before finance, people created real wealth though selling goods, like produce, or chairs, or toaster ovens.
of course, finance was created 'as a practical application of economics, to help best allocate money where money is most needed'. the stock market, for instance (or any market, bond market, etc). and the nature of money (if you have money, you are only willing to give it up to someone else if you are told you will get more money in return) allows the 'finance' industry to happen.
but that is a sugar coated lie that those stuffy old white guys in suits tell the commoners.
finance is their excuse to make money without knowing how to create real wealth (make and sell toaster ovens). finance is no real skill but only knowledge gleaned from knowing how to dupe other people into handing over their check books. all they need to know is to be one step ahead of everyone else (the public, other 'investors', etc).
finance, money is greed. the corporation known as the united states, wall street, investment banks--greed. and because reward always comes with risk, and risk always comes with reward, the driving force of greed is leading to the impending collapse of the united states financial system, maybe even the world economy.
sad how so many human lives are dedicated to something manmade, synthetic, the most material of all goods--the american dollar--and so many lives at risk of losing their wealth. why can't we all just smoke some pot, sit out on the porch, and have some good wholesome fun?
haha
andy
Showing posts with label investing. Show all posts
Showing posts with label investing. Show all posts
Thursday, June 26, 2008
Tuesday, April 1, 2008
the great game
wow it has been too long since i've written here. just a lot of thoughts that i have need to be put down before i forget.
mark twain once said 'The past does not repeat itself, but it rhymes'. this is proven true with business cycles and simple adages as 'everything comes to an end.' empires rise and fall. if you haven't read the book 'Guns, germs and steel' by jared diamond, i highly suggest it.
it has always been the middle east that everyone fights for. the holy land, to religious people. the crusades, among numbers of other religious wars. but ever since the industrial revolution, it has been energy that people have fought for. but since the struggle to find stable energy (fossil fuels, natural gas) is a zero sum game, violence is inevitable.
cue corporate america's invasion in the middle east. george w bush and his administration duping the american public to secure more oil reserves in a chance to preserve america's dominant empire over the rest of the world. but bush fucked up--his brute force method of taking crude oil from the middle east has created a schism in the american public: conservatives who don't know jack shit and think that the old way is the right way and continue to be the right way, and everyone else who have lost faith in the government, lost faith in the direction of america, and is forward thinking enough to find change.
but will bush's decision to get the oil be worth it? we already have reserves in alaska, and while oil will run dry by 2050 (tentative guess) political leaders around the world are eyeing the last drops. maybe enough oil to sustain the US, but with a myriad of other factors can make the extra oil useless in the big picture.
ever since the housing crisis and the fed bail out of bear stearns, it is pretty evident that america has surpassed its peak (when i say america, i generally mean corporate america because that is essentially how america operates). corporate america is fueled by greed. the rich pigs on top are constantly finding new ways to dupe the average american person (american consumerism is 70% of america's gdp). infomercials, advertisements, etc. in this day and age, it is difficult to go through a day without these external pressures telling you how you are not, how you should be, how society wants you to be, etc. meaningless drivel, it all is (but that is another issue to be addressed).
the bear stearns fiasco screams controversy. pundits say that the fed bailout is a 'tax refund to bankers'. now bear stearns is in a situation that if another financial institution fails, they will have to bail them out. seriously though. bear stearns, the lamest of all of the financial institutions??
ok, now for some technical jargon biznatch motherfucker of how america fucked up.
the summer of 2003. the federal funds rate was at 1%, which means that money is easy to lend and borrow, and alan greenspan was trying to pump money into the american economy. at this time, the standard mortgage rate was 6%. people who were building houses and selling houses could make a heft 5% profit. but then, greenspan raised the funds rate all the way to 5.25% in 2006, and all ape shit busted loose on your grandmother's nuts. but why?
when the difference between the feds fund rate and the mortgage rate decreases, how do home sellers and mortgage lenders make money? increase turn over rate. so they built more and more houses to make up for the lost revenue due to the rising funds rate. but when the rate reached 5.25%, the mere .75% ended up becoming all of the transaction costs and no new money entered the housing market. with all of these empty houses and no buyers, the only place for the market to go is down.
