February 2008
You're watching the articles of Euribor for the month of February 2008.
Daniel Kahneman is a psychologist who won the Nobel Prize for economics in 2002 by the introduction of knowledge from psychological research into economic science. He studied primarily the taking of decisions in cases of insecurity and concluded that investors in the stock market, for example, sell for reasons not rational, but emotional: dispose of their shares when markets go down, fearing to lose even more if do not sell. The curious thing of all is that the primary motivation for investors is the fear (an emotion) and not making money (something rational). Thus, an investor would prefer not to lose rather than win 100 euros, which implies an asymmetry in decision-making.
To prove it, I'm going to make some assumptions.
First choose between:
- A profit of $ 300,000 safely.
- A 80% chance of winning $ 400,000. and 20% did not win anything.
And now choose between:
- A loss of $ 300,000 safely.
- A 80% probability of losing $ 400,000. and 20% did not lose anything.
In the first situation the majority of subjects opt for the alternative A, despite the fact that the alternative B has higher expected probability.
Paradoxically more than 90% chose alternative B in the second position. This pattern is constant, people try to avoid risks when looking for a win, but if you choose the risk is to avoid a loss.
It is interesting to know this behavior to negotiate and realize the feelings of the other party. The fear of losing is quite strong. Imagine for a moment that you € 6,000 playing roulette in a "Red and Black." If ganáis, surely you subidón the last few days, but if you lose the remorse will endure for many weeks (not to mention the anger of your partner).
Having learned this, we can try to understand why many times the upgrades are so slow and falls so fast.
Closely related to this subject, I read that in Cotizalia The financial turmoil fall in risk aversion levels seven years ago.
All these fears have led to changes in investment strategies. Thus, there has been an increase in the cash within existing portfolios. The cash has reached on average 4.7% of capital compared to 3.9% from January. Furthermore, according to this survey, 41% of those surveyed were sobreponderados in cash, the highest percentage since the terrorist attacks of Sept. 11.
If you already read my mother, that money is very miedica.
At the moment we have today does not seem scared, as if the economy had some kind of disorder piscológico a day rose from depression and other euphoric. For example, we see that the Japanese ended with a rise in the Nikkei's 4.3%, which means the highest since 6 years ago. As for Spain's GDP grew by 3.5% in the fourth quarter of 2007, more or less than expected.
If those who are going to endorse what are the Swiss, yesterday in the midst of the storm gave them to raise rates. Today one of its largest banks, UBS has confessed to a loss of 11,300 million dollars in the fourth quarter of the year as a result of the crisis in subprime mortgages, has also announced that it will replenish some 13,700 million dollars and has reiterated that 2008 will be another difficult year for the entity. We see that here is not saving anyone.
Yesterday comentábamos Warren Buffet's strategy of buying cheap and then sell expensive (innovative, we) may now be a good time to exit the credit card because the dividend yield of the stock market is the most attractive in 15 years. Although clear, we must have good jobs and with a heart-proof tachycardia.
So in conclusion, you get a dilemma for those of Kahneman, to see what haríais:
- You have chosen to go to the last concert that will give the Rolling Stones with all its components in life and now you have the input that he has cost € 1000. When you're at the Vicente Calderon, you realize that you've lost the entry and it is impossible to queue. Would you spend on other 1000 € in buying a new?
- You have chosen to go to the last concert that will give the Rolling Stones with all its components in life and you have booked a ticket which costs € 1000. When you're at the Vicente Calderon, you realize that you have lost € 1000, but they accept credit card and there is so much demand for tickets that there is no penalty to cancel the booking. ¿Buy the ticket?
PS: If you are interested in studying Kahneman, so you can download (in English) here
Written by Carlos Lopez on February 14, 2008 with 197 reviews
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A few times we have spoken here of the "Oracle of Omaha" Warren Buffet. I admit that I admire him as a person (donating 99% of his fortune to charitable causes) and especially as a multimillionaire. And from very small, at 6, started with business, buying a pack of coca cola bottles and then sold loose with the consequent benefit. He bought his first shares at the tender age of 11 years (that little angel) and the 26 and founded his own investment company. Their strategy is very simple "with the Logout wallet full of dollars in settlements of the season."
