Financial Crisis

[AlexLah]

Ok, I'll say it: Gambles, I had the gut instinct from way back, when I asked you how many times you had blown out.

Now this is not meant to insult nor to flame, but I still have that gut feeling about you - maybe because I was a market maker and we made fun of you types. Maybe because you sound like a used-car salesman version of Abrak, maybe because your handle is "Gambles" but you claim to be an "advisor" for people's money, maybe because you're just a super-duper nice guy. So that I can push that gut feeling back down a bit, please tell me that your beloved dead dog was named "Gambles" and your handle is to honor him.

Advise on, my friend - I hope you're not trying to drum up business around here, though.

ok, see I put a smiley on there so everything is ok.

*I agree with Abrak's post #6307, and I believe that strategy to applicable in a thread like this, where most (if not all) of us are not pushing funds or their strategies.

[/quote

Admitt it Jcon, you have lost a lot of money in the past by making the wrong bet's, right? And recently you were begging God on your Brazilian bet.

I told you to wait and asked you what you did.

Did you follow my advice or made your bet? You never told us.

But hey, you are backed by your wealthy family, am I right?

I will give you another clue, it is up to you what to think of it...

Alex

Edited March 22, 2010 by AlexLah

[jcon]

Alex

Can't see that pic, Plarex.

I don't make bets with my money - well, unless I'm in Macau or Vegas...

I think you have it wrong with my take on the BRL - pull up a chart - it's been very strong. In any case, there is no easily accessible carry trade to be had there, and I haven't put on any trade with the BRL - can you point out where I allegedly did? (I do plan to acquire land there in the near future, yes.)

You like pictures:

As to my wealthy (or not) family... so what? Sour grapes? I assure you it's a conspiracy - my surname is is Illumi-Roth-Sachs-Derberg so I have the inside info

[elliss]

Pint of IPA is down to 99 pence...and could go lower .......wot do you want FREE Beer...maybe tomorrow...

They should pay you to drink IPA

I t,s

P issing

A wfull

Rinrada get your taste buds checked out .

you may be missing out on something good .

[Naam]

i admit there was a time when i thought being extremely diversified is the non-plus-ultra of investing. the results were a boring time and mediocre yields. presently i am still moderately diversified, 16 positions in three asset classes, as i am not willing to stare ten or more hours at three screens daily. actually the afore-mentioned 16 positions are all in one asset class, namely bonds. my diversification is limited to bonds (AAA debtors) and cash in various currencies, a few high yield / high risk bonds and the basis consists of 6 of my beloved subordinates.

I find the idea of owning a AAA rate bond totally horrific plus it is a sign that you have far to much money in the first place. But I do think knowing one asset class really really well is key because the best returns are always somewhere at the margin. I remember looking at that Sukuk in Dubai - it looked a good speculative punt but you dont really make money that way while you knew of a good -10/+60 side bet - that was the trade.

Abrak, to judge one has to look at the details. in my [not so] humble view the risk of investing in high yield currencies(e.g. TRY, BRL and ZAR) should be partially compensated by an excellent rating of the debtor which also provides satisfactory liquidity in case one wants to get out in a hurry. no liquidity could cause considerable losses.

a similar cautious approach should be used when holding subordinates, especially to those which are non-cumulative. the ranking provides some guidance whether the underlying debtor will pay or defer coupons. three of my subs (DE000A1ALVC5, XS0217518397, XS0225342970) have a triple or double A rating but still yield 8.57, 7.16 and 6.59% (yield to potential call not considered). your assumption "AAA = extremely low yield" is therefore not warranted.

another factor as far a "too much money" is concerned is that if you have reached a certain age and have an income which is a multiple of your expenses you are not chasing yields anymore as you did when you were young and "hungry" but you try to put your wealth on a more solid footing.

[Gambles]

my "doubts" are based on my personal experience and involvement in Asia (long before i decided to settle down her), the "western" investors i know and last not least the "western" bankers in Asia who manage billions of "western" money. all of us are since many years involved in asian investments which did not fare one iota better than investments in other emerging regions.

Herr Naam. Totally understood - it can be difficult sometimes to be objective - in my own case I find that as we get older there's a very fine line between many years of invaluable experience and prejudices that I've collected along the way! (BTW an excellent piece by Bill Gross recently focused on how fund management is one of the few jobs that you can improve at with age and still be at your peak after you pass 'normal' retirement ages)

referring to Churchill's question. he is trying to figure out how to square a circle but merely based on assumptions (goldmines>SGD>THB). would i want to comment on this undertaking or your subtle advice to hedge? the answer is "no".