this is the first problem that hit. but the related credit crunch and the financial instability of investment banks are happening right now.
this will continue later
andy
mark twain once said 'The past does not repeat itself, but it rhymes'. this is proven true with business cycles and simple adages as 'everything comes to an end.' empires rise and fall. if you haven't read the book 'Guns, germs and steel' by jared diamond, i highly suggest it.
it has always been the middle east that everyone fights for. the holy land, to religious people. the crusades, among numbers of other religious wars. but ever since the industrial revolution, it has been energy that people have fought for. but since the struggle to find stable energy (fossil fuels, natural gas) is a zero sum game, violence is inevitable.
cue corporate america's invasion in the middle east. george w bush and his administration duping the american public to secure more oil reserves in a chance to preserve america's dominant empire over the rest of the world. but bush fucked up--his brute force method of taking crude oil from the middle east has created a schism in the american public: conservatives who don't know jack shit and think that the old way is the right way and continue to be the right way, and everyone else who have lost faith in the government, lost faith in the direction of america, and is forward thinking enough to find change.
but will bush's decision to get the oil be worth it? we already have reserves in alaska, and while oil will run dry by 2050 (tentative guess) political leaders around the world are eyeing the last drops. maybe enough oil to sustain the US, but with a myriad of other factors can make the extra oil useless in the big picture.
ever since the housing crisis and the fed bail out of bear stearns, it is pretty evident that america has surpassed its peak (when i say america, i generally mean corporate america because that is essentially how america operates). corporate america is fueled by greed. the rich pigs on top are constantly finding new ways to dupe the average american person (american consumerism is 70% of america's gdp). infomercials, advertisements, etc. in this day and age, it is difficult to go through a day without these external pressures telling you how you are not, how you should be, how society wants you to be, etc. meaningless drivel, it all is (but that is another issue to be addressed).
the bear stearns fiasco screams controversy. pundits say that the fed bailout is a 'tax refund to bankers'. now bear stearns is in a situation that if another financial institution fails, they will have to bail them out. seriously though. bear stearns, the lamest of all of the financial institutions??
ok, now for some technical jargon biznatch motherfucker of how america fucked up.
the summer of 2003. the federal funds rate was at 1%, which means that money is easy to lend and borrow, and alan greenspan was trying to pump money into the american economy. at this time, the standard mortgage rate was 6%. people who were building houses and selling houses could make a heft 5% profit. but then, greenspan raised the funds rate all the way to 5.25% in 2006, and all ape shit busted loose on your grandmother's nuts. but why?
when the difference between the feds fund rate and the mortgage rate decreases, how do home sellers and mortgage lenders make money? increase turn over rate. so they built more and more houses to make up for the lost revenue due to the rising funds rate. but when the rate reached 5.25%, the mere .75% ended up becoming all of the transaction costs and no new money entered the housing market. with all of these empty houses and no buyers, the only place for the market to go is down.
this is the first problem that hit. but the related credit crunch and the financial instability of investment banks are happening right now.
this will continue later
andy
Wednesday, October 31, 2007
the american economy
it has been too long since i have graced the blogosphere with my presence. but it was tonight, after a conversation with my roommate mark over a stuffed bowl about the current direction of the american economy, that prompted me to write here.
to better frame this, keep in mind the nature of united states capitalism: the rich get richer (by exploiting their riches to control market movements) and the poor get poorer. also remember that the us federal reserve is a private corporation and that when the fed turned private in 1913, the united states signed its proverbial soul to the devil: wealthy international bankers who, like any banker, always has his best interests in mind (mortgages, for instance: banks will loan you money but ask for collateral--if you default on your payments, the bank gets your house). so the united states became a corporation, built on top of conglomerates, congress, and lobbyists. eventually, the government is working for lobbyists/corporations and not for the everyman, the american.
