BASIC BRIC

The year has more or less come to an end with 4 trading days left. The major seismic change for me this year was the emergence of the so called emerging markets. The G7 and G8 have lost its power. The G20 is the way forward. Apart from that the countries that will hold the most power in global policy whether economic or otherwise will be China ,India, Russia, Brazil and South Africa. The climate conference in Copenhagen saw the replacement of Russia with South Africa to form a new group called BASIC. Next year will see a lot of funds focussed on these countries.   Now the sharpe or sortino ratio of these funds may not be as high as the BRIC or global funds but the long term annualised returns will be extremelly attractive. A fine balance will

-- Sent from my Palm Prē

What's new pussycat?

Today's events reminds me of the Tom Jones song. Abu Dhabi's bail out of Dubai has in a sense made me paranoid. There has to be a catch. I cannot believe that Abu Dhabi will give US$ 10 billion just like that. The bonds jumping nearly double in value and the dubai stock market jumping by nearly 10%. This is unreal. There has to be some kind of logic to the emotions behind the results. Then there is the news that Goldman is planning a 1 billion IPO of an energy company that has no proven oil reserves. I am no oil experts but after listening to my colleagues around me I would say I have got some kind of knowledge. Even companies with proven oil reserves run a fine line as far as profitability is concerned. However one piece of news saying that they have proven reserves could make a big difference.
It is nearly one year since my divorce. What a year it has been. A whole emotional roller coaster. I know the new year will bring in something special. I do not want to reveal it yet. Last year I was like a company facing chapter 11. In between there were some attempted mergers but I think the new year will bring more than proven reserves.
Sent from my BlackBerry® wireless device

Death and Taxes

The first thing my first accounts teacher said to our class was "The only certainties in life are death and taxes." I do not think that my professor had this in mind but I think that Darling has sounded the death knell of the City by announcing the new tax increases. I have always maintained that bonuses should be paid. It does not matter whether they are short term or long term in nature. Bankers usually do not save their money by putting it in an ISA. They will spend most of it. Whether ploughing it back into the stock market or spending it in Spearmint Rhino. Creating another tier of taxes is not effective. If you think that Bankers are being paid more than they are due then give them the incentive to contribute part of their earnings in the form of a charity. The government may not be getting that income directly but it will help them save a lot by putting in money earmarked for certain causes elsewhere. Bonuses of bankers should not be taxed at a higher rate than the others. Instead create a more liberal policy so that people who have moved to Geneva or are in Dubai will come back to London. If the U.K. wants to become a powrhouse again then more benefits should be given to people working in the financial sector not less.
Sent from my BlackBerry® wireless device

Dragging the Dog

I was met by an interesting sight as I left the office. An elderly man was "walking" a Lhasa Apso. However the dog just refused to budge and ended up being dragged. The battle between the rest of Europe and U.K. is similar. Now I have to state that by no means am I calling the U.K. a dog. Nicolas Sarkozy made a big mistake by hailing the appointment of Michael Barnier as a victory for the French European economic model and that they will be in control of the City. I have not been to the equivalent of the City in any other country except for America. There is no charm or beauty on wall street or the areas surrounding the site that previously held the World Trade Centre. The area is like a huge monolith. It does not have any character. You know it is there and hope it stays in place and does not come crashing on you. The City on the other hand is like a beautiful panther. Beautiful, full of mystery and most dangerous when injured. It may face extinction but it will go down fighting and there will be humans that will try their best to help its population grow. The Euro Zone are like poachers. They will try their best to kill the panthers off. However if they succeed well they are going to go out of a job. The City may get hurt especially if Darling introduces the 50% income tax on wealthy individuals. However I think the beneficiary of that will be Switzerland rather than Europe. When the dollar weakened, people shifted to Gold rather than the Euro or Pound. I support Gordon Brown for not being able to talk to Sarkozy due to his calendar being full. First Hienry pushes France into the world cup and denied Ireland the opportunity. Now Sarkozy has decreased the goodwill (Was there any left after France lost the 2012 Olympic bid?). You may try to drag a dog but be aware that the dog will be behind you and you have a good chance that the dog will take more than a nibble of your arse.
Sent from my BlackBerry® wireless device

Dragging the Dog

I was met by. An interesting sight as I left the office. An elderly man was "walking" a Lhasa Apso. However the dog just refused to budge and ended up being dragged. The battle between the rest of Europe and U.K. is similar. Now I have to state that by no means am I calling the U.K. a dog. Nicolas Sarkozy made a big mistake by hailing the appointment of Michael Barnier as a victory for the French European economic model and that they will be in control of the City. I have not been to the equivalent of the City in any other country except for America. There is no charm or beauty on wall street or the areas surrounding the site that previously held the World Trade Centre. The area is like a huge monolith. It does not have any character. You know it is there and hope it stays in place and does not come crashing on you. The City on the other hand is like a beautiful panther. Beautiful, full of mystery and most dangerous when injured. It may face extinction but it will go down fighting and there will be humans that will try their best to help its population grow. The Euro Zone are like poachers. They will try their best to kill the panthers off. However if they succeed well they are going to go out of a job. The City may fail especially if Darling introduces the 50%
Sent from my BlackBerry® wireless device

True Lies

Sent from my BlackBerry® wireless device

Credit where credit is due

I have a lot of ideas running in my head. I will start off with this. I mentioned earlier that one of our relationship managers mentioned a square root recovery. He sent me the following link and made sure to point out that it was after he told us about it. I told him that I said his description was nothing short of genius and I stick by it.

