Jamesian Philosophy Refreshed

  Credit soundness affirmed. Israel can continue to finance its war.   This month, S&P Global -- the company formerly known as Standard & Poor's', the bond rating giant -- affirmed the long and short term foreign and local currency sovereign credit ratings of the state of Israel at A/A-1.  Of course, since they aren't idiots, the authors of this report observed that prolonged or intensified military conflict can negatively impact fiscal soundness and balance-of-payments performance.  So the resumed military operations in Gaza and 'ongoing military activities' in Lebanon and Syria, could lead to a ratings deterioration. The time for that deterioration is not yet, though.  But the report also says that Israel has  strong fiscal fundamentals (which means it has a sufficiently productive economy to create tax debtors and it is good at collecting from them), which have gifted it with a  net external asset position  and a current account su...

I'm getting pretty tired of these ads telling people to keep checking their credit score, aren't you, dear reader? Credit score hyper-consciousness seems unhealthy both economically and psychologically. It all sounds a bit like a message from a certain brand of 1950s sci-fi movie. "Keep watching the skies!" The idea that humans should keep watching the skies (for UFOs and such) was code for the real-world anxiety that Americans had to keep watching the skies for Russian bombers or, as time rolled on and the anxieties became updated, for Russian missiles. If you keep watching the skies, you may know when to "duck and cover," which will be really useful. Or ... not. And continued checking of an online service to stay up on your credit score?  ... not all that useful for most people with most lifestyles most of the time.

In our last post devoted to the mathematics of finance, we mentioned that the standard deviation of a bell curve showing the range of possible returns from an asset can be employed as a surrogate for its risk. I'd like to pursue that point a bit. It is the chanciest corporations,  the ones that do have significant risk, that have to bribe you into buying their bonds with a higher return than their safer brethren need offer: thus, a trade-off. One way of looking at the trade-off is this: suppose I come into your neighborhood and offer to play a simple game. You will roll a pair of dice I provide and I will give you $1,000 times the number shown on the dice when they come to rest. I require only that you pay me $1,000 before we begin. The lowest possible score is 2, so the lowest possible pay-out is twice what you’ll pay me up front. This, then, (if I am honest and actually have the money I’m offering to pay) is a can’t-lose proposition for you. The worst outcome is ...