Im too tired to blog nowadays. Especially after the stone cold stunner of Liza's comments on my post of Nature vs Society (and brilliant ones at that):P. I was going to give a finance post, but man, im too freaking lazy. So instead, I copied paste from desmond's note as we discuss on various financial aspects in a prim and proper way. In other words... 2 idiots trying to act smart. Enjoy.
Desmond's note:
Be it bonds, funds or anything that is sold by banks or institutions, how much do you know about it. Even the money market fund or our banks could be vulnerable.(have you ever thought of it)
Taking insights in the Madoff and now standford ponzi scheme, of what scales are local issues such as sunshine empire.. Fixed Deposits are structured deposits are getting so complex, that risk is taken off the balance sheet and borne by investors such as us, suckers.. While they intelligently keep the investment fees, brokerage fees and fund management fees.(Arbitrage) The clauses state that any small exposure of section11 for a structured deposit, could render the fund worthless(eg. Lehman Bros). The prospectus doesnt even give full details of the companies invested, only the sector. Yup, banks are too big to fail! So without knowledge in the banking and finance, securities or investment sectors, we are all just making the rich richer and safer. Where is the ethics of the finance sectors that we trust so much, should we just revert back into putting our $ into Milo tins?(not promoting Nestle)
Its true that only in crises that we observe the full effects of the risk or schemes.. Only at such times are regulators able to fish out crucial loopholes and compare them with benchmark indexes, question their credibility and freeze their assets. Its always a fight between regulation and financial innovation. Talking about the lag, money and bonuses still leads the way up front, after that, RUN FAST!
Its a game of bluff-Bluff or be fooled. So its not dont invest, if you dunno wtf you investing in, dont! just bloody heck ask someone who knows la, zzz (third person)
PS. I wonder if I can find a banking job after posting this, haha.. Prob update with more figures later.
no way you are getting a job for this man... this is obvious lor... u haven't realli said anithing insightful other than the lure and consequence of a bubble economy. Investors are not suckers... should everyone start being risk adverse and keeping money in tin cans, our global economy will not be even close to the standard we are in, liquidity crunch notwithstanding.
Ethics in finance is like art, you have rely on what you believe is right and wrong. What is unethical to you, is perfectly lawful business to another. Therefore, one can argue that its makes perfect business sense to maximise the profits, otherwise don't get involved in finance. While Im not supporting dubious schemes such as Standford Ponzi or Sunshine Empire MLM, Im just saying it would be downright silly to judge other forms of investment just based on the 1 or 2 rotten apples.
Ethics in finance is like art, you have rely on what you believe is right and wrong. What is unethical to you, is perfectly lawful business to another. Therefore, one can argue that its makes perfect business sense to maximise the profits, otherwise don't get involved in finance. While Im not supporting dubious schemes such as Standford Ponzi or Sunshine Empire MLM, Im just saying it would be downright silly to judge other forms of investment just based on the 1 or 2 rotten apples.
Probably I'll just put some of my thoughts on this issue here too. The biggest problem is the issue of risk and reward. Probably when times were good, no one bothered about risk, only the reward. Now that times are bad, people tend to focus on risk and not reward. That's why you can see the stock indexes in free fall.
The problem with ethics is usually the gray area where the law doesn't cover. With respect to the law-ethics divide, i'll leave you a quote from my text on ethics.
"When men are pure, laws are useless; when men are corrupt, laws are broken" - Benjamin Disraeli
The problem with ethics is usually the gray area where the law doesn't cover. With respect to the law-ethics divide, i'll leave you a quote from my text on ethics.
"When men are pure, laws are useless; when men are corrupt, laws are broken" - Benjamin Disraeli
cool, juz more to write about =)
I oso wan to prepare a doc to compare all the different policies, and to what extend each better or minimal impact
I oso wan to prepare a doc to compare all the different policies, and to what extend each better or minimal impact
Ron and WJ, the ethics part was to contrast between knowledge and playing on the arbitrage risk free return which the financial system creates as profits everytime a person invests.
Which leads to WJ point- if we do not pump in liquidity, how will we grow. free-banking theory? hmmm..
Not that investors are suckers, but we are just playing on a global gambling table.(no link to IR). If we do not calculate our risk, not mathematically, but by not doing our homework, we are gambling! We might as well play scissors, papers, stone. 33% chance its a draw, 33% chance win, 33% chance lose. Assumed under normal situations and no psychology or fixed pattern observed.
'judge other forms of investment just based on the 1 or 2 rotten apples'
there exists every oppurtunity to tamper results, balance sheet restructuring, different performance measures, worse, scam. Such can be minimized to the minimum, just how?
Evidence:Nick Leeson 827m pounds losses (barings bank 1995)
-Hmmm, law? To be cont..
