Category: International Finance

Me & My Money: Making investments simple and fuss-free so there’s more family time

Ms So Sin Ting keeps her investing experience uncomplicated by choosing portfolios that are already designed and monitored.
JUN 30, 2024

So Sin Ting

SINGAPORE – Financial sector executive So Sin Ting has learnt one big thing over her 15 years in the wealth management game – keep it simple.

Ms So, 36, keeps her investing experience uncomplicated and automated by choosing portfolios that are already designed and monitored, allowing her more time for something far more valuable: her family.

“I also set up monthly recurring investments which also help me deploy my investments in a disciplined manner and grow my portfolio over time,” she adds.

“The old adage never rings truer here – it is ultimately time in the market, and not ‘timing’ the market, that is important to building wealth.

“This approach saves me a lot of time and effort, and allows me to focus on my family priorities and enjoy my child’s growing years.”

Ms So is the chief client officer at Endowus, a fund investment platform and fiduciary adviser that serves around 200,000 individuals, family offices, charities, endowments and institutions.

It is also the first digital adviser in the region to span private wealth and public pensions, so it covers Central Provident Fund (CPF) contributions here.

Ms So was part of the founding team of Endowus in 2017, a fact she is proud of when she looks at how far the company has come as the largest independent wealth management platform in Asia.

“We had a clear vision to make holistic advice and institutional quality investments accessible to everyone at a low, fair, and transparent cost,” she says.

“I was incredibly excited about our mission because I really wanted to make a tangible impact, and fundamentally change the traditional wealth management business model so that we could bring better financial outcomes to everyone.”

This mission also stemmed from Ms So’s personal experience. “I always found it challenging to manage my personal wealth in a holistic manner.

“It was difficult to access institutional quality investment products as an individual investor, and I saw the difference between how banks would advise their clients to invest, versus how I would personally invest for my life goals.”

She adds that this was one of the inherent problems of the traditional wealth management industry in Asia – that the client’s best interests did not always align with the advice offered, which could also be layered with hidden fees.

“We are leading the industry by introducing greater transparency so investors can keep more of their returns and compound their wealth. That said, in many ways, we are still at the beginning of our journey and have much more that we want to do.”

Ms So believes aligning her investment decisions with her life goals also remains vital, especially with her two-year-old daughter in mind. “Becoming a mother has also definitely given me a new perspective in balancing work and family,” she says.

“Not only do I want to give my child the best in life, but I hope to be present and to be emotionally and physically available to her all through her formative and growing years.

“This also means that my money needs to work much harder for me in the background, and my investment mindset needs to encapsulate much longer-term goals.”

Ms So’s husband also runs a fund management company. The family includes three children from his previous marriage.

Q: What is in your personal portfolio?

A: My investment choices and asset allocations are based on my life goals, which help me understand how much I need to invest, the amount of cash flow I need, and the level of risk I can take. The bulk of my assets are with Endowus, via equity in the company and invested on the Endowus platform.

I invest my CPF Ordinary Account and Supplementary Retirement Scheme account. I also invest cash across three main “buckets” – a short-term liquidity bucket concentrated on cash management funds, a mid-term bucket with fixed income funds, and a longer-term bucket that comprises an equity-heavy Flagship Portfolio.

My long-term bucket with the Flagship Portfolio holds the majority of my funds, and has an asset allocation of 80 per cent equities and 20 per cent in fixed income.

On top of these three buckets, I have a small satellite portfolio invested in China funds, which unfortunately has been challenging over the last few years.

When you go through major life events, it is also an opportunity to revisit your investment plan. I have definitely changed my investing strategy since starting Endowus and having a daughter. As a mum and entrepreneur, time is my most precious commodity. It is always such a challenge carving out and dedicating time to different parts of my life.

As for further investment plans, I am thinking of allocating some money to multi-strategy hedge funds and private market funds for additional diversification and lowered volatility, for instance.

However, given that a significant part of my investments is already invested into my company and my husband is also heavily exposed to illiquid investments, I also want to be careful about adding more semi-liquid investments to my portfolios.

My financial plan goes beyond my personal investments and ensures that my family’s well-being and future are covered. We have insurance policies in place for the family, but I personally prefer to separate investments from insurance so we do not own any investment-linked insurance products.

Q: What was your biggest investing mistake? Which was your best investment?

A: Like many of us, I have made my fair share of investing mistakes. At the beginning of my investment journey, I invested in some “fad” stocks that friends recommended, which lost most of their investment value. I am not sure why we thought that we could outsmart the market!

In the last few years, some of the private venture companies that my husband and I invested in have been written down to hardly anything. Thankfully, we had put in smaller amounts of money. The big learning for me is that it is important to right-size your tactical investments. It is also important to always understand what you are invested in.

My best investment is equity in my own company. Many of us have poured in our life savings to grow Endowus, as we are in it for the long game and believe we are building the wealth management experience of the future.

Ms So Sin Ting and her two-year-old daughter, Alexandra Lauren Moey. Becoming a mother has given her a new perspective in balancing work and family. ST PHOTO: GIN TAY

Q: Describe your lifestyle.

A: I own a four-bedroom apartment near Orchard with my husband. I also drive a second-hand grey Mini Cooper Clubman.

Retirement planning is extremely important to me, and is another crucial bit of education that we impart to our clients, especially women. Women statistically outlive men, and that makes saving up for retirement even more important and challenging.

That being said, I think the concept of retirement will look very different for our generation versus our parents’ generations. To me, saving enough for retirement is about having the freedom to choose when I stop working for a pay cheque, and having the freedom to pursue work that I am passionate about while being able to spend quality time with loved ones.

A lot of my values around money are shaped by my family. My father was and still is extremely frugal – you can count on two hands the number of shirts he owns. He is a strong believer in spending within his means and taught me the importance of saving for a rainy day.

However, education has always been extremely important to him. The one thing I was always allowed to spend money on growing up was books. My siblings and I have amassed a large collection of books in my parents’ home, and we hope to pass down our collection to our children one day.

Her top three investing tips:

Arm yourself with knowledge: Gaining financial literacy will really give you the confidence to take control of your financial well-being.