For anyone who lives in this neck of the woods, Asian currencies are their base and therefore they are taking an investment risk in their financial planning if they hold any other currencies. I am far more concerned with the risks that get taken without always being fully appreciated by holding default currencies like Euro, GBP, AUD by long term residents of Thailand simply because of an accident of birth or of holding USD simply because it's the global reserve currency. The fact that Baht hedging wasn't available in the past forced investors here to choose between taking that currency risk or, as you rightly pointed out, circumventing currency risk by limiting investments to the pool of available Thai assets - generally higher risk or lower yield. That's changed now and that has enormous implications for long term Thai residents - well done to the likes of Churchill for picking up on this. If your investment selection means that you favour gold mining stocks and/or bullion then looking to hedge that into Baht is simply common sense if at an individual asset level you can achieve that cost-effectively (depending on the individual deal size I'm not sure whether we might not yet be quite there for many investors seeking bespoke hedges for individual assets).

Also with the possibility of greater future strength for local currencies then I think that it is a little irresponsible not to at least consider these possibilities at this particular time.

[Gambles]

Gambles,

You are again taking a fund management approach to investment strategy. If you run a US$2bn fund I would agree it is extremely difficult to add much value through asset selection compared to asset allocation. If you say manage US$10m of personal wealth it is incredibly easy. Individual investors have a massive competitive advantage over large fund management Groups. Can you really argue that buying stocks on 2x earnings trading at half BV is an investment strategy that is likely to lose 50% of your money. I see it as a low risk way of guaranteeing excess returns. One stock I own was trading at 0.7 last year (I didnt buy there of course) and will make Bt1.5 eps this year and another trading below 10 made 10 EPS last year. The problem with the US$1bn fund is that he couldnt buy more than a US$1m and it could go up 5x and it wouldnt register as any performance. And it is exactly these funds who say through redemptions usually at the bottom of the market that cause such totally ridiculous valuations.

Conceptually, I believe that it has to be so much easier to add more value at the micro level for a small investor. Say gold has a 10 million investors looking at it - I find it extremely difficult how any one investor can add much value at all (to be honest I have never worked out how the entire 10m know how to value it). I mean rational expectations (not that investors are rational) would say price movements (with a degree of perfect information between the 10m of them) should only be affected by unknown future events. Now say the Thai stockmarket which had a market capitalization of US$15bn at its lows is simply too small for fund managers to hold a single stock and if you go to see a company that hasnt been visited by a fund manager or analyst for three years, I would have thought if someone is not entirely brain dead he should be able to add value. So it really has to be much easier to add value in by looking into 500 individual stocks (asset selection) than working out whether the entire market will go up or down (asset allocation.) When a fund manager asks you whether he should buy BBL or PTT because they are the only 2 stocks in the market that he can put US$20m into which is still less than 1% of his portfolio, obviously it is pretty hard for him to make money through asset selection.

And when you say everyone is looking at good value buys please note is interested in precisely 2 stocks. Asset allocation by definition determines fund management performance because asset selection cannot

The other reason I am pretty confident that this is true is that I have made possibly the worst asset allocation that is conceivable on this planet. Namely I invest in a market that has risen 20% in 18 years and which peaked at over double current levels 16 years ago in January 1994. I mean I actually find it almost inconceivable that any fund management Group in the entire world has made an asset allocation decision worse than that. Yet I have made money every year (except one) and my average returns are substantially in excess of 20% p.a.

To be honest, the only way I can really think of making money in asset allocation is usually by betting against Central Banks who are making investment decisions whereby they are intentionally losing money in one asset for macro benefits for the economy. Clearly if they are intentionally trying to lose money, it is rather rude not to take advantage of it.

Anyway I am up 48% so far this year, how are you guys doing?

The problem, Abrak, is the available data. Studies have shown that individual investors have generally fared far worse than invstors who use professional advice but while all forms of professional management tend to be capable of measurement (their data is all reported somewhere), individual data is harder to report (yes you can sum the performance of holdings via the likes of e*Trade etc but this is far less comprehensive). That said family offices may be a good respresentation but the danger here is that we're comparing apples with pears in that funds, private portfolios, family offices and indidvual investors may all have different liquidity and risk profiles so just looking at returns is meaningless. You have to consider a whole range of other factors too. In fact, in my experience as a braod generalisation, it is in the area of risk management where many individual investors encounter the greatest difficulties. In general, individual investors may be able to opportunistically recognise areas of great potential as well as professional managers, if not better, but understanding the risk and mapping the implications of any single investment decision to a risk matrix is, in many cases, done less well.

I'm not knocking do-it-yourselfers - in a sense that's how professionals such as Warren Buffett and Alfred Jones started but as I say the available but imperfect data suggests that most D-I-Y investors ultimately perform far worse than professionals but please read that in light of all the caveats above.

As I mentioned we're up around 0.5% over the last 3 months (in US$, GBP, Eur, AUD, SGD and THB) which I think is comfortable for us at this time. We're very concerned about the potential risks and consistency and wealth preservation are our key drivers rather than excess return through additional risk. We don't think that for our aims any asset class can ever be predicted accurately enough to justify the kinds of concentration risks that you describe but this comes back to the suiability for purpose. We are managing existing wealth, we need to preserve it, we could never achieve 48% gains in 3 months. That's not what we do. It's too risky from our perspective.

