Sunday, November 29, 2009

Vent for the Day

In a discussion thread was this gem. What do you think?

'Innovation requires imagination, which requires an atmosphere where people can do that freely. That's why freedom is always better and leads to the "great ideas."

It's the idea that's important. Whoever has the idea can always get the geeks to actually create it.'

That's nice. Have someone else do all of the work, and get none of the credit. That's why the US and UK are overrun with technical talent.

Charitable giving - is it cost-effective?

As money gets tighter, charities have to compete more for what we are able to give them. How do we know that our contribution is being used effectively?

In the United States, you can log onto Charity Navigator and get financial information and ratings on U.S. charities, but unfortunately there is no sister site for the UK, so we have to check our charities with other sources.

For example, let's take a worthy-sounding UK-based cause called the World Children's Fund. This is attractively presented on its own website, and I have had several slick mailshot approaches from them which made me feel emotionally coerced. But are they value for money? I could look them up on Charity Choice, which says "WCF ... has minimal overhead costs". However, this may merely be a wording supplied by WCF itself, so we turn to the accounts submitted to the Charity Commission, where it transpires that 29.1% of the funds raised have been spent on "Generating voluntary income". Compare that with the British Red Cross Society, which only spent 13.7% on the same category.

But that's only one way to do the figures. Calculating the proportion that goes on "charitable spending", I see that WCF manages 70% as against the Red Cross' 76%; and the Red Cross is a massively bigger outfit, so it might benefit from economies of scale. Yet according to Charity Navigator, Action Aid International achieves 84.9% for "program expenses", despite having a turnover less than half that of WCF's.

Well, we get down to complexities of accounting again. How many hands touch the money as it goes past, how much sticks to their fingers, how much ends up where it's needed? How detailed, transparent, honest are the accounts?

And it also gets philosophical: what are the needs you're trying to address? How well are you succeeding? And don't the people involved in running the charity have needs, too? Should they work for nothing?

UK-based Intelligent Giving tries to give a subtler approach to weighing up the performance of charities, and how well they report on what they're doing - see here for their judgment on the Red Cross, for example. Intelligent Giving also features a page listing other evaluation sites and foundations that screen beneficiaries and projects.

New Philanthropy Capital is another UK-based organisation researching charities; and their blog argues that we can be too easily diverted by expenditure issues and should re-focus on what we are trying to achieve.

In short, think about and research your giving carefully, as you would do with other important spending.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Saturday, November 28, 2009

No deal

Société Générale: how to invest if the credit crunch worsens

A new report (fourth quarter of 2009) from French investment company Société Générale (SocGen) looks at the potential threat to the world economy of mounting debt. It may be that the credit crunch is far from over.

On page 12, the report looks at how investments could be affected, in the worst case. If the scenario is correct, then over the next 12 months SocGen predicts the best gains will come from long-term government bonds, and agricultural commodities.

SocGen warns of debt's potential to collapse the world economy

SocGen - Worst Case Debt Scenario

Thursday, November 26, 2009

Could Dubai be the trigger?

Warren Pollock points out that the real danger lies, not in Dubai possibly deciding to default on its sovereign debt, but in the credit default swaps surrounding the debt, which may magnify the problem by 10 - 100+ times. If some of these huge side bets are wild ones not adequately backed by the gamester's capital, off we go - and off Pollock goes, for his well-earned beer.

Incidentally, he gives a lovely description of a quantitative analyst: a schizophrenic with an IQ of 160 who belongs in a rubber room, but since he's working for a financial firm and "no-one understands him, what he's doing must be right". Only a brighter quant could spot his colleague's errors. Quis custodiet, eh?
Don't know why, but this made me smile:

If you're feeling a little down today, and looking for something to be thankful for, be thankful you have not lent money to Dubai. Unless, of course, you have lent money to Dubai.

Wednesday, November 25, 2009

Breaking News - "Debtman" sunk

The following extract has been taken from news agencies, though Internet reception is currently poor on account of flooding and there may have been some scrambling of information. For the full story, click here.

