Modern finance theory, whichever methods we examine, bases its analysis on the risk-return trade-off. It is a pairing which, through being repeated time and time again, we have come to regard as unique and inseparable, and upon which investment decisions are based. Any proposal offering a more attractive return than is normally achieved tends to prompt the question «but what is the risk?», without delving any deeper.
Banks, for example, when recommending investments to their customers (without going into the quality of what they are selling), do not usually stop to consider whether the product is suitable for the customer. Thus, for example, we come across cases – which, unfortunately, are true – such as that of an elderly lady whose savings were invested in leveraged Argentine debt, to make matters worse, in the pre-corralito era; or that of a top-flight footballer whose entire salary for that year had been invested in dollars at an exchange rate of 1.15$/€, because «it was a magnificent opportunity». But there’s no need to go to such extremes. I’m sure most of you have, on more than one occasion, been approached by a bank adviser offering their products on the grounds that they offer good prospects for returns, that the investment risk is minimal, and so on. At best, as the height of a banker’s expertise, they might recommend investing small amounts in higher-risk products – a practice known as «asset allocation». But realistically, in most cases they will simply recommend buying whatever product or fish they happen to have on offer at the time.
However, all these analyses lack a third element, without which the investment decision is completely flawed: personal circumstances – those intangible factors (it is not possible to quantify whether an individual is married with children, or their aversion to investing in foreign currencies) which, in our view, must undoubtedly form the basis of any decision. Simply overlooking them without giving them due consideration strikes us as such a significant error in the strategic planning of family wealth that it jeopardises its sound performance over time.
Let us take the example – highly simplified but illustrative – of the Christmas Lottery, in which the variables of return and risk are clearly defined and well known to everyone: it is possible to win a huge prize, but the chances of this happening are very slim. So, what makes someone compulsively buy every ticket offered to them by family and friends one year, yet buy none the following year? Of course, this decision would seem illogical on the face of it, unless one takes the circumstances into account. Perhaps the person is getting married and has decided not to play in order to save money for the wedding, or perhaps they have decided to put all the money they were going to spend into a savings account, tired of seeing their euros – and their hopes of becoming rich overnight – vanish into thin air year after year.
For this reason, diversification – or the allocation of proportional shares of assets based on the risk-return ratio (Asset Allocation) is merely the tip of the iceberg when it comes to the circumstances surrounding investment, which take into account not only the portion of one’s assets to be invested but also a myriad of factors intrinsic to and affecting the investor:
Age, marital status, your propensity to spend (or save), whether you have children, your future aspirations, your career prospects, how many times a year you wish to travel, the additional enjoyment that can be derived from an investment (a flat on an exotic beach), the success or failure of previous investments in terms of the proportions and risks defined by your Life Balance and your potential for reinvestment, the strategic timing of the investment itself, as well as the proportion of assets allocated – these are just a few examples of what constitutes the circumstances surrounding an investment. As you can see, as we go through these circumstances, the simple risk-return ratio becomes less of a key factor in investment decision-making. To make this clearer, let’s take an extreme example: a person with a stable income spending 3 euros on the ‘Primitiva’ lottery, with the prize money intended to pay off a relative’s mortgage who is in financial difficulty, is by no means an aberrant investment, whereas betting half the annual benefit of an unemployed person with ten children, who would use the prize money to buy a yacht, is not only absurd but immoral and sickening. However, the risk-return ratio on which most bankers and financial advisers tend to rely exclusively is identical.
Carrying out an analysis of the individual’s (or family’s) circumstances forms the basis for drawing up the Life Balance, which, like the circumstances themselves, will change over time and, furthermore, helps to prevent poor investment decisions. Without the benefit of this analysis, the circumstances determining the investment could be as simple as the mood we are in on the day the decision is made.
Let's throw a few drops of humour into the sea of financial tears to make the daily news more bearable for our readers. Some of you will already be familiar with it because it is an alleged recent publication of an advertisement in the US business press. It was sent to me by a good friend whose company (Husesolar), by the way, sets the tone for the evolution of the renewable energy sector towards other segments such as the Biogas. And about which we will soon publish an article.
That said, let's take a look at the announcement published in the US electronic financial press. I have taken the liberty of polishing the English translation a little. The ad in question reads as follows:
«I am a beautiful girl, wonderfully beautiful, 25 years old. I am well educated and classy. I want to marry someone who earns at least half a million dollars a year. Are there any men among the readers of this portal who earn $500,000 or more? Maybe the wives of those who win that can give me some advice. I've been the girlfriend of men who make 200-250k, but I can't go above that and 250k isn't going to make me live on Central Park West. I know a woman, from my yoga class, who married a banker and lives in Tribeca, but she is not as beautiful as me, nor is she smart. So what did she do that I didn't? How can I get to her level?»
Rafaela S.
So much for a peculiar advertisement in a business newspaper, in the country where all this is possible. But pay attention to the response from a reader and wealthy investor:
«I read your query with great interest, thought carefully about your case and made an analysis of the situation. First of all, I am not wasting your time, as I earn more than 500,000 per year, and that said, I consider the facts as follows: Putting the roundabout aside, what you are offering, seen from the perspective of a man like the one you are looking for, is simply a lousy deal. Here are the reasons why:You provide the physical beauty and I provide the money.Clear proposal, without between the lines. However, there is a problem: For sure, its beauty will fade and one day it will end, and most likely my money will continue to grow, more and more.
So, in economic terms, you are a depreciating asset and I am a dividend-yielding asset. Not only do you suffer depreciation, but because it is progressive, it always increases! To clarify further, you are 25 years old today and you will continue to look beautiful for the next 5/10 years, but always a little bit less every year, and suddenly if you compare it with a photo of today, you will see that it will already be aged. This means that you are now ‘on the rise’, at the ideal time to be sold, but not to be bought. To use Wall Street parlance, whoever has it today must have it in a ‘trading position’, and not in a ‘buy and hold’, which is what you are offering it for?Therefore, still in commercial terms, a marriage with you (which is a ‘buy and hold’) is a marriage with you (which is a 'buy and hold'). is not a good business in the medium/long term. However, renting it can be and, in social terms, it may be a reasonable business we can ponder and pretend.I think, through certification of, how ‘shapely, classy and wonderfully beautiful’ she is, I probable future As a lessee of this ‘machine’, I want to do what is standard practice: I want to do a test drive to make the possible operation more concrete. I can schedule it. Jack Paul HendersonInvestor.