Which leads to WJ point- if we do not pump in liquidity, how will we grow. free-banking theory? hmmm..
Not that investors are suckers, but we are just playing on a global gambling table.(no link to IR). If we do not calculate our risk, not mathematically, but by not doing our homework, we are gambling! We might as well play scissors, papers, stone. 33% chance its a draw, 33% chance win, 33% chance lose. Assumed under normal situations and no psychology or fixed pattern observed.
'judge other forms of investment just based on the 1 or 2 rotten apples'
there exists every oppurtunity to tamper results, balance sheet restructuring, different performance measures, worse, scam. Such can be minimized to the minimum, just how?
Evidence:Nick Leeson 827m pounds losses (barings bank 1995)
-Hmmm, law? To be cont..
Ron, behavioral finance, market over and under reaction leads to opportunities for contrarian and momentum strategy depending if the asset has been over or under priced. Through Efficient market hypothesis, the market should accurately reflect the states of the publicly available situation and self correct through competition. Fear exist just so that the risk we take is more and higher future returns, so we are indeed compensated. Other than naked short selling, haha..
Damn, I lack the law part for argument. But too much twisting on procedures, even money laundering. And its crazy debating with lawyers. We can link it to crime* instead for the discussion.
My stand is still defensive on the investors point of view as victims of the financial system.
Cool, direct application of knowledge. But all we stated so far is of a systematic and economic viewpoint. Damn hard to use direct Finance concepts in an argument.
Damn, I lack the law part for argument. But too much twisting on procedures, even money laundering. And its crazy debating with lawyers. We can link it to crime* instead for the discussion.
My stand is still defensive on the investors point of view as victims of the financial system.
Cool, direct application of knowledge. But all we stated so far is of a systematic and economic viewpoint. Damn hard to use direct Finance concepts in an argument.
Well... Finance is a subset to economics... so nothing wrong there...
Here is the thing... The argument for free market forces in linking to the Efficient Market Hypothesis is severely flawed due to numerous factors. Many of these factors are based on human error and judgement, and the intervention of regulation. A good example is the 700+ billion US$ economic stimulus package in an effort to help (directly or indirectly) failing banks. The interesting thing abt crisis is that it streamlines the economy of a country, making it more efficient through a financial survival-of-the-fittest type of environment. If perhaps the banks were allowed to fail, perhaps that would streamline the already-frail banking industry to be more resistant to future bank runs or liquidity crisis.
In truth, there is no real right or wrong answers, just unproven theories until someone has the balls to test them out.
Here is the thing... The argument for free market forces in linking to the Efficient Market Hypothesis is severely flawed due to numerous factors. Many of these factors are based on human error and judgement, and the intervention of regulation. A good example is the 700+ billion US$ economic stimulus package in an effort to help (directly or indirectly) failing banks. The interesting thing abt crisis is that it streamlines the economy of a country, making it more efficient through a financial survival-of-the-fittest type of environment. If perhaps the banks were allowed to fail, perhaps that would streamline the already-frail banking industry to be more resistant to future bank runs or liquidity crisis.
In truth, there is no real right or wrong answers, just unproven theories until someone has the balls to test them out.
To the part about gambling, it is simple. If you dont do your homework, you will take on unnecessary risk, and you have to be willing to pay the price. You also have to accept the reality of the situation of the economy.
In truth, nothing dealing with big money is realli perfect in the ethical sense, bt the advancement of technology combined with the strict policing of trades has lowered the usage of money scams, accounting fraud and dubious schemes. True, they do exist, some even to large scale. But from what ive seen, most firms have actually left the fraud or scheme worse off when they went into it (see Enron fraud). Perhaps the best type of free market policy is to allow market forces to operate under the watchful eyes of the law.
If you ask me, to introduce ethics into financial world is equivalent to playing a piano to a bull. The concerns of ethics has to be upheld by policymakers and enforcers, but the actual traders will always feel that money-making is their right.
In truth, nothing dealing with big money is realli perfect in the ethical sense, bt the advancement of technology combined with the strict policing of trades has lowered the usage of money scams, accounting fraud and dubious schemes. True, they do exist, some even to large scale. But from what ive seen, most firms have actually left the fraud or scheme worse off when they went into it (see Enron fraud). Perhaps the best type of free market policy is to allow market forces to operate under the watchful eyes of the law.
If you ask me, to introduce ethics into financial world is equivalent to playing a piano to a bull. The concerns of ethics has to be upheld by policymakers and enforcers, but the actual traders will always feel that money-making is their right.
Crises are different from market correction, being more of systemic risk. Survivor of fittest, over-competition, induces more profiteering leading to greed and financial innovation for the wrong reasons. Letting the banks fail would be as good as our money being hedges for bank losses.