the infamous 'american dream' as middle school teachers preached to our young minds about their hopes and aspirations always included upward social mobility. for example, any dumbass sitting next to you can strike it rich in america (keep in mind that this mindset was held before the 9-11 attacks--i'll mention why further on). america to everyone, to our parents who immigrated here from china or india or wherever, was a beacon of opportunity. so our parents, being asian, studied hard and were awarded with the chance to live a new life in america, where their first generation asian babies can move up the social ladder (because they don't bear the burden of thick asian accents that have prevented our parents from moving up) and won't have to suffer a life of hardship they endured as children (thank you mom).
so now, thousands of americans are working for their american dreams, wishing that some day their dumbass minds can somehow produce a 'hot' beat or that their dumbass looks can land them a role in a movie. but everyone knows that a standard measurement for social class is the amount of money chilling in the bank account.
so sure, only .0001% strike it rich in the hollywood industry, record industry, professional sports, the lottery, etc. what is a pretty sure fire way of getting money? well, what is the study of money in society? the economy.
one way that people raised money for building infrastructure or buildings were through finding investors and paying dividends. this is the early and basic idea behind companies and shareholders (for short history of stock market, see here). eventually, by the 1980s when trading equities and bonds became really hot (the movie 'wall street' also added to the hype), everybody started getting into it.
around 1980s, investors assessed companies based on their market cap and rate/amount of dividends paid towards shareholders (this was called fundamental analysis, analysis based on the general workings of the company). only a handful at the time were using technical analysis, which was based on huge amounts of data. soon, everybody started seeing the yields of the stock market and wanted to get a piece of that 'get rich quick american dream'. but when people enter the stock market, the general yield goes down. think about it this way--the market is always trying to reach efficiency and when more people are chasing after the same amount of return, each individual will receive a smaller portion of the proverbial market pie.
have you ever heard people say that putting money on the stock market is like gambling? by the 1990s, when the advent of the internet brought about online brokerage systems and any dumbass sitting next to you can put money into an account to start trading stocks, everybody was throwing money at everybody else that the movement of the stock market became essentially random. so random in fact that the second school of thought behind trading equities is that 'everything is random'. bizarre, huh?
so taking that principle and applying that to the finance industry, we notice that this first generation born into immigrant families are all going to graduate with some sort of business degree (of course there are exceptions, you engineering masturbators, but i generalize for the sake of this entry) and enter the finance industry with the american dream deeply embedded into their minds. but with so many people who want to make quick money off any sort of market (equities, bonds, etc) the yield is getting lower and lower. now, by 2000s, most traders use technical analysis over fundamental analysis because we now have the computer power to run simulations. soon, mark speculates that trading will all be done with algorithms (maybe within 10 years) and there will be no need for an actual trader to sit at a computer, looking for a sign to enter the market and then, subsequently, looking for a sign to exit. and of course, paying that trader a lot of money and giving him amenities like a comfortable chair with lumbar support, free snacks, a black car that will take you to as far as northern new jersey, etc. market efficiency and the constant improvement of technology will eventually get rid of human traders.
as if that isn't one factor that i am concerned about (i want to be a trader, that is the whole purpose of my undergraduate degree in finance), the united states economy is tanking. it all began with the subprime mortgage meltdown. before any word got out about people unable to pay their mortgage loans, the dow jones industrial average (the standard used to measure the american economy) kept hitting record highs. is that a sign that america is artificially inflating its own economy, or that american people are just plain retarded? the federal reserve cut interest rates to 4.75% on september 18th and may cut it again tomorrow (today, october 31) to help out the market. but if the feds continue to help out the market, then the dollar will continue to depreciate.
when my parents moved here, they were able to find a nice home and live decently with $70,000. but now, people who graduate and earn the same amount of money can't even find a townhouse to live in (apparently houses in detroit are cheap, if you are interested). the turning point of the united states economy is the 9/11 attacks. it was then when things began turning sour. the federal reserve putting more and more money into the market; corrupt politicians working in their own best interests; enron, world com, and other corporations cooking books and practicing corporate scandals; and everything, especially gas prices, are getting more and more expensive. the quality of life in united states isn't as it once was, the land of opportunity, the land of greatness, where everyone can exercise the freedom of speech. after 9/11 and the patriot act established by george w. bush, the first amendment went out the window. america is becoming shittier by the second. i want to raise my kids elsewhere.
so how can i get the money that i so hunger and thirst for? i can't make much in the united states finance industry (unless i suck mad balls, aka investment banking). its in china's market. china, a young united states, if you will, will soon rise as an economic power. we should catch the wave and make our big bucks before its too late.
so all of you chinese money chasers out there, take advantage of being chinese--the reign of america as the super power will soon be over.
