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I am going to make a bold prediction - we are on the verge of a mass extinction. And as any doomsday prophecy, it is going to be a long one, so brace yourself for a long post.   Late Cretaceous I have spent most of my financial career on the buy side or, as it is formally known, in asset management. And with every passing day my conviction growth stronger that majority of the firms in the sector are dinosaurs waiting for some calamity to wipe them out. They are not your T-Rexes, those two-legged predators were more like investment banks, but rather lumbering giant sauropods. The biggest ones has grown so huge that they are confident their size alone makes them invincible. And the smaller ones think they are sufficiently different from the rest to thrive in their own niche. But they share the same environment, and as tectonic shifts reshape it,  all of them are affected. Mini-Asteroids Waiting to Fall Overcrowded market and lack of genuine product...

That Creepy Feeling About two weeks ago, as I was making myself a cup of tea at the office, I was suddenly overwhelmed by a feeling of déjà vu. August 2019 felt a lot like the August of 2008. Something in that brew was unnervingly familiar, and I don't mean Earl Grey. It was the combination of faltering economic fundamentals with stubbornly rising US equity market, mixed with the unhurried pace of the day-to-day business in the financial industry that touched a nerve in me. Come to think of it, back in 2008 everyone knew there was a lot of debt out there, even though nobody was sure how much exactly. Bear Sterns had nearly gone belly up and was acquired by J.P. Morgan earlier in spring, so the risks were hardly imaginary. Lehman was still around and its executives were criss-crossing the Pacific courting Korea to prop them up by buying a stake. Yet, economy looked good enough. The FT ran a column called Commodities Boom, emerging markets were growing like crazy. So, the ban...

Investment Banking Series Post 7 Roadshows 1. What is it anyway? Roadshow is basically marketing of the firm issuing securities to the potential investors. CFO, CEO and a few more people from senior managers hit the road and make presentations to all kind of investors in both group and one-to-one meetings. The presentation's contents are typically heavily curated by investment bankers to make sure that the equity story is as smooth and persuasive as possible, and they show and tell only the positive sides of their business. There would be an explanation of the existing business, and the expansion plans that will be financed by the proceeds from fund-raising. It is actually also a good opportunity for junior bankers to meet the company that they spend many days and nights to make look good in the pitch book. And the savvy ones would make good use of it to connect with the CEOs and CFOs that in the future may benefit from their investment banking services. 2. Inv...

Asia is getting wealthier, and faster than any other part of the world. So is Japan, but at the slowest pace globally. Global Wealth Tops $135 Trillion as Asia Pacific Growth Surges

まだまだなんだが、ちょっとは良くなったか・・・ 大学生の内定率76.2％に上昇　10月、民間調査

A comment on Bloomberg View article: http://www.bloomberg.com/news/2012-04-08/economists-have-a-lot-to-learn-from-the-weather.html When I first started studying economics back in college, I was stunned: all consumers perfectly rational? Free markets always lead to maximization of utility? It was in a stark contrast to what I have experienced as someone who saw Soviet Union collapse and embrace the free market theology to the extreme. So I asked my professors: how could something this unrealistic explain all the complexity that actually exists? They told me you had to start with some assumptions to see the gist of it, but you can then relax them to arrive to the more realistic ones. To the best of my knowledge, a model that would really explain the real world of economics is still to be developed. But that doesn't seem to bother most of the economists. Neoliberalism (criticized by some bright minds, Joseph Stiglizt one of them) feels more like a religion than a science. Believed...

FSA Wants to Ban "Toxic" Life Settlements : Calling life settlements "toxic", the Financial Services Authority in the U.K. said it  wants to   ban them from being marketed to retail investors. Oh yes, they should - this is not a retail product.

Cayman directors sit on hundreds of boards I was aware of the fact, but not of the scale of this phenomena . Does make you wonder what do these people get paid for... ■

The article in FT titled  Few FoHFs yield value, report says  claims fund of hedge funds are largely equivalent to a random selection of a basket of hedge funds, and fail to generate alpha on the fee-adjusted basis. Maybe. But they do all the dirty work on monitoring, re-balancing and (only the better ones) keeping investors money away from fraud. Whether this deserves 1% of management fees and 10% incentive fees, is indeed subject to debate, but I do believe Fund of Hedge Funds have their own merit. Plus, the paper (of which original could not be obtained) apparently uses hedge fund indices for the analysis. I am sure most people are aware of how flawed these metrics are. Borrowing some statisticians parlance, this "fails to reject the hypothesis" of FoHF value added "within the confidence interval", in my humble opinion. On the other hand, not every Fund of Hedge Funds deserves high praise, with that I wholeheartedly agree. ■