[Gambles]

Gambles is my surname, jcon. I was given it by my parents at birth.

I'm not trying to drum up any business. I've been mainly talking macro issues.

I am passionate about active management and diversification though and if you read what I said it was basically you don't have to come to me, I'm not selling anything, but please do look at the active diversification approach. To me it's more important that people understand this approach than whether or not they give me business. I don't believe that it's possible to generate business from a site like this and in fact one is far more likely to get shot at on a forum like this, so you have to be ready for that and confident in your own achievements to be ready to do so.

but if anyone thinks that I'm trying to push anything I'm very hapy to exit the forum but I think that there is a decent balance of interesting views on here but the lats thing that I want to do is offend anyone.....

Yes, I do like to think that I'm a nice guy, most of the time but we can all always do better.....

Ok, I'll say it: Gambles, I had the gut instinct from way back, when I asked you how many times you had blown out.

Now this is not meant to insult nor to flame, but I still have that gut feeling about you - maybe because I was a market maker and we made fun of you types. Maybe because you sound like a used-car salesman version of Abrak, maybe because your handle is "Gambles" but you claim to be an "advisor" for people's money, maybe because you're just a super-duper nice guy. So that I can push that gut feeling back down a bit, please tell me that your beloved dead dog was named "Gambles" and your handle is to honor him.

Advise on, my friend - I hope you're not trying to drum up business around here, though.

ok, see I put a smiley on there so everything is ok.

*I agree with Abrak's post #6307, and I believe that strategy to applicable in a thread like this, where most (if not all) of us are not pushing funds or their strategies.

[Gambles]

no worries, jcon

cheers,

Paul

maybe because I was a market maker and we made fun of you types.

Come on JCon, if you were a market maker you always made fun of absolutely everyone because you knew there was no other job in the world that paid so much for doing so little.

Touche Abrak! I didn't make that much, though.... 50% of all profits to the boss hurts.

To Gambles: Sorry. My post came off a bit too strong, and it's too late for me to edit. I read your contributions to the forum, though I may not agree with them.

jazzbo: I agree the baddest ass traders don't say much. Just like anything else in life, really. Though I don't think Abrak was trying to show off, he was just trying to make a point.

[Gambles]

With all due respect, Abrak, that's not investment advice it's a couple of trades. Ones that turned out well, I agree, but trades.

I can only name a handful of organizations who specialise in multi-asset portfolio allocation - a lot of others do it as a sideshow but generally not as well as the specialists.

Trades are sexier and much more fun to talk about because fundamentally investments can be a much more complex and boring subject.

This creates a real problem in that even post-LTCM the world is still obsessed with trades at the expense of investments. Nothing wrong with trades but don't misunderstand them. Trades are a far more focused way to make and to lose money, as long as

i) you make more than you lose over time

ii) you have a big brother to bail you out when you go down to zero or worse

I'm not knocking trading and for some people it may be the right way to go but for the vast majority of people I meet it's completely wrong. They should be asset-class and methodogically diversified so their risk is controlled. Most of the people that I deal with would be more concerned about your biggest trading losses than your YTD gains. It's different that's all. For this vast majority, especially in this year of expect the unexpected, controlling risk should be THE ONLY GAME IN TOWN - the risk genie is desperately trying to find a way out of the bottle whatever the VIX may say about that right now.

I'm glad that your style works for yourself, Abrak and I really hope that you don't get wiped out but I think that it's very dangerous to postulate that anyone can do this when the results bear out the opposite. On a sample of one, thus far Abrak has been extremely successful at this would be a more accurate statement.

jazzbo: I agree the baddest ass traders don't say much. Just like anything else in life, really. Though I don't think Abrak was trying to show off, he was just trying to make a point.

I agree that talking about investment returns out of the air is pretty crap but I was a little pissed at the couldnt sleep at night without my strategy, yours is a recipe to lose 50%, go and look at the risk rewards.

I will show you exactly why. Flying once accused me of never making an investment recommendation true, I said noone would actually be interested and we were both right.

So here.... http://www.thaivisa.com/forum/Dividend-Gro...48#entry3343248

Now on the day I posted that 5 weeks ago STA was trading at Bt25. It reported annual earnings of Bt11 and a dividend of Bt3. Its BV is Bt33. Now in my view that is virtually no risk with very high returns. It has gone up 40% since but it isnt that surprising and still looks cheap. And the real rub is that at Bt25 it looks great but 12 months ago it was Bt8 on a PE of 0.8x current year earnings and 20% of BV. Of course I didnt buy it then though.

There is in my opinion no possible asset allocation decision you can find globally that would have that sort of risk reward ratio at any time (possibly apart from shorting the baht in 1997). Any 8% allocation of your portfolio to yen for instance seems meaningless to me.

