Thursday, November 08, 2012
Wednesday, November 07, 2012
If it's useless it's useless, if it's a loss it's a loss: The Myth that insurance stimulates the economy
SHOOT: We seem to have lost our common sense. War, storm damage, theft and vandalism are seen to have a silver lining, because insurance money is pumped into the economy, creating more money. Really? Read this from the MarketOracle.
One more interesting feature of the Hurricane Sandy episode is that the National Weather Center (NWC) and state governors seem to believe economic losses are eliminated when they are paid for by insurance companies.
In fact, I thought it was odd when the NWC downgraded Sandy from "Hurricane Sandy" to "Post-Tropical Storm Sandy" the second it crossed the New Jersey shore on Monday evening.
It now turns out that most insurance companies have much higher deductibles for hurricanes than for regular storms, so the authorities were trying to maximize the payout on voters' insurance claims.
The problem is that insurance companies are people too, even if a quirk of the Constitution fails to give them the right to vote. Conniving at insurance fraud by pretending Sandy wasn't really a hurricane is NOT the ethical behavior we should expect from those in authority.
And if you work for an insurance company, go picket the New Jersey State House in Trenton or New York's City Hall. Mayor Bloomberg, of all people, ought to know better!
So how big are the damages caused by so many "broken windows"?
The disaster modeling company Eqecat currently estimates the insured losses on Sandy at $20 billion, with an additional $50 billion in uninsured economic losses. (Those include the lost opportunities caused by most of New York not showing up to work for a week.)
Contrary to popular opinion, the $20 billion covered by insurance are real losses; they will be reflected in higher insurance premiums going forward, otherwise the insurance companies would go out of business.
As a result of the higher premiums, some projects in the future will be shelved because their cost is too high, some houses will not be built because homeowners can no longer afford them.
You see, Keynes is wrong. The $20 billion is a real loss to the economy, and in the long run it will not simply come out of insurance company profits, but be passed on throughout the economic system as higher costs-which equals less money.
Similarly, the $50 billion economic costs of the storm are real.
To take one example, if Goldman Sachs (NYSE: GS) averages $100 million every day in trading profits, then having the exchange closed for two days will reduce their fourth quarter profit by $200 million, with no chance of making that up.
This effect will also be reflected throughout the larger economy. Many New York and New Jersey businesses will go bankrupt, because the losses push them over the edge. And if the state decides to refund the costs, the additional taxes in future years will push other businesses over the edge as well.
Yes, the money spent on reconstruction is real, but it just substitutes for other money that won't get spent.
Maybe a restaurant is forced to rebuild using insurance money, and now has a larger, newer building. However, apart from the insurance premium increases discussed above, and any out-of-pocket cost to the restaurateurs, there may have been customers attracted by the old restaurant's charm, who will be repelled by the antiseptic new one.
Certainly if I were told I could rebuild my 1911 house with a 2013 one of equivalent size I would refuse; instead I would search high and low for another house with as much charm as my current residence.
As in most economic matters, I am on the side of Bastiat, not Keynes.
In this case, many of the costs of Hurricane Sandy are hidden, or postponed to future years, but they are nonetheless real.
That's true no matter what guys like New York Times columnist (and Nobel Prize winner - jeez --) Paul Krugman say.
You may remember what Paul Krugman said in August last year when he proposed that we could somehow rescue the economy by preparing for an imaginary alien invasion, building huge laser-guided defense systems, none of which would be needed unless aliens surprised us by actually invading on schedule.
Needless to say Bastiat would disagree. With cool nineteenth-century logic he would point out that whether it's an unnecessary window repair or an unnecessary atomic ray gun,
if it's useless it's useless.
Our leaders should take Bastiat's lesson to heart, and not just when there's a hurricane.
One more interesting feature of the Hurricane Sandy episode is that the National Weather Center (NWC) and state governors seem to believe economic losses are eliminated when they are paid for by insurance companies.