And we must recognize that after the recent stock market movements, the market is on sale and that is how he sees Buffet. Yesterday it touched move with a plan to invest in "Monoline", the main function of a "Monoline" is to support their resources with a bond issue. In exchange for a premium, guaranteed payments and interest associated with a broadcast of paper. The truth is that this definition is infumable, but basically come to be the foundation on which underpin high-risk mortgages.
Since we are talking about a rather espabilado investor, it is clear who will stay with the most creditworthy of a business that is literally drowned and accept help is at a price they can. For the moment, what it has achieved is to lift the mood of investors has offered to say that "reinsure" $ 800 billion in tax-free bonds or municipal. We write in numbers, it seems more: 800,000,000,000 dollars.
This is the first reading we have, Buffet spoke bags and go up, but if we look in more detail, we are faced with the paradox that companies theoretically benefit from this investment, plummeted yesterday on the stock, how can this be?. We try to count in this article (in English) entitled "The kiss of death Buffet" I've discovered thanks to Cotizalia where we are trying to count the trick:
And is that the news contains three tricks.
One, any realization will not occur until within at least 30 days. Buy the rumour.
Two, Buffet wants to relieve the Monoline in its guarantees of emissions from municipal bonds, which theoretically have the backing of a public purse that was beginning to question their role. Leaves, by contrast, in the hands of the signatures existing coverage of those products are more toxic than those who actually are doing them harm (CDOs backed by mortgages garbage) tested yesterday as lower estimates of results that made AIG.
Three, the investor intends to pay a premium for the assets most miserable valid for these companies, whose acceptance would lead them to secure a recapitalization within a short period of time. ¿Discuss your performance? No. It is the market and its opportunity.
The interesting thing here is to see the amount of financial instruments that are scattered in the market who had heard of the Monoline? and quantity of opportunities that may have on the markets.
Another interesting news is that yesterday we were able to read the plan to help the debtors to be launched in the U.S..
The administration of President George W. Bush and six major mortgage lending institutions announced Tuesday the latest proposal to deal with the problems in the housing market, and offered to "pause" the process of implementation of the mortgages for troubled home owners.
On this side of the pond, now it's up to talk to our friend Trichet, we will be attentive to his speech as the markets begin to discount rate cuts, after the bad macroeconomic data that have been published.
Locally, we see that banks and funds seeking new avenues of financing by the liquidity crisis.
The latest discovery has been the mortgage ballots, which are fixed-income securities issued by an entity that has a double guarantee of the issuer and the buildings themselves. These ballots, regarded as one of the highest quality assets, have been an excellent means of funding until the crisis in August.
The article today has been a bit thick but occasionally it is appropriate to speak of "Monoline" and "mortgage cards" to better understand what is simmering in the market.
So to create a little controversy. What do you think the U.S. measure taken to help the mortgage? Do you see feasible in Spain?
Written by Carlos Lopez on February 13, 2008 with 186 comments
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Many of us are wondering what is going on by the head of the governor of the European Central Bank. Fortunately, Euribor.com.es have prepared a group of hackers that thanks to the Internet has been able to access the PC from Trichet and from there via keyboard with your fingers to finish reaching his brain. There you have a photo with the Polaroid and we've just brought a messenger.
To understand how this works, you must do the following: In the middle (black spot) we have to inflation. Around in various colors have a crisis in the U.S., falls out of pockets, the Euro through the roof, soaring bad debt, risk of unemployment and something more.
Now look for a minute look at inflation (black dot) and you can check as the rest of the problems (color) disappear.
(Optical Illusion in sight alt1040.com)
Understanding their operation, we can understand that with which he is falling into the bags say that the correction in the stock markets will continue in the coming months. We see that she studied at a school very different from Bernanke.
Basically, we must not blame everything on Trichet, as each has its particular setting that prevents you from seeing other things, it may well be the desire to pretend that the neighbor, to pay credit, buy something we can not invest in something because it always goes up, and so on. The important thing is to stop looking at the "black dot" and learn to see the problems around.
The news yesterday that we aguó the party at all, the bill is being paid by subprime mortgages. Yesterday it touched the account to pay higher insurance group in the world, the U.S. American International Group (AIG) and amounted to nothing less than 4112 million Euros. Our brain, as if it were a bad calculator can not with so many zeros, but it looks to be a lot of pasta.
At this very delicate situation, should see how things are around here, so "The Godfather" Solbes asked banks to clarify their accounts by the mortgage crisis.