Epileptic Disaster

I have had epilepsy since I was a kid. For a brief period I was drug free but had a relapse when I had an accident. Now I have resigned myself to the fact that I will have to take my medicines for the rest of my life. Why am I revealing this? The reason is that an epileptic dance artist is planning to induce a seizure on stage by fasting, not taking her medicine and by having strobe lighting. In financial terms it would be like giving money without sufficient collateral then not hedging your portfolio and then leveraging your investment. It sounds crazy right? However that is exactly what happened. The result was to be expected as the world went through a massive epileptic fit. Once you get an epileptic attack you have to be attack free for 5 years before then can consider gradually reducing the medicine. Then small things like your weight can make a big difference. Cut the medication too fast and it will harm the patient. Similarly all this talk about the pace of Quantitave Easing is interesting. My opinion is that it should be done gradually otherwise we will see a relapse. The effects of the crisis has not been felt as yet. It will take time to see the markets stabilize in a proper fashion. Of course in 5 years time we could see another crash.
Sent from my BlackBerry® wireless device

Square Roots and W's

These times are different and they express recovery in different ways. You have the traditional J curve which is unrealistic. A W is possible but the latest research indicates a square root. I read a 2010 analysis which implied this. One of our relationship managers described this as a square root recovery. I thought his description was nothing short of genius. I have always respected his opinion and have had some interesting debates with him. I have disagreed with him on the the timing of investments. However today I shared most of his views. Marriage changes a man. After my divorce he gave me probably the best words of wisdom. He said that there was a choice of going out drinking with the boys and get deppressed or get fit, enjoy life, find someone and be happy. Today he is happily married. I followed his advice. Maybe I will be happily married sooner than I expect. Like the markets; we may be already in November but January 2nd has not come yet.
Sent from my BlackBerry® wireless device

"Blondes are more expensive to maintain that Ferraris"

Not my words!!! It is one of the many "jokes" that was circulated by Mark Lowe. I do not think that is true. A blonde can purr as nicely as a Ferrari and requires as much maintenance as a Toyota. Now by this I am not saying that Blondes are cheap. What is expensive though is a Ferrari engine in a communist or socialist car. Give me a simple "blonde" fund over an overleveraged bad fund anytime. However sometimes we can get blinded by the returns and forget about the structural integrity. Sometimes you just don't know whether your decision is right or wrong. In the long run which will perform better. Every rule has its exception and right now even though I think that a normal fund is better; I have taken a big risk by going in for the over leveraged vehicle. Only time will show me whether it is the right move. If something wrong happens then all I can say is that I would be stranded in a desert not knowing where the mirage starts and where the oasis are.
Sent from my BlackBerry® wireless device

Sex and the city

The other day as I read a headline of a lady claiming that a hedge fund manager in the city had sexually harassed her. As I read the article I saw the name Mark Lowe. The name sounded familiar and I panicked. I practically ran to my desk and checked my business cards but could not find any reference to him. I checked by emails and then I noticed that emails from him regarding his fund. I cannot recollect if I met the person but in the time that I have been in the industry, I never was taken out by anyone to a gentleman's club or were introduced to willing ladies. This I do not say with any regret. I do not know what I would have done if I was made such offers. However I can say with a clear heart that I have not taken any decision with regard to investments based on any action that could be classified as a gift.
I was and I guess I still am sheltered. However I have heard sufficient stories to know that these things do happen in the city. It is a deadly spiral. Banks want more of their clients money. Clients must be kept happy. If certain clients can be kept happy by providing sex then it will be done. In the end the bank is happy for getting the profit. The relationship manager has a more plush cushion. Part of the clients need has got satisfied. If the investments do well then that is an extra bonus.
I do not need to be taken out to keep me happy. Provide me with good ideas, warn me when something bad is going to happen and be truthful to me. Trust is a very fragile commodity. Quite a few times it has been broken by people I least expected to. Now I have learnt that I have to be careful with everyone. I hope the people that broke my trust never find out. They will act as if they love me and I will do the same. However deep down and behind closed doors we know which way the current flows.
Sent from my BlackBerry® wireless device

Emerging Markets?

Today there is no other alternative but to invest in alternative investments. However more and more banks and financial institutions are distinguishing investments by those that provide alpha and those that provide beta.
Similarly the last year and a half has seen the metamorphis of the emerging market. Exposure to BRIC and other emerging markets should be an essential part of a portfolio. If you buy into vodafone then you are by no means buying a developed market U.K. based company. Conversely you may actually be buying a company that depends more on the Asian and Eastern European markets for growth, while they lose market share in their traditional markets where O2 which is owned by Telefonica gets all the exclusive deals.
In the coming years I think the markets currently classfied as emerging will outperform the developed markets with a better risk adjusted return. I do not think that we will see years where the return would be greater than 50% but if the US markets are giving 8% with a 5% volatility and the Asia market are giving 10% with an 7% volatility then surely it will be better to go in for the latter.
This financial mess was cataclysmic and requires a paradigm shift in our thinking of investments. Are fixed income or even. Government issued bonds safe? Are investments backed by real assets safe? Are hedge funds really riskier than equities?
If it was up to me then I would get my entire exposure to the asset classes through hedge funds and ETF's. Hedge Funds I believe are flexible in nature even if they are not liquid for investors. ETF's gives you access to the broad market and asset classes. You get your beta from the ETF's and alpha from hedge funds. You don't end up paying unnecessary fees to managers. I would rather see the profits of those investments increase by the non payment of fees rather than fatten their pockets. Besides I do not think that banks actually provide sufficient service to justify their fees. But sometimes you just don't have a choice. A small sized family office will not have the manpower to do the due dilligence of a fund properly. It is not cost effective. When stuck between the devil and the deep sea it may just be better to sleep with the devil than risk drowning in the process of finding out if you can swim in the deep sea.
Sent from my BlackBerry® wireless device

Regrets

"Regrets? I've had a few,
But then again, too few to mention.
I did what I had to do
And saw it through without exemption."

