In GOD we trust
And who else?
Go to a doctor. He tells you that you need a bypass. What are you going to do? What if he is careless. No, you don't ask that question! Because you trust your doctor.
Go to a car mechanic. He thinks your transmission needs replacement. It will cost you lot of money. You get second opinion. Give the car to the mechanic. Come back and pick up the car. Did he steal any other part? Did he really do what he is claiming he needed to do? How did you check that? You trust him!
Driving a car at 70 mph on a freeway on your lane. Not expecting that the guy in the next lane will hit you. You are not worried. You trust he will do the "right" thing.
How many times you had been in a situation where you almost passed out, and this noble guy helped you (and others didn't snatch your wallet).
Trust. Whether you are trusting somebody in noble profession (the doctor), or somebody driving (acting out of self preservation logic), or just humanly trust, that people will do the right thing, is what keeps the society.
What if that guy snatched your wallet and took some money from it when you were not yourself. What if the car mechanic replaced some other parts of the car. You won't know.
Welcome to wall street. Do you trust your advisor and/or your bank and/or your credit card company?
You signed the contract. He has every right to take money from you, because you signed on the dotted lines.
Why?
May be you have a better answer. I would love to know. Mine is very simple. Wall street has the highest level of opportunities to find the flaws in the trust system. So, it attracts people with low level of integrity. Money is supreme for them. If you have agreed by signing a 500 page document, so be it. You are his breakfast, lunch, dinner and that expensive wine.
Somebody told me, it is better to have smart enemies than stupid friends. So, don't get me wrong. I do desire a system where these businesses and people exist. And, properly channeling them, should produce for the society.
In an amazing way, our system has brought these people in a narrow set of professions (Las Vegas Pimps and Wall Street). Shouldn't it be easy (and beneficial) to regulate them?
Thursday, February 25, 2010
Saturday, February 13, 2010
Who made the money?
Who made the money?
My dad bought potatoes, because somebody told him to buy them, put them in cold storage and told him that they will go up in value. Ha Ha... Fill in the rest. Sure enough, cold storage guy made money.
You can "invest" in anything today. You can invest in treasuries (least perishable) to orange juice. Wait! Why should you invest in orange juice? I thought investment is for long term. Does OJ really stay good long term? Have you tried drinking frozen oj? It is disgusting!
You can invest in natural gas. The cost of storing natural gas is almost 10% (including leakages). Do you really expect that it will go up more than 10% a month in your investment horizon.
They invented these funny instruments called double shorts that you can buy in your 401K. So that you can make money when markets go down. Markets did go down, just google on internet and find out who made money.
I bought munis. Great investments. Secure, liquid. But, when I tried to sell them, they told me it is off the run. So, not liquid anymore. Who made the money?
The famous AAA super senior sub-prime CDOs. Who made the money again?
Have you ever bought an insurance which when you needed it, they told you that you didn't buy insurance with right options.
Do they tell you how much they will get paid from doing the deal with you?
Do you really think you will benefit by investing in mutual funds? Have you looked at how much they make?
Do you really have this nice advisor who buys you 35c donut and 50c coffee so that he can advise you what to do with your money. What does he know that you don't?
Just ask, who is making the money? And what is their incentive to tell you if a particular transaction is bad for you? And based on your own answer, decide!
My dad bought potatoes, because somebody told him to buy them, put them in cold storage and told him that they will go up in value. Ha Ha... Fill in the rest. Sure enough, cold storage guy made money.
You can "invest" in anything today. You can invest in treasuries (least perishable) to orange juice. Wait! Why should you invest in orange juice? I thought investment is for long term. Does OJ really stay good long term? Have you tried drinking frozen oj? It is disgusting!
You can invest in natural gas. The cost of storing natural gas is almost 10% (including leakages). Do you really expect that it will go up more than 10% a month in your investment horizon.
They invented these funny instruments called double shorts that you can buy in your 401K. So that you can make money when markets go down. Markets did go down, just google on internet and find out who made money.
I bought munis. Great investments. Secure, liquid. But, when I tried to sell them, they told me it is off the run. So, not liquid anymore. Who made the money?
The famous AAA super senior sub-prime CDOs. Who made the money again?
Have you ever bought an insurance which when you needed it, they told you that you didn't buy insurance with right options.
Do they tell you how much they will get paid from doing the deal with you?
Do you really think you will benefit by investing in mutual funds? Have you looked at how much they make?
Do you really have this nice advisor who buys you 35c donut and 50c coffee so that he can advise you what to do with your money. What does he know that you don't?
Just ask, who is making the money? And what is their incentive to tell you if a particular transaction is bad for you? And based on your own answer, decide!
Minimum Wages
Minimum wages on wall street
Congress should pass an act. If you are on wall street, you should not get paid less that $150,000 (put your number).
They argue, that majority of wall street workers make measly $150k, so the bonus amounts are not outrageous. so, are they arguing $150k to be the minimum wages?
They made money on their skills. Borrowing at 0% and buying market with that money is a great skill (GS made a lot of money by shorting vol in March 2008: equivalent of getting long the markets).
In an ordinary year, they spend 15% of time to fight for compensation. The best of the best (GS), even have their former employees in governments working for them.
They talk about the challenges of retaining talent. Ah, so where are they going to go? Hedge funds? How many will go to hedge funds? Why should everybody be paid large sums because select few want to go to hedge funds.
Banking is about borrowing and lending with proper controls. That is their value add to the society. They should be at par with the rest of the society.
If they create businesses, they should start companies, and get paid accordingly (no harm if they go to hedge funds for that). If they create businesses for banks, how do they bring more value to the table than the guy who starts domina's pizza franchise in India.
Let me tell you the real reason. Peer pressure! The cost of living in NYC and LN is so high (your kids go to $35k private schools. You need $100 dinners. You need "fill in the blanks"). They can't survive without such large compensations.
The guy next door (the hedge fund guy) makes so much money. They want to make that too, and are not willing to take the risk. Solution, demand from the confused system.
Congress should pass an act. If you are on wall street, you should not get paid less that $150,000 (put your number).
They argue, that majority of wall street workers make measly $150k, so the bonus amounts are not outrageous. so, are they arguing $150k to be the minimum wages?
They made money on their skills. Borrowing at 0% and buying market with that money is a great skill (GS made a lot of money by shorting vol in March 2008: equivalent of getting long the markets).
In an ordinary year, they spend 15% of time to fight for compensation. The best of the best (GS), even have their former employees in governments working for them.
They talk about the challenges of retaining talent. Ah, so where are they going to go? Hedge funds? How many will go to hedge funds? Why should everybody be paid large sums because select few want to go to hedge funds.
Banking is about borrowing and lending with proper controls. That is their value add to the society. They should be at par with the rest of the society.
If they create businesses, they should start companies, and get paid accordingly (no harm if they go to hedge funds for that). If they create businesses for banks, how do they bring more value to the table than the guy who starts domina's pizza franchise in India.
Let me tell you the real reason. Peer pressure! The cost of living in NYC and LN is so high (your kids go to $35k private schools. You need $100 dinners. You need "fill in the blanks"). They can't survive without such large compensations.
The guy next door (the hedge fund guy) makes so much money. They want to make that too, and are not willing to take the risk. Solution, demand from the confused system.
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