In fact, I thought it was odd when the NWC downgraded Sandy from "Hurricane Sandy" to "Post-Tropical Storm Sandy" the second it crossed the New Jersey shore on Monday evening.
It now turns out that most insurance companies have much higher deductibles for hurricanes than for regular storms, so the authorities were trying to maximize the payout on voters' insurance claims.
The problem is that insurance companies are people too, even if a quirk of the Constitution fails to give them the right to vote. Conniving at insurance fraud by pretending Sandy wasn't really a hurricane is NOT the ethical behavior we should expect from those in authority.
And if you work for an insurance company, go picket the New Jersey State House in Trenton or New York's City Hall. Mayor Bloomberg, of all people, ought to know better!
So how big are the damages caused by so many "broken windows"?
The disaster modeling company Eqecat currently estimates the insured losses on Sandy at $20 billion, with an additional $50 billion in uninsured economic losses. (Those include the lost opportunities caused by most of New York not showing up to work for a week.)
Contrary to popular opinion, the $20 billion covered by insurance are real losses; they will be reflected in higher insurance premiums going forward, otherwise the insurance companies would go out of business.
As a result of the higher premiums, some projects in the future will be shelved because their cost is too high, some houses will not be built because homeowners can no longer afford them.
You see, Keynes is wrong. The $20 billion is a real loss to the economy, and in the long run it will not simply come out of insurance company profits, but be passed on throughout the economic system as higher costs-which equals less money.
Similarly, the $50 billion economic costs of the storm are real.
To take one example, if Goldman Sachs (NYSE: GS) averages $100 million every day in trading profits, then having the exchange closed for two days will reduce their fourth quarter profit by $200 million, with no chance of making that up.
This effect will also be reflected throughout the larger economy. Many New York and New Jersey businesses will go bankrupt, because the losses push them over the edge. And if the state decides to refund the costs, the additional taxes in future years will push other businesses over the edge as well.
Yes, the money spent on reconstruction is real, but it just substitutes for other money that won't get spent.
Maybe a restaurant is forced to rebuild using insurance money, and now has a larger, newer building. However, apart from the insurance premium increases discussed above, and any out-of-pocket cost to the restaurateurs, there may have been customers attracted by the old restaurant's charm, who will be repelled by the antiseptic new one.
Certainly if I were told I could rebuild my 1911 house with a 2013 one of equivalent size I would refuse; instead I would search high and low for another house with as much charm as my current residence.
As in most economic matters, I am on the side of Bastiat, not Keynes.
In this case, many of the costs of Hurricane Sandy are hidden, or postponed to future years, but they are nonetheless real.
That's true no matter what guys like New York Times columnist (and Nobel Prize winner - jeez --) Paul Krugman say.
You may remember what Paul Krugman said in August last year when he proposed that we could somehow rescue the economy by preparing for an imaginary alien invasion, building huge laser-guided defense systems, none of which would be needed unless aliens surprised us by actually invading on schedule.
Needless to say Bastiat would disagree. With cool nineteenth-century logic he would point out that whether it's an unnecessary window repair or an unnecessary atomic ray gun,
if it's useless it's useless.
Our leaders should take Bastiat's lesson to heart, and not just when there's a hurricane.
Tuesday, November 06, 2012
Do you know Ivan Penny, Vernon Penny, Samantha Penny or David Romero
Business Day : 7 September 1999 : (Refcorp staggers under cash
problems)
"Controversial venture capital company REF Finance and Investment
Corporation (Refcorp) is staggering under major cash flow problems that
could lead to its liquidation.
Former employees who did not wish to be named have said they have not
been paid for more than two months and that this was just the tip of the
iceberg. The company is apparently also about R4m behind on
pay-as-you earn(PAYE) tax remittances to the Receiver of
Revenue.
Five directors have left the company over the past couple of months for a
variety of reasons which included the nonpayment of salaries.
One employee said the problem with Refcorp was not so much the listed
entity but the underlying, non-listed companies that were draining the
parent’s accounts, balance sheet.
