...they already exist. When an account pays little or no interest and you are charged fees then in effect you are paying for the privilege of someone holding you money.
As for Cyprus, this makes it even more explicit - a capital saving tax rather than just income tax on interest!
Monday, 18 March 2013
Thursday, 23 August 2012
Which is better income or capital?
Measures of wealth, solvency and happiness at least politically for people and businesses alike
1) Income - Outgo
2) Assets - Liabilities
The question is how you wish to define them and what the public what them to mean.
1) varies in many ways eg profits, cash flow.
income - taxes is a political version, the definition of tax being manipulative eg United Kingdom National Insurance is an income tax in all but name and is a deduction from wages.
Level of income tax and liquidity matter as you may need to pay cash in an emergency.
If the population median of Income - Outgo is too low which can happen if prices are too high, the political incumbent is in trouble.
2) Assets - Liabilites is supposed to be solvency.
However, who values their earnings, pension plans and mortgage actuarially or at least over the whole of the lifetime of payments? I suppose on death the value of the estate shows how successful the individual has been in bequeathing to their next of kin. Also as mortgages are sometimes used to buy houses, it means that many are likely to have this as negative which is not quite the same as insolvent.
In both 1 and 2 there is sometimes a margin.
However, as pointed out on the tv programme Capital Account (search on youtube if you want to find out more about this free show) , you may have to worry if your assets are someone else’s liabilities. Also, bear in mind my actuarial learning said that government bonds are the securest asset! That must have been a long time ago!
Finally, as also pointed out on Capital Account, currency as legal tender has an additional value at least at home!
1) Income - Outgo
2) Assets - Liabilities
The question is how you wish to define them and what the public what them to mean.
1) varies in many ways eg profits, cash flow.
income - taxes is a political version, the definition of tax being manipulative eg United Kingdom National Insurance is an income tax in all but name and is a deduction from wages.
Level of income tax and liquidity matter as you may need to pay cash in an emergency.
If the population median of Income - Outgo is too low which can happen if prices are too high, the political incumbent is in trouble.
2) Assets - Liabilites is supposed to be solvency.
However, who values their earnings, pension plans and mortgage actuarially or at least over the whole of the lifetime of payments? I suppose on death the value of the estate shows how successful the individual has been in bequeathing to their next of kin. Also as mortgages are sometimes used to buy houses, it means that many are likely to have this as negative which is not quite the same as insolvent.
In both 1 and 2 there is sometimes a margin.
However, as pointed out on the tv programme Capital Account (search on youtube if you want to find out more about this free show) , you may have to worry if your assets are someone else’s liabilities. Also, bear in mind my actuarial learning said that government bonds are the securest asset! That must have been a long time ago!
Finally, as also pointed out on Capital Account, currency as legal tender has an additional value at least at home!
Sunday, 29 January 2012
Capital intensive - meaning
Contracting is capital intensive, You have to pay for lots of things before you get any payment for services rendered. You hope to earn more than your outlay initially and for the whole of the freelance arrangement.
Things to pay for include transport, accommodation, food etc.
As you will also realise rapidly growing insurance companies like rapidly growing babies require more capital and thus more expenditure than less rapidly growing ones or in the case of companies contracting ones.
Thus a source of capital (eg money/resource) can be the use of an overdraft, or loan no matter how temporary. Another source could be any equipment or assets which you use but not purchased for the arrangement (eg clothes - not purchased for the business but obvioulsy need to be worn!)
Things to pay for include transport, accommodation, food etc.
As you will also realise rapidly growing insurance companies like rapidly growing babies require more capital and thus more expenditure than less rapidly growing ones or in the case of companies contracting ones.
Thus a source of capital (eg money/resource) can be the use of an overdraft, or loan no matter how temporary. Another source could be any equipment or assets which you use but not purchased for the arrangement (eg clothes - not purchased for the business but obvioulsy need to be worn!)
Thursday, 12 January 2012
Managing risk and lucky insurers
Lucky insurers. Insolvency of companies will protect lots of insurers and reinsurers from significant costs
Link: http://www.telegraph.co.uk/health/women_shealth/8999936/The-breast-implant-scandal-strips-away-the-glossy-euphemisms-of-cosmetic-surgery.html
Commentary:
Insolvency is great news for some insurers. The product liability insurers should be very relieved at the moment. At the moment Cosmetic surgery companies are being pressurised into redressing the situation - removing implants.
What are the problems and issues?
However who should pay and how long have the companies got?
In other words to what extent is this an operational research problem and to what extent is this an actuarial problem?
Are there insurers who can pick up the company tabs?
What order should the implants be removed? FIFO or some sort of triage?
Further down the link, one way to manage reputational risk is to get a proper typist or what used to be called by the masses a secretary and don't let others tweet sincerity/remorse/praise on your behalf.
Link: http://www.telegraph.co.uk/health/women_shealth/8999936/The-breast-implant-scandal-strips-away-the-glossy-euphemisms-of-cosmetic-surgery.html
Commentary:
Insolvency is great news for some insurers. The product liability insurers should be very relieved at the moment. At the moment Cosmetic surgery companies are being pressurised into redressing the situation - removing implants.
What are the problems and issues?
However who should pay and how long have the companies got?
In other words to what extent is this an operational research problem and to what extent is this an actuarial problem?
Are there insurers who can pick up the company tabs?
What order should the implants be removed? FIFO or some sort of triage?
Further down the link, one way to manage reputational risk is to get a proper typist or what used to be called by the masses a secretary and don't let others tweet sincerity/remorse/praise on your behalf.
