Tag: Finance

Is the dollar overvalued or undervalued - will it rise or fall this year? The dollar will continue its bumpy ride, but the fundamental reasons why the trend is downward remain in place.

The process by which large numbers of people become convinced of things that are not true has always been an important feature of political and economic life. Believing in Santa Claus is part of the joy of Christmas - but fantasies about great returns on hedge funds or unprecedented commercial opportunities of the internet is a different story.

There is wisdom in crowds, but more often wisdom in the wise. And you can beat the market, but not as often as the crowd would have you believe.

Financial markets would work better if we could be confident in the reliability of its products and the integrity of those who sell them. As the example of Scottish Life precipice bonds highlights, selling shares to customers who do not understand what they are buying is hardly a means to this end.

Because no rule or code can define the character of a non-executive, even boards compliant with every code and regulation will range from the effective to the useless. Shareholders should keep an eye on excessive remuneration and vainglorious acquisitions, and intervene in issues of management succession when it appears that non-executive directors have become too close to the company to do a proper job.

The efficient market hypothesis is 90 per cent true, and you will lose money by ignoring it. However, judging by Warren Buffett’s fortunes, a few skilled searchers might find rewards in the remaining 10 per cent worth chasing.

A nodding acquaintance with modern finance theory tells you that the strategy of Equitable Life was the financial equivalent of alchemy or perpetual motion. Yet, Lord Penrose is wrong to believe that tighter regulation is the best solution – the only answer is higher standards of both ethics and competence in the whole financial services industry.

Heads, we win; tails, they lose! Managers, traders and advisers who take more of gains than of losses have incentives to support risky courses of action that are not in the best interests of the principals they represent. John explains why this scheme can never really align the rewards of the individual with the objectives of the organisation.

The problem of the European pension gap cannot be tackled by the kind of financial engineering proposed by the European Financial Services Round Table. This is not the moment in history to argue that private pension funding is necessarily superior to state provision.

If the government wants people to save more it will have to look beyond first year economics. Full information and homogenous products are no antidote to imperfect human nature