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Monday's Top 10 with NZ Mint; The crime of the century; adjusted reality; urban mining; the war on selling; app competition; Dilbert
Here's my Top 10 links from around the Internet at 10:00 am today in association with NZ Mint.
Bernard will be back with his version tomorrow.
As always, we welcome your additions in the comments below or via email to email@example.com.
1. 'Crime of the century'
"Forget Bernie Madoff and Enron’s Ken Lay - they were mere amateurs in financial crime. The current Libor interest rate scandal, involving hundreds of trillions in international derivatives trade, shows how the really big boys play. And these guys will most likely not do the time because their kind rewrites the law before committing the crime." Robert Scheer is one angry man. Count me with him.
Modern international bankers form a class of thieves the likes of which the world has never before seen. Or, indeed, imagined. The scandal over Libor - short for London interbank offered rate - has resulted in a huge fine for Barclays Bank and threatens to ensnare some of the world’s top financers. It reveals that behind the world’s financial edifice lies a reeking cesspool of unprecedented corruption. The modern-day robber barons pillage with a destructive abandon totally unfettered by law or conscience and on a scale that is almost impossible to comprehend.
2. Adjusted reality?
I am not much of a fan of seasonally-adjusted stats, although I know they are technically superior and now ubiquitos. I always want to see the 'actual' data. And I reckon you can 'see' the seasonality if you chart data (and look). I never really understand the impact of seasonality on the latest data point - it's a mystery to me. And it is compounded when you realise that the number reported last month has changed, as have the data for most previous periods. Most of our charts show 'actual', rather than 's.a.' And it seems I am not alone. The latest US jobs numbers are reported as 'weak' and 'weakening' - well they are on a seasonally adjusted basis, but not on an 'actual' data basis. Floyd Morris is scratching his head too. Here he is revealing the huge difference in those latest US jobs numbers:
On a monthly basis, by the way, there were more than 800,000 private sector jobs added - before seasonal adjustments - in each of the last three months. But the seasonal adjustments reduced the monthly average to less than 100,000.
3. A new industry: urban mining
'Urban mining' deposits are 40 to 50 times richer than mined ore, experts tell a recent conference. New PCs, cell phones, tablets, other e-products now use 320 tons of gold, 7,500 tons of silver per year, and rising. Here are the details, from ScienceDaily:
A staggering 320 tons of gold and more than 7,500 tons of silver are now used annually to make PCs, cell phones, tablet computers and other new electronic and electrical products worldwide, adding more than US$21 billion in value each year to the rich fortunes in metals eventually available through "urban mining" of e-waste, experts say.
Manufacturing these high-tech products requires more than US$16 billion in gold and US$5 billion in silver. Most of those valuable metals will be squandered, however; just 15% or less is recovered from e-waste today in developed and developing countries alike.
4. Rosy future?
'Australia is a province of China; New Zealand a suburb of Australia' - you've no doubt heard that phrase before (here on interest.co.nz), pointing out how our fortunes are linked closely to what goes on in China. China is slowing, no doubt about that. So instinctively we think we are in for a rough future. But don't tell the experts in Australia; the Sydney Morning Herald has recently polled their economic 'experts' are they seem unusually optimistic about the future of Australia.
On average, our 22 forecasters predict Australia's gross domestic product will grow by 2.9 per cent in the coming 12 months, within the 2.5 to 3.5 per cent range forecast by the Reserve Bank, although slightly less than the budget forecast of 3.25 per cent as the year average.
They expect global output in 2012 will expand by 3.2 per cent, a bit less than the 3.5 per cent forecast in April by the International Monetary Fund. But many in the panel see global confidence returning in 2013, lifting prices for Australia's mining exports, and reversing the slide in the terms of trade.
Most disregard the forecasts of a further fall in commodity prices, and signals by BHP and Rio that mining projects could be put on hold. They say mining construction work for the next year or two is now locked in, and while prices may have peaked, the peak in mining investment is several years away.
