Tuesday 21 July 2009

Temasek says Goodyear will not be CEO

Temasek Holdings said on Tuesday in a surprise announcement that Chip Goodyear and the Singapore state investment company had mutually agreed that the former BHP Billiton chief would not proceed with plans to head the group, raising questions over its future leadership.

”The Temasek Board and Mr Goodyear have concluded and accepted that there are differences regarding certain strategic issues that could not be resolved. In light of the difference, both parties decided that it is in their mutual interests to terminate the leadership transition process and hence the executive relationship with effect from 15 August 2009,” Temasek said in a statement.

Friday 12 June 2009

Quantum poker: Are the chips down or not?

http://www.newscientist.com/article/mg20227081.300-quantum-poker-are-the-chips-down-or-not.html?full=true&print=true

YOU slump in your chair and smile as your on-screen bankroll notches up another $1000 first prize. Knocking back the last of your coffee, you check your watch. It's 3 am. You've been playing these tournaments since lunchtime. One more, you tell yourself, and then bed. After all, it's worth it: this is the game that has made you rich. Well, that's not quite true. You're rich all right - but your talents at online poker are only part of the story. You glance down at the quantum processor buzzing softly under your desk as the virtual cards hit the felt once more.

According to one US academic, this fictional scenario will not remain fantasy forever. Steve Bleiler, a mathematician at Portland State University in Oregon, is figuring out what will happen to the game of online poker when today's computers are eventually superseded by the quantum computing technology of tomorrow.

"The strategies you find in classical poker textbooks work just fine for online games right now," he says. "But when your 'Quantum iMac' arrives you can just take all those poker textbooks and throw them in the dumpster."

When your 'Quantum iMac' arrives you can just take all your poker textbooks and throw them in the dumpster

Bleiler's calculations suggest that when the game of poker is played by the rules of the quantum world, it undergoes a radical transformation. New strategies open up that simply didn't exist before and any gamers ready to exploit them stand to make a tidy profit - at the expense of those who are not. Players with quantum computers but with no access to "quantised strategies" will be at a terminal disadvantage, he says. "I can't wait."

These startling predictions come from recasting poker within the framework of a branch of mathematics called quantum game theory. The most basic version of game theory arose in the 1920s as a way to evaluate the different strategies available to the players in any kind of competitive game, from poker to military campaigns.

When the playing pieces in your game are everyday-scale objects that obey the laws of classical physics, this is relatively straightforward. But at the scale of subatomic particles, physics is governed by the counter-intuitive rules of quantum theory.

Quantum particles do bizarre things, like being in different positions at the same time, a phenomenon called quantum superposition. They can also stay connected to other particles even when they are separated by vast distances, a property known as entanglement.

This means that when you play games in the quantum realm, actions like betting or not betting are suddenly replaced by complex superpositions of the two. This opens up new strategies by allowing players to both bet and not bet, and to do so in varying proportions simultaneously. Not only that, but thanks to entanglement, the decisions you take instantly affect your competitors' options.

The foundations of quantum game theory were laid in 1999 by physicist David Meyer at the University of California in San Diego. He was motivated by what he saw as the coming revolution in quantum information technology (Physical Review Letters, vol 82, p 1052). Researchers were starting to realise that storing and processing information in quantum form was both faster and more efficient than doing it classically.

Take computing as an example. Computers today perform calculations using classical bits of information that can take the value 1 or 0. Quantum computers, on the other hand, work with quantum bits, or qubits, formed by encoding information in the quantum states of subatomic particles.

Owing to quantum weirdness, a qubit can be in a superposition of both 1 and 0 at the same time. That means that while a single byte, made up of a string of eight bits, can represent any single number up to 256, a quantum byte, made of eight qubits, can store and process 256 different numbers all at once. This leads to an enormous hike in processing speed and computational power.

Meyer realised that when everyone has a quantum computer on their desk, hooked up to one another via quantum communication channels - a sort of quantum internet - then any kind of competitive pursuit conducted over this network is going to obey quantum rules. And that's where quantum game theory comes in. You need more than just quantum computers, though. "Quantum games should be thought of as games with quantum communication between the players and the referee rather than classical communication," Meyer stresses.

Several well-known games from classical game theory, such as the prisoners' dilemma, have already had the quantum treatment. So how will poker fare when the referee and the players adopt quantum strategies?