Funny advert and funny response, no doubt. But let's go a little further in our reflection: Perhaps some stock market investors and, above all, their bank managers or those of the financial institutions with which they risk their money, have been thinking for months or years that the right decision is to marry this lady. Perhaps they think that those incipient wrinkles are about to disappear and that in the long term their wives will always gain in beauty, even though they may age in the short term. And it is quite possible that in that particular case they will one day, but perhaps your client will not live long enough and will spend his last years with a very unpleasant companion.. But there are other ladies who can make us happier today, without having to wait for a long term that we may never know, and who will age as well or better. Or perhaps our managers are only interested in us staying as long as possible by repeatedly marrying and divorcing in order to get unmentionable commissions on each of our new romantic dates, with their subsequent visits to the office of the matrimonial lawyers who will avidly realise our munisvalues. Perhaps they will propose polygamy with the highest number of «polygamies".«assets»The "possible" (as much as our heritage allows), rotating our hearts several times a year, regardless of whether the beauty of our achievements is bullish or bearish.
At most, our managers will join the bandwagon of the most Machiavellian marketing by charging success fees, i.e. depending on the amount of pleasure received. To this end, they will obviously provide us with a large number of candidates, assuming health risks, sentimental risks and unbridled and lustful costs of all kinds, and they will cross their fingers that on one of these dates, one of these candidates will satisfy us enough to achieve their success fee established. They don't care if we take serious risks in the multiple failures, they will try everything to get enough pleasure to collect their success commission, theirs, of course.
What is certain is that none of our managers will be concerned about our heart, but only about our body. However, just as in a marital relationship, in our assets we need a stable long-term relationship that can more than compensate for natural ageing with a relationship of love, complicity, companionship and, in short, all the virtues of a stable partner with whom we can find happiness. Why do managers call it Love when they really mean Sex? Even the young lady and the Investor in the advertisement distinguish one from the other.
Well, sex has always been economically more profitable. But only when life smiles on us, when we are young, handsome and rich. That is to say, only in the short term, and the life of the Investor in capital letters is something else. If we follow the indications of these managers, we will surely end our investment life old, tired, sick, lonely and poor, very poor. When we talk about asset management, we must keep both concepts in mind: Love and Sex, in that order. Because if we focus only on the latter, we will have a very bad time in the medium or long term. But unfortunately, private banking and other asset managers focus exclusively on giving us a good time... or even a bad time. At the end of the day, that matters very little to the thugs.
It is easier to look good as a lover than as a husband; because it is easier to be timely and witty once in a while than every day.
Ante el escenario actual de crash bursátil (o inicio de crash bursátil), muchos inversores se plantean cuál es el timing adecuado para abandonar la liquidez y comenzar a comprar valor. Sin embargo, una minoría creemos que, además de estudiar el timing correcto debemos analizar con nuevos criterios dónde está el futuro valor, ya que no siempre va a coincidir ni mucho menos con el valor clásico.
La mayoría de analistas consideran que las utilities y empresas de servicios básicos como energéticas, alimenticias, etc… son el salvavidas donde agarrarse en medio de la tempestad. Efectivamente parece que pueden ser un buen refigio corporativo donde invertir, teniendo en cuenta que sus precios ya descuentan una proporción importante de pánico. Pero quizás nos estamos equivocando al buscar «valores refugio». Quizás deberíamos, por supuesto en la proporción de nuestro Vital Balance diseñada para ello, buscar el futuro value de la nueva era que viene. Un valor que, como en todo punto de inflexión, se encuentra de un modo distinto al conocido. La pregunta del millón es dónde está el nuevo «Manual del Inversor Value», y la respuesta es que, lamentablemente, está aún por escribirse, aunque pronto se publicarán diversos borradores o también llamados palos de ciego.
Los ciclos conocidos son Historia y la globalización es uno de los principales responsables de este caos. Un caos que nos llevará a una nueva Economía donde surgirán nuevos modelos de negocio y por lo tanto de inversión, nuevos sectores, nuevos Blue Chips, nuevos Medium Caps, ingentes cantidades de nuevos Small Caps, e incluso nuevos y lamentables chicharros que conformen nuevos y burbujeantes rallies alcistas. Y todo ello en un entorno de un capitalismo refundado e inquietante.
Estamos ante una encrucijada, un dilema: ¿Buscamos valor refugio en utilities y servicios básicos; o bien nos centramos en el análisis de un gigantesco y globalizado Seed Capital, Angel Investor o como queramos llamarle? Yo apostaría por lo segundo, sobre todo para los inversores que sufren lo que en nuestro Family Office llamamos Distressed Wealth. Que necesitan una estrategia específica para sus perjudicados patrimonios, por otra parte, común a todos los nuevos Clientes en estos últimos meses. Es lo que ya conocemos como Distressed Wealth Strategy. Todo ello sin olvidar, por supuesto, una cuidadosa selección de valor tradicional, dependiendo de cómo evolucionen los mercados en un futuro próximo.
Aún a riesgo de ser repetitivos, debemos recordar a los lectores que siempre debemos ceñirnos rigurosamente a la hoja de ruta marcada por el BV elaborado específicamente para cada inversor. Un BV que, además, debe ser revisado constantemente en función de los cambios sufridos por el propio Cliente y también por el escenario global, que es cambiante como nunca. Otro gallo le cantaría a Gordon Gekko…
Seguiremos muy atentos a las nacionalizaciones bancarias para disipar o no el pseudo-pánico existente entre sus clientes. Quién iba a decir que una nacionalización bancaria globalizada y de millones de hipotecas norteamericanas podían ser la medicina para intentar calmar los ánimos del capitalismo mundial, ante la mirada atónita de una China consumista. Si el comunismo levantara la cabeza… Mientras, la olvidada Guerra Fría se rearma y el terrorismo islámico descansa.
Echevarri me ha rebotado (de ésta te acuerdas…) el meme lanzado por Farnan2 acerca de la posibilidad de quiebra de algún banco o caja español y de la seguridad del dinero depositado en ellos.
Antes que nada debo decir que mis comentarios al respecto van a ser, ante todo, responsables. Y, a pesar de que la extensión de este artículo sobrepase lo aconsejable para un post, voy a comentaros de un tirón todo aquello que me parezca relevante y que me dé la gana, como hago siempre.
