







Quixotic, eccentric, humane, philosophical takes on the varying vicissitudes of life









May 19 (Bloomberg) -- Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.
Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who adopted the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who used the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.
Pretty interesting, I thought. Shows how much the large investment banks follow their own analysts' advice! Clearly, they did not implement the 'top trades' otherwise how would they have made profits EVERY SINGLE DAY in the last quarter. In the same time period, clients following the recommended trades would find themselves in a much worse position. If the chef refuses to eat in his own restaurant, I would rather go hungry than eat there!

"Psychologists have long known that if rats or pigeons knew what the NASDAQ is, they might be better investors than most humans are. That's because, in some ways, animals are better than people at predicting random events. If, for instance, you set up two lights in a laboratory and flash them in a random sequence, humans will persistently try to predict which of the two lights will flash next. Stranger still, they'll keep trying even when you tell them that the flashing of the lights is purely random. Let's say you flash a green light 80% of the time and a red one 20% of the time but keep the exact sequences random. (A run of 20 flashes could look something like this: GGGGRGGGGGGGRRGGGGGR.) In guessing which light will flash next, the best strategy is simply to predict green every time, since you stand an 80% chance of being right. That's what rats or pigeons generally do in a similar experiment that rewards them with a crumb of food whenever they correctly guess the next outcome".
But humans are apparently convinced that they're smart enough to predict each upcoming result even in a process they've been told is random. On average, this misguided confidence leads people to get the right answer in this experiment on only 68% of their tries. In other words, it's precisely our higher intelligence that leads us to score lower on this kind of task than rats and pigeons do.
IIM-A has denied a front-page report in The Economic Times which said a recruiter made a Rs 1.44 crore-plus salary offer at final placements currently on at the school.
“Sure, no one’s talking yet. But ET has learnt that Deutsche Bank, which had set the upper ceiling in 2008 by offering a Rs 1.44-crore package, has broken that record this year”, said the ET report.
In a blog link sent by student media co-ordinator Rohan Desai, the school said (Desai also urged that we put-up the link on our blog to reach a wider audience):
“We would like to clarify in interest of the entire community that this is incorrect. Also, converting dollar salaries to rupee terms does not portray the correct picture and hence we provide the average dollar salary separately in our press releases.
We felt compelled to communicate this clarification because we believe it has the potential of driving aspiring students into making misinformed decisions and also gives incorrect signals about the economy.
IIMA over the last few years has chosen not to disclose the highest salary offered as we believe salaries are just one component of the jobs offered and also because the highest salary is in no way representative of the recruitment scenario.”
While the purpose of this blog is not to run-down competition, and we have never done that,Mint understands why students, and teachers, wish to project b-schools as more than just places where students turn into crorepatis. While salary figures are indicative of the economy, we stick to the official version released at the end of the placement season.
Placements can be covered in other ways. This is one of the reasons why the writer of this blog was allowed to live on-campus during placement week in 2007 at a time when there was a media black-out.
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BANGALORE: Venkataraman Ramakrishnan won the Nobel prize in Chemistry in 2009 but decades ago he failed to clear entrance tests for both the IITs At a public lecture at the Indian Institute of Science campus here, he recalled his journey from Baroda where he went to school and college before moving to Ohio University for his Ph.D. He shifted to Baroda from Chidambaram in Tamil Nadu when he was three. He noted that he appeared for the IIT entrance test but "did not get a single seat in IIT". "My parents were somewhat old-fashioned; they did not believe in coaching classes (in preparation for entrance test)," Ramakrishnan told a packed J N Tata Auditorium, where many could not even enter because it was crowded. They (his parents) thought coaching classes were "nonsense". He also appeared in the entrance test for a seat in the reputed Christian Medical College in Vellore in Tamil Nadu but was unsuccessful. Giving an explanation, he said that those days, there were only a small number of seats for men. The (really sad) takeaways I have after reading this stupendous article is
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The bursting of the housing bubble cost the American economy trillions of dollars and brought Wall Street to its knees. But a few savvy investors, most notably hedge fund manager John Paulson, made fortunes betting against housing and related securities.
In The Greatest Trade Ever, Wall Street Journal columnist Gregory Zuckerman details how Paulson pocketed $6 billion as his firm made $20 billion betting against the boom from mid-2006 through early 2009. These returns included $4 billion for Paulson personally in 2007, which Zuckerman describes as the single-most lucrative payout in history.
While few, if any, will ever approach Paulson's staggering accumulation of wealth, Zuckerman says there are some timeless lessons for the rest of us, including:
Have the courage of your convictions: Paulson stuck by his thesis even as the trades didn't initially pay off in 2006, myriad housing "experts" told him he was on the road to ruin, and seemingly all of Wall Street's machinery was working against him. And when the bets starting paying off in 2007, Paulson didn't book profits and run as many advised -- and some clients begged. After shorting subprime in 2007, Paulson effectively doubled down in 2008, shifting some of his firepower to bets against Fannie Mae, Freddie Mac and Wall Street firms knee-deep in the MBS market.
See the forest for the trees: As an outsider to the mortgage world, Paulson was able to see the carnage coming that those on the inside missed. The ability to think independently and see beyond what the "experts" are saying is critical for individual investors because more financial bubbles are likely, Zuckerman says.Hindsight being 20-20, it's clear the housing market was a bubble and Paulson's strategy of buying cheap insurance against subprime mortgages - in the form of credit default swaps - seems like a no-brainer.
But as Zuckerman details in the book, getting the trade right wasn't easy; others tried but failed to match Paulson's stellar returns because they were either too early, had the wrong trading strategy or didn't see the bet through to its ultimate conclusion.
Furthermore, Paulson struggled in early 2006 to raise money for a fund dedicated to betting against housing securities, Zuckerman reports; Paulson was viewed as an "outsider" in the mortgage market at the time and didn't reached legendary status until after the mega-profits had been booked.