Gustavo Ballvé on October 31st, 2011

Two very recent stories on CDSs (credit default swaps) highlight the issue of Risk. Risk has a lot of aspects to it and some get overlooked, such as counterpart risk, process risk, instrument risk (liquidity, clarity of regulations, how tested it was in real-life distressed situation etc.)… Not reading the fine print, for instance, has led more investors astray than they would like to confess. Much has been said about CDO-Squared and complex instruments in general, but the CDS was actually not supposed to be complex. Even so, investors in Greek debt CDSs are finding that “default” may not be what they thought it was… And another side of the debate is counterpart risk: what if the instrument is good, the writing is clear and so on – but the counterparts (whoever they are in this immensely interconnected financial world) just can’t honor their side of the deal?

Read more about Read the fine print

Gustavo Ballvé on October 27th, 2011

The Occupy Wall Street movement is so anarchic as to be impossible to name one “mentor” or group behind it – although that’s not stopping some people from claiming influence over it. Ultimately, in investments or revolutions, it’s all about the key people – it’s vital to understand their real motivations, aspirations, personalities and incentive/moral systems. Not what they say it is, what it really is. And that’s why it’s so hard to define “OWS”. We highlight three articles about it that may shed some light in a few spots.

Read more about Occupy the classroom

Gustavo Ballvé on October 25th, 2011

Amazing how governments, agencies and especially politicians in Brazil have still not realized that the cost of doing business in Brazil must go down. In fact, says the World Bank, Brazil is actually getting worse in this aspect. What kind of sustainable growth can we reasonably expect when only the private sector gets to worry about productivity, especially when the government is actually increasing in size? Governance systems… incentives… Almost one year ago to this date, we published “The amazing sausage factory”, going into these issues. Apparently this will become a (sad) annual feature here, but we won’t let go.

Read more about Death, taxes and the “Brazil cost”

Gustavo Ballvé on October 24th, 2011

The UN expects “Earthling #7 Billion” to be born this week – the report will be released on Tuesday, Oct. 26th 2011. Yet it’s just a symbol to spark a stream of articles about overpopulation – demographics, at this level, is open to much debate. Clive Cookson in the Financial Times had a short piece with a brilliant infographic, and the New York Times today has an entire debate series about it. We link to other sources. Not being able to reach a conclusion is no excuse not to think about it.

Read more about World welcomes “Citizen 7 Billion”

Gustavo Ballvé on October 20th, 2011

If you haven’t read “Moneyball”, by Michael Lewis, please do so – or watch the movie. The 2003 book was about revolutionary data analysis that changed baseball forever. However, the article we link to here is about the fact that all revolutions have an ending, and not always a happy one. Inefficiencies get taken out, or are at least softened. This article is about what happens after change. It doesn’t mean one shouldn’t pursue change, much to the contrary, nor does it mean that inefficiencies shouldn’t be sought out and explored. The point is that once you’ve found a “method”/framework, use it but don’t marry it, don’t bet the farm on it, and assume its mortality.

Read more about “Moneyball revolution” revisited

Gustavo Ballvé on October 18th, 2011

A few notes about Day One (Monday, Oct. 17th) in the 2011 Value Investing Congress. You can follow their own live updates on Facebook or Twitter. We start with David Einhorn – he wasn’t the first speaker of the day, but things started to get interesting when he came onto the stage. Having attended both, the Ira Sohn Investment Conference is a better event: shorter in length, better attended and with better speakers, more focused and, we dare say, with more committed speakers.

Read more about VIC NY 2011, part one

Gustavo Ballvé on October 17th, 2011

Interesting Wall Street Journal editorial pointing out some contradictions within the Occupy Wall Street movement. As with all movements that start small and seem innocuous or naive at first, politicians and Wall Streeters ignore them at their own peril. How long before someone with any kind of political relevance gets tempted into picking up this flag?

Read more about Occupy Wall Street’s contradictions

Gustavo Ballvé on October 13th, 2011

After depicting both sides of the Eurozone crisis – Greece on the one hand and Germany on the other – Michael Lewis now turns his attention to the USA and to where he might find trouble. That he does, and plenty of it, in California. Our usual cautionary notes – about great writers sometimes skimping over a bit too much evidence for the sake of an argument – apply.

Read more about California nightmare

Gustavo Ballvé on October 10th, 2011

“Synergy”, “two powerful minds working in unison”, “complementary skills” and so on: all that we try to achieve has to be checked against reality, especially when theory meets the REAL incentives and cultural aspects of a company. As we constantly repeat to ourselves, “culture eats strategy for breakfast”. An article notes that the two co-heads of Morgan Stanley’s Institutional Securities Group can’t stand each other and, more importantly, that this personal dispute is disrupting business. The Epicurean Dealmaker wrote a very interesting analysis of this particular dispute in light of the bigger picture of the natural conflict of interests inside an investment bank. What he finds there can be applied almost anywhere else where such conflicts are, perhaps, less obvious.

Read more about Humans, incentives and teamwork

Gustavo Ballvé on October 6th, 2011 is about the work done by all of us at IP, but this is a personal note – instead of the normal “we”, this post is about something I’ve watched today: a 1987 “product concept” video that’s simply impressive, not just because the “Knowledge Navigator” is a wonderful vision, but also because we’re not that far away from something like this. Think iPad + the Siri app. Sure enough, the 1987 video was Apple’s. Prof. Sasser’s point: seeing things that others didn’t was nice, but seeing it through and changing the world was Steve Jobs’ genius.

Read more about Technology and Magic

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