29 Aralık 2014 Pazartesi

Why John Oliver Is A Must Watch Show ...

The comedic talents emanating from the cavernous  cave of illicit intellectual masturbation that is The Daily Show, have sprouted wings to conquer the airwaves and brainwaves as well. It all started with Jon Stewart, who is actually a less angry incarnation of the indefatigable late George Carlin, the father of honest/rude/crude/intellectual/in your face commentary that happens to be extremely funny. From The Daily Show, the first to sprout wings was the "hard to box in" Stephen Colbert, who may have sold his soul a little to take over David Lettermen's show.


The third member who left The Daily Show was John Oliver and his Last Week Tonight with John Oliver is a must watch for his incisive commentary of what's wrong with politics, people in power, people and corporations that make stupid decisions, on the often anal attitudes of some Americans and the general riff-rafts that make you shake your heads. Its highly educational, informative and brilliantly funny.

Here are some of his better episodes:

On monarchies ...

https://www.youtube.com/watch?v=CkfnUm4w-Xk

On recent Indian elections ...

https://www.youtube.com/watch?v=qO2U4wRYE1M

On corruption in supplements market ...

https://www.youtube.com/watch?v=c5nUREYjowc

On the stupidity and misuse of funds of lottery ...

https://www.youtube.com/watch?v=9PK-netuhHA

On Brunei ...

https://www.youtube.com/watch?v=ycpDV9LvgU0


23 Aralık 2014 Salı

Why Air Ticket Prices won't Come Down just yet? (Dec 2014)


World's oil prices have been tumbling down substantially since June 2014 to current level of US$60/barrel. As most of us already knew, when this kind of news appear, airlines industry tends to be one of main beneficiaries. However, why cheaper oil price this round doesn't really translates into cheaper air ticket price?


The Oily Factor...
Oil is the biggest variable cost for airlines, often representing 1/3 or more of their operating expenses. Hence, the profit of an airline is very much depends on oil prices movements. And, due to this very important factor, many airlines are trying hard to minimize this risk until they found one strategy called --- hedging.


However, there is a flip side to this hedging strategy, which is if they bet on the wrong direction. Normally, an airline would hedge against the rising oil prices up to certain months. It can be three months or six months for example. This strategy works well if oil prices didn't fluctuate much, helping airline to estimate and control their costing.

Good sometime may be Bad also...
But, it's a totally different story if oil price tumbles as much as 40% within few months time as what we are experiencing currently. Instead of hedging against the rise of oil prices, the hedging costs is eating into the benefits of cheaper fuels. That's the reason why air ticket prices just won't come down yet until the hedging contracts is over.


I believe all of the airlines have this kind of hedging strategy. How competitive are they in the next few months would depends on how many % of fuel they already hedge. Let's wait...



19 Aralık 2014 Cuma

The Economics of It's A Wonderful Life

A tradition at Finance: Past, Present and Future is that the final post of the year is both Christmassy and cheesy - for past examples see here and here. This year, we will continue this great tradition with the help of the folks over at EconStories, who have performed an economic analysis of the classic Christmas movie It's A Wonderful Life, starring James Stewart as George Bailey.

I hope that you have a Merry Christmas and a prosperous 2015!


17 Aralık 2014 Çarşamba

Ethnic Diversity: A Cure for Bubbles?

The Proceedings of the National Academy of Sciences has recently published an interesting article entitled Ethnic Diversity Deflates Price Bubbles. The basic insight of the article is that bubbles can be aided by population homogeneity and thwarted by ethnic diversity. Here is the article's significance statement:
Markets are central to modern society, so their failures can have devastating effects. Here, we examine a prominent failure: price bubbles. We propose that bubbles are affected by ethnic homogeneity in the market and can be thwarted by diversity. Using experimental markets in Southeast Asia and North America, we find a marked difference: Market prices fit true values 58% better in diverse markets. In homogenous markets, overpricing is higher and traders’ errors are more correlated than in diverse markets. The findings suggest that price bubbles arise not only from individual errors or financial conditions, but also from the social context of decision making. Informing public discussion, our findings suggest that diversity facilitates friction that enhances deliberation and upends conformity.