British 'Debtman' Gordon Brown ditches in Atlantic

Not Philippe Naughton

The British political adventurer Gordon Brown found himself in deep water today after a failed bid to make the first long-range economic flight using a debt-powered wing attached to his back.

Brown, 58, planned to fly 7 years from the 2008 Credit Crunch to the 2015 General Election, at a speed of almost £120 million per hour, a flight that should have taken about 80 months.

Only a year into the flight, however, the British "Debtman" disappeared from TV feeds. Live pictures shortly afterwards showed him up to his neck in it, swimming around beside his Parliamentary pension golden parachute, while the IMF prepared to winch him to safety.

The reason for his failure was not immediately apparent to anybody except the blogosphere, but the British premier seemed to be unhurt and waved at a passing TV crew.

Sunday, November 22, 2009

The search continues


My hero!

Banks: "parasites... financial bastards... should never have lent the money in the first place... bankrupt them... nationalise them... cancel debt... or the economy will die... never-ending Depression."

Straight-talking Aussie economist Steve Keen, talking to teeth-clenched grinning, gonzo (but still on the money, in my opinion) "Wall Street are terrorists" Max Keiser.

Saturday, November 21, 2009

Steve Keen: we are facing a rerun of the 1930s

In a long and fairly technical presentation which, as an amateur I freely admit to not fully understanding, Steve Keen, one of the few professional economists to foresee the credit crunch, argues that there will NOT be a successful reflation this time, and instead we face a savage "deleveraging" as in the 1930s. Possibly worse, since the ratio of debt to GDP is worse this time.

Friday, November 20, 2009

Thursday, November 19, 2009

Dilution

It is generally agreed that our current financial mess was precipitated by the sub-prime mortgage fiasco. The system was already burdened by too much debt to absorb those new losses. The commentators have moved on to the American hobby of assigning blame: to President Clinton and the Democrats for forcing the banks to offer high-risk loans to the poor, the bi-partisan officials for deregulation, and to the poor themselves, for accepting 'free' money.

To me, a finance ignoramus, the real questions are:

a) How did a few million bad loans bring down such a huge system?

and

b) How did the system get so much debt?

The answer to a) seems simple. While the government could have paid the $500 billion or so in bad loans, or Wall Street could have given up bonuses for a couple of years, the way that the debt was securitized meant that each bad dollar in investment was multiplied by factors in the hundreds. All on paper, of course.

As for b), I note that Robert Rubin states that 'this could not have been foreseen'. I can only attribute this to a quasi-religious belief in the magic of the market. Several people that I know were worried at the trends over 15 years ago. Nominal house prices were rising faster than inflation and incomes combined, and too many people were using their homes as cash machines by re-mortgaging.

This fiat money was magnified many times by the system through derivatives, until we reach the current state. With a world's annual production of goods and services at about $55 trillion, there is an estimated $1000 trillion in derivatives. That is, we have mortgaged everything on the Earth for the next 18-19 years. That's what I call a sub-prime loan!

Homeopathic 'medicines' are made by diluting active chemicals with distilled water until no molecule of the ingredient is left. We appear to be actively approaching homeopathic wealth, diluted by paper.

Sunday, November 15, 2009

Strangling the goose

When the dust has settled on the Keydata case...

when Keydata and its directors no longer pay the taxman on profits, wages and dividends derived from a business that had, until the tax office got zealous and technical, apparently paid off all its debts, was showing a profit and had cash in hand;
when the former employees are claiming a complex array of benefits instead of paying income tax and National Insurance;
when PriceWaterhouseCoopers have sent in their final massive bill for services rendered;
when the investors, many worried half to death for months, finally (most of them) get massive collective financial compensation from the Government...

.. will this really look like a win for the Shylock approach to revenue gathering, and to regulation?

