Quantum of Solace

On Black Monday markets worldwide collapsed by 20%, today we are down just about 9%. Not everything is bad in today's world see !!

In this week's OMG news: I finally managed to ride my first stock to $0.00. I had aggressively bought Wachovia bank-WB when it was part of the financial rally early last month, managing to make a killing as it moved from the 9s (bought a big chunk at 10.x) to the 20s. Even booked a big chunk of those profit, but still held onto a fair number of shares. And today it is at $1.84. Life is good. Oh and yes the market is a bitch.

Cuurently: On life tilt. And contemplating moving my whole equity-portfolio to my poker accounts. To put it in perspective, ROI in poker 35% (essentially it means that on an average everytime I play an online poker game I make $45, extrapolate that to well over several thousand games), ROI in stock (YTD): -13.5%. Did I say life tilt??

United Sovereign Socialist States of America and $700 B

“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency”

Yes this is one of the lines in the current 700 billion USD bailout-bill that the Treasury Sec of the United Sovereign Socialist States of America, formerly known as USA, Henry Paulson (formerly of Goldman Sachs) has sent to the Congress for immediate approval. Please re-read the sentence and try for a second to grasp its ramifications.

What this means is that once the bill is passed putting 700B of the taxpayer's money at super-risk,neither the secretary, nor the financials institutes who would be bailed out, are in anyway accountable to the people for either their past actions (no judicial hearings, no congressional hearings on their shady dealings) or for their future actions (meaning we will have no idea where/how/whether the 700 B will be used).

Now for those who are still unclear of what some of these so-called "shady" dealings that the big financial instituions have been practising for so long (out of pure greed) heres a primer (for all you mba applicants/students/alumni/b-school adcoms/faculty, remember while reading , that business ethics is something that the mba machinery has preached like for-ever, to me at this point it looks like eye candy at best, at the end of the day what matters to the mba machinery is $$$$ and nothing else):

• Sub-prime : This is something we all know, but the real problem arose when Lehman and its clique developed financial instruments via which they started trading these mortages as equities.
• Credit Swap: AIG owns a piece of a $500 million sub prime paper (packaged and sold by Lehman), but it aint sure whether the mortagee can pay him back. They go to a $100 million Hedge fund and ask him to cover/insure this mortgage they are holding. Now the insurer (the hedge fund here) has to provide some collateral, usually of the same value as the object being insured (500 mill). But the hedge funds get greedy, AIG hopes no one will notice, and a 100 mill hedge funds acts as an insurer for a 500 mill package. This is credit-swap. Currently the credit-swap market is worth 45.5 trillion dollars (twice the enitre worth of the whole US stock market).
  
• Leveraging : A typical Hedge fund takes 2% of Asset under management (AUM) as management fees and 20% of all profit as benefits packet. For a 100 mill break-even hedge fund that means that 2mill is what the fund-runners get. But hey, thats monopoly money on Wall street. Sheeeeshh. Hold on, suppose we leverage 10:1, so now instead of 100 mill AUM, our books will show we have 1000 mill AUM. What about our management fees, oh yea they went up 10 fold too. Lehman. Goldman, Merryl and the whole brotherhood was leveraged upto 30:1.
  
• Coming soon to a Wall street near you: ARMs (adjustable rate mortages), credit defaults, retail non-housing loan defaults etc etc.
  

But unfortuntaley the near Armageddon that these financial executives have brought in has not yet ended. With the govt sponsored free money (a mere 700 billion) that will soon be in Wall street heres how the bankers are reacting to it (via NYT)

• Wall Street is lining up at the trough for a piece of the action, lobbying to run some of the $700 billion fund — and take huge fees — for their own mess.
• And then there is the jockeying among the banks so they can sell their absolute worst stuff to the government — even loans that have nothing to do with mortgages — and change the rules in the process. The Financial Services Roundtable, which represents big financial services companies, wrote an e-mail message to members on Sunday suggesting, laughably, that “the government bid for the assets should not count as a mark-to-market value for accounting purposes.”

Next time some Bschool reps start preaching about their new course on the ethical business, be prepared for some chosen profanities coming your way. Oh and in the meantime, for those of you still writing your essays, please dont forget to leverage your lies 30:1 or more. I know I'll be doing it. After all its an excellent prep for the business world, especially the finances.

