The Ugly Truth?

Leo Kolivakis's picture

Via Pension Pulse.

On
Sundays, I like to write and reflect on various topics. Take the time
to read this comment carefully as it covers everything from
relationships (personal to professional), to markets to politics. The
theme today is going to be the Ugly Truth.

1) Ugly truth on yours truly: I'm going to begin and end this post on a personal level. I've been going through a lot of introspection ever since turning 40. First, I'm glad I got off my ass and joined a gym. I don't know what is going on in my body but ever since I underwent the CCSVI procedure
in late March and then joined the gym to work out with a trainer, I've
seen a major transformation and feel stronger than I have in years. I'm
walking further, my upper back pain is almost gone, and my posture is
better as I stand up straight and push my shoulder blades back. I'm
honestly not scared of my MS and know I will beat this bloody disease
through diet, exercise and positive energy. And let me assure other MS sufferers, scientists will cure MS sooner than we think.

The only thing I've
been doing at the gym is legs and back, focusing on developing muscles
that have atrophied over the years. If you have MS, no matter how
severe, get cracking and head to the gym and do whatever you can! I'm
now completely and utterly obsessed about working out first thing in the
morning and simply love pumping iron as I listen to music. To pump
myself up, I listen to Tiesto's Elements of Life and a song by Lil Wayne and Eminem, Drop the World. Don't ask, it helps me channel my inner rage!

That's
the second thing you should know about me, I have anger issues. I'm not
angry that I have MS -- it's actually made me stronger in ways very few
people can possibly relate to -- but angry at the weasels I've
had to deal with in my life and how they used and abused me.
Unfortunately, I'm very naive when it comes to personal and professional
relationships. In finance, there are two types of people: those who are
primarily focused managing money and those who are primarily focused on
managing their careers. I would say the bulk lie in the latter camp
(over 95% of the CFAs in Montreal have never managed money!!), and these
people tend to be extremely dangerous narcissistic egomaniacs who only
care about their public image. Makes me sick to my stomach!

But I
need to explore some of my other anger issues that have been festering
inside me for years because it's affecting my ability to develop more
meaningful relationships, focus on more productive goals and just be my
old happy self again. My brother, a psychiatrist, recommended a
psychologist and I decided to go see her this week. I've seen someone in
the past but got bored after three sessions, never listened to him, and
didn't take it seriously. This time, I will put in a lot more effort
and be completely honest with her. I'm doing this mostly for me, but
also for the two people I love the most in this world, my mother and
father. I could be a stubborn, intense, obsessive ass but sometimes you
have to listen to the people who love you the most and trust their
judgment. Importantly, there is no shame in seeking professional help.
If you need it, just do it! Who cares what others think! And remember
Einstein's definition of insanity: "Doing the same thing over and over
again and expecting different results."

2) Ugly truth on Quebec's Absolute Return Fund: My inner rage was definitely expressed in my last comment on Quebec's absolute return flop.
I simply cannot understand how poorly managed this whole endeavor was.
If it was done properly, Mario Therrien's team at the Caisse would have
invested directly into these funds, doing the due diligence, informing
the FTQ and Fondaction CSN every step of the way, and they would have
used Innocap's managed account platform, one of the best managed account platforms in the world.
Everything would have been open, public, transparent, including the
investment management agreement which would stipulate how managers are
selected, what percentage is going into directional and market neutral
strategies, what percentage goes into established versus emerging
managers, what are the terms governing these investments, including the
fees being paid out to everyone. I don't blame Mario Therrien or his
team for the sloppiness of this whole project. In fact, I have a strong
feeling something else is going on in the background and it likely goes over Michael Sabia (ie. political nonsense!).

3) Ugly truth on Quebec's absolute return funds and my capital introduction services:
Having met a lot of hedge funds here in Montreal, I'm impressed with
the alpha talent we have in this city. And there are other talented
individuals I know of, getting screwed working at some bank which
extracts the blood from their veins. All these people deserve a fair
shot. There is exceptional talent in this city that is grossly
underutilized and I also know of other experienced money managers from
Quebec outside this province who would come back to manage money if the
terms were right. Not everyone is up to snuff, some managers are a lot
more experienced than others, but they all deserve a fair shot and a
helping hand.

I have done more than my fair share to promote these funds on my blog.
I will continue meeting new managers and updating my list. I have even
done some capital introduction without having signed any legal
agreement. All I'm asking for my capital introduction is 25 basis points
for the initial investment, and 12.5 basis points for all subsequent
investments. To my great disappointment, none of the Quebec hedge funds I
approached and met have signed the legal agreement I provided them and
none of them have contributed a dime to my blog (except for my former boss at PSP Investments, Pierre Malo, who is now
working at Jean Turmel's global macro fund, Perseus Capital and someone
else who shall remain anonymous).

Worse still, I
provided the legal agreement to the limited partners (LPs) so they can
see the terms and see that they are part of the prospective qualified
investors, and a couple of them came back to me to ask me to be removed
from the list even though they're open to meeting new managers. I
reminded these people that their job is to meet the best managers from
around the world, including those in Canada, and that they can't be open
to meeting managers and not accept that they be listed on my legal
agreement. Moreover, unlike the US, none of the LPs in Canada have open
policies governing capital introduction -- a major governance gap!

In this world, I trust two people unconditionally: my mother and my father. The rest can screw me over at any time and verbal agreements are absolutely worthless in a court of law.