-andy
to better frame this, keep in mind the nature of united states capitalism: the rich get richer (by exploiting their riches to control market movements) and the poor get poorer. also remember that the us federal reserve is a private corporation and that when the fed turned private in 1913, the united states signed its proverbial soul to the devil: wealthy international bankers who, like any banker, always has his best interests in mind (mortgages, for instance: banks will loan you money but ask for collateral--if you default on your payments, the bank gets your house). so the united states became a corporation, built on top of conglomerates, congress, and lobbyists. eventually, the government is working for lobbyists/corporations and not for the everyman, the american.
the infamous 'american dream' as middle school teachers preached to our young minds about their hopes and aspirations always included upward social mobility. for example, any dumbass sitting next to you can strike it rich in america (keep in mind that this mindset was held before the 9-11 attacks--i'll mention why further on). america to everyone, to our parents who immigrated here from china or india or wherever, was a beacon of opportunity. so our parents, being asian, studied hard and were awarded with the chance to live a new life in america, where their first generation asian babies can move up the social ladder (because they don't bear the burden of thick asian accents that have prevented our parents from moving up) and won't have to suffer a life of hardship they endured as children (thank you mom).
so now, thousands of americans are working for their american dreams, wishing that some day their dumbass minds can somehow produce a 'hot' beat or that their dumbass looks can land them a role in a movie. but everyone knows that a standard measurement for social class is the amount of money chilling in the bank account.
so sure, only .0001% strike it rich in the hollywood industry, record industry, professional sports, the lottery, etc. what is a pretty sure fire way of getting money? well, what is the study of money in society? the economy.
one way that people raised money for building infrastructure or buildings were through finding investors and paying dividends. this is the early and basic idea behind companies and shareholders (for short history of stock market, see here). eventually, by the 1980s when trading equities and bonds became really hot (the movie 'wall street' also added to the hype), everybody started getting into it.
around 1980s, investors assessed companies based on their market cap and rate/amount of dividends paid towards shareholders (this was called fundamental analysis, analysis based on the general workings of the company). only a handful at the time were using technical analysis, which was based on huge amounts of data. soon, everybody started seeing the yields of the stock market and wanted to get a piece of that 'get rich quick american dream'. but when people enter the stock market, the general yield goes down. think about it this way--the market is always trying to reach efficiency and when more people are chasing after the same amount of return, each individual will receive a smaller portion of the proverbial market pie.
have you ever heard people say that putting money on the stock market is like gambling? by the 1990s, when the advent of the internet brought about online brokerage systems and any dumbass sitting next to you can put money into an account to start trading stocks, everybody was throwing money at everybody else that the movement of the stock market became essentially random. so random in fact that the second school of thought behind trading equities is that 'everything is random'. bizarre, huh?
so taking that principle and applying that to the finance industry, we notice that this first generation born into immigrant families are all going to graduate with some sort of business degree (of course there are exceptions, you engineering masturbators, but i generalize for the sake of this entry) and enter the finance industry with the american dream deeply embedded into their minds. but with so many people who want to make quick money off any sort of market (equities, bonds, etc) the yield is getting lower and lower. now, by 2000s, most traders use technical analysis over fundamental analysis because we now have the computer power to run simulations. soon, mark speculates that trading will all be done with algorithms (maybe within 10 years) and there will be no need for an actual trader to sit at a computer, looking for a sign to enter the market and then, subsequently, looking for a sign to exit. and of course, paying that trader a lot of money and giving him amenities like a comfortable chair with lumbar support, free snacks, a black car that will take you to as far as northern new jersey, etc. market efficiency and the constant improvement of technology will eventually get rid of human traders.