Invest with intention: Adopt goal-based, long-term investing strategies.

Set up automated investments: It helps keep us disciplined and takes the emotion out of investing.

Quote of the Week

You have the Barons, who perceive change as a risk to their fiefdoms and personal importance. You have the Creationists, who feel comfortable with things as they are and distrust evolution. And you have the Romantics, who hark back to some imagined Camelot, when every subject in the kingdom was happy and prosperous.

~ Friedman, on the three camps that resisted change in Goldman Sachs

Economists warn of deep recession for Singapore if euro zone breaks up

Singapore could sink into a deep recession if Greece’s debt crisis leads to a break-up of the euro zone and causes another global downturn.

The warning came from economists on Wednesday who outlined a range of nightmare scenarios that, while appearing unlikely at present, remain possible if events spiral out of control.

The downbeat assessment also dovetailed with a new survey on Wednesday showing that Asia’s top companies are less optimistic about their business outlook.

Credit Suisse economist Robert Prior-Wandesforde painted two gloomy narratives that could result in the European monetary union falling apart in the coming months.

The first is one where Greece leaves the grouping but contagion to other European countries is limited; the second involves Greece leaving and contagion spreading.

If this second scenario transpires, Mr Prior-Wandesforde said Singapore would likely experience a deep recession by the year end with the economy contracting 4.6 per cent in the fourth quarter.

If this happens, the economy would be down 0.6 per cent for the whole year, similar to the 1 per cent fall in gross domestic product experienced in 2009 following the financial crisis.

Singapore is officially expected to grow between 1 per cent and 3 per cent this year, the Trade and Industry Ministry has said, although it too has warned of rising risks over the euro zone crisis.

‘This scenario assumes the most immediate impact, through the trade channels and exports to Europe and the United States,’ said Mr Prior-Wandesforde yesterday.

‘There are likely to be other negative implications as well. These include a drying up of trade finance, as witnessed during the financial crisis, as well as a withdrawal of funds from the Asian region to shore up European balance sheets.’

Bank of America Merrill Lynch economist Chua Hak Bin agreed, saying his model showed that an ‘ugly bear case’ could mean a 1 per cent contraction for Singapore’s economy this year.

‘We are worried about the financial contagion channel, which could see credit freeze up and affect many businesses,’ he added.

Mr Prior-Wandesforde was also less optimistic on the prospect of a quick recovery this time as governments have less financial power for another huge stimulus.

In 2010, Asia saw a quick and remarkable V-shaped recovery from the 2009 recession.

Singapore grew at a rapid 14.8 per cent that year, more than making up for the 1 per cent contraction.

Capital Economics noted that Asian governments are better placed than their Western counterparts to pump prime their economies this time but the region also has less firepower than in 2010.

It noted that both Hong Kong and Singapore have the healthiest fiscal positions in Asia, with large surpluses and reserves.

‘However, as trade-dependent economies with big financial sectors, they are the two places in Asia most vulnerable to a crisis in the euro zone and most exposed to another global downturn,’ it said.

‘As a result, even expansionary fiscal policy is unlikely to prevent these two economies from falling into a deep recession if exports slump.’

Fortunately a Greek exit is unlikely to happen in the next six months. Credit Suisse puts the probability at about 20 per cent while Swiss bank UBS says the chances of Greece leaving the euro zone are less than 10 per cent.

Meanwhile, a recent survey showed that Asia’s top companies are now less upbeat about their business outlook than in the first quarter.

The Thomson Reuters/Insead Asia Business Sentiment Index fell to 69 last month from 74 in March.

A reading above 50 indicates an overall positive outlook.

Of the 177 companies polled, 78 said their business outlook for the next six months was positive, while 87 said it was neutral, and 12 said it was negative, Reuters reported.

The poll was conducted between June 4 and 15.

Asked what the biggest risk factor they faced was, 111 companies said global economic uncertainty, and 28 cited rising costs.

‘Things are looking tougher with what’s happening in the global economy. Asia is not fully insulated but will still do relatively better, given that most governments in the region still have leeway to stimulate domestic economies,’ Aberdeen Asset Management Asia investment manager Kristy Fong told Reuters.

‘Cost pressures are another issue, such as rising inflationary pressures in Singapore (and) infrastructure and logistical bottlenecks in India.’

OCBC Investment Research analyst Carey Wong noted that consumers were turning more cautious in placing orders.

‘As long as customers don’t give them very clear order indications, sentiment won’t be that good. As a business owner, you can’t plan ahead, such as planning capital expenditure.’

The Carrian Group

The Carrian Group was a Hong Kong conglomerate founded by George Tan, a Singaporean Civil Engineer working in Hong Kong as a project manager for a land development company. The Group’s principal holding company Carrian Holdings, Ltd. was founded in 1977.

In January 1980, the group, through a 75% owned subsidiary, purchased Gammon House (a commercial Office building, now Bank of America Tower) in Central District, Hong Kong for $998 million. It grabbed the limelight in April 1980 when it announced the sale of Gammon House for a staggering HK$1.68 billion, a price that surprised Hong Kong’s Property and Financial markets and developed public interest in Carrian.

In the same year, Carrian capitalized on its notoriety by acquiring a publicly listed Hong Kong company, renaming it Carrian Investments Ltd., and using it as a vehicle to raise funds from the financial markets.

The group grew rapidly in the early 1980s to include properties in Malaysia, Thailand, Singapore, Philippines, Japan, and the United States. At its peak, the Carrian Group owned businesses in Real Estate, Finance, Shipping, Insurance (China Insurance Underwriters Ltd), Hotels, Catering and Transportation (A Taxi fleet that was the largest ever in Hong Kong).

Carrian Group became involved in a scandal with Bank Bumiputra Malaysia Berhad of Malaysia and Hong Kong-based Bumiputra Malaysia Finance. Following allegations of accounting fraud, a murder of a bank auditor, and the suicide of the firm’s adviser, the Carrian Group collapsed in 1983, the largest bankruptcy in Hong Kong.

