Though credit default swaps have been in existence for a long time, I just happened to catch the news recently that Argentina is at the brink of defaulting again since the year 2001. I believe June 30th,2014  was the date by which Argentina had to pay $530 million in settlements. However, coming towards the end of the grace period of a month after the deadline, the amount to be paid to bondholders surpassed $1.3 billion.  Back in 2001, when Argentina faced a similar situation, it offered the bond holders to exchanged the outstanding debt for cheaper debt, meaning the interest payments paid would be smaller( a process known as a “haircut” in the bond world). Some hedge funds, however, were not willing to oblige with these terms; after all as hedge funds they are in a very competitive industry and want to perform well for their investors.  The dissidence between the so called “holdouts” and Argentina has called alot of unrest within Argentina as even the thought of paying on the bonds for the holdouts might lead to holders with haircuts to demand their entire share of payments as well.

A natural question that rises is that: “Does Argentina just not have the funds to pay back the interest on its bonds?”. With $30 billion in reserves and holding the title of Latin America’s 3rd largest economy, it certainly does not seem like the case. So why does Argentina not just pay from its reserves? One explanation might be the fact that those funds are meant to be used in a state of emergency or for some other reason. Whatever the  case may be, CDS holders may see over a $1 billion being received as Argentina heads to “sovereign default” again.  Something interesting to look at would be figuring out who was holding these CDS’s. Did they merely catch  a fluke and cashed in or was there something at the fundamental view that seemed alarming and led to the purchase of the insurance

On Monday June 16th, 2012, news broke out that Marissa Mayer is being named the head of Yahoo.com. What’s ironic is that Mayer’s comes from a company that has been battling it out with Yahoo for internet supremacy. Yes, you guessed it, its Google inc.  Mayer, now 37 years old, actually joined Google during its infancy. She has spearheaded the search division for years and has also run the location and local arms of the division. News articles have cited her as one of the best spokesperson for Google. Why would a computer science Stanford Graduate abandon Google, a company who has been expanding their plethora of product lines and increasing profits, at a top post and join Yahoo, a web portal that has been faltering in recent years,? Turns out,  she hasn’t been able to secure a position in Google’s top senior research team. Nevertheless, her incumbency as Yahoo’s CEO is a possible threat to Google. Juxtaposed to her predecessors, she has brought the most to the table. Following her announcement as Yahoo’s CEO, Google’s stock price tumbled from 578 to about 573 at around 9:30 EDT-9:50 EDT during early hours of trading. It doesn’t seem like Mayer is an imminent threat at least. When I start hearing “yahoo it” instead of “google it”, then I would think Google needs to watch its back.

After a few hours of tinkering, cubegeek.net has finally been upgraded. The site is now better organized, faster and looks better. The Houston Cubing Association pages have been now put  on the cubegeek.net site. I designed a new front page with a slidshow effect with pictures. Go check it out! Any suggestions or feedback on the site and its design are appreciated

Its been 3 years since the crisis occured in late 2008. The Dow Jones had reached a low point of about 9,000 in 2008. The economy seems to be improving and prospering; the Dow Jones has blown past 12,000 in recent weeks. Unemployment levels are lower than before. Will something like this ever happen again? It probably will, according to Peter Thiel, Paypal’s co-founder and hedge fund manager. This time its not going to be related to your house, your car, or your private jet. Thiel is predicting that the next “bubble” will be in the area of education; as kids we have always been told that if we work hard and excel in school and then you will get into Harvard. Essentially, its been said that your set for life after graduation from college. But are you really? Investing in a college education has been always been one of the best investments that anyone could make, despite the fact that you may need to get loans. It has been getting easier and easier to get loans for a college education, simply because you have to pay it up no matter what happens. To me this looks exactly like the mortgage crisis; cheap and easy credit. American students have to now compete with candidates from other countries for the same jobs. What will happen if Ms. Sally cannot pay her $100,000 college loan because she can’t get a job at a financial firm? Defaults will occur and another panic will happen. Lets just hope its not any time soon ( I would say 5 to 6 years would be a good time, personally).

Its been a while since I last posted. School  has really been tough and just getting through my assingments has been a struggle. Anyway, I was talking to someone about sports and what not, and an interesting point came up; why are some things called sports and other things not? For example, almost everyone ( by that I mean every single person in the entire world which might end due to global warming and stuff) agrees that soccer is a legitimate sport. Players run around and kick the ball into the goal. Its not really a hard concept. On the other hand if you tell someone that chess is a sport or that speedcubing is sport, people usually have a big grin on their face and laugh at you thinking its a joke or something. Why is soccer/football/baseball/whatever considered a sport but other activities are not? Is it based on how popular the “activity” is? Quoting from Wikipedia, a  sport “ is an organized, competitive, entertaining, and skillful activity requiring commitment, strategy, and fair play, in which a winner can be defined by objective means. It is governed by a set of rules or customs.” In that case, chess should be considered a sport since its entertaining, skillfull and an organized activity. Speedcubing should be as well. Heck, even computer programming competition, paper airplane competition, and eating competitions can be considered sports. People gibe at saying that table tennis, one of my many hobbies, is a sport. It is as equal a sport as is football or something. So no matter what sport you guys might do, even if its not that popular in the US (in my case, I like playing cricket, but its not really big in the US), just keep doing it. You do sports to have fun and lose weight, not to please other people by playing the “right” sports.