The vice president has insisted that the restriction of credit who live global financial markets does not reflect a liquidity problem, "but of confidence" in the transactions between lenders and borrowers.
Here I think he has a bit confused cause and effect as the restriction of credit is not reflecting a liquidity problem is that it is created by it, which in turn comes from a lack of confidence. Anyway, that is not who has explained it worse, if he or I ...
In this environment, we have to habituate to pulling a sensational headlines like this: Frenazo in construction "are increasingly those who are going to work on site for a job." While attentive to this testimony:
"To me that what I pay," says a painter. "I do not I go for less than 4,000 euros." Most do not look with favor this perspective. Abandon their city, their customs and their friends of sandwiches, and cane skewer tortilla is more than you are willing to take a salary with which they are not particularly agree with.
I think that sometimes we have what we deserve.
Finally, remember that since yesterday we have a new forum in which to discuss all matters outside the issues of the day, you know to do the typical questions "I renew the mortgage this month Euribor What shall apply, or that of December The January? "or" Do you buy or rent? "
Written by Carlos Lopez on February 12, 2008 with 168 comments
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Many times for certain problems unresolved, we use the expression "The whiting that bites its tail," or "vicious circle" and basically recognized for what falls under the definition set. A good example would be:
"Put the bag because investors are scared and frightened investors because it lowers the bag."
This kind of circular arguments are called "Diallel" and should add it to your dictionary of words pedantic.
The other day, the chairman of the Federal Reserve said it Philadelphi downhill rates are useless against recession when the real problem is the inability or unwillingness of banks to lend money. What we do not know is if banks fail to lend money by the uncertainty created by central banks. Will it be another "Diallel"?
By contrast, in Five Days tell us that the banking dispute that it toughened the requirements for obtaining a loan.
Financial institutions claim that they do not are tightening the conditions for the provision to companies and individuals. The economic slowdown has not made the banking fluctuate within a maximum of mortgages or the percentage of the property that fund, though it has provoked a 'break' in the demand for credit.
I do not understand, among the list of reasons justifying the break between the first real estate always was that the bank had closed the tap. According Emilio Botín: 'We are keen to give credit to everyone. Just ask solvency. " Maybe the difference is that now added that "We only ask solvency" for dismissal that before did not. Although if we've survived, it might be time to think that we can draw some benefit from all this, as well as discussed in the Country: A crisis, an opportunity.
There is an ill wind that blows nobody any good, says popular wisdom. And this is the position of many analysts before the crisis caused by the tensions of credit and sub-prime mortgages in the U.S. (subprime), as well as before the fraud case at the French bank Societe Generale. In his opinion, these blows could build from now on the implementation of long-term strategies and an awareness of business risks at the international level.
The real estate crisis every day more concerned, because the latest data tell us that a 20% drop in demand for housing tumbaría 180,000 jobs, according to Industry.
Speaking of crises, comes to mind the situation of U.S. and the classic "When the U.S. sneezes Europe get colds," there are some who cast doubt on that assertion, concretamentre Simon Johnson, economic adviser and director of the department of the IMF analysis.
The MIT professor, an expert in the financial sector and the crisis, believes there is a degree of decoupling of economies and that while the slowdown in the U.S. has reached Europe, the euro-zone inflation is a problem more serious than in America.
This crisis has put into question the theory of uneven (Decoupling) of economies. Or what is equal, that the crisis is not passed at all.
Interestingly, having to rethink certain economic dogmas. Will Europe come to its economic maturity and no longer as dependent on U.S.?
Written by Carlos Lopez on February 11, 2008 with 196 reviews
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The world of watchmaking is far less interesting and exciting. Among the many houses of a watchmaking shines above all others: Patek Phillippe. Founded in 1839 in Geneva by Antoni Patek, and has the honor of having carried out the first wristwatch in history.
In 1989, Patek to celebrate its 150th anniversary created one of the most advanced mechanical clocks ever created with 33 complications, including for example, thermometer, the date of Easter, solar time, graphics and more stars of 2800. Up to 9 years it took to manufacture.
They also have the record of the world's most expensive watch, a built in 1933 specifically auctioned in 1999 for $ 11 million.
To do that you an idea of exclusivity of a Patek, throughout its history have produced approximately 600,000 pieces, which is less than what Rolex produces in a year.
