Showing posts with label SOCIOLOGY. Show all posts
Showing posts with label SOCIOLOGY. Show all posts

Sunday, July 16, 2017

What is Love? (Include Video)

Dear Working Professional- students.

Exam results are around the corner. That is something you can't change. The past.

Move on, whatever the results will be.

Here is a video that says that love is about sacrifice, not how I feel about you.


 Make sacrifices for your love ones and you will yield the results for many years to come.

Best regards,
Marcus - your always supportive lecturer.

Friday, April 21, 2017

Are marriages happier when women control the money?

Disclaimer of Liabilities: Articles are uploaded in the spirit of humour and motivation. Please don't personalised it to extent that is detrimental to your mental health. But take to heart the lessons from the world around us and learn the good factors to improve our character. 

Dear Hardworking ACCA men,

The world is becoming complex. It was complex a long time ago where women rules the world in a certain society in India. Alert! Such practice can spread with the author Jo Piazza best selling book. Many parents or mothers might be thinking to let the women wear the pants, so to speak. 


 Image result for women power

To prove yourself as men useful, invest lots into your qualification and experience. Hone skills to add value to enterprise and ultimately your self. 

Image result for women power
Please read and may this NOT HAPPEN to you. If it does, well Jo Piazza may have another sequel book.
Image result for women powerRemember, to succeed one must be focused and disciplined. Exams are round the corner, minimise idle time but invest in contructive time sharperning Exam Techniques. 

Best regards,
Entrepreneurial approach to life - Marcus



_________________________________________________________________________________



Jo Piazza is the author of the new book How To Be Married in which she crowdsourced marriage advice from around the world in an effort to figure out how to have a successful partnership. This is an excerpt from her travel memoir. 

I would have missed out on one of the most interesting models for marriage and partnership in India if I hadn’t started talking marriage with this tuk-tuk driver outside the Kamakhya temple in Guwahati, India.

“You can’t leave without going to Meghalaya,” he insisted. At this point I was used to being told I couldn’t leave India without seeing at least one thing, be it the Taj Mahal or the new Taco Bell in Delhi.

“What’s special in Meghalaya?”

“It’s the place where the women are in charge. They’re the heads of the family,” he explained. It was all he had to say. I changed my plans.

That’s how I ended up in Shillong, the capital of the northeastern state of Meghalaya, so close to the border with Bangladesh that the two cultures spill into each other.


Author Jo Piazza crowdsourced marriage advice in India. (Jo Piazza)

The Khasi and Jaintia hill tribes of Meghalaya are matrilineal. Property and assets are passed down through the youngest daughter in a family. All of the children take the mother’s name instead of the father’s. The husband moves into his wife’s home, often bringing with him just a single suitcase of his things—a few changes of clothes, maybe his guitar or his cricket bat. It’s the women who run the households and are largely in control of the finances and the major financial decisions. The men work, but they often hand their money over to their wives.

Meghalayan tribes have been matrilineal as long as anyone who lives there remembers, since long before the British came, back when all of what we now call India was just a medley of tribes linked by geography. No one could tell me for certain where the matrilineal tradition originated. It’s as old as the oldest stories they talk about.

I’d traveled to more than thirty countries in the past two years and never been anywhere, including the States, where women were institutionally favored above men.

The way the women in Meghalaya control the money and the property made me think of my own marriage and the dynamic between money and power. When Nick and I first met, I earned the higher salary, which made me feel like I had the right to manage our finances and make major decisions.
I drove into the bustling capital, where I was supposed to meet up with a translator named Sukher, a petite, soft-spoken, and meek man in his twenties. His shoulders curled into his body in a way that made him take up even less space.

“Of course the men just accept that the women have power here. That’s just the way it is,” he told me very matter-of-factly in a voice as low as a whisper. “It’s important to listen to my wife. She makes good decisions.” His wife is the second daughter in the family, but not the youngest. This means that she doesn’t stand to inherit any of the family’s property. I kept asking why it was the youngest and not the eldest daughter who inherited. The answer makes a lot of sense. The youngest daughter will be around the longest, so she’ll be able to use the family property and money to take care of her parents and then the older siblings as they age.

