Derivatives, Goldman, CalPERS & India, oh my!

26.03.12 | george sorosthe inside jobgoldman sachsbankingwall streetobamaforeclosuresbush cheneyharvardcolumbia business schoolderivativessecuritizationcdoabsmbscitigroupmerrill lynchCalPERSBombay Stock ExchangeIndiaCFTC

There are leagues of young men out there just dying to become the next George Soros and this is a scary thing. Is it as simple as becoming hedgie = $$ = girls = ego?  The scary thing is I fell in love with a guy like this and that’s not the kind of man I want to be with. Moreover, the fear I have is that realists like me are perceived to be pessimists while others are happily moving along, not aware that the system wants you to watch sports and buy shoes so you won’t pay attention to what is really going on. 

What is really going on is not much different than was before. More people are employed, yes. There are tons of homes on the market and reportedly people are quitting their jobs to buy foreclosures, according to Reuters. More worrisome, though, is my concern that the banks are buying Obama. According to The Washington Post, Obama’s campaign fund is benefiting from the banks.

Here are some news pieces and/or press releases I deem noteworthy now b/c they show not much is changing. So while you cozy up in front of your 52” flat screen, I hope you have a nest egg because there’s no loyalty in a nation where there’s no accountability or morals driving big business. Yes, there is corruption but we also owe it to ourselves to be prepared for the future. Maybe not have the second kid you want for another year, maybe not buy or lease that new car, maybe buy generic…

The Guardian reports that Goldman $achs is thinking about building a new UK HQ, and among the architects it is talking with is the famed Lord Foster. 

Romney’s campaign is basically Bush-Cheney people, from No Child Left Behind to Columbia and Harvard econ brains. Joy. 

Oppenheimer announced that its “Institutional Equity Derivatives group has hired three experienced senior professionals to expand the capabilities of its options desk.”

According to Bloomberg, ”Italyholds derivatives contracts on about 160B euros ($211 billion) of debt or almost 10% of government securities in circulation, a government said.”

According to Reuters, Goldman $uchs Group will hold its first board meeting in India this week. 

Bloomberg reports that Shittygroup Citigroup and Bank of America Corp. have joined the Bombay Stock Exchange’s Derivatives platform. 

I don’t know how credible this website Watchdog.org is, but it is reporting along with CalPensions.com that CalPERS, among or possibly the nation’s largest retirement fund, is a funding level in the low 70s. Why does this matter? Because if it’s true, those Cali residents better hope their employers can pay their salary because they aren’t retiring any time soon. Might as well bump the average U.S. retirement age to 70. 

CalPERS will soon use a standard form for PE reporting, according to the Sacramento Business Journal.

NYTimes DealBook reported the Commodities Futures Trading Commission voted 4 to 1 last week for new rules aimed at driving more oversight and transparency within the derivatives market. Pop the top for the complete story. 

One excerpt from the DealBook article: “The new measures impose a battery of risk-management rules on banks and other firms that trade derivatives. Under the regime, firms must conduct “stress tests” of all potentially risky customer positions, evaluate their ability to meet margin requirements every week and test all lines of credit yearly.”

Is the Middle Class a Dying Breed?

10.02.12 | BofAgini indexAmazonViacomHourglass theoryDr. Farhoud KafiLouis VuittonChinaIndia

There are tents in Harvard Square in front of designer stores and they are not protesting the 1% or Goldman. They are people camping out, probably because the cops patrol Cambridge Commons and only so many will fit under the canopy of the BofA (ironic huh?). I found myself feeling guilty for checking out window displays after passing by folks huddling for warmth after possibly getting their daily dose at the meth clinic one subway stop away in Central Square.

Maybe there aren’t more homeless but just a shift in their patterns. Brattle Street is less obvious than JFK by The Pit or the park, where a handful still spend the night in sleeping bags. Homeless are nothing new but it struck me to see the locals in their new regular spot after a day when the stock markets soared on economic news and tech news/rumors, from Amazon and Viacom, to Google’s impending cloud and streaming ventures. Because my fear is that the economists are right — the middle class in America is a dying breed and it’s not a slow death.

Countless writers and economists have tackled the concept that America might be losing its crown and will soon no longer be viewed as king of the “free world.” Along with the crown will go a healthy middle class. The West and the Rest or the Markets Collide — it all says the same thing and aligns with the popular Hourglass Theory from Citi (also see Gini index)- that while the Third World grows, we have reached a plateau. If we plateau as a nation, than no new resources or jobs will be created and what will happen to the cash strapped, the unemployed, the uninsured?

Part of the shift in the power in the global community is tied to the middle class. Historically this community didn’t exist in places like China and India but the push for Mainland to boost domestic consumption came from their desire to decrease their reliance on Western purchases. The peasants can’t buy iPhones and L’Oreal products, and it’s not enough that the rich go crazy for Louis Vuitton. An interesting note my econ professor, Farhoud Kafi, mentioned, was that most of China is funded by foreign investments so even though they are growing, it’s at least partially thanks to our moving operations abroad. But, he added, once their middle class starts buying more, we may no longer have access to the goods at the cheap prices we now get.

The other night Paypal Founder Peter Theil spoke with Niall Ferguson at Harvard’s Kennedy school. He bottom lined this situation in one sentiment. He said that in the past people spoke of the First World and the Third World. Now they speak of the Developed World and the Developing World. Essentially, he said if America, Europe and Japan represent “Developed,” than we have no more growth left in us. If we do not grow, there is no new product or money but simply a shift of resources between people.

Average is no longer enough, or so argues The Atlantic. The truth is prior generations might have benefited from the post WWII growth that stemmed from rebuilding, the period when Deming helped Japan bounce back, while America too began working on its renaissance. But now working the line isn’t enough, there’s no gold watch, we all need to innovate and yet we’re more exhausted than ever.

I have no answers. Somehow now I feel a bit comforted that this is all happening while I’m in B school because even though the U.S. government is charging me 6.8% to borrow to educate myself, I know it will change me. If The Atlantic is right, what I have to offer without an MBA may not be enough in the world at large. If I don’t change anything, than I too could plateau and I can’t have that.

I have no answers. I don’t know how the world, this country, can save itself. I could say we should use more technology in schools but who will pay for it? I could say we need more technical and vocational schools as alternatives to college but who will develop these programs? I could say we need more condoms, more mentoring programs, more student entrepreneurship programs but who will do the outreach? I suppose at the very least I can promise myself I won’t take any more from the system, the government, than I need and that in the future, when I have more than I need, I will help lend my knowledge and money to those that can develop these programs. And I can say I won’t lose hope, I won’t make myself see right through the homeless, I won’t give up on the junkies, I won’t give up on Obama, and I will do my best to better myself and support programs working to fill the aforementioned voids.