Money, money, money

Oh, I like this. And not just because of the, "He's running for coin!" aspect.

Dowling Duncan, a graphic design studio, has taken a stab at redesigning US currency.

God knows it needs it.

Here's an image of the set:

"Reference Guide on our Freedom & Responsibility Culture"

A 128-slide deck from Netflix, meant to be read, not presented. A full explication of their internal culture and values. As David Weinberger says (he of Joho the Blog and The Cluetrain Manifesto), "...liberating, humane, and slightly scary."

Commodities = Insurance?

Thought provoking piece from Reuters' John Kemp. He's taking dead-eye aim at gold bugs, peak oilers, and others convinced of doomsday scenarios.

A report to the trustees, staff and advisers of the California State Teachers Retirement System (CalSTRS) confirmed: “Investors should view commodity performance as analogous to insurance. Commodity investments may not always produce high returns and may impose some form of opportunity costs similar to an insurance premium. During unexpected investment-related events, such as high inflation, commodities are expected to outperform”.

A similar case is being made for why investors should include 100-year bonds, gold, commodity futures and a host of other insurance-like contracts in their portfolio to protect against a range of investment risks — from inflation and deflation to flash crashes, a global energy crisis or bad harvests.

OVER-PAYING FOR INSURANCE
The comparison with insurance should give investors pause. The only people who make money from insurance are generally the sellers. For buyers, they amount to a cost — and sometimes not very good value. Some companies such as BP and some other oil majors decide it is cheaper to self-insure against at least some risks.

Insurers make money because the amount collected in premiums and earned by reinvesting them exceeds the amount paid out in the event of insurable events. Providing insurance is profitable because (a) insurable events are not common; (b) insurers have reserves to absorb periodic large losses; and (c) insurers pool risks across uncorrelated markets.

The key is that buyers of insurance generally pay more up front in premiums (ex ante) than they ever claim in payouts (ex post). Precisely the same thing is happening in many of these newly popular markets for tail risks. Investors will pay far more for the exposure to tail risks than they will ever get back if and when those risks eventually occur.