What is the biggest trading market in the world? Stocks? Options? Futures? Not exactly. Trading currencies is actually the biggest trading market in the world. In fact, trillions of dollars are traded everyday by speculating on the prices of currencies. What is interesting to see is that you can trade a whole lot for just a little in the currencies market, thanks to the extremely high leverage ratio of 1 to 100, meaning you can control 100 dollars of something with only a 1 dollar. Here is how it works: you pick a currency you like or want to trade. I will be using the US dollar, since its familiar to me. In the currency or the Foreign Exchange ( “Forex”, get it?) market, you trade one currency against another currency; basically you trade in pairs meaning you sell one currency while simultaneously buying the other. So for example, you could trade Euro:USD . If you “bought” this pair you are buying Euro and selling the dollar. If you “sell” this pair, it would mean that you are selling the Euro and buying the Dollar. Quotes for this example would be displayed as EURO:USD 1.4569 meaning in the market 1 Euro is worth 1.4569 dollars. Profit and loss in the forex market is determined by how many “pips” the  currency pair price has moved.  A “pip” is usually 1/100 of a percent or 0.0001 change. Calculating the profit or loss is actually very simple. Lets say you buy 100,000 euros ( you arent actually buying anything in real life though) for $145,690 ( you get that number by multiplying 100,000 euros by the 1.4569 euro-dollar factor I made up). If the currency pair price increases by 20 pips, the new price would then be EURO:USD 1.4589. Your 100,000 euros ( remember you actually have not bought anything for real) are now worth $145,890 meaning that if you sell your euros you would have a $200 profit. What makes forex particularly exciting to me is that you can buy the 100,000 euros for practically a really small fraction of the price. Often times, the margin levels are extremely low; in some cases to actually buy the $145,690 worth of euros would only require a tiny amount such as 2,000 for intial margin. So in this case the $200 gain would be quite a gain; you would have a 20 percent gain on your investment, which is not bad at all.

Recently I have been using a new simulator tool I found on the Internet called “virtual trade” on the CBOE website. It is a pretty nice stimulator and gives you a wide array of options of trading. You can trade options, stocks, and futures as well as xspreads ( I don’t know what these are). I bought some stocks and got fairly low gains in the account, so I bought 50 contracts on CLX10 which is the crude oil futures contract that expires in December 2010 I believe. The reason I bought the contracts on crude oil was because of a recent shortage of oil in France. I thought that since there was less oil availailble, the price of crude oil should shoot up and it sort of did. I was sitting in class and I was excited to see that my speculation had been correct. Well, in the next minute my smile was turned up side down. What had been like a 50,000 profit turned into a 69,000 loss in about 2 minutes about of time. This demonstrates an important concept of futures market: you can make a ton of money and in the next minute and lost 2 times that money in the next minute. If only I had put some stop loss orders on my trading, but I do not fully understand these orders. The only order I actually understand is the market, which is a pretty basic order saying to buy or sell something at whatever the  the markets price of that thing is. If you understand stop, stop limit, and limit orders, please feel free to comment below and hopefully I will understand these orders.

I recently got interested in game theory and I finally understood one of most popular examples in it:  Prisoners Dilemma. I find it quite exciting so I will explain it to you in the most simple way possible.

Prisoner’s Dilemma: Basically, Billy Bob and Joe are caught while robbing Caesar’s palace in Las Vegas. Both Billy Bob and Joe are about to be sent to jail, but the problem is that Jack, the police officer, does not have enough evidence to put them both in. Jack goes to Billy Bob and Joe, each locked up in different cells and gives them the following choices : confessing that the other actually robbed the casino or being quite about it. Here are the possible outcomes:

  • If both of the convicts keep quite, they both go to jail for 4 years
  • If one ratts or tells the police that the other did the crime and the other one keeps quite, the one who spoke up goes to jail for a year, while the more reticent one goes for 15 years
  • If both the convicts say that their partner actually committed the crime, both go to jail for  6years

So the question is: What should Billy Bob and Joe do? It seems obvious that both should keep quite since that outcome has the least number of years. That, however, is probably something that Billy Bob or Joe would not do. The reason for that action is that it is not favorable for either of them to be quiet. To explain why this is the case, take a look at my awesome picture below:

In the picture, it is clear that it is better for both of Billy Bob and Joe to rat the other out because the jail time is less. For example, if we ignore Joe’s descision and only look at the numbers availabile to Bob, he would choose the top row since 6 years is better than 10 years and 1 year is better than 4 years. Joe has the exact same issue. So if we suppose that both crooks are only caring about themselves, it is better to rat than be quite. Even if Bob and Joe were smart enough to figure this out, they would still bail the other out since they would have the uneasiness of thinking “hey my partner might have lied to me” So they both end up doing 6 years instead of 4 if they had kept quiet.

I was reading some articles on the Wall Street Journal website, when an article about the dearth of high scores on standardized tests caught my eye. The article, in a nut shell, talks about why the American education system is so bad and why fewer and fewer high school students possess basic skills that are essential for success in college. High schoolers are not being challenged enough; the rigor of the courses is just not enough to prepare students. Government can’t really help since its divided because Democrats and Republicans  have different ideas of changing the education in America, don’t expect a major change anytime soon. What flabbergasts me is that more adults have at least an associate degree in countries such as Europe than  adults in America, yet the best colleges in the world reside in America. So the people who think that Americans are dumb( mostly from countries in the East) have a point in that the education level in America is not at par with education level’s in other parts of the world, as these disappointing numbers show.

I was digging through my computer files yesterday when I found my paper that I had written about the financial crisis. My teacher was not a big fan of the paper, but I think some of you might be interested in it so here is the link.