(Originally posted on August 12th 2009)
My friend Sunil Chandy made the following statement “A good song is one where the meaning of words and the meaning of the music meet and enrich each other.” Sunil is a gifted musician and a gem of a guy. The wisdom and simplicity of the quote is filled with sublime beauty.
I have from time to time described myself as a singer who plays the guitar and not a guitarist who sings. A year back I used to joke that if I had to lose my job then at least I had some chance of earning an income by busking in the underground.Music to me should be pure. There should be as few physical barriers between the audience and the musician. A simple stringed or percussion instrument and an audience. The best songs are those that are played with the three major chords and at the most using the two related minors. However this by no means makes a song less complex or interesting.
Investments should follow a similar philosophy. If a hedge fund is supposed to be a long/short equity fund then it should invest in purely liquid equities or have the option of placing cash. Having portions of the fund in shares of unlisted companies should not be part of the portfolio although the manager will have such a clause in the Private Placement Memorandum.
Transparency in hedge funds is needed. However not to the extent that each and every deal should be made available to the public. If that had to happen then there would be no money to be made. Huge profits can be made only in environments where positive and negative returns results in a good volatility. A good hedge fund is one that comes as close as possible to providing absolute returns year after year just like a good song is one that touches you no matter when you listen to it.
1 hour and 11 minutes till the tube strike ends. Do I wait for the tube strike to end or start my journey now? My purpose and destination will not change. I probably will leave now. At the end of the day I doubt whether it will take me more than 2 hours if I leave now. 2 hours will be what my journey time will be if I include the waiting period. This brings up the interesting issue of market timing. Can one actually time the market? Is it possible to know when the markets will hit the acme and nadir of the cycle? I don’t believe it is possible to call the markets. There is no use in wondering whether it will fall or rise. If you like an idea or investment then get into it now. If you are dealing with a bigger amount then invest a little on a weekly basis so that the cost averages out. Yes there is the possibility that a lower point may be reached but why should fear of a possible loss prevent you from taking action?
The tube strike is on. Waiting for transportation is crazy. LI guess the strike is partially justified. Demanding that the employees that made mistakes be given their jobs back does not make sense. Asking for a rise in pay is acceptable. They are doing a much better job than the bankers. If they can get bonuses then why can’t the tube employees? Besides in my opinion the tube workers provide a more essential service. I should make it clear that I support giving of bonuses to people who perform well in the financial sector. However I think it should be based on a risk reward basis. Possibly more related to the Sortino ratio than Sharpe. The sledging of the Ashes has gone political. Gordon Ramsay called a leading Australian TV presenter a lesbian and “pig woman”. He also recommended that she use Simon Cowell’s Botox doctor. The Australian PM said “I think I can describe his remarks as reflecting a new form of low life. Good on Tracy Grimshaw for coming out and giving him a left uppercut.” Politicians should do what they do best. Let them continue making empty electoral promises and fleecing the tax payers money. I am not only referring to what has been happening in the UK. The rule in politics, finance and to a certain extent in life is”Do what you want to as long as you don’t get caught.” If you do get caught then you have to be ready to face the repercussions. These don’t only hurt the person who caused the mistake and cheated but also other people around. This should be a lesson that we have to learn from the financial crisis and the current political situation in the United Kingdom. I do not know whether the head of Gordon Brown will role. However I am sure that the public has lost faith in the political leaders.