If Beta is dead, VaR should be extinct

It is to my horror that after poring through the notes on what is VaR. It finally dawned upon me that the entire financial industry has embarked down the path of no return. In the academic world, Beta is dead and thus by inference so is VaR. I thought the industry practitioners might be better when it comes to this kind of stuffs so perhaps they might have something more advanced.

Seems like I was dead wrong, allow me to correct myself, they are even more out of touch than the academicians. Financial markets are like the real world, it is much more chaotic than what can be captured by some complex formulation and parameters. The all to familiar gaussian bell curve appeared on the 3rd page to my disgust.

Just how do you model human behaviour? Applying mediocristan laws in a world of extremistan is bound to get you into trouble. The natural tendency of human beings to swing towards extremes. Right down here we still have an entire industry worshipping something that is incorrect and I have a career that is based on bullshit.

Being politically correct emails galore

Got an email straight from a director in London to change all references of "Proprietary and Prop" to "Arbitrage" in all our reports. Well, yeah as if that is going matter at all. Now the harsh criticism on proprietary trading is coming down from the regulators and politicians. So change the wordings of the title. Presto, we are operating a different business now!!

Please do not use the acronyms PIIGS. Spell them out Portugual, Ireland, Italy, Greece and Spain correctly. Do not say you have short positions, that makes us look like short-sellers. These people gain from the misery of investors. Say you have a short exposure.

Seriously, I totally do not understand what all the fuss is about.

Practical Realities

It is the distinctive unmistakable feeling that work is starting to suck my lifeforce away. Nowadays, I spend the most of my time looking at practically meaningless data. Delta, Gamma, Vega, Theta and Rho, these Greeks are really meant make to simple things complex.

In reality, risk sensitivities are only meant for trading purposes. They represent no significance at all when it comes to real long term investments. However, trading in a bank is no difference from gambling. Investment banks are just super big glorified casinos. Why do I have to bother with all these nonsense?

Ah...I forgot, because it's my job to do so. It pays very well but I literally hate it, but this is the best I can get to move towards my goals.

Career Advice

"Would you tell me, please, which way I ought to go from here?"

"That depends a good deal on where you want to get to," said the Cat.

"I don't much care where..."said Alice.

"Then it doesn't matter which way you go," said the Cat.

-Lewis Carroll, Alice in Wonderland

Reigning in the banks

Though this might mean lower bonuses for everyone but hopefully this will reduce the amount of work I am getting! Simplify the rules and regulations as well. Lower leverage, lower risks and please...lower the amount of new trades. Banking should be boring and I would like to have it that way.

Tiger Airways IPO

"Investors have regularly poured money into the domestic airline business to finance profitless (or worse) growth. For these investors, it would have been far better if Orville had failed to get off the ground at Kitty Hawk: The more the industry has grown, the worse the disaster for owners."
-Warren Buffet

One of the worst industry ever to invest in, couple this with losses over the past few years and a negative net asset value. This may be the year of the tiger but with numerous global airlines dropping like flies, don't expect a spectacular flight for this one. Main sellers of the stocks, Ryanair. If the kings of LCCs can't turn this company around, I can't see how Temasek and SIA can.

Expectations of future profits due to the IRs is nothing but a hope at best. It might turn out well, it might not. On the otherhand, if this paper tiger were to roar, then it is sure indication that we are entering bubble territory. Caveat Emptor.

What a mess!

As much as I like the club, its finances are in a mess. Here's what I picked up from soccernet:

The bond will be used to repay the "senior secured notes". It was thought that the Glazers would be looking to finance the £175 million worth of payment-in-kind notes that are currently attracting 14.25% interest. However, this is considered personal debt and will not be refinanced through bonds.

"Manchester United today announced that it will be seeking to raise approximately £500 million aggregate principal amount from an offering of senior secured notes due 2017,'' said a United statement. "The notes, whose proceeds will be used to refinance existing debt secured against the club, will be issued by MU Finance plc.''

But the Glazers will not be selling the club and intend to use the money saved from restructuring the debt to ensure significant money is available to Sir Alex Ferguson to spend in the transfer market.

I have no idea what are in the books. However, from the surface, 14.25% worth of interest is just madness to me. No corporation can ever survive that kind of interest rates on loans. This is the kind of rate you pay for a junk bond, something with a high probability of blowing up within the next few years. Furthermore, isn't issuing new bonds to refinance existing debt a big red flag, a classic robbing Peter to pay Paul syndrome. The Glazers are destroying a great franchise from the inside.