16 Aralık 2014 Salı

Following On The 11th Commandment ...

Even if you are financially successful or career wise or has been able to involve yourself in sustainable charitable works ... I can safely say that you will not necessarily have great relationships. Its not a matter of acceptance or the need to endure, most of us just do not have the 'bigger perspective', the devotion needed and the "hows" to nurture loving relationships. Anyone, and I do mean anyone getting married will have a 5050 chance of getting divorced, with another 20% ending in listless, loveless, cumbersome ties. I am no expert but the 11th commandment and the two things below would really sum up what we lack.

http://www.businessinsider.com/lasting-relationships-rely-on-2-traits-2014-11?IR=T&

Science says lasting relationships come down to—you guessed it—kindness and generosity.
Every day in June, the most popular wedding month of the year, about 13,000 American couples will say “I do,” committing to a lifelong relationship that will be full of friendship, joy, and love that will carry them forward to their final days on this earth.
Except, of course, it doesn’t work out that way for most people.
The majority of marriages fail, either ending in divorce and separation or devolving into bitterness and dysfunction.
Of all the people who get married, only three in ten remain in healthy, happy marriages, as psychologist Ty Tashiro points out in his book "The Science of Happily Ever After," which was published earlier this year.
Social scientists first started studying marriages by observing them in action in the 1970s in response to a crisis: Married couples were divorcing at unprecedented rates. Worried about the impact these divorces would have on the children of the broken marriages, psychologists decided to cast their scientific net on couples, bringing them into the lab to observe them and determine what the ingredients of a healthy, lasting relationship were.
Was each unhappy family unhappy in its own way, as Tolstoy claimed, or did the miserable marriages all share something toxic in common?
Psychologist John Gottman was one of those researchers. For the past four decades, he has studied thousands of couples in a quest to figure out what makes relationships work. I recently had the chance to interview Gottman and his wife Julie, also a psychologist, in New York City. Together, the renowned experts on marital stability run The Gottman Institute, which is devoted to helping couples build and maintain loving, healthy relationships based on scientific studies.
John Gottman began gathering his most critical findings in 1986, when he set up “The Love Lab” with his colleague Robert Levenson at the University of Washington. Gottman and Levenson brought newlyweds into the lab and watched them interact with each other. 
With a team of researchers, they hooked the couples up to electrodes and asked the couples to speak about their relationship, like how they met, a major conflict they were facing together, and a positive memory they had. As they spoke, the electrodes measured the subjects' blood flow, heart rates, and how much they sweat they produced. Then the researchers sent the couples home and followed up with them six years later to see if they were still together.
From the data they gathered, Gottman separated the couples into two major groups: the masters and the disasters. The masters were still happily together after six years. The disasters had either broken up or were chronically unhappy in their marriages. 
When the researchers analyzed the data they gathered on the couples, they saw clear differences between the masters and disasters. The disasters looked calm during the interviews, but their physiology, measured by the electrodes, told a different story. Their heart rates were quick, their sweat glands were active, and their blood flow was fast. Following thousands of couples longitudinally, Gottman found that the more physiologically active the couples were in the lab, the quicker their relationships deteriorated over time.
But what does physiology have to do with anything? The problem was that the disasters showed all the signs of arousal — of being in fight-or-flight mode — in their relationships. Having a conversation sitting next to their spouse was, to their bodies, like facing off with a saber-toothed tiger. 
Even when they were talking about pleasant or mundane facets of their relationships, they were prepared to attack and be attacked. This sent their heart rates soaring and made them more aggressive toward each other. For example, each member of a couple could be talking about how their days had gone, and a highly aroused husband might say to his wife, “Why don’t you start talking about your day. It won’t take you very long.”
The masters, by contrast, showed low physiological arousal. They felt calm and connected together, which translated into warm and affectionate behavior, even when they fought. It’s not that the masters had, by default, a better physiological make-up than the disasters; it’s that masters had created a climate of trust and intimacy that made both of them more emotionally and thus physically comfortable.
Gottman wanted to know more about how the masters created that culture of love and intimacy, and how the disasters squashed it. In a follow-up study in 1990, he designed a lab on the University of Washington campus to look like a beautiful bed and breakfast retreat.
He invited 130 newlywed couples to spend the day at this retreat and watched them as they did what couples normally do on vacation: cook, clean, listen to music, eat, chat, and hang out. And Gottman made a critical discovery in this study — one that gets at the heart of why some relationships thrive while others languish.
