last century and a half, the industry has become more inefficient at its core role of intermediation, not less. Yes, there are numbers and charts.

In brief:
The finance industry that sustained the expansion of railroads, steel and chemical industries, and the electricity and automobile revolutions was more efficient than the current finance industry.
The conclusion:
In the absence of evidence that increased trading led to either better prices or better risk sharing, we would have to conclude that the finance industry's share of GDP is about 2 percentage points higher than it needs to be and this would represent an annual misallocation of resources of about $280 billions for the U.S. alone.

Sunday, April 15, 2012

Ben Bernanke's Great Delusion?

Ben Bernanke made a speech Friday in which he made a couple of curious comments about the financial crisis.

First (my bold):
The multiple instances of run-like behavior during the crisis, together with the associated sharp increases in liquidity premiums and dysfunction in many markets, motivated much of the Federal Reserve's policy response. Bagehot advised central banks--the only institutions that have the power to increase the aggregate liquidity in the system--to respond to panics by lending freely against sound collateral.
And then:
The Federal Reserve's responses to the failure or near failure of a number of systemically critical firms reflected the best of bad options, given the absence of a legal framework for winding down such firms in an orderly way in the midst of a crisis--a framework that we now have. However, those actions were, again, consistent with the Bagehot approach of lending against collateral to illiquid but solvent firms.
Really?

Was the Fed really lending against sound collateral, or was it more the fact that, whatever it chose to lend against became, ipso facto, "sound collateral."

And were these really "illiquid but solvent firms" or "illiquid and insolvent firms" that the Fed, through a bevy of support programs, succeeded in reviving?

I can't tell if Bernanke really believes what he's saying or, deep inside, realizes it's a necessary intellectual cover for a spate of unprecedented Fed activism.

Friday, April 13, 2012

More Games Played by Ratings Agencies With Securitizations

I found this paper this morning: "Ratings, Mortgage Securitizations and the Apparent Creation of Value."

Some excerpts below (my bold):
Structured products are designed to produce desired ratings. The company issuing a bond has no easy way of restructuring itself to change the rating assigned to a bond if it does not like the rating.
Yup.
The apparent creation of value happens when any portfolio of debt-like assets is securitized. It is therefore a potential explanation for popularity of re-securitization and re-re-securitization.
Double yup.

On to the summary:
The creation of tranches with AAA ratings was the key to the success of the securitization of subprime mortgages during the 2000 to 2006 period. Indeed, the profitability of a securitization to the structurer depended critically [on] the volume of AAA-rated tranches that were created ...

Pension funds, endowments and other large investors often establish rules governing how their assets can be invested. These rules often specify that the credit rating of instruments must be above a certain level, and sometimes that the credit rating must be AAA. There is a limited supply of AAA-rated corporate and sovereign bonds in the world ...

Was a AAA-rated tranche equivalent to a AAA-rated bond? The answer ... should be clear from our analysis ... If the rating agencies applied their criteria appropriately, one dimension of the loss distribution of a AAA-rated tranche was the same as that of a AAA-rated corporate bond, but other aspects of the loss distribution were liable to be quite different ...

Consider a bond and a thin tranche, both rated BBB by S&P or Fitch. They will have approximately the same probability of default. However, in the case of the bond, the expected loss in the event of default is about 60% whereas, in the case of the tranche, it is almost 100%.

There are other reasons why investors should have been wary ... regarding a AAA bond as equivalent to a AAA tranche. As pointed out by Coval et al. (2009), AAA-rated tranches have high systematic [sic, should be "systemic"] or market risk. They tend to lose money when the market as a whole performs very poorly and there are many defaults. AAA-rated bonds do not have as much systematic risk.

Another difference concerns the probability of downgrade. As explained earlier, structurers knew the models used by rating agencies and were able to show proposed structures to rating agencies before creating them. As a result, it is likely that AAA-rated tranches had just made it to the AAA category.
I won't even comment on the unmentioned here, regarding systemic risk -- that these instruments that are likely to perform more poorly during periods of systemic risk are themselves, with their shiny AAA veneers, contributors to the eventual appearance of that systemic risk.

So those are some of the games. Investors, note well.

Thursday, April 12, 2012

Greece's Death March

Greek unemployment has hit a new record high, up to 21.8% in January from a revised 21.2% in December. Youth unemployment now stands at a highly dangerous and shameful 50.8% up from 37.1% in 2011 and 22.6% in 2008.

A country that consigns more than half of its youth to the dustbin also consigns its future to that same dustbin.

Kicking The Can Down The Road

In a clear sign that the financial crisis is far from over, Joerg Asmussen, a member of the executive board at the ECB, has backed calls from the IMF to consider targeted debt relief for homeowners in financial trouble.

The IMF report, published earlier this week, outlined evidence from a number of countries where mechanisms have been put in place to cut household debt levels; thereby boosting personal spending and helping economic growth.