Sukher had recently moved into his wife’s ancestral home in a neighboring village called Mawlynnong and he commuted into Shillong each day to work as a translator and tour guide. He and his wife had been arguing because Sukher wanted to move closer to the city to make his commute for work easier, but his wife was adamant about not leaving their village. In the end, she won.

Sukher dutifully led me into Shillong’s Khasi market, which was tucked down a dank, narrow alleyway, past a series of winding side streets, dark tea shops, and counters for placing bets on professional archery. They love professional archery in Shillong, and skilled archers are the equivalent of NFL football players in the United States or soccer stars in Europe. The Khasi market is a series of never-ending stalls where the women sell everything from betel nuts and banana leaves to tobacco and fancy dresses for less than five American dollars. Elsewhere in India the men control the markets, but here the women do the buying and the selling. The only men I saw sat quietly in the backs of the shops, sometimes making change, feeding a baby, or running an errand for their female boss.

The women of Meghalaya in India control the money and property. (Jo Piazza)

I struck up a conversation with a young woman from the Jaintia tribe named Daphi, the proprietor of a small dress shop. The shop had been passed down through the women of her family for three generations. A photograph of her deceased mother hung above the counter, gazing down at her daughter with pride. Her mother’s younger sister owned the dress shop across the way, and they teased one another about which stall had the prettier dresses and better deals.

“My mother made all of the decisions for our family herself,” Daphi told me. “When I get married, I will be the one to make the big decisions. This is just the way our culture is.” Daphi was the youngest daughter in a family of two girls, which meant that ownership of the store went to her when her mother passed. “It’s a lot of responsibility,” she explained. “But I hope to find a husband to share it with me.”

“To share it with me” was an interesting choice of words. I asked Daphi if she thought that being the owner of her shop would present problems in her future relationship.

“I don’t think so. I think that I will always consult my husband and we will have discussions about all of our decisions. I saw my mother do that and my female relatives do that. We involve the men. Why wouldn’t we?”

I thanked Daphi for being so honest and bought two colorful Indian nightgowns from her and one fancy child’s dress from her aunt across the street.

Down the alleyway I ran into a woman named Diana standing barefoot in front of tall bins of betel nuts, wearing the traditional Khasi checked kyrshah, or apron. Her hair was pulled back in a tight ponytail revealing a high, regal forehead.

She told me she was forty-two years old and that she’d been married for more than twenty years. She and her husband had three boys. She’d love to have a girl who could inherit, but she was too tired to keep trying. Instead, her sons would be the heirs when she and her husband passed away.
Diana laughed when I asked about the merits of living in a matrilineal society.

“This is the best place in the world to live. In other places it is hard to be a woman,” she told me, her positive pride in her culture evident in her thrown-back shoulders and expanded chest.

“We are a very special people, you know.” Her eyes danced with mischief. “Obviously it’s the women who have the power. Doesn’t that make sense?” she said and smiled, flecks of betel nut caught in her teeth. “I never do anything at home. My husband does the cooking, the cleaning, everything. But he does that because he likes to do that. You have to have an understanding in marriage. Marriage is a compromise. If he needs help, then I help him.” She leaned in close to me. “You have to give the men some understanding. You work hard to understand each other, but the men, they need it more.”

The Khasi and Jaintia women control the money and the property, and yet every woman I met talked about understanding and compromise. They told me it wasn’t their place to force their husband to do things. They stressed that no matter who controls a family’s wealth, the most important thing in a marriage is an understanding of equality between the two partners, compromise.

