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?
Monday, January 9, 2012
Thursday, August 18, 2011
Is Government God?
That is what Karl Marx believed.
Corollary: Can government create jobs?
For a long time, we have heard that capitalism is the “right” philosophy. Government has no business telling people what to do.
I believe(d) that. Then, why is western world changing? Why is governments trying to create jobs? do they think capitalism failed? Are investors no longer capable of creating jobs?
What is wrong?
What is wrong is, we no longer can endure pain. The western world is too used to getting lifestyle (and resources) as birth right. We even want our survival as a right (no longer, you need to work to survive). Ha!
We are not God (if it exists). We are born to persevere. We are born to learn and achieve freedom by working hard and smart. Nothing is our birth right. Our society provides us the luxury of learning and other freedom and that is why we all have freedom. But that is humanity, not earnt! That is human largesse. That is the only give away we should be reliant upon.
We have to earn the rest.
We create job the hard way. When somebody needs a service, a job can be created. West should leave the capitalism to work and let the jobs be created.
Right now, at least in US, there is a huge overhead of taxes and other entitlements on the job creators that jobs are not being created. (How many of you had spent hours waiting for continental representative to ask simple questions, I would have easily paid some money to be able to do that). Reason: hiring the extra representative is too expensive..
There are needs. There are unemployed. And, that is where the government comes in. Create and enforce rules which provide people certainty in their interactions. The jobs will come.
Current economic meltdow -- I am sorry, we (out of imperfection of capitalism) created so many jobs where people are out there to fool others. Their jobs should be eliminated. At least, that is what capitalism is telling. They don’t want to accept that and unfortunately so does their government. Funny thing is that these people are in both main street (people who overstretched), but also on wall street (they seem to have overstretched as well : but, less accepting to coming reality).
Who are the hard working people who can be the answer? I wish I know. I would like to bet on them. But, they are there and will provide us the direction.
Corollary: Can government create jobs?
For a long time, we have heard that capitalism is the “right” philosophy. Government has no business telling people what to do.
I believe(d) that. Then, why is western world changing? Why is governments trying to create jobs? do they think capitalism failed? Are investors no longer capable of creating jobs?
What is wrong?
What is wrong is, we no longer can endure pain. The western world is too used to getting lifestyle (and resources) as birth right. We even want our survival as a right (no longer, you need to work to survive). Ha!
We are not God (if it exists). We are born to persevere. We are born to learn and achieve freedom by working hard and smart. Nothing is our birth right. Our society provides us the luxury of learning and other freedom and that is why we all have freedom. But that is humanity, not earnt! That is human largesse. That is the only give away we should be reliant upon.
We have to earn the rest.
We create job the hard way. When somebody needs a service, a job can be created. West should leave the capitalism to work and let the jobs be created.
Right now, at least in US, there is a huge overhead of taxes and other entitlements on the job creators that jobs are not being created. (How many of you had spent hours waiting for continental representative to ask simple questions, I would have easily paid some money to be able to do that). Reason: hiring the extra representative is too expensive..
There are needs. There are unemployed. And, that is where the government comes in. Create and enforce rules which provide people certainty in their interactions. The jobs will come.
Current economic meltdow -- I am sorry, we (out of imperfection of capitalism) created so many jobs where people are out there to fool others. Their jobs should be eliminated. At least, that is what capitalism is telling. They don’t want to accept that and unfortunately so does their government. Funny thing is that these people are in both main street (people who overstretched), but also on wall street (they seem to have overstretched as well : but, less accepting to coming reality).
Who are the hard working people who can be the answer? I wish I know. I would like to bet on them. But, they are there and will provide us the direction.
Wednesday, August 10, 2011
Buy Growth and get value free
What is growth?
I thought growth is an outcome (or output), not an input. If FED thinks that they can induce growth by printing money, then GOD help us.
Growth comes from improving efficiency. By coming up with better way of fulfilling our lives. Not by producing more, or consuming more.
America and the western world forgot the value of productive work. Everybody wants to enhance their lives by fooling somebody else, as opposed to helping somebody else.
The financial crisis of 2008 look distant. We are already seeing the new crisis. There are so many of us whose skill set are proving useless. How many of us are willing to acknowledge that. How many of us are looking beyond the glass and ask, can I do better (as opposed to, why am I stuck because I know only this much?). The group of people in this category will only grow.
