Inconvenient truth about irrational expectations

http://www.bloomberg.com/news/print/2013-04-28/shoppers-turn-blind-eye-to-bangladesh-in-6-bikini-hunt.html

Shoppers Turn Blind Eye to Bangladesh in $6 Bikini Hunt

By Sarah Shannon - Apr 29, 2013

In the wake of disasters in Bangladesh garment factories that have claimed hundreds of lives in recent months, shoppers in the west have shown growing concern about worker safety in developing countries. As long as it doesn’t mean an end to bargains.

“It bothers me, but a lot of retailers are getting their clothes from these places and I can’t see how I can change anything,” 21-year-old university student Elizabeth McNail said, clutching a brown paper bag from clothier Primark the day after a building collapse in Savar, Bangladesh, killed at least 381 people. “They definitely need to improve, but I’ll still shop here. It’s so cheap.”

Both of Primark’s (ABF) stores on Oxford Street in central London heaved with crowds sorting through clothing under neon signs heralding “Amazing Fashion Amazing Prices” last week. The floors were littered with crumpled t-shirts, jeans, and sundresses, while shoppers waited in queues 50-deep to pay for summer wear like a 1.50-pound ($2.32) fluorescent sun visor and 7-pound cut-off denim shorts.

Primark, a unit of Associated British Foods Plc (ABF), is one of at least five retailers whose products were made in the eight- story building that collapsed. Loblaw Cos.’ brand Joe Fresh, U.K. budget retailer Matalan Ltd. (MTN), plus-size womenswear seller Bonmarche Ltd. and Spanish department store El Corte Ingles have also said they had suppliers in the building.

A 2012 report by consultants McKinsey & Co. said purchasing chiefs at American and European clothiers considered Bangladesh the “next hot spot” due to its low costs. Over four-fifths plan to cut China sourcing, where wages are rising, because of declining profit margins. The Bangladesh Garment Manufacturers and Exporters Association says the country is the world’s second-largest apparel exporter, after China. Textiles account for about 80 percent of Bangladesh’s exports.

Electrical Wiring

The shift to Bangladesh has created an $18 billion manufacturing industry, yet one that is marred by factories with poor electrical wiring, an insufficient number of exits and little firefighting equipment. More than 1,000 Bangladesh garment workers have died in fires and other disasters since 2005, according to the International Labor Rights Forum, an advocacy group in Washington. A November fire at a factory making clothes for companies including Wal-Mart Stores Inc. killed 112 people.

Clothing companies have come under increasing pressure to lower costs as the rise of fast fashion at cut-throat prices has trained consumers to expect $5 T-shirts and $6 bikinis. The cost of clothing in Britain has dropped 20 percent since 2005, according to the U.K.’s Office for National Statistics, while food is up 43 percent.

Sunglasses, Handbag

Even small price increases in the name of better worker safety would be enough to turn away some shoppers, like American exchange student Shannon Atwell. The 21-year-old spent 12 pounds on a dress, sunglasses and a fake-leather handbag at Primark last week. “I didn’t buy a 13-pound dress because I thought it was too much,” she said. “If prices went up I wouldn’t buy from here.”

As attention turns to Bangladesh, Primark is among the companies with the most to lose. The retailer has more than doubled sales in the last five years to 3.5 billion pounds, far outpacing rivals on the British high street like Hennes & Mauritz AB (HMB) and billionaire Philip Green’s Topshop. That’s been driven by a focus on trendy, regularly updated fashions and low prices on garments imported from Bangladesh and other Asian countries.

Contractor’s Subcontractor

Primark says it hired a supplier called Simple Approach to make some of its garments. Simple Approach, in turn, contracted with a company named New Wave, which had a workshop in the collapsed building.
Since the factory collapse, Primark has vowed to push for structural surveys of buildings as part of supplier audits. Spokesman Chris Barrie said the retailer has sent senior staff to Bangladesh to work with a non-governmental organization to get food and other assistance to the local community. He declined to comment further.
Primark has many pages on its website dedicated to what it calls its ethical trading stance. The company outlines its code of conduct, supplier auditing process, and its own performance. The site includes a short film about how the company provides health and nutritional education for female garment makers in Bangladesh.
The program “has encouraged me to learn more and work harder,” Habiba, a 24-year-old worker whose surname was not provided, said in a case study on the site.