La opinión pública sólo se preocupa por la salud de la Economía cuando ve en los telediarios bajadas importantes de las bolsas. Parece que si las bolsas no caen, el crack no existe. Pero desgraciadamente el crack ya viene sucediendo en el crédito desde el verano 2007. Y esta fallida de la RF conforma los fundamentos sobre los que se basan muchos otros aspectos de la economía, entre ellos las bolsas. Como dijimos en La química inestable de la molécula económica hace ya medio año, una RF extrañamente alterada no podía convivir mucho tiempo con una RV boyante. Nosotros apostábamos por un reequilibrio en forma de recuperación en la confianza del crédito, pero como comentamos en dicho artículo, la otra posibilidad era que la molécula se estabilizara hacia la desconfianza con minusvalías de la RV, manteniendo la RF en mínimos «…batiendo marcas en el tiempo dando lugar a una crisis global nunca vista…».
En estas últimas semanas estamos viendo caídas de las bolsas globales que desgraciadamente generalizan la desconfianza, lloviendo sobre inundado. Esto se traduce en este momento en pánico monetario, poniendo en duda la solvencia de las entidades bancarias y acelerando gravemente el deterioro del sistema financiero. Este efecto es mortífero y convierte una caída bursátil en un caos bancario, en entidades ya heridas de muerte, cuando deberían ser fenómenos absolutamente independientes. Un crash convencional de bolsa (como el del 87 o incluso el del 29) no sólo no debería afectar sustancialmente más allá de los mercados, sino que incluso es cíclicamente saludable. Pero esta vez las interconexiones de la multi-crisis son letales.
En cuanto a la situación financiera de la banca mundial, ésta es crítica. La norteamericana está sufriendo lo indecible, y la europea posee aproximadamente la mitad del chapapote crediticio existente. Por tanto parece que el nivel de sufrimiento europeo será cuando menos igual, ya que su capacidad de reacción está más limitada por el menor potencial de sus economías y, lo que es peor, la atomización de políticas complica aún más el escaso márgen de maniobra existente para los europeos en general.
La cacareada mejor predisposición de la banca española para afrontar esta crisis financiera es en cierto modo real pero irrelevante. Es decir, el problema existente es de tal calado que la ventaja cualitativa de la normativa española de FGD es despreciable. Prueba de ello es que las medidas políticas tomadas en la reunión de los 27 han sido garantizar de momento 100.000 € por titular y entidad, o sea muy lejos de la superioridad cualitativa pregonada a cuatro vientos de los ya obsoletos 20.000 €. Quizás estas medidas no sean suficientes para retornar la confianza o quizás sí, pero por el momento el Show Me The Money se está imponiendo.. El tiempo (y nosotros) dirá. En cualquier caso se trata de una medida de confianza, un acto de fe. Ya que estas garantías se aplicarán para todos los ahorradores independientemente de si la fallida bancaria afecta a unos miles de ahorradores o a todos los españoles, como si se tratase de un chicle.E si non e vero e ben trovato, que de eso se trata.
El problema de fondo de la crisis bancaria, es decir los activos contaminados que llevan a la quiebra técnica a los bancos, está en vías de solución. Una solución política, ya que para una solución financiera hace tiempo que se tiró la toalla. En este escenario los bancos españoles, al igual que los europeos, ya no dependen de sí mismos. Su capacidad propia de supervivencia es virtualmente nula. Parace que los rescates se irán sucediendo en un orden macabro e imprevisible, y no depende tanto del ranking de CDS‘s sino más bien de las decisiones de sus directivos, que buscarán el timing menos malo para caerse de un armario cada vez más estrecho y superpoblado. Pero existe otro peligro aún peor que la propia contaminación de activos y para el que difícilmente serían efectivos los rescates estatales: El pánico. Nuestro pánico como clientes de entidades bancarias y cajas de ahorros. Para una retirada masiva de fondos ningúna entidad está preparada. Pero no por su perjudicada situación actual, incluso en sus épocas doradas de récords de beneficios (anteayer), una retirada masiva de dinero habría fulminado sus balances contables. Y ante ese riesgo no hay rescate posible. El sistema funciona mediante uniones tan intangibles como la confianza, y en ella no caben reparaciones o soldaduras, ni siquiera chapuzas para ir tirando: La hay o no la hay.
Los bancos ya no se prestan dinero entre ellos, no se fían. Sin embargo nosotros sí que debemos hacerlo y debemos seguir prestándoles el nuestro, porque si lo guardamos debajo del colchón, apaga y vámonos. Y sólo con la continuidad del sistema financiero, con su malfuncionamiento actual, podemos esperar que la confianza interbancaria vuelva y los flujos de dinero lubrifiquen de nuevo un motor que se está clavando por días. Podemos apuntillar el Sistema retirando nuestro dinero del banco (sólo los primeros); o bien podemos confiar en las garantías estatales y que los más ricos diversifiquen sus fortunas en varias cuentas y/o titulares. Dentro de los daños colaterales de estas medidas, mencionar que en el plan de esta semana fruto de la reunión de los 27 europeos (que no será el último), no se garantizan los fondos de inversión. Y eso es algo que no era conveniente ni mencionar, ya que probablemente provoque un flight to quality que agudice las caídas de las bolsas en favor de la deuda soberana o, en el peor de los casos, directamente en favor de los colchones y los escondites bajo las baldosas. Pero eso prefiero no pensarlo porque nos haríamos daño de verdad, y está en nuestra mano evitarlo.
Por encima de la toxicidad de las titulizaciones que se guardan las bodegas bancarias; por encima de los rescates estatales, coordinados o no con operaciones carroñeras privadas; por encima de las bajadas de tipos multidivisa de medio punto concertadas por sorpresa a nivel mundial (lo nunca visto)… por encima de todo ello, a pesar de todo, está en nuestra mano la no continuidad del sistema. Si no seguimos prestando nuestro dinero a los bancos no hay salvación posible. Los que me habéis leído asidiuamente, ya sabéis que siento una especial aversión por el comportamiento de bancos y banqueros, y no seré yo quien les defienda. Pero sin bancos, nuestra sociedad retrocedería varias décadas de bienestar y de creación de riqueza. Inimaginable. Estoy convencido de que las posibilidades de que ese caos ocurra son mínimas, pero también es cierto que jamás estuvimos tan cerca como hoy.
Si no hacemos locuras, habrá futuro para el Sistema, aunque será una locura de futuro, con mucho sufrimiento. No olvidemos que las hipotecas más tóxicas todavía no han hecho más que despuntar. En los próximos 2, 3 o 4 años debemos ver lo peor. Es decir, serán los peores años para los Estados que van a absorber los créditos que se convierten ya en embargos de imposible liquidez, pero con un agravante que los hará radicalmente distintos: A diferencia de las entidades creditoras que vendieron los créditos, el Estado o las entidades parapúblicas creadas ad hoc, no se podrán permitir el embargo y desahucio masivo de su población. Quizás se adopten soluciones sociales que mantengan a sus inquilinos en las que fueron antaño sus propias viviendas hipotecadas a cambio de alquileres muy por debajo del precio de mercado. Quizás además tengan opciones de compra limitadas en el futuro. Pero lo que parece impensable es que la ejecución de hipotecas por parte de entidades públicas conlleve un problema social y humano a millones y millones de personas. Una verdadera subvención de la vivienda al más puro estilo popular (de la China, no del PP).
