Twofish's Blog

October 10, 2006

I love this business

Filed under: china, finance, tcfa2006 — twofish @ 4:12 am

A comment on Brad Setsers blog….

I’m starting to dislike the word “liberalization” since it is becoming one of those vague feel good words whose meaning is fuzzy. When someone talks about financial system liberalization, what do they mean? End of capital controls? Floating currency? Remove restrictions on foreign ownership? Market based interest rates? What?

Also, I just finish a conference at MIT by the Chinese Financial Association and I’m about to head to NYC for another conference on Chinese banking by the Asia Society. I think that there is a consensus among most people (including people in China) that China needs to appreciate the RMB. The question right now is timing, pace, and sequence. Does floating the currency go before or after relaxing capital controls, for example?

Paulson (unless he is radically different from everyone else in finance I’ve talked to) is *not* happy about global imbalances. It worries anyone who has thought of it.

About Democrats, Wall Street is more partial to Democrats than one might otherwise expect. There are a lot of “Rubin Democrats” on Wall Street, and my general impression is that the campaign contributions people make are because they really believe in the policies rather than for tactical reasons.

The other thing is that is refreshing about Wall Street is that people are much more “big picture” than most people I’ve met elsewhere (including frighteningly, Washington DC). Part of it may have to do with the fact that a lot of them are pension fund managers that have to think 25 to 50 years ahead.

Goldman-Sachs *does not care* whether the Chinese government increases the limit on bank investment in the next year or two. It’s looking 25 to 50 years ahead.

Long term greed. It’s quite refreshing.

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Personal finance is hard….

Filed under: finance, personal, personal finance, tcfa2006 — twofish @ 4:11 am

I’ve got pages and pages of notes from TCFA ‘2006, and I’m going to be posting them on my blog over the next few weeks. It will be stream of consciousness, and it won’t be in chronological order. Just whatever I’m interested in.

One of the interesting talks was by Professor Robert Ibbotson, who made a very interesting point in that he pointed out that it is tougher to manage personal finances than it is to manage a huge billion dollar portfolio for an institution. Invididuals have to worry about a very, very complex tax code whereas institutions don’t have to worry the tax consequences of their investments. Individuals have to have most of their investments in liquid investments, whereas institutions don’t have to do this. Individuals take whatever products are available whereas institutions can have financial products custom built for them. Individuals pay a huge amount in transaction fees, whereas transaction fees are a minor part of an institutional investment. Individuals don’t have the ability to get much advice and a lot of the advice has conflict of interest issues whereas institutions can hire specialists to manage their investments.

The net result is that the average person has a much harder problem managing their finances than a institutional fund manager has in managing theirs. (And institutions do more or less what individuals do, which is to to look up and invest in what are basically mutual funds.)

The other interest point is that for an individuals, *returns don’t matter*. The difference between returns is insignificant compared to transaction fees and taxes, and those need to be the main concerns for an individual.

I love this business

Filed under: china, finance, tcfa2006 — twofish @ 3:57 am

A comment on Brad Setsers blog….

I’m starting to dislike the word “liberalization” since it is becoming one of those vague feel good words whose meaning is fuzzy. When someone talks about financial system liberalization, what do they mean? End of capital controls? Floating currency? Remove restrictions on foreign ownership? Market based interest rates? What?

Also, I just finish a conference at MIT by the Chinese Financial Association and I’m about to head to NYC for another conference on Chinese banking by the Asia Society. I think that there is a consensus among most people (including people in China) that China needs to appreciate the RMB. The question right now is timing, pace, and sequence. Does floating the currency go before or after relaxing capital controls, for example?

Paulson (unless he is radically different from everyone else in finance I’ve talked to) is *not* happy about global imbalances. It worries anyone who has thought of it.

About Democrats, Wall Street is more partial to Democrats than one might otherwise expect. There are a lot of “Rubin Democrats” on Wall Street, and my general impression is that the campaign contributions people make are because they really believe in the policies rather than for tactical reasons.

The other thing is that is refreshing about Wall Street is that people are much more “big picture” than most people I’ve met elsewhere (including frighteningly, Washington DC). Part of it may have to do with the fact that a lot of them are pension fund managers that have to think 25 to 50 years ahead.

Goldman-Sachs *does not care* whether the Chinese government increases the limit on bank investment in the next year or two. It’s looking 25 to 50 years ahead.

Long term greed. It’s quite refreshing.

October 8, 2006

TCFA 2006

Filed under: Career, china, quantitative finance, quantlib, tcfa2006 — twofish @ 11:16 pm

Posting this from Hayden Library at MIT.  I just finished TCFA 2006 a few hours ago, and I have got huge amounts of notes that I need to transcribe to the blog.  Tomorrow is FEA 2006, but I think that I’m going to skip day one and just attend day two and the banquet.  Conferences are amazingly exhausting, and I need to do some sightseeing while I’m at MIT.

I learned a whole bunch, but the main thing that I learned was that I’m not doomed….

There was always the nagging feeling that if I didn’t do the right things that I would be doomed in finance.  This fear was reinforced by the fact that my first contact with finance was through headhunters, and they strictly control the information that they give you about what it is like in finance, and also suggest that if you don’t take the job you are doomed.  The fear that this is your one and only chance is a powerful emotion, but fortunately the main thing that I learned is that everything is probably going to work out alright for me.  The main thing is that I’ve talked to enough people that I now see myself as on the “inside” of the finance community rather than on the “outside.”

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