Conduct Code

The Ethical Trading Initiative, a consortium of apparel makers, trade unions and non-governmental organizations that establishes codes of conduct for companies, has spoken out against the “horrific incident” in Savar and called for better safety. The ETI declined to comment specifically on Primark’s sourcing practices.

“This terrible tragedy highlights the urgency of putting a stop to the race to the bottom in supplying cheap means of production to international brands,” said Jyrki Raina, general secretary of the Industrial Global Union, which says it represents 5 million garment workers worldwide, including some at the collapsed Bangladeshi factory.

The challenge for Primark is balancing activist and government demands with customer desires for cheap clothes. Those two forces collided April 27 when a group called War on Want held a protest outside Primark’s Oxford Street store, according to the BBC.

Nike’s Reaction

While Primark will likely see little impact from the disaster, despite the global headlines, “it’s something they have to monitor more carefully because while it won’t hurt trade, it may impact consumer perception of how well they look after their suppliers,” said Honor Westnedge, an analyst at retail industry trackers Verdict Research.

Perceptions do matter. Just ask Nike Inc., the world’s largest sporting-goods maker, which improved Asian factory conditions in the late 1990s after its stock sank amid widespread reproach from advocacy groups, politicians, and shareholder activists. Critics said workers were hurt by low wages, forced overtime, and the use of toxic chemicals in poorly ventilated facilities.
To avoid similar censure, Primark should put more time and effort into monitoring its suppliers, according to Planet Retail analyst Isabel Cavill.
“They could probably afford to invest in their factories, but it’s a tough market and it’s very difficult to up prices,” Cavill said. “The consumer may need to start getting used to higher prices.”

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

Inspiring devotion to the future

Jadav Payeng was honoured at a public function arranged by the School of Environmenal Sciences, Jawaharlal Nehru University on 22nd April, 2012 for his remarkable achievement. He shared his experience of creating a forest in an interactive session, where Magsaysay Award winner Rajendra Singh and JNU vice-chancellor Sudhir Kumar Sopory were present. Sopory named Jadav Payeng as "Forest Man of India"^[9]
--------------
Article: http://www.mnn.com/earth-matters/wilderness-resources/stories/indian-man-single-handedly-plants-a-1360-acre-forest

Indian man single-handedly plants a 1,360-acre forest

Jadav Payeng turned a barren sandbar in northern India into a lush new forest ecosystem.

Stephen Messenger

Fri, Dec 21 2012 at 1:20 PM

The forest, called the Molai woods, is a safe haven for numerous birds, deer, rhinos, tigers and elephants — species increasingly at risk from habitat loss. (Photo: PhBasumata/flickr)

A little more than 30 years ago, a teenager named Jadav "Molai" Payeng began burying seeds along a barren sandbar near his birthplace in northern India's Assam region to grow a refuge for wildlife. Not long after, he decided to dedicate his life to this endeavor, so he moved to the site where he could work full-time creating a lush new forest ecosystem. Incredibly, the spot today hosts a sprawling 1,360 acres of jungle that Payeng planted — single-handedly.

The Times of India recently caught up with Payeng in his remote forest lodge to learn more about how he came to leave such an indelible mark on the landscape.

It all started way back in 1979, when floods washed a large number of snakes ashore on the sandbar. One day, after the waters had receded, Payeng, only 16 then, found the place dotted with the dead reptiles. That was the turning point of his life.

"The snakes died in the heat, without any tree cover. I sat down and wept over their lifeless forms. It was carnage. I alerted the forest department and asked them if they could grow trees there. They said nothing would grow there. Instead, they asked me to try growing bamboo. It was painful, but I did it. There was nobody to help me. Nobody was interested," says Payeng, now 47.

