Welcome to Mind Matters week of 14 May 2022

Being in exam block allows you to choose how best to use your (limited) time. We always feel that we could have done better with more time but is it really true to say that we would have used the time wisely or does it come down to applying ourselves to the purpose. When you are struggling to focus bring yourself back to the plan you had for that hour. Realign your attention to that purpose and your actions will follow suit with energy to meet the goal. Do it as often as you need to. 

Mindfulness this week was courtesy of Monash University’s course entitled “Mindfulness practice for wellbeing and peak performance”. The recording of the practice can be accessed here. You may find it useful to help you to recalibrate.

Inflation: here and elsewhere  

Inflation should be viewed as public enemy number 1: here’s why

Inflation is a process of sustained increases in the general price level over a period of time, typically 12 months.

Inflation can be calculated for a country, for specific regions in a country and for different income and demographic groups, for instance pensioners.

Countries suffering high inflation experience exchange rate pressure, with declining currency values. The exchange rate of the currency will remain under downward pressure as long as high inflation persists. Owing to high inflation, investment in the country becomes unattractive. The demand for the currency therefore declines, which puts the exchange rate of the country with high inflation under pressure.

This article helps to explain the relationship between interest rates set by Central Banks and inflation in that country. It is a useful explanation and is available in .pdf below. Do you agree that inflation is public enemy number one?  5 min read. 

Beyond inflation: The impact of weaker global trade on equity markets

Northstar’s Marco Barbieri looks at the short- and long-term risks facing global equity markets.

The latest global trade data does not suggest a slowdown in globalisation levels (trade interdependence), but the impact of US-China tensions, the Covid-19 pandemic and more recently the war in Ukraine, have had a significant impact on global trade.

These dynamics are likely to further weaken trade cooperation between countries as policymakers re-consider the balance between economic efficiency and supply chain security.

The impact on inflation and long-term equity returns could be significant.

This article goes to show why inflation can be hampered by the big three variables impacting global trade. As interdependence breaks down so does globalisation.  4 min read

Economists predict big rate hike for South Africa this week – here’s what to expect

The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) is set to increase the repo rate this week – with consensus among most analysts and economists that the hike will be larger than at previous meetings.

The MPC will sit for its May meeting from 17 May, with an announcement expected on Thursday (19 May).

Good time to read this article after the first two on inflation. 3 min 30 sec read Do you know what it went up to?

Industry News and Research

The most complained-about insurers in South Africa

The office of the Ombudsman for Short-term Insurance (OSTI) has published its annual report for 2021, showing which insurance companies in South Africa drew the most complaints last year.

In 2021 OSTI closed 10,879 complaints, 0.7% more than in 2020. The OSTI recorded a resolved ratio, also known as an overturn ratio, of 18%, the same as in 2020.

This article provides a table of figures which is edifying. You'll love the figures! 3 min 30 sec read.

Reducing Insurance Fraud Through Enhanced Identity Verification

Register for your own copy of this white paper or else read it on the MM site. 

Executive Summary:

The insurance industry (excluding medical insurance) loses $40 billion per year to fraud, according to the FBI.1

Insurance fraud is one of the most common types of fraud. But the schemes perpetrated against insurance companies are vast, ranging from simple (issuing a fake claim) to more complex (enrolling and issuing claims on thousands of fictitious identities and/or unwitting victims).

What is more, insurance companies face new challenges. Accelerated by the pandemic, firms increasingly rely on digital-first and digital-only environments to authenticate the identities of their customers and claims.

This white paper, developed by the identity and payments fraud experts at GIACT (a Refinitiv company), outlines sample insurance fraud schemes and how insurance companies can strengthen and streamline digital identity verification.

Read more below courtesy of Carrier Management Research. 10 min

AI in Action: The Journey of a Property Across the Policy Lifecycle

This whitepaper tells the story of AI (a software robot) and Mike (a real person with a real home) and demonstrates how artificial intelligence can reveal key insights about a property throughout the policy lifecycle. It begins however with the elements that property insurers have to accommodate in their customer interface and in the world at large.  Pay attention to short term insurance - it was the fastest growing sector in 2021. 

You can access the link and download a copy of the white paper or else read it below.  Another practical and insightful white paper from Carrier Management Research. 20 min read

Investments: Crypto crash, AI managed funds

Gaurav Nair of Jaltech: Analysing the Crypto Crash – why this could be an excellent buying opportunity

The Crypto Crash, which has seen prices drop sharply in the past week, has shaken the confidence of many enthusiasts. Jaltech’s Gaurav Nair, an actuary, is not among them. His advice: if you own cryptos because of an appreciation of how the blockchain will transform financial services, this is the worst time to sell.

In this podcast with BizNews editor Alec Hogg, Nair explains that the crash was the result of both broad economic issues (higher US interest rates, rising inflation) and some crypto-related developments. He is keeping the faith and says from their stoic response to the past week’s turbulence, so are those who have invested in Jaltech’s crypto basket.

You can access the interview below as an MP4 recording. 17 min 30 secs

Cryptocurrencies: why they’ve crashed and what it could mean for their future

If you had invested £100 (US$122) in the cryptocurrency Luna a month ago, you might have been quietly confident you’d made a sensible bet. But Luna’s value has since fallen drastically – at the time of writing, that £100 is worth around 4p (5¢).

Luna was by no means the only victim in a week where cryptocurrencies were down 30%. Some have recovered to a certain extent, but this still represents an aggregate seven-day loss of over US$500 million (£410 million), prompting existential questions about the future of the market.

A good read - practical historical comment lined up against ideology and behavioural science. 4 min read and available below in .pdf courtesy of The Conversation and Creative Commons Licensing. 

