Thursday, December 11, 2008
Tuesday, November 11, 2008
Saturday, October 11, 2008
La confianza en Wall Street fue una de las causas de su colapso esta semana que paso. La confianza de corredoras y banqueros de aceptar papeles de dudosa reputacion. Algunas excusas que salen a la luz es que los paquetes hipotecarios que fueron comprados por estos bancos eras una mezcla de papeles buenos y malos. Otra excusa es que eran papeles (derivadas de creditos) muy complejos para ser valorados perfectamente.
Aun asumiendo que estas excusas son veridicas para todos los casos (que no lo creo), uno puede decir que la confianza jugo un papel supremamente importante al aceptar este riesgo sin ningun tipo de precaucion. Los banqueros en Wall Street (y el mundo) comenzaron a tranzar y disectar papeles que no conocian a la perfeccion. Se basaron en una cadena de confianza para librarse de la responsabilidad de indagar mas a fondo.
Bancos como Goldman Sachs y Morgan Stanley lideraron una nueva era donde utilizando su audacidad y tecnologia comenzaron a disectar papeles pero al final se dieron cuenta que el metodo de valoracion no era tan simple. Es dificil valorar algo al cual uno no conoce bien. EStos papeles tan complejos dependen mucho de la volatilidad, algo parecido a una opcion (calls/puts). Lo dificil de estos papeles es que no tienen la informacion necesaria de varios años para valorar que tipo de volatilidad tiene el activo que respalda el papel.
En el caso de las opciones sobre acciones, uno piensa que conoce el tipo de volatilidad del activo sujeto simplemente porque conoce el precio de las acciones por años de años. En el caso de estos papeles de renta fija es un poco mas complejo. Cada papel es diferente a otro por lo que uno no conoce el riesgo intrinsico. Adicionalmente ciertos tipos de papel no han sido tranzados en bolsa nunca (solo "Over the counter"), otro solo por unos años.
Obviamente que este es solo un factor del derrumbe de las bolsas y la economia estadounidense. Primero se derrumbaron los precios de los bienes raices. Con la ayuda de los CDOs derrumban las acciones de instituciones financieras. Luego los problemas de la capitalizacion de muchas compañias. Luego se derrumban las calificaciones de riesgo. Luego los papeles de renta fija de las instituciones financieras. El sistema se vuelve iliquido afectando el resto de la economia. Todo el mercado se ve afectado y el resto de las acciones se derrumban. Se pierden millones de dolares en pensiones e inversiones del resto de personas no involucradas en Wall Street. Con esto se pierde la confianza del consumido comun. Sin confianza (sin consumo) el resto de la economia se desbarata.
Ahora estamos en un dilema. Por un lado la gente no consume porque ve que el proximo año va a ser tenaz. Por el otro lado se necesita de consumo para que las compañias sobrevivan. Sin consumo las compañias no fabrican. Sin fabrica no hay necesidad del empleado. Con desempleo se genera mas recesion y mas desconfianza. La gente ahorra mas y no consume y comienza nuevamente el ciclo vicioso.
Ahora si que nos salve Mandrake.
Wednesday, September 24, 2008
Here is something that I found from Peter Watson, author of "Ideas - A History of Thought and Invention, from Fire to Freud": "Instead of learning in school, say the relativity theory or electricity, we should actually be taught it as it happened to the people who discovered it, with all the rivalry, the dead ends and the blind alleys. By doing so, it becomes much more interesting and you don't only have the abstract knowledge what electricity is, but how people came first across the idea of electricity"
Interesting enough the best business schools in the world teach their students through business cases. Can we bring this same methodology to the K12 classroom?
Sunday, August 24, 2008
The book touches on thousands of historical facts but the one that interested me the most was the fact that the religions of today are based in past beliefs from older religions. Even more astonishing, we celebrate rituals todays that came from old celebrations from religions around the world. Those old celebrations are based in certain cases to a physical event (e.g. solstice) and not to the historical facts that are religions try to sell us (e.g. birth of Christ).
The consolidations of beliefs and celebrations into very few religions nowadays makes me belief that the first industry to be consolidated in the world was relgion. The first consolidator and "multinational" was Catholicism.
