There is one saying that link physics to finance but before that hedge fund is one of the main lubricant for a machine called "finance".
Derman (physicist turn banker): In physics, we are trying to find information that god has hidden from Mankind (Einstein's special relativity states time not a constant and is dependable on speed), in finance, we are trying to find information that is hidden in the mind of all mankind.
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It remarkable to know that physicists study the smallest matter (quarks in proton) to the whole universes (some even hypotheses more than 1 universe called parallel universe).
It is almost the hardest major, there is one similarity in both physics and finance, both are extremely complicated stuff, the top hedge funds (finance) employs physicist, mathematician and computer scientist for their fund.
Physics is complicated because you are dealing with objects far too small or big to be seen and most theories in modern physics defies intuition.
In finance its the same thing, you are competing with mankind (whom most are greedy) and there are many smart ones from Ivy League, Oxbridge etc. The top hedge fund manager is formerly a Professor in the mathematics faculty of Harvard university. He states that in finance, the only way to beat the market for superior returns is to think like a physicist or maybe mathematician because they are less likely to accept a wining strategy that is just a statistical fluke. The equations used to create his fund strategy is almost like equations used in Manhattan Project.
Among this 2 interesting subject which I read everyday, I think physics is more interesting considering the fact that physicist study black holes, finding a worm hole to reverse time.
In finance according to a statistics, fund managers or equivalent have the most extreme emotions among all other jobs. (When yr portfolio rise by 50% in 1 day, you will by the happiest man, what if you had all yr money in yr own fund and when Black Monday(1987) happens again without any apparent reason, you may have lose 50 percent if you leverage (most top financial firms used leverage to enchance return but also risk). You will be the "@#$$%" person for that day.
Sunday, May 18, 2008
Wednesday, May 14, 2008
In capitalism, the world is never fair! The rich can get richer without working while the poor always work harder and earn lesser.
Does anyone knows how university maintain or even increased their endowment though no one has donated to the university and they also incurred expenses?
The answer is that they invest the money so they would hope to cover the expenses and inflation to maintain their purchasing power.
How? Some universities have an endowment of 1 billion dollars and if they invested properly, they would have gain roughly 12% a year(based on the average returns of the US stock market since it was open). This means that they can earn 120 million a year without putting in any work. Can a cleaner earn even 1 million in his lifetime?? Lets say inflation is 2% and expenses incured is 80 million the total cost for the year is 100 million and another 20 million is added to their portfolio.
The above example is what I will be saying today. The world is never fair. The rich can enjoy life and still earn a hell lot of money if they invested for the long term and ride out the volatility in the financial market. Lets say if I have 100 million, what would I do? If u spend all, u are a no brainer! Invest it and always remember invested it. A 100 million invested in the financial world can make the 100 million perpetual. Lets say I invest in one of the most safe securities,Bonds, the average return is about 6% a year. This means that I have earn 6 million dollars though I did not work for the year. But lets say my purchasing power decrease by 2% because of inflation, I still make a 4 million dollar profit and that is equilavent of what a CEO in a huge coporate earns a year but just that I did not have to work. May I know if any teacher in a primary school earn that much in their life??
The next is the poor, though they invest, they money earn through investing is barely able to cover their everyday needs. Their money invested cannot accelerate fast enough like the rich people. They worked their whole lifetime and sometimes under stressful conditions but their income is still peanuts while the son of a multimillionaire or a billionaire just invest the money and they can enjoy their lifetime without working and still earn a hell lot of money or maintain their expensive lifestyle. If a poor only invest $100,000 in stocks and the stock market return is about 12% as mention above, and may I ask if how the 12,000 be spent?? Buy ferrari like the rich people?? No way the 12k probably could cover his family utilities and water bills if he chose not to invest the 12k again and didn't let it compound.
This is capitalism! Face it! The weakness of capitalism is that the rich gets richer without working while the poor gets poorer though they are smarter, more hardworking and work for their whole lifetime then their billionaire counterparts.
The answer is that they invest the money so they would hope to cover the expenses and inflation to maintain their purchasing power.
How? Some universities have an endowment of 1 billion dollars and if they invested properly, they would have gain roughly 12% a year(based on the average returns of the US stock market since it was open). This means that they can earn 120 million a year without putting in any work. Can a cleaner earn even 1 million in his lifetime?? Lets say inflation is 2% and expenses incured is 80 million the total cost for the year is 100 million and another 20 million is added to their portfolio.
The above example is what I will be saying today. The world is never fair. The rich can enjoy life and still earn a hell lot of money if they invested for the long term and ride out the volatility in the financial market. Lets say if I have 100 million, what would I do? If u spend all, u are a no brainer! Invest it and always remember invested it. A 100 million invested in the financial world can make the 100 million perpetual. Lets say I invest in one of the most safe securities,Bonds, the average return is about 6% a year. This means that I have earn 6 million dollars though I did not work for the year. But lets say my purchasing power decrease by 2% because of inflation, I still make a 4 million dollar profit and that is equilavent of what a CEO in a huge coporate earns a year but just that I did not have to work. May I know if any teacher in a primary school earn that much in their life??