 Source:

Tuesday, May 13, 2014

Forensic Audit Interview with PWC on BFM

- Related to P7 AAA Candidates

Exam pressures are closing in. Nice to relax for a while. Heard a good practical interview with Director of Forensics Lead Alex Tan on approaches on survey related to Corporate Fraud. This is an international studies and as you have guessed right that Malaysia is ranked quite high on Fraud risks. As you can see many 'unresolved' scandals posted below. Note that the sources were taken from Government controlled press. Biased it would be in "protecting" its own leaders. But have a read and see if you can't help it but see glaring Corporate Governance failures, lack of accountability and opaque explanations.

To play the above mentioned interview, please go directly to link below:

PwC's 2014 Global Economic Crime Survey - The Malaysian Cut

Sit back and enjoy this interview of about 30 minutes. It touches on Forensic strategies, ethical approaches in conducting it and Report Assurance Findings (also known as Negative Assurances Report). All of which are related to P7 AAA exam preparations.











 Source:Shawan, 2014,
SHAZWAN MUSTAFA KAMALJanuary 13, 2014
SHAZWAN MUSTAFA KAMALJanuary 13, 2014
http://www.themalaymailonline.com/malaysia/article/is-pkfz-scandal-a-crime-without-culprits-pakatan-asks, January 13



Enjoy learning on case company Target (USA) Inc.

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++


Case Company: Target Markets (USA) 

Target hackers may have exploited backdoor in widely used server software

KrebsonSecurity digs in to point-of-sale malware infecting retailer's network.





Update: About 24 hours after this report was published, BMC issued a statement that said in part: "BMC has confirmed that the password mentioned in the press is not a BMC-generated password. At this point, there is nothing to suggest that BMC BladeLogic or BMC Performance Assurance has a security flaw or was compromised as part of this attack."

Widely used management software running on Target's internal network may have given an important leg-up to attackers who compromised 40 million payment cards belonging to people who recently shopped at the retail giant by KrebsonSecurity.

Malware that infected Target's point-of-sale terminals used the account name "Best1_user" and the password "BackupU$r" to log in to a control server inside the Target network. The malware used the privileged insider access to temporarily stash payment card data siphoned out of the terminals used in checkout lines so it could then periodically be downloaded to a different service for permanent storage. In Wednesday's post, Krebs filled in some intriguing new details that suggest a poorly secured feature inside a widely used server management program may have played a role. Krebs explained:
That “Best1_user” account name seems an odd one for the attackers to have picked at random, but there is a better explanation: That username is the same one that gets installed with an IT management software suite called Performance Assurance for Microsoft Servers. This product, according to its maker — Houston, Texas based BMC Software — includes administrator-level user account called “Best1_user.”
This knowledge base article (PDF) published by BMC explains the Best1_user account is used by the software to do routine tasks. That article states that while the Best1_user account is essentially a “system” or “administrator” level account on the host machine, customers shouldn’t concern themselves with this account because “it is not a member of any group (not even the ‘users’ group) and therefore can’t be used to login to the system.”
“The only privilege that the account is granted is the ability to run as a batch job,” the document states, indicating that it could be used to run programs if invoked from a command prompt.
Krebs went on to quote a part of the BMC article that said:
Perform Technical Support does not have the password to this account and this password has not been released by Perform Development. Knowing the password to the account should not be important as you cannot log into the machine using this account. The password is known internally and used internally by the Perform agent to assume the identity of the “Best1_user” account.
Krebs asked BMC if "BackupU$r" is the password that controls access to the "Best1_user" account. Company representatives have yet to provide an answer.

Krebs also cited a report that Dell SecureWorks privately distributed to clients earlier this week. "The Best1_user account appears to be associated with the Performance Assurance component of BMC's Software's Patrol product," Dell SecureWorks researchers wrote. "According to BMC's documentation, this account is normally restricted, but the attackers may have usurped control to facilitate lateral movement within the network."

Krebs also repeated what Ars that there's a compelling case to be made that, just like the co-conspirators of now-convicted Albert Gonzalez, the people who hacked Target may have first penetrated the network by mounting a SQL injection attack on Target's website. Wednesday's report from Krebs has many more details, including a recent dump of more than 2 million compromised payment cards, all of them used at Target between November 27 and December 15.