Watch your money grow

Watch your money grow
Buying the right timepiece can pay off quickly
Peter McGarrity
SCMP Jan 09, 2011

jaeger_lecoultre

Buying a new watch is in many ways similar to buying a new car – a premium is paid for the latest models and once you take it out of the dealer’s showroom its value will likely drop by around 30 per cent.

However, in certain circumstances it is possible to make money from buying watches. At the top end of the market, it is easier simply because you can buy more exquisite pieces, the supply of which is strictly limited by the manufacturer.

For example, at a recent Sotheby’s auction in Hong Kong a 2009 Patek Philippe diamond and platinum perpetual calendar sold for HK$2.1 million, handing the owner a healthy HK$500,000 profit on the purchase price in under a year.

Now before you rush out and buy an expensive watch – and try to justify the purchase to your spouse as a wise investment – there are certain factors to consider. In the middle range of the market (HK$40,000 to HK$100,000) it is considerably more difficult to make money from your collection.

Vanessa Herrera, head of the watch department at Sotheby’s Hong Kong, said: “If you want to buy a watch as an investment in this sector of the market, you should focus on brands that have an established history and are able to tie in their newer pieces to that history, creating a narrative that purchasers can relate to.”

Certain brands such as Patek Philippe, Rolex and Cartier have been very successful at this, and so it is no surprise that their watches do particularly well at resale. For example, Patek has created an aura of timelessness and nostalgia by implying that their watches are heirlooms to be passed down to the next generation and the current owner is just a temporary custodian.

Panerai is another brand that uses this technique with great success. The company, which originally made military instruments for the Italian navy, now makes huge diving watches. The advertising features the company’s military connections and the connotations associated with this: precision, robustness, manliness.

These factors, plus an ever-increasing demand (often from desk-bound businessmen) for larger and more rugged timepieces, have helped add to the desirability factor of the watches.

As a result, select Panerai titanium models from only five or six years ago are now selling for more than double their original price.

Herrera’s other suggestion for those buying in the middle range is to buy recently discontinued models of successful brands that have been replaced with updated versions.

“In the short term, when a new model of a successful brand is launched, people will be looking to buy that model, but during this time the recently discontinued pieces are neglected and so the price drops. I recommend you take the opportunity to pick up one of these watches during this time because when the novelty of the new model has worn off, the price [of the discontinued model] will go up again,” she said.

If you are interested in investing, Hong Kong is as good a place as any in the world to start. China is the largest market in the world for Swiss watches, accounting for more than 25 per cent of total worldwide sales.

Hong Kong-based international finance lawyer Neil Campbell has been buying for about 15 years and his collection includes six Rolexes, two Jaeger-Le Coultres, two Cartiers, a Panerai and a Franck Muller. His primary motive for buying watches is pleasure – he enjoys looking at them and above all wearing them.

However, Campbell, who has never sold one of his watches, is also an astute reader of the market. Many of the watches in his collection have gone up in value and most, if not all, have at least maintained their value.

He considers one of his best purchases to be a Jaeger-Le Coultre with a rose gold case and a black dial. Jaeger no longer makes this watch with a black dial and has no plans to do so in the near future.

“A dealer in Switzerland told me to hang on to this watch as it is in much demand and that if I lost it I would be unlikely to be able to get hold of another one,” he said.

Another of his successful purchases is a Rolex Daytona – again with a black dial. “This watch retails at HK$73,000 but it is almost impossible to buy a new one from a Rolex dealer. I picked this one up for HK$82,000 a couple of months ago and it is already retailing on the second-hand market at HK$95,000.”

For would-be investors, the watch market is a highly visible one as manufacturers publish the recommended retail purchase price for models and authorised dealers are bound by this recommendation. The internet has also transformed trading. It is now easy to purchase watches from dealers around the world and compare prices.

However, as with buying anything on the internet, there are issues to consider. One of the main stumbling blocks is that the seller is unlikely to be an authorised dealer and any warranty it gives will not be backed by the original manufacturer.

Other common problems include the difficulty in confirming whether you will receive the watch’s original case, tools and receipt – the absence of which will affect value if you try to resell. There are also many fakes.

Most serious collectors avoid the internet simply because there is no substitute to seeing your purchase first hand. Campbell cites an example of how he once saw a Rolex Milgauss with a green sapphire crystal (it gives a greenish hue around the edge of the dial) on the internet and was not particularly impressed. But later when he was shown one by a dealer, he liked it so much, he bought it on the spot.

If you are uncertain about the value of the watch that you want to buy or sell, you can always contact an auction house. Sotheby’s, for example, has a database on watch prices and tracks sales around the world. Even if you have no intention of bidding at an auction you will be able to speak to an expert and access some top quality advice free of charge.

When you are purchasing a watch with a view to resell, it is important to remember that even though the watch market is global, there are some regional variations. There is a strong preference in Asia for new pieces, whereas in Europe a vintage or antique watch that has obviously been worn and reeks of old money can command a premium. Even flaws such as the discolouration of the dial – a common occurrence on certain types of vintage and antique Rolexes – can add value to the piece.

According to Julian Chow Shum of David Watch, “the trend in Western markets is for solid, durable, practical watches which are suitable for everyday use. In the Asian market, we like more luxury, more diamonds, rose gold and complications”.

International watch dealer Marc Djunbushian said of the vintage and antique market: “It is difficult to make money in this sector of the market if your budget is under HK$100,000.

“If you have a bigger budget, there is money to be made, especially in minute-repeating watches and enamel watches, because both require the attention of master craftsmen. What I have learned from my 15 years’ experience as an expert is that perfection, rarity and complication will always bring a profit.”

Djunbushian recommends “watches from the ’70s that use different materials and have unusual designs” as more affordable investments. Already dealers in Europe are holding on to these pieces in anticipation of future demand.

Another tip from both Djunbushian and Herrera is pocket watches. These types of European watches are in high demand in China (especially the ones in gold) and good pieces can still be picked up for a reasonable price.

If you are thinking purely in terms of investment, few would dispute that there are much easier ways of making money than in the watch market, especially if your budget is limited. However, if you are interested in watches, then it seems that if you follow a few simple principles it is possible to combine your interest and either maintain the value of your collection over time or even realise a healthy profit.