If you had found it at Bt8 you could basically put in US$1m and sleep well knowing that you dont have to work for the next 5 years. So to claim that micro has no value added cos everyone is looking for value stocks. And claiming that active diversified global asset allocation is a specialized business with more value added seems quite something when every fund management Group and every broker has teams of people allocated to it. To be honest matching assets and liabilities, risk allocating assets I would have thought is best done by the individual.

And this is not about being clever. An IQ of 60 or above should do. The other stock didnt so well (up 15%) but it was Bt5.25 5 weeks ago and a year ago it was Bt0.7 and it is going to make Bt1.2 EPS this year (and no of course I didnt spot it at Bt0.7.) But I did read an industrial mag where the MD said the company was going to make EPS Bt1 in 2010 while the stock was trading at Bt1.8. So I guess an ability to read is a minimum qualification.

The good news is that all those analysts and fund managers are so busy pushing money around globally into all sorts of asset classes, concentrating on the top 20 stocks in a market of 500 that nobody does anything else. BTW I am not really criticizing the industry, I was a broker and it pays extremely and we help JCON front run the clients and make a ton (only joking JCON.)

[Naam]

If your investment selection means that you favour gold mining stocks and/or bullion then looking to hedge that into Baht is simply common sense if at an individual asset level you can achieve that cost-effectively (depending on the individual deal size I'm not sure whether we might not yet be quite there for many investors seeking bespoke hedges for individual assets).

Also with the possibility of greater future strength for local currencies then I think that it is a little irresponsible not to at least consider these possibilities at this particular time.

please explain the procedure how you would meet with "common sense" Churchill's request. most probably by (using an old german joke) "reaching the living room by entering the basement where coal and potatoes are stored, working slowly up the stairs to the kitchen window and use a ladder from there..."

[Gambles]

The overwhelming bulk of available evidence would actually suggest otherwise, Abrak

I agree. But it sort of explains my underlying dislike of diversification. I actually believe one key to investment success is 'conviction'. On those few occasions you find something really good then make a big bet on it. Why have 30 investments - just have 6-7 that you really believe in and really know well.

[Gambles]

but that does not happen very often

I agree. But it sort of explains my underlying dislike of diversification. I actually believe one key to investment success is 'conviction'. On those few occasions you find something really good then make a big bet on it. Why have 30 investments - just have 6-7 that you really believe in and really know well.

i admit there was a time when i thought being extremely diversified is the non-plus-ultra of investing. the results were a boring time and mediocre yields. presently i am still moderately diversified, 16 positions in three asset classes, as i am not willing to stare ten or more hours at three screens daily. actually the afore-mentioned 16 positions are all in one asset class, namely bonds. my diversification is limited to bonds (AAA debtors) and cash in various currencies, a few high yield / high risk bonds and the basis consists of 6 of my beloved subordinates.

If you want secure capital with a defined income then AAA bonds are the logical way to go. I would suggest that property could also be added to such a portfolio also but that really depends on individual circumstances. 16 positions within an asset class is good diversification as long as they don't have unitary correlation. You have a portfolio that does what you want it to. That is a good match. The same applies to Abrak. The difference is that I know many people for whom Naam's type of portfolio would also be a good fit. I don't know many people who are prepared to take the concentration risks within risk assets that Abrak is. Concentration risk, theoretically at least, becomes less of an issue the further down the risk curve that you move.

Edited March 23, 2010 by Gambles

[Naam]

"Studies have shown that individual investors have generally fared far worse than invstors who use professional advice"

an utterly useless, generalising and unfounded claim! there is no such thing like "individual investor" and neither does "professional advice" exist. but individuals exist who are very successful and professionals exist who are losers and of course vice versa. anybody who claims to have checked empiric data for both is a plain liar because empiric data does either not exist or is too difficult to evaluate.

[Gambles]

If your investment selection means that you favour gold mining stocks and/or bullion then looking to hedge that into Baht is simply common sense if at an individual asset level you can achieve that cost-effectively (depending on the individual deal size I'm not sure whether we might not yet be quite there for many investors seeking bespoke hedges for individual assets).

Also with the possibility of greater future strength for local currencies then I think that it is a little irresponsible not to at least consider these possibilities at this particular time.

please explain the procedure how you would meet with "common sense" Churchill's request. most probably by (using an old german joke) "reaching the living room by entering the basement where coal and potatoes are stored, working slowly up the stairs to the kitchen window and use a ladder from there..."

I don't work at the individual asset level but at the portfolio level we just place a weekly hedge - Baht to asset currency and the cost is the interst rate differential (plus or minus) and an annualised cost of less than 10 basis points. It's imperfect because it's to offshore Baht rate not onshore but that is much better than nothing and very little tracking error over time.