Monday, August 26, 2013

Which is your favourite Picture?

Reader's digest said that Laughter is the Best Medicine. Yes, to de-stress from a regime of jamming ideas into our over-loaded grey matter.

Have a look! Tell me which is your favourite picture by putting your comments below the article.

Enjoy!












Thursday, July 25, 2013

Being Beautiful is a Disadvantage

- Relevant to all ACCA Students awaiting results


Beauty - a limitation? 




We enjoy beautiful things in life. Be it starry skies, breathtaking waterfalls, awesome nature or gorgeous ladies. Well, the feminine gender can be appealing to the eyes, but there is a downside. In USA Iowa Court has ruled that it is legal for a male employer to fire a female employee simply because she looked too attractive. That's right! You read it correct. 


Reason is the gorgeous lady can be too distracting to male colleagues. Thus causing loss of work productivity. So, is this a disadvantage to our ACCA-undergraduate ladies? 



Who is Beautiful?

This is a tricky question - How many of our students are beautiful (Compare Picture 01)? I am directing this question only to ladies, not guys! In my opinion, every lady is pleasant to the eyes, however Beauty lies in the eyes of the Beholder (in some cases Stalkers!). 


 






What should be done?

To be fair, it is not the fault of one looking pretty and attractive. But to minimise such risks, it is best that one invest in "Substance Over Form", if you allow me to borrow F7/P2 Expert lecturers. Yes, invest in brains rather than looks. If ACCA AFFLIATE Ladies is to venture into employment, their skills are highly demanded rather than skin-deep looks. Employers fighting off personal temptations may not see you as a threat but a value added staff to the firm. 


 





Solution

There you go! Graduate with ACCA, possibly University Degree or even POSTGRADUATE studies will enhance your career. Better still, you become the employer. See Yahoo's Hot but brainy CEO Melissa  (See Picture 02)


Final Word : If Handsome Men?
The question is - Is it legal for a Lady Employer to fire a Male Staff because he is too handsome? If so, poor
Bae Yong-joon, Sharukh Khan, Henry Cavill or  any wannabe Joe Actor trying to look for work in your firm. (See Picture 04-07)


Well, if it is legal to fire a beautiful lady, I can't see why it is not legal to hire a handsome man. Why, you can lock up a handsome man forever legally, of course, I think you know what I mean.






ACCA RESULTS 

Prepare yourself to accept the coming ACCA Results this 8th August, 2013. Remember, finish the journey ie to complete ACCA. Don't allow speed bumps along the way to discourage or de-rail your ambition. 

My favourite quote from Churchill (1939), "Never Give Up! I say once again, Never, Never Give Up!"  


______________________________________________________

Court's Decision

IOWA CITY, Iowa (AP) — The Iowa Supreme Court on Friday stood by its ruling that a dentist acted legally when he fired an assistant because he found her too attractive and worried he would try to start an affair.

 

 

Coming to the same conclusion as it did in December, the all-male court found that bosses can fire employees they see as threats to their marriages, even if the subordinates have not engaged in flirtatious or other inappropriate behavior. The court said such firings do not count as illegal sex discrimination because they are motivated by feelings, not gender.

The ruling upholds a judge's decision to dismiss a discrimination lawsuit filed against Fort Dodge dentist James Knight, who fired assistant Melissa Nelson, even while acknowledging she had been a stellar employee for 10 years. Knight and his wife believed that his attraction to Nelson — two decades younger than the dentist — had become a threat to their marriage. Nelson, now 33, was replaced by another woman; Knight had an all-female staff.

The all-male court issued its revised opinion Friday in the case after taking the unusual step last month of withdrawing its December opinion, which had received nationwide publicity, debate and criticism. 