Tuesday, July 01, 2008
A campaign in Congress to punish traders for record oil prices reveals a fundamental misunderstanding of how futures markets work.
By Jon Birger, senior writer
Last Updated: June 27, 2008: 9:11 AM EDT
NEW YORK (Fortune) -- "Make no mistake about it," U.S. Rep. Bart Stupak, D-Mich., said Monday while chairing a meeting of the House Energy and Commerce subcommittee on Oversight and Investigations. "Excessive speculation in commodity markets is having a devastating effect at the gas pump that is rippling through our entire economy."
Here's a suggestion: The next time a Congressional committee wants to hold a hearing on how "speculators" are driving up oil prices, each committee member should first be required to demonstrate - preferably in their opening remarks - a basic understanding of the mechanics of futures trading.
Even better, they should be required to explain in detail how it is that investors who never take delivery of a single barrel of crude - and thus never remove a drop of oil from the open market - are causing record high oil prices.
If there were such a requirement, I guarantee we'd never again see a circus like the one Stupak presided over Monday.
"Do I think [Washington politicans] understand the role of futures markets - how they facilitate price discovery and the transference of risk?" asks former U.S. Commodities Futures Trade Commission chief economist Gerald Gay. "No, they're clueless - at least most of them."
Bad public policy
If our representatives did understand the oil markets, they'd know that the true telltale sign of a speculative bubble is not rising trading volumes but rising oil inventories. Speculators would be hoarding oil - building up inventories either in anticipation of higher prices or as part of a scheme to drive prices there. Yet according to the Department of Energy, U.S. oil inventories are now at below-average levels. U.S. oil stocks stand at 309 million barrels, versus 330 million in June 2005.
So far, lawmakers have introduced nine different bills targeting oil speculators, though for the most part their prescriptions have been milder than their over-the-top rhetoric .
Bashing futures traders may well be good politics, but it's stupid public policy. By providing a mechanism for locking in prices, the futures market makes it easier for oil companies to make costly investments in new production - which is the key to lowering prices at the pump.
Futures trading also discourages hoarding in an otherwise tight market. Without speculators willing to take the other side of so many futures contracts, oil refiners and other end-users might be inclined to ramp up their spot-market purchases and store more oil as a hedge against further price increases.
And, of course, any increased draw on current supplies would lead to even higher oil and gasoline prices. Indeed, without a futures market, I believe we'd be decrying oil at $200 a barrel oil instead of oil at $135.
A more basic misconception in Washington involves what these so-called speculators are really buying. They're not buying oil, they're buying futures, and this is a crucial distinction. A futures contract is an agreement between a buyer and a seller to deliver a set amount of oil - typically 1,000 barrels - at a specific price on a specific date. The value of that contract rises and falls, depending upon market conditions, right up until the date of delivery.
Thing is, the pension funds, index funds, hedge funds and other so-called speculators almost never take delivery of any oil. The typical investment fund will buy, say, the August oil future and then sell it days before it comes due - typically rolling over the proceeds into the next month's contract.
"For speculators to be propping up the price of oil, they somehow have to be taking physical oil off the market," says energy markets expert Craig Pirrong, a finance professor at the University of Houston's Bauer College of Business.
Pirrong points out that when the federal government decided to bolster cheese prices in the 1970s, it did so by purchasing warehouses full of cheese and keeping it off the market. "Well, where's the cheese now?" Pirrong asks. "Where's all the oil that the speculators have held off the market?"
Even if you believe there's no way that oil trading volumes could be soaring without influencing oil prices, remember that influence then has to run two ways.
If an index fund is indirectly driving up spot oil prices every time it buys a future, then the converse must be true, too - there must be an equal and opposite downward push on spot prices every time that future is sold. In other words, futures market critics can't have it both ways.
There's something else politicians conveniently overlook: futures trading requires two to tango. For every investor who is betting oil prices will go up, there also needs to be an investor willing to take the opposite side of that bet.
In the past, there have been times when the overwhelming majority of speculators were "longs" betting on higher prices, while their commercial-trader counterparts - i.e. traders working for oil refiners, airlines, and other end-users of oil - were the "shorts" betting prices would fall.