Hugh Hendry

Maverick fund manager shares his contrarian views, obsession with China

The New York Times in London
Jul 25, 2010

Hugh Hendry has a big mouth, as Hugh Hendry will tell you.

With a sharp wit and a sharper tongue, Hendry, a plain-spoken Scot, has positioned himself as the public contrarian thinker of London’s very private hedge fund community.

The euro? It’s finished. China? Headed for a fall. President Barack Obama? “If there was a way to short Obama, I would,” says the man who runs Eclectica Asset Management.

It is an old-school macroeconomic fund company with a think-big, globe-straddling style more akin to the Quantum Fund, of George Soros fame, than to the hi-tech razzle-dazzle of Wall Street’s math-loving quant analysts.

At 41, Hendry is emerging from the normally secretive world of hedge funds to captivate fans and foes with a surprising level of candour.

Last May, on British television, he verbally sparred with Jeffrey Sachs, director of the Earth Institute at Columbia University, and perhaps the best-known economist writing on developmental issues.

Before that, he took on Joseph Stiglitz, the Nobel laureate, about the future of the euro. “Hello, can I tell you about the real world?” Hendry interjected at one point. It was a huge hit on YouTube.

His verbal pyrotechnics have won Hendry a reputation for challenging the economics establishment. He is regarded and appreciated by many as overly pessimistic about, well, just about everything.

His big worry lately has been China. Like James Chanos, a prominent hedge fund manager in the United States, Hendry says he believes China’s days of heady growth are numbered. A crisis is coming, he insists.

Hendry has made – and sometimes lost – money for his investors. Eclectica’s flagship fund, the Eclectica Fund, is up about 13 per cent this year, besting by far the average 1.3 per cent loss among similar funds.

But returns have been erratic – “too much sex, drugs and rock ‘n roll” for some investors, he concedes. In 2008, the Eclectica Fund was up 50 per cent one month and down 15 per cent another. Hendry plans to change that.

The firm bet correctly that the financial troubles plaguing Greece would eventually ripple through to the market for German bonds, considered the European equivalent of ultra-safe US Treasury securities. But the firm lost money betting on European sovereign debt in the first quarter of last year.

Last week, Hendry was musing about the financial world in his office behind a scruffy shopping mall in the Bayswater section of London. No Savile Row here: He was sporting a white oxford shirt, jeans and blue Converse Chuck Taylor sneakers, along with a three-day stubble and hipster horn-rim glasses.

His latest obsession is China. He likens the country to Starbucks: good at growing quickly but not so good at creating wealth. “The idea is that things would happen today that are commonly thought of as impossible, most notably a significant reversal of China,” Hendry said.

Maps cover the walls of his office. On one, blue magnetic pins plot his recent trip through China. He filmed himself there in front of huge, empty office buildings and giant new bridges in the middle of nowhere – signs, he said, of a credit bubble.

Hendry is devising ways to bet on a spectacular deterioration of China’s economy. He declined to divulge any details.

His outspokenness has won him both fans and detractors.

Marc Faber, the money manager known as Doctor Doom for his bearish views, calls Hendry “a deep thinker”. “He has strong views and expresses them, not to get publicity but because he has a great understanding of the markets,” Faber said.

Some London investors are less charitable. Two declined to comment on Hendry, saying they did not want to “get into a fight” with him.

Hendry certainly does not fit the stereotype of a discreet London moneyman.

The son of a truck driver, he was the first in his family to attend a university – Strathclyde, in Glasgow, not Oxbridge. He studied accounting and joined Baillie Gifford, a large Edinburgh money manager.

Frustrated that he could not challenge the investment strategies of his bosses, he jumped to Credit Suisse Asset Management in London. There, a chance meeting with an equally opinionated hedge fund manager, Crispin Odey, led to a job.

Before long, Hendry struck out on his own.

The inspiration for his investment approach comes from an unlikely source: The Gap in the Curtain, a 1932 novel by John Buchan that is borderline science fiction. The plot centres on five people who are chosen by a scientist to take part in an experiment that will let them glimpse one year into the future.

Hendry calls the novel “the best investment book ever written” because it taught him to envision the future without neglecting what happened leading up to it, a mistake many investors make, he said.

More Ayn Rand

aston_martin_one_77_images_001

“In the name of the best within you, do not sacrifice this world to those who are its worst. In the name of the values that keep you alive, do not let your vision of man be distorted by the ugly, the cowardly, the mindless in those who have never achieved his title.

Do not lose your knowledge that man’s proper estate is an upright posture, an intransigent mind and a step that travels unlimited roads. Do not let your fire go out, spark by irreplaceable spark, in the hopeless swamps of the approximate, the not-quite, the not-yet, the not-at-all. Do not let the hero in your soul perish, in lonely frustration for the life you deserved, but have never been able to reach.

Check your road and the nature of your battle. The world you desired can be won, it exists, it is real, it is possible, it is yours.”

~ Part Three / Chapter 7 This is John Galt Speaking

TED Spread

The TED spread is the difference between the interest rates on interbank loans and short-term U.S. government debt (“T-bills”). TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract.

Initially, the TED spread was the difference between the interest rates for three-month U.S. Treasuries contracts and the three-month Eurodollars contract as represented by the London Interbank Offered Rate (LIBOR). However, since the Chicago Mercantile Exchange dropped T-bill futures, the TED spread is now calculated as the difference between the three-month T-bill interest rate and three-month LIBOR.

The size of the spread is usually denominated in basis points (bps). For example, if the T-bill rate is 5.10% and ED trades at 5.50%, the TED spread is 40 bps. The TED spread fluctuates over time, but historically has often remained within the range of 10 and 50 bps (0.1% and 0.5%), until 2007. A rising TED spread often presages a downturn in the U.S. stock market, as it indicates that liquidity is being withdrawn.

Indicator

The TED spread is an indicator of perceived credit risk in the general economy. This is because T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. When the TED spread increases, that is a sign that lenders believe the risk of default on interbank loans (also known as counterparty risk) is increasing. Interbank lenders therefore demand a higher rate of interest, or accept lower returns on safe investments such as T-bills. When the risk of bank defaults is considered to be decreasing, the TED spread decreases.