Al final, estamos ante un panorama muy pero que muy socialista, algunos dirán que comunista. Es indudable que ver al Estado más ultraliberal del planeta, que ha negado durante años tan siquiera una cobertura social sanitaria decente a sus habitantes, socializando la vivienda existente y subvencionandola, es algo surrealista. Se producirá una socialización y una intervención del Estado tan involuntaria como efectiva, y me atrevería a decir que en muchos aspectos justa. Involuntariamente justa, y hemos llegado hasta ella de la peor manera.
Vengo escribiendo hace meses que estamos ante una multi-crisis jamás vista. A pesar de ello siempre he mantenido un tono relativamente optimista, pero los acontecimientos se han precipitado. Hay un antes y un después de la caída de Lehman Brothers. Un antes y un después político, financiero y económico. Lo que hemos visto después, es un cisne más que negro, y por lo tanto los viejos manuales están sirviendo de muy poco o de absolutamente nada. La situación es tan grave que se ha llevado por delante la mismísima crisis energética que sufríamos hace tan sólo tres meses. En cuanto a la crisis económica y social, mi opinión es desgraciadamente muy pesimista. Sólo estamos ante la punta del iceberg. Me temo que lo peor lo veremos entre el 2010 y el 2012, donde la selección de empresas será feroz y las cifras de paro abrumadoras y crueles. Estar endeudado en estos tiempos es y será un lastre demasiado pesado para sobrevivir con una economía doméstica digna. La depresión será larga, quizás una década atravesando un desierto donde muchas economías, de países, de empresas y de particulares, quedarán en el camino. Afortunadamente la mayoría de personas son inconscientes de la gravedad de la situación, pero la realidad es otra: Adiós a Disneylandia, adiós durante muchos años. Y todo ello, globalizado como nunca.
Ningún Estado tiene suficiente dinero para parchear esta malla. El dinero se deberá fabricar, y con ello se destruirá buena parte de la riqueza del Sistema que se ha generado, quizás virtualmente, durante décadas. Y cuando se supere esta depresión, probablemente los Estados cederán el protagonismo a las grandes empresas, dando lugar a un Nuevo Orden Mundial inimaginable hoy por hoy. Pero para que eso suceda, antes deberemos intentar superar la insólita depresión que hoy sólo intuimos.
It seems clear that the financial system is going to be saved by the mother of all bailout plans. But that doesn’t mean the mother of all crises It is going to ease off. Let no one be under any illusion: this multi-crisis has countless social side-effects that are difficult to prevent. We’ve squandered our future in the most irresponsible and absurd way. And now we have to cross the desert after having poured the water from our last canteen over our heads.
But faced with the possibility that this bailout might avert financial collapse, we find ourselves in the position of someone who knows that a family member has been in a serious accident and is fearing the worst. And when the doctor emerges from the ICU and tells us that the patient has come out of the operating theatre alive, the seriousness of their condition seems like a lesser evil compared to the thought of never seeing them again. The financial system will survive thanks to the Democratic-Republican bailout that will be approved come what may, but the patient’s prognosis remains extremely serious, reserved. I think it would be interesting to read the article again: The American Patient, which, dated December 2007, gives us a glimpse of the situation as it stood nine months ago – an eternity in this turbulent era in which we find ourselves living in such peril.
As we said at the outset, although the system will survive, the socio-economic outlook is devastating. We are set to suffer a decline in wealth and social welfare equivalent to several decades. And anyone who downplays the situation by saying that this is merely a cyclical crisis like so many others we have seen is either mistaken, deluded or lying in a politically correct manner. The locomotive that has been pulling the rest of the world along since the Second World War will no longer be able to do so in the coming years. The million-dollar question is: who is going to replace it? And we’re not talking about who is going to be the world’s leading power in the coming years, because the Chinese have no intention of ousting anyone, let alone the economic system as we know it. It is an unknown whose answer will undoubtedly shape the New World Order.
We can no longer talk about tightening our belts, but rather about a substantial change in lifestyle that hundreds or thousands of millions of people will have to make in the coming years. A dramatic yet gradual situation, in which opportunities, hidden amongst the devastation that the crisis will leave in its wake, will abound more than ever before.
I can’t help but feel strangely surprised when I reread Once upon a time… at the end of the 20th century, an article we wrote over half a year ago. A light-hearted exercise in economic fiction that is taking on an increasingly grim reality with each passing day. It has only been seven years since 9/11 (WTC), and the world is a different place. But this is only the beginning of what is yet to come. A historic, thrilling and uncertain future unlike anything we have ever seen, the result of the virtual wealth accumulated, globalisation and our own foolishness, respectively.
The Emergency Economic Stabilisation Act 2008 (EESA 2008), has become the most important and far-reaching constitution ever drafted in modern history. And it was drafted in just a few days, with round-the-clock work amidst hurried negotiations and in a situation of greater stress than the American political class – or any political class anywhere else in the world – has ever experienced. Meanwhile, the rest of the world watches in astonishment as events unfold Sunday after Sunday, unaware of the future significance of the weeks we have been living through since the intervention took place Mac & Mae. We have been saying for over a year now that history is being made, ever since, in the middle of August 2007, some of us (still only a few) woke up from the A Midsummer Night’s Credit Dream, but the drafting and subsequent adoption of the Emergency Economic Stabilisation Act 2008 It represents a genuine ‘Re-founding Charter’ for the global economic system. And it lays the foundations for a constitution for the new capitalist system. We are, in effect, reinventing the banking business and the foundations of the future credit system, and The most worrying thing is that we’re doing it under time pressure and whilst facing record levels of stress and pressure.
There were two ways of making it work and ensuring its viability:
That the 2008 Emergency Stabilisation Plan (I don’t know why, but I’m reluctant to call it a ‘law’), which originally consisted of just three pages, was implemented at the discretion of the Bush administration and carried over by his successor.
May this simple document, which gave the leaders a free hand, evolve into a much more concrete 106-page text, the implementation of which must be overseen by both the government and the opposition.