But as New York Mercantile Exchange Chairman James Newsome explained to Stupak's Congressional committee, today's speculators are evenly split between shorts and longs. Moreover, the percentage of futures contracts held by speculators (as opposed to commercial traders) "actually decreased over the last year," Newsome told the subcommittee, "even at the same time that [oil] prices were increasing."
It's time to find a new scapegoat. My own nominee: Congress. But that's another column.
Your voice: Is Birger right? Tell us what you think.
First Published: June 27, 2008: 8:30 AM EDT
Wednesday, June 11, 2008
Econbrowser: Oil bubble (May 17, 2008)
How speculation may be contributing to the most recent moves in oil prices.
An important recent trend in management of pension and hedge funds is the increasing allocation of investment dollars to commodity speculation. There are lots of ways you can do this. Perhaps the simplest is to purchase, say, the July NYMEX oil futures contract. If you'd bought that contract Friday, it would enable you to take delivery of oil in Cushing, Oklahoma some time in July for $126/barrel. As a pension fund, you don't actually want to receive that oil, so in early June you'd plan on selling that contract to someone else and using the proceeds to buy the August contract. If oil prices go up and you can sell the contract for more than $126/barrel next month, you will have made a profit. By rolling over near-term futures contracts in this way, your "investment" will earn a return that follows the path of oil prices.
For the rest go to: http://www.econbrowser.com/archives/2008/05/oil_bubble.html
Sunday, May 11, 2008
Taken from: http://bigpicture.typepad.com/comments/2008/04/soros-says-comm.html
Friday, April 11, 2008
March 25, 2008; Page A22
A hard drive recovered from the computer of a killed Colombian guerrilla has offered more insights into the opposition of House Democrats to the U.S.-Colombia Free Trade Agreement.
A military strike three weeks ago killed Raúl Reyes, No. 2 in command of the FARC, Colombia's most notorious terrorist group. The Reyes hard drive reveals an ardent effort to do business directly with the FARC by Congressman James McGovern (D., Mass.), a leading opponent of the free-trade deal. Mr. McGovern has been working with an American go-between, who has been offering the rebels help in undermining Colombia's elected and popular government.
Complete article at: The Wall Street Journal
Tuesday, March 11, 2008
March 30, 2008
Files Suggest Venezuela Bid to Aid Colombia Rebels
By SIMON ROMERO
BOGOTÁ, Colombia — Files provided by Colombian officials from computers they say were captured in a cross-border raid in Ecuador this month appear to tie Venezuela’s government to efforts to secure arms for Colombia’s largest insurgency.
Officials taking part in Colombia’s investigation of the computers provided The New York Times with copies of more than 20 files, some of which also showed contributions from the rebels to the 2006 campaign of Ecuador’s leftist president, Rafael Correa.
If verified, the files would offer rare insight into the cloak-and-dagger nature of Latin America’s longest-running guerrilla conflict, including what appeared to be the killing of a Colombian government spy with microchips implanted in her body, a crime apparently carried out by the rebels in their jungle redoubt.
The files would also potentially link the governments of Venezuela and Ecuador to the leftist guerrillas of the Revolutionary Armed Forces of Colombia, or FARC, which the United States says is a terrorist group and has fought to overthrow Colombia’s government for four decades.Complete Article at: The New York Times
Monday, February 11, 2008
March 5, 2008
Exactly one month later, millions of people around the world marched in 163 cities, from Washington to Dubai, to call for an end to this terrorist organization. According to police estimates, in Colombia alone, an estimated 4.8 million people turned out for 387 different events.
This unprecedented mobilization was lauded because of its universal message and its ability to bring together a worldwide protest of concerned individuals. Facebook, the social network utility site, is often used as a tool for raising awareness of global issues and collecting donations for numerous non-profit organizations. However, the momentum and outcry of the February 4 events were unparalleled.
More impressive than the size of the march was its humble origins. Soon after creation of the Facebook group, inquiries started pouring in from around the world, some to request information, others to offer gestures of support. Within weeks, complete strangers had formed a worldwide logistics network using Facebook, email, websites, blogs, and Skype, an Internet-based phone service.