Historical Levels

The long term average of the TED has been 30 basis points with a maximum of 50 bps.

During 2007, the subprime mortgage crisis ballooned the TED spread to a region of 150-200 bps. On September 17, 2008, the TED spread exceeded 300 bps, breaking the previous record set after the Black Monday crash of 1987. Some higher readings for the spread were due to inability to obtain accurate LIBOR rates in the absence of a liquid unsecured lending market. On October 10, 2008, the TED spread reached another new high of 465 basis points.

Knowledge

Avoid processing more information than you can digest: it is better to know less and understand more.

Data is not information until it has been collected, collated and organized.

Information is not knowledge until it is absorbed and comprehended.

Knowledge is not understanding nor wisdom, until it is associated with life experience and given perspective.

bquote

Don't settle

apple

“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle.”

~ Steve Jobs

STATEMENT ON U.S. ECONOMIC OUTLOOK BY DR. NOURIEL ROUBINI

July 16, 2009

STATEMENT ON U.S. ECONOMIC OUTLOOK BY DR. NOURIEL ROUBINI

The following is a statement from Dr. Nouriel Roubini, Chairman of RGE Monitor and Professor, New York University, Stern School of Business:

“It has been widely reported today that I have stated that the recession will be over “this year” and that I have “improved” my economic outlook. Despite those reports – however – my views expressed today are no different than the views I have expressed previously. If anything my views were taken out of context.

“I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19 months into that recession. If as I predicted the recession is over by year end, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year’s end.

“Indeed, last year I argued that this will be a long and deep and protracted U-shaped recession that would last 24 months. Meanwhile, the consensus argued that this would be a short and shallow V-shaped 8 months long recession (like those in 1990-91 and 2001). That debate is over today as we are in the 19th month of a severe recession; so the V is out of the window and we are in a deep U-shaped recession. If that recession were to be over by year end – as I have consistently predicted – it would have lasted 24 months and thus been three times longer than the previous two and five times deeper – in terms of cumulative GDP contraction – than the previous two. So, there is nothing new in my remarks today about the recession being over at the end of this year.

“I have also consistently argued – including in my remarks today – that while the consensus predicts that the US economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery where growth will average about 1% in the next couple of years when potential is probably closer to 2.75%.

“I have also consistently argued that there is a risk of a double-dip W-shaped recession toward the end of 2010, as a tough policy dilemma will emerge next year: on one side, early exit from monetary and fiscal easing would tip the economy into a new recession as the recovery is anemic and deflationary pressures are dominant. On the other side, maintaining large budget deficits and continued monetization of such deficits would eventually increase long term interest rates (because of concerns about medium term fiscal sustainability and because of an increase in expected inflation) and thus would lead to a crowding out of private demand.

“While the recession will be over by the end of the year the recovery will be weak given the debt overhang in the household sector, the financial system and the corporate sector; and now there is also a massive re-leveraging of the public sector with unsustainable fiscal deficits and public debt accumulation.

“Also, as I fleshed out in detail in recent remarks the labor markets is still very weak: I predict a peak unemployment rate of close to 11% in 2010. Such large unemployment rate will have negative effects on labor income and consumption growth; will postpone the bottoming out of the housing sector; will lead to larger defaults and losses on bank loans (residential and commercial mortgages, credit cards, auto loans, leveraged loans); will increase the size of the budget deficit (even before any additional stimulus is implemented); and will increase protectionist pressures.

“So, yes there is light at the end of the tunnel for the US and the global economy; but as I have consistently argued the recession will continue through the end of the year, and the recovery will be weak and at risk of a double dip, as the challenge of getting right the timing and size of the exit strategy for monetary and fiscal policy easing will be daunting.

Francisco D’Anconia’s Speech: The Meaning of Money

The Meaning of Money
Tuesday, January 1, 1957

“So you think that money is the root of all evil?” said Francisco d’Anconia.

“Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

“When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor–your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money, Is this what you consider evil?

“Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions–and you’ll learn that man’s mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

“But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man’s capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made–before it can be looted or mooched–made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can’t consume more than he has produced.

“To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss–the recognition that they are not beasts of burden, born to carry the weight of your misery–that you must offer them values, not wounds–that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men’s stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find. And when men live by trade–with reason, not force, as their final arbiter–it is the best product that wins, the best performance, the man of best judgment and highest ability–and the degree of a man’s productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

“But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality–the men who seek to replace the mind by seizing the products of the mind.

“Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values, if he’s evaded the knowledge of what to value, and it will not provide him with a purpose, if he’s evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

“Only the man who does not need it, is fit to inherit wealth–the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve the mind that cannot match it. Is this the reason why you call it evil?

“Money is your means of survival. The verdict you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men’s vices or men’s stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment’s or a penny’s worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you’ll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of your hatred of money?

“Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

“Or did you say it’s the love of money that’s the root of all evil? To love a thing is to know and love its nature. To love money is to know and love the fact that money is the creation of the best power within you, and your passkey to trade your effort for the effort of the best among men. It’s the person who would sell his soul for a nickel, who is loudest in proclaiming his hatred of money–and he has good reason to hate it. The lovers of money are willing to work for it. They know they are able to deserve it.

“Let me give you a tip on a clue to men’s characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it.

“Run for your life from any man who tells you that money is evil. That sentence is the leper’s bell of an approaching looter. So long as men live together on earth and need means to deal with one another–their only substitute, if they abandon money, is the muzzle of a gun.

“But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich–will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt–and of his life, as he deserves.

“Then you will see the rise of the men of the double standard–the men who live by force, yet count on those who live by trade to create the value of their looted money–the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law–men who use force to seize the wealth of disarmed victims–then money becomes its creators’ avenger. Such looters believe it safe to rob defenseless men, once they’ve passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

“Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed. Money is so noble a medium that is does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’

“When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, ‘Who is destroying the world?’ You are.

