Information Arbitrage: Goldman Sachs: Taking a Page from the DB Advisors Playbook

The decision to move Mr. Agus highlights the importance of hedge funds for investment banks because of the potential revenue they can generate and as an option the banks can market to their wealthy clients. Inside the securities division of Goldman Sachs, Mr. Agus puts up the firm’s own capital.

With Mr. Agus’s shift into the asset management division, he and his team can gather money from Goldman Sachs, its clients and outside investors, offering Goldman three benefits: a fund for its clients to invest in, a stream of fees from the funds and the ability for Goldman to put more money at risk — through the hedge fund, and in principal strategies.

Let’s say I own a money machine, which pours money down onto my head. The problem is that I don’t have a suitable hat, which can catch the money so that I can then deposit it in a bank account. I go to my bank and ask for a loan to buy the hat, and they demand a very high rate of interest, because I’m a bad credit. (After all, I don’t have any money – yet.) So raising debt to buy a hat is expensive. But raising equity to buy a hat is even more expensive: my friend Fred will pay for the hat, but only in return for a percentage of all the money that flows into it in perpetuity. I don’t want to pay off Fred for ever, I just want to get that hat.

The answer to my problems is securitization. I go to my friend Tom, and he buys the hat. He doesn’t give me the hat immediately – he keeps possession of it. And whenever money pours in, he takes that money until he’s paid off the price of the hat, plus interest. But his interest rate is much lower than the bank’s interest rate, because he has a guaranteed income from the hat – which is a much better credit than my sorry self. And when he’s been paid back for the hat, I get the hat: it’s all mine, and neither Tom nor Fred owns any of it.

That’s why securitization is a good thing: it’s a way of lowering borrowing costs for companies with bad credit. Which has got to be a good thing.

According to Alpha, the top 5 Asian hedge funds are:

1. Sparx Group, US$6.6b AUM Long/Short & Credit


2. Value Partners, US$4.7b AUM Long-bias Equity


3. Arisaig Partners, US$2.1b AUM Activist


4. Penta Investment Advisers, US$1.9b AUM, Long/Short


5. Ward Ferry Management, US 1.8b AUM, Long/Short

A couple of Chartwell’s seven model ETF portfolios have a small position in PowerShares DB G10 Currency Harvest (DBV) which is up 14% year-to-date. It tracks 10 currencies, going long on the three top tier currencies with the highest interest rates and going short on three currencies with the lowest interest rates. DBV is currently long on the Australian dollar, the New Zealand dollar and the Pound sterling and short on the Japanese yen, the Swiss franc and the Swedish kroner. Then there is the PowerShares U.S. Dollar Bearish Fund (UDN) that track the New York Board of Trades U.S. Dollar Index. This index is the most popular measure of the dollar against other currencies; the Euro has a 58% position; Japanese yen 14%; British pound

“The real contest is always between what you’ve done and what
you’re capable of doing. You measure yourself against yourself and
nobody else.” – Geoffrey Gaberino

Via San Jose Mercury News:

Wham-O changed the name of the Pluto Platter to Frisbee 50 years ago Sunday, flinging a new word into the cultural ether that still conjures images of carefree fun in the park and breezy days at the beach.

And to think Walter “Fred” Morrison, the inventor of the beloved disc, thought the new moniker would never fly.

“I thought Frisbee was a terrible name,” said Morrison, now 87. “I thought it was insane.”

Frisbee instead became insanely popular, making the name as synonymous with flying discs as Google is with searching on the Internet and Kleenex is with tissue.

....one does not draw attention to a nosebleed when one is immersed in a shark tank.


The Epicurean Dealmaker: A Simple Request

An amazing fight between lions, buffaloes and crocodiles. It all starts when the lions catch a baby buffalo. The next thing they know, they are fighting over it with crocodiles. An to top it all off, even after winning the baby, the herd of buffaloes comes back to reclaim their lost son, chasing and hitting the lions.

When a Spanish matador, runs into trouble with the bull he was fighting, a stray dog jumps to the rescue. And this dog is no pitbull or mastiff. It’s a small little dog, wrestling that big bull. That’s why they say a dog is a man’s best friend! Amazing!

I had always wondered whether our perception of fame, talent and beauty is influenced and dictated by the zeitgeist. Maybe we think and feel what we are subconsciously told to think and feel. Even in an intensely personal space like music, we may not be immune to common perceptions. Here is an interesting experiment by Washington Post on this:

....the fiddler standing against a bare wall outside the Metro in an indoor
arcade at the top of the escalators was one of the finest classical
musicians in the world, playing some of the most elegant music ever
written on one of the most valuable violins ever made. His performance
was arranged by The Washington Post as an experiment in context,
perception and priorities—as well as an unblinking assessment of
public taste: In a banal setting at an inconvenient time, would beauty
transcend?

In the three-quarters of an hour that Joshua Bell played, seven
people stopped what they were doing to hang around and take in the
performance, at least for a minute. Twenty-seven gave money, most of
them on the run—for a total of $32 and change. That leaves the 1,070
people who hurried by, oblivious, many only three feet away, few even
turning to look.

No, ....... there was never a crowd, not even for a second.