The Johannesburg Stock Exchange (JSE) is believed to be investigating
Refcorp and has already interrogated some former directors.
Refcorp was warned by the JSE last week for failing to submit annual financial
statements within six months of the financial year-end. Refcorp deputy
chairman Ivan Penny pleads that the group’s financial director had to go on
maternity leave three weeks sooner than expected and that results would be
released soon.
http://icms.iac.iafrica.com/pls/cms/iac.page?p_t1=1539&p_t2=0&p_t3=0&p_t4=0&p_dynamic
=YP&p_content_id=387980&p_site_id=83
David Romero, who headed Refcorp, a key investor in the laughably named Noble Minerals, is probably one of the worst managers of expectations. Minority shareholders lost their money within days of Noble's listing as the price sank to 1c from a R2/share maiden listing.
and: http://www.dispatch.co.za/2005/03/12/Easterncape/crook.html
Financial adviser says he is not a crook
By Eddie Botha Business Editor
EAST LONDON - Hannes Brink, the financial adviser who is blamed by more than 50 investors for their R10 million losses, says he is not a crook.
Instead Nimrod Financial & Tax Consultants CC's Brink has fingered as the culprits his former partner, David Romero, head of finance company REF Equity Finance, into which the funds were invested, and Ivan Penny, an REF director.
Earlier this week the Daily Dispatch reported that the National Prosecuting Authority in Pretoria had confirmed that an investigation into the financial scheme was almost complete.
Many investors, among them pensioners, have lost their life savings in the scheme, and subsequent to this week's report many more called the newspaper to say that they too had lost large amounts of money.
The Daily Dispatch first reported about the failed scheme in 2001 when Amalinda pensioners Carl and Rosemary Hill, who invested and lost R100000 - their life savings - approached the paper.
Yesterday Brink, who now lives in Nelspruit with his common-law wife and business partner Linden Kelly, denied any responsibility.
When contacted in Pretoria he first said that the target of the investigation was REF Equity Finance, the unlisted company in which he invested the funds.
Later, in a second telephone call to him, Brink said that he was not aware of a current police investigation into the failed investments.
He said, though, he had given investigators copies of all the documents - "but that was three years ago. I have not heard any word from them since then".
Brink said he had merely acted as an agent for the investment company.
"They (the investors) bought the shares (in REF) through me."
Brink said he would be willing to give evidence if required to do so, adding: "I have also lost between R600000 and R700000 with REF.
"The problem lies with the people who handled the portfolio, Romero and Penny," he said."I have done nothing wrong."
Brink added that he did not understand what the sudden fuss was about - over events that took place six years ago.
He said he had sold the Ntoni Game reserve, which he had owned in the Cradock district, to King William's Town businessman Eddie Goetsch, the owner of the Buildrite hardware group.
REF also bought a 50 percent stake in Ntoni.
At one stage when Romero wrote to Eddie Leach - a retired contractor who lost over R210000 in Brink's scheme- to explain the delays in dividend payouts, he used stationery with the stamps of Nimrod and Ntoni.
REF was suspended from the JSE Securities Exchange in 2003 for failing to produce financial statements.
According to a Business Day report in the final quarter of last year shareholders had been trying to contact the company since its suspension - but telephone calls and e-mails went answered.
The report also said that United States-based businessman Albert de Lint had written to Trade and Industry Minister Alec Erwin asking him to warn South African investors to steer clear of Romero, saying: "We must conclude that investors will soon face the reality that there won't be funds to pay them back."
http://www.suntimes.co.za/2000/09/10/business/companies/comp17.htm
Furthermore, Gullan and Gullan allege that Noble's previous corporate adviser, REF Finance and Investment Corporation as represented by David Romero and Ivan Penny, was "unable to pay over approximately R6.25-million of shareholders' funds which they collected on behalf of the company".
The report says Romero and Penny, a director of Noble until February, signed an acknowledgement of debt to Noble in their personal capacities and as directors of Refcorp and other related companies.
problems)
"Controversial venture capital company REF Finance and Investment
Corporation (Refcorp) is staggering under major cash flow problems that
could lead to its liquidation.
