mathematics

Proof that there are more questions than answers, by Katie age 7

"Well, firstly you have the list of questions that have answers. Then you think of the list of questions that don't have answers. So obviously, there must be more questions than answers."

The Pink Sheet casino

I got this in a spam today. It managed to foil my spam protection (for now, heh) but as it contained financial information, I decided to take a further look:

RYOZANPAKU CO., LTD
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED MAY 31,2006

Sales		                57 873 948
Cost of sales                  	 2 278 720
                           ---------------
Gross profit	                55 595 228


Miscellaneoues expenses	        30 937 295
Total operating expenses	21 407 381
Total expenses	                52 344 676
                             -------------
Income from operations	         3 250 553


Income before income tax	 2 430 132
Provisionfor income taxes	 1 106 526


Net income for the year		 1 323 606
Other compr. income( loss):		
Forex translation adjustment	   291 751

Comprehensive income     	 1 615 357 dollars


Company name 
RYOZANPAKU

Symbol 
RZPK

Last
5.25 $

Float: 1,450,000
Authorized Shares: 50,000,000
Outstanding Shares: 12,483,000

Like, wow. I really would advise against investing in anything on the Pink Sheets, a far bigger casino than AIM any day of the week. As a case in point, just look at the unaudited financial information given above.

It doesn't even add up!

Lib Dems wake up on the exploitation of the financially illiterate

I wrote some time ago about the problem of companies exploiting financial illiteracy to tempt consumers into bad deals. It seems now that the Liberal Democrats have jumped on this bandwagon. Good for them. This is a real problem about which the industry should be ashamed.

Unfortunately, the Lib Dems have only addressed one part of the problem - that of high up-front fees. Into the mix they should also add the issue of overhanging commitments and lack of flexible terms.

That said, I'd hate to be in an environment where the Government set a maximum level of fees. Instead the industry should be encouraged to come clean. For mortgage lenders, the Council of Mortgage Lenders could produce a code of best practice for members. Only if the industry consistently fails to clean up its act should the Government consider stepping in to fix it. I reckon that the following should be given equal prominence to any 'headline' rate:

  • the 'effective' monthly rate (i.e. up to the first point at which the customer can move for free to another provider);
  • the 'maximum' monthly rate (i.e. the highest monthly payment the customer will have to pay); and
  • the 'normal' monthly rate (i.e. what the rate will become when all incentives have expired)

selfish and stupid

From the annals of the BBC's Have your Say on the subject of how we should encourage lower carbon emissions:

It is all just an excuses for more tax. I own a Ferrari, I fly to Europe at least once a month just overnight to go shopping or just get out for a meal!. My wife drives a 4X4 and we dont live in the country.

Putting more Tax on all these things will not stop me Flying or Driving. Are these things not the reason that drives people to have a job. We pay more than enough TAX it is getting stupid.

In business we pay 35% corporation tax, 40% income tax and 18% employers and employers NI so I already pay 93% tax... People should not stand for much more.

So the inland revenue alreay is a 93% shareholder in my business it is just stupid!.

Martin, Portsmouth

Firstly, Martin's lifestyle choices are terrible. He and his wife are putting an unfair strain on the environment for no good reason other than because Martin feels like it. What a selfish tit.

And a stupid one too. He can't spell properly nor write grammatically. Nor does the merger of the Inland Revenue and Customs & Excise seem to have registered in his consciousness - it's called HMRC now.

But Martin's biggest crime is his conclusion that he has an unwanted 93% shareholder in his business. Indeed his business may pay taxes at the rates he outlines above. But these taxes are not all levied on the same number, so it's a fallacy to add them together to arrive at an overall tax rate. He's also double-counting, because employees' NI (misspelt above, there's a surprise) is paid by the employee out of their wages, not the employer out of profits.

It's the responsibility of every one of us to do our bit to reduce our impact on the environment. People who behave like - and have the mathematical ability of - small children will lead to more draconian regulations for the rest of us.

Exploiting financial illiteracy

Regan and I recently applied for new mobile phone contracts. Wow, was that a chore! It's almost impossible to make a comparison between two different tariffs, as each has a slightly different set of benefits, call charges, ongoing costs, extended tie-in periods, and the like. The other widely-used trend that we noticed was the tendency to provide a deep discount in early months. Unfortunately for the poor consumer, these companies exploit consumers by advertising the early-month discounted price as if that will be the monthly cost for all months of the contract.

And it's not just mobile phone providers. A recent flyer from Sky TV tells me that I can get satellite TV for "just £14.99 per month". Except I can't. I can get it for £14.99 for three months, followed by at least nine months at £29.99 per month.

And mortgage providers! From the BBC's Streets of Debt campaign: "There was a discount of 2% for 11 months which was fine in the beginning and then it jumped back up and that's when the difficulties started kicking in," Steve said.

Accounting standard setters got wise to this little scam years ago. Property companies used to offer incentives to companies to enter into building leases. Accounting standards insisted that the incentive must be spread over all periods, instead of being taken in the period that it is received.

Quite right too. Companies should not be allowed to tempt consumers with confusing information. If they won't do the right thing, they should be forced to disclose both the 'effective' monthly rate (i.e. up to the first point at which the customer can move for free to another provider), the 'maximum' monthly rate (i.e. the highest monthly payment the customer will have to pay) and the 'normal' monthly rate (i.e. what the rate will become when all incentives have expired). We know that people generally struggle with financial information, so companies should present it as simply as possible. It's an outrage that they can continue to bamboozle their customers with misleading advertising.

A load of balls

Do you know a Mr Roy Hills of Eastbourne? Does he have a reputation for tall stories? Because in the BBC's Have Your Say website, he makes the following claim:

I know a lady who has spent £5 a week on the lottery since it started and has never won a penny. I bet there are a lot like her.

I'd like to take that bet.

The odds of winning a prize - any prize - in the National Lottery are 1 in 54 (source: Camelot leaflet Subscribe Today - It's The Easy Way To Play, March 1998). So, conversely, to lose with a particular ticket in a particular draw, your odds are 53 in 54.

If she's entering five tickets every draw, her odds of losing a particular draw are:

(53 / 54) ^ 5 = 0.910773842

According to a Lottery fansite I found on Google, there have been 1,074 draws up to the middle of April. So her odds of losing all of these draws are:

[(53 / 54) ^ 5] ^ 1074 = 2.55228699 × 10-44

That's a pretty small number. In fact, it's so small, I can't even get close to explaining how small it is. Let's try... The odds of winning the lottery are 1 in 13,983,816, or 1 in 1.4 x 107. So there is more chance of winning the jackpot six times in those 1,074 draws than there is of losing every single one!

I don't want to pick particularly on Mr Roy Hills of Eastbourne, who is probably a nice bloke. But the level of financial illiteracy in the UK is absolutely shocking. It should be obvious to anyone right from the start that the story simply cannot be true.

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