As a continuation of the two articles “Becoming A Trader”, I am prepared to jump into a very delicate subject: finding the balance between the professional trading career and the personal life. Needless to say that one has a better chance of winning the lottery than becoming an accomplished trader and concurrently having a successful personal life. For me, there is no magic one-size-fits-all solution when solving for the optimal balance of the amount of time spent earning money and the amount of time spent with the family. Bottom line, it is all about time, not about money. Whether we are at the beginning of our career or toward the end of it, we are constantly trading our time for money. Everyone knows that the amount of time we have at our disposal is limited and irreversible. If we could find ways to earn more money, we could never make more time or turn back the clock. Continue reading ‘Between Fame And Pain’
Archive for the 'Witty Commentary' Category
Tuesday, Goldman Sachs [GS] reported the first quarter results, with net revenues of $12.8 billion, net earnings of $3.5 billion and earnings per share (EPS) at $5.59. Investment banking produced net revenues of $1.2 billion, while the trading business recorded stellar results with net revenues of $10.3 billion. Commenting on the recent SEC lawsuit, Lloyd Blankfein – Goldman Sachs CEO, claimed that the most profitable investment bank in Wall Street history had no economic incentives for the Abacus 2007 CDO deal to fail, since GS lost more than $100 million on the transaction. Moreover, we have learned that SEC decision was a 3-2 split along the party line: 3 Democrats against 2 Republicans. Unfortunately, there is nothing new under the sun in Washington. Continue reading ‘Believe It Or Not’
Goldman Sachs [GS] is to Wall Street what Ferrari is to Formula One. Last Friday, the investment bank powerhouse was accused of securities fraud in a civil lawsuit filed by the Securities and Exchange Commission (SEC). According to the complaint, in February 2007, Goldman created a Collateralized Debt Obligation (CDO) labeled Abacus 2007-AC1, at the request of John Paulson, a hedge fund manager who earned an estimated $3.7 billion in 2007 by betting against the housing bubble. As per the official statement “Goldman wrongly permitted a client to heavily influence which mortgage securities to include in an investment portfolio”. The SEC also sued Fabrice Tourre, a Goldman Sachs VP who was principally responsible for structuring the CDO transaction and for marketing the deal across the investors. Continue reading ‘SEC vs. Goldman Sachs’
At a hearing last week in Washington before the Financial Crisis Inquiry Commission (FCIC), former Citigroup CEO Charles Prince claimed that he was not aware of the mortgage-related securities that pushed the financial giant on the brink of total collapse. In addition to that, he added that nobody could have predicted that the super-senior tranches of the Collateralized Debt Obligations (CDO) would lose so much money, and the Chief Risk Officer (CRO) and senior traders did not understand the risks the bank took on. Unbelievably, he strongly defended its employees, declaring that Citigroup’s risk management group was among the best on Wall Street. His ultimate explanation stated that the bankers relied excessively on statistical models that could not predict the potential losses and the depth of the crisis. Though Charles Prince was sacked in November 2007, in the same quarter when the world’s biggest bank reported a then-record $9.8 billion loss, he received a severance package worth $40 million. Continue reading ‘CEO Wall Of Shame (II)’
The Asian crisis of 1997, the failure of Long Term Capital Management and Russia’s debt default in 1998 send the crude oil price under the $10 a barrel. Since the beginning of the century, the global demand grew by 3.9% per year, while oil supply struggled to keep pace with demand. There were few major changes in the global oil market (i.e., non-OPEC supply growth slowed, OPEC’s spare capacity shrank, and OECD inventories fell) that pushed the oil price at $100 a barrel, in January 2008. Amazingly, at the beginning of July 2008, oil reached a record high of $147 a barrel. During 2008, the price of energy rose nearly 50%, than it collapsed by 74% during the fourth quarter. Trying to elucidate the meteoric trajectory, traders, analysts, and media talking heads came up with an endless chain of esoteric explanations. Continue reading ‘The Black Gold Rush’
Goldman Sachs, JP Morgan, Bank of America, Morgan Stanley and Citigroup are largely gaining from a slowing in the write-down volume and a Federal Reserve-induced steep yield curve. Investors who bought US bank bonds are also benefiting from banks’ successful raising capital attempts and the repayment of TARP money. For instance, Citigroup put $20 billion back into the Treasury, Bank of America paid back $45 billion, JP Morgan $25 billion, Goldman Sachs $10 billion and Morgan Stanley returned $10 billion. Apparently, there is such thing as a free lunch, as long as a bank could borrow short-term money via the discount window, currently at 75 basis points, and it could lend long-term money at lucrative rates. According to Fed’s data, the net interest margin at larger US banks have increased to 3.38% in 2009, from a record low 2.94% in 2008. Last March, JP Morgan [JPM] was trading at $15, Goldman Sachs [GS] at $47, Citigroup [C] at $1, Bank of America [BAC] at $2.5 and Morgan Stanley [MS] at $15. These financial stocks reached their 52-week highs at astonishing levels: JPM at $47, GS at $192, C at $5, BAC at $19 and MS at $36. Continue reading ‘Banks’ Free Lunch’
Bear Stearns, at one point, the fifth-largest US investment bank, has survived the September 11th attacks, just as it had survived safe and sound other events since its founding in 1923, among them: the Great Depression, World War II and the Black Monday. In the summer of 2007, the maverick firm had to pledge more than $3 billion to bail out two of its hedge funds that had bet heavily on subprime mortgages. On Mar 10 2008, Alan Greenberg – the former Bear Stearns CEO, responding to the liquidity rumors which caused shares to drop 10% in early trading, told CNBC that the liquidity rumors were totally ridiculous. One week later, the 383 Madison Avenue investment bank was offered to JP Morgan for an initial fire sale price of $2. Continue reading ‘CEO Wall Of Shame (I)’
One-Year Anniversary
A year to the day, I took the dazzling initiative of setting up the “It Is What It Is” blog. First and foremost, all I intended was to share with my readers an unbiased and educated opinion about the complicated world of finance. Today I would like to walk through the main topics that I have addressed over the last twelve months. Where should I start? Maybe back in the summer of 2008, when I have been invited to the Romanian Diaspora Conference and where I presented my research paper “Financial Meltdown – Effect on CEE Credit Markets”. The conclusion of my work stated that Hungary, the Baltic countries and Romania are the most vulnerable economies to the global credit crunch. We all know what happened in the following months thereafter. Continue reading ‘One-Year Anniversary’