My nephew told me that it is looking scary. Indeed it is scary. Who knows if London riots evolve into something sinister. What are we doing about this. 9/11 and follow on events brought down the world to its knees. So, hatred is winning.
What is the answer? Optimism. Sure. I am an optimist. I believe in GOD and creativity of human beings. I guess that is where it stops. Believing is something and wishful thinking is another. We need somebody/something to help us provide growth.
I don’t consider FB, Google, and apple to be those people. There are many reasons why they have their own shortcomings. We need more than that. We need people to take charge in a better way than democracy. We need a superior system.
Or may be some retailer in Las Vegas will say "Buy growth get value free".
The best one I heard. If we have growth in America, then it will increase employment, taxes... and it will solve the problems.
So, growth is available to buy? Can we buy it?
PS: I wrote this couple of days ago. So, it may look a little stale already. I still thought it is is worthwhile publishing this.
I thought growth is an outcome (or output), not an input. If FED thinks that they can induce growth by printing money, then GOD help us.
Growth comes from improving efficiency. By coming up with better way of fulfilling our lives. Not by producing more, or consuming more.
America and the western world forgot the value of productive work. Everybody wants to enhance their lives by fooling somebody else, as opposed to helping somebody else.
The financial crisis of 2008 look distant. We are already seeing the new crisis. There are so many of us whose skill set are proving useless. How many of us are willing to acknowledge that. How many of us are looking beyond the glass and ask, can I do better (as opposed to, why am I stuck because I know only this much?). The group of people in this category will only grow.
My nephew told me that it is looking scary. Indeed it is scary. Who knows if London riots evolve into something sinister. What are we doing about this. 9/11 and follow on events brought down the world to its knees. So, hatred is winning.
What is the answer? Optimism. Sure. I am an optimist. I believe in GOD and creativity of human beings. I guess that is where it stops. Believing is something and wishful thinking is another. We need somebody/something to help us provide growth.
I don’t consider FB, Google, and apple to be those people. There are many reasons why they have their own shortcomings. We need more than that. We need people to take charge in a better way than democracy. We need a superior system.
Or may be some retailer in Las Vegas will say "Buy growth get value free".
The best one I heard. If we have growth in America, then it will increase employment, taxes... and it will solve the problems.
So, growth is available to buy? Can we buy it?
PS: I wrote this couple of days ago. So, it may look a little stale already. I still thought it is is worthwhile publishing this.
Tuesday, March 1, 2011
Money vs Environment
What is money?
Simple question for some of us naive people. What is money?
If money is piece of paper, printing more is a good idea. Everybody can have some.
Wait! German learnt the hard way. It causes inflation.
So, why is all feds of the world printing more?
They are worried about deflation. They say! They need to "inflate". They need to utilize the "current exceess capacity" in the economy. They can do that, if they print money, distribute it. So that, everybody else can buy more milk, bread. So, instead of throwing milk away (excess capacity), you can use it.
What a noble thought!!!!
What is wrong with this?
Well, that is what socialism is. So, what was wrong with socialism? Why did USSR fail? Why did China abandon communism?
If we get free food, what do you think we will do. We will produce more population! Create more misery in the future. Create USSR, and fail!
More population means more resource consumption. That means more oil, food, metals and more of everything.
What suffers? Environment. So, wait... Am I suggesting that printing of money is going to create environmental issues?
Tell me where did I get it wrong!
Simple question for some of us naive people. What is money?
If money is piece of paper, printing more is a good idea. Everybody can have some.
Wait! German learnt the hard way. It causes inflation.
So, why is all feds of the world printing more?
They are worried about deflation. They say! They need to "inflate". They need to utilize the "current exceess capacity" in the economy. They can do that, if they print money, distribute it. So that, everybody else can buy more milk, bread. So, instead of throwing milk away (excess capacity), you can use it.
What a noble thought!!!!
What is wrong with this?
Well, that is what socialism is. So, what was wrong with socialism? Why did USSR fail? Why did China abandon communism?
If we get free food, what do you think we will do. We will produce more population! Create more misery in the future. Create USSR, and fail!
More population means more resource consumption. That means more oil, food, metals and more of everything.
What suffers? Environment. So, wait... Am I suggesting that printing of money is going to create environmental issues?
Tell me where did I get it wrong!
Thursday, February 25, 2010
In GOD we trust
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?
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?
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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