At first glance, the second option seems the more sensible choice, but it could be a double-edged sword, as partisan political interference could seriously hamper the effective implementation of the 2008 Emergency Economic Stabilisation Act.
The American political class is being put to the test in full view of the whole world. And what is most worrying is that its ability – or inability – to rise to the occasion will affect us all. Perhaps option 1 would have been more effective, albeit less democratic. It would have allowed the freedom to cover up scandals and restore confidence in the system. Something similar to what usually happens when one acts in the interests of the state, or in this case, going even further, System Reason. However, the regulatory framework for the new system – that is, the way in which financial institutions are (I hope) going to be kept on a tight leash from now on – must indeed be agreed upon by both the Congress and the Senate in order to avoid, as far as possible, favouritism, potentially corrupt decisions and the dreaded laxity.
Only as the weeks and months go by will we find out whether the 106-page document, the oversight by senators and members of Congress, and their ability to veto the use of half of those 700,000 millones from the $ programme will prove to be a positive development or not. Since initially only 250,000 will be released, with the option of a further 100,000, the government (whichever party is in power at the time) will then have to pass a renewal before Congress and the Senate before he is grant a further 350,000 million $. To save the system, it may be necessary to take too many politically incorrect decisions that will not pass the scrutiny of so many politicians who, before giving their approval, will look to their voters, fearing they might lose their future support. But this delicate process of implementing these funds requires agility, determination and a steady, surgical touch. This is something the man in the street is not equipped to deal with, and I fear that neither is a large part of the political class, which has been elected on the back of electioneering demagoguery. Politicians and political opportunists, whose quest for fame and power they may now be reluctant to jeopardise by endorsing measures that will have a direct and severe impact on their voters’ pockets.
For everyone’s sake, I hope that the American political class, for once in their lives, will live up to what is expected of them and, instead of engaging in party politics, govern for a few months in coalition with the leadership. And this must be done both by the Democrats in opposition and by the Republicans’ own internal opposition, who, to date, have been the most reluctant to support the implementation of measures that might save the system.
The path is beginning to come into view; now all that remains is for politicians to shake off their bad habits and devote themselves to Politics with a capital P, recalling the times of Plato and the Republic, but without forgetting to adapt it to our reality.
Let us hope that electoral manoeuvring and republican liberal fundamentalism do not hinder the pilots who must guide this aircraft – in which we are all on board – to the runway. It will undoubtedly be the most dramatic emergency landing in history, and one in which there may be many casualties. When we were writing Fasten your seatbelts On 14 September 2007, the aircraft’s technical problems were far less serious than they were a year later. Today, the hydraulic systems – so vital to any aircraft – have failed, and we are hurtling towards the runway in an emergency in which we must all do the right thing to survive. Because if anyone tries to exploit the situation for political gain, they will end up being elected president of the most barren region ever seen. Meanwhile, the markets continue to turn their backs on the 2008 Emergency Stabilisation Act. Something that is, in a way, trivial, because what is really at stake is far more important than the markets.
When a mob exercises authority, it is even more cruel than tyrants.
«I have been reading your work for some time now, and although I have no doubt as to your professional integrity, I have a serious complaint to make.’. Those of us who’ve been involved in the markets for a few years now are so scared and terrified this year that we don’t know what to think anymore. All that talk about the time horizon, each person’s risk profile, and where my savings or investments are headed – whilst not entirely untrue – already sounds almost as hollow to me as any sales pitch from a high-street branch sales rep. Mind you… I’ve used it too, because I’ve also been selling motorbikes in private banking. What’s interesting for your readers – and I’m one of them – is how you’ve weathered the tsunami, or whether you’re just as badly hit as the rest of us; what you’ve invested in; how you’ve put your foot in it or managed to dodge the blow; what your medium-term outlook is; which stocks are undervalued… The rest is fine for a chat with clients to win over a few over a cup of coffee, or for the foreword to some McKinsey handbook that’s completely useless in the real world…»
As will be clear, Mangallous, I think the only thing we agree on is our admiration for Xavier Sala-i-Martin.
Mangallous, our worlds are different. «All this fuss», as you put it, is nothing more and nothing less than the vast difference between looking at the markets, the competitors’ benchmark and the return as at 31 December (your commendable and, I have no doubt, honest work); and ensuring the proper growth of a family fortune, as our Family Office does. It is a question of perspective: whether to look solely at the year-on-year return on stock market investments, or to work across a myriad of areas such as taxation, property, family circumstances, legacies for future generations, family philanthropy, corporate advisory services, coaching for heirs, the optimal legal structures for each fortune, asset relocation, and a loooooong etcetera that we have been discussing for years and in hundreds of articles which you seem not to have understood at all. And all of this, of course, without forgetting such an important aspect as the financial management of monetary assets, which is where the work of asset managers—such as yourself, for example—comes into play.
You’re, as you put it, «scared stiff, terrified or drenched» because you see your stock market portfolio as a whole universe. That’s why I’m telling you it’s a question of perspective.
It is no surprise, then, that we always protect the bulk of our clients’ assets through fixed-income investments, and always in accordance with the rigorous standards set by the Balance sheetVital tailored to each individual. Consequently, the extent to which what you might consider a nightmare affects you is greatly minimised, as it should be. Furthermore, the selection of fund managers, funds or portfolios and other derivatives that may potentially be added, depending on the design of each BV, are selected according to criteria based on two fundamental concepts: The historical rigour netos (if any), and the absolute independence of interests, as well as, of course, all the investment selection criteria that are suited to the circumstances for each Customer, as we have already explained in the previous article. Only in this way – through high-risk investments and the proportion of one’s assets allocated to them – can we minimise losses in bad times and maximise profits in good times. But infinitely more important are all the criteria on which the rigorous design of a BV the detail involved in simply selecting the stock market assets that make up your portfolio.
The ups and downs you experience on the trading floor or on screen, in volatile markets, only have a negative impact on the smallest proportion of the portfolio that was jointly designed for this purpose with each client. We probably don’t know how to do your job better than you do (although, judging by your tone, I’d venture to say we may well have more years’ experience of following the markets). But bear in mind that you won’t get the answer you’re asking for, nor will you find it anywhere else, simply because there is no magic formula that guarantees profits in the equity markets these days. No one will give you a foolproof formula that will make money for you and your clients in the future, no matter what happens on the stock market. And anyone who claims to do so is deceiving you. Forget about finding the magic formula. SYou’ll only come across illusions that are extremely dangerous for you and, worse still, for your clients.
