Sunday, 29 January 2012

What is crowd sourcing? What did it allow Star Wars fans to do?

Crowd sourcing is the equivalent of 'asking the audience' in a radio show.  And there is no keener audience than die-hard Star Wars devotees. One enthusiast asked fellow-fans to recreate scenes from the film and has now
spliced the pint-sized, crowdsourced, fan-generated scenes into Star Wars Uncut: The Director’s Cut, which has just been released. Star Wars Uncut is a crowdsourced work of wonder.
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Tuesday, 24 January 2012

What is an Oscar? Where does the word come from?

Winners of Hollywood's Academy Awards receive a gold-plated statuette on a black metal base.  It is 13.5 in (34 cm) tall, weighs 8.5 lb (3.85 kg) and depicts a knight rendered in Art Deco style holding a crusader's sword standing on a reel of film with five spokes. The five spokes each represent the original branches of the Academy: Actors, Writers, Directors, Producers, and Technicians.

The popular name for an Academy Award is an Oscar. But there is no definitive explanation as to why.

The name was first publicly used was in an article by Hollywood columnist about Katharine Hepburn's first Best Actress victory at the fifth annual ceremony in 1934. By 1939 the word was universally known - but there remains confusion regarding its origin.

One theory is that the name came from an early Academy director, Margaret Herrick, in 1931. According to this legend, Herrick thought that the statue looked like her Uncle Oscar. Another is that Bette Davies named it after her husband - but that was in 1936.

A good example of how a nickname can survive long after its source is forgotten.
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Friday, 13 January 2012

What does a credit rating downgrade mean?

What do credit rating agencies do?
Credit rating agencies are independent bodies which assess whether a company or country has the resources to pay back money loaned. An AAA rating indicates that the market is confident the money will be paid back. 

The big credit rating agencies (Standard and Poor's, Moody's etc) have had a patchy record in recent years. Lehman Brothers, for example, had an AAA rating right up to their collapse. But few doubt that they are essentially correct in their current analysis. This can be summarised as: too much debt and too little growth to ever pay it off.

What difference does this make?
Credit rating has two key financial consequences. The first is in the yield or dividend offered on bonds or fixed term loans. Because investors value security, particularly in a volatile market, a government or company can pay its bond holder a lower rate of interest to reflect the lower risk.

The second and more immediate impact is on the ability to raise money on the international markets.  Put simply, the lower your credit rating, the more you pay in interest. For Greece and now Portugal that interest rate is a ruinous 7%. That is why they have approached international financial institutions for emergency loans aka bail-outs.

Does US now risk default?
The market doesn't think so because the US has the money to pay its debts. For this reason US treasuries still pay a low yield or rate. US Treasury Bonds (Treasuries) were considered one of the safest investments in the world. They had the highest (AAA) credit rating. When this was downgraded to (AA+) this might have adversely affected the yield on its bonds. So far this has largely not happened because the US Dollar is a 'reserve' currency but the long-term risk remains. Everything depends on the confidence investors have in the capacity of the US to repay its debts.

What about European countries?
In the case of the sorry collection of European downgrades (French, Italian, Portugese, Spanish, Austrian etc) there is a more imminent threat caused by the need of these countries to borrow on the international markets.

For France and Austria the biggest impact of the downgrade is psychological. The Eurozone 'solution' depends on the idea of France and Germany sharing top-billing as the rich, financially stable guarantors for more wobbly economies. The downgrade damages confidence in this assertion, though perhaps not fatally yet.

So countries like France and the US are not effectively bankrupt like Greece? 
The situation is very different in Greece because Greece does not have the capital to repay its loans. That is why Greek bond rates are so high - the markets assess that loans to Greece have a high risk of default. The Italian situation is closer to the Greek one and is further intensifies the Euro crisis.

So the US is doing fine?
Not exactly. President Obama was right in one sense when he said that America 'will always be AAA country' but the downgrade recognises the increasingly unsustainable debt levels  in the US economy.

The Italian economy also has significant assets but is more vulnerable. What particularly spooks the markets is the uncertainty regarding the extent of public and private sector debts.

What does a debt default mean?
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Sunday, 1 January 2012

Why do we say Happy New Year/Happy New Year's on January 1st??

A more complex question that it first appears. January was first declared the beginning of the year by Julius Caesar in 46 BCE to celebrate the God of Janus - whose two faces looked back into the past and forward into the future. Like many Pagan holidays (e.g. Christmas/Midwinter Festival) it slowly became incorporated into the Christian calendar, though from a Christian perspective the 12th Day of Christmas (January 6) might be the more logical transformation point from old into new. Throughout the medieval period there was sporadic resistance to what was generally thought to be an alien, pagan anniversary

A desire to standardise calendars eventually drove the assimilation of the NYD as the official beginning of the year. In 1066 William the Conqueror  declared that January 1st a holiday and in the same 'I'll show you who's boss' spirit Pope Gregory XIII used the 1578 New Year's Day celebration to  decree 
that all Roman Jews, under pain of death, must listen attentively to the compulsory Catholic conversion sermon given in Roman synagogues after Friday night services. 
In 1582 Gregory confirmed that January 1st should be celebrated but the Protestant societies of northern Europe stuck doggedly to a March 1st  start date until the late Eighteenth Century.

So an artificially imposed holiday, often used as a pretext for spot of forced religious conversion.

Happy New Year!
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