Nelson's attorney, Paige Fiedler, had asked the court in January to reconsider, calling the decision a blow for gender and racial equity in the workplace. She had warned the opinion could allow bosses to legally fire dark-skinned blacks and replace them with light-skinned blacks or small-breasted workers in favor of big-breasted workers.

The court had only granted reconsiderations five times in the last decade.


Final Word

Be self-employed like Tennis Star Sharapova would be one solution. (see picture 07)


 


Source: 

Anonymous, 2013,Melissa Nelson firing: Iowa Supreme Court upholds ruling affirming decision, http://www.wjla.com/articles/2013/07/melissa-nelson-firing-iowa-supreme-court-upholds-ruling-affirming-decision-91289.html, Visited on 25th July.

______________________________________________________________________________

Sunday, February 3, 2013

Tau Foo Fah Man: Investing Now for Better Tomorrow

Somehow, Petronas Berhad knows how to touch the core culture of Hardworking Chinese. Yes, Chinese who struggle, going through thick and thin together and seeing the fruits of their labour in later years.

I find this video very encouraging and motivating. I wish that ALL students be re-invigorated and propelled to invest now in their studies for a better future! A Tau Foo Fah man in the past is akin to an ACCA candidate studying very hard for his/her future and existing family (or family to come).

Lecturers wish that you ALL pass and have a fantastic career and balanced with Happy Family Life.






Best Regards.

Wednesday, January 30, 2013

Einstein Worst Fear on Technology-Is he right?

Hi ACCA Candidates,

Exam results are around the corner. Be vigilant! Be determined! Never Give Up! Press forward and continue to invest in your future!

Be wary of distractions and destruction - is this case modern gadgets. See below and enjoy humourously serious message.

PIC 01: HAVING MEAL TOGETHER

PIC 02: ENJOYING BEACH HOLIDAY TOGETHER

PIC 03: ENJOY FOOTBALL GAME TOGETHER

PIC 04: INTIMATE ROMANTIC DATE

PIC 05: ENJOYING FRIENDSHIP

PIC 06: VISIT MUSEUM ADMIRING ARTS

PIC 07: HAVING GREAT TIME WITH BFF

PIC 08: SIGHT SEEING BREATH TAKING VIEWS

PIC 09: MAY THIS NOT HAPPEN TO YOU

Wednesday, September 19, 2012

Apple - The Forbidden Fruit

Dear ACCA Candidates, 


Pic 01: The Forbidden Fruit
Today, Apple has made headlines again as the most valuable company on earth. It shares has reached new peak of US$715.24 per share. The paradox is the smarter the phones get, the dumber its user becomes. Particularly the recreational users who are fascinated by games, freebies, videos and all. 

The richer Apple become, the poorer the human brains will be.  

I repeat earlier article- "I absolutely DON'T recommend students ogle over the new IPhone 5. Smart phones are for not so smart people. It distracts you with it many thumb-numbing games. No knowledge or skills are developed as a result.

Still, it didn't prevent Apple from getting a pre-order level of 2 million units.

REWARD yourself with IPhone 6 or 7 when you graduate, or get that other phone, I think its called Samseng Gaga phone. Now its not the time to focus on gadgets that distracts and destructs your chances of success in ACCA exams.

Always concerned Lecturer : Marcus







Pic 02: Looks nice, but deceptively destructive

NEW YORK -- Apple's stock reached $700 for the first time Tuesday, the day after it announced that orders for its iPhone 5 topped 2 million in the first 24 hours.

The stock traded as high as $701.44 in the morning, up a quarter of a percent from Monday's close. It later fell slightly. It had come within 20 cents of $700 Monday.

The rally in Apple's stock price puts the company's market value at $656 billion.
The $700 mark is somewhat of an arbitrary milestone for Apple's stock, representing little more than a nice round number and a record high trading level.


Pic 03: Tech Addiction
After all, Apple already enjoys the distinction as the world's most valuable public company ever, at least if one ignores inflation.