as if that isn't one factor that i am concerned about (i want to be a trader, that is the whole purpose of my undergraduate degree in finance), the united states economy is tanking. it all began with the subprime mortgage meltdown. before any word got out about people unable to pay their mortgage loans, the dow jones industrial average (the standard used to measure the american economy) kept hitting record highs. is that a sign that america is artificially inflating its own economy, or that american people are just plain retarded? the federal reserve cut interest rates to 4.75% on september 18th and may cut it again tomorrow (today, october 31) to help out the market. but if the feds continue to help out the market, then the dollar will continue to depreciate.
when my parents moved here, they were able to find a nice home and live decently with $70,000. but now, people who graduate and earn the same amount of money can't even find a townhouse to live in (apparently houses in detroit are cheap, if you are interested). the turning point of the united states economy is the 9/11 attacks. it was then when things began turning sour. the federal reserve putting more and more money into the market; corrupt politicians working in their own best interests; enron, world com, and other corporations cooking books and practicing corporate scandals; and everything, especially gas prices, are getting more and more expensive. the quality of life in united states isn't as it once was, the land of opportunity, the land of greatness, where everyone can exercise the freedom of speech. after 9/11 and the patriot act established by george w. bush, the first amendment went out the window. america is becoming shittier by the second. i want to raise my kids elsewhere.
so how can i get the money that i so hunger and thirst for? i can't make much in the united states finance industry (unless i suck mad balls, aka investment banking). its in china's market. china, a young united states, if you will, will soon rise as an economic power. we should catch the wave and make our big bucks before its too late.
so all of you chinese money chasers out there, take advantage of being chinese--the reign of america as the super power will soon be over.
-andy
Wednesday, June 13, 2007
on managing risk
the risk premium is what distinguishes gambling from speculation. investors who are willing to take on risk because they expect to earn a risk premium are speculating. speculatoin is understaken despite the risk because the speculator sees a favorable risk-return trade-off. in contrast, gambling is the assumption of risk for no purpose beyond the enjoyment of the risk itself. gamblers take on risk even without the prospect of a risk premium.
-essentials of investments
i once remember browsing the internet in boredom and coming across a mind teaser puzzle. a professor at a prestigious university was teaching a class about risk management. being an offbeat professor, the final exam consisted of only one question: what is risk? only one person in the class received an A for the exam. what did he put down?
his one word answer: this.
risk plays a major role not only in gambling or investing, but also in life. of course, nobody would create an entire subject devoted to risk had it not been billions and billions of dollars in the finance industry at stake. nobody thinks about daily, mundane risks--driving cars, walking, using the vending machine (50 vending machine deaths per year), etc--mostly because those risks are negligible. imagine calculating the weighted average of the risks associated with driving. although the chances of losing your life is minimal, you cannot place a value on life. but that, by no means, is a reason to sit at home and vegetate in front of your television (what if a meteor strikes your house? or aliens come, abduct you, and probe your anus mercilessly until you die? very possible.) fuck risks. humans are probably hardwired to take risks regardless, i.e. gamblers.
investing is a crapshoot.
-andy
-essentials of investments
i once remember browsing the internet in boredom and coming across a mind teaser puzzle. a professor at a prestigious university was teaching a class about risk management. being an offbeat professor, the final exam consisted of only one question: what is risk? only one person in the class received an A for the exam. what did he put down?
his one word answer: this.
risk plays a major role not only in gambling or investing, but also in life. of course, nobody would create an entire subject devoted to risk had it not been billions and billions of dollars in the finance industry at stake. nobody thinks about daily, mundane risks--driving cars, walking, using the vending machine (50 vending machine deaths per year), etc--mostly because those risks are negligible. imagine calculating the weighted average of the risks associated with driving. although the chances of losing your life is minimal, you cannot place a value on life. but that, by no means, is a reason to sit at home and vegetate in front of your television (what if a meteor strikes your house? or aliens come, abduct you, and probe your anus mercilessly until you die? very possible.) fuck risks. humans are probably hardwired to take risks regardless, i.e. gamblers.
investing is a crapshoot.
-andy
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