Transparency

 
Can you see it?

Transparency. Enemy of the profiteer. Friend of the confident.

Do you like transparency? Or you hate it!

It is not good when it is about your privacy. But, when it applies to your dealings, it has to be transparent!

If you know how much money your counterparty is making off a transaction, you will demand fair share. Where does that leave your counterparty though?

It is in the incentive of a businessman to be less transparent. Hide fees. Figure out ways so that you don't know or understand how you are paying (and worse, you are going to pay).

Mutual funds hide fees in their underperformance. They will tell you that they bought a stock at $50.10, when in reality, their broker bought it at $50, and booked it at higher price for them, pocketing $.10 which is undeclared commission.

Hedge fund has a whole concept of soft dollar, even legitimizing the above.

Insurance companies manage your money. Promise you return on your premium. Return which is much lower than long term bonds (granted, these days, US bonds carry very low interest, but it is not always the case).

New age companies (such as Facebook itself) don’t want to tell you what do they do with your information.

If you are looking to renovate your kitchen, do you really get a straight answer from your contractor?

What will you do if they really tell you the real cost? Would you give them business?

PS: In my view, regulations should work on increasing transparency, reducing conflict of interest. Not dictate or decide if some business models are correct or incorrect.

What is Currency?

Written on any denomination of dollar bill.

“THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC OR PRIVATE”

What does it mean?

So when you pay that money, you are demanding a favor (debt). The favor being some kind of service somebody or something will do for you.

Of course, so if you have lot of money, you can keep demanding favors. Hmmm...... You are the master and people who are being paid are the servants.

It is all fine, as this is the system (and alternative is communism).

But, what does it do? Puts so much power in currency? The power is in the hands of people who commands these currencies.

Bernanke, Greenspan, Trichet and the list goes on....

Since you can exchange favors with currency, the currency itself is just an accounting mechanism about the relative prosperity, where that relativity is determined by central bankers.

The system supposedly works as the central bankers are supposedly impartial.

What if they are misguided. What if, they want to get reelected. Would they make rational decisions? Your money (hence assets) will be in the hands of these people. Would you keep your money in cash (so they can decide its fate), or in Gold (while being precious metal, it is still driven by demand/supply) or something else?

Food for thought.

PS: Whenever I think of the above, I let my kids buy that additional tennis lesson or that additional..xyz.... Because, otherwise I am leaving junk behind for them.... Yes money left behind is junk!

In the eyes of the beholder

What is Risk for you?
You don’t know whether you took the risk if you don’t envision an alternate outcome.

Risk in in the eyes of the beholder. Seeing an accident on the road reminds you of the risk involved; It may not exist in your mind before that.

My broker pushed me to buy Nation Bank of Greece bond in 2008 telling me that they don’t carry any material risk as they are almost like government bonds.

Gold used to be safe haven! Now with the violent moves, it may not be any more.

My 2 cents, risk is the fear of loss. It is perception which is kindled by recent experience or deeper traumatic experience.

I thought Merrill Lynch was not risky at $95. But, at $6.50 BAC, I think it can go to zero!

What is safe? What is risky? It all depends on your perspective!

People tell me that they are very conservative investor, so they put money in index fund. Go figure! Until they say index down 50%.

Is US treasury bond safe? Is Cash safe? Time will tell. I think not. But, I am not sure what to do about that.

So many people spend lot of money and effort in doing estate planning etc. Will it work? Will this cash mean anything when your kids grow up?

But, one thing is for sure. I never cared about such things when I had nothing. And, I was still quite happy leading a risk free life. Can we give that to the ipad generation?