“You stand in the midst of the greatest achievements of the greatest productive civilization and you wonder why it’s crumbling around you, while you’re damning its life-blood–money. You look upon money as the savages did before you, and you wonder why the jungle is creeping back to the edge of your cities. Throughout men’s history, money was always seized by looters of one brand or another, whose names changed, but whose method remained the same: to seize wealth by force and to keep the producers bound, demeaned, defamed, deprived of honor. That phrase about the evil of money, which you mouth with such righteous recklessness, comes from a time when wealth was produced by the labor of slaves–slaves who repeated the motions once discovered by somebody’s mind and left unimproved for centuries. So long as production was ruled by force, and wealth was obtained by conquest, there was little to conquer, Yet through all the centuries of stagnation and starvation, men exalted the looters, as aristocrats of the sword, as aristocrats of birth, as aristocrats of the bureau, and despised the producers, as slaves, as traders, as shopkeepers–as industrialists.

“To the glory of mankind, there was, for the first and only time in history, a country of money–and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man’s mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being–the self-made man–the American industrialist.

“If you ask me to name the proudest distinction of Americans, I would choose–because it contains all the others–the fact that they were the people who created the phrase ‘to make money.’ No other language or nation had ever used these words before; men had always thought of wealth as a static quantity–to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words ‘to make money’ hold the essence of human morality.

“Yet these were the words for which Americans were denounced by the rotted cultures of the looters’ continents. Now the looters’ credo has brought you to regard your proudest achievements as a hallmark of shame, your prosperity as guilt, your greatest men, the industrialists, as blackguards, and your magnificent factories as the product and property of muscular labor, the labor of whip-driven slaves, like the pyramids of Egypt. The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide–as, I think, he will.

“Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns–or dollars. Take your choice–there is no other–and your time is running out.”

Theory of Reflexivity

“I must state at the outset that I am in fundamental disagreement with the prevailing wisdom. The generally accepted theory is that financial markets tend towards equilibrium, and on the whole, discount the future correctly. I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future; they help to shape it. In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy.”

– George Soros, 1994

Singapore devalues after shock GDP drop

Apr 15, 2009
Singapore devalued its currency yesterday after its economy shrank far more than expected.

The city state’s gross domestic product shrank an annualised 19.7 per cent in the first three months of the year – more than twice the 9.6 per cent drop analysts had forecast and worse than the 16.4 per cent rate at which it contracted between October and December. The fall was the biggest since at least 1975.

Singapore-based banks DBS and UOB adjusted their GDP forecasts, predicting the economy would shrink at least 7.5 per cent this year.

The Monetary Authority of Singapore shifted the centre of the secret trade-weighted band for the Singapore dollar down to the market level of the exchange rate basket, effectively a devaluation.

“The re-centring translates to roughly a 1.7 per cent devaluation of the Singapore dollar on a trade-weighted basis,” said Wai Ho Leong, a regional economist at Barclays Capital in Singapore. It was the first effective lowering of the currency band since July 2003, he said.

“The situation is really dire and the central bank’s policy will improve sentiment and help the economy,” said Vishnu Varathan, an economist at Forecast Singapore. The move “gives them the flexibility to weaken the currency now and steer it to strengthen when things get better”.

Reuters, Bloomberg

Thriving bear sees many more US bank failures

Thriving bear sees many more US bank failures
Reuters in New York
Apr 04, 2009

John Jacquemin, a hedge fund manager of Mooring Financial Corp, who predicted the credit crisis and tripled his investors’ money over the past two years, warned that hundreds of United States banks were doomed to fail and that an economic recovery was far away.

Mooring Financial has posted 10 consecutive years of gains snapping up loans at distressed prices, while his two-year-old Intrepid Opportunities Fund generated 222 per cent returns betting against corporate debt and financial stocks.

Beyond a housing glut and slower consumer spending, Mr Jacquemin said he remained bearish because banks and regulators had not confronted the mountains of bad loans still on banks’ books.

While banks needed to mark down bonds to prevailing market prices, “with whole loans, they don’t have to and they haven’t”, he said.

“If they did, there would be literally hundreds and hundreds of insolvent banks,” he said.

Eighteen years ago, Mr Jacquemin was a commercial lender who snapped up loans sold by Resolution Trust and the Federal Deposit Insurance Corp in the wake of the savings and loans crisis.

Mr Jacquemin said government agencies were aggressive in closing failed banks, selling branches and deposits to the highest bidders. Today, he contends, officials have been more tentative, allowing weak banks to hobble along.

“If the banks sold these loans for what they could get, they would be insolvent,” Mr Jacquemin said. “The difference between now and the 1990s is the government today is not closing banks down.”

This approach would only prolong the crisis.

“They’re not being aggressive because it would scare the hell out of us,” Mr Jacquemin said. “But we can’t get rid of the problem the way they’re approaching it now … [The government] ought to be closing the weak banks and helping recapitalise the stronger ones.”

Little-known Mooring Financial has generated returns on par with renowned credit market bear John Paulson and his hedge fund firm Paulson.

Mr Jacquemin’s Mooring Capital Fund has never had a losing year and returned 12 per cent a year, on average, for 10 years buying distressed loans and debt.

The excesses of the credit bubble – reckless leverage and frothy property markets – prompted him to launch Intrepid Opportunities in February 2007.

The fund shorted indices that tracked bond and mortgage markets, as well as bet against banks, credit card lenders and other financial companies.

The new fund soared 56 per cent last year, when equities fell 40 per cent and the average hedge fund dropped 18 per cent.

Mr Jacquemin said the firm, which manages US$400 million, was seeking new investors.

While bank shares have rallied in recent weeks, Mr Jacquemin has maintained his negative views on corporate bonds and finance stocks.

He predicts rising commercial property defaults and worries that consumer spending will never rebound to pre-crisis levels.

Mr Jacquemin said housing prices would not improve until the glut of empty units was absorbed – a process that will take at least 18 months and as long as 2-1/2 years.

GIC cuts loss in one fell swop

See also
http://chenreiki.com/blog/archives/376
http://chenreiki.com/blog/archives/350
http://chenreiki.com/blog/archives/327

Mon, Mar 02, 2009
The Business Times

GIC cuts loss in one fell swop

By Conrad Tan

THE Government of Singapore Investment Corp (GIC) will convert all its preferred shares in Citigroup into common stock to cut its losses. The swop will give it an 11.1 per cent stake in the troubled US bank, which yesterday announced a sweeping plan to boost its common equity base. The conversion will pare GIC’s paper loss on its original US$6.88 billion investment in Citi from 80 per cent or US$5.5 billion to 24 per cent, or US$1.67 billion, based on Thursday’s closing price of US$2.46 for Citi shares.

