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.
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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.
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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.
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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?
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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.
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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."
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