Pensions of the great and the good

... whose identities are best unmentioned. They are those that receive the full pension of half their last paycheck every month until death. Idle curiosity while making some other calculations on the good ole HP12c led me to work out the Net Present Value (NPV) of their pensions. I assumed 3.00% p.a. as the discount as this is approximately the historical long term inflation rate for Singapore and that this would apply for the future. I also assumed they would receive a monthly pension of $41,666.67, viz. $500,000.00 p.a. divided by 12 months. Here are the results:

If drawn over 25 years, the NPV is $8,786,518,89. This is the sum that, when invested for a return of 3.00%p.a. and drawn down at $41,666.67 monthly will last for 25 years.

Let's compare this with the salary paid over three terms of the great and the good. Since general elections are never called at the end of the statutory five-year limit, I'm going to use 13 years as the service period. I'm also assuming that the great and the good receive 80% of the full million over the 13 years as they may not be fully great and good for the first few years of service. Plus they get the 13th month Annual Wage Supplement (AWS). Other bonuses are excluded as these are secret. Using the same discount rate:

If serving for 13 years, the NPV of their salary is $9,319,946.11 Think about it. the NPV of their pension is more than 94% of their basic pay!

Of course, this astonishing reward comes working for only 13 years and drawing a pension for 25 years. How did I get the 25 years? Well, retire at about 60 and live till 85, which is reasonable since the great and the good know how to take care of themselves and have the means to do it. Plus they get free health care and checkups and tests and investigations, which BTW, I didn't calculate as part of their pension package.

No wonder that civil servants had to serve for more than 31 years before receiving the full pension of half the last-drawn pay! Ah, well, we must make exceptions for the great and the good, mustn't we?

The Credit Crunch

A trader: "This is worse than a divorce. I've lost half my net worth and I still have a wife."

President Bush said clients shouldn't be concerned by all these bank closings. If the bank is closed, you just use the ATM, he said.

George Bush said that he is saddened to hear about the demise of Lehman brothers. His thoughts at this time is to go out to their mother as losing one son is hard, but losing two is a tragedy.

The problem with investment bank balance sheets is that on the left side nothing is right and on the right side nothing is left.

In maths there are 30 billion prime numbers below 700 billion. The rest are all subprime.

How do you define optimism? A banker who irons 5 shirts on a Sunday.

What do you call 12 investment bankers at the bottom of the ocean? A good start.

Why are all MBAs going back to school? To ask for their money back.

For Geography students: What's the capital of Iceland? Answer: About Three Pounds Fifty...

If you want to gamble, go to Las Vegas. If you want to trade in derivatives, God bless you.

Whats the difference between a guy who just lost everything in Vegas and an investment banker? A tie.

Whats the difference between a bond and a bond trader? A bond matures.

Lehman have changed their recommendation on Lehman from hold to sell.

Forty years ago I sold fifty shares of my company stock and had enough money to purchase a brand-new 1967 Ford pickup. Last week, I checked it out, and if I sold another fifty shares, Id have enough money to buy a 1967 Ford pickup. So, the market has stabilized.

Theodore Kaczinski saw it all ...

(From the New York Times)

Making money, it seems, is all about the velocity of moving it around, so that it can exist in Hong Kong one moment and Wall Street a split second later. "The unlimited replication of information is generally a public good," George Dyson writes. "The problem starts, as the current crisis demonstrates, when unregulated replication is applied to money itself. Highly complex computer-generated financial instruments (known as derivatives) are being produced, not from natural factors of production or other goods, but purely from other financial instruments."

It was easy enough for us humans to understand a stick or a dollar bill when it was backed by something tangible somewhere, but only computers can understand and derive a correlation structure from observed collateralized debt obligation tranche spreads. Which leads us to the next question: Just how much of the world's financial stability now lies in the "hands" of computerized trading algorithms?

Here's a frightening party trick that I learned from the futurist Ray Kurzweil. Read this excerpt and then I'll tell you who wrote it:

But we are suggesting neither that the human race would voluntarily turn power over to the machines nor that the machines would willfully seize power. What we do suggest is that the human race might easily permit itself to drift into a position of such dependence on the machines that it would have no practical choice but to accept all of the machines' decisions. ... Eventually a stage may be reached at which the decisions necessary to keep the system running will be so complex that human beings will be incapable of making them intelligently. At that stage the machines will be in effective control. People won't be able to just turn the machines off, because they will be so dependent on them that turning them off would amount to suicide.

Brace yourself. It comes from the Unabomber's manifesto.

Yes, Theodore Kaczinski was a homicidal psychopath and a paranoid kook, but he was also a bloodhound when it came to scenting all of the horrors technology holds in store for us. Hence his mission to kill technologists before machines commenced what he believed would be their inevitable reign of terror. (But I'm not suggesting that we do this, however appealing it might presently seem!)

Making the World Safe for Partial Democracy? Questioning the Premises of Democracy Promotion

Making the World Safe for Partial Democracy? Questioning the Premises of Democracy Promotion

Arthur A. Goldsmith is Professor of Management at the University of Massachusetts Boston.

Democracy promotion is a favored strategy to advance the cause of world peace, especially in the Greater Middle East, but undifferentiated democracy promotion has two faulty premises. First, all progress toward the establishment of democratic regimes does not necessarily make the global community safer. Second, regime change is not something external actors have the capacity to direct along desired pathways. The first assumption fails to consider the well-documented security problems caused by partial democracies. The second assumption overstates the ability of powerful outsiders to induce transitions to full democracy. These research findings are grounds for cautious and selective democracy promotion, not a blanket approach that is indifferent to the composition of the regimes designated to be reformed and democratized.

Nat King Cole

Please listen to my confession: I do enjoy Nat King Cole songs. No, he wouldn't appear on any krazy-kool list of my favourites (Weather Report, Steely Dan, Giberto Gil, Toumani Djabate, Ry Cooder, Santana, Zizi Possi, Pink Floyd, U2 ...) but Nat is pure dark chocolate, Irish coffee and a Panatella cigar. Music and lyrics that I can taste, smell and sing-along.

No, its not kool to like music that Dad used to play on his radiogram at 78rpm, but who can resist Nat King Cole's audible chocolate and cigars. You can pass me the Jameson whiskey too, and while you're at it, put on some Barry Manilow.