Managing a family’s wealth over the years goes far beyond simply year to date (year-to-date performance) or any other short-term performance of any fund or index that you monitor on a daily basis. EI hope you can see beyond the heads of those around you and understand this.I deeply regret that, as you yourself acknowledge, you have been «»selling motorbikes in private banking with empty sales pitches from high-street branch sales staff". And I don’t just feel sorry for you – who’s peddling motorbikes in a way that ought to be keeping you awake at night far more than it actually does – but I feel sorry, above all, for the customers who, over the course of your life, bought the motorbikes you sold them. For you, they were just small commissions and accolades that have propelled you to where you are now, but along the way you’ve ruined the efforts and hopes of many families who trusted you and your smart tie. Of course, you did help some of them make money, but Don’t kid yourself – they were merely collateral damage in your main objective, which was to sell indiscriminately the company’s products, for which you were paid a fixed salary plus a variable bonus. And in these extremely tough market conditions, the consequences for your career must be devastating.
But please don’t see this post as a personal attack on you. We don’t even know each other. What you’ve been doing in your job is common practice amongst bankers and other asset managers. But just because it’s common practice doesn’t make it any less shocking or reprehensible.
I know lots of people like you who, one fine day, insightful and memorable They ceased to be part of the armed wing of the banking and financial sectors. Most of them (though not all) saw their financial and career prospects cut short by this decision, but I take my hat off to them because they chose the difficult but right path. It is essentially a matter of personal and professional ethics, which is not incompatible with success, even if that path is longer and more winding than the financial fishmonger’s ‘motorway to heaven’.
To conclude, I’ll answer your questions: If you’re referring to RV, I have to say that at the moment we recommend holding only a very small amount in portfolios, provided that the BV consider this, placing greater emphasis on US non-financial value and blue-chip stocks. Although this depends on the approval of the mother of all rescues, there may be some financial opportunities. For those BV As for emerging markets, we are focusing on Latin America and Greater China. Our medium-term outlook (if you are referring to the global economy) is very negative, given that the fact that to ensure the system’s survival does not mean that this is not Let it be the Perfect Storm which could wipe out much of the economic growth and prosperity achieved over recent decades. As for the undervalued stocks you’ve asked about, I’d say there are countless examples these days. But only time will tell whether the current apparent undervaluation was not simply the start of these companies’ decline. Therefore, you should never invest more than the amount set out in the BV for value shares, no matter how much they’ve fallen. Even if they’re made of gold, they’re still knives falling from the sky. As you can see, you won’t find a miracle share that will definitely get you – and your clients – out of this situation. And I wouldn’t recommend taking a gamble, for the sake of the assets that depend on you. Readers – and of course you too – must remember that none of the above holds any universal truth without first drawing up your Vital Balance Sheets, and it is only in light of these that our recommendations make sense.
Fortunately, customer acquisition is now a thing of the past for us, and we have never sold our expertise, either on this blog or in any book. I would simply be satisfied if, through these reflections, I have managed to open your eyes a little and broaden your horizons beyond the losses
That's it, game over, that's the end of the road. Nothing will ever be the same again.
The total figure is approaching the 600 billion already committed, to which must be added the 700 billion from the final plan, that is to say: 1,300,000,000,000′-$ ($1.3 trillion) or, to put it another way, 150,000,000,000,000 pesetas (150 trillion pesetas) is the approximate cost of our excesses. Everyone’s. Because those of us who bought the securitisations or compulsively took out loans in one form or another, whether we realised it or not, are just as jointly responsible as the securitisation firms, the credit rating agencies; or as the companies that recklessly offered mortgages to the insolvent, and they, in turn, are to blame for embarking on the purchase of a house without knowing how to swim or having a life jacket. A explosive cocktail Financial markets, speculators, the credit and property bubbles, with a dash of terrorism and new geopolitical orders, a good splash of oil speculation, and all served up in a long drink glass made in China.
However, it is highly likely that hundreds of billions of dollars could be saved if some Americans were able to keep their jobs and their dignity, and thereby avoid the foreclosure of their partially paid-off homes. Even so, most of the repossessed properties will end up in public or quasi-public hands, which will then put them back on the private market according to criteria that are, for the time being, inscrutable. And they will have more than earned it.
European banks are breathing a sigh of relief because only those that acted like bloodsuckers, exploiting the now-defunct property developers by recklessly concentrating their risks, will disappear from the map. It seems that only the savings banks (mostly Spanish) and the odd reckless, second-rate little bank will sacrificed by the law of natural selection. Banking with a capital 'B' seems to be spared from extinction if Father, Son and Holy Spirit They dry and iron the wet paper they’ve been piling up on their balance sheets. Now all that’s left is the easy part: reinventing their core business, as they have done time and time again, whilst negotiating the upcoming regulations downwards. Beads of sweat were already trickling down the faces of big names in suits and ties in the sumptuous offices of the most prestigious organisations, for example at UBS without going any further. It was only a matter of weeks, or even days, before those beads of sweat became apparent to the general public. And the ground would have given way beneath their feet, and beneath those of their millions of customers too.
Massive interventionism in the name of the most extreme form of liberalism: socialising losses and privatising profits.... these are truisms that will remain just that, but it is essential that we learn from this historic mistake made by everyone. In my view, the action taken by the most powerful nation on the planet is not open to criticism, but rather vital. To judge the solution on the basis of its fairness is to forget that there is no better one. There is no alternative; or rather, the alternative is so harmful and regressive that humanity cannot afford it. It is the only one, although unfair a way for millions of people to survive the widespread poverty and famine that would have led to the collapse of our economic system. The Great Depression of the 1930s would have been child’s play compared to what the whole world would face if the most globalised house of cards in history were to actually collapse, since time immemorial. Even as we consolidate the foundations of the System, at the expense of all the inhabitants of North America and those affected by the coordinated interventions of past and future central banks, we may well have to weather something akin to that depression. But it will be a far lesser evil.
Throughout the 20th century, there was endless theorising about whether or not it was advisable to intervene in Mr Market. There were eminent theories to suit every taste. But they all spoke of a market in its purest form, and none of them envisaged that our own abuses would distort it to the point of absurdity. So much so that market self-regulation would endanger too many lives and make Intervention with a capital ‘I’ imperative. The theory worked until very recently but, as always, reality surpasses fiction. In this case, reality has surpassed economic theories.
Perhaps Obama has lost his appetite for winning the election, and for McCain, defeat would not be quite so bitter if it were to happen. Or vice versa. The fact is, the post-Bush landscape is more daunting than ever for the future most powerful leader on the planet. But the path has been laid out, and now all that remains is the journey through the desert itself.