When pictures say a thousand words

For many of us wannabe MBAs, especially those interested in finance, the week of Sept 12-Sept 19th was a once-in-a-lifetime joy(?)ride. Call it a black swan, call it the beginning of the end for I-banks, call it a mere blip for the think-long-term advocates, call it whatever you want, but sure as hell this was one unforgettable week (actually this is turning out to be one unforgettable year !!).

If you fell asleep on the 12th. and are just waking up, heres a view of last week's mayhem (via tradermark):



Interestingly inspite of the absolute carnage in the market (driven almost in whole by the financial crisis), on Friday Sept 12th (week before the carnage) the S&P 500 closed at 1251.7 and on Friday Sept 19th it closed at 1251.3. So if you were truly asleep ala Rip-Van-Winkle, you would have woken up a week later, fired up google finance, and said to yourself "Blaaah, what a boring market, the indices havent moved an inch". Is anybody reminded of the Japanese markets of the mid 90s ?

As I get ready for my MBA apps, I wonder how this market will effect the ROI of a 150k+ MBA education. Will it be something like this for us fin wannabes:



In this week's OMG news: I won a seat via an online mega-satellite (1k buy-in) to the Europeon Poker Tour-London No-Limit-Holdem Championship event, starting October 5th at the Victoria Casino, London. By winning the satellite, I get my buy-in (10k pounds) for the tourney waived, free hotel, free food, free air-fare. I only need to get the visa and everything else is pretty much taken care of, EXCEPT of course freaking work. With a bunch of projects being worked on, my manager is going to flip out if I ask for vacation, lets see how things work out. If I cant make it to London, then I can probably keep the value of the seat I won.

Diamond and Kashyap from GSB on the current market

There is an interesting piece at the Freakonomics blog, where Doug Diamond and Anil Kashyap from the GSB give us a rundown on the current turmoil in the financial sector. They talk about why Lehman had to fail, Freddie and Fannie had to be rescued, AIG and the bleak scenario going forward for the fin service sectors.

A part of this post for the utter layman goes like this:

I do not work at Lehman or A.I.G. and do not own much stock; why should I care?

The concern for the man on Main Street is not the bankruptcy of Lehman, per se. Rather, it is the collective inability of major financial institutions to find funding.

As their own funding dries up, the remaining financial firms will be much more cautious in extending credit to normal firms and individuals. So even for people whose own circumstances have not much changed, the cost of the credit is going to rise. For an individual or business that falls behind on payments or needs an increase in short-term credit because of the slowing economy, credit will be much harder to obtain than in recent years.

Yesterday a friend of mine with a spotless credit record, super high credit score was denied a car lease, on the grounds that his credit history was not "sufficient for him to lease a second car when he already has one", his is a 150k income household.

Interesting times ahead.

Lehman Layman

The I-Bank behemoths have been crushed, the S&P has broken the 1175 mark (Bear-Sterns low of earlier this year), the Russian stock market has been halted, the retail investors have their hides nailed to the wall and on the back of these crushing news heres what the compensation/retirement/severence packages for the executives of these greedy, unregulated jackasses look like:

(1) The demi-god of I-banking Richard Fuld,CEO Lehman:
Awarded $71.9 million by his board for bringing down Lehman. Interestingly I learnt via Tradermark that in Lehman's board (supposedly in place to rein in rogue jackass CEOs like Fuld, who is best known for launching scathing public attacks on his executives in meetings) 9 are retirees, 4 are over 75, 1 is a navy admiral, 1 is a theatre producer, only 2 on the board ever had any direct contact with the finance industry. The board has a risk assessment commitee that has met atleast twice in both 06 and 07 (via SEC filings) and to them everything was fine.

(2) Merryl Lynch mariachies:

• Current CEO John Thain took up Merryl's reins in Dec 1 of 07, after being offered a 15 million USD signing bonus. Since Mr.Thain's first day in office Merryl's shares have fallen a mere 60% . If he decides to leave after the merger he is guaranteed another 11 million USD.
  
• Trading Chief at Merryl Thomas Montag who is at Merryl for less than 6 weeks (joined Aug 6th, 2008) is expecting 76 million USD in accelerated compensation of he decides to leave.
  