The British taxman has become a laughing-stock

Following the ridiculous 2001 sale of the taxman's own offices to a property company that smartly transferred the ownership to the tax haven of Bermuda, the British Treasury has made itself into a charity case and is asking for tax-deductible donations to reduce the National Debt.

Saturday, November 14, 2009

In a tizz about guns

I have enjoyed firing rifles when a youth in the Combined Cadet Force (joining was compulsory at my school in the 60s), but away from a range, firearms scare me. Their power has a deadly fascination, just as the Ring has, even for the good Gandalf. (It's said that the samurai swords made by Muramasa tempted men to shed blood.)

However, here in the UK post-Dunblane, we haven't actually banned handguns; only legal ones. What now?

The National Rifle Association in the USA (htp: John Lott) obviously has its own quite clear agenda, but their arguments don't seem easy to dismiss out of hand. Here are some extracts:

... Researchers, both public and private, have estimated total defensive gun uses at between 800,000 and 2.5 million times per year. To many, that's a difficult reality to accept since we don't hear the hundreds of armed citizen stories that should be reported daily...

... One of the first things we learn through analysis of media-documented self-defense episodes is that no place is "safe"—no matter the place, time of day, neighborhood or crowds, no matter how unlikely an area is for a violent confrontation...

...The most frequently reported crime prevented by armed citizens has been home invasion... Approximately 25 percent of documented defensive gun uses occurred in places of business...

... Many anti-gun advocates would grudgingly allow ownership of rifles and shotguns if they could ban all handguns. Armed citizens, however, beg to differ. Of stories identifying defender firearms, 79 percent involved handguns. Shotguns were used only 15 percent of the time, and rifles 6 percent. The message is clear: Banning handguns would remove the most common means of self-defense for most people...

... In confrontational shootings, studies show police hit their targets between 13 percent and 25 percent of the time. Of the incidents analyzed in this study, civilians hit their targets 84 percent of the time. This comparison does not account for the number of shots fired, only hits or misses. Nevertheless, it gives us a statistical basis to refute claims that only police should have firearms or that civilian shooters are largely ineffective in emergencies.

I'd like to pooh-pooh it all as gun-nuttery, but if opposing the right to bear arms, where would one begin?

What an irony that (allegedly) a man can single-handedly kill 13 and wound 31 on the biggest Army base in America, and be stopped only by a policewoman's pistol (or maybe a sergeant's, we're not sure).

Rude funnies that made my wife laugh

... especially the first and last. (htp: Paddington)
But as I once said to a lady, "If our needs weren't simple, how could you satisy them?" "Spot on," said a fellow male, breaking the thoughtful silence.




Friday, November 13, 2009

Frustration

Several international studies show the the US and UK populations perform woefully in science and mathematics, when compared with other industrialized nations. I have no doubt that this is contributing to our economic decline, which is supported by Sackerson's recent post on the health of the German economy.

Neurological studies show that talent in these areas seems to be genetic. However, the disregard for those with the talents, and the simultaneous embracement of the technology that results, is a cultural issue.

One does not have to look hard to see some of the enabling elements:

Popular culture has elevated all opinions to the same level. Sometimes, the level is based on the volume of the holder, or the number of adherants. Thus, the majority of the US public holds creationism at the same factual level as evolution theory, chiropractic as equivalent or better than evidence-based medicine, astrology equal to astronomy, and homeopathic medicines as better than those with active ingredients.

Our leaders make decisions based on the current polls and personal bias, even when the issues are highly technical, like defense, energy, medicine and education.

Our colleges of education teach that pedagogy trumps knowledge base. In other words, a 'good' teacher supposedly can teach material that they do not understand. Business colleges teach similarly that management skills are independent of the industry involved.

In higher education, we pretend that logic and analytical skills really don't matter, while claiming to teach 'critical thinking'.

I can give no better example than to summarize the discussion at a college meeting that I attended today. One highly-educated individual said: "It is all very well to have technical training (in science, technology, engineering and mathematics), but that is not 'real' education".