The Gold Standard | US notes

Returned to Singapore in the early hours of Tuesday after about a week in North America – first time back there in eighteen years. Left Boston in March 1994 after Ph.D at UMASS, Amherst. Did not get a chance or reason to go back. Spoke at CFA  Montreal Emerging market conference on May 15th on SE Asia and India. Slightly more positive on the former than the latter. Surprise, surprise! See the ‘India Today’ cover story. May be, subscription is required for full access.

Spent 3+ days in D.C area. Gave a talk at the GW University co-hosted by the US-India  Business Council (USIBC). Spoke on India. Had to do a balancing act. I think it went well. Decent crowd. 20+ but great participation.

Could not get a sense of the health of the economy. Not that I was looking for it. Did not see the 60% overweight in the small sample that I ran into. No road rage. Only my anxious friend, not to miss a turn, skipped a red light!

Top news during my stay was Facebook IPO pricing. My 10-year old son wondered what the fuss was about and why Zuckerberg was a billionnaire when he had nothing to sell. One friend clarified that we, the people, are the product.

The other story was, of course, JP Morgan. This WSJ story, as usual, was great on the human interest dimensions. But, for me, the key take-aways are:

The debacle has raised broad questions on Wall Street and in Washington about whether any executive can properly oversee such a large financial institution, whether new regulatory rules will do anything to prevent another financial crisis and whether tougher regulation is needed to further rein in risky bank trading, particularly at financial behemoths that are viewed as too big to fail.

Indeed, hubris wants and feeds itself on becoming bigger. Coffee mugs in America are a testimony to their obsession with size. The simple answer to the question posed in the first highlighted sentence above is that no executive (human being) can properly oversee such large financial institutions. Period. It needs not a whole lot of humility to accept that. Just some humility would do.

Last year, Mr. Macris dropped risk-control caps that had required traders to exit positions when their losses exceeded $20 million.

Why would some one do that unless they were overconfident? Again, the importance of two words in English that start with ‘H’: Hubris and Humility.

Mr. Dimon had recalled that he was aware of the group’s strategy to take a bearish position on the economy, an official says. And he also recalled that early this year he approved a reduction in that position amid signs of economic recovery, though the official says Mr. Dimon had never vetted the “particular means to execute” the strategy.

This is a very important disclosure. This is an example of how banks behave with their clients. Their economist for the US is a perma-bull. He has never had anything negative to say on the US economy. If he sounds cautiously optimistic, that is the worst negative sentiment you can get out of him and as an investor, it would be time to head for the exit doors. Yet, the bank’s proprietary trading unit – CIO office is a politically correct label for the old prop. trading desk.

At the same time, the appointment of a Venezuelan immigrant as MIT President showcased the best of what America has to offer. Mr. Reif’s remarks at the press conference after his  selection is a  great read. Lovely touch at the beginning of his remarks.

P.S: Will be curious to know the United Airlines’ policy on the recruitment of pilots and cabin crew.


DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.