[Gambles]

"Studies have shown that individual investors have generally fared far worse than invstors who use professional advice"

an utterly useless, generalising and unfounded claim! there is no such thing like "individual investor" and neither does "professional advice" exist. but individuals exist who are very successful and professionals exist who are losers and of course vice versa. anybody who claims to have checked empiric data for both is a plain liar because empiric data does either not exist or is too difficult to evaluate.

Naam - there is data available and if you read my comments you will see that I have problems with the data methodology.

So I'm not sure what your point is.

[Gambles]

"Studies have shown that individual investors have generally fared far worse than invstors who use professional advice"

an utterly useless, generalising and unfounded claim! there is no such thing like "individual investor" and neither does "professional advice" exist. but individuals exist who are very successful and professionals exist who are losers and of course vice versa. anybody who claims to have checked empiric data for both is a plain liar because empiric data does either not exist or is too difficult to evaluate.

Naam - there is data available and if you read my comments you will see that I have problems with the data methodology.

So I'm not sure what your point is.

The basic methodology was that platforms that have both self-managed accounts and investment advisor appointed accounts compared the returns of self-managed versus advised accounts.

however as a methodology this is very flawed, there are sample size issues. The best data that we have made the point very emphatically that advisor appointed accounts performed better BUT this is an extremely flawed basis.

[Naam]

If your investment selection means that you favour gold mining stocks and/or bullion then looking to hedge that into Baht is simply common sense if at an individual asset level you can achieve that cost-effectively (depending on the individual deal size I'm not sure whether we might not yet be quite there for many investors seeking bespoke hedges for individual assets).

Also with the possibility of greater future strength for local currencies then I think that it is a little irresponsible not to at least consider these possibilities at this particular time.

please explain the procedure how you would meet with "common sense" Churchill's request. most probably by (using an old german joke) "reaching the living room by entering the basement where coal and potatoes are stored, working slowly up the stairs to the kitchen window and use a ladder from there..."

I don't work at the individual asset level but at the portfolio level we just place a weekly hedge - Baht to asset currency and the cost is the interst rate differential (plus or minus) and an annualised cost of less than 10 basis points. It's imperfect because it's to offshore Baht rate not onshore but that is much better than nothing and very little tracking error over time.

there is hardly any difference nowadays between on- and offshore rates (yesterday USD/THB offshore 32.34 slightly better than SBC's 32.22). if you can hedge with just 10 basis points cost besides interest rate differential i admit it's an excellent deal IF you don't pay each and every time again when you renew/rollover weekly because that is the what my freaking bank demands. i gave up hedging a long time ago and keep THB ~12mm offshore on a monthly basis at 0.90% p.a. which is still more than the 0.25% SCB pays me on the balance of my current account. however, i don't mind the pittance in interest rates as the Baht appreciation vs. EUR is in my case presently between 12 and 15% in 3 to 5 months. anyway, for EUR and USD i am getting ZERO

but whatever... "real" hedging is not Churchill's baby as he does not seem to be experienced enough. no offence meant Churchill!

[Naam]

"Studies have shown that individual investors have generally fared far worse than invstors who use professional advice"

an utterly useless, generalising and unfounded claim! there is no such thing like "individual investor" and neither does "professional advice" exist. but individuals exist who are very successful and professionals exist who are losers and of course vice versa. anybody who claims to have checked empiric data for both is a plain liar because empiric data does either not exist or is too difficult to evaluate.

Naam - there is data available and if you read my comments you will see that I have problems with the data methodology.

So I'm not sure what your point is.

The basic methodology was that platforms that have both self-managed accounts and investment advisor appointed accounts compared the returns of self-managed versus advised accounts.

however as a methodology this is very flawed, there are sample size issues. The best data that we have made the point very emphatically that advisor appointed accounts performed better BUT this is an extremely flawed basis.

my point is that it cannot be proven who has more success.

[Abrak]

The problem, Abrak, is the available data. Studies have shown that individual investors have generally fared far worse than invstors who use professional advice.

The average individual investor account in the US closes with an average loss of US$13,000. The average individual investor in Thailand believes in voodoo, lottery winning numbers and the belief that the stock that they are buying will go up in the next two hours. Fund management data shows that they generally do better than that but that they dont do any better than matching their underlying benchmarks. And dont be to hasty to claim superior strategy investment techniques just because you are employed by a fund management company. Because I presume if the strategy was that successful you would no longer have to work.

And honestly you make ludicrous assumptions of what I do. I do not trade (well ok the odd speculative in gold or whatever) and invest in stocks for a minimum of about a month to about 5 years. I never invest in stocks without visiting the company (or at least sending one of the better fund managers or analysts to see it.) STA I have been invested in for over 9 months visited them twice in Hat Yai before I invested and talk to them on a monthly basis. I will have read the annual report from cover to cover (and in some cases even help write it.) I basically do not like to invest in a company until I know what time the CEO goes for a shit in the morning. Then to say that a company on 1.5x earnings and half book and good growth prospects is not an 'investment' is rubbish - I would go back to school. VERY SIMPLY IF THAT CANNOT BE REGARDED AS AN INVESTMENT ABSOLUTELY NO RATIONAL REAL ECONOMIC INVESTMENT WOULD TAKE PLACE IN THE ENTIRE GLOBAL ECONOMY.