I have started reading a book called "Too big to fail." So far it is really good. It deals with the months prior to the collapse of Lehman, AIG and how the other banks were "saved". It is a perfect scary halloween read for people in the investment field. I wonder whether any of them regrets any of the decisions they made.
I do not believe in regrets. So far I do not have any. This includes my divorce. However lately I am starting to regret one episode. This one episode is something I regret professionally and personally. The funny thing is that if I had not taken that business decision then I would not have had the regret in my personally life but that decision was followed by one of the best periods of my life. There is a possibility that in both these cases I acted too fast. I do not know. However that whole episode has made me hesitant and made me less trustful of others. I hope this does not effect me too much but I know that a lot of dreams I had were dashed. Now I am afraid to dream. I do not want to dream because I do not want my hopes to fall like a pack of cards. I am also scared to dream because a lot of my dreams come true. Sometimes I do not want to sleep because of that. The curse of the number 8. A highly spiritualistic number, a number that personifies struggle, a number that can bring success but at a cost. Sometimes the cost can be too great and I know that I may have to pay a high cost. I think right now my life reads more like "When Geniuses Fail." rather than "Too Big to Fail."
Sent from my BlackBerry® wireless device

The Doppelgänger

It disheartens me to say this but a lot of private wealth managers and client relationship managers are doppelgängers. Most of them smile when they are in front of you but once they get out of sight then you hear about their evil deeds and see their actions unfold. Most of them do not have their clients interests are at heart. These are times of great opportunity. Those doppelgängers and banks they work for can make a lot of money by offering products that seem secure. However the bankers would never have created the product in the first place if there wasn't a significant profit to be made. The relationship managers would not have pushed those products if it did not fatten their pockets. I am not against bankers getting bonuses but what I do not like and appreciate is selling products which even a lay person can make out will do significantly better than the maximum cieling on the return that can be maintained.It is an insult to my intelligence. Safety is an apparition. Either you believe in an investment and get completely into it or you stay out. Wading in a shallow beach wearing a scuba kit which includes an oxygen tank just because a Tsunami hit the land a year back is stupidity. You end up with a hurt back and the person who sold the gear has more money to fill the tills. Get into your swimming trunks or your 2 piece bikini and enjoy the water. The tsunami may come or you may get stung by a jelly fish but the reward you get for taking that risk is far greater than what you will get if you protect yourself.
Sent from my BlackBerry® wireless device

Remembering our soldiers

Veterans day is coming and the poppy has started to accesorize everyones clothing. I hope that what I write today will not come back to bite me in the future.
I admire the soldiers and what they do and did. One of my favourite Indian song is in Kannada and it is called Madikeri Sipahi (Soldier from Madikeri) My favourite hymn is "Glory Glory Hallelujah". My favourite sport anthem is "Jerusalem." All of these are songs dealing with war. I support the poppy appeal. However I also believe that there should be charities for those people who lost their jobs in the financial crisis. In fact I think we should hold a minute silence to mourn the collapse of Lehman Brothers.
I am in no way putting the soldiers down or elevating the status of those that worked in the financial sector. However when you join the armed forces then you know that at some stage you will be sent to the front line and will be killed. The maximum possible loss is your life. When a trader walks onto the floor then you know that your job will be at risk with every trade you make. You don't take sufficient risk then you are fired. You make a huge loss then you are fired. You make a profit then you live to fight another day. Investing is war. You have to form your strategy and hope you are right. You fight the market. You may be able to have a comprehensive victory against human enemies but you can never beat the market. The market will always exist in some form or the other. Spare a thought for the misunderstood warriors. The people who used to work in the square mile.
Sent from my BlackBerry® wireless device

The veil of secrecy

This whole Galleon affair has got me nervous. Where do you draw a line on insider trading? Can something I say about a particular hedge fund or share over the phone or a glass of whisky be counted as a recommendation to buy and later on become a candidate for hedge funds? I classify hedge funds into three categories. Funds that potentially can be suited for the family office, funds that I like and funds that I would feel comfortable to invest in. I do not think I have revealed the specific names of funds that the family has invested in. I have told people of funds that I like or do not like. However now I think I will keep that too to myself. Hopefully the lack of a current confidant will not cause me to burst my seams. I do miss the person I used to talk to. In this industry it is very hard to trust people and even harder for someone to understand what you are saying. I hope a quarter century from now my son will share my passion for the markets. I also hope that half a decade from now I will not be a Madoff. The last thing I would want is to spend the last 4 years of my life depending on the hospitality of His Majesty's Prison Guard.
Sent from my BlackBerry® wireless device

TV Shows

I have started watching Law & Order: Criminal Intent again after Jeff Goldblum has come into it. Yesterday's episode dealt with Hedge Funds. Somehow even TV shows will not stop in bashing hedge fund managers and investors. Hedge Funds are supposed to be for sophisticated investors. If people don't understand that then they should stick with traditional investments or just buy ETF's. Making money is not a sin even if it is as the expense of another. For the markets to do well a balance has to be maintained. Somehow I cannot escape from the financial markets. "You can get in anytime you like but you can never leave." Getting into Investments is like getting bitten by a vampire. That blood thirst will never leave you. Most of the people will be suspicious of you. Some people will give themselves to you. Finally every vampire will be suspicious of other vampires. Oh and during economic summits it may be best going out during the night.