The identification of loopholes, provisions, coordinated interventions, bailouts, vultures and other developments in the greatest multi-crisis in history were leading us towards the the light we sensed at the end of the tunnel even a year ago, when hardly anyone knew the meaning of subprime. However, let no one be under any illusion: We haven't come out of the tunnel; they've just turned on the lights. Powerful spotlights that reveal its filth, its winding nature and its immense length. We now realise that we would probably never have made it out unscathed, even if we had glimpsed a light at the end of the tunnel. Now we know what lies ahead, and this should serve as a lesson to us not to get ourselves into another dead-end situation again.
Meanwhile, in a grotesque turn of events, those analysts in their suits continue to recommend investments left, right and centre, justifying them with academic reasoning without the slightest sense of the absurd or of ethics.
Call me soft-hearted or naive (or worse), but I am proud of the coordinated global response that has continued to this day and of the action taken by the Trio Calaverabacked by the Democratic opposition.
11 September 2001 and 18 September 2008 are two dates that have changed the world. What a 21st century lies ahead of us. A clean slate—unfair and accursed—and a hopeful and blessed new beginning.
What we are about to discuss applies, for the time being, only to the US market and its official bodies such as the Fed. However, we may see similar developments in Europe and at the ECB in the future.
The scene is brimming with hope and a desperate need for good news to lift people’s spirits. Bear Stearns, Mac & Mae y AIG, are, to this day, the chosen ones for glory or rrising stars. On the contrary, for the time being, only Lehman Brothers features on the blacklist of fallen angels. Investment banks, unorthodox mortgage institutions that are difficult to categorise, insurance companies… various types of financial business models, but all with the same outcome: The public bailout or semi-public.
As for bailouts or private mergers and acquisitions, the criteria have naturally been commercial, that is to say, market-driven. There may have been some political influence in the form of personal commitments and/or non-commercial favours, but they have essentially been based—and will continue to be based—on commercial criteria. However, on the basis of what criteria have decisions regarding bailouts and public interventions been made? That is the million-dollar question, and it is likely that those responsible will take some of those criteria to their graves. Nevertheless, we venture to suggest that some are directly linked to the scale and severity of the consequences of letting the angels in question fall. In other words, depending on the damage this might cause to the System, the default or the bankruptcy of those companies, the Fed or whoever is in a position to prevent it will take the necessary action (in conjunction with the Fed). However, I must say that given the current economic climate, I refuse to believe that such decisions could have been influenced by personal interests, political considerations per se, or any other factor other than the pure pursuit of the best solution to the current financial crisis. I sincerely believe that the leaders in question are aware of the extreme gravity of the situation and are working tirelessly and without interference for the global good. That said, if the extent of the damage is the main criterion for deciding on the bailout, we can to jump to conclusions those institutions that find themselves in an extreme situation, such as investment banks, insurance companies, private mortgage lenders or commercial banks themselves. Let me explain. Perhaps the manoeuvres, overtures, flirtations and rumours of deals and rapprochements between private US financial institutions are not strictly motivated by commercial reasons. It’s possible that Wachovia isn’t actually in a position to acquire Morgan Stanley, and in fact nobody knows whether this is a takeover or a merger. Who’s buying whom? Who’s in a worse state? We might well suspect the same of the deal between Bank of America and Merrill Lynch. We’re back to the same old story Where the hell is Wally?, and I doubt the Fed knows for sure.
Perhaps not all the merger or acquisition deals we are seeing now, and will see in the future, will have a viable plan at its core. Nor should they be based on corporate restructuring aimed at optimising resources that are already severely depleted. Perhaps some of these sudden infatuations are simply down to the fact that unity creates pressure, not strength. Under pressure to be rescued by an underfed and overwhelmed lifeguard.
Given the amplified damage caused by the collapse of a macro-entity comprising two or more entities (commercial and investment banks in the cases mentioned), it may be more likely that cries for help will be heeded which, on their own, would be lost in a sea of storms, as happened with the heart-rending cries for help from Lehman Brothers. Machiavellian? Yes, but also likely. And I would venture to say that, in a way, it is understandable given the situation of extreme desperation faced by the shareholder-director-owner, who sees a imminent extinction of its financial institution, with the resulting disaster for creditors, shareholders and bondholders.
With all this flirting and «UTEE”»s" (temporary partnership) strategic (businesses) let us hope that these false vultures do not hinder the work of the genuine ones, that they do not cause amplified tremors that exceed the structural and confidence-based capacity of the system, or the capacity for public bailouts. I will never tire of repeating it: only the public and private vultures can save the system.
Dollars: Those reckless American banknotes that come in different denominations but are all the same size.
Ojalá pudiéramos disponer de un Waste Allocation Load Lifter – Earth-Class (WALL-E) para eliminar la chatarra financiera y los residuos tóxicos generados por el abuso creditício de la última década. Alguien tierno y con corazón que se ocupe de hacer más habitable el mundo inversor. Pero a diferencia de lo que sucede en la memorable película de Wall-e de Disney, éste debería venir a limpiar el planeta antes de que desaparezca todo vestigio de nuestro Sistema Financiero y no 700 años después. En su ausencia los carroñeros de nuestra civilización de Mercado deben hacer su trabajo, sin interferencias negativas ni menosprecios ajenos. Más bien al contrario, con la ayuda de entidades públicas que jamás agradecieron tanto la labor de los scavengers. Sólo ellos pueden evitar que un Wall-e deambule absurdamente por yermas tierras financieras cuando ya ninguno de nosotros se mantenga en pie para necesitarlo.
Estos carroñeros son tan diversos como necesarios: Desde fondos soberanos de medio oriente hasta simples especuladores que compran cuchillos de oro en plena caída, pasando por los clásicos Buffett, JP Morgan, Bank of America, el mismísimo BSCH o fondos soberanos Chinos. Además entre fusiones y rescates (sobre todo el de Mac & Mae) se beneficia a los grandes tenedores de deuda de las entidades en estado de descomposición que, a su vez, ejercen demuros de contención de la devastación financiera. Entre estos grandes tenedores se encuentran muchos bancos centrales, y esto puede dar una idea de la vital importancia de que la carroña sea debidamente asimilada por scavengers y rescatada por quien esté en disposición de hacerlo, sea quien sea.