Well, not really into nationalisation of banks, but if there would really be greater availability of risk free deposits, sets the clear difference between them and investment banks. The investment banks would have to offer higher interest, to compensate the risk taken. But the policy makers would have to rake their brains earning the required returns, and clearing short term demand for withdrawal. Would also greatly slow down the development of the banking sector.
Den again, are we growing TOO rapidly beyond control? We take steps controlling money supply. Hmmm, how does a govt control growth? taxes too obvious, haha..
*Ethics-Finance, where $ involved, just no ethics, concluded, haiz..
Well, not really into nationalisation of banks, but if there would really be greater availability of risk free deposits, sets the clear difference between them and investment banks. The investment banks would have to offer higher interest, to compensate the risk taken. But the policy makers would have to rake their brains earning the required returns, and clearing short term demand for withdrawal. Would also greatly slow down the development of the banking sector.
Den again, are we growing TOO rapidly beyond control? We take steps controlling money supply. Hmmm, how does a govt control growth? taxes too obvious, haha..
*Ethics-Finance, where $ involved, just no ethics, concluded, haiz..
When banks fail, there will be loss of jobs, money, angry customers, etc. But that as opposed to trying to keep banks who had made poor business decisions afloat? Banks are businesses still, we have to remb that. So if poorly run banks are repeatedly resuscitated by govt funds, wont that suck out more of the people's money as compared to the hedges? Its a painful but necessary in my opinion.
The thing about crisis is that is does streamline the economy, making it more efficient. Poor performance workers are retrenched, prices are lowered, poorly run businesses fail, which leads to a drop in that 'over-competition' u mentioned. The best companies emerge, generally reinstating consumer confidence and a recovery in the economy in general.So, in a way, an economic crisis is a form of market correction, if govts would just let it. True, profiteering does exist in a greater extent, but it is not as if the country's enforcement agencies suddenly disappears.
The thing about crisis is that is does streamline the economy, making it more efficient. Poor performance workers are retrenched, prices are lowered, poorly run businesses fail, which leads to a drop in that 'over-competition' u mentioned. The best companies emerge, generally reinstating consumer confidence and a recovery in the economy in general.So, in a way, an economic crisis is a form of market correction, if govts would just let it. True, profiteering does exist in a greater extent, but it is not as if the country's enforcement agencies suddenly disappears.
Cool, you should read up on islamic banking. Try 'Revving the Islamic Finance Growth Engine by Karyn Wang'. We cannot assume govt money=people's money. Yup, its taxes, but directly affected. We can just move or just take PR for example.
Mergers and acquisitions, haha, damn, skipped that lect, lol.. KK, i got half of the stuff up, so i will re-draft den discuss again. At least facebook has some uses, lol
Mergers and acquisitions, haha, damn, skipped that lect, lol.. KK, i got half of the stuff up, so i will re-draft den discuss again. At least facebook has some uses, lol
Well, even if govt money does not = people's money, a bankrupt govt will mean bad news to the people. There are discrepancies in terms of definitions, but for the sake of this discussion, i dont think the details are realli necessary.
Cool, look forward to it... tho I prob shld spend more time studying n less time going facebook and replying your crap..
Cool, look forward to it... tho I prob shld spend more time studying n less time going facebook and replying your crap..
Haha, to start a journal, you gotta have a starting point to work towards ma =)
Just a last note. There is absolutely nothing wrong with securitisation leading to the current sub prime induced credit crunch to recession.
Securitisation, the process is in simply termed moving of assets off balance sheet for the banks. Well, technically, there is no wrong between sharing of risk with insurance companies on toxic debts, rating of agencies who risk their reputation and consumers who share the risk with banks for higher returns. BUT, they are now, transferring risk and NOT sharing risk. So when the sub-prime hit, someone must fail/fall. If not the banks, not the insurance companies, not the agencies, and obviously not STUPID consumers like us, who does the debt go to? Innocently, the government, lol.. Too big to fail, or doomed to fail.
Im not going to say who is right and who is wrong. I think both of us have too little knowledge on the subject. So it is really trying to act smart.
Securitisation, the process is in simply termed moving of assets off balance sheet for the banks. Well, technically, there is no wrong between sharing of risk with insurance companies on toxic debts, rating of agencies who risk their reputation and consumers who share the risk with banks for higher returns. BUT, they are now, transferring risk and NOT sharing risk. So when the sub-prime hit, someone must fail/fall. If not the banks, not the insurance companies, not the agencies, and obviously not STUPID consumers like us, who does the debt go to? Innocently, the government, lol.. Too big to fail, or doomed to fail.
Im not going to say who is right and who is wrong. I think both of us have too little knowledge on the subject. So it is really trying to act smart.
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