So if you want me to help you, get to it and sign the legal agreement.
At a minimum, all of the hedge funds I've helped in my career should
have contributed to my blog by clicking on the PayPal account button
under the pig at the top of my blog.
Importantly, to all GPs and LPs, if you're going to talk the talk with
me, make sure you walk the walk. I mean it, no more double-speak or
blowing smoke in my face, when I talk, I deliver, and I expect the same
from all of you. You're all aware of my current situation and while
you don't owe me anything, I expect you to be honorable and fair with
me.

4) Ugly truth on Greece: A senior pension fund manager sent me an interesting blog comment on Greece, Democracy vs Mythology: The Battle in Syntagma Square.
I enjoyed reading it and passed it along to family and friends in
Greece and Canada. My uncle Takis in Athens read it, found it too
leftist for his taste and wrote back: "Our politicians are responsible
for the enormous debt they created by overborrowing (the debt never was
never enforced on us) and we are now paying the consequences of the
big mistakes they have done."

It's true. With the help of US,
French and German banks, Greece borrowed more than it was able to pay
off and global financial system will likely experience yet another crisis due to contagion risk.
What angers me and most hard working Greeks is that the common workers
are bearing the brunt of the austerity measures while the rich get off
scot free.

Let me share with you the ugly reality on Greece's
woeful tax collection system. Everyone in Greece knows this, but let me
give it to you straight. A close buddy of mine, a radiologist, is now
vacationing in Greece with his family. His aunt recently had to replace a
heart valve and she slipped an envelope of 12,000 euros to the
cardiovascular surgeon so he would do it. In Greece, this envelope is
called "fakelaki" and if you don't have the money, you're dead.
Specialist surgeons working at public hospitals are typically the worst
offenders, but there are others notorious for accepting huge sums and
they declare nothing. And most of them pay off Greek tax collectors who
are equally corrupt and greedy.

In Greece, if you want to strike
it rich, become a specialist dealing with critical life and death
decisions, tax collector or a high profile minister in the government.
The scandalous stories that are coming out now of doctors, tax
collectors, and ministers with millions of euros in their bank accounts
and villas in Santorini and Mykonos are no surprise to regular
hard-working Greeks. They know the system is corrupt at its core. It's
disgusting. I'd make a public display of all these criminals by throwing
them in jail for treason for the rest of their living years.

5) Ugly truth on US economy: This morning I listened to a roundtable discussion on ABC's This Week with Christianne Amanpour on the state of the economy. Click here to watch this discussion. I've already written on how the US and developed world jobs crisis is here to stay.
Given the current political environment, I doubt any new spending will
pass in Congress. There is an irrational fear that the US will default
on its debt, but this is all nonsense. Robert Reich is right: the issue
now is jobs, jobs, jobs! Not the stupid debt ceiling, the deficit or the
debt. The sooner American policymakers get to tackling this jobs
crisis, the sooner they will be able to increase their government
revenues and pay down the debt in the long-run.

6) Ugly truth on the Canadian economy: This one is easy. Just go back to read my comment on the Canada bubble and Canada's mortgage monster. In case you haven't been paying attention, Canada's benchmark index, the S&P/ TSX has been taking a beating over the last three months. The Canadian dollar remains strong, but it too is losing its luster and it can head much, much lower from here. The problem is so can the US dollar, especially if the Fed moves ahead with QE3.

Link7) Ugly truth on the 'solarcoaster':
I'll tell you what else has lost its luster in the last three months,
solar stocks. Along with other risk assets, they've been slaughtered. According to Bloomberg, short sellers are flocking to solar power, dumping record levels of stock in First Solar Inc. (FSLR)
and competing equipment makers in a bet that profit will be hurt by a
glut of Chinese panels and shrinking demand in Europe. The shorts have
hammered solars but they're creating opportunities for long-term
investors.

I recommend investors keep an eye on solars and start scooping them up
at these levels. The companies I'm watching carefully are: Amtech
Systems (ASYS), Daqo New Energy Corp. (DQ), Emcore Corp (EMKR), First Solar (FSLR), JASO Solar (JASO), LDK Solar (LDK), Power-One (PWER), Satcon Technology Corp. (SATC), Suntech (STP), Trina Solar (TSL), MEMC Electronic Materials (WFR), Yingli Green (YGE) and speculative plays in Canada are Timminco (TIM.TO) and Opel Solar International (OPL.V).

8) Ugly truth on unrequited love:
It's agonizing. Trust me, I know because I just lived through it and
it's not her fault. Like any relationship, if you're not getting what
you expect or putting into it, have the courage to walk away. Just like a
good traders know when to cut their losses, you got to know when to
stop doubling, tripling or quadrupling down, hoping things will change.
They don't and you have to accept that reality and start expending your
emotional capital on people who will reciprocate your love. Always be
true to yourself.

And on that highly personal note, I'm going to
wrap this comment up with some humor. I got the idea on the title of
this post from a movie I saw in the middle of the night on Friday when I
woke up and couldn't fall back to sleep. The movie is called The Ugly Truth,
starring Katherine Heigl and Gerard Butler, and it left me in stitches.
Below is one of the scenes that made me laugh out loud (Only found one
with subtitles. Try not to be offended and watch the movie, it's
hilarious!).

***Feedback***

A senior pension fund manager was kind enough to share this advice with me:

A piece of advice.

Be careful how much you tell about yourself in public.

Most people who know you will not pose a problem.

But I have learned that a small minority will turn the kind of personal information you just wrote about against you and to their advantage when they see an opportunity.

Homo homini lupus

And that may be unkind to wolves.

Indeed, he's right. I thank him and remind these wolves that I can see them coming from a mile away. I may be naive but not stupid and realize in this industry, I've got very few friends and lots of enemies who would love to see me crumble. Won't give them that satisfaction.

binky's picture

Stocks and pillory would make a nice public spectacle.