The online realm

I am an avid online gamer. I started off with Ultima Online and moved on to World of Warcraft (WoW) later. Today World of Warcraft is a behemoth with over 6 million subscribers. The next biggest game is the recently launched Aion. It has about 1 million subscribers but so far has not been able to take a foothold in Europe and North America. It will be very hard to take the marketshare from World of Warcraft and for this reason one of the safest shares right now to buy will be Activision. Electronic Arts would also be another share that might be a good buy. The problem I have with EA is that the success of their games have been rather mixed.
The economics of WoW is fascinating. Money is a necessity if you want to do well. I have been able to transpose my work skills and philosophy to the game and I make a good profit in the market. Buy low and then sell high. Buying things whose demand and purpose I understand is what I do. I take a few high value, high risk investments once in a while. Thankfully most of my trades have been successful. I would be willing to hire a person that has been successful in WoW to trade shares for me because the opportunities to make money are limited and things are extremelly competitive. Apart from that there is no bank system so there is no official leverage. There is no shorting either. The result is that people who become successful and have money in WoW are mostly people who can identify opportunities and capitalize on them or they will be people who buy safe stuff and are willing to hold them until the price is right.
Yes I play WoW to relax from work but the thrill of making a profit is in my blood and try as I may I just cannot escape it. If I was a professor and had to teach students about the markets then I would use WoW as the training ground and the required reading would be "The Merchant Prince" by Raymond E. Feist. Who knows maybe one day I will be able to create a browser based game that incorparates a serious trading and economic system into the game. What better way of incorporating my love for the stock market, hedge funds and gaming?
Sent from my BlackBerry® wireless device

Cats in the cradle.

I no longer feel special. This realization has dawned on me when I heard a group of grandmothers talking about exchange rates, markets going up and down and walking more than they used to so that they can save money because their pensions have got effected. In a years time nearly everyone have become experts in the financial markets. With each of them having their own view. I was blissfuly unaware of the LTCM and Russian default crisis when it occurred. Today I can bet a year's wage that most of the teenagers would know about Lehman, RBS and the collapse of the financial markets.
One of the people I learnt a lot from about hedge funds is today the person in charge of Alternative Investments at one of the major banks. I had invited him and his sons for a Chelsea football match. They must have been around 10. I watched with great intent when he was explaining to his son the concept of a P/E ratio. It was then that I had hoped that my kids would be interested in my line of work and I will be able to teach them about the markets along with a whole bunch of other things. Part of this is possibly the guilt of now knowing the details of my Dad's work.
I do not know if I would push my children to work in the financial industry. However I will tell them about LTCM and Lehmans so that they will be prepared to handle the situation in whatever facet of life they end up being.
Sent from my BlackBerry® wireless device

The fall of the monarchy

It would be irresponsible of me not to make any comment with the one year anniversary of what would become one of the biggest financial crisis in history. It was one of those events which was supposed to be a six sigma event. However those six sigma events are becoming more frequent. There are various theories which seek to explain these phenomenon but I will save it for another day.
The collapse of Lehman,AIG, the selling of Merrill Lynch and Royal Bank of Scotland created a paradigm shift which changed the face of banking and the way people viewed bankers and people working in the financial industry. Last Halloween the hottest costumes were that of a banker and Sarah Palin. Suddenly bankers were placed on the same platform as Guy Fawkes, Osama bin laden and George W. Bush. The irony of these three names are that they are viewed as super heroes by some people and villains by others.
Hedge Funds are placed in the same basket and the recent ads by Stella Artois are a hit below the belt. My view was and continues to be that Hedge funds are the only instruments that could have eased the fall. However the brilliant members of the central banks of the world over decided to ban short selling. I liken that move to blaming an undertaker for making profits during an epidemic and preventing from digging graves to bury the body.
The big banks were a monarchy. They ruled the world. Now the people are fighting back. I cannot say whether their cause is just or whether they are even aware of what they are fighting for. The people will win this round but the big banks will be back to their behemoth best in some form or the other. In the mean time I continue to believe that Hedge Funds are one of the best alternatives. I end with a quote made about a person who was a prince in a lot of people's hearts. Jennifer Grey paid tribute to Patrick Swayze on his death by saying "Gorgeous and strong,he was a real cowboy with a tender heart." "He was a rare and beautiful combination of raw masculinity and amazing grace" In my view Patrick Swayze in Dirty Dancing provides a good metaphor for hedge funds. Johnny Castle was exotic, attractive, kind,misunderstood and had humble beginnings. However he was the only one who had the strength to say "Nobody puts Baby in a corner."
Sent from my BlackBerry® wireless device

