Prem Sikka is a Professor of Accounting you know

Gambling, or placing bets on the movement of exchange rates, interest rates, price of wheat, oil, gold, commodities and even rates of death, is ingrained in the world of finance.

We\’ve a couple of ways of describing that gambling on the rates of death.

\”Life insurance\” is one, \”annuities\” another.

Strange to see a Professor of Accounting, even at Essex, raging at either.

18 thoughts on “Prem Sikka is a Professor of Accounting you know”

  1. Actually there are funds offering longevity hedges: the trouble is that if they lose their bet they may not be able to pay out to the pension fund that purchased the hedge.
    The original Life Assurance companies only gambled to the extent that they hoped the Black Death would not hit their policyholders in the first few years: thereafter they worked on a worst plausible case scenario with the benefits of lower mortality rates shared among policyholders.
    So, no Prem Sikka didn’t fail his actuarial exams – it is obvious that he never started

  2. Does being an accountant turn you into a complete knob? Or am I getting the arrow of causality the wrong way round?

  3. Bloke in Spain:

    There’s more!

    Those who can, do.

    Those who can’t, teach.

    And those who can’t teach, teach teachers.

  4. I am so sorry to intervene in the gahering of idiots that this website excels at (no, I retract that in case it gives idiots a bad name). Have any of you knobs ever looked at a credit default swaps contract? If you did you would find that bankers are taking positions on parties with him they have no contact or any direct economic interest. Bankers stand to be paid handsomely if some of you/us have an accident and suffer injuries.

    As regards the article, it is the only one that I have found that highlights the bankruptcy of theories of finance.

    OK lads, you can now return to your idiotic games but I will be checking in case any of you starts talking sense.

  5. @ Davinder Kohli
    A credit default spreads contract does not bet on mortality.
    Under English law (I don’t what applies in your home country if it is different) an insurance contract is invalid if the policyholder does not have an insurable interest in the event against which he/she/it is taking out insurance.
    Now, if you are capable of reading what I actually wrote, please can you do so and apologise. If not I shall have to assume that you are either semi-literate or a mannerless boor.

  6. @Bloke and Gene

    And it continues…

    Those who can, do.

    Those who can’t, teach.

    Those who can’t teach, teach teachers

    And those who can’t teach teachers, write books on the philosophy of education.

  7. I suppose one could add to the list: If incapable of any of the above candidate is eminently suitable for government minister but that might tempt fate…

    And just in case we are accused of being overly dismissive, the man’s CV is here:

    http://www.essex.ac.uk/ebs/about/people/PremsikkaCV.pdf

    A brief decade in the world of work ending in 1979 & the last 5 years of which he was a qualified accountant. Never entered independent practice. Since then he’s been telling others how it should be done.

  8. He kind of shoots himself in the head by stating that ‘ Separating the investment and retail arms of banks might help in managing the risks to the economy.’ when it was the universal banks like Barclays that did not require a state hand out, and it was the smaller specialists like Bear Stearns or Northern Rock that failed.

    @ Davinder Kohli
    Wow, credit default swaps allow people to swap the risk of a default, an amazing revelation. You are unlikely to be able to comprehend that this is actually a good thing as it makes the insurance market more liquid and therefore more able to price risk and get the risk to those willing to bear it. Had the banks got rid of more of the risk of sub-prime mortgages to those more willing to bear it then fewer of them would have gone bankrupt, but then I expect your real objection is more to ‘bankers’ and ‘profit’ than the CDOs themselves.

  9. Does a farmer choosing how much of which crops to plant based on what he thinks the demand will be at harvest time display an ingrained (sorry) behavior of gambling?

    if the author wanted to argue about CDs’s, he could have done so. instead he’s made a cheap misleading point about the universal human need to plan for an uncertain future, maximizing our potential profit and minimizing our potential losses, and calls it gambling.

    Ditto squirrels, nuts, winter.

    He’s being called a knob for making a knobbish non-point.

  10. Derivatives are not dissimilar to placing a bet on a horse, where the outcome could be anything from loss of the wager to a large win.

    This is absolutely true.

    However, betting on a horse does not make it run faster or slower, it only alters the odds.

  11. No, not all accountants are knobs… I tend to think of myself as being more of an a**hole than a knob, and I have references to back it up.

    But based on the available evidence, it appears there’s a cluster of accountant knobs in the UK, and it seems they’re all quite noisy as well.

  12. @Bloke, Gene, Pete

    I was going to add that those who can’t teach teachers, teach teacher trainers, or they write books on education law. Since I do both of these things I hate to think what it says about me.

    Sadly, in my experience, very often those who can’t teach, teach.

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