Friday, March 20, 2009

So, Or and Like

Depending on what generation you grew up in, you probably use the above words in a highly irritating manner. If you grew up in the 90s, you probably still use "like" like 10 times more than necessary:
I was like "the coffee's hot" and he was like "and bitter too" and she was like so not smart, and he was like all over the place.
I am like, can you shut the heck up and not use "like" anymore?

What about "Or"? This is a recent phenomenon and equally annoying. Young people and middle-aged alike end questions with the word "Or" in a trailing off fashion. For example:
Are we going to buy apples or?
Should we divide the numerator by pi or?
My answer to that nowadays is "or what?"

Then we have "So". How did "So" become the starting word of every other sentence?
So the sunshine really makes me happy.
So Microsoft really does not have any solid predictions on their revenue streams for 2009.
So the book I was reading was like boring.
Notice how in the last one, the person violated twice. The "so" sentences can all be stated without uttering "so" at all! Yet, they insist in saying "so" all the time. I've even seen professors and business people misuse "so" so many times. So I say, what the so is wrong with you?

Finally, a throwback to the times of prohibition. I'm trying to bring back the word "see" as an ending to sentences. All you need is a cigar in your mouth and softening of the letter "s" in "see" when you utter the example sentences below:
The shirt looks good, see
The sky is blue, see
I need the money back by midnight tonight, see
Al Capone style, see?

We're back in business. So, like, should I end the blog with a period or...?

What is love?

Haddaway really sang about what love is in a spectacular and catchy tune, and Mango and Will Ferrell showed us superficial love in that Night at the Roxy (correct title?) movie. But what is love really? Is it just the release of and addiction to the chemicals dopamine and norepinephrine released by the brain during love?

Let us hear the engaging viewpoint of some scientists / geeks who know their material!

Tuesday, March 17, 2009

AIG meltdown

First a little announcement from today's press, then my commentary:

Associated Press Writer Michael Virtanen wrote on 3/17/09: {Troubled insurance giant American International Group paid bonuses of $1 million or more to 73 employees, including 11 who no longer work for the company, New York Attorney General Andrew Cuomo said Tuesday. …"These payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG," Cuomo wrote. "Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout. Something is deeply wrong with this outcome." According to the attorney general's office, the top individual bonus was more than $6.4 million, and the top seven received more than $4 million each.}

Here’s my commentary: Sure we’ve bailed out AIG with tens of billions (is it hundreds now?) of dollars of taxpayer money. And we’re mad purple about bonuses awarded to the derivatives traders who jeopardized AIG and its multifarious clients. Whoop de doo da! The real question for every capitalistic American should be: how do I get in on this money train? Where do I learn to negotiate binding bonus contracts that pay me boat loads even if I grind the firm to the ground?
(For those of you that do not know me, I’m being sardanoic to the core here...but seriously if anyone knows the answer contact me)

Menkind - do we deserve the bad rap?

Yes, I wrote menkind, not mankind i.e. our kind, our gender. Men have been getting bashed lately by the media, by women, by every quarter of society. The images are everywhere especially in commercials and sitcoms. Here’s a condescending female talking to her man ( in a multigrain cheerios commercial. You’ll never find a commercial with a male talking to a female in that manner. The sometimes outright and often subtle male bashing goes on in a great number of commercials that feature males and females today.

Did we bring this upon ourselves? How did the myth of the unfit male get perpetuated to the point where men have been effeminized and had their dignity stripped. Whatever happened to commercials with portrayals of men as protectors, leaders, caretakers, and compassionate fathers?

Men get bad raps from other men when they misuse power or become corrupt. But men get a helluva bad rap from females for a variety of other reasons – including lying, cheating, not having a job, being lazy, etc. So who are the men who sully the reputation of the whole gender by their actions? Is it the avuncular pot bellied Uncle who has preparation H challenges, thinning hair, and spins yarns from his belly button lint while watching Maury Povich declare who the baby daddy is? I think that type of man is fairly harmless. Is it the man who isn’t smelling like a bunch of roses today because he slogged away the day working the jackhammer on a construction site? I think he’s fairly harmless. Is he the man who is curt and won’t respond to your greetings when you’re reaching out to him? I think he’s fairly harmless too! The only males that really get on females nerves are the ones that cannot think properly because they are busy chasing tail. Now that is a harmful variety of us men – but even these men are harmful temporarily. When the testosterone level subsides, they are veritable Ned Flanders. They just want to go and put in an honest days work, come home and relax, say hello the neighbor, eat some food, and sleep or watch a little sports. Now what harm is there in that I ask!