August 12th 2009

My friend Sunil Chandy made the following statement "A good song is one where the meaning of words and the meaning of the music meet and enrich each other." Sunil is a gifted musician and a gem of a guy. The wisdom and simplicity of the quote is filled with sublime beauty.
I have from time to time described myself as a singer who plays the guitar and not a guitarist who sings. A year back I used to joke that if I had to lose my job then at least I had some chance of earning an income by busking in the underground. Music to me should be pure. There should be as few physical barriers between the audience and the musician. A simple stringed or percussion instrument and an audience. The best songs are those that are played with the three major chords and at the most using the two related minors. However this by no means makes a song less complex or interesting.
Investments should follow a similar philosophy. If a hedge fund is supposed to be a long/short equity fund then it should invest in purely liquid equities or have the option of placing cash. Having portions of the fund in shares of unlisted companies should not be part of the portfolio although the manager will have such a clause in the Private Placement Memorandum.
Transparency in hedge funds is needed. However not to the extent that each and every deal should be made available to the public. If that had to happen then there would be no money to be made. Huge profits can be made only in environments where positive and negative returns results in a good volatility. A good hedge fund is one that comes as close as possible to providing absolute returns year after year just like a good song is one that touches you no matter when you listen to it.
Sent from my BlackBerry® wireless device

28 July 2009: Authors or Analysts?

We had a meeting with one of the banks we have an account with. The person managing the fixed income portfolio said that we would have to see whether what we are going through are green shoots or weeds. Sometime back the finance minister of Germany said that she gardens and she would call something a green shoot only when she is able to see some green. A person I know wrote a commentary titled "Apropos the Stock Market." In the years I have known her, I think this is the first time I have heard her opinion on the market. However I have never heard her use a word to the quality of Apropos before. I am one of the gateways to the family and it is my solemn duty to protect the family. All of us in the family office are either second generation employees of the company or directly related to the company. We are who we are because of the company. I do not know where the future will take me. However I do know that it would take a cataclysmic event to do anything that would compromise or hurt the family. I like my job and what I do. As a kid I wanted to be a Priest. My friends tell me that I should be an author,poet or musician. However I do not think I am going to go away from the world of finance and this blog is not a path to penetrating that space. Writing should come natural to all of us in the field of finance. We rarely state the reality. Everything we say is open to interpretation. What trades or strategy we do is dependent on what we perceive as the truth or it may be because we are letting the mass public hear what they want to hear. Very few people have the guts or talent to tell things as they see it. I am a poet. Every word I write is carefully measured. In my poetry especially I purposely write things so that they are ambiguous. Next Monday City Girl who writes for the London Paper will be revealing her identity and will be publishing a book as she has quit her job. Another person to walk away from the evil of the city. All of us in the world of investments are guilty of some sin or the other. Finally I guess our humanity catches up with us. We see the city for who she really is. However should we blame her for what she has become? After all it is we who have created her.And we end up walking away once we either tire or get guilty of prostituting her. I shall end this by quoting the same quote from Oscar Wilde that city girl did; "The only way to get rid of temptation is to yield to it." Sent from my BlackBerry® wireless device

July 21 2009

One of the best feelings I get is when the "experts" from the major financial institutions comes up with the same conclusion that I have after I have realized it. Yes it is narcissistic of me but that it is the flower of my birthday and therefore it is to be expected. The latest episode was last night when one of the sports commentators on Sky said "One small step for Flintoff, one big step for England." Earlier in the day I wrote on my facebook "One small step towards the Urn and one big step for England." The ASX increased by .01% today. That .01% increase can be attributed to the applause the populace at Lords gave Ricky Ponting an applause when he admitted that they were outplayed. The FTSE on the other hand has increase by over 1%. The share price of all the sponsors of the English Cricket Team have increased since yesterday. The only sponsor of the Australians who have had their share price increased is 3G. However 3G is 50% owned by Vodafone. Now what would a normal Aussie bloke do if he knew that? Does the average Aussie cricket fan know that Fosters have sold the rights to brew Fosters in Europe to Scottish and Newcastle which is owned by Heineken? In Europe the beer associated with Australia is not Australian!! Everything is not what it appears to be. Pure transparency among equity funds and hedge fund does not, will not and should not exist. If transparency did exist then everyone from a 90 years old grandmother in Timbuktu to Wall Street would be buying the same things. If that would happen then there will be no money to be made. Efficient markets cannot exist. It is the risk and uncertainty that gives rise to opportunity. All creation stories and theories begins with Chaos. Since that is the case then who are we to go against the Gods?

July 16th 2009

Matthew Lynn who is a columnist for Bloomberg wrote a very interesting article on whether the seriousness of Steven Jobs health was of material consequence to release the information earlier than when Apple actually did. I believe that this is a gray area. A line should be drawn. However the question is where the boundary between public and personal space should start for a prominent public figure. Humans are voyeuristic in nature. This is not about which celebrity is sleeping with whom. Yes there are people who feed on this but Katie Price breaking up with Peter Andre will not have as much of an effect on the world as the health of Steve Jobs or Warren Buffett. The value of companies and funds are associated with the people who lead it. Will the successor of Apple and Berkshire Hathaway be the same without Jobs or Buffett? The performance of Absolute Capital Management fell dramatically after Florian Homm who co-founded the company suddenly walked out of the company. The point of all of this is that there is a big possibility of people losing a lot of money if something had to happen to prominent people in industry. I am not insinuating that CEO's twitter their life but if there is any issue that will potentially influence a company or a fund then full disclosure should be made as soon as possible. As usual I have to bring cricket into the picture. The very next day after the first test match was over a public declaration was made that Andrew Flintoff had to undergo a scan on his knee. The results were not published but immediately Steve Harmison was called up as a precaution. However there were also pictures published of Flintoff practicing in the nets and the announcement by Flintoff that he was going to step down from Test cricket after this series. Flintoff is the talisman of the English side and a very important part. His departure will have a more profound effect on this series than if Andrew Strauss who is the captain on the side got injured. I do not know if Flintoff will play today but the English Cricket Board handled his situation in a significantly better way than Apple did with Steve Jobs.