5. ‘Leftist’ governments are bad for business
Although governments of the ‘left' are typically viewed by economists and the general public as being less business-friendly, formal evidence linking the political orientation of parties in power to their country's economic performance is decidedly mixed. However a recent prizewinning paper from Sasha Molchanov from Massey University and his co-authors Art Durnev and Jon Garfinkel more or less proves conclusively that they are. Here is a summary (.pdf)
6. Japan shrinks
Many nations have aging populations, but none can quite match Japan. Its experience holds lessons for other countries as well as insights into the distinctiveness of Japanese society. There will be spectacular changes, as Nicholas Eberstadt points out:
Within barely a generation, demographic trends promise to turn Japan into a dramatically- in some ways almost unimaginably - different place from the country we know today. ... there will be so many people over 100 years of age in 2040, and so few babies, that there could almost be one centenarian on hand to welcome each Japanese newborn.
In the aftermath of two “lost decades” of meager growth, a world economic crisis, and a devastating tsunami, the Japanese economy faces a future in which simply sustaining growth will be an increasing challenge. The working-age population is set to shrink by 30 percent over the next three decades, and even if older Japanese take up some of the slack, the country’s work force will almost surely be much smaller than it is today. Extreme population aging, for its part, stands to place mounting downward pressure on the nation’s savings rate - and thus, other things being equal, on investment.
Ballooning debt obligations will compound the demographic pressures on economic performance. Thanks in part to its approach to financing programs for the aged, Japan already has the highest ratio of gross public debt to gross domestic product (well over 200 percent) of the developed nations. Projections by researchers at the Bank for International Settlements imply that this ratio could rise to a mind-boggling 600 percent by 2040. (Greece’s public debt, by contrast, amounted to about 130 percent of its GDP at the start of its current default drama.) While Japan might well be able to service such a mountain of debt without risk of sovereign default (assuming the country’s low-interest-rate environment continues to hold), it is hard to see how a recipe for rapid or even moderate economic growth could be cooked up with these ingredients.
7. This is your brain on shopping, and it's not very smart
Because most of us aren't very good at maths, companies use that 'weakness' when they market their products. Read this by Derek Thompson and you will instantly see why you should upskill on the numbers front. Actually, its not actually the companys fault - if you only invested in a bit of effort you wouldn't be such a sucker. Take maths, logic and financial skills seriously - even if your teachers were too snooty (or incapable) themselves. (Read interest.co.nz regularly !)
(4) We're in love with stories. In his book Priceless, William Poundstone explains what happened when Williams-Sonoma added a $429 breadmaker next to their $279 model: Sales of the cheaper model doubled even though practically nobody bought the $429 machine. Lesson: If you can't sell a product, try putting something nearly identical, but twice as expensive, next to it. It'll make the first product look like a gotta-have-it bargain. One explanation for why this tactic works is that people like stories or justifications. Since it's terribly hard to know the true value of things, we need narratives to explain our decisions to ourselves. Price differences give us a story and a motive: The $279 breadmaker was, like, 40 percent cheaper than the other model - we got a great deal! Good story.
8. The war on selling
In case you missed it over the weekend, lawyer Brian Henry reminds the FMA that salespeople are never advisers and advisers are never salespeople. He wants to see an honest declaration of these relationships in the law.
When is a salesperson an adviser?
The answer is simple. Never!
The guidelines need to deal with the actual intent of the “adviser” and force them to tell the customer their true intent at the outset; that is, they are there with the intent of selling a product. They are not a friend and confidant. They are not an “adviser”.
9. Help managing
Inspired by what they are seeing in places like Kenya and the Philippines, the US Treasury is sponsoring a competition to find the best monile phone app ideas. Apparently Timothy Geithner was impressed with how Kenyans make remittances between each other. Is this an official effort to encourage an end-run around traditional bank payment systems? It could also be a regulatory challenge, but at least one regulator is front-footing it. Good on them.
But not everyone thinks you really need an app to be effective. Here is one comment we saw:
I use a simple excel sheet to track my income and expenses and it works fine.
Managing money is not about applications it is about our ability to curb our desire to have everything now and pay later. Oh, I have credit cards and I use them - wisely - no interest payments.
No matter what an app does it cannot stop someone from spending money because their desires overtook their wallet.
Here are my rules of spending:
1. Anything over $150 - wait 30 days
2. Anything over $100 - wait 96 hours
3. Anything over $50 - wait 24 hours.
4. Anything less than $50 pay cash.
Of course this does not include groceries or fuel or consumables. It applies to durable goods.
Following these rules allowed me to use my car for 15 years and put 220,000 miles on it. And I paid cash for my new car.
The question to ask - can I do without this item?