Google, its Silicon Valley neighbor, saw its stock price surpass $700 in 2007. On Tuesday, Google's stock was trading at $715.24. But the online search leader's market capitalization is well below Apple's at $234.1 billion.

Apple started taking orders for the iPhone 5 on Friday. Orders during the first 24 hours more than doubled what Apple had for its predecessor, the iPhone 4S, over the same period last October.
Pic 04: Gadgets burns brain cells


"This was despite somewhat lukewarm reviews and some claiming it had 'lack of a wow factor,' Sterne Agee analyst Shaw Wu said in a note to investors. "We continue to believe many underestimate iPhone 5 in that it is a significant update and will drive a powerful product cycle."
Wu estimates Apple will likely ship 27 million iPhones in this quarter. That's up from his earlier estimate of 26 million.

Apple said Monday that while most orders will be delivered this Friday, when the phone goes on sale in stores in the U.S. and eight other countries, demand for the iPhone 5 exceeds the initial supply. That means some of the devices will be delivered in October.

Buyers who have a two-year service agreement with AT&T, Sprint or Verizon Wireless are able to order the phone for $199 (16 gigabyte model), $299 (32 GB) or $399 (64 GB).


Pic 05: Devolution of Man


The iPhone 5 represents the first major revision of the iPhone's screen size since the first model was introduced in 2007. It has an elongated screen, at 4 inches measured diagonally, bigger than the previous 3.5-inch screens. That allows room for another row of icons and lets widescreen movies fit better.

The new phone is also thinner and weighs less than previous versions. It can operate on LTE cellular networks and sports a new processor and updated software.


Pic 06: Governments should BAN these


Apple share have risen 87 percent since Oct. 5, when CEO Steve Jobs died. 

Reference:
Charles, 2012, IPHone Reviews, http://www.guardian.co.uk/technology/2012/sep/19/iphone-5-review?newsfeed=true, 19th September


Wednesday, August 22, 2012

A Flock of Black Swans

- P3 (BA) candidates better read and understand this!

Pic 01: Greek Crisis that hits the World

Pic 02: Mass unemployment and still rising!
What was said in my class? 
Last semester ( about February, 2012), I have said in my modest size P3 class in PJ Kasturi that I am more worried about the PIIGS (Portugal, Ireland, Island, Greek and Spain) Government default more than the after effects of Japan's economic effect of tsunami. [PIC 1 & 2] Guess what? That proved true today as Euro currency is losing credibility and the world of retail investors have exited and poured into the world's last safe investment haven, American Bonds. Just last week, report showed that retailers poured $964 billions into US Treasury Market. 

Are these improbable? Actually not, as P3 candidates are introduced through recent Exam article of the Black Swan concept, made popular by Nassim Taleb in his book Fooled by Randomness. 



Pic 03: I don't know what will happen to me tomorrow! (Nassim T)


Pic 04: Nassim's Best Seller Book

Black Swan - What is it? Black swan theory was developed by Nassim Taleb [PIC 03-05] to explain:
•    the huge impact of unpredictable, rare events that are outside our normal experience and without historical precedent
•    the non-computability of the effect of these rare events because there is no data on which to base calculations

•    the psychological bias that blinds us to the possibility and impact of rare events. We tend to assume that things (such as property price increases) will continue in a predictable way.

Pic 05: Black Swan was never sighted for over 200 years. Thought never to exists, at least statistically.


The phrase ‘black swan event’ is therefore used as a metaphor for the frailty and limitation of any system of thought and planning: bounded rationality. This means that we cannot know all-important factors that will affect the future (and, anyhow, do not have time to evaluate them). We are, in practice, likely to suffer from bounded rationality even with the known knowns because of imperfect research or pressure of time.

 






To illustrate: 
Pic 06: Turkey's Perfect World

Pic 07: Turkey, "Life couldn't be better. Food! Food! Food!"




Imagine you are a turkey [PIC 6-7]. Everyday, you spend a paradisiac life in a garden and a wonderful man comes with a bucket of delicious meal. He has been doing that since you hatch from your egg shell. Your total experience is he is a every turkey's dream man. 