Throughout the day, partners would make requests for connection, what Gottman calls “bids.” For example, say that the husband is a bird enthusiast and notices a goldfinch fly across the yard. He might say to his wife, “Look at that beautiful bird outside!” He’s not just commenting on the bird here: he’s requesting a response from his wife — a sign of interest or support — hoping they’ll connect, however momentarily, over the bird.
The wife now has a choice. She can respond by either “turning toward” or “turning away” from her husband, as Gottman puts it. Though the bird-bid might seem minor and silly, it can actually reveal a lot about the health of the relationship. The husband thought the bird was important enough to bring it up in conversation and the question is whether his wife recognizes and respects that.
People who turned toward their partners in the study responded by engaging the bidder, showing interest and support in the bid. Those who didn’t — those who turned away — would not respond or respond minimally and continue doing whatever they were doing, like watching TV or reading the paper. Sometimes they would respond with overt hostility, saying something like, “Stop interrupting me, I’m reading.”
These bidding interactions had profound effects on marital well-being. Couples who had divorced after a six-year follow up had “turn-toward bids” 33 percent of the time. Only three in ten of their bids for emotional connection were met with intimacy. The couples who were still together after six years had “turn-toward bids” 87 percent of the time. Nine times out of ten, they were meeting their partner’s emotional needs.
By observing these types of interactions, Gottman can predict with up to 94 percent certainty whether couples — straight or gay, rich or poor, childless or not — will be broken up, together and unhappy, or together and happy several years later. Much of it comes down to the spirit couples bring to the relationship. Do they bring kindness and generosity; or contempt, criticism, and hostility?
“There’s a habit of mind that the masters have,” Gottman explained in an interview, “which is this: they are scanning social environment for things they can appreciate and say thank you for. They are building this culture of respect and appreciation very purposefully. Disasters are scanning the social environment for partners’ mistakes.”
“It’s not just scanning environment,” chimed in Julie Gottman. “It’s scanning the partner for what the partner is doing right or scanning him for what he’s doing wrong and criticizing versus respecting him and expressing appreciation.”
Contempt, they have found, is the number one factor that tears couples apart. People who are focused on criticizing their partners miss a whopping 50 percent of positive things their partners are doing and they see negativity when it’s not there. 
People who give their partner the cold shoulder — deliberately ignoring the partner or responding minimally — damage the relationship by making their partner feel worthless and invisible, as if they’re not there, not valued. And people who treat their partners with contempt and criticize them not only kill the love in the relationship, but they also kill their partner's ability to fight off viruses and cancers. Being mean is the death knell of relationships.
Kindness, on the other hand, glues couples together. Research independent from theirs has shown that kindness (along with emotional stability) is the most important predictor of satisfaction and stability in a marriage. Kindness makes each partner feel cared for, understood, and validated—feel loved. “My bounty is as boundless as the sea,” says Shakespeare’s Juliet. “My love as deep; the more I give to thee, / The more I have, for both are infinite.” That’s how kindness works too: there’s a great deal of evidence showing the more someone receives or witnesses kindness, the more they will be kind themselves, which leads to upward spirals of love and generosity in a relationship.
There are two ways to think about kindness. You can think about it as a fixed trait: either you have it or you don’t. Or you could think of kindness as a muscle. In some people, that muscle is naturally stronger than in others, but it can grow stronger in everyone with exercise. Masters tend to think about kindness as a muscle. They know that they have to exercise it to keep it in shape. They know, in other words, that a good relationship requires sustained hard work.
“If your partner expresses a need,” explained Julie Gottman, “and you are tired, stressed, or distracted, then the generous spirit comes in when a partner makes a bid, and you still turn toward your partner.”
In that moment, the easy response may be to turn away from your partner and focus on your iPad or your book or the television, to mumble “Uh huh” and move on with your life, but neglecting small moments of emotional connection will slowly wear away at your relationship. Neglect creates distance between partners and breeds resentment in the one who is being ignored.
The hardest time to practice kindness is, of course, during a fight—but this is also the most important time to be kind. Letting contempt and aggression spiral out of control during a conflict can inflict irrevocable damage on a relationship.
“Kindness doesn’t mean that we don’t express our anger,” Julie Gottman explained, “but the kindness informs how we choose to express the anger. You can throw spears at your partner. Or you can explain why you’re hurt and angry, and that’s the kinder path.”
John Gottman elaborated on those spears: “Disasters will say things differently in a fight. Disasters will say ‘You’re late. What’s wrong with you? You’re just like your mom.’ Masters will say ‘I feel bad for picking on you about your lateness, and I know it’s not your fault, but it’s really annoying that you’re late again.’”
For the hundreds of thousands of couples getting married each June — and for the millions of couples currently together, married or not — the lesson from the research is clear: If you want to have a stable, healthy relationship, exercise kindness early and often.