Ace in the hole

Enter Bleiler, a mathematician and professional poker player who has more than 30 years' experience and has competed twice in the World Series of Poker in Las Vegas.

Bleiler considered the impact on online poker, where the referee is a computer program that deals the cards, mediates the players' actions and spits back the results.

The most popular variation of the game today is Texas hold 'em. In hold 'em, players are dealt two "pocket cards" each, which they keep hidden. During the hand and between betting rounds, a total of five "community cards" are dealt face-up.

Each player makes the strongest five-card hand they can by combining their pocket cards and the community cards. There is a maximum of four rounds of betting during each hand. The first player to act in each betting round can either bet or decide not to open the betting by declaring "check". If he checks then the action passes to the next player, who has the same two options. However, if the first player bets then every subsequent player must at least match that bet or fold their cards, which would exclude them from further participation in that hand. A third option is to raise the stakes and increase the amount bet, in which case the other players must match the new bet in order to stay in the hand. If all but one player folds, that player wins the money in the pot. If, after all four rounds of betting, more than one player remains, the game goes to a showdown - they compare hands, and the strongest wins the pot.

There are at least a billion billion possible ways that each hand of poker can unfold. So to keep the mathematics tractable, Bleiler confined his attention to the last round of betting after all the community cards had been dealt. He assumed that the community cards form a "straight" comprising a nine, ten, jack, queen and king from different suits. According to the rules of hold 'em, any player who holds an ace in this situation wins. To simplify this showdown, Bleiler assumed that the cards can take one of two denominations - high (an ace) or low (any other card) - with high beating low.

One of the first things Bleiler noticed when he set this up was that quantum rules completely reverse the tactical benefit of what poker players call "late position". In classical hold 'em, the last player to act in a round of betting has a big advantage: they get to see how everyone else has bet before deciding on their own tactics. For example, if you're in late position with a middling hand and there have been several big raises ahead of you, it's a fair assumption that someone else has stronger cards and you're better off folding. On the other hand, if everyone else has checked or made small bets then it might be worthwhile to raise the betting, to scare the other players into folding.

In quantum poker, it's the players acting first, in "early position", who have the advantage. Bleiler has found this is due to quantum entanglement.

Communicating during the game with quantum particles such as photons means that your decision to bet or fold can be represented by a photon's "up" and "down" spin states. Being quantum, your photons exist in a superposition of states pointing up and down at the same time. Only when the referee measures the photon you sent is it forced into either the up or down state.

If you play with entangled photons the situation is complicated further. With entanglement, all the players' actions are linked, so as each player adjusts the state of their photon according to their tactics it instantly affects everyone else's photons. This introduces an unavoidable connection between the players, so that seizing the initiative comes to outweigh the benefits of acting later.

Winning at poker is generally about formulating a solid strategy and sticking to it. Playing on a quantum computer can help here too - enabling players to communicate not just their individual game play actions but entire winning strategies all in a single qubit.

Call my bluff

For example, how often should you bet or raise with weak cards in order to scare everyone else into folding? Clearly, if you bluff like this all the time, other players will soon get wise and catch you out. But if you never bluff then you will miss out on lucrative opportunities that a bluffy reputation can provide when you actually have a very strong hand. For best results, and to keep your opponents off-balance, poker players should bluff a certain optimal percentage of the time - call it p - and play straightforwardly the rest of the time (100 - p).

Game theory predicts what p should be and how it varies in different scenarios but players rarely stick to their strategy. The key advantage when you play on a quantum computer is that p becomes automatically built into your actions. The skill is in using quantum game theory to work out p, and in preparing the qubits you send to the referee so that they are in a superposition of p parts bluff and 100 - p parts not-bluff. This guarantees that when each qubit is measured it will have you bluff, or not, in exactly the right proportions.

This alone, Bleiler believes, forces players to stick to their strategy when they might otherwise have felt tempted to alter it.

He thinks this effect might even make quantum poker a more exciting game - reasoning that once everyone is playing by quantum rules, the optimal strategies will lead to greater swings between profit and loss.

Quantum poker could become reality sooner than you might think (see "Quantum computing's first killer app?"). In October 2008, a team in Austria switched on the world's largest quantum communication network. Spanning 200 kilometres, it connected six locations in Vienna and the nearby town of St Pölten. Meanwhile, Swiss firm ID Quantique is already selling quantum communication systems that boast absolutely secure business transactions.