Lets face it most of the stocks you guys invest in you have never even been to see. And as you dont believe much in value added individual stock analysis you are bound to make horrendous mistakes. I mean when TA listed at Bt197 a share it was clearly worth no more than Bt10 but it was a very large stock - perhaps you guys would even buy it simply to reduce 'risk' or 'volatility' of returns. A lot of fund managers did. I went to see a top 20 Thai listed company that had been defaulting on all its debt for over three years and was TMB's largest bad debt. They only started paying interest after launching a US$100m ECD which of course they never repaid.

You have your strategy aimed at average returns with reduced risk and volatility. Most individual investors have a strategy of buying at the top and selling at the bottom. I definitely think yours is better than theirs. Now both you lot dont really believe in doing individual stock analysis. Because I like to really know my investments I make say minimum US$500k investments in a relatively small number of stocks anything less cannot possibly be worth the analysis to work out whether it is worth investing. I reduce my risk by making sure that the company is at least 2x fundamentally undervalued before investing - often they are 3 or 4 times undervalued. Of course you are not sure that these stock even exist. But, of course they do, because the professional investor thinks that a half BV, 1.5x PE stock is not even an investment, and the local punter doesnt even know what BV means.

Lots of investment strategies work. You guys cant use my strategy. But dont go claiming superior strategies because you are a 'professional' at a fund management company. I was an investment analyst for 10 years and now I simply invest because it is simply not worth my while working. You are still working.

Your investment strategy is actually one designed for maximum profitability of a fund management company. You see it is essentially passive but has potential to at least achieve average returns with less volatility and risk. You cannot stock pick and add value because your funds are so large. Local punters dont even understand the concept of stock picking. So there is a huge hole with lots of money to be made.

[flying]

This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

http://economicedge.blogspot.com/2010/03/m...of-century.html

Edited March 23, 2010 by flying

[Abrak]

The overwhelming bulk of available evidence would actually suggest otherwise, Abrak

I agree. But it sort of explains my underlying dislike of diversification. I actually believe one key to investment success is 'conviction'. On those few occasions you find something really good then make a big bet on it. Why have 30 investments - just have 6-7 that you really believe in and really know well.

I have already explained to you that the underlying is totally distorted and irrelevant. So please read carefully 'large funds cannot get value added performance out of individual stocks because the holdings are too small to make a noticeable. There performance will be driven by asset allocation. So I am sort of saying I think I might be good at picking stocks but this cant possibly be of any use to me in a US$2bn fund.

Individual investors with US$10m to invest. Can achieve excellent outperformance through stock picking because they hold relatively significant holdings to their fund size. Given that you guys dont stock pick and retail dont stock pick there are huge opportunities (although I am less convinced you might recognize one.)

[Gambles]

if you can hedge with just 10 basis points cost besides interest rate differential i admit it's an excellent deal IF you don't pay each and every time again when you renew/rollover weekly because that is the what my freaking bank demands. i gave up hedging a long time ago and keep THB ~12mm offshore on a monthly basis at 0.90% p.a. which is still more than the 0.25% SCB pays me on the balance of my current account. however, i don't mind the pittance in interest rates as the Baht appreciation vs. EUR is in my case presently between 12 and 15% in 3 to 5 months. anyway, for EUR and USD i am getting ZERO

Wow they do? How much must that cost in real terms?? Let's all of us just give up all this and become a bank - that would be huge margins and the best bit is that it doesn't matter if we screw up; taxpayers are very generous!

[Gambles]

The problem, Abrak, is the available data. Studies have shown that individual investors have generally fared far worse than invstors who use professional advice.

The average individual investor account in the US closes with an average loss of US$13,000. The average individual investor in Thailand believes in voodoo, lottery winning numbers and the belief that the stock that they are buying will go up in the next two hours. Fund management data shows that they generally do better than that but that they dont do any better than matching their underlying benchmarks. And dont be to hasty to claim superior strategy investment techniques just because you are employed by a fund management company. Because I presume if the strategy was that successful you would no longer have to work.

And honestly you make ludicrous assumptions of what I do. I do not trade (well ok the odd speculative in gold or whatever) and invest in stocks for a minimum of about a month to about 5 years. I never invest in stocks without visiting the company (or at least sending one of the better fund managers or analysts to see it.) STA I have been invested in for over 9 months visited them twice in Hat Yai before I invested and talk to them on a monthly basis. I will have read the annual report from cover to cover (and in some cases even help write it.) I basically do not like to invest in a company until I know what time the CEO goes for a shit in the morning. Then to say that a company on 1.5x earnings and half book and good growth prospects is not an 'investment' is rubbish - I would go back to school. VERY SIMPLY IF THAT CANNOT BE REGARDED AS AN INVESTMENT ABSOLUTELY NO RATIONAL REAL ECONOMIC INVESTMENT WOULD TAKE PLACE IN THE ENTIRE GLOBAL ECONOMY.