July 13th 2009

The Ashes season has started. Probably it was one of the most exciting first test match of an Ashes series. Australia won the first test match in 2005. The Australian index outperformed the FTSE by 2.36% starting from the Monday before the Test match to the next Monday. In 2006 the ASX outperformed by .19%. Australia won that match too. Last week the FTSE outperformed by 2.61%. England drew the match. However Australia missed a golden opportunity to win the match. If Jenson Button had to win the German Grand Prix instead of Mark Webber then I would guess that the the difference would have been in excess of 3.0% Ricky Ponting was furious that England used time wasting tactics. At least Nathan Hauritz was honest enough to admit that Australia would have used the same tactics. Besides I am pretty confident that had the Aussies taken the last wicket and won the match then they would have been totally pompous about it. It is not that England breached the spirit of the game but the Aussies are just sore losers.

July 9th 2009

I am writing this from the tube. A strange place to be writing a blog from but thank God for emails and blackberries.
There were 2 old people in the tube and a blond pony tailed man gave up his seat and took them by the hand and escorted both of them by the hand. The man was partially blind and the lady needed the help of a walking stick. It was then that another girl got up and so did I.
I was too busy reading that Primark had an increase in their sales. Sometimes we are so engrossed in the economics of the world and the next big idea that we forget that the primary responsibility of a relationship manager or a fund manager is to get their client from the precarious position of leaning against the sliding doors of a crowded moving train to a seat of safety.
We are lucky to have some really good relationship managers. They were there to take us from the door to the seat. They were also there to tell us when to get up and start running and when to get out of the train and to sit on the benches and just watch the trains go by.
However there is one bank which we are not happy with. Their focus is not on building a long term relationship. There is little alternative to what they have to offer so for the time being we are staying put. However getting into this bank has opened my eyes to the seedier side of the finance field. A world due to various reasons I have escaped from. A world that I read about through the columns and books written by Geraint Anderson. Reading that a world exists where people are willing to do anything for money and actually seeing it and hearing about it is two different things. The scales have been falling from my eyes. In this world of greed there are few things that can save us. Ethics, concern about our fellow people, compassion and love. It is the small things in life that matter. Money is important but it is not the end all. The hug from a true friend, the kiss of a lover, laughing at the silliest of things and the pleasure of a family. These are the things that matter in the end.
Sent from my BlackBerry® wireless device

July 7th 2009

Today is four years since the bombings in London. A lot has changed since then. However the Ashes is upon us again and it is less than 24 hours away. As in 2005 there is a good possibility that England will win this series. Someone on face book said that the chances of England winning the Ashes is as good as America having an economic recovery. I do not think that the recovery of America will start tomorrow and will be significantly better by the time the Ashes end. However what I do know is that America is on the path of recovery. The distressed funds cropping up is testament to this. Roger Federer created a record at Wimbledon over the weekend. He deserved it. However I have to admit that I did admire Roddick. I do not think he is a better player than Andy Murray or Roger Federer. However what he did was he studied his opponents, created a strategy and stuck to it. His plan was good enough to beat Murray and to take the finals to a five sets. The talent of Federer was better than the skill of Roddick combined with his plan. That match is an epitome of the financial market. A beautiful sunny day, a lush green carpet of grass for the most part. The baseline however nearly caused both players to slip at different times. Finally strategy is not good enough to win. You have to be talented.

June 18th 2009

There is a Chinese proverb that says "The palest ink is better than the best memory". It is for moments like this where I believe this blog will be extremely useful in the future. Right now I feel like Pearl in Andrew Lloyd Webber's musical Starlight express. The song "Make up my mind, make up my heart" is how I feel right now. I am convinced that Distressed is the place to be. But which investment is the right one? Finally I guess the decision will boil down to which fund provides the best accessibility to the managers and how easy will it be to get out of the investment if things take a turn for the worst. Even with that criterion there is no clear cut winner. There is always the option to get into more than one to hedge the bets. I can't help but notice that my philosophy and approach is effecting my personal life. Hedging things in my life, measuring the risk reward, wondering whether I should consider the overall volatility when making a decision or consider only the downside potential. Sometimes things are becoming so bad that I apply the same principles to make money in World of Warcraft. I am supposed to be using that to relax from work not be reminded of it. Switching off is extremely important for me. I hope I can continue to do that successfully.

I have been receiving so many distressed funds that it almost depresses me. Is the market in a worse situation than I think it is? Am I missing out on some information that others can see? Sometimes emotions and staunch belief's can cloud judgement. I hope I am not falling into that spiral. Does one choose an investment that is highly volatile, with an uncertain future but a potentially high exciting return and an even higher volatility or during these times it is better to play safe and go for something that is tried and tested but is liked to be very stable? I have just returned from a meeting where John Paulson presented his funds. I am looking forward to listening to him tomorrow too at a different seminar. One of Europe's biggest entrepreneurs. Very unassuming and if one had not seen his picture on the news or in the papers then you would not have been able to guess who he was. I don't know whether he is an investor or a potential investor but it only goes further to prove the strength of the Paulson funds.