Quote:
"Bold household debt restructuring programmes can significantly reduce the number of mortgage defaults and foreclosures and substantially reduce debt repayment burdens."
That is all very well as a short term palliative to keep us afloat. However, at some stage we will have to significantly boost our earnings (from hard real productive value adding work, not by printing money) if we are to ever get ourselves out of this mess!

Wednesday, April 11, 2012

Greece General Election Called

In less than a month, on 6 May Greece will hold a general election. The results of which will determine whether Greece tries to continue to uphold it side of the bailout terms.

A Diamond In The Rough?

How much is a top banker really worth these days?

Well, if you are on the board of Barclays it appears that you believe that your CEO (Bob Diamond) is worth £17.7M.

Unfortunately for Diamond not everyone is of the same view. The Association of British Insurers (ABI) has sent its members an "amber alert" note raising concerns over Mr Diamond's pay (the second amber alert it has issued re Barclays).
ABI are less than impressed with the £5.75M contribution by Barclays to settle Diamond's tax bill he incurred when moving from the US to the UK.

ABI are not alone in being peeved at the size of Diamond's remuneration. Standard Life, Fidelity, Aviva and Scottish Widows are also up in arms about it. On Monday Pirc advised its members to vote down the deal.

So, how much is a "top" banker really worth?

Are We Finally Ready to Do Something Meaningful About Shadow Banking?

I've been heartened by a growing number of news stories that pose the question: "What to do about shadow banking?". Here's the latest, from the New York Times, to pop up on my screen (though this piece isn't very substantive).

Barry Ritholtz shows us with this graphic from the Wall Street Journal that shadow banking never went away after the big financial crisis; the Fed and Treasury just stepped in to pick up the slack.

Finally: Be very, very wary of people peddling solutions that make the world's central banks the shadow bankers of last resort.

Tuesday, April 10, 2012

Ten Countries Most Likely To Default

Bottom 10 Sovereign CDS ranked by spread at end-March 2012

Name    5Y Spread   Change   % Change   Feb ranking
Cyprus     1183             4              0%             N/A
Portugal   1075          -90            -8%             2 (0)
Ukraine      859         101            13%            4 (+1)
Argentina   809           32             4%             3 (-1)
Venezuela  712          -13            -2%             5 (0)
Ireland       572          -27            -5%             6 (0)
Hungary    546            50           10%             8 (+1)
Egypt        544           -52            -9%              7 (-1)
Lebanon    459          -17            -4%               9 (0)
Spain         428           55            15%             16 (+6)

Source markit

Greece is not on the list, because it has already defaulted.

Sunday, April 8, 2012

10 Stock Selection Criteria by Benjamin Graham

1. An earnings-to-price yield at least twice the AAA bond rate
2. P/E ratio less than 40% of the highest P/E ratio the stock had over the past 5 years
3. Dividend yield of at least 2/3 the AAA bond yield
4. Stock price below 2/3 of tangible book value per share
5. Stock price below 2/3 of Net Current Asset Value (NCAV)
6. Total debt less than book value
7. Current ratio great than 2
8. Total debt less than 2 times Net Current Asset Value (NCAV)
9. Earnings growth of prior 10 years at least at a 7% annual compound rate
10. Stability of growth of earnings in that no more than 2 declines of 5% or more in year end earnings in the prior 10 years are permissible.

Thursday, April 5, 2012

Greece's Ever Flexible "Deadline"

On 2nd April I wrote the following:
"Oh, that's easy, Greece has yet again postponed the "deadline" (from 4th April) to 18 April!"
Well I was a little ahead of events, and was two days out on the the date.

Today Greece has announced that it has indeed postponed the deadline for remaining bondholders to accept a debt swap, the new "deadline" is 20th April.

Ever flexible "deadlines" are the tools of fools, conmen and dreamers. 

Wednesday, April 4, 2012

Big Society Capital

David Cameron has finally defined the "Big Society", and put "his" money where his mouth is, by launching the Big Society Capital.

This a bank that will lend money to charities and community groups. It is funded with £400M stolen by the government from dormant bank accounts, and by £200M funded by other banks.

Tuesday, April 3, 2012

Greece's Oil Shock

In February I wrote that Hellenic (Greece's main oil refiner):
"are currently negotiating for supplies of oil from elsewhere, any admission that their supplies have been cut will negatively impact those negotiations and cause panic buying in Greece."
Today Hellenic have announced that it has suspended purchases of Iranian crude in April, as approaching sanctions on Tehran have made banking payments virtually impossible.

This of course means that its negotiations for reasonably priced supplies for Greece from elsewhere have just been torpedoed.  

Hardly good news for the imploding Greek economy!

FSA Grows Some Balls

In a rare display of balls, the soon to be disbanded FSA fined Ian Hannam, the Chairman of Capital Markets at J P Morgan Cazenove, £450K.

For good measure the FSA also published their decision:
"The Financial Services Authority (FSA) has today published a Decision Notice for Ian Hannam, the Chairman of Capital Markets at J P Morgan Cazenove. The Decision Notice indicates that the FSA has decided to fine Hannam £450,000 for market abuse.

