Open banking is transforming the financial industry, promising greater transparency, competition, and innovation. The European Union, which looks set to introduce updated rules about digital payments and financial services within the next two years, is at the leading edge of regulating open banking. This could enable Europe to bolster competition and accelerate innovation in its […]
Category: Finance
Understanding inflation is essential for comprehending the global economy and predicting how changes in inflation are likely to impact economic activity, employment, and asset prices. Inflation, which refers to a general increase in the price of goods and services, results in a reduction in the purchasing power of money over time. Since 2008, the rate […]
This is the second article in a series about the U.S. Federal Reserve. The Fed has significant influence over much of the U.S. economy, which in turn impacts economic growth and government policies worldwide. Thus, Jeremy Powell, current chairman of the Fed, is arguably the most powerful man in the world — in some ways […]
In recent years, the news has been filled with stories about the impending collapses of the banking system. The Federal Reserve (the Fed) influences U.S. interest rates. Since the U.S. dollar is the global reserve currency, this means that the Fed also influences the level of interest rates around the world. As a result, Fed […]
Hedge funds have long been shrouded in mystery, earning a reputation as lucrative yet elusive vehicles within the financial landscape. Hedge funds have gained increased attention over the years, with their involvement in financial markets drawing interest from investors, media, and the general public. However, many people still struggle to grasp what exactly hedge funds […]
In the previous article, we looked at how banks make money and how they must meet capital requirements. In this article, we will explore the importance of profitability ratios and valuation metrics that are crucial when analyzing banks. There are seven key profitability ratios and two valuation metrics that it is important to understand. We […]
How do banks make money? Where does this money ultimately go? What is a bank really worth? In this 2-part series, we will address these questions. Firstly, by outlining the major items on a bank’s income statement, and then by discussing key ratios that are commonly used to measure profitability and to estimate the market […]
In the ever-evolving world of finance, where data analysis and informed decision-making are vital, the emergence of artificial intelligence has proven to be a transformative force. One particular facet of AI that is revolutionizing the finance industry is natural language processing, which leverages AI and machine learning algorithms to extract valuable insights from vast volumes of […]
The financial services industry comprises firms that operate across a range of sectors: Asset & Wealth Management, Banking & Capital Markets, and Insurance. Business conducted by each firm varies but the scope of financial services generally includes the following: Asset Management: managing assets and investments for retail and institutional clients such as stocks and bonds, […]
Venture capital (VC) is a type of investment in which a venture capital firm provides funding to early-stage companies with high growth potential. The goal of venture capital firms is to identify and invest in companies that have the potential to become successful and generate high returns for the investors in the fund. What do […]
BRICS – Brazil, Russia, India, China, and South Africa – are the group of five major emerging economies that have been a serious topic of discussion in recent years. These countries have some of the largest populations and have experienced rapid economic growth and increasing global influence over the past decade. These countries have been […]
While CBDCs are still a relatively new concept, they have gained significant attention due to their potential to transform the financial system. What are CBDCs, and how do they work? Central Bank Digital Currencies (CBDCs) are a new form of digital currency that will be issued and backed by central banks. Unlike traditional currencies, which […]
Equity research is a vital function within the investment industry that helps investors make informed decisions about buying, holding, or selling stocks. Equity researchers, also known as stock analysts, are professionals who conduct in-depth research and analysis on publicly traded companies to help investors understand the potential risks and returns associated with owning a particular […]
Wealth management is a critical field that helps high net worth individuals and families to achieve their financial goals and maintain their financial assets over the long-term. Wealth managers assist their clients to do this through a combination of strategies involving financial planning, investment management, and risk management. The role of a wealth manager is […]
Investment banking forms part of the financial services industry involved in the underwriting, distribution, and trading of securities. Investment bankers work on behalf of both individual and institutional clients to raise capital by issuing securities, as well as to advise clients on financial matters such as mergers, acquisitions, and other corporate finance activities. What Investment Bankers […]
“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” ~ John Maynard Keynes Inflation in America is currently running hot, with the official rate hitting 6.2% in October, its highest level since 1990. Some market commentators saw this coming, and those same players predict that higher […]
Knowing the ins and outs of upcoming trends in finance is indispensable for any aspiring consultant. You are likely to receive a question at your upcoming job interview, which assesses to what extent you are up-to-date with the latest business developments, and also requires you to reflect on that knowledge with regards to a major […]