AI-managed funds will handle billions of dollars in the next few years

Sasfin expects its new AI-driven South African equity fund to generate extra alpha.

Machine learning’s superior ability to identify patterns will boost investment performance and transform the asset management industry. As a result, artificial intelligence (AI) driven funds will take billions of dollars in worldwide assets under management (AUM) from traditional actively managed funds.

This is the view of AI expert Daniel Saksenberg, who helped develop the new Sasfin BCI AI Equity fund, which launched on April 1 and focuses on South African equity. He is the co-founder and chief AI officer at Johannesburg-based Emerge and a qualified actuary.

This is an enlightening article and a pleasure for those who appreciate the power of machine learning. 5 min read 

Climate Change: Price of ESG investing and hidden costs elsewhere

Climate-linked catastrophe losses have surged over the past decade

 The existence of global warming and the link to extreme weather is still a matter of debate among certain groups. However, the (re)insurance industry would do well to at least be suspicious.

Four months into 2022, the Year of the Water Tiger, there has been an unprecedented increase in flood losses globally, with floods in Germany, Belgium and Australia. South Africa, too, has not been exempt.

Our claims experience supports the climate change narrative that storm-related losses are becoming more frequent and more severe. Back in 2012, storm damage claims accounted for 3-5% of losses in our combined Commercial and Personal lines categories; now it exceeds 10%!

A must read for industry perspective on Climate Change. 5 min

Cryptocurrency price collapse offers hope for slowing climate change – here’s how

Published: May 17, 2022 4.16pm BST Updated: May 17, 2022 5.41pm BST

Cryptocurrencies like bitcoin were meant to be used as digital cash. Instead, they’ve become popular as speculative investments. As well as being resource-intensive and inherently wasteful, cryptocurrencies are also incredibly volatile. Prices for the largest cryptocurrencies, bitcoin and ethereum, have both dropped by over 55% in six months, leading some to suggest that regulation is needed to contain the turmoil.

See how blockchain is linked to climate change issues. Making an investment choice is not binary it is complex! 4 min read and available below in .pdf courtesy of The Conversation and Creative Commons Licencing. 

How do we address the unintended consequences of global decarbonisation efforts

It has become increasingly clear over recent years that the world has not only a moral imperative to decarbonise, but also an urgent practical incentive. If we continue on the current trajectory based on a world-wide fossil fuels-dependent energy system, we will breach the global temperature limit identified as necessary for our ecological sustainability within the next decade or so.

A cautionary note to investors to look carefully at their choice of investments and an appeal to governments to synchronise efforts to reduce economic fallout while transitioning to renewables.  3 min 30 sec read

Rich nations offer debt guarantees on South African climate deal

A group of the world’s richest nations offered South Africa debt guarantees as part of a proposed $8.5 billion deal designed to cut the nation’s reliance on coal for power generation, people familiar with the talks said, potentially resolving one sticking point in the negotiations.

The guarantees would enable South Africa or companies such as state power utility Eskom Holdings SOC Ltd. to borrow money needed to close down coal-fired power plants and enable the generation of renewable energy, one of the people said. The people asked not to be identified as the talks aren’t public.

Well, this would be grand if it happened according to plan. What do you think? 3 min read from Bloomberg. 

Republicans Have a New Enemy No. 1: ESG Investing

Conservatives have identified the popular investing strategy, which accounts for environmental, social and governance risks, as part of a broader narrative about left-wing overreach and “ wokeness” run amok. Utah Treasurer Marlo Oaks calls it “corporate cancel culture.” Behind the rhetoric lie policies designed to sap the momentum of one of Wall Street’s most successful initiatives in recent years, now worth $35 trillion globally. If it works, it will firmly ensconce ESG in the culture wars, galvanize voters and weaken the resolve of big asset managers to act on climate change and other big, societal issues.

Why should be interested in how the American public votes?  You can't be in finance if you believe the outcome of this "war" is of little or no consequence. 3 min read from Insurance Journal.  

Pollution Kills 9 Million People a Year, Mostly in Poorer Nations

Premature deaths from common pollution sources have risen by two-thirds globally since 2000, a dark consequence of the economic development that has lifted millions from extreme poverty this century. More than 90% of the deaths have occurred in rapidly developing low- and middle-income countries, according to research published in The Lancet Planetary Health.

Another insightful article from Insurance Journal. 3 min 30 sec read

About you

A recruitment firm in South Africa reveals the skills it looks for most when screening for job candidates

Hiring specialist CareerJunction says that the way it hires candidates has gone through many changes over time. One of them is the emphasis placed on soft skills. Soft skills refer to the experience that candidates have gained through years of working in their industry or learned behaviour, as opposed to skills learned through study.

The emphasis has shifted from focusing only on a candidate’s degree and years of service to whether they would be a good culture fit and what kind of attitude they would bring to the company, CareerJunction said.

Head over to the article and take note. Speak to the specialists when you want to get ahead. The recruiters know a lot more than we do as applicants in terms of what and who we're up against when applying for jobs. 3 min 30 sec read

To choose a career, I needed to do more than ‘follow my dream’

This is Ananya Sen's reflective piece on how they solved the dilemma of where they should work. It's worth reading at this point of your academic career as you begin to look for work.  3 min read. 

6 Easy Tricks That Will Make You Way More Productive

When it comes to productivity, we all face the same challenge — there are only 24 hours in a day. Since even the best ideas are worthless until they're executed, how efficiently you use your time is as important as anything else in business.

You don't have to master the subject matter as much as you need to master yourself. Here are six simple tricks from Dr Travis Bradberry that you can apply now when time is of the essence. 4 min read