On Thanksgiving Day, instead of bringing the usual bucket of food, he comes in armed with an axe! [PIC 8] What is the probability of you foreseeing that? It is virtually zero or maybe statisiticians called it the Long Tail of the Bell Curve.  This is fits the Black Swan theory that: 






Pic 08: Turkey 'thankfully' became food - A delicious one at that.


1. Huge impact of unpredictable or rare events.
2. Non-computability since he never came in with an axe before. 
3. Psychological bias that blinds you the possibility of you ending on the dining table. 

In P3(BA) the use of Scenario Planning is vital tool when making Strategic Rational Planning. 
 
Below are a host of black swans events. 

Enjoy it as it tells you that our future is not that bright as politicians would like you to believe.

ACCA Candidates need to foresee the 'obvious Black Swan' coming to them. 

1. Do you think that the Big 4 Accounting firms will be a safe employment firm? 
Clue: Think of Arthur Andersen. 

2. Will joining a MNC be considered as sure career progress? 
Clue: Think of difference between Starbucks and Maggi noodles. 

3. Will Asian economies stay resilient despite the record high unemployment in America and Europe? They are at 9.3 million and 18.7million respectively!!  
Clue: Think of what Asian main businesses are. 

4. Should I buy properties now? Its always going up since my grandparents time.

Clue: The answer is in the question!


Pic 09: What is the Probability of the End of the World - Armegeddon? Read Revelation 16:16 and Revelation 19:19 for clues


5. Will the world come to an END? Armegeddon [PIC 10] as made famous be Ben Affleck?
Clue: There will people coming to your doors telling you that. Pay attention to them, I recommend.

In my class, if you pay close attention, you will see how I elaborate the Black Swan Theory and its applications to your career future. Well, its part of P3 syllabus for crying out loud. You gotta to know it.

Best Regards,
Marcus - ACCA Lecturer in theory-narrative papers. 


___________________________________________________________________________________
20 August 2012

Author: Jeffrey Frankel [PIC 10], a professor at Harvard University's Kennedy School of Government, 
Pic 10: Professor Jeffrey Frankel, Harvard University

Pic 11: World War? Nah, it will never happen!



Wars, Economic Sanctions, Forex Mechanism, Property crisis
Throughout history, major political and economic shocks have often occurred in August, when leaders have gone on vacation believing that world affairs are quiet. Consider World War I’s outbreak in 1914 [PIC 11], the Nazi-Soviet pact in 1939, the Sputnik launch in 1957, the Berlin Wall in 1961, and the failed coup in Moscow of 1991. Then there was the Nixon shock of 1971 (when the American president took the dollar off the gold standard and imposed wage, price, and trade controls), the 1982 international debt crisis in Mexico, the 1992 crisis in the European Exchange Rate Mechanism, and the 2007 subprime mortgage crisis in the United States.

Many of these shocks constituted events that had previously been considered unthinkable. They were not even on the radar screen. Such developments have been called “black swans” – events of inconceivably tiny probability.

But, in my view, “black swan” should refer to something else: an event that is considered virtually impossible by those whose frame of reference is limited in time and geographical area, but not by those who consider other countries and other decades or centuries.

The origin of the black swan metaphor was the belief that all swans are white, a conclusion that a nineteenth-century Englishman might have reached based on a lifetime of personal observation and David Hume’s principle of induction. But ornithologists already knew that black swans existed in Australia, having discovered them in 1697.  They should not have been viewed as “unthinkable.”

Pic 11b: Pilots flying directly to your office.
Before September 11, 2001, some experts [PIC 11B] warned that foreign terrorists might try to blow up American office buildings. Those in power did not take these warnings seriously.  After all, “it had never happened before.” Many Americans did not know the history of terrorist events in other countries and other decades.