June 15th 2009

Maybe my theory about the relationship between sports and financial markets is wrong. If this theory was true then the English markets should have opened higher when compared to the Australian and Indian markets considering that England beat the Indian team and Andy Murray won Queens. I probably am wrong about the degree of influence of sport on the financial markets. If I am wrong then I have no qualms about admitting it.

June 12th 2009

A pretty boring day at the markets. However once in a while boring is good for it helps us recognize excitement. A low volatility is bad for the market. Bring on the roller coasters. Money can be made when there is opportunity for arbitrage. And arbitrage is effective only when there are huge displacements.

June 11th 2009

1 hour and 11 minutes till the tube strike ends. Do I wait for the tube strike to end or start my journey now? My purpose and destination will not change. I probably will leave now. At the end of the day I doubt whether it will take me more than 2 hours if I leave now. 2 hours will be what my journey time will be if I include the waiting period. This brings up the interesting issue of market timing. Can one actually time the market? Is it possible to know when the markets will hit the acme and nadir of the cycle? I don't believe it is possible to call the markets. There is no use in wondering whether it will fall or rise. If you like an idea or investment then get into it now. If you are dealing with a bigger amount then invest a little on a weekly basis so that the cost averages out. Yes there is the possibility that a lower point may be reached but why should fear of a possible loss prevent you from taking action?

June 10th 2009

The tube strike is on. Waiting for transportation is crazy. I guess the strike is partially justified. Demanding that the employees that made mistakes be given their jobs back does not make sense. Asking for a rise in pay is acceptable. They are doing a much better job than the bankers. If they can get bonuses then why can't the tube employees? Besides in my opinion the tube workers provide a more essential service. I should make it clear that I support giving of bonuses to people who perform well in the financial sector. However I think it should be based on a risk reward basis. Possibly more related to the Sortino ratio than Sharpe. The sledging of the Ashes has gone political. Gordon Ramsay called a leading Australian TV presenter a lesbian and "pig woman". He also recommended that she use Simon Cowell's Botox doctor. The Australian PM said "I think I can describe his remarks as reflecting a new form of low life. Good on Tracy Grimshaw for coming out and giving him a left uppercut." Politicians should do what they do best. Let them continue making empty electoral promises and fleecing the tax payers money. I am not only referring to what has been happening in the UK. The rule in politics, finance and life in general is "Do what you want to as long as you don't get caught." If you do get caught then you have to be ready to face the repercussions. These don't only hurt the person who caused the mistake and cheated but also other people around. This should be a lesson that we have to learn from the financial crisis and the current political situation in the United Kingdom. I do not know whether the head of Gordon Brown will role. However I am sure that the public has lost faith in the political leaders.

-- Sent from my mobile device

June 9th 2009

There seems to be an overdose of cricket in my blogs but I cannot help that. All the strong favorites are no more bankable. Australia have crashed out. England lost a match to Netherlands who is "just" an associate member. Once Ireland beat Bangladesh who is a full member of the International Cricket Council. New Zealand barely escaped losing to Scotland. Currently Pakistan are fighting for their lives against the Dutch. My point over here is that the big bankable strategies may no longer hold good. There should be no room for fear. Just go on the field and believe in what you are doing. Further the developed markets or cash may no longer be the best bet. Investing in India rather than the US would have given you an additional 51%. The question is are you willing to take that risk. Sometimes you know something will not work but you can get too emotionally involved to let go. It is prudent to hedge your bets initially. Hopefully at least one of your investments will be a success and will make up for the losses of the other. Never ever hold on to something that you hope to do well in the future. You will be terribly disappointed. These times are interesting. Test the investments. Go with the one that you think will give you the best return. Is going with a steady past track record with an uncertain future better than going in with a start up investment that has the potential to produce the returns that you are looking for? I do not know right now but may find out sooner than what I expect. Everything can go wrong. There is the possibility of losing everything. Add that to the time you spent researching and doing the due diligence then your losses mount. However there is no return without risk and money cannot be made without having money in the first place.

June 8th 2009

England had a successful weekend of sports. However the markets fell and by a bigger margin that Australia. Does this mean my theory about the relationship between sport and the markets is wrong? I still stand by my theory. Twenty20 can go in any direction and it is hard to predict a result. It just does not make sense that Netherlands was able to beat England but England thrashed Pakistan who has the best T20 record. Now Test cricket is the real thing. People may think it is boring but you need a lot of talent to succeed in it. I do not know why people complain about cricket. A NFL game is made up of four quarters of 15 minutes. This one hour of actual play time takes about four hours to play. No wonder they have sexy cheerleaders. Now equate that to a test match and it will take about 20 days to finish one game.

June 6th 2009

I hate discussing finance over the weekend. However I am still reeling under the shock that Netherlands beat the English cricket team. The minnows have beaten one of the giants. West Indies are currently over powering Australia. If my theory about the relationship between sport and financial markets are true then the emerging markets should do better than the developed markets on Monday. The Euronext may do better than the FTSE. It will be a close call between the FTSE and the ASX. The advantage that the FTSE has is that it has the the England and Kazakhstan match to redeem itself,the F1 in Turkey and the England vs. Pakistan match tomorrow. If Williams, McLaren and Brawn do well tomorrow then the FTSE may redeem itself. If Renault, BMW or Ferrari does well then I would be reasonably confident that the Euronext would do well. Will my theory be proved right? I cannot wait to see.