"There's no doubt in my mind that engineers are going to get quantum computation to work," says Bleiler.

Primitive quantum games have been played already. A team led by Prem Kumar at Northwestern University in Evanston, Illinois, built an experimental fibre-optic apparatus on which three people can play a quantum version of the "public goods" game of economics. In it, players decide how much of their personal wealth to invest in a communal pot, which is then used to buy shared rewards for the whole group. "Quantum poker could be played in a quantum communication system such as the one they built," says Meyer.

Intrigued by potential parallels between quantum games and business, Bleiler and his colleagues are now exploring other instances where quantum strategies might hold advantages over classical ones. "There's a nascent community of modellers that are just starting to realise the power of using a quantised game as a model over a classical one," he says.

This could elucidate not just poker and economics, but also the hazy link between the quantum world of subatomic particles and the classical reality that we inhabit. As games go, that's a pretty good payout.

Deferred tax assets (DTAs)

http://www.ft.com/cms/s/1/46206a22-5663-11de-9a1c-00144feabdc0.html

We now know all sorts of nasties lurk on balance sheets. Hitachi shines a light on how some of the more mundane acronyms have become big-ticket writedowns. The Japanese electrical conglomerate last month wrote off $1bn of deferred tax assets, or DTAs, in effect aFont sizedmitting it could not see itself earning enough to be able to cash them in.

DTAs, created by taxable losses and used against future earnings, are familiar territory in Japan. Banks accumulated DTAs in spades after the bubble burst in 1990. They recognised $66bn worth in 1998, or almost a third of shareholders’ equity, which they could count as tier one capital. Like subsequent accounting gerrymandering, such as easing mark-to-market accounting, this concealed damage to capital bases. Since banks appeared relatively healthy, they were eligible recipients of taxpayers’ funds.

Regulators have become more stringent, however, and DTAs now account for a maximum 20 per cent of tier one capital. Last March, banks had $26bn of DTAs, or 13 per cent of tier one capital, although they are now reckoned to be nudging closer to the 20 per cent ceiling.

Banks are not the only DTA hoarders. Manufacturers are close behind. Nomura Securities estimates that non-financials hold a combined $250bn worth, equivalent to 10 per cent of net assets. That is a pretty big chunk, especially as many manufacturers expect more losses this year.

Accounting for DTAs is complex, with different rules depending on expected future profitability, but generally they expire within five years.

Exceptions are those companies posting large losses: do so for three years continuously and DTAs are toast.

Tussles between management and auditors are inevitable. That the latter are claiming more victories for accounting transparency is good, although it does provide another reason to worry about the health of corporate balance sheets.

Thursday 11 June 2009

S'pore becoming more expensive for expatriates

http://www.businesstimes.com.sg/sub/news/story/0,4574,337106,00.html?

SINGAPORE is now the 10th most expensive city in Asia for expatriates, despite its weakened currency, a survey shows.

Having moved up three notches from its previous ranking of 13th place in ECA International's survey on cost of living a year ago, Singapore is however still ranked below Japanese and Chinese cities, which dominate the top ten.

'Price rises have not slowed down as much in Singapore as in other parts of Asia,' said ECA's regional director for Asia, Lee Quane.

Prices of goods and services in China and Malaysia have increased at half of last year's pace, while in Singapore, they have increased by three-quarters, Mr Quane added.

Also, currencies of locations previously more expensive than Singapore (such as London, Stockholm and Istanbul) have depreciated at an even faster rate than the Sing dollar.

Meanwhile, the survey showed that due to the strong yen, Tokyo maintained its position as the most expensive city for expats. Its lead was followed by three other Japanese cities: Nagoya, Yokohama and Kobe.

Chinese cities and territories - Beijing, Shanghai, Hong Kong, Shenzhen and Guangzhou - stayed ahead of Singapore, due to the strengthening yuan.

'The yuan has continued to strengthen while the yen has appreciated by almost 8 per cent against the US dollar,' Mr Quane said.

'Many Western currencies, including sterling, the euro and the Swiss franc, have weakened. As a result, people coming from these economies into Asia will notice a considerable difference in costs compared with 12 months ago.'

