Tag Archives: Financial Crisis

When Performance Doesn’t Matter

One of the most amusing phrases on Wall Street is “smart money.”

 

This phrase is used to describe the handful of professional investors whose abilities and foresight are thought to be so acute that they spot the big moneymaking opportunities before the average Joe Pro.
The smartest of the “smart money” is thought to be hedge funds.

 
A look at recent performance suggests that hedge funds are indeed extremely smart money, though not in the way that most people think.

 
In fact on average, hedge funds are no smarter about picking stocks or other investments than anyone else. In fact, they’re decidedly, startlingly worse.

 
Hedge funds are in fact shutting today at a rate not seen since the financial crisis, as many managers post disappointing returns and an elite group of firms dominate money raising.

 

For More: When Performance Doesn’t Matter

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Will Wall Street ever be fixed?

When it comes to the financial industry, there is a major fallacy that exists: that Wall Street deals only with elite, rich people who deserve to lose their money, and that Mom and Pop are not directly affected by the antics and conflicted practices in the industry.

 

This couldn’t be farther from the truth. Even when Wall Street CEOs are hauled in front of Congress—as Lloyd Blankfein was amid the SEC fraud charges against Goldman Sachs, and as Jamie Dimon was after JPMorgan Chase lost $6 billion on bad trades—they try to make this argument. “We are all big boys.” “We are all sophisticated institutional investors who know exactly what we are doing.”

 
But stop and think about this for a second. Whose money is being played with anyway?

 
Look at just the recent scandals: Who gets affected when a county in Alabama trades a structured derivative with JPMorgan that goes sour, and brings the county closer to bankruptcy? Who gets impacted when a government such as Greece or Italy trades derivatives with Goldman Sachs or JPMorgan to cover up its debt and kick its problems down the road? Who ultimately loses when Morgan Stanley misprices the Facebook IPO and mutual funds lose billions of dollars of retirement and 401(k) savings?

 

For More: Will Wall Street ever be fixed?

 

Thank you.

When Performance Doesn’t Matter

One of the most amusing phrases on Wall Street is “smart money.”

 
This phrase is used to describe the handful of professional investors whose abilities and foresight are thought to be so acute that they spot the big moneymaking opportunities before the average Joe Pro.

 
The smartest of the “smart money” is thought to be hedge funds.

 
A look at recent performance suggests that hedge funds are indeed extremely smart money, though not in the way that most people think.

 
In fact on average, hedge funds are no smarter about picking stocks or other investments than anyone else. In fact, they’re decidedly, startlingly worse.

 
Hedge funds are in fact shutting today at a rate not seen since the financial crisis, as many managers post disappointing returns and an elite group of firms dominate money raising.

 

For More: When Performance Doesn’t Matter

Thank you,

Challenges and Opportunities in India

The good news is that unlike China, which faces structural change as it shifts from an export-driven to a consumer-driven economy, India’s growth has long been dependent on domestic demand, even as exports have risen. However, its major weakness remains infrastructure, with basic transportation, power grid and irrigation systems lagging behind those of China. In a welcome move, the government plans to increase infrastructure spending by INR1.74 trillion ($38 billion) this year and that is always welcome.

 
The better news is that unlike China and Brazil, which have witnessed an increase in acquisitions by local private equity firms, India attracts a greater proportion of foreign private equity firms. The country’s legal and governance systems have indeed long attracted private equity investors from around the world which bodes very well for us at Blackhawk.

 
Further, and since the opening of the economy in 1991, the country has seen huge improvements in both capital markets regulation and in corporate governance.

 

For more:  Challenges and Opportunities in India

Game Of Finance

Have we learned anything from the Financial Crisis?

I would say nothing at all…. In fact, instead of changing their behavior to prevent another crisis regarding finance, the Powers-that-be seem to be doubling down on the strategies that Caused the Financial Crisis in the First Place

Liberals blame deregulation and reckless Wall Street greed for the economic crisis. Conservatives blame bad government policy.

What are they doing? Well here again…. they are:

1. Pushing banks to make home loans to people with weaker credit (sound familiar?)

2. Deregulating and even promoting insane levels of derivatives (ring a bell?)

3. Following policies which lead to rampant inequality (that didn’t work out so well last time)

4. Letting white collar criminals know that they have free rein to do whatever they want, and they won’t be prosecuted (once again)

5. Letting the giant banks get bigger and bigger (the government helped them get big in the first place)

Continue Reading: Financial Crisis

 

 

Terms of Expansion and Investments on Brazil Market

Although the value of investments in emerging markets has been hit hard by the financial crisis, we should keep in mind that the sources of the crisis were definitely not the emerging countries. These markets did not suffer any severe credit crises. Mortgages, which triggered the crisis, are not a cause for concern in this region.

The Latin American economies were spared, in large part, because their mortgage systems are completely different from the U.S. system. Most Latin American mortgages are subsidized by the government. As a result, there was none of the speculation of housing prices and method of finance that we experienced here in the United States.

Some Latin American economies might, in fact, be better prepared to recover from the crisis than several of the more developed economies and are, in principle, in better economic shape as a number of them have generated stabilization funds to support their respective economies. A lot of those Western hemisphere countries are resource rich.

They have enjoyed significant additional benefits from the economic development in China while the Chinese have used their recent economic muscle in an effort to corner the world’s most strategic natural resources. This has contributed significantly to Latin America’s rise.

I see the Latin American – Asian relationship strengthening further as China spends billions to gain access to Latin America’s natural resources and create an infrastructure in the region that will not only enable resources to flow back to China, but provide a basis for further economic development and consequent political stability in South America.

Continuous Reading: Investments on Brazil Market

How can we Avoid another 2007-2008 type Financial Crisis in the Future?

Financial Crisis

The financial system may well have recovered more quickly if the bailouts hadn’t happened, but the suffering in the meantime would most likely have been unacceptable

The financial system may well have recovered more quickly if the bailouts hadn’t happened, but the suffering in the meantime would most likely have been unacceptable. Everyone who had savings would have seen them wiped out and a great many businesses would have ceased trading because they depend on credit for their cash flow, resulting in mass unemployment. Military coups in previously stable democratic countries could not have been ruled out and the prospect of extreme left or right wing groups taking control would have been a real possibility. The global economy was able to absorb localized banking collapses such as that in Iceland or of Lehman Brothers, but the human cost of a wider collapse would have been far worse.

The bailouts have been “successful” in the sense that some stability has returned, but they have not solved the underlying problem. Despite commitments in some areas to split up retail and investment banking and to improve capital ratios, the moral hazard remains because banks know they are too big to fail and will be bailed out again should the need arise. Only a total, irreversible disengagement of government from the financial sector could resolve this, and that is politically unrealistic. The main issue remains that the real cost of the bailouts is that they have reinforced the promise which was the root cause of the problem, that governments are there to rescue the banks when they fail.

Continuous Reading: How can we avoid another 2007-2008 type Financial Crisis in the Future?

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