Former employees who did not wish to be named have said they have not
been paid for more than two months and that this was just the tip of the
iceberg. The company is apparently also about R4m behind on
pay-as-you earn(PAYE) tax remittances to the Receiver of
Revenue.
Five directors have left the company over the past couple of months for a
variety of reasons which included the nonpayment of salaries.
One employee said the problem with Refcorp was not so much the listed
entity but the underlying, non-listed companies that were draining the
parent’s accounts, balance sheet.
The Johannesburg Stock Exchange (JSE) is believed to be investigating
Refcorp and has already interrogated some former directors.
Refcorp was warned by the JSE last week for failing to submit annual financial
statements within six months of the financial year-end. Refcorp deputy
chairman Ivan Penny pleads that the group’s financial director had to go on
maternity leave three weeks sooner than expected and that results would be
released soon.
http://icms.iac.iafrica.com/pls/cms/iac.page?p_t1=1539&p_t2=0&p_t3=0&p_t4=0&p_dynamic
=YP&p_content_id=387980&p_site_id=83
David Romero, who headed Refcorp, a key investor in the laughably named Noble Minerals, is probably one of the worst managers of expectations. Minority shareholders lost their money within days of Noble's listing as the price sank to 1c from a R2/share maiden listing.
and: http://www.dispatch.co.za/2005/03/12/Easterncape/crook.html
Financial adviser says he is not a crook
By Eddie Botha Business Editor
EAST LONDON - Hannes Brink, the financial adviser who is blamed by more than 50 investors for their R10 million losses, says he is not a crook.
Instead Nimrod Financial & Tax Consultants CC's Brink has fingered as the culprits his former partner, David Romero, head of finance company REF Equity Finance, into which the funds were invested, and Ivan Penny, an REF director.
Earlier this week the Daily Dispatch reported that the National Prosecuting Authority in Pretoria had confirmed that an investigation into the financial scheme was almost complete.
Many investors, among them pensioners, have lost their life savings in the scheme, and subsequent to this week's report many more called the newspaper to say that they too had lost large amounts of money.
The Daily Dispatch first reported about the failed scheme in 2001 when Amalinda pensioners Carl and Rosemary Hill, who invested and lost R100000 - their life savings - approached the paper.
Yesterday Brink, who now lives in Nelspruit with his common-law wife and business partner Linden Kelly, denied any responsibility.
When contacted in Pretoria he first said that the target of the investigation was REF Equity Finance, the unlisted company in which he invested the funds.
Later, in a second telephone call to him, Brink said that he was not aware of a current police investigation into the failed investments.
He said, though, he had given investigators copies of all the documents - "but that was three years ago. I have not heard any word from them since then".
Brink said he had merely acted as an agent for the investment company.
"They (the investors) bought the shares (in REF) through me."
Brink said he would be willing to give evidence if required to do so, adding: "I have also lost between R600000 and R700000 with REF.
"The problem lies with the people who handled the portfolio, Romero and Penny," he said."I have done nothing wrong."
Brink added that he did not understand what the sudden fuss was about - over events that took place six years ago.
He said he had sold the Ntoni Game reserve, which he had owned in the Cradock district, to King William's Town businessman Eddie Goetsch, the owner of the Buildrite hardware group.
REF also bought a 50 percent stake in Ntoni.
At one stage when Romero wrote to Eddie Leach - a retired contractor who lost over R210000 in Brink's scheme- to explain the delays in dividend payouts, he used stationery with the stamps of Nimrod and Ntoni.
REF was suspended from the JSE Securities Exchange in 2003 for failing to produce financial statements.
According to a Business Day report in the final quarter of last year shareholders had been trying to contact the company since its suspension - but telephone calls and e-mails went answered.
