January 29, 2007

Should not Higher Education be more of a joint venture?

Sir, hearing so many young professionals in the USA describing their problems with debts they incurred while studying, I guess that soon some of them could be suing their Alma Maters for misrepresentation or plain failure in delivering the services offered.

Perhaps the incentive structure of the education system needs to be revised so that at least some of the higher education providers offer to collect a part of their fees through a profit participation scheme, like for instance by receiving a small percentage of the student’s future earned gross income that is above the level that the student could have been estimated to earn without further education, during his first 20 years of work.

How are then the universities going to pay for their professors now? Easy, that is what the financial markets are for. These participations in the future of our youngsters could be securitized and sold in the markets, perhaps even as a good investment for a professor’s retirement fund… of course, that is if the professor delivers on his promises.

For a university to show a willingness to invest in their own students, because they are sure of what they are giving them, might be a better marketing tool than outright grants and “we invest our money in your future” is my slogan. Also, for students, the question of what university offers to invests the most present dollars against the smallest percentage of the expected future earnings... should rank among the first when selecting an Alma Mater into which to invest their own future.

January 23, 2007

If only we could share into the loser’s bless

Sir, John Kay while explaining interestingly why frequently sensible investors willingly exchange very tangible money for unknown financial intangibles, “Why the winner’s curse could hit complex finance”, January 23, he might have underestimated the role of the advisor and the intermediary, whose normal incentive structure is based on deals completed and not deals avoided. As a financial advisor I have many times wished for that I could receive even a millionth part of the losses I have helped my clients to avoid, so as to be able to share the loser’s bless.

January 19, 2007

Where have all the bank risks gone?

Sir, Prof Stella Fearnley, January 22, reacting over Gillian Tett´s column about the explosion in structured finance (“The unease bubbling in today’s brave financial new world”, January 19) advances with some humility the possibility that “passing the risk around does not get rid of it”. The bank regulators in Basel should take heed since having on the contrary arrogantly presumed they could simply get rid of risks and although they might indeed have managed to eliminate some, they now seem utterly befuddled asking themselves…. where all the bank risks have gone? Also, sad to say, even in the case of risks eliminated, no one has any idea of at what cost, as we all would benefit from remembering that any risk avoided could just as well have been a valuable opportunity lost.

Prof Fearnley ends up expressing the hope “that none of my savings are being used for circular gambling” while expressing the criteria that “if the returns look too high, they probably are.” and though he has a clear point, let us also not take for granted that the opposite, low returns, do necessarily mean lower risks.

When will they ever learn?

We need a carbon-solutions-neutral agency.

Sir, there seems to be a much growing divergence between the realization of how serious our environmental problems are and the effectiveness of the measures, or at least that is the impression one gets when reading “Business must bend with the winds of climate change” by Philip Stephens, January 19. The fact that a reputable company such as Marks and Spencer and that is surely run by capable and creative professionals will now, to help do their part, recycle unsold food into energy, seems more to evidence how much the world really needs a carbon-solutions-neutral agency to tell business and the rest of us about how to best bend. When told that temperatures are rising, fast, can we really afford for our lead corporate citizens to be wasting resources playing for the galleries or investing in magic-green-potions peddled by some eloquent salesmen?

January 15, 2007

What we really should fear about the green cars is how little we know about them

Sir, John Gapper writes “Carmakers are turning green with fear” January 15, arguing the dangers for Detroit, GM, Ford and others to sit on the sidelines in the production of more environment friendly cars. This might indeed be true but the real surprising and fear-inspiring fact is really how little we know about how efficient these green cars are in tackling our global warming problems. Yes, they do indeed consume less petrol per mile, but, at what costs? These new green cars could just be postponing some more fundamental changes that are needed; they could be creating new environment problems, for instance with the more intensive use of batteries; there could be many much more cost efficient solutions, etc, and so those on the sidelines might turn out to be the real final winners. Also, since for instance in Europe all these green cars are not sold on the basis of how much petrol the save but because of how much tax on the consumption of petrol they save then, if the society wishes Detroit to behave differently, perhaps it should be sending clearer signals, hopefully in a more timely fashion.

January 08, 2007

Which green is best for the environment and our pockets?

Sir, on January 8 FT carried on the same page stories about GM’s plug-in car and Toyota’s hybrid petrol-electric car, both of which have a market niche primarily because they are environmentally friendly, though in fact no one really knows how friendly they really are or how much that friendliness really costs. A world that is in so much need of sounder environmental behavior, which costs money, also urgently needs some truly neutral environmental advise to help it navigate and pick among all the green tonics that are currently peddled. Perhaps the best thing an environmental conscious motorist could do is to buy himself a traditional car and invest whatever he saved by not buying a green into something that is in environmental and economic terms, more efficient. The World Bank could perhaps have a role to play as that wise green arbitrator, of course as long as it can avoid being captured itself by windmill and solar panel-producers.

January 06, 2007

Two nightmarish possibilities

Sir, Christopher Caldwell’s brilliant “Youth and war, a deadly duo”, January 6, based on the probably even more brilliant book Söhne und Weltmacht by Orell Füssli, and that now has me brushing up on my 35year´s never more spoken and originally bad German, brings me two visions. The first is about a clash-of-generations pitting the baby boomers and other older people all over the world, wielding their wealth and political power, against hoards of desperate barehanded youths, and the other, of a big global arena were a mass of old Neroes are enjoying the spectacle of young gladiators killing each other. Let us pray we are wise enough to spare ourselves either nightmare.

January 05, 2007

On trusting and hacking

Sir, Benn Steil’s “Digital gold and a flawed global order”, January 5, serves quite well in reminding us about not digging too deep into the reasons for this extraordinary trust that a generally very suspicious world has shown most of their politicians over the last few decades by being willing to accept their printed money against the sole backing of the imprint of a “In God we trust” and, to top it up, this in days were fever people seem to trust God, at least by church going standards. The other thing the article does is of course to alert us to the significant retooling those old Fort Knox plunders have to do in order to be able to hack themselves into the vaults of digital gold.