Lets face it most of the stocks you guys invest in you have never even been to see. And as you dont believe much in value added individual stock analysis you are bound to make horrendous mistakes. I mean when TA listed at Bt197 a share it was clearly worth no more than Bt10 but it was a very large stock - perhaps you guys would even buy it simply to reduce 'risk' or 'volatility' of returns. A lot of fund managers did. I went to see a top 20 Thai listed company that had been defaulting on all its debt for over three years and was TMB's largest bad debt. They only started paying interest after launching a US$100m ECD which of course they never repaid.

You have your strategy aimed at average returns with reduced risk and volatility. Most individual investors have a strategy of buying at the top and selling at the bottom. I definitely think yours is better than theirs. Now both you lot dont really believe in doing individual stock analysis. Because I like to really know my investments I make say minimum US$500k investments in a relatively small number of stocks anything less cannot possibly be worth the analysis to work out whether it is worth investing. I reduce my risk by making sure that the company is at least 2x fundamentally undervalued before investing - often they are 3 or 4 times undervalued. Of course you are not sure that these stock even exist. But, of course they do, because the professional investor thinks that a half BV, 1.5x PE stock is not even an investment, and the local punter doesnt even know what BV means.

Lots of investment strategies work. You guys cant use my strategy. But dont go claiming superior strategies because you are a 'professional' at a fund management company. I was an investment analyst for 10 years and now I simply invest because it is simply not worth my while working. You are still working.

Your investment strategy is actually one designed for maximum profitability of a fund management company. You see it is essentially passive but has potential to at least achieve average returns with less volatility and risk. You cannot stock pick and add value because your funds are so large. Local punters dont even understand the concept of stock picking. So there is a huge hole with lots of money to be made.

Abrak,

Rather than you & I trading (or should that be investing ) insults about each other's philosophy and approach without having properly looked into it first, I'd rather that you got to understand our model somewhat better and then if you still felt exactly the same come back on here and say so or if we changed your views slightly you came back and and published a more informed critique as there are some of your assumptions that are wide of the mark.

For instance we have performed far, far more strongly against our risk and return benchmarks than you imply. I'd like to open our books to you for you to look at and then hear your views and also see them on the forum too.

Cheers,

Paul

[Gambles]

"Studies have shown that individual investors have generally fared far worse than invstors who use professional advice"

an utterly useless, generalising and unfounded claim! there is no such thing like "individual investor" and neither does "professional advice" exist. but individuals exist who are very successful and professionals exist who are losers and of course vice versa. anybody who claims to have checked empiric data for both is a plain liar because empiric data does either not exist or is too difficult to evaluate.

Naam - there is data available and if you read my comments you will see that I have problems with the data methodology.

So I'm not sure what your point is.

The basic methodology was that platforms that have both self-managed accounts and investment advisor appointed accounts compared the returns of self-managed versus advised accounts.

however as a methodology this is very flawed, there are sample size issues. The best data that we have made the point very emphatically that advisor appointed accounts performed better BUT this is an extremely flawed basis.

my point is that it cannot be proven who has more success.

I would prefer to have better data available on this too.

[churchill]

Broke? Buy a Few Warships, France Tells Greece

http://www.cnbc.com/id/35997958/

It is going to get worse !

Greek Impasse Deepens as Trichet Rejects Loan Subsidy

http://www.bloomberg.com/apps/news?pid=206..._XGqg&pos=1

Edited March 23, 2010 by churchill

[midas]

It is going to get worse !

Greek Impasse Deepens as Trichet Rejects Loan Subsidy

http://www.bloomberg.com/apps/news?pid=206..._XGqg&pos=1

sounds like it going to be worse in Japan

" Compared with Greece, Japan's gross government debt is far worse, at 181 percent of gross domestic product — the highest among the developed countries. Greece's debt-to-GDP ratio is 115 percent ".

Bubble prophet fears new disaster

Economist Noguchi warns soaring public debt may bankrupt Japan, bring back hyperinflation

http://search.japantimes.co.jp/cgi-bin/nn20100319f1.html

[Gambles]

It is going to get worse !

Greek Impasse Deepens as Trichet Rejects Loan Subsidy

http://www.bloomberg.com/apps/news?pid=206..._XGqg&pos=1

sounds like it going to be worse in Japan

" Compared with Greece, Japan's gross government debt is far worse, at 181 percent of gross domestic product — the highest among the developed countries. Greece's debt-to-GDP ratio is 115 percent ".