The report also said that United States-based businessman Albert de Lint had written to Trade and Industry Minister Alec Erwin asking him to warn South African investors to steer clear of Romero, saying: "We must conclude that investors will soon face the reality that there won't be funds to pay them back."
http://www.suntimes.co.za/2000/09/10/business/companies/comp17.htm
Furthermore, Gullan and Gullan allege that Noble's previous corporate adviser, REF Finance and Investment Corporation as represented by David Romero and Ivan Penny, was "unable to pay over approximately R6.25-million of shareholders' funds which they collected on behalf of the company".
The report says Romero and Penny, a director of Noble until February, signed an acknowledgement of debt to Noble in their personal capacities and as directors of Refcorp and other related companies.
Monday, November 05, 2012
The World According to Lance - Carte Blanche/ABC
'Have you ever used any performance enhancing drugs?' Lance, hanging onto his IV, rattled off EPO, testosterone, cortisone, growth hormone and steroids. My eyes popped out of my head and Frankie said 'I think we should leave the room', and we left the room. And Frankie and I had just been engaged six weeks previously, and I said 'That's how he got his cancer, if you are doing that I am not marrying you'."
SHOOT: Makes sense, and also an interesting scenario in the downside of doping. EPO has been found to stimulate tumour and cancer growth, which is a major downside to the treatment of cancer patients. Also ironic that Lance himself used highly carcinogenic substances and at the same time heads up the world's largest cancer charity.
More.
Zapping Culture
SHOOT: Something fascinating and disturbingly true I read recently...
The spending of leisure time today can be characterised as a so-called ‘zapping culture’.
Consumers want to be entertained and expect to get a lot of different experiences and, most
of all, sensation45. Because the best is not good enough, people step into a kind of rat race to
find the perfect peak experience. If an experience is not good enough, we simply zap to
another one, because there is enough to choose from. People quickly shift their attention
once they feel an activity or product is a waste of their valuable time. The drive for
experience and the urge to consume more (convenience) goods in less time drags the
consumer into endless zapping. Suppliers have to survive in this ‘experience’ or
‘entertainment economy’. In marketing, therefore, the focus is shifted from the sole products
to ‘vague associations’ such as sphere, style and ‘getting a kick out of it’.
The spending of leisure time today can be characterised as a so-called ‘zapping culture’.
Consumers want to be entertained and expect to get a lot of different experiences and, most
of all, sensation45. Because the best is not good enough, people step into a kind of rat race to
find the perfect peak experience. If an experience is not good enough, we simply zap to
another one, because there is enough to choose from. People quickly shift their attention
once they feel an activity or product is a waste of their valuable time. The drive for
experience and the urge to consume more (convenience) goods in less time drags the
consumer into endless zapping. Suppliers have to survive in this ‘experience’ or
‘entertainment economy’. In marketing, therefore, the focus is shifted from the sole products
to ‘vague associations’ such as sphere, style and ‘getting a kick out of it’.
Sunday, November 04, 2012
Arren Brown wins the 12th edition of MTN OFM Classic in 2012 PLUS OFM Classic Photos
Arren Brown wins the 12th edition of MTN OFM Classic in 2012
Bloemfontein – 4 November 2012: Arren Brown, from
multi discipline continental race team,
Team MTN Qhubeka won the 2012 MTN OFM Classic which took
place at the Free State stadium in Bloemfontein on Sunday morning.
Brown, who won his first MTN OFM Classic, came through the finish line
with a winning time of 2:20:23, taking
home R80 000 in cash. Reinardt Janse van Rensburg, who took the title in the 2011, came fifth in the extended 107km road race in sweltering conditions.
Top
Club
Continental Bonitas Team member Tyler Day crossed the finish line
second while Team Tasol Solar Energy member, David Maree, came in third
place for the second
year in succession.
The
ladies event was won by Cherise Taylor from Momentum Toyota Woman’s
Elite team with a winning time of 2:54:14 while An-li Pretorius took
second spot, representing Team MTN Qhubeka.
Perceived
as one of the best organized and safest races in South African cycling,
the MTN OFM Classic provided a diverse route to the cyclists.