The next is the poor, though they invest, they money earn through investing is barely able to cover their everyday needs. Their money invested cannot accelerate fast enough like the rich people. They worked their whole lifetime and sometimes under stressful conditions but their income is still peanuts while the son of a multimillionaire or a billionaire just invest the money and they can enjoy their lifetime without working and still earn a hell lot of money or maintain their expensive lifestyle. If a poor only invest $100,000 in stocks and the stock market return is about 12% as mention above, and may I ask if how the 12,000 be spent?? Buy ferrari like the rich people?? No way the 12k probably could cover his family utilities and water bills if he chose not to invest the 12k again and didn't let it compound.
This is capitalism! Face it! The weakness of capitalism is that the rich gets richer without working while the poor gets poorer though they are smarter, more hardworking and work for their whole lifetime then their billionaire counterparts.
Tuesday, May 13, 2008
George Soros? A kind or evil person?
This is just a sample 1st blog by myself.
This person is the only person I both hate and admire.Why? He indirectly ignited the 1997 Asian Financial Crisis and cause my father to lose lots and lots of money in the stock market but he also make 1 of the greatest trade in history. In 1992 he shorted the British pounds and earn 10 billion pound for his quantum fund and 1 billion for himself. Since then he was dubbed "the man who broke the bank of England."
George Soros was born György Schwartz in a Hungary Jewish family. Studied in London School of Economics which I hope to get my bachelor of science in economics too.
What I don't understand about him is his weird thinking of philanthropy acts. Though he has given away 4 billion dollars though his open society by various means like supporting and funding democracy in Eastern Europe etc but in the first place why he want to exploited the foreign investment credit crisis in Thailand by shorting the Thai Baht and Indonesia Rupiah and cause the already poor people in Thailand to become poorer? Those are also people that can feel hunger, but he donated food to Africa nation rather then Thailand.
I do not know what he is think about, destroying 1 economy and save another.(eg. Destroy Thailand and promote democracy in Eastern Europe)
In almost every country where George Soros attack their currency, the political leaders will insult him as in the case of Malaysia, Dr Mahathir accused Soros of using the wealth under his control to punish ASEAN for welcoming Myanmar as a member and called him a moron.Thai people labelled him as an "an economic war criminal". But later Dr Mahathir was seen shaking hands and smiling to Soros. A political moves as seen by me(not really sure) to "overthrow" the current Malaysia Prime Minister Abdullah Badawi.
But I aspire to be like him, a successful hedge fund manager that understand economies so well.
Just this afternoon I met with my Stats tutor in the Library, he asked me to read about the Theory of Reflexivity by George Soros . This theory have already reinvent my thinking on the economies and my financial thinking.
A very well written article that shows why social science(Economics,Psychology etc) cannot be treated the same as natural science(biology,astrophysics etc) because in social science we are participants which are thinking which can change our thoughts and psychology and utimately causes disequilibrium in an "efficient market". For more.......
http://www.geocities.com/ecocorner/intelarea/gs1.html
This person is the only person I both hate and admire.Why? He indirectly ignited the 1997 Asian Financial Crisis and cause my father to lose lots and lots of money in the stock market but he also make 1 of the greatest trade in history. In 1992 he shorted the British pounds and earn 10 billion pound for his quantum fund and 1 billion for himself. Since then he was dubbed "the man who broke the bank of England."
George Soros was born György Schwartz in a Hungary Jewish family. Studied in London School of Economics which I hope to get my bachelor of science in economics too.
What I don't understand about him is his weird thinking of philanthropy acts. Though he has given away 4 billion dollars though his open society by various means like supporting and funding democracy in Eastern Europe etc but in the first place why he want to exploited the foreign investment credit crisis in Thailand by shorting the Thai Baht and Indonesia Rupiah and cause the already poor people in Thailand to become poorer? Those are also people that can feel hunger, but he donated food to Africa nation rather then Thailand.
I do not know what he is think about, destroying 1 economy and save another.(eg. Destroy Thailand and promote democracy in Eastern Europe)
In almost every country where George Soros attack their currency, the political leaders will insult him as in the case of Malaysia, Dr Mahathir accused Soros of using the wealth under his control to punish ASEAN for welcoming Myanmar as a member and called him a moron.Thai people labelled him as an "an economic war criminal". But later Dr Mahathir was seen shaking hands and smiling to Soros. A political moves as seen by me(not really sure) to "overthrow" the current Malaysia Prime Minister Abdullah Badawi.
But I aspire to be like him, a successful hedge fund manager that understand economies so well.
Just this afternoon I met with my Stats tutor in the Library, he asked me to read about the Theory of Reflexivity by George Soros . This theory have already reinvent my thinking on the economies and my financial thinking.
A very well written article that shows why social science(Economics,Psychology etc) cannot be treated the same as natural science(biology,astrophysics etc) because in social science we are participants which are thinking which can change our thoughts and psychology and utimately causes disequilibrium in an "efficient market". For more.......
http://www.geocities.com/ecocorner/intelarea/gs1.html
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