Bubble prophet fears new disaster

Economist Noguchi warns soaring public debt may bankrupt Japan, bring back hyperinflation

http://search.japantimes.co.jp/cgi-bin/nn20100319f1.html

yes, but it's not quite apples with apples - as in most things Japan has its own way of calculating Debt ratios which in general terms make the Japanese numbers higher, if I recall correctly

[Abrak]

if you can hedge with just 10 basis points cost besides interest rate differential i admit it's an excellent deal IF you don't pay each and every time again when you renew/rollover weekly because that is the what my freaking bank demands. i gave up hedging a long time ago and keep THB ~12mm offshore on a monthly basis at 0.90% p.a. which is still more than the 0.25% SCB pays me on the balance of my current account. however, i don't mind the pittance in interest rates as the Baht appreciation vs. EUR is in my case presently between 12 and 15% in 3 to 5 months. anyway, for EUR and USD i am getting ZERO

Wow they do? How much must that cost in real terms?? Let's all of us just give up all this and become a bank - that would be huge margins and the best bit is that it doesn't matter if we screw up; taxpayers are very generous!

I am generally bemused by interest rates and real rates. How come we can all sit on some of this cash that Governments are making virtually the greatest attempt to render worthless and not even be paid interest. And just remember we are essentially giving it to the most hated, worthless individuals on earth to supplement their bonuses.

I dont really understand what is going on (looks like an incredible magic trick by Bernanke) but it is bound to end in tears. And if it doesnt it bloody well should. Just think about it we had the financial and economic collapse of the US due I believe to various structural problems (1) overborrowing (2) overconsuming (3) bad lending (4) lack of savings (5) large fiscal deficit - I am sure there are a bunch of others. Two years later we find 0% deposit rates 2% lending rates and 3% inflation and -3% real rates. Economists are often incredibly crafty and subtle with their ideas. To me it sounds like one of Sokal's ideas that everyone laughs at.

I mean (1) overborrowing solved by the lowest nominal rates probably since the war lowest real rates for forty years (2) overconsumption solved by low nominal rates negative real rates for the first time in 40 years (3) well lending at 2% when the inflation rate is 3% is just not bad it just sound ridiculous (4) lack of savings by lowest real rates in 40 years (5) large fiscal deficit that it is getting so bad people are worried it wont be paid financed for free. This inherently sound like Greek economics to me. Did anyone actually suggest this as a policy? Finally I thought the last crisis was caused by keeping rates too low too long. Now they are just too low.

Personally the only thing that will make me feel better about the whole thing is if they sack Tarisa at the BoT. Just what was the BoT thinking when it shorted US$60bn worth of baht against the US$.

Anyway this why I think it must end in tears. Deposit rates I dont think will below 0%. One rational person should not lend to another rational for 2% interest so nominal lending rates will fall. Inherently negative interest rates must be unsustainable over the medium term. Why would a bank lend? Shouldnt there be a real interest rate for foregoing consumption today to next year and if there isnt why not buy an asset. Now it promotes inflation so real interest rates might go further negative but it is still not sustainable. I dont believe you could be either a long term economic model or banking model on negative rates.

The one thing we can absolutely definitely say is it creates an asset bubble. You cannot think of any better way of creating a asset bubble but lowest possible lending rates combined with negative real rates. In fact it is by definition an asset bubble (So point no.6 Caused by an asset bubble solved by the most conducive asset bubble conditions eve.) Eventually positive real rates must assert themselves.

Maybe Midas is right and we will see deflation. But if inflation increases negative real rates will increase to excerbating all the problems and increasing the bubble and as rate changes will have to increase further the bigger will be the bust. As I see it there is something terribly artificial about the current scenario.

Average real rates have been 2.5% over the last 100 years. So purely an adjustment to real rate norms would mean that lending rates would have to increase 140% to 5.5%. If we blow the bubble up further the adjustment could be far more. Interest rates at 5.5% would presumably collapse everything.

So deposit rates arent going to fall, lending rates arent going to fall and the more inflation was to rise the harder the landing.

[flying]

None knew this guy Chris Martenson a couple years ago....

Although I listened to his crash course back when the crisis started....

Amazing though that he has gone on to speaking in front of Parliament & London School of Economics, and to councilors and members of the Scottish Parliament

http://www.chrismartenson.com/blog/getting-story-right/36727

[ronz28]

I am currently listening to The Big Short by Michael Lewis and find it to be an interesting explanation of how we got into the Financial Crisis and the techniques people used to make money on it.

http://www.audible.com/adbl/site/products/...UseBVCookie=Yes

even better than No One Would Listen by Harry Markopolos on the Madoff ponzi scheme

http://www.audible.com/adbl/site/products/...UseBVCookie=Yes

Its amazing how the crooks fooled all the due diligence experts, auditors and regulators including the US Securities and Exchange Commission yet others were smart enough to make a ton of money on the failures and frauds or at least avoid losses.