July 1st, 2008

(no subject)

People who make predictions which later turn out to be completely wrong destroy their credibility, at least with me.

I'm not sure why this is. We're all wrong sometimes, aren't we?

Nonetheless, it's what happens. Personally, I find the more confident they were at the beginning, the less I respect them later. But many people seem to have made good livings of appearing sure of themselves, and it seems like those livings are dependent on never admitting that they were ever wrong, or showing a bit of doubt.
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    thoughtful thoughtful

My bank is issuing Visa debit cards to children.

From today's Daily Telegraph (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/30/cnvisa130.xml):

Lloyds TSB gives Visa cards to 11-year-olds
A leading bank is giving children as young as 11 debit cards without informing their parents, it has emerged.

The bank receives a fee from the retailer every time a card is used. In the past, children aged 11 to 15 with current accounts could only have debit cards that could be used only in cash machines or at bank branches.

A spokesman for Lloyds TSB said: "We wrote to customers under the age of 16, who previously had a cash machine card, to let them know they could have a debit card.
I used to have one of these cards before I closed my Lloyds TSB current account after a fee increase. If they're anything like the debit card I had on my account, it's possible to overdraw the account and get hit with some significant fees and interest. Current accounts in the UK generally include overdraft features as a standard part of the account. I don't know if that's true of accounts opened by children.

If so, I suppose the bank's just taking advantage of a new revenue source. :)

Another post on kids and banks, this time from China.

From http://piaohaoreport.sampasite.com/china-financial-markets/blog/Some-anecdotal-evidence-of-risks.htm:
Yesterday I had an interesting lunch with a Chinese investor. We were discussing the informal banking sector in China, and he agreed that it seems to have grown a great deal in the recent past. Interestingly enough, according to him, loans to real estate developers had become a particularly important source of growth for these banks, which is perhaps not surprising given lending caps and attempts by the PBoC [People's Bank of China] to discourage the commercial banks from taking on more real estate exposure.

He told me that he believed that the highest quality real estate developers were able to obtain one-year funding for around 15% which, given CPI inflation of around 8% (probably understated by 1-2%) and PPI inflation of around 9%, represents, I think, a reasonable borrowing cost for a prime creditor in a developing economy. Lower-tiered real estate developers, however, were paying 80% for one-year money, which is consistent with some of the other numbers I have heard. Very few of the real estate developers would be considered prime enough to get the lower cost funding.

Needless to say 80% is a pretty high cost of funding, and almost certainly requires rising real estate prices in order to be economically viable. In case of an economic contraction or declining real estate prices, I would assume that a lot of these real estate developers would face severe debt-servicing difficulties. We discussed what would happen in the case of a default – besides the proverbial visit by the man with a baseball bat he suggested, with a completely straight face, it was also likely that one of your kids might be kidnapped.

This kind of collection process strikes me as a reasonably strong argument for lower default rates in the Chinese informal banking sector than in the formal sector, at least in the initial stages of a contraction, although it also suggests that the Chinese banking habit of deferring losses might not work here. On the contrary, I expect that payment difficulties would lead to significant selling pressures as real estate developers try to raise cash as quickly as possible to meet their obligations (and get their kid back). I guess that in areas characterized by large informal banking sectors, real estate price corrections are likely to occur much more rapidly than in places like Beijing, where I think the informal banking sector is relatively much weaker.
That's the kind of collection process I'd expect in Russia, too. Ah, capitalism.

On bad science reporting.

(A followup to a recent conversation with cerridwynn and bloodstones.)

From http://www.guardian.co.uk/commentisfree/2008/jun/21/2:
WGary Schwitzer used to be a journalist, but now he has turned to quantitative analyses of journalism, and this month he published an analysis of 500 health articles from mainstream media in the US. The results were dismal. Only 35% of stories were rated satisfactory for whether the journalist had "discussed the study methodology and the quality of the evidence": because in the media, as you will have noticed, science is about absolute truth statements from arbitrary authority figures in white coats, rather than clear descriptions of studies and the reasons why people draw conclusions from them.