While it's taken years for Payeng's remarkable dedication to planting to receive some well-deserved recognition internationally, it didn't take long for wildlife in the region to benefit from the manufactured forest. Demonstrating a keen understanding of ecological balance, Payeng even transplanted ants to his burgeoning ecosystem to bolster its natural harmony. Soon the shadeless sandbar was transformed into a self-functioning environment where a menagerie of creatures could dwell. The forest, called the Molai woods, now serves as a safe haven for numerous birds, deer, rhinos, tigers and elephants — species increasingly at risk from habitat loss.

Despite the conspicuousness of Payeng's project, forestry officials in the region first learned of this new forest in 2008 — and since then they've come to recognize his efforts as truly remarkable, but perhaps not enough.

"We're amazed at Payeng," says Gunin Saikia, assistant conservator of Forests. "He has been at it for 30 years. Had he been in any other country, he would have been made a hero."

Copyright Treehugger 

see also: http://articles.timesofindia.indiatimes.com/2012-04-01/special-report/31269649_1_forest-wild-elephants-red-ants

Didn't central banks used to buy bonds?

Didn't central banks used to buy bonds and leave the equity speculation to investment banks and other fund managers?

http://www.bloomberg.com/news/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields.html

Central Banks Load Up on Equities as Low Rates Kill Yields

By Sarah Jones - Apr 25, 2013

Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk- averse investors toward equities.

In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while theSwiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves.

“In the last year or so, I have spoken with 103 central banks on diversification,” Gary Smith, London-based global head of official institutions at BNP Paribas Investment Partners, which oversees about $649 billion, said in a phone interview. “If reserves are growing, so are diversification pressures. Equities are not for every bank tomorrow, but more are continuing down this path.”

Managers of banks’ assets are looking for alternatives to holding government bonds after efforts to stimulate growth from the Federal Reserve, the Bank of Japan and the Bank of England helped send yields near to record lows. Central banks’ foreign- exchange holdings have increased by about $8.5 trillion globally in the past decade, exceeding levels needed for day-to-day currency administration.

Currency Moves

Central banks typically hold assets such as government debt that can be sold easily if funds are needed to counter a move in their currency. The reliance on fixed-income securities at a time when bond yields are below inflation in many countries risks allowing to the value of reserves to decline.

While consumer prices are rising at a 1.5 percent annual rate in the U.S. and 1.7 percent in the euro area, the average yield to maturity of securities in Bank of America Merrill Lynch’s Global Broad Market Sovereign Plus Index fell to an all- time low of 1.34 percent on April 23, according to data compiled by Bloomberg.

The SNB allocated 82 percent of its 438 billion Swiss francs ($463 billion) in reserves to government bonds in the fourth quarter, according to data on its website. Of those securities, 78 percent had the top, AAA credit grade and 17 percent were rated AA.

More Risk

The survey of 60 central bankers, overseeing a combined $6.7 trillion, found that low bond returns had prompted almost half to take on more risk. Fourteen said they had already invested in equities or would do so within five years. Those conducting the annual poll had never before asked that question.

“I definitely see other central banks doing or considering equities,” said Jan Schmidt, the executive director of risk management at the Czech National Bank in Prague, which has built up stocks to 10 percent of its $44.4 billion in reserves since 2008. Even so, the risks of owning shares are the same as ever, he said in e-mailed comments.

Currency reserves among the world’s central banks climbed by $734 billion in 2012 to a record $10.9 trillion, according to data from the Washington-based International Monetary Fund. That’s about 20 percent of the $55 trillion market value of global stocks, data compiled by Bloomberg show.

Central banks’ purchases of shares show how the “hunger for yield” is changing the behavior of even the most conservative investors, according to Matthew Beesley, head of equities at Henderson Global Investors Holding Ltd. in London, which oversees about $100 billion.