Hannam has referred the matter to the Upper Tribunal (the Tribunal) where he and the FSA will each present their case.  The Tribunal will then determine the appropriate action for the FSA to take. The Tribunal may uphold, vary or cancel the FSA’s decision.  The Tribunal’s decision will be made public on its website.

In the Decision Notice dated 27 February 2012, the FSA set out its decision to fine Hannam for two instances of market abuse (improper disclosure).  In the FSA’s opinion, Hannam disclosed inside information in two emails sent in September and October 2008 to a prospective client.  The emails contained inside information relating to Heritage Oil Plc (Heritage), an existing J P Morgan client for which Hannam was the lead adviser. 

The September email contained information about a potential offer for Heritage and the October email contained information about a new oil find by Heritage.

The Decision Notice states that the FSA accepts that Hannam did not set out to commit market abuse but considers that Hannam’s failings were serious in view of his experience and senior position within J P Morgan. 

The FSA believes that the size of the proposed fine reflects the serious nature of the market abuse and should act as a deterrent to other market participants. 

Tracey McDermott, acting FSA director of enforcement and financial crime, said:

“Inside information is extremely valuable and must be handled with care to ensure that it is properly controlled and that appropriate safeguards are observed.  This applies to all market participants but is particularly important for senior practitioners who will regularly interact with a wide circle of contacts”.
Hannam is disputing the fine. However, he has today resigned from JP Morgan.

Monday, April 2, 2012

Greece's Deathmarch Continues

The Foundation for Economic and Industrial Research (IOBE) reports that the Greek economy will continue to shrink (5%) this year, and that unemployment is at 20%.

Eurozone Unemployment Rises

Unemployment across the Eurozone has increased from 10.7% in January to 10.8% in February, the highest level since the Euro was imposed in 1999.

Spain leads the field, with a stonking 23.6% of its citizens unemployed!

Greece Postpones "Deadline" Again

Despite the threats and empty rhetoric from the Greek government, and others within the Eurozone, investors in Greek bonds issued under foreign law have not rolled over and acquiesced to threats; instead they have rejected Greece's attempts to restructure the debt at meetings held last week.

In 20 out of 36 meetings, bondholders either turned down the government’s proposal, adjourned the talks or failed to achieve a quorum.

What happens now?

Oh, that's easy, Greece has yet again postponed the "deadline" (from 4th April) to 18 April!

Oh, and by the way, there is a payment due today on some bonds relating to Greek railways.

Sunday, April 1, 2012

Why You Should Be Very Depressed About Climate Change

This is a bit off topic, but for years I've been following the climate change debate. Today I came across this terrific list of "myths vs. what the science says". There are 173, total.

So that's 173 myths that nothing's really wrong, debunked.

Still, part of me wanted to cry at the earnest thoroughness of the debunkers. They even break down their answers into basic/intermediate/advanced, to suit everyone from pea-brained U.S. Senators (doesn't Jim Inhofe actually, physically look like a dinosaur?) to climate scientists who can handle advanced formulas and charts.

But it's all just spitting into the wind.

Even if the science were agreed upon by 100 percent of the population -- yes, climate change is coming if we don't restrain levels of carbon dioxide -- does anyone really think anything would change in any significant way?

One problem is, we all live on one planet, share the same air, but are governed by hundreds of different political systems. And we can't compel global cooperation. So there's a huge incentive for any one country to cheat while others cleave to aggressive carbon-dioxide lowering rules -- and that's if we ever got close to agreeing on anything substantial globally, which we won't.

Another problem is, in the U.S. (the worst of the carbon-spewers per capita), we don't do pain. We don't want our lifestyle threatened. Just look at the federal gas tax. It's been frozen at 18.4 cents per gallon for almost two decades. If you double, triple, quadruple (or more) that tax, that will change driving habits and fill up some of those one-person cars you see everywhere zooming down the freeways.

There are lots of great reasons to do this -- reduce pollution, encourage energy independence, generate revenue for a cash-strapped budget, fight global warming. Conservative economists like Greg Mankiw have gotten behind this proposal. But the average American hates the idea, so don't hold your breath.

One last problem (though there are many; this is the short list): To combat global warming, we would be asked to make real, immediate sacrifices for a hypothetical, distant problem. That just won't happen.

So what now?

If we wait too long, and the effects of global warming are as serious as we've been told, we'll just find a way to cope. If half of New York City winds up under water, we'll just adjust. Highways on stilts. Floating homes. Water taxis.

On global warming, I'm sorry: I just don't think there's anything to be optimistic about.

$1,000,000 by 38 years old

According to plan, I would have accumulated $500,000 at the age of 33 and the next milestone is to have net worth of a million dollars by age 38. To achieve this, I assumed a return of 8% and a yearly savings of $42,000 until age 35 and $48,000 thereafter. Also, the yearly savings are compounded at 8% per annum.

Networth Update (March 2012)