When people think about practicing kindness, they often think about small acts of generosity, like buying each other little gifts or giving one another back rubs every now and then. While those are great examples of generosity, kindness can also be built into the very backbone of a relationship through the way partners interact with each other on a day-to-day basis, whether or not there are back rubs and chocolates involved.
One way to practice kindness is by being generous about your partner’s intentions. From the research of the Gottmans, we know that disasters see negativity in their relationship even when it is not there. An angry wife may assume, for example, that when her husband left the toilet seat up, he was deliberately trying to annoy her. But he may have just absent-mindedly forgotten to put the seat down.
Or say a wife is running late to dinner (again), and the husband assumes that she doesn’t value him enough to show up to their date on time after he took the trouble to make a reservation and leave work early so that they could spend a romantic evening together. But it turns out that the wife was running late because she stopped by a store to pick him up a gift for their special night out.
Imagine her joining him for dinner, excited to deliver her gift, only to realize that he’s in a sour mood because he misinterpreted what was motivating her behavior. The ability to interpret your partner’s actions and intentions charitably can soften the sharp edge of conflict.
“Even in relationships where people are frustrated, it’s almost always the case that there are positive things going on and people trying to do the right thing,” psychologist Ty Tashiro told me. “A lot of times, a partner is trying to do the right thing even if it’s executed poorly. So appreciate the intent.”
Another powerful kindness strategy revolves around shared joy. One of the telltale signs of the disaster couples Gottman studied was their inability to connect over each other’s good news. When one person in the relationship shared the good news of, say, a promotion at work with excitement, the other would respond with wooden disinterest by checking his watch or shutting the conversation down with a comment like, “That’s nice.”
We’ve all heard that partners should be there for each other when the going gets rough. But research shows that being there for each other when things go right is actually more important for relationship quality. How someone responds to a partner’s good news can have dramatic consequences for the relationship.
Super Seniors coupleREUTERS/Michelle McLoughlin
In one study from 2006, psychological researcher Shelly Gable and her colleagues brought young adult couples into the lab to discuss recent positive events from their lives. They psychologists wanted to know how partners would respond to each other’s good news. They found that, in general, couples responded to each other’s good news in four different ways that they called: passive destructiveactive destructivepassive constructive, and active constructive.
Let’s say that one partner had recently received the excellent news that she got into medical school. She would say something like “I got into my top choice med school!”
If her partner responded in a passive destructive manner, he would ignore the event. For example, he might say something like: “You wouldn’t believe the great news I got yesterday! I won a free t-shirt!”
If her partner responded in a passive constructive way, he would acknowledge the good news, but in a half-hearted, understated way. A typical passive constructive response is saying “That’s great, babe” as he texts his buddy on his phone.
In the third kind of response, active destructive, the partner would diminish the good news his partner just got: “Are you sure you can handle all the studying? And what about the cost? Med school is so expensive!”
Finally, there’s active constructive responding. If her partner responded in this way, he stopped what he was doing and engaged wholeheartedly with her: “That’s great! Congratulations! When did you find out? Did they call you? What classes will you take first semester?”
Among the four response styles, active constructive responding is the kindest. While the other response styles are joy-killers, active constructive responding allows the partner to savor her joy and gives the couple an opportunity to bond over the good news. In the parlance of the Gottmans, active constructive responding is a way of “turning toward” your partners bid (sharing the good news) rather than “turning away” from it.
Active constructive responding is critical for healthy relationships. In the 2006 study, Gable and her colleagues followed up with the couples two months later to see if they were still together. The psychologists found that the only difference between the couples who were together and those who broke up was active constructive responding. Those who showed genuine interest in their partner’s joys were more likely to be together. In an earlier study, Gable found that active constructive responding was also associated with higher relationship quality and more intimacy between partners. 
There are many reasons why relationships fail, but if you look at what drives the deterioration of many relationships, it’s often a breakdown of kindness. As the normal stresses of a life together pile up—with children, career, friend, in-laws, and other distractions crowding out the time for romance and intimacy—couples may put less effort into their relationship and let the petty grievances they hold against one another tear them apart.
In most marriages, levels of satisfaction drop dramatically within the first few years together. But among couples who not only endure, but live happily together for years and years, the spirit of kindness and generosity guides them forward.


