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Guy Oppenheim Green, Gold and Edible

Guy Oppenheim Green, Gold and Edible

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Published by Guy Oppenheim

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Published by: Guy Oppenheim on Nov 16, 2012
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12/04/2012

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Guy Oppenheim Green, Gold and Edible
Green, Gold and EdibleBy Toby Birch and Guy Oppenheim  As 2010 draws to a close and pundits peddle insipid predictions for the year to come, it seemsincredible how little has been learned over the last few years. There is huge relief among assetmanagers who have generated positive returns, albeit from a passive policy of investing andhoping for the best. Few seem to care about the cause or consequence of what made marketsdefy gravity. Their jobs are safe for now and with a bit of luck their bonuses will be locked-in.While share prices have undergone a roller-coaster ride and commentators have squanderedevery simile in relating it, certain things remain immovable. The first is the attitude of alpha
male portfolio managers that don’t do apologies as well as they do arrogance. To admit an
error of judgment, conflict of interest or plain bad luck is the ultimate corporate and financial
 faux pas
. The second is the committee-driven and consensual structure of model portfolios thatlook just the same as they did 5 years ago.The reason why many investment portfolios appear so similar is that they cling to core theoriesof managing money, such as the Efficient Market Hypothesis and the now-discredited Value-at-Risk measures. Like all hypotheses they are built with certain assumptions that academicsaccept but market players forget. They are not designed to accommodate human foibles,including those that led to leviathan levels of leverage. There is much controversy over theirviability, as some believe them to be redundant post-2008. This navel-gazing is missing the
 
point, as pending developments will sweep aside such intellectual niceties. This scholarlydeliberation is reminiscent of Roman Senators who continued to debate trivia as the Barbarianhordes headed for the Metropolis. Few have modified their methodology and cling to the old
mantras of money management. While distressing to discard what has been learned over one’s
entire career, accepting reality is the essence of evolution where the smartest survive and willeventually prosper. These changes will be as painful as they are colossal but will, paradoxically,benefit future generations albeit at our expense.With apologies to the literary fraternity that abhors the first person singular, allow us to makesome observations in this article that go beyond the convenience of the next calendar year. Asa result of such mental role-
play, there are certain points in life where one’s sanity is
questioned; either by oneself or by others. The last time this happened we wrote a book calledThe Final Crash to warn the public that a market meltdown was imminent. This time round itwill be more than financial woes to worry about should our fears prove to be well founded. The
penultimate chapter of the book is called “2020 vision”; a happy coincidence with the name of 
this publication. It highlighted the shift of power and wealth from West to East restoring theequilibrium that existed prior to the Industrial Revolution. Such extreme forecasts are fretful forthe investment community that occupies a supposedly safe middle ground. Fear of change isthe enemy of innovation and typical of dying industries that cling to dysfunctional habitsthrough familiarity rather than observation of reality.It is one thing to write text and tell people what to do; it is another to lead by example andprovide a mechanism for change. To do so, Oppenheim & Co is designing a fund called
GaiaOpportunities
. After launch in 2011 it will only be open to professional investors. While themotivation is of course financial it nevertheless provides a practical platform for progress that ismore powerful than mere words.Given the dominance of High Frequency Trading one may question whether an investment fundis the right vehicle to effect reform in the real world. Just because markets are being artificiallymolded does not mean they have mutated for good. They will undergo a transformation of 
‘swords to ploughshares’ but for now are swelled by printed money and the erroneous
assumption that the US Federal Reserve will prevent prices falling too far. While recognizingthat financial markets are prone to manipulation by central banks and institutions alike, weshould not forget that the price mechanism is essential for drawing money to the right place inthe most timely, efficient manner. The flow of capital is far more powerful than another round
of stilted statute. With the best will in the world, projects don’t progress without finance so we
must use market mechanisms that for once will benefit the real economy rather than thebanking sector.Before offering solutions we must first identify the signs and symptoms of what is to come.There is an old saying that history does not repeat but it does rhyme. The similarities with the
1930’s are becoming more disturbing by the day and leave one convinced that fe
w of ourleaders have any notion of historical precedent. Like the Seven Seals in the Book of Revelationskey events are unfolding that appear pre-determined and obvious to those with understanding.

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