The Volcker Rule.

I have been down with a fever ever since I came back from India on the 18th. However it looks like The Volcker Rule has scared the fever out of me. The markets have reacted negatively. Personally I am not sure what to make of it. Curbing the power of the proprietary desk is in a sense good but extending that to not investing in Hedge Funds or Private Equity is not good. If the Volcker Rule is implemented then in the future there will be very little to base a decision on whether the banks are putting their money where their mouth is. That is however the least of my concern. The greater and more immediate fear is if the banks have to pull their money out then the investor will get hit because the managers of the funds will have no choice but to sell. This will result in the same deadly spiral that we saw in September and October of 2008. I will be highly disappointed if banks are forced to sell immediately. I think I will be on my toes until things become clearer. There will be no knee jerk reaction from my side but I will be hesitant. It is Friday evening and it is time to switch off.

Snowed In

I was supposed to be at a business conference in London right now. Instead I am in Bangalore as I had difficulty getting the flight back to London due to the snow. Somehow that seems to mirror the economy. Over here it is a nice pleasant 28 celsius. In London it is freezing. People are hiring here and money is being spent by the common man. The infrastructure and real estate projects coming up in Bangalore are amazing. Some of the residential apartments coming up here and a more refined touch than some of the places in Central London. Being in India you can see why there is such a huge potential for growth. You can also see why the price of gold goes so high. People talk about the price of gold rising because it is a safe haven from the weakening currencies. However I believe that no matter what happens to the major currencies, the price of gold will rise because people in countries such as India will continue to buy it.

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

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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.
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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.
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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.
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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%
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