‘Logical Move’

“Equities are the last asset class standing,” Beesley said in a phone interview on April 18. “When you have dividend yields in excess of bond yields, it’s a very logical move.”

Companies in the Standard & Poor’s 500 Index pay 2.2 percent of their combined share price as dividends, compared with the 1.69 percent yield on 10-year Treasuries, according to data compiled by Bloomberg.

The S&P 500 (SPX) closed at an all-time high of 1,593.37 on April 11 and is up 11 percent this year though April 23. Investors have earned 0.7 percent owning U.S. government debt repayable in one year or more, according to Bank of America Corp. bond indexes.

Stocks are also cheap compared with government bonds using a valuation method favored by former Fed Chairman Alan Greenspan that compares earnings with interest payments. Companies in the S&P 500 generate profit equal to 6.4 percent of their share prices, about 4.7 percentage points more than yields on 10-year Treasuries, Bloomberg data show.

Beyond Pale

Even so, 70 percent of the central bankers in the survey indicated that equities are “beyond the pale.”

The growth in reserves has slowed as a strengthening dollar puts less pressure on policy makers to intervene by selling their currencies, data compiled by Bloomberg show. Central-bank assets grew by 1 percent last quarter, the smallest gain since the same period of 2012, as Taiwan’s reserves fell by more than $1 billion to $402 billion and Singapore’s dropped by a similar amount to $258 billion.

Some central banks, including the Fed in Washington and the Bank of England in London, have no mandate to buy stocks directly. The Fed has $42.6 billion in reserves and the Bank of England controls $65.1 billion, data compiled by Bloomberg show.

Other banks are deterred by price swings in equities that can be larger than for other securities. The MSCI All-Country World Index (MXWD)fell 3.3 percent in five days after rising to a 4 1/2-year high on April 11 and tumbled 11 percent in the five weeks through June 12 last year. The gauge of global stocks rose 0.3 percent at 8:04 a.m. in London today.

SNB, Israel

Among central banks that are buying shares, the SNB has allocated about 12 percent of assets to passive funds tracking equity indexes. TheBank of Israel has spent about 3 percent of its $77 billion reserves on U.S. stocks.

In Asia, the BOJ announced plans to put more of its $1.2 trillion of reserves into exchange-traded funds this month as it doubled its stimulus program to help reflate the economy. The Bank of Korea began buying Chinese shares last year, increasing its equity investments to about $18.6 billion, or 5.7 percent of the total, up from 5.4 percent in 2011. China’s foreign-exchange regulator said in January it has sought “innovative use” of its $3.4 trillion in assets, the world’s biggest reserves, without specifying a strategy for investing in shares.

‘Pursue Yield’

“Central banks are looking at assets that I wouldn’t have necessarily expected in times gone by,” said Paul Price, London-based head of international distribution and client relations at Morgan Stanley Investment Management, which oversees about $338 billion. Low yields and “movement in the ratings around certain sovereigns is forcing central banks to rethink how they pursue yield and how equities are viewed in that context,” he said.

The yield on the benchmark 10-year U.S. Treasury reached a record low of 1.38 percent in July. The same month, German government rates of similar maturity declined to 1.13 percent. France’s 10-year yield retreated to 1.7 percent on April 23, the lowest level since Bloomberg began tracking the data in 1990.

“Government bonds remain a fundamental pillar of central- bank asset allocation, but there is scope to go into other asset classes to help provide a higher return,” said Massimiliano Castelli, head of strategy at UBS Asset Management’s global sovereign markets unit in London. “We are in a lot of discussions with several or so institutions who are considering such a step.”

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

Market-making math

Added 9 May 2013: http://www.youtube.com/watch?v=RAN6menqmAk&feature=share

Didn't central banks used to buy bonds and leave the equity speculation to investment banks and other fund managers? Article on central banking and equity purchases below. 

