I have two Engineering degrees-in Metallurgical Engineering, and Electrical Engineering.
I tried to understand Financial stuff these last few years-came across words like Financial Engineering. This is crap. There's no such thing-otherwise lets invent one called "Predict the football game Engineering" or "Read your Future Astrological Engineering".
Financial Engineering is a sham. It is people using complex mathematics to confuse people into believing they know something. They don't. They sell "products"---currencies, volatility swaps, u name it. All bullshit wrapped in different bright colored packages.
Private equity is the abyss of Finance. The whole idea of capitalism and stock markets-where you loan your money to a company who you don't know personally via a stock market and a financial regulator is dumped by these groups called Private Equity who take public companies private and apply Financial Engineering to them to turn them around. Private Equity investors are probably the dumbest investors of the world. How can you take out the owners of a company and expect to improve the company? See this example of Kerry's media empire in Australia being taken over by Private Equity jokers here.
Here in South Chile there's some fund called Southern Cross, who took over a supermarket chain for $80M. This supermarket chain is owned by a family, and I know the owner personally. He was pretty happy with the offer-seemed like a nice deal. Now he is out of the company's day to day operations and these bozos from Southern Cross plan to run the company....do you think bozos trained in Financial Engineering can run a supermarket better than people who have owned it for 30 years?
Since voodoo people only respect the art of other voodoo people, that's why you have banks, central banks, etc. all in bed with these people called Private Equity. These are buyers and sellers of money; a business they don't understand much at all. They seem to buy high and sell low. That's why China invested in BX and you have these poor taxpayers in China paying for stupid investments by their Government.
Private Equity firms like Blackstone and Fortress are the highest examples of investor stupidity. They are Public! The whole idea of a Private Equity firm with Public shares is bizarre-they take out public companies and engineer them financially and then dump them back on the stock market, and for this financial engineering they can command a premium??? Investors are paying for a non-existent ability called financial engineering, just like millions of people worldwide pay for astrologers...who do use very interesting charts and complicated diagrams, by the way, to read your future (sounds like complex math of finance???).
Will tell you another time about the biggest speculators in currencies-the central banks and the treasury departments. Hint-they "defend" their currencies ---buying them when they go down.... This is not volatility reduction or market making, this is pure speculation.
Sanjay
The cause of the present financial crisis-not US subprime loans-it is unknown
The press and Governments worldwide, especially the US Government, has blamed the present financial crisis as originating from US sub prime housing loans and then "snowballing" into a bigger problem.
Just because two things are happening together doesn't mean that one is causing the other. There is no proof anywhere that the malaise in financial markets today was caused by the US sub-prime bets going bad (on part of investors and banks).
To attribute the cause to a liquidity problem doesn't say anything. Any financial crisis is a liquidity problem at heart, duh.
Nobody knows why the markets fell part this year; and more importantly, for the policy makers etc. around the world who are trying to "fix" this problem---you can't. Bailing out Bear Stearns seemed to have done it, then increasing credit to banks, then bailing out AIG, then selling Washington Mutual to Citibank...the list goes on. The end result is that the liquidity problem still continues---ergo---you aren't doing much at all to solve the problem.
They should all come out with hands up in the air one of these days and say 'WE HAVE NO CLUE WHY THE MARKETS ARE BEHAVING THE WAY THEY DO'.
A group of monkeys could get together to solve the present crisis-and it would have the same effect-none. This is no disrespect for my own species-but simply a fact that we don't know is a very good answer often times in our lives.
Long live Taleb.
Sanjay
Just because two things are happening together doesn't mean that one is causing the other. There is no proof anywhere that the malaise in financial markets today was caused by the US sub-prime bets going bad (on part of investors and banks).
To attribute the cause to a liquidity problem doesn't say anything. Any financial crisis is a liquidity problem at heart, duh.
Nobody knows why the markets fell part this year; and more importantly, for the policy makers etc. around the world who are trying to "fix" this problem---you can't. Bailing out Bear Stearns seemed to have done it, then increasing credit to banks, then bailing out AIG, then selling Washington Mutual to Citibank...the list goes on. The end result is that the liquidity problem still continues---ergo---you aren't doing much at all to solve the problem.
They should all come out with hands up in the air one of these days and say 'WE HAVE NO CLUE WHY THE MARKETS ARE BEHAVING THE WAY THEY DO'.
A group of monkeys could get together to solve the present crisis-and it would have the same effect-none. This is no disrespect for my own species-but simply a fact that we don't know is a very good answer often times in our lives.
Long live Taleb.
Sanjay
Dallas Fed's Fisher on capitalism and banks
Here's what Dallas Fed''s President Fisher says about the banking system and capitalism:
"Paulson, the Congress and other officials will ``will engineer an appropriate recapitalization of the banking system in a manner that does not kill the goose that lays the golden eggs of the practice of capitalism,'' See full story here at bloomberg.
To think that banks are the most important part of capitalism is false.
Mr. Fisher would do well to visit a Texas Instrument's Fab right under his nose in Dallas; that's capitalism. If Adam Smith were alive today he would be proud to see division of labor and capital being employed so well as in a semiconductor manufacturing facility. And I would bet that he would be aghast at how little the banking industry has progressed-and probably even has gotten worse since his times.
Sanjay
"Paulson, the Congress and other officials will ``will engineer an appropriate recapitalization of the banking system in a manner that does not kill the goose that lays the golden eggs of the practice of capitalism,'' See full story here at bloomberg.
To think that banks are the most important part of capitalism is false.
Mr. Fisher would do well to visit a Texas Instrument's Fab right under his nose in Dallas; that's capitalism. If Adam Smith were alive today he would be proud to see division of labor and capital being employed so well as in a semiconductor manufacturing facility. And I would bet that he would be aghast at how little the banking industry has progressed-and probably even has gotten worse since his times.
Sanjay