Below is a ling to article in FT: Swiss and US set to clash again on bank secrecy : Reports say Washington has given Bern an ultimatum to deliver further names of American taxpayers with undisclosed Swiss accounts I have no doubts greedy bankers may have used a dirty move or two, but let me get this straight: so, is the US saying that THEIR laws should be applied to bank accounts in Switzerland? Maybe we should apply some Chinese laws to the bank accounts in US? Or maybe some African country laws? The US has serious issues with its supposed global dominance, and trying to regulate what other countries' banks are doing seems a dumb idea to me, given how the US regulatory authorities failed to regulate their own financial system, leading to spectacular blow-ups and dumping billions of taxpayer dollars onto the banks balance sheets. I realize that in this particular case, American citizens are involved, so there may be some justification to these demands, but the very idea that t...

I'd like to share this post on LandThink blog, as I think it summarizes the pay structure and some of the issues in timberland investments very well. How Do Timberland Investment Managers (TIMOs) Make Money? ■

I'd like to cite a good acquaintance of mine. This is what he told us over a beer or two at a hedge funds networking event: We are drinking people with hedge fund problems, not hedge fund people with a drinking problem. Can't help but agree!.. to an extent.

Goldman Sachs just admitted they put Russia at the bottom of investment attractiveness within "Big 8" country group, at least within the private equity space. Why am I not surprised?

I took the liberty of commenting on an Alphaville post Death bonds’ unique risks . My comment is as follows: Life Settlements are clearly one of the asset classes you need to be extra-cautious investing into, but I have to disagree with the overall tone of this post, which appears to label ALL life settlement investments as money-losing and/or fraudulent products. Among the many life settlement investment managers I had a chance to speak with, there is a handful of people who seem to know what they are doing, having both the right industry experience and a (audited!) track record to back it up. The bottom line is, never invest into something you don't understand. Do your due diligence (especially if that is you fiduciary responsibility!). Pay attention to the valuation policy (no straight-line appreciation to life expectancy), type of policies (avoid those in their contestable period, be wary of the jumbo policies as they tend not to adhere to VBT), and check if the appropri...

CFA Japan is conducting a seminar on insurance-linked products. The speaker, Mr. Masaaki Katusyama is an industry veteran, with deep knowledge of re-insurance business. He also has the ability to bridge the worlds of capital markets and insurance in a plain and easy-to-follow language. Highly recommended event. Details can be found here: ＣＡＴボンドへの投資 - 金融危機で実証された、分散効果の高い保険リンク証券投資戦略 ■

One passage in this article ( Madoff claims Ponzi scheme’s roots legal ) in FT sent me laughing out loud: "Mr Madoff also blamed institutional clients for failing to ask the right questions and regulators for failing to spot the fraud" So, it's not really HIS fault that investors were defrauded. They have themselves to blame... The man is total nuts. ■

Are you a dog person or a cat person? Well, I don't know about the dogs, but the "cats" have been gaining popularity with investors for some time now. Not that purring furry things, of course, but the Cat Bonds.

トヨタ、販売好転につながるか　電子制御「シロ」判定 やっぱりJapan bashingだったよね・・・

S&P downgrades Japan to AA- : "Yen madness on Thursday — following Standard & Poors’ downgrading of Japan’s credit rating to AA- from AA. Just some hours ago we were discussing with a HF manager what would happen if the JGBs crash. While this is unlikely to be the start of it, the outlook is anything but rosy.

Two days ago I sat the CAIA Level 2 exam. Likewise my post on CAIA Level 1 , I cannot give much detail here, but the overall impression is as follows: Significantly harder than Level 1. More calculations, more detail required. There were again some questions I do not recall seeing answers to in Schweser Notes. Essay questions are not very difficult, but require to list up/describe certain processes/reasons for certain events, so memorizing these lists came in very useful (although I am not sure my answers were accurate enough). As such, I am much less confident in the outcome than I was for Level 1. Will be waiting for the results. RELATED POSTS: Preparing for CAIA Level 2 CAIA Level 1 Exam Comparison of financial certifications CFA and CAIA Designations ■