----------------

April: Slides from the Recent advances in high frequency and algorithmic trading conference, UCL, 3-5 April (mirror of  my FB post of 5 April,  http://www.facebook.com/#!/media/set/?set=a.4639890038457.1073741827.1329212341&type=1)

Opening presentation on risk issues and reflection on developing the analogue of wind tunnels for technology testing in computational finance - so what's the equivalent of geese in a turbine?

---

Ending with panel discussion on regulation, with math modelling of market microstructure and optimal order execution (algorithmic trading) in between. I asked Fod Barnes a hypothetical question afterward about market manipulation  (the Q was a bit beyond the scope of regulating market microstructure or algo trading)  but after a bit of discussion his response to my query was that one would have to break up the banks...  So I guess that means "too big to fail" is not in public interest - nice to get it confirmed from an expert, right?

 ---

So assuming we need markets, how does one regulate to prevent abuse of assymetric information without killing innovation ... depends on whether you ask an academic, industry practitioner, regulator or politician (the last 2 are supposed to represent people with pensions right?) 

----

Making slides for course material on market risk (how long does it take to put together a 3 hr lectorial?)

---

Saw this in a bookshop. Fear of high frequency trading may be misplaced though: while high frequency funds all together made profit between 4 and 7 billion USD last year. goldman sachs' net profit was over 13 billion (after salary and bonus payouts, on revenue of 34 billion). So if its an ecosystem with predators, the HFTs are not top of the chain.

----

The literature on mini flash crashes is expanding. On 24 April, the example of how a fake twitter item could trigger a market tumble became a reality. The market dropped 134 Billion USD in 2 min, but recovered in 10 minutes after it became evident that the news was a hoax:
http://m.apnews.mobi/ap/db_6776/contentdetail.htm?contentguid=MNlFo9TI

--------

Didn't central banks used to buy bonds and leave the equity speculation to investment banks and other fund managers?

http://www.bloomberg.com/news/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields.html

Central Banks Load Up on Equities as Low Rates Kill Yields

By Sarah Jones - Apr 25, 2013

Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk- averse investors toward equities.

In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while theSwiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves.

“In the last year or so, I have spoken with 103 central banks on diversification,” Gary Smith, London-based global head of official institutions at BNP Paribas Investment Partners, which oversees about $649 billion, said in a phone interview. “If reserves are growing, so are diversification pressures. Equities are not for every bank tomorrow, but more are continuing down this path.”

Managers of banks’ assets are looking for alternatives to holding government bonds after efforts to stimulate growth from the Federal Reserve, the Bank of Japan and the Bank of England helped send yields near to record lows. Central banks’ foreign- exchange holdings have increased by about $8.5 trillion globally in the past decade, exceeding levels needed for day-to-day currency administration.

Currency Moves

Central banks typically hold assets such as government debt that can be sold easily if funds are needed to counter a move in their currency. The reliance on fixed-income securities at a time when bond yields are below inflation in many countries risks allowing to the value of reserves to decline.

While consumer prices are rising at a 1.5 percent annual rate in the U.S. and 1.7 percent in the euro area, the average yield to maturity of securities in Bank of America Merrill Lynch’s Global Broad Market Sovereign Plus Index fell to an all- time low of 1.34 percent on April 23, according to data compiled by Bloomberg.

The SNB allocated 82 percent of its 438 billion Swiss francs ($463 billion) in reserves to government bonds in the fourth quarter, according to data on its website. Of those securities, 78 percent had the top, AAA credit grade and 17 percent were rated AA.

More Risk

The survey of 60 central bankers, overseeing a combined $6.7 trillion, found that low bond returns had prompted almost half to take on more risk. Fourteen said they had already invested in equities or would do so within five years. Those conducting the annual poll had never before asked that question.

“I definitely see other central banks doing or considering equities,” said Jan Schmidt, the executive director of risk management at the Czech National Bank in Prague, which has built up stocks to 10 percent of its $44.4 billion in reserves since 2008. Even so, the risks of owning shares are the same as ever, he said in e-mailed comments.

