Slashdot videos: Now with more Slashdot!
We've improved Slashdot's video section; now you can view our video interviews, product close-ups and site visits with all the usual Slashdot options to comment, share, etc. No more walled garden! It's a work in progress -- we hope you'll check it out (Learn more about the recent updates).
"Nothing in this Agreement shall be construed
(a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or
(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests
(i) relating to fissionable materials or the materials from which they are derived;
(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;
(iii) taken in time of war or other emergency in international relations; or
(c) to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security."
The great thing about this article is it's self-judging -- in particular, XXI(b)(ii) can be interpreted to apply to almost anything. Cf. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2079608.
First, history plays a key role. The credit rating system started out this way (with letter ratings and modifiers) decades ago, and since then so much national legislation, international regulations, and corporate policies have been crafted around the existing system that it'd be very costly to change. For example, BBB- or higher is the legal definition of "investment-grade", and many financial institutions (insurance companies, pension funds, etc.) are legally barred from investing more than a certain percentage of assets under management in non-investment-grade securities. Similarly, Basel III and national reserve requirements assign different risk weightings to different credit rating levels -- AAA and AA may have a zero weight, for example (no capital is required to be held against the possibility of default for these classes of securities), while high-yield investments below C may have a 50% risk weight.
There actually is one rating agency that does use a 0-100% scale, but their scale is actually more difficult for the people who actually use the ratings (fund managers, policymakers, chief risk officers, etc.) to understand since it does not correlate as directly to existing regulatory and legal definitions.
Second, there actually are loss-given-default ratings like you describe, but they are assigned to specific securities rather than to companies as a whole. In fact, there are actually many different types of credit ratings. The one you hear most often is the long-term corporate issuer (or sovereign issuer) credit rating, but there are also short-term ratings, foreign-issuer ratings, loss-given-default ratings, etc.
A company would typically have many of these ratings simultaneously -- e.g. a Canadian company may have an AA rating for CAD-denominated short-term bonds, a A rating for Canadian-dollar-denominated long-term bonds, and a BBB- rating for US-dollar-denominated long-term bonds. Moreover, although the company's US-dollar-denominated long-term bonds issued last week were rated only BBB-, they have a loss-given-default of only 1% because they are structurally senior in the capital structure to the rest of the company's debt, whereas the loss-given-default rating for its AA-rated short-term debt issued yesterday may actually have a loss-given-default rating of 85% because it is subordinated to ten other bonds.
Second, one significant cause for the rash of suicides was that Foxconn, acting under pressure from Apple, actually compensated the first suicidee's family with an enormous compensation package, equal to 5-10 years worth of wages. Shortly thereafter, twelve more workers committed suicide, with one of them leaving behind a suicide note to his family along the lines of "at least now, with the money you will be able to live well and be happy".
I think two lessons follow from this. First, the press should always be treated with a degree of skepticism. Second, compensating the families of suicide victims has negative secondary consequences that must be considered.
1) Firms have to take a long-term view with regards to certain investments. I don't know this particular business well-enough, but e.g. firms may have to make go-no-go decisions on expanding existing manufacturing capacity or breaking ground on new factories. These could easily amount to $300mm decisions, which require some idea of the long-term growth trend. However, you don't need that much precision in these long-term forecasts -- typically for long-term forecasts like this, corporate strategy teams would be interested primarily in the overall trend and the order-of-magnitude only (e.g. will the market be $300M in 5 years? $3B? or just $30M?). Most large firms that use this data will have internal strategy teams developing similar forecasts based on internal sales data (which IDC will rarely have access to, and have to estimate), their own corporate intelligence (competitor channel checks, etc.), data on competitors' manufacturing capacity build-outs, etc. to provide a sanity-check, and they are aware that any data in the tech industry past 2-3 years out is (at best) useful for order-of-magnitude estimates only.
2) Even if this particular industry doesn't rely as much on long-term forecasts (e.g. I don't see why a factory churning out Android phones can't be quickly reconfigured to churn out WP7 phones), these data providers typically have long-term contracts that require them to provide forecasts out X years for Y number of product categories, to a Z level of detail. So if they're providing 5-year forecasts for semiconductors or LCD demand by manufacturer, for example (very reasonable considering the large capital investments and high retooling costs in those sectors), for the sake of consistency they'll also develop 5-year forecasts for smartphones by operating system. Similarly, mobile phone manufacturers will want at least a 5-year forecast for the overall smartphone market (to know how much total smartphone capacity to build out), and for the sake of consistency they'll also provide a breakdown out to that 5-year period.
In short, no one who really works with the data needs the level of precision implied by the article, but to generate any forecast you need some quantitative model that will provide a "best" estimate, so that's the estimate these firms are reporting. The fact that error bars get (exponentially) larger the farther out you go is already well-understood by any serious user.
On page 13 it addresses the point you raised. I've quoted it below for your convenience, but in short the number was calculated directly from a peer-reviewed study, which Friel misunderstood or overlooked in his review of the text.
"The only peer-reviewed study to calculate all extra heat deaths and avoided cold deaths globally shows that the number of avoided cold deaths strongly outweigh the extra heat deaths. This study, (Bosello, Roson, & Tol, 2006), shows that although we are likely to see about 400,000 more heat deaths because of global warming by 2050, we will likely see about 1.8 million fewer cold deaths. Moreover, this effect will persist until at least 2200: 'The first complete survey for the world was published in 2006, and what it shows us very clearly is that climate change will not cause massive disruptions or huge death tolls. Actually, the direct impact of climate change in 2050 will mean fewer dead, and not by a small amount. In total, about 1.4 million people will be saved each year, due to more than 1.7 million fewer deaths from cardiovascular diseases and 365,000 more deaths from respiratory disorders.'"
The first one recalls that Japan followed a very similar development trajectory, only to implode in the late 1980s. This argument holds that China's recent rise is temporary and the US has nothing to worry about -- similar to what happened after Japan collapsed, the US will resume its predominant position in the order of things.
The second one notes that China's government so far appears to be managing its economic rise quite well, and more importantly has a lot more people to draw on, so its manufacturing advantage in terms of labor costs could potentially last a lot longer than Japan's did. Based strictly population, China would have four times the GDP of the US by the time its GDP/capita (a rough proxy for labor cost) equals the US. This means this situation could last for decades. Whether this is harmful or not is really a matter of how you view China's intentions. If they played according to WTO rules, there's no economic reason why we couldn't keep producing services (financial and otherwise) and trading them with China for goods. The problem, of course, is China hasn't always obeyed WTO rules in the past.
A longer-term POV, of course, would note that third countries -- India, Vietnam, Malaysia, etc. -- are also rising to compete with even lower labor costs, which suggests there may be no opening in the forest anytime soon. Of course, this isn't necessarily a bad thing -- it does mean that billions of people are being pulled out of poverty.