Categories
10 Flaws with Mainstream Economics
Having taught undergraduate economics for a number of years, I wanted to pen a list of some of the ideas that appear flawed but which form the basic pillars of mainstream economics. Although professional economists are often familiar with the weak points in their discipline, the problem lies in the fact that the ideas are […]
Categories
China’s Role in Africa
In a mere two decades, China has become Africa’s biggest economic partner, surpassing the United States and EU member states. This is driven by China’s increasing participation in the global economy. According to a McKinsey report, China is one of the top economic partners for Africa across five dimensions: trade, level of foreign direct investment […]
Categories
Investing in Gold ETFs
Gold remains one of the most recognisable precious metals and a highly sought-after commodity. In many cultures, owning gold is still considered a status symbol of affluence and good fortune. Historically, currencies from the US, and many other countries, could be converted into a certain weight of gold. Gold was the money, and the circulating […]
Categories
Combatting COVID-19 in Emerging Markets
When the COVID-19 crisis became evident in South Africa in mid-March, the South African government put strict lockdown measures in place, including school closures and store lockdowns which were accompanied by reducing the output of production facilities. The government implemented a number of policies including social distancing, curfews, mandatory facial masks, and stay at home orders. […]
Categories
The Cantillon Effect
Richard Cantillon was a 17th century merchant and banker, as well as arguably the world’s first modern economist. He authored Essai sur la Nature du Commerce en Général (Essay on the Nature of Trade in General), which 19th century English economist William Stanley Jevons later referred to as the “cradle of political economy”. Cantillon’s most famous idea, the […]
Categories
Bitcoin vs Gold
With the US Federal Reserve printing up several trillion dollars of new money in 2020, market commentators have been banging the war drum. Inflation is coming! Some suggest gold as an inflation hedge, and others suggest bitcoin. But before we look at these two potential solutions to the inflation problem, let’s first consider whether inflation […]
I have written multiple financial crises articles in the past but have yet to touch on my home turf, New Zealand. These tumultuous times make for quite the backdrop to finally highlight this nation. New Zealand found itself in quite an enviable position following the GFC due to a number of policy decisions that put […]
Categories
Descent of the Global Monetary System
When I studied economics at Sydney University in the early 2000s and financial economics at Oxford in the early 2010s, I learned pretty much the same thing about money; very little. Money is not really respected in academia, and so most of the attention tends to focus on other topics: the interaction between buyers and […]
Categories
Rising COVID cases, falling economy
As the coronavirus continues to spread, the combined health and economic impacts are likely to be truly massive. Where did it all go wrong? Since this is not a medical sciences blog, we will leave the health related issues to the relevant experts. However, that leaves plenty of topics to examine on the economic front. […]
Categories
Banks – Industry Overview
The Business of Banking Banks are intermediaries for capital and hold the risk when supply and demand is not perfectly balanced. Historically, commercial banking and investment banking functions have been separated by law – these restrictions have since been repealed and larger banks tend to take on capital markets operations due to the complimentary nature […]
Cryptocurrency has often been a divisive and controversial topic in the world of finance and economics. Some notable figures have written it off, claiming it to be nothing more than a complex Ponzi scheme, while others are insistent that cryptocurrencies are the future of the monetary system. Regardless of which party is correct, the near […]
I’ve mostly looked at demand driven components of health economics in previous articles. Now though, I will look at an aspect of health economics that flips the equation on its head. Organ donation has a fairly steadily increasing rate of demand, but the rate of organ donations has not risen in tandem. Therefore, there is […]
Simple linear regression is an important tool for understanding relationships between quantitative data, but it has its limitations. One obvious deficiency is the constraint of having only one independent variable, limiting models to one factor, such as the effect of the systematic risk of a stock on its expected returns. Real relationships are often much more […]
In part one of my series about health economics I gave an overview of the drivers of demand in the medical care market. In this post, I will go beyond a general interpretation of demand and give you an in-depth overview of a specific and expensive issue: the rising cost of public liability insurance. Public […]
Statistical inference helps us understand the data, and hypothesis testing helps us understand if the data is different from another set of data. These techniques are important when exploring data sets, as they help guide our analysis. However, these techniques are not enough. Most times, we are looking to understand the relationship between two sets of […]
This post is the first in a series of articles exploring concepts of one of the lesser known fields of economic study – health economics. When one thinks of economics their mind usually turns to concepts of trade, resource allocation, and other similarly business-related concepts. However, ideas of supply and demand have gone beyond traditional […]