The original man is strong, not frail. He is tough but compassionate. He is quiet but dignified. He is a protector not a destroyer. He is a humble servant of his family and society. He is a leader who is decisive, with upstanding character to help him and those under his care weather the treacherous heat and bitter coldness of life. May I kindly remind female kind and the media mavens that men have invented or discovered the comforts that both men and women enjoy today – refrigeration, electricity, vehicles, highways, air conditioning, heating, parks, and paved pathways. Men have even been the recipients of divine revelation. So please, no more male bashing! No more male hating! And no more male effeminizing! Let us return to the earlier days when men were considered beacons of light and pillars of integrity.

Monday, March 16, 2009

A thought on Stocks & Bonds

I've had a few requests to write a piece on the equity and debt markets (i.e. stocks and bonds in particular). I thought I should invite my sister-in-law to write as she just made $600 in one day of trading last week during a 3-day market upswing. But then she has no formal training in stock analysis and was effectively playing coin slots with the market.

Well you can fill a tome with the topic of investments. I'll pare it down. Right off the bat, bonds - whether discount, premium, municipal, zero coupon, or whatever other type of bond you find in the market is structured to pay you your principal after a certain maturity date (or if called early by the Corporation issuing the bond) plus steady interest payments (normally semi-annual). Since I do not deal with usury I won't discuss bond valuations and yields.

Then we've narrowed it down to stocks. The stock market has seen a massive exodus of funds. Where did they all go? Either to treasury bills, or commodities like gold that are deemed safer during risky times, or to the bond market which is yielding far better than the stock market right now. However, anyone familiar with Ibbotson's yearbooks knows that $1 invested in 1925 grew to an astounding $13,706 by 2005 if the money was invested in small-company stocks. Large company stocks by comparison grew to $2,657 and bonds grew to $71. As a baseline, inflation grew during this time to $10.98. (By the way, these numbers were holding period returns, not geometric or arithmetic average returns). So why doesn't every Tom, Dick and Harry invest in stocks? The reason is volatility and lack of investor discipline. You're either in the stock market to take advantage of daily up and down swings (day traders) or you're in it for the long haul (holders). The long haulers have always come off better. The day traders who understand macroeconomic conditions and are savvy with the impact of pending government policy announcements, earning reports, potential litigation are way better off. But day trading has tremendous risks and tremendous rewards.

So what am I getting at? First a little bit of technical details, then I'll simplify what it means. In any portfolio of securities (carrying one stock, two, three or 20 for example), there is a portfolio risk which is essentially the market risk or systematic risk. No matter what you do with your portfolio mix, the market risk is a constant and you can do nothing about it. The second element is the portfolio risk also known as idiosyncratic risk. This is a risk that is specific to the firms that compose your portfolio and the risks can be diversified away. How? By placing unrelated firms into your portfolio such that your correlation coefficient is as close to -1 as possible. In a portfolio of 2 securities (or 2 stocks), your correlation coeffecient is the covariance of the returns of the 2 securities divided by the product of their standard deviations which should be a number between -1 and +1. The closer you are to -1, the less risk your portfolio has.

Now the simplification. If you have two stocks, one in Gap, and one in Ross, is your correlation coeffecient likely to be closer to -1? Probably not, because both stocks are in the same industry and the same macroeconomic conditions can cause both stocks to rise and fall in tandem. If you have one stock in Gap, and the other in Walmart, you're more diversified. Leaving aside the formulae which makes economists and quants scream with glee, one can intuitively 'see' a diversified portfolio versus a non-diversified one. Why would you want to invest in the stock market now when everyone is running away from it like the plague? Because stocks are available at cut rates now much like your local Iraqi rug bazaar store that has been going out of business for 5 years (seriously I've seen a sign like that).

If you do invest in stocks, make sure you diversify and if you're risk averse, be in it for the long haul. If you're a brash risk-taker like me, trade like a bull and after you've paid off your mansion, car and private jet, send some royalty checks to me. PayPal accepted.

For specific stock tips, you can e-mail me.

Sunday, March 15, 2009

Scent of a Seattle Woman

I never envisioned blogging about the scent of a woman. The title is misleading. This is really about catharsis (or is it about a love lost?), about immersing myself into a past that I have struggled to forget. Yet my strongest memories in life are from that time.

