Redefining Old

Nomura has an excellent piece of research out that goes well beyond what that genre usually entails in the brokerage space. The Business of Ageing is an extensive discussion of the key risk of the pensions industry that is longevity, its implications for the real economy, financial markets and the major industries. I particularly value the section about longevity with its discussion of the technophysio approach which, in combination with longevity convergence across countries, is posited as leading to rapid longevity growth. Where official UN projections arrive at an average life expectancy of ca 85 years in 2050, Nomura models predict ca 90 years. 

Redefining Old refers to another interesting aspect of the paper: Whereas a social security definition in terms of years lived will lead to an increasing share of the "old" cohort burdening social security, the authors argue that with increasing healthy life expectancy due to morbidity compression, it will be reasonable (i.e. necessary) to expect people to work (much) longer. The authors pinpoint that age at about 80, which would be suicidal for any politician to ask for. Note that this blog has argued for the same number before.

Virtually unseen in brokerage research is the extensive, up-to-date scientific apparatus provided. The label useful is fully deserved.

As a side comment: In spite of Switzerland's claim of having an exemplary retirement system that is the envy of the world, her only (and favourable) appearance in the paper is in a table about obesity ...

XBRL final rule imminent

Well, we've got something wrong there, it seems. It wasn't the US SEC meeting deliberating on the final XBRL rule that was scheduled for 10 December, it was a Sunshine Notice to announce the SEC meeting of 17 December. But what's a week in the greater scheme of things ...

Speaking of which - it's interesting to note that one of the seven milestones on the road to IFRS adoption in the US is going to be improvement in the ability to use interactive data for IFRS reporting (p27 ff). Specifically, the SEC would look for a more detailed IFRS taxonomy in its 2011 review, presumably containing standard industry extensions. Thus, XBRL has just been hiked up to a critical priority in a strategic project.

Death and taxes ...

This is an excellent presentation by Governor Jens Thomsen of the National Bank of Denmark, on how to hedge and invest in an environment where average life expectancy rises by over 5 hours every day. He proposes that governments should issue more ultra-long term bonds to create a hedging substrate for that time horizon. 

What Thomsen does not address, however, is the challenge to such instruments arising from an investment environment with massively higher government debt, as it is foreseeable in many countries. The temptation to apply the inflation tax to reduce such debt may be overwhelming, which is why such ultra-long bonds should be issued with an inflation protection.

XBRL final rule imminent?

I've been looking for a confirmation of what David Blaszkowsky of the US SEC said during yesterday's XBRL conference here in Warsaw, namely that he'd been given clearance to announce a Commission meeting to be held on Wednesday, December 10, during which a final XBRL rule will be discussed and possibly approved - but I couldn't find anything, yet. So, there's something to look forward to next week ...

Accounting politics

On Saturday, Finanz und Wirtschaft has published an article of mine in which I discuss the background to the current tensions in accounting politics between the EU and the IASB. To the casual observer, this conflict may look like it is entirely related to the financial crisis, but it is more about the independence of the IASB than anything else. That's where the interest of every investor should come into the equation.