There is a big difference between betting and investing. Investing in inverse ETF’s equates to betting. This article talks about the demise of XIV. People investing in products such as XIV should be given a lobotomy sponsored by the NHS. This is starting to bring back memories of 2008. The culprit was Hedge Funds then. Today it is ETF’s. That time one person I spoke to that worked for a bank that was heavily marketing Hedge Funds admitted that they did not read the fine print and did not know about gating. Another person told me that he was told hedge funds would never lose money. I wonder what that person’s view would be on ETF’s today. I am not a betting man but if I was then I would say that he would cease investing in ETF’s for the next one year. I would be telling him to keep his wallet out.
The active versus passive debate has been skinned so many times that there is nothing left to skin. The answer is that there is a place for both. However, in neither should there be a place for inverse ETF’s. There is nothing wrong with shorting stocks or ETF’s. You cannot crucify the undertaker for making money when people die. Investing in inverse ETF’s is like injecting yourself with a lethal substance hoping that you will make money off the insurance. The reality though is that action of your will probably leave your health beyond repair and cause heartbreak to the ones closest to you.
Except for two people; everyone else I know who passed through the gates of Credit Suisse has been glorified cold calling salespeople. Their structured products are so beautifully created that the client will not even realise that the only people making money are the banks themselves. Of those two people, one died and the other is a gem of a person who is thankfully working for another institution. I have told him that leaving Credit Suisse was the best thing that he did. It has been some time since I spoke to him. Maybe I should now.
Filed under Banking, Blog, Business, Compliance, ETF, Family Office, hedge funds, Indices, Investments, Market Outlook, Market Timing, Private Banking
Filed under Blog, Business, Compliance, ETF, Indices, Investments, Market Outlook, Market Timing, Private Banking, Regulations, Tax Avoidance, Vanguard
I love alternate indices. RAFI which can be invested through PowerShares is probably my favourite investable index. The other index I really like is the Christmas Price Index. I had written a post on the following topics
- Religion-based Indices
- Condoms and Chocolates
- Analysis Test Series England vs. South Africa
I am still in the process of tweaking my cricket index. The common assumption in all this is my strong belief that the methodology used to measure certain indices is not completely accurate and some like the ICC cricket ranking is completely wrong. One decision I really liked was a recommendation to buy the shares of Apple when the news that Steve Jobs had cancer broke out. Yes, I did feel sad that Steve Jobs had cancer but I absolutely was furious at the people who thought that Apple would collapse because Steve Jobs would no longer be involved and would die. Today I feel the same way about the negative ratings given by analysts about Apple. The good thing though is that the fall in the share price of Apple is a good opportunity to buy it. Apple is an innovative company and will continue to do so. Everyone initially predicted that the cost of the iPhone X would under perform the iPhone 8 and would eat into the profits of Apple. Analysts more often than not get their calls wrong. Does it really matter if a company distributes less dividend than analysts expected? The important thing is that Apple is a good company. I read an interesting astrological article on the numerology analysis of certain tech companies. I am not a great believer in astrology or horoscopes. I do consider that there is a certain amount of science in numbers. It does not matter whether it appears as numerology or the significance of numbers in various religious texts. This post on the thirteen tribes of Israel is extremely good. There is a logic in Shmita. Apple will always be an attractive company to buy into. Buying it when the share price is down is a bigger bonus.
Filed under Apple, Business, Christianity, Cricket, ETF, Healthcare, Indices, Investments, Islam, Leaders, Market Outlook, Market Timing, religion, Test matches
(Originally posted on March 8th, 2010)
Durex in one of their studies just after the financial crisis reported that their sales had gone done and the average number of times people had sex reduced significantly. Around the same time, there was a report stating that the sales of chocolates had gone up. I told my friend then that a good sign that the world was in recession was when the sales of condoms decrease and that of chocolates go up. I view this as a sign of nervousness. The next step would be that the sales of condoms increases while the sale of chocolates begins to stabilise (rather than stagnate) This is a sign that the economy is improving. Then the final stage is when the sales of condoms increase at a significantly higher rate than that of chocolates. The sale of chocolates may actually decrease during this period. This I would equate with the economy being really good. People feel good about themselves. They feel happier. They go out more. Chocolate sales decrease because people no longer depend on it as a cure for depression. They avoid it so that they can get fit and look sexy again. I do not have any research yet to back my theory but I may be able to do it if I spend a few hours on Bloomberg.
If I can empirically prove my theory then I think this will be a better index than the Big Mac or iPhone because the number of people having sex and thereby using condoms is higher than people consuming either the Big Mac or the iPhone. The same with chocolates. The alternatives to both of these are limited. It is possible to make this index more accurate by calling it ” The Contraceptives and Confectionary Index (CONCON)” However that sounds too boring and not as exciting and naughty as “The Chocolate and Condom Index (CHOCO). Give me naughty and nice any day over formal and boring.
I have always been opposed to investing directly in Marks & Spencer. My view was simple. M&S sat in no man’s land. You had John Lewis that provided high-end goods. On the other end, there was Primark. If M&S made a few wrong calls on fashion then they would have a major slump. This did happen quite a few times. Yesterday’s news that M&S is to close down more stores came as no surprise. I strongly believe that M&S food is the ventilator that has kept the company alive. It will continue to do so. As always all you have to do is have a walk through the stores of M&S. In general, M&S Food will have the largest percentage of people. This trend will change unless M&S can appeal to the people who are inclined towards healthy but quick food but their older base that would like their traditional British meals. Will M&S be able to balance their traditional Cottage Pie with their Thai green curry? In light of Brexit, I hope they do as they are one of the iconic British brands. If one has to gain exposure to the UK today then possibly the best way to do it is through VGK. The Vanguard European Fund has about a 29% exposure to the UK. The exposure to the European markets would act as a hedge. I believe we are going through an extremely interesting time right now. I do not like making predictions but there will be a winner and a loser in the whole Brexit process. Either way, the financial markets will get affected. Overall the European markets will go up.
Disclaimer: I do not hold any shares of Marks & Spencer or VGK right now.
Filed under Brexit, England, Europe, Food, FTSE, Indices, Investments, Market Outlook, Market Timing, United Kingdom, Vanguard
(Originally posted on November 10th 2009)
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.
(Originally posted on 23rd October 2009)
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.