A few voices se sorprenden de que los tenedores de deuda de entidades distressed salgan mejor parados que sus accionistas. Quizás sea porque no comprenden que la inversión en acciones y la compra de deuda corporativa son animales distintos, a pesar de que muchos las confundan en cuanto la bolsa se vuelve bajista o simplemente flat (algún idiota incluso las confunde en ciclos alcistas). Señores: El hecho de que los rendimientos de la RF sean circunstancialmente comparables o superiores a los de la RV no significa que se deban considerar herramientas de inversión afines. Es del todo lógico que ante un rescate o absorción más que dudosa, el inversor en acciones pierda el 100% de su inversión mientras que el tenedor de deuda pueda salir no sólo airoso sino incluso especialmente beneficiado. Son riesgos totalmente distintos.
El margen de maniobra del comprador de deuda ante un credit event, especialmente ante un default, es nulo. Y su buen fin no depende tanto de los balances sino del grado de incertidumbre de su futuro como entidad, al contrario de lo que suele ocurrir con el precio de la acción. Ante una absorción o rescate sólido la deuda queda exenta de duda, mientras que los fundamentos contables y en definitiva la esencia del corporate sigue siendo muy incierto. Tanto como el valor de sus acciones. En ese escenario sólo se habrá disipado la duda de que la acción pueda alcanzar el valor cero, pero a partir de ahí la incertidumbre para el accionista suele seguir siendo total tras una fusión o rescate. Además las circunstancias de dicho rescate público o privado probablemente distorsionen los futuros fragmentos de la empresa hasta límites irreconocibles. Por tanto ¿qué certeza podemos encontrar en el precio de sus acciones? Sólo su supervivencia. Sin embargo el potencial windfall puede llevar a la acción a un 1000% del valor de compra pre-rescate en apenas unos días, y eso es algo que los tenedores de deuda no conseguirán jamás por muy beneficiados que se vean del proceso de absorción, intervención o rescate, como ha sucedido con Bear Stearns. Repito, son animales distintos. De hecho, alguno que yo conozco bien compró acciones de Lehman Brothers en la apertura del 11-S (con dos c… y perdiendo más del 18% en un sólo día a la espera de ese pelotazo), en cambio su deuda corporativa sigue otra vía incierta pero muy distinta. Pero como explicaremos en un próximo artículo, la bondad de una inversión depende de tres variables: Rentabilidad, Riesgo y las Circunstancias de la Inversión, siendo ésta última la más importante de las tres.
Volatilidades estratosféricas aparte, hasta el momento los rescates públicos, las absorciones y las ofertas privadas para ventilarse cuerpos financieros en descomposición se vienen dando suficientemente. Y que no falten. Es cierto que la honestidad o deshonestidad de las ofertas son directamente proporcionales al grado de descomposición de la carroña, la gravedad de la situación global y a la sequedad del mercado carroñero, pero hasta el momento donde no llega el scavenger privado lo hace el público. Y eso da confianza al Sistema para que muchos comiencen a ver oportunidades históricas en lugar de colapsos histéricos, favoreciendo así la aparición de nuevos carroñeros sobrevolando nuestro dantesco escenario financiero. Jamás sus sombras sobre nuestras cabezas fueron tan reconfortantes.
Esperemos que nuestro tierno Wall-e no tenga que verse como una ánima en pena deambulando entre escombros inertes de lo que en otra época fue una Economía de Mercado. Haciendo una tarea de limpieza ya absurda e inútil, eliminando restos de bancos de inversión e hipotecas que en su día arrastraron consigo el resto de créditos al consumo. Un endeudamiento que murió de éxito allá por los inicios del s. XXI.
«Cuanto mayor es la riqueza, más espesa es la suciedad»
John Kenneth Galbraith
P.D. Comunicado oficial de Lehman Brothers 24h después de escribir este artículo:
For Immediate Release
LEHMAN BROTHERS HOLDINGS INC. ANNOUNCES IT INTENDS TO FILE CHAPTER 11 BANKRUPTCY PETITION;
NO OTHER LEHMAN BROTHERS’ U.S. SUBSIDIARIES OR AFFILIATES, INCLUDING ITS BROKER-DEALER AND INVESTMENT MANAGEMENT SUBSIDIARIES, ARE INCLUDED IN THE FILING NEW YORK, September 15, 2008 – Lehman Brothers Holdings Inc. (“LBHI”) announced today that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. None of the broker-dealer subsidiaries or other subsidiaries of LBHI will be included in the Chapter 11 filing and all of the broker-dealers will continue to operate. Customers of Lehman Brothers, including customers of its wholly owned subsidiary, Neuberger Berman Holdings, LLC, may continue to trade or take other actions with respect to their accounts. The Board of Directors of LBHI authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value. In conjunction with the filing, LBHI intends to file a variety of first day motions that will allow it to continue to manage operations in the ordinary course. Those motions include requests to make wage and salary payments and continue other benefits to its employees. LEHMAN BROTHERS HOLDINGS INC. ANNOUNCES IT INTENDS TO FILE CHAPTER 11 BANKRUPTCY PETITION / pg.2 LBHI is exploring the sale of its broker-dealer operations and, as previously announced, is in advanced discussions with a number of potential purchasers to sell its Investment Management Division (“IMD”). LBHI intends to pursue those discussions as well as a number of other strategic alternatives. Neuberger Berman, LLC and Lehman Brothers Asset Management will continue to conduct business as usual and will not be subject to the bankruptcy case of its parent, and its portfolio management, research and operating functions remain intact. In addition, fully paid securities of customers of Neuberger Berman are segregated from the assets of Lehman Brothers and are not subject to the claims of Lehman Brothers Holdings’ creditors. Lehman Brothers (ticker symbol: LEH) is headquartered in New York, with regional headquarters in London and Tokyo, and operates in a network of offices around the world. For further information about Lehman Brothers, visit the Firm’s Web site at www.lehman.com.
Fue más apetitosa la carroña de Merryl que la de Lehman. Game Over…
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Modern finance theory, whichever methods we examine, bases its analysis on the risk-return trade-off. It is a pairing which, through being repeated time and time again, we have come to regard as unique and inseparable, and upon which investment decisions are based. Any proposal offering a more attractive return than is normally achieved tends to prompt the question «but what is the risk?», without delving any deeper.
Let us take the example – highly simplified but illustrative – of the Christmas Lottery, in which the variables of return and risk are clearly defined and well known to everyone: it is possible to win a huge prize, but the chances of this happening are very slim. So, what makes someone compulsively buy every ticket offered to them by family and friends one year, yet buy none the following year? Of course, this decision would seem illogical on the face of it, unless one takes the circumstances into account. Perhaps the person is getting married and has decided not to play in order to save money for the wedding, or perhaps they have decided to put all the money they were going to spend into a savings account, tired of seeing their euros – and their hopes of becoming rich overnight – vanish into thin air year after year.