• Strategy head Peter Kraus who is at Merryl for less than a week now (yes you heard it right) will get 95 million USD for his hard work over the past week.

In the meantime 8%+ of my portfolio has been shaved off in the past 2 weeks. God bless Corporate America.

Apple geniuses now launch the iThing

Attention: All marketing MBA aspirants,students read and read and re-read this post.

Gotta hand it over to the marketing geniuses at Apple It started with the mac followed by the ipod, then a million versions of the iphone (a million models of which are now on their way to be re-called) and now ladies and gentleman :
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APPLE LAUNCHES: iThing (image below)
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From Apple's press release:
World renowned cool company Apple Inc. has launched their latest product, the iThing – a strange, minimalistic handheld device with no apparent features or uses. Now available in stores globally, the iThing is unbelievable sleek, sexy, desirable and useless. While even Apple has admitted that they have no idea what it actually is, this hasn’t prevented millions of Mac fans from lining up outside retail outlets from the wee hours of the morning to be among the first to own one.

Complete coverage and details can be found here. I am off to the Apple stores, how about you???

Vote for OMG

Since September is turning out to be a sucky horrid month, I decided to change careers, hoping for some serious support from the mba blogosphere

Dont forget to vote-->OMG

The Good, the bad and the ugly

I found this flowchart on things to say after sex depending on the quality of the said sex.

Some of the usable ones:

Good sex:
- Animal sounds ---> RAWRRR--> T-Rex mating cry
-Inner sounds------> Mmmmmm, Oh, Oh, Oh Yeaaa
- Romantic--> You are beautiful like the moon.
-Foreign/Subtitled Passion----> Anything french

Bad sex:
-Animal sounds---> Whoooliluii --> Whale mating cry
----> Baah Baaah-> Sheep
-Inner sounds--> Booooo, blaaaahhh, Yabba doobie Dooobe Dooo
-Romantic---> I love (not your partner's name) (not their gender) soooo much
-Foreign/Subtitled Passion-----> Heil hitler

Some addendums on the bad sex (via Amit Varma ):

-Can you atleast cook?
-I need to blog some pictures of this. Say cheeeeeese.
-Done. 100 girls in 100 days. I won the bet. I don’t need to do this any more.

Good luck picking.

World Championship of OP (WCOOP '08)

It is that time of the year, the time to burn a big hole in ones pocket. Today marks the start of the 2008 World Championship of Online Poker over at Pokerstars. It is a 20 day long series with more than 30 championship events and close to 30 million in prize money (schedule below in the image). Unfortunately the start times are horrendous (afternoons in the US) and I will defi not be able to play most of the weekday events (though I havent takes a day's vacation this year, hence ......)

Even then I am playing about 12-15 of the events and thats 15kish straight in buy-ins. Sigh.

Also there are a whole slew of sidebets and being the degenerate gambler, I am part of both the team and individual sidebets over at P5s. Rules for the sidebets :
(1) For teams: 3 memeber teams each team putting up 6k, top ten finishes by each player in a team will be tracked for points, currently there are 7 teams in on the sidebet, winning team takes it all (42k).
(2) Individual: 2k per person, same tracking rules as above, winner take all.

Now for the schedule (courtesy moorman):



Going to be a bad bad month of September, I already feel like a degen donkey. Oh well.

btw are I-bankers/hot-shot consultants allowed to write off gambling losses on their expense account?

Shipppp itttttttt sonnnnnnnn

Got my biggest online tournament score in poker yet---> on sunday--->on full-tilt,


Wait for it wait for it wait for it

$ 7 5 , 0 0 0 . 0 0 0 0

YUPPPIEE ....
SHIP IT ALL BABY
ZOMG
ZOMG

that should pay for a year's tuition at B school and cover one essay's material too right????

weeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee, as you can see OMG has been zapped with an even bigger OMG, would be difficult to concentrate on any stuff over the next few days... forgive thys pottiness for the moment.... though a good part of sunday late night, after the win, was spent at a certain posh gentleman's bar blowing $1 bills with friends ;-), that 75k could have gone way bit lighter by the time the night ended ;-)

but still

OMG