Separately, Citi said yesterday that it plans to swop up to US$52.5 billion of its preferred stock, including US$25 billion of the US$45 billion held by the US government, for ordinary shares.

Citi also recorded a massive US$10 billion charge for impairment of goodwill and other intangible assets in the fourth quarter, resulting in an additional net loss of US$9 billion for the final three months of last year.

For GIC, the decision to convert its shares appears to have been the lesser of two unpalatable choices. Citi yesterday suspended dividend payments on its preferred shares as well as common stock, which means that GIC would lose the 7 per cent annual dividend that it has been receiving if it chose not to convert its holdings.

The conversion will make GIC the second-biggest shareholder in Citi with a stake of about 11 per cent, compared to about 4 per cent at the time of its original investment. The US government will be Citi’s largest shareholder, owning 36-38 per cent of Citi’s common equity. The final stakes will depend on how many investors in the publicly held tranche of Citi’s preferred stock decide to participate in the share conversion.

One thing is certain: Existing ordinary shareholders will suffer massive dilution of more than 70 per cent. Citi shares plunged 37 per cent to US$1.55 at the start of US trading yesterday after the bank’s announcement. At that price, GIC’s unrealised loss on its Citi investment would be US$3.6 billion. The profitability of US banks ‘is likely to be impaired in the next two years’, said Ng Kok Song, GIC’s group chief investment officer in a statement.

‘GIC’s view is that with this latest move, Citigroup’s capacity to weather the severe economic downturn will be strengthened.’

Before yesterday’s announcement, the market value of the preferred shares held by GIC had already slumped 80 per cent to just US$1.376 billion since its initial investment in Citi, as mounting losses made it less likely that the bank would be able to keep up its dividend payments.

The US government, GIC and other investors that bought Citi preferred stock alongside GIC in January last year will receive common stock at a price of US$3.25 a share. Those investors, including Saudi Arabia’s Prince Al-Waleed bin Talal, have agreed to the exchange, said Citi.

At the conversion price of US$3.25, GIC will get some 2.12 billion common shares in exchange for its US$6.88 billion in preferred stock. Based on Thursday’s closing price of US$2.46 a share, GIC’s stake after conversion is worth US$5.21 billion.

That puts GIC’s unrealised loss on its original US$6.88 billion investment in Citi at US$1.67 billion after the conversion, compared to US$5.5 billion before.

Under the original terms of GIC’s investment in Citi, it would have had to pay a much higher conversion price of US$26.35 for each common share, GIC said. That would have translated into a stake of just 261.1 million shares, worth a mere US$642 million at Thursday’s closing price for Citi shares.

But the conversion also means that GIC will now bear greater risk than before, as an ordinary shareholder. It also gives up for good the 7 per cent annual dividend that it previously earned on its preferred shares.

Citi chief executive Vikram Pandit said that the conversion plan had just ‘one goal’ – to increase the bank’s tangible common equity or TCE. Converting its preferred shares into ordinary equity will boost its TCE ratio – the focus of stress tests by US regulators starting this week as a key measure of the bank’s ability to withstand further losses if the recession is worse than expected.

Ordinary shareholders are the first to suffer any losses, so common equity is seen as the highest quality of capital that a bank holds, and the size of a bank’s common equity base relative to its assets is considered the purest measure of its buffer against losses.

The hope is that by raising its TCE ratio, Citi will be able to weather the worst recession that the US has seen in decades. The plan is expected to increase its TCE as a proportion of its risk-weighted assets from less than 3 per cent now to 7.9 per cent.

Crucially, it does so without the need to inject more money from the public purse. That makes it unnecessary for the US government to seek the approval of lawmakers for more funds amid growing public fury over the use of taxpayers’ money to bail out large banks.

But the US government could still inject more capital into Citi – in the form of mandatory convertible preferred shares – if the stress tests show that the bank’s capital cushion still needs bolstering. That would mean further dilution for ordinary shareholders, including GIC, when the shares are eventually converted to common stock.

‘As a shareholder, GIC supports the initiative by Citigroup and the US government to strengthen the quality of the bank’s capital base in view of the challenging economic environment,’ GIC said in a statement.

25 Year-Old Beauty Seeks Rich Banker

This was posted on Craigslist last year:

‘What am I doing wrong?

Okay, I’m tired of beating around the bush. I’m a beautiful (spectacularly beautiful) 25 year old girl. I’m articulate and classy. I’m not from New York. I’m looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don’t think I’m overreaching at all.

Are there any guys who make 500K or more on this board ? Any wives ? Could you send me some tips ? I dated a business man who made an average of around 200 – 250K. But that’s where I seem to hit a roadblock. $250,000 won’t get me to Central Park West. I know a woman in my yoga class who was married to an investment banker, and lives in Tribeca. She’s not as pretty as I am, nor is she a great genius. So what is she doing right ? How do I get to her level ?

Here are my questions specifically:

– Where do you single rich men hang out ? Give me specifics – bars, restaurants, gyms

– What are you looking for in a mate? Be honest guys, you won’t hurt my feelings

– Is there an age range I should be targeting ?

– Why are some of the women living lavish lifestyles on the Upper East Side so plain? I’ve seen really ‘Plain Jane’ boring types, who have nothing to offer incredibly wealthy guys. Then I’ve seen drop dead gorgeous girls in singles bars in the East Village. What’s the story there ?

– Lawyers, investment bankers, doctors. How much do those guys really make ? And where do the hedge fund guys hang out ?

– How do you rich guys decide on marriage vs. just a girlfriend ? I am looking for MARRIAGE ONLY.

Please hold your insults – I’m putting myself out there in an honest way. Most beautiful women are superficial – at least I’m being up front about it. I wouldn’t be searching for these kind of guys if I wasn’t able to match them – in looks, culture, sophistication, and keeping a nice hearth and home’.