The route consisted of a select route of flat sections, a stretch in
the suburbs of the city, with plenty surprising uphills and even
extended to the N1 highway as part of the race.
On Saturday 3rd November, a day before the main race, the fourth MTN OFM Classic Mountain Bike race was presented at the Windmill
Casino where Dylan Girldestone of the Westvaal BMC team won the Men’s category.
Tuesday, October 30, 2012
Mother Nature Gunning for New York
I find it very interesting that the organism that is Earth, has produced a monstrous storm and aimed it at the source of so much global debt, corruption and mismanaged power. New York. Wall Street. Isn't it strange that this enormous system would aim straight for the heart of the world's largest city, its financial centre and seat of its political power. 32.5 foot waves were measured entering New York harbour, eclipsing the previous record of 6 feet.
Battery Park drowned under 13.88 feet of water. A crane, and the side of a building, were simply stripped down, in the centre of the city.
It feels like a case of nature striking at the Empire that has its claws in the Earth like a cancer.
Battery Park drowned under 13.88 feet of water. A crane, and the side of a building, were simply stripped down, in the centre of the city.
It feels like a case of nature striking at the Empire that has its claws in the Earth like a cancer.
Monday, October 29, 2012
Sunday, October 28, 2012
Saturday, October 27, 2012
Where is Hurricane Sandy (aka Frankenstorm) right now? + 5 Day Storm Track
Hurricane Sandy: where it will land, and how bad will the damage be? Find out more here.
The beaches look to be specially hard hit. We can expect the major flooding up and down the coast because of the combination of heavy winds, rain, and a full moon. These are the places that are most likely to see evacuations, especially further to the south from Long Island to Virginia.The width of Sandy will also lead to widespread heavy rainfall.
From CNN.com
Worst case, Sandy could
merge with a strong cold front from the west. The double threat could
morph into a "superstorm" that could sit over New England for days,
making untold trouble for millions of residents. Weather experts said
it's a recipe not unlike 1991's "Perfect Storm."
"Expect it to move very
slowly," said James Franklin of the National Hurricane Center. "The
large size of the system and its slow motion will mean a long-lasting
event with two to three days of impacts."
At 8 p.m. ET Friday,
forecasters said Sandy was about 400 miles south-southeast of
Charleston, South Carolina, heading north at 7 mph. It was a Category 1
hurricane with winds of 75 mph. It's possible, the hurricane center
says, that Sandy may weaken to a tropical storm. Nonetheless, experts said, it's not to be taken lightly.
Hurricane Sandy 'storm of a lifetime'
Hurricane Sandy hits Jamaica
"Forget about the
category with this," said CNN meteorologist Rob Marciano. "When you have
trees with leaves on them still, this kind of wind and rain on top of
that, you're talking about trees that are going to come down, power
lines are going to be out and the coastal flooding situation is going to
be huge."
Sandy's death toll in Haiti, Jamaica and Cuba this week was 21 people.
The U.S. target area is
hard to predict at this point. Some landfall computer models show the
storm striking somewhere between the border separating North Carolina
and Virginia north to Connecticut, some of the most densely populated
areas of the country. The District of Columbia, Pennsylvania, Maryland,
Virginia and New York have declared states of emergency, while Maine's
governor signed a limited emergency declaration.
From News24.com:
The late-season hybrid storm has been dubbed "Frankenstorm" by some weather watchers because it will combine elements of a tropical cyclone and a winter storm. Forecast models show it will have all of the ingredients to morph into a massive and potentially catastrophic "super storm."
On its current projected track, government forecasters said, Sandy could make landfall on Monday night or Tuesday in Maryland, Delaware, New Jersey, New York or southern New England.
In New York City, the global financial hub, officials were considering closing down mass transit before the storm hits.
Coming in the final weeks before the U.S. presidential election on November 6, the storm could throw last-minute campaign travel plans into chaos.
More here.
Thursday, October 25, 2012
Subscribe to:
Posts (Atom)