Monday, 3 October 2011
Biting the hand that fed (or feeds) you - why independence does not exist but objectivity might
The newspapers reported Sir Alex Ferguson moaning about the power of TV. The sort of remark you make when untouchable and close to retirement. Now as we know (at least prior to the sale of Cristiano Ronaldo) that the Sky deals are probably responsible for Sir Alex’s big wages. However, he is not the only one. Financial services was or is full of such people. The obvious ones, presumably also with millions, such as Lords Myners and Turner seem to be forever critical of the City.
This brings me on to the more important point, Is it possible to be independent in a review of any aspect of financial services without being totally ignorant of it? The answer is no, This begs the question that if you review decision making then it makes you attractive for your next role in the private or public sector, could this influence your judgement. Politically, this was levelled at Neil Kinnock as he, his wife and family have clambered aboard the Euro gravy train (written with a degree of envy or is that jealousy) and has changed his anti-Europe stance from all those years ago.
Now, as regulators can also grab jobs in the private sector (with possible gardening leave or sabbaticals prior to the new role) this begs the question CAN YOU TRUST THE INDEPENDENCE OF JUDGEMENT OF SOMEONE WHO NEEDS TO WORK? Also, are regulators paid enough and knowledgeable enough? Bribing poor people is much easier!
Objectivity can exist.
This brings me on to the more important point, Is it possible to be independent in a review of any aspect of financial services without being totally ignorant of it? The answer is no, This begs the question that if you review decision making then it makes you attractive for your next role in the private or public sector, could this influence your judgement. Politically, this was levelled at Neil Kinnock as he, his wife and family have clambered aboard the Euro gravy train (written with a degree of envy or is that jealousy) and has changed his anti-Europe stance from all those years ago.
Now, as regulators can also grab jobs in the private sector (with possible gardening leave or sabbaticals prior to the new role) this begs the question CAN YOU TRUST THE INDEPENDENCE OF JUDGEMENT OF SOMEONE WHO NEEDS TO WORK? Also, are regulators paid enough and knowledgeable enough? Bribing poor people is much easier!
Objectivity can exist.
Sunday, 11 September 2011
Risk management is rubbish at prevention of future risks
Is risk management rubbish at prevention of future risks? What are the major risks facing financial concerns? Unknowns. What are the unknown unknowns? You may have to use your imagination in any environment and those who predict something are not always that great unless they can demonstrate significant profits from the course they have taken away from orthodoxy. However when orthodoxy goes wrong eg with over-sophistication, no-one ever seems to spot it soon enough.
Let’s flesh this out. One of the biggest operational risks is caused by over-sophistication or in old-fashioned English being too clever for your own good or too clever by half. Companies and managers (like Governments) are far too clever and sophisticated in doing things but eventually it will end in tears as either the systems can’t cope, aren’t properly documented, staff shortages and even sabotages or inexperience, excessive staff turnover and loss of the key intellect and other staff etc may mean for instance the pricing does not work, the derivative is disastrous etc Documentation is only any good if someone else understands it and can be bothered to make that effort. So a thousand page manual is in theory good documentation. However in practice it is a waste of time as who will read it and remember it. Look at the ipod nano.
Risk management is poor as they need to be fully integrated with the (Internal?)Audit Function so that everything is thoroughly and regularly checked and understood. This is more so when companies are involved in joint ventures with financial concerns. The financial concerns should have the expertise (apparently) and the company pays accordingly. Also both parties should be handsomely rewarded. But as we already know (eg LTCM) experts and intellects are not guarantees of success all the time.
Monitoring does pick up many faults…but will it be too late?
Internal Audits need to be more pro-active and thorough. The system’s supposed to do this and it will not always be enough to spot check a few things.
Mistakes happen but the secret is to make ones that don’t matter too much. For instance typos are a nuisance here but unemployment vs. in employment is a huge typo (which I nearly made once in an e-mail).
Let’s flesh this out. One of the biggest operational risks is caused by over-sophistication or in old-fashioned English being too clever for your own good or too clever by half. Companies and managers (like Governments) are far too clever and sophisticated in doing things but eventually it will end in tears as either the systems can’t cope, aren’t properly documented, staff shortages and even sabotages or inexperience, excessive staff turnover and loss of the key intellect and other staff etc may mean for instance the pricing does not work, the derivative is disastrous etc Documentation is only any good if someone else understands it and can be bothered to make that effort. So a thousand page manual is in theory good documentation. However in practice it is a waste of time as who will read it and remember it. Look at the ipod nano.
Risk management is poor as they need to be fully integrated with the (Internal?)Audit Function so that everything is thoroughly and regularly checked and understood. This is more so when companies are involved in joint ventures with financial concerns. The financial concerns should have the expertise (apparently) and the company pays accordingly. Also both parties should be handsomely rewarded. But as we already know (eg LTCM) experts and intellects are not guarantees of success all the time.
Monitoring does pick up many faults…but will it be too late?
Internal Audits need to be more pro-active and thorough. The system’s supposed to do this and it will not always be enough to spot check a few things.
Mistakes happen but the secret is to make ones that don’t matter too much. For instance typos are a nuisance here but unemployment vs. in employment is a huge typo (which I nearly made once in an e-mail).
Sunday, 20 February 2011
Tax Haven or good economy? Barclays
If a country does not spend much on defence, and/or has low wages then it should deserve to do well in world trade and afford low tax rates. More so as the West does not do warfare for economic reasons, (officially? Iraq?). So criticism in the past about the Channel Islands, Isle of Man and Ireland are harsh!
Barclays pays low tax on corporate profits. Well if you have a tax system when losses can be brought forward to relieve tax on future profits...what do you expect!
Barclays pays low tax on corporate profits. Well if you have a tax system when losses can be brought forward to relieve tax on future profits...what do you expect!
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