It has been slightly more than a decade since I saw her. The Seattle woman of Pakistani origin... a woman with innate charms and fatal flaws. A woman seductive - capable of stealing hearts and reveling in the attention of all those that would shower her with attention. She would liken herself to Manisha the Nepali actress. They did share eyes.

Now she lives a life that I know nothing about. The same coquettish smile, slightly heavier frame, same fair skin and penchant for style. Her sister a theologian, her brother an engineer - they lived up to their father's dreams of a better future - a future in middle class America, and not one in a burger shack concocting smoothies. Strangely, I am happy to know of their worldly success.

'Twas a torrid affair albeit with warning signs. Signs I could not decipher until it was too late. Yet when a young man is in love, deep unrequited love, he knows nothing and sees nothing but her charms. I was serious, she was flippant. We were in different stages of our lives although only 4 years separated us. She was experimenting, and I was dreaming about the fantasies she would ingrain in me. A fantasy of true love and family. Her letters with mesmerizing words of promise and pictures have not been touched by me in ages. Why would I dare take that risk and unleash the torrent of emotions?

Her touch was soothing, her kisses sublime, her gaze amazingly sincere, her wit razor sharp. I remember her folding my clothes for me with care, her waving at me from her bedroom window with a smile sweeter than honey, the fragrance of her lustrous hair, her commenting on liking my black and silver shoes while not as much liking my blue turtleneck, our carefree jaunts in gray misty Seattle, our exuberant youth, and her vivacious spirit. Then it all fell apart - a frail falling house of cards, a foam washed away into the ocean, a life extinguished in one fell swoop. The memories were overwhelming, the sense of loss like a bottomless abyss. She would haunt me in my dreams and I would cry my pillows wet even 2 years after the loss. Even now she appears in dreams once in a while as if everything is as it was during the flights of our fantasies, offering me outstretched arms of reconciliation and words of enchantment and in my dreams, where I am a gullible fool, I fall in love again.

Reality of course is stark, dark, and cold with occasional peeks of sunshine. To all those young lovers in the world - let my story be a warning: do not let a woman become the object of your worship. How does a woman become an object of worship when you're not really worshipping her? If she dominates your every thought and waking moment, if your love of her causes you to sin, and the thought of losing her makes you insane, then you've let her become your downfall and your object of worship.

The Seattle woman of Pakistani origin...the possessor of charm and wit.

Stimulus packages and what lies beneath...

The stimulus packages emanating from Washington as of late have triggered much debate between Keynesians who advocate government policy interventions and Friedmansians who espouse letting a free market be free. Free to rise unfettered, and free to crash without the government propping up any failing business entities. Stabilization policies however do require government intervention to stave off further potential damage. And so we have the tug of war going on in America right now between Obama's administration leaning towards Keynesianism while Republicans are howling for letting the AIGs of the world fall. (My take on it is frankly populist in nature: let them fall no matter the outcomes - sometimes it's better if the gangrene claims the leg)

In reality, the chance of such mishaps continuing to occur in bear markets are high if the fundamental financial architecture is not overhauled. International hot money flows, hedge fund oversight, and consumerism at its core need to be checked. While economists encourage consumerism as a key ingredient in economic growth and sustainability, this has led to "saving for a rainy day" being thrown to the wayside. Americans currently spend more money than they earn. How is that possible? By incurring debt. The money is not flowing from a vacuum. The country as a whole is saddled with debt, from the tiny consumer to the big Uncle Sam. This has serious repurcussions for future generations of Americans who will inherit massive levels of debt. China's treasury bill injections have been in excess of a trillion dollars and just recently the Chinese Premier (or another high level government official) did not mince words in warning the U.S. to not let the dollar devalue. China's increasing power in the world economy and its influence on America is unquestionable. How will you impose your will on a nation when that nation finances your lives?! Have you ever heard of a debtor swashbuckle his will with a creditor? Normally the debtor tries to avoid the creditor, if not take on a mentally subservient role.

My take on the stimulus package is that there's much showboating and a lot of pork barrel projects and very little focus on the fundamentals of 1) the financial system architecture 2) consumer behavior. And both are needed to stabilize the system in the long run and prevent future crises. Oh, and one more thing, cut out all dealings in 'interest' and the world will be much healthier economically....but that's for another blog.