Read more:  http://www.theatlantic.com/health/archive/2014/06/happily-ever-after/372573/#ixzz3M7FyKnSJ


Why is the UK Banking Sector So Big?

Why is the UK banking sector so large? Why has it grown so large over the past four decades? And is the size of the banking system a problem? Click here to read a recent Bank of England Quarterly Bulletin article which addresses these questions. One of the article's authors discusses the report in the video below.


15 Aralık 2014 Pazartesi

Finance Research Letters

From January 2015, I will be an Associate Editor of Finance Research Letters. I will be dealing with all financial history papers submitted to the journal. The journal publishes peer-reviewed letters / short papers on any topic in finance and aims to have a quick turnaround.

12 Aralık 2014 Cuma

The 11th Commandment .....

This is a great truth, and would go a long way to saving, healing, mending your many relationships ... In fact the most enduring relationships reside with those who totally get this truth ...


11 Aralık 2014 Perşembe

Vital Skills for the Modern World

Nobel laureate James Heckman is the world's leading authority on the economics of human development. He is a huge advocate of the need for kids to develop maths and IT skills from an early age. He is also a big advocate of the need to develop 'soft skills' in children. In the short video below, he outlines his views on soft skills and why they are so important. These are skills that we at Queen's University Management School try to develop in our students.


9 Aralık 2014 Salı

The First Time ...

I am going away for a short trip and just left my dog with a reputable (high cost) pet hotel. It comes with different sized rooms, some with fans, some with aircon .... so I got the best they had at RM125 per night. Seems like more expensive than Tune hotels but they wouldn't take my dog I think. It seems expensive but its guilt-fees I think. 

Though I have traveled before and left my dog behind before, ... before it was always with my mum back in Ipoh or the numerous times when I had a maid in the house (who loved Dali anyway). Now my maid has ran away a few months back and mum is tagging along in the trip ... no choice. First time at a pet hotel.

