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
(Originally posted on November 11th 2009)
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.
(Originally posted on October 26th 2009)
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.