Globally, Singapore jumped to the 72nd most expensive city worldwide from 114th year-on-year.

However, not all Asian cities remained expensive for expats. Due to the weakened won, Seoul has fallen to the 17th most expensive city in Asia, from its top position as the most expensive Asian city two years ago.

Similarly, the depreciating currencies of Malaysia, Thailand, Indonesia and Taiwan have lowered expatriate living costs in those countries.

Among the top 10 cheapest places for expats are Indian cities, as the weakened rupee coupled with lower inflation has made the cost of living for those locations fall.

The biannual survey by ECA compares a basket of 125 consumer goods and services commonly purchased by international assignees in over 370 locations worldwide.



Wednesday 10 June 2009

To live a creative life, we must lose our fear of being wrong

I think this quote is a great reminder for us all: from birth to adulthood we are conditioned to think and behave in certain ways...the argument goes that it's "easier" being in the middle of the bell curve. But that's just it, we reduce the chance of something extraordinary happening. 

For that long-tail event, we do need to experiment a bit more, and lose our fear... I see it in my baby girl: she has no fear to try: she's my mentor.

Count us in, maths experts tell UK regulator

Count us in, maths experts tell UK regulator

By Clive Cookson, Science Editor

Published: June 10 2009 02:42 | Last updated: June 10 2009 02:42

Mathematicians have urged the financial regulator not to leave them out of the equation when it calculates how to rebuild confidence in the banking system.

“Quants” and other financial geeks might have fallen from favour but maths has an essential role to play in the City, they say.

Sir David Wallace, who chairs the Council for the Mathematical Sciences, has written to Lord Turner, chairman of the Financial Services Authority, asking for a meeting so that he can explain why maths is part of the solution to the banking crisis – and not part of the problem.

Leading financial mathematicians have signed Sir David’s letter, upset by Lord Turner’s review in March, which appeared to blame “misplaced reliance on sophisticated maths” for the crisis.

Lord Turner told the Financial Times on Tuesday that he wished he had used the phrase “misplaced reliance on apparently sophisticated maths” instead. He said the possible interpretation mentioned in Sir David’s letter – that he thought “mathematics per se has a negative effect on the City” – was wrong.

Lord Turner said he looked forward to meeting the mathematicians and hearing how their research could help the FSA’s work.

The problem, he said, was that banks’ mathematical models assumed a “normal” or “Gaussian” distribution of events, represented by the bell curve, which dangerously underestimated the risk of something going seriously wrong.

“The really interesting issue is how much is fixable by using better maths, and how much is inherently uncertain and beyond the scope of mathematical modelling,” Lord Turner said. “I will be keen to engage with the mathematicians on this issue.”

The letter says: “Mathematics is surely the only medium capable of describing quantitatively the complex nature of the products that traders, risk managers, etc are handling, and the economic environment which they are operating in and influencing.”

The letter was signed by 15 university professors specialising in financial maths, including David Hand of Imperial College, Andrew Cairns of Heriot-Watt University and Xunyu Zhou of Oxford. It was endorsed by Britain’s main mathematical bodies, including the Royal Statistical Society and the Institute of Mathematics.

The mathematicians also see a role for themselves “in engaging the public in how mathematics is used in the financial services industry. This will support the objectives of the FSA in creating more informed investors, and will strengthen market discipline”, they wrote.

http://www.ft.com/cms/s/0/f29248c6-554a-11de-b5d4-00144feabdc0.html


Should he stay or should he go?

FDIC looks to defuse Citigroup tension

By Joanna Chung in New York

Published: June 10 2009 01:36 | Last updated: June 10 2009 01:36

Sheila Bair, the chairman of the Federal Deposit Insurance Corporation, on Tuesday addressed Citigroup’s board in an effort to defuse tensions sparked by the regulator’s push to replace Vikram Pandit as chief executive.

People close to the situation said Ms Bair called for an end to squabbling between the two sides, reminding the bank that the FDIC is carrying out its normal regulatory duties. Ms Bair did not address Mr Pandit’s position, in spite of her widely reported desire to see him replaced by someone with greater commercial banking experience. Citi and the FDIC declined to comment.

People with knowledge of the meeting said Richard Parsons, Citi’s chairman, also struck a conciliatory tone.

http://www.ft.com/cms/s/0/095b0e52-5556-11de-b5d4-00144feabdc0.html