An Investment Banker’s Response:

Dear Pers-431649184:

‘I read your posting with great interest and have thought meaningfully about your dilemma. I offer the following analysis of your predicament.

Firstly, I’m not wasting your time. I qualify as a guy who fits your bill – that is, I make more than $500K per year. That said, here’s how I see it:

Your offer, from the prospective of a guy like me, is a plain and simple crappy business deal. Here’s why. Cutting through all the B.S., what you suggest is a simple trade: you bring your looks to the party and I bring my money. Fine, simple. But here’s the rub, your looks will fade and my money will likely continue into perpetuity – in fact, it is very likely that my income will increase, but it is an absolute certainty that you won’t be getting any more beautiful!

So, in economic terms, you are a depreciating asset. Not only are you a depreciating asset, however, your depreciation accelerates! Let me explain – you’re 25 now and will likely remain pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 – stick a fork in you!

So, in Wall Street terms, we’d call you a trading position – not a buy and hold…hence the rub…marriage. It doesn’t make good business sense to ‘buy you’ (which is what you’re asking) – so I’d rather lease. In case you think I’m being cruel, I would say the following: if my money were to go away, so would you – so when your beauty fades I need an out too. It’s as simple as that. So the deal that makes sense for me is dating, not marriage.

Separately, I was taught early in my career about efficient markets. So, I wonder why a girl as ‘articulate, classy and spectacularly beautiful’ as you has been unable to find your sugar daddy. I find it hard to believe that, if you are as gorgeous as you say you are, your $500K man hasn’t found you – if only for a tryout.

By the way, you could always find a way to make your own money – and then we wouldn’t need to have this difficult conversation.

With all that said, I must say you’re going about it the right way. Classic ‘pump and dump’. I hope this is helpful, and if you want to enter into some sort of lease, please let me know’.

Atheists and the Stock Market – Nassim Nicholas Taleb

Taleb’s exposition of the Ludic fallacy:

“We love the tangible, the confirmation, the palpable, the real, the visible, the concrete, the known, the seen, the vivid, the visual, the social, the embedded, the emotional laden, the salient, the stereotypical, the moving, the theatrical, the romanced, the cosmetic, the official, the scholarly-sounding verbiage, the pompous Gaussian economist, the mathematicized crap, the pomp, the Academie Francaise, Harvard Business School, the Nobel Prize, dark business suits with white shirts and Ferragamo ties, the moving discourse, and the lurid. Most of all we favor the narrated.

Alas, we are not manufactured, in our current edition of the human race, to understand abstract matters — we need context. Randomness and uncertainty are abstractions. We respect what has happened, ignoring what could have happened. In other words, we are naturally shallow and superficial — and we do not know it. This is not a psychological problem; it comes from the main property of information. The dark side of the moon is harder to see; beaming light on it costs energy. In the same way, beaming light on the unseen is costly in both computational and mental effort.”

John Thain

Thain behaviour
FT
Published: January 23 2009 22:03 | Last updated: January 23 2009 22:03

What is it that bankers don’t get? Unable to own up to a collective failure, some still display a sense of entitlement that bears no relation to their current status as wards of the state supported by the taxpayer. Step forward John Thain.

Formerly of Goldman Sachs, he was feted just months ago for securing the sale of Merrill Lynch to Bank of America, just as Lehman Brothers crumbled into dust. BofA even paid a 70 per cent premium. Some deal. Some salvation.

It now emerges that Mr Thain brought forward about $4bn in discretionary bonuses, paying them out in the narrow window after the sale of Merrill was agreed but days before the deal was actually closed.

This wheeze went down just as Merrill headed into record $21.5bn operating losses in the fourth quarter and BofA started seeking additional taxpayers’ funds from the troubled asset relief programme to digest its acquisition.

These bonuses, moreover, came in a year when Merrill’s total operating loss was $41.2bn. Bonuses equivalent to 10 per cent of the profits would be excessive, but 10 per cent of the losses? Furthermore, reports that Mr Thain spent $1.22m doing up his office, including $1,400 on a parchment rubbish bin, after his arrival at Merrill last year will serve to feed popular perceptions that the greed and insensitivity of investment bankers knows few limits.

Whether or not the bonuses were legal – and it seems they were – outside the parallel universe of investment bankers they are seen as looting. Bankers played a very big part in setting fire to the world economy – and reaped large rewards for their recklessness. They are being supported with public money because the economy cannot work without banks, not because bankers should be a protected species.

There may be no tumbrils rolling down Wall Street or through the City of London but a backlash is building. It would be a pity if this translates into regulation more stifling than that required to restrain more foolish risk-taking. But if bankers behave like this, it certainly will.

Citibank

When Travelers chief executive Sandy Weill acquired Citibank for US$70bn in April 1998 he effectively forced a rewrite of the rules of financial regulation. The US system was set up in the 1930s to prevent a repeat of the crash that led to the Great Depression.

The Glass-Steagall Act kept investment banks on Wall Street separate from commercial and retail lenders on main street, so traders couldn’t bet bank deposits. It was effectively repealed during the dying days of the Clinton Presidency in November 1999.

The Citibank takeover, which brought together legendary bond trading house Salomon, acquired by Travelers in 1997, with one of America’s largest main street lenders, forced this issue out into the open.

It heralded a wave of similar deals, combining both sides of the banking business. Most notably in September 2000 Chase Manhattan bought JP Morgan for US$33bn shortly after it had snapped up UK investment bank Robert Fleming.

Soon afterwards inventive investment bankers made the most of the low interest rates put in place after the terrorist atrocities of September 11 2001 to create debt instruments that led ultimately to the current debacle.
Continue reading “Citibank” →

Ted Williams

Ted Williams was the most robust batter in baseball history. Williams discarded the strike zone and ignored umpire calls, instead creating his own personal batting zone. This was an area divided into 77 sub-sectors each the size of a baseball.

Through many trials, Williams determined that the probability distribution of him getting a hit was best in only nine of those zones. Using tremendous discipline in his set-up, he would only swing the bat if a pitch was in one of those nine zones. The results are recorded in baseball’s Hall of Fame.

If there was ever a time in market history when we all need to be Ted Williams, it’s now.