I guess its the same kind of feelings when you leave your kids at kindergarten for the first time ... or even leaving your kids for the first time to travel. No matter how well you plan it, the guilt is enormous.

I can still see it in her eyes when I ushered her into the 'new room' ... its the "don't leave me here look", "are you leaving me for good look" ... I had to rush out of the place. She doesn't know its temporary, she doesn't even know that there will be walks with other dogs and play time with them as well.

You question what kind of "parent" you are. You also know deep down its the fair thing to do, your life cannot be 24-7 always with the dog, even though she is a member of your family. You think of the numerous "vicious sad thoughts" that she may be thinking of her friend. Sigh...


8 Aralık 2014 Pazartesi

The Effects of the Strong Dollar

Will the Fed raise interest rates in the face of a strong dollar? What is the effect of the strong dollar on the rest of the world? John Auther tackles these questions in the video below.

7 Aralık 2014 Pazar

Why S&P500 Keeps Rising

by Charles Hugh Smith

As long as corporations continue borrowing money to buy back their own stocks and the yen keeps dropping, the SPX will continue lofting higher.
The unmanipulated sector rose a bit, while the stock buyback crowd soared:Why is the S&P 500 rising, even as valuations are getting stretched, profit growth is declining and sales are stagnant? Two charts explain it all. Here is a chart showing the S&P 500 companies that have been buying back their own stocks (often by borrowing cheap money to do so) and companies that haven't bought back hundreds of billions of dollars in their own stock.
Here is the S&P 500, with red lines marking its recent lows:
Here is the Japanese yen ETF (NYSEARCA:FXY), with red lines marking its recent highs. The correlation is near-perfect: when the yen drops, the SPX rises.
This is a function of the carry trade, in which speculators borrow money in near-zero interest-rate yen and buy U.S. stocks with the cash. The financiers make money in two ways: the buying pushes the U.S. stocks up and the decline of the yen means they can pay back their loan in cheaper yen.
But the correlation isn't caused by just the carry trade: it's also a function of trading computers keying on the carry trade for momentum and direction.
The correlation is also visible in two ratio charts: SPX-FXY, and FXY-SPX:
As long as corporations continue borrowing money to buy back their own stocks and the yen keeps dropping, the SPX will continue lofting higher. If either of these drivers fades or reverses, the rally in SPX will reverse, too.

4 Aralık 2014 Perşembe

Bubbles and Central Banks

Marcus Brunnermeier and Isabel Schnabel have a new working paper entitled Bubbles and Central Banks: Historical Perspectives. In their paper, they look at the most prominent asset price bubbles from the past 400 years and how central banks (or their precursors) reacted to those bubbles during their formation and bursting. They suggest that a passive stance of merely cleaning up after the bubble is costly. However, although interest-rate leaning policies and macroprudential tools have helped to deflate bubbles, the implementation of these proactive polices is fraught with danger. What then are central banks to do?

What Brunnermeier and Schnabel ignore is the institutional or regulatory environment which commercial banks operate in during bubbles. As I show in my book Banking in Crisis, asset price bubbles in the UK did not always result in banking crises or economic disaster. The reason for this was that bankers were incentivised to not take excessive risk during the boom by having skin in the game or by stringent asset regulations imposed by the Bank of England. The recent housing boom resulted in the 2008 crisis because of the absence of these two features - bankers had no skin in the game and were not constrained by regulation. This both increased the size of the bubble and made its bursting extremely troublesome for the real economy.    


2 Aralık 2014 Salı

Central Bank Psychology

Andy Haldane, the Bank of England's Chief Economist, gave a really thoughtful speech a few days ago on central bank psychology. He highlighted four "cognitive ticks" that affect human decision making and public policy making - preference biases, myopia biases, hubris biases and group-think biases. In his speech, he outlined ways in which the Bank has been organised to take account of these cognitive ticks. His speech is well worth reading.