As a generalist consultant you are unlikely to need any statistics for day-to-day project work (there are specialists to call on for situations where it’s needed). The workaday numerical tool is Excel which, with the “Analysis Toolpak”, gives most consultants more than enough of what they need. However, you are likely to build a lot […]
Asset management as an industry is becoming increasingly important for a variety of reasons: The world is getting wealthier, driven by growth in emerging markets. The growing middle class in China and India means that millions of people are purchasing wealth products, while new millionaires and billionaires are looking for high net worth wealth solutions […]
Retail Wealth Management Retail investors are everyday investors without much buyer power. Generally, retail investors are individual investors with liquid investable assets of less than $1 million – although the allure of a more bespoke investment counsel is not compelling until $5 million. The retail business comes with the highest fees, so at least on […]
Characteristics of Asset Management Firms Most major asset managers are conservative with their use of leverage. There are a couple of reasons for this: Asset managers can see cash flow and earnings fluctuate wildly with markets. For instance, with an AUM of $100 billion and average fees of 1%, the asset manager has $1 billion […]
Asset managers are institutions that ‘manage money’ on behalf of certain beneficiaries. What does this mean exactly? Well, asset managers aim to understand client investment objectives and invest client funds in a variety of financial products and asset classes. These asset classes can include public equities/stocks, fixed income/bonds, money markets, commodities, infrastructure, real estate and […]
My friends and I walked out of the Big Short several years ago feeling like a group of global financial crisis experts. We were shocked, how could no one have seen the collapse coming? It all seemed so clear. Many an economics and finance course later, I see that the layers of complexities to the […]
Categories
The age old tale of financial crises
The story of the 2008 financial crisis begins somewhere shortly after the death of Jesus Christ himself. Not 33 years after Christ’s passing did Emperor Tiberius of the Roman Empire have to rescue his constituents’ financial sanctity through the age-old process of quantitative easing. The Roman Empire was in shambles following a severe economic downturn […]
The financial services industry has seen drastic technology-driven change over the past few years, and digital has fundamentally reshaped consumer behaviour in banking. According to Oliver Wyman, a global management consulting firm, 90% of Canadian banking customers use digital channels and more than 30% are now banking exclusively virtually. In response, banks worldwide are making […]
Before we dive into why AI is the solution for the banking sector, let’s first explore what big tech companies have in common, how many of them have grown successfully, and what banks can learn. The three ingredients that have contributed to the massive success of big tech firms might be described as: Identify big […]
Categories
10 Amazing Examples of Nudge Theory
Nudge Theory, first formulated by the Nobel Laureate Richard Thaler, is part of a relatively new field called behavioral economics, which believes that subtle conditioning and small environmental changes can actually have a profound impact on the behavior of individuals and groups. This theory, and the practical repercussions of it, have been taken to heart […]
As I have been writing in this space of late, the days of the Wild West for cryptocurrency are absolutely at an end. The writing has been on the wall all summer. The latest news to hammer the point home? As September dawned last week, six more major banks joined a UBS-led effort to create […]
Categories
Lest We Forget
This past week we saw violent protests in Charlottesville, USA. They deserve our attention. A rally called “Unite the Right” had formed to prevent a statue of Robert E. Lee from being torn down. Lee was a General during the American Civil War who fought for the Confederacy, a collection of southern states that supported […]
Cryptocurrencies are digital assets or “tokens” – akin to the idea of money – specifically designed to take advantage of the architecture of the Internet. Unlike traditional currency they have value not because of the guarantee of a financial institution or government. Instead, they have value for three reasons: their ability to be accurately “confirmed” […]
Blockchain, the underlying technology used by Bitcoin, has implications that reach far beyond the financial services community and banks. This is where new development and implementation may have focussed so far. However, as the technology and its implications become better understood, it will rapidly expand to new industries and verticals. Blockchain systems operate as a […]
Merry Christmas! Joyeux Noël! Sheng Dan Kuai Le! (圣诞快乐!) Wishing you an enjoyable day, and a happy holiday season spent with good people, surplus amounts of food and drinks, and a large number of gifts! One idea that is firmly associated with Christmas is gift giving. This is a central part of the Christian tradition, […]
Frankfurt is one of the oldest business centres in the world. From at least Roman times, the low-lying city, bifurcated by the welcoming River Main, has been a hotspot for global endeavours that changed the nature of many industries – including but not limited to banking. Mayer Rothschild, a courtier to the German king of […]
Six months ago I predicted that Trump would most likely win the US election. The official opinion polls told the opposite story, that Hillary was the preferred candidate, but my reading of the situation was different. It was mid-July, and I was attending a talk given by Elizabeth Economy, Director for Asia Studies at the […]