This whole roll comes to rescue "the comment of the week" who in the last 7 days has been the most voted and now it's up to our reader to "Dumpers"
In a small village on an island, there was a watch factory where they worked almost everyone. These watches are sold mostly abroad. Those not working in the factory, worked in services for the workers in it. One day the two bakers on the island agreed and began to raise price of bread, from 1 € per bar to 10 € per bar, people continued to purchase at that price might be, but rechistando purchased. The two bakers became rich and had big mansions, big trips and cayenne galore, more people came to work in bakeries, large and templates that paid more than at the factory because of the large profits, large investments etc ... One day the factory went on the island since the overheating of the economy and the "toos semos ricoh", inflation had shot up labor costs, and the villagers ran out of work. Could no longer buy bread or those who wanted locally.
Bakers caciquiles saw their sales fall. Raised export, but it was not exportable goods being perishable.
In short, there was a high economic growth based on something of little value added and non-exportable, and this unbalanced growth industry went really productive, Do you familiar? What value does not exportable bread on an island where the ability of the people could only pay 1 € per bar? ¿1 €?
Do not forget one thing, the developer, builder etc ... is a sector that serves the people who live in one place at one time, and must sell its products at a price people can pay at the time and place.
We will have to think again that "even the most stupid makes watches."
As for the economic news we have a good, is that the euro deflates: registering the biggest weekly drop against the dollar in a year and a half, no doubt due to the hangover of yesterday's message from Trichet and the potential shown to potential decreases in a future.
Here are a few pearls from his speech:
The ECB stressed the need to "anchor inflation expectations in the medium and long term" and was "ready to prevent materialization of inflationary risks" "While continuing the readjustment of risks in financial markets, remains an unusually high uncertainty about its impact on the real economy. "
I love this man as speaking, when you ask about the risk of growth replied "unusually high". I imagine him writing speeches in a pen on parchment.
As for the stock market, behaves like a rubber ball and now plays to go up (opens Jan. 1% rise) because yesterday the closure of Wall Street showed some optimism, and it seems that these days, something that if there is oversold .
Good weekend to all and I'll update the article as new stories come out, because currently, Trichet's speech overshadows all others.
Written by Carlos Lopez on February 8, 2008 with 250 comments
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The other day I read with astonishment that 23% of Britons think that Winston Churchill did not exist and what is worse, 58% believe that Sherlock Holmes if he did (that of the photo is Katie Holmes, I noticed that generates more visits that his distant uncle Sherlock). It is a pity because Churchill is a kind of the most interesting because in addition to being prime minister of the United Kingdom at a time as critical as the Second World War was also a Nobel laureate in literature. A guy really smart we are delighted with quotes such as:
The problem of our time is that his men do not want to be helpful but important. - Often I had to eat my words and I have discovered that they were a balanced diet.
And occasionally he was leaving his political vein, which should learn many of which I am now agreeing:
- The politician must be able to predict what will happen tomorrow, next month and next year, and then explain why that was not what happened to the predicted.
- Democracy is the need to occasionally bowing to the views of others.
- Democracy is the worst system of government designed by man. With the exception of all others.
And finally, one of the have learned that if our politicians (all)
- Just trust me that I have manipulated statistics.
Come on, as with the CPI.
Ya see, at the end in the minds of the British remain Sherlock Holmes and his "dear Watson Elementary" instead of the cool phrases that Churchill be as a character in the comic. It is sad what the manipulation of information to which we are subjected on all sides that instead of informing achieve just the opposite and misinform us terribly. If we constantly repeat something that does not exist, in the end we just believe.
In the economic sphere we like because information forms a part of economic policy, yesterday we discussed the importance of the mood of consumers so that the economy is good or bad, so the question that we do is as follows . Assuming that a country in crisis esntra what is appropriate? You recognize the crisis and take appropriate measures or to give messages of calm so that the citizens do not worry and continue consuming? As you can see are two completely different strategies and the role that both are perfectly valid.
In this environment we have provided the escape route that is the Internet to read publications of all kinds and ideology that guided us about the economy. So let's do a summary of the press:
So how can we tap tighten their belts in the future, who better than the last invention of Tau, a tile that helps make allowances or check the time of the coffee workers. You know, nothing of chopping between am and Curran, who are a few vague.
Updates with two headlines:
Written by Carlos Lopez on February 7, 2008 with 319 comments
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