Currency reserves among the world’s central banks climbed by $734 billion in 2012 to a record $10.9 trillion, according to data from the Washington-based International Monetary Fund. That’s about 20 percent of the $55 trillion market value of global stocks, data compiled by Bloomberg show.

Central banks’ purchases of shares show how the “hunger for yield” is changing the behavior of even the most conservative investors, according to Matthew Beesley, head of equities at Henderson Global Investors Holding Ltd. in London, which oversees about $100 billion.

‘Logical Move’

“Equities are the last asset class standing,” Beesley said in a phone interview on April 18. “When you have dividend yields in excess of bond yields, it’s a very logical move.”

Companies in the Standard & Poor’s 500 Index pay 2.2 percent of their combined share price as dividends, compared with the 1.69 percent yield on 10-year Treasuries, according to data compiled by Bloomberg.

The S&P 500 (SPX) closed at an all-time high of 1,593.37 on April 11 and is up 11 percent this year though April 23. Investors have earned 0.7 percent owning U.S. government debt repayable in one year or more, according to Bank of America Corp. bond indexes.

Stocks are also cheap compared with government bonds using a valuation method favored by former Fed Chairman Alan Greenspan that compares earnings with interest payments. Companies in the S&P 500 generate profit equal to 6.4 percent of their share prices, about 4.7 percentage points more than yields on 10-year Treasuries, Bloomberg data show.

Beyond Pale

Even so, 70 percent of the central bankers in the survey indicated that equities are “beyond the pale.”

The growth in reserves has slowed as a strengthening dollar puts less pressure on policy makers to intervene by selling their currencies, data compiled by Bloomberg show. Central-bank assets grew by 1 percent last quarter, the smallest gain since the same period of 2012, as Taiwan’s reserves fell by more than $1 billion to $402 billion and Singapore’s dropped by a similar amount to $258 billion.

Some central banks, including the Fed in Washington and the Bank of England in London, have no mandate to buy stocks directly. The Fed has $42.6 billion in reserves and the Bank of England controls $65.1 billion, data compiled by Bloomberg show.

Other banks are deterred by price swings in equities that can be larger than for other securities. The MSCI All-Country World Index (MXWD)fell 3.3 percent in five days after rising to a 4 1/2-year high on April 11 and tumbled 11 percent in the five weeks through June 12 last year. The gauge of global stocks rose 0.3 percent at 8:04 a.m. in London today.

SNB, Israel

Among central banks that are buying shares, the SNB has allocated about 12 percent of assets to passive funds tracking equity indexes. TheBank of Israel has spent about 3 percent of its $77 billion reserves on U.S. stocks.

In Asia, the BOJ announced plans to put more of its $1.2 trillion of reserves into exchange-traded funds this month as it doubled its stimulus program to help reflate the economy. The Bank of Korea began buying Chinese shares last year, increasing its equity investments to about $18.6 billion, or 5.7 percent of the total, up from 5.4 percent in 2011. China’s foreign-exchange regulator said in January it has sought “innovative use” of its $3.4 trillion in assets, the world’s biggest reserves, without specifying a strategy for investing in shares.

‘Pursue Yield’

“Central banks are looking at assets that I wouldn’t have necessarily expected in times gone by,” said Paul Price, London-based head of international distribution and client relations at Morgan Stanley Investment Management, which oversees about $338 billion. Low yields and “movement in the ratings around certain sovereigns is forcing central banks to rethink how they pursue yield and how equities are viewed in that context,” he said.

The yield on the benchmark 10-year U.S. Treasury reached a record low of 1.38 percent in July. The same month, German government rates of similar maturity declined to 1.13 percent. France’s 10-year yield retreated to 1.7 percent on April 23, the lowest level since Bloomberg began tracking the data in 1990.

“Government bonds remain a fundamental pillar of central- bank asset allocation, but there is scope to go into other asset classes to help provide a higher return,” said Massimiliano Castelli, head of strategy at UBS Asset Management’s global sovereign markets unit in London. “We are in a lot of discussions with several or so institutions who are considering such a step.”

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net