Fed Doctor or Fed Pharmacist

A doctor’s job is to diagnose and provide correct recovery path to the ailing patient. For that Doctor may run a lot of tests on patient and in consultation with his/her colleague create a path for recovery.

On the Other hand a pharmacist is strictly doing his/her job in terms of providing prescribed medicines to the patient. Pharmacist with some experience may help a patient with some fever relive the fever for some times but would not cure a cancer or a sickness whose symptoms may be deep.

When I read today’s WSJ about inflation rising and WSJ commenting its not bad enough YET to stop fed from cutting interest rates. I ask the same question is FED playing the Doctor or a pharmacist or just a new resident experimenting.

In any case, if all the pharmacists are predicting interest rate cuts and FED is ignoring inflationary pressures, the road ahead is going to get steeper.

The Symptoms
1. Market is down and depressed before the FED rate once again
2. Inflation is a cause for concern once again
a. Price of Gas is higher
b. Price of Milk is higher
c. Price of GOLD is higher
d. Price to rent an apartment is up
e. Price to buy a news paper is higher
3. Financial firms are reporting BAD loans once again
4. Dollar is wakening


I have been a critic of FED for last few years because I think we need to take the pain and be done with it in place of enlarging the period by acting in a market responsive manner.

Make your own meaning

Every time there is a FED meeting market goes down...

From Book "Big Deal" - By Bruce Wassersten

"When Beggers and shoshine boys, barbers and beauticians can tell you ho to get rich it is time to remind yourself that there is no mor dangerous illusion than the belife that one can get something for nothing."

- Bernard Baruch, on the 1929 crash (Baruch: My Own Story)

So why is Etrade(ETFC) a good buy?

ETFC

Etrade stock has lost 25%, it has been downgraded by three big analyst. But I’m of the opinion Etrade is a good buy and not just opinion I have bought some in last few days.

Why When Citadel invests in Etrdae a $2.5 Billion. They must have looed at their portfolio of loans. Yes, Etrade gave away $2.5 Billion of portfolio for $800 Million. But Etrade alos entice Citadel to invest $1.4 Billion of equity in it. That is a great show of strength.

When anlyst is arguing ETrade has $11 Billion worth of mortgages, I don’t think all the mortgages will go sour. The mortgages Etrade has must also have PMI and they are back by illiquid and falling housing prices agreed, but the market is bound to come back. If mortgages are the issues why would BOA invest $2 billion in the CFC, all the banks should be in the same line as Etrade.

So it’ a buy baby buy

Mindmapping revisted

Last year at the school, mindmapping helped me in great deal to organize my thoughts to work on the cases (an avg 3 cases a day). To put those cases in perspective interms of putting important information in one cheat sheet, mindmapping software tool was a great help.

I used a tool called freemind an opensource mindmapping tool then. I knew of another tool that I thought could be a great help, The brain. The brain has been used by Kurzweil's site for a long long time and I have always been intrigued by how they display the information on their website.

Since I’m a opensource user by compulsion (can not afford these $100 software tools), I tried the tool and never used it in November 2006. Now Thebrain is free with some features removed.

I’m loving the tool.

Next step try out online mindmapping tools claims to allow collaborations.

Freemind
Thebrain

Bad Practice

In olden days when some one got injured, or when some one had blood from infection or /injury, the physician would let the bad blood out. The person with wound would feel weak after the fact that he/she lost a lot of blood, but the person would not have venom/ infection in his/her body.

In such a scenario if some doctor were to just stop the flow of bad blood and allowed to keep the blood in the body, what should one say about Doctor’s practice? Purely bad practice. The motive for such bad practice could be anything. A short term gain to make that person fight a war ( may be at a cost of sacrificing injured arm/leg or the person) or it could be plain old gullibility/stupidity.

That’s exactly what FED is doing / has done so far. The FED has reduced interest rate after the credit market crunch or as some call it sub prime meltdown. As a Doctor, Fed did not let the bad blood flow away. The FED has just put the bandages on the wound and readied the (tired/wounded) US economy to continue on growth path. Eventhough, everything in the real world is arguing FED to do opposite.

1. inflation is high
Even though the indicators don’t/may not show inflation
I’m paying more for Milk, Gas, Commute, Food, Restaurant and the most important housing.
The only place I’m paying less is for technology and services (not the most necessity of life).
2. US economy is not doing well compared to China, India, Europe (some one would say dragging)
3. US trade deficit is rising
4. US Budget deficit is at highest
5. US is in the middle of WAR


So is it not a Bad practice according to conventional wisdom.

One possible caveat
It is possible that FED has more data and better understanding of the problem. By elongating the problem FED it suffocating the problem or in a way applying new medicin. And all the other symptoms I mentioned (1 thro’ 5) are not life threatening while the Sub prime symptom is life threatening.

A kool website for risk management

It's been time I have been thinking of writing on my learning of uses of financial learning from school. It's about time.

Yesterday, I came across a pretty kool website on risk management. It sounds like this website is bible on RISK management and VAR.

http://www.gloriamundi.org/

The site houses pretty good papers on VAR and it's implementation aspects.

Living in a flat world

Just came across this picture in an email I subscribe to J