Coincidentally, three days after the march, Facebook, with more than 2.8 million active users in Latin America and Spain, launched a Spanish platform—the first step in internationalizing the site. Like the anti-FARC march, users—almost 1,500—took the lead in ushering in the change. Working across borders, people of all ages translated the site in less than four weeks, with the top translator responsible for 3 percent of the new Spanish content.
Democracy is defined as “a form of government in which the supreme power is vested in the people.” If Facebook can serve as a means to make a person’s voice heard then it and other networks should be recognized as a tool of democracy.
The face of the Internet hardly resembles that of 10 years ago. Originally dubbed the “information superhighway,” the Internet has evolved into far more than just a source for information, giving birth to new, virtual communities. Many of these communities, such as gaming centers, file sharing networks, blogs, and forums, can, in part, attribute success to allowing individual web presence to remain completely anonymous. Facebook, on the other hand, puts a real identity and “face” to its users, helping it to function as a democracy-spreading arsenal.
As evidenced by the February 4 march, the Internet can play an important role in helping to engage entire populations at a time—a feat unimaginable just a few years ago. Critics may say the demonstrations were initiated by a small, elite group with exclusive access to the Internet. However, Facebook and other social networking sites are free and globally available.
For social networking to become a true tool of democracy, we must boost the number of people with access to the Internet. From 2000 to 2005, the number of Internet users in Latin America jumped from 3.8 percent to 15.6 percent of the population. Nonetheless, we still have a long way to go. Without access, participation in this new age remains a distant goal.
Mauricio Ardila studies international business at George Washington University and works part-time at the Council of the Americas in Washington, DC.
Friday, January 11, 2008
Alan Corey, young author and millionaire, contacted me after visiting MDJ one day. He told me about his story/book where he set a big financial goal at the age of 22 to become a millionaire before the age of 30. Not only did he reach his goal on average income (below average in NYC), he did it before the age of 29.
He didn't win the lottery, have a high salary job, or an inheritance. When it comes down to it, Alan Corey's success evolved from his frugality, bargain hunting real estate investing style and his bigger than life determination.
Some people will finish the book and say that Alan Corey was lucky to have hit the real estate jackpot in his transactions. It's true that luck may have had some part of it, but the sheer desire and drive to be a millionaire is what really made this young fellow succeed.
Who is Alan Corey?
Alan Corey is a regular guy who graduated with a business degree who had big aspirations to be a millionaire before the age of 30. He admits in the book that "he's not particularly good at anything" but he has the drive to save and make money. I know that I'm frugal, but I spend money like Michael Jackson compared to Alan Corey. He cut his expenses so much that he lived on 29% of his gross salary (in NYC) which was $40k at the time.
What are the main points made by the book?
- The book is a true story of how Alan Corey became a millionaire before his 29th birthday by simply making a goal for himself, and sticking to it regardless of the sacrifices he had make along the way.
- Alan Corey's method of obtaining wealth is extreme frugality, investing the saved money in equities and real estate. Most of his wealth was made from real estate transactions of his primary residences. Alan Corey has a keen eye for "up and coming" neighborhoods, which made up a bulk of the cash he made along his journey.
- His smartest moves in my opinion were buying houses in an up and coming neighborhoods, renting out the "good/high income" rooms while keeping the "bad/low income" room to live in himself.
What I liked?
- I enjoyed the frugal tips highlighted throughout the book
- I respect that Alan Corey describes every frugal technique that he could think of to reduce his expenses to next to nothing.
- I enjoyed reading about his challenges and the risks that he took (borrowing from family/friends) to secure his real estate transactions. He's a model for the old saying "No Risk/No Reward".
What I didn’t like?
- Even though Alan Corey implemented an extremely frugal lifestyle, I didn't agree with some of his highlighted frugal strategies. For example, creating a fake magazine company just to get concert tickets isn't ethical in my books, but to each their own.
- I personally really enjoy reading success stories of young people achieving their goals through determination and hard work. Once I started reading, I couldn't put the book down and finished the book the same night. I would recommend "A Million Bucks by 30" to everyone for it's entertainment and financial value.
For those who have read the book, I've been in contact with Alan Corey recently and yes the millionaire still lives in the cramped, windowless closet he calls a bedroom. Nope, he's not letting his cash savings go to waste, he's currently working on other real estate deals.