Sent from my BlackBerry® wireless device

June 5th 2009

I am at the world polo event and was invited by one of the hedge funds that I know. Like others in the industry they were adversely affected.However this is not because they did a bad job. They were victims of their own success. They did exceptionally well. Their redemption terms were very good. Investors decided to pull out their money to compensate for the losses they suffered with their other investments. One of our relationship managers mentioned that she had heard that they may be in trouble. In hindsight I should have listened to her. I did my due dilligence and found nothing wrong. I did not account for investor sentiment though. I continue to believe in the potential of this asset management company. I have also started to value the opinion of that relationship manager more.
The weekend is here and as a policy I do not watch or read any news. It is something I have had to implement after my health got affected during the financial crisis. From mid September to mid December I used to sleep on average about 3 hours during weekdays and on the weekends about 15 hours. Have a nice weekend and now we will have to see if Gordon Brown continues to be the Prime Minister.

Sent from my BlackBerry® wireless device

June 4th 2009

The chances of the Australian cricket team doing well in the T20 have taken a big beating by the disciplinary actions enforced on Andrew Symonds because he had a bit too much to drink. It really does not matter that he was not included in the squad for the Ashes. Now Australia will be on the back foot. Maybe it is time to short the ASX and go long the FTSE. Going long the Sensex will not be a bad idea either. The election result in India has been a big boost for the country. The Indian government has been held to ransom by smaller regional parties for too long. 1991-1996 and 1999-2004 were strong periods of economic growth in India. The ruling party in both these elections had a strong majority in the parliament. The next five years should be extremely interesting.

June 3rd 2009.

Last evening to this morning has been busy with meetings. I have been in meetings, conferences and seminars before where it mostly was useless and a waste of time. To quote a song by Brad Paisley; it was "Like a long sermon on a pretty Sunday." Starting the day with Janwillem Acket the Chief Economist at Julius Baer was nice. He always has interesting and solid comments. Look Attending a meeting where Marc Rowan from Apollo Management was the main speaker was insightful. This was later followed by another event where James Caan of Dragons Den fame. Both of them were at opposite ends of a scale. Marc Rowan is someone who keeps away from the limelight,down to earth,approachable and warm. James Caan on the other hand is in the spot light, distant and slightly pompous. What he had to say about the markets made a lot of sense and his approach to investing is sound. You can read his interviews on the Bloomberg website. The most charismatic person I have heard speak was Colin Powell. He has a powerful aura about him. The most chilled person was Sir Richard Branson. He spoke via a teleconference from Necker island in the Carribean which is part of the Virgin Group. How cool is that? The most passionate person I have heard is Sir Bob Geldof. In the finance world in addition to Janwillem Acket; David Darst, John Paulson and Ken Griffin are absolutely brilliant. Warren Buffett is another person whose interview I love to watch. However unlike James Caan I cannot make a claim of sitting next to and having a chat with him. The thing that impressed me about them is their humility. Everyone knows how good they are. They know how good they are. However they do not parade themselves and blow their own trumpets.

June 2nd 2009

Emotions play an important role in the world of finance. Clinical data rose 7.1% because their flagship antidepressant will not reduce a person's sex drive. You know something is wrong with the markets when there is a drop in the sale of condoms but an increase in the consumption of chocolate. Investments are similar to relationships. You have those that want to make a quick buck. They are the "Wham Bam, thank you Ma'am" kind. You have those people who want to test and try the waters before making a commitment. You have the people that bereft of reason or logic bail out at the first sign of trouble. You have the people that are willing to be patient and wait. I believe that the last has the best long term return. However the risk is that you may end up waiting for too long and lose everything. At some point an assessment should be made whether a relationship or an investment is going in the direction you want it to grow. If it is not then it will be best to let go and take whatever losses/gains you have recieved. The ideal scenario though is to be patient, get into the right investment that not only provides short term dividend gains but also long term capital growth. This sadly is not as easy to achieve or find in investments or relationships.

June 1st 2009

A new month and the sun is shining brightly. The markets have been boosted by the news that the Chinese manufacturing markets have grown. However I am extremely skeptical when the markets increase or decrease on news of the mining, financial and Chinese sectors. This has also boosted the commodity prices which is of no surprise. Tomorrow will tell whether the news is actually positive or not. GM is to file for bankruptcy today and is expected to emerge from it in 60-90 days. Will it rise like the mythical Phoenix from the ashes? The countdown to the Ashes has begun. Historically the country that is expected to win the Ashes and wins the Ashes will increase. October 2008 is a good date to start as Australia played India in India and that was followed by England playing India in India. The FTSE futures are lagging the ASK by 1.73%. However the FTSE has increased at a faster rate than the ASX since England comprehentively beat West Indies in the Wisden Trophy. The performance of the two countries in the upcoming T20 cricket world cup will start to determine whether England or Australia will win the Ashes and consequently which market will do well. The person who will make a difference in the recovery of the UK market could be Andrew Flintoff. My eyes will be on Sophia Gardens in Cardiff on July the 8th where History will be made as it will become the 100th ground to host a test match since Cricket began.