Likewise, until 2006, most Americans based their economic behavior on the assumption that nominal housing prices, even if they slowed, would not fall, because they had not done so before – within living memory in the US. They may not have been aware that housing prices had often fallen in other countries, and in the US before the 1940’s. Needless to say, many indebted homeowners and leveraged bank executives would have made very different decisions had they thought that there was a non-negligible chance of an outright decline in prices.

From 2004 to 2006, financial markets perceived market risk as very low. This was most apparent in the implicit volatilities in options prices such as the VIX. But it was also manifest in junk-bond spreads, sovereign spreads, and many other financial prices. One reason for this historic mispricing of risk is that traders’ models went back only a few years, or at most a few decades (the period of the late “Great Moderation”). Traders should have gone back much further – or better yet, formed judgments based on a more comprehensive assessment of what risks might confront the world economy.

Pic 12: Big Banks don't fail?!

Starting in August 2007, supposedly singular black swans begin to multiply quickly. “Big banks don’t fail?” [PIC 12] No comment. “Governments of advanced countries don’t default?” Enough said.
Debt troubles in Greece, especially, should not have surprised anyone, least of all northern Europeans. But, even when the Greek crisis erupted, leaders in Brussels and Frankfurt failed to recognize it as a close cousin of the Argentine crisis of 2001-2002, the Mexican crisis of 1994, and many others in history, including among European countries.
 
Nowadays, a eurozone breakup has become one of the most widely discussed possible shocks. Considered unthinkable just a short time ago, the probability that one or more euro members will drop out is now well above 50%. A hard landing in China and other emerging markets is another possibility.

An oil crisis in the Mideast is the classic black-swan event. Each one catches us by surprise: 1956, 1973, 1979, 1990. Oil prices can rise for many other reasons, as they have in recent years. But the most likely crisis scenarios currently stem from either military conflict with Iran or instability in some Arab country. The threat of a supply shock typically fuels a sharp increase in demand for oil inventories – and thus in prices.

The most worrisome financial threat is that currently over-priced bond markets will crash. In theory, inflation (particularly commodity-induced inflation, as in 1973 or 1979) could precipitate a collapse. But this seems unlikely. Default in some euro countries or political dysfunction in the US is a much more likely trigger.

Evidence of extreme dysfunction in US politics is already plain to see, reaching a low in 2011 during the debt-ceiling showdown (also in August), which cost America its AAA sovereign rating from Standard & Poor’s. In theory, as the “fiscal cliff” set for January 1, 2013, approaches, fearful investors should start dumping bonds now. But investors still believe that politicians, aware of the dire consequences of going over the cliff, will again find a last-minute way to avoid it.

Pic 13: First USA Black President - unpredictable event!


Perhaps observers believe that a clear result in November’s elections, one way or the other, would help to settle things. A true black swan – low probability, but high enough to think about – would be a repeat of the disputed 2000 presidential election [PIC 13]. There has been no reform since then to ensure that people’s votes will be counted or that a disputed outcome will not be resolved by political appointees.
Scariest on the black-swan list is a terrorist attack with weapons of mass destruction. There is a long-standing gap between terrorism experts’ perception of the probability of a nuclear event and the probability as perceived by the public. (Admittedly, the risk is lower now that Osama bin Laden is dead.)


Pic 14: Armageddon as End of the World? Disasters as in Environmental Catastrophe? Economic Meltdown? Divine Judgment? (Please read Matthew 5:5)

Last on the list is an unprecedented climate disaster [PIC 14]. Environmentalists sometimes underestimate the benefits of technological and economic progress when they reason that a finite supply of resources must imply their eventual exhaustion. But it is equally mistaken to believe that a true climate disaster cannot happen simply because one has not already occurred.


Pic 15: Everything is GONE!

Have a nice vacation.

Main source:
Jeffrey Frankel, 2012, A Flock of Black Swans, http://www.project-syndicate.org/print/a-flock-of-black-swans-by-jeffrey-frankel, 20th August.
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