Tag Archive: Investors

Bitcoin – Is It Merely ‘A Speculative Bubble’?

One of my favorite reads this weekend is Oaktree Capital co-founder Howard Marks’  latest memo to clients- “Yet Again?”

I can totally relate to the issues he highlights about Bitcoin and the numerous digital currencies we have these days. Particularly, i fully understand the honest statement he makes –” I think I understand what a digital currency is, how Bitcoin works, and some of the arguments for it. But I still don’t feel like putting my money into it, because I consider it a speculative bubble. I’m willing to be proved wrong” ( Page 8 of the Memo “Yet Again?”)

In fact, Just a few weeks ago, a friend of mine, and a reader of my blog, wrote me a message on WhatsApp after I shared an article about How Bitcoin Is Reducing The Need For Trade financing.

She asked me-

“Rahab, what do you think of Bitcoin and all these digital currencies I hear about? You know, I still don’t understand this whole buzz in Finance these days.”

She continued to ask me –

” And with all this fraud going on these days, Is it real, or is it another one of those scams? I hear people are making tons of money in this business. But how?”

I had to be honest with her. I told her,

“Reen dear, I am still learning about these things too.” 

From his memo, i believe there is a lot investors can learn. For example, It’s not enough to accept Bitcoin merely as a medium of exchange. For investors, it is also worth considering issues such as ‘Bitcoin price volatility and it’s future’ and some of the ‘factors that lead to it’s volatility.’

Still wondering what Bitcoin is and how it works? A great place to start is by reading this article ‘Why Bitcoin Matters’ by Marc Andreesen, the co-founder of the venture capital firm Andreessen Horowitz.

Deutsche Bank $6 Billion “Fat Finger” Error

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Ooops! Too many zeros! To err is Human, right? We all make mistakes. I also recall making mistakes when i first worked in an Accounting office and i realised the balance sheet couldn’t balance because of an extra ‘zero‘ i mistakenly added.

However, a typo or an addition of some extra zeros was not just a logical banking error at the Deutsche Bank Ag in Summer, June 2015. It turned out to be a huge financial error with too many zeros, which exceeded the figure that was supposed to be wired. What an expensive mistake? But thank goodness the giant German Bank recovered their money from the  US Hedge fund the following day. According to a Financial Times article by Martin Arnold and Katie Martin in London, a Junior member of the Deutsche Bank‘s trading team mistakenly transferred $6 Billion to a hedge fund client’s account in the US this year in June 2015. Although the ‘fat-finger’ error was reversed within 24 hours, the erroneous transaction is said to have been tied to a communications error where the junior foreign trader “misunderstood” instructions left by the client sales person who at the time was on leave. The article further reveals that Instead of processing a net value of trades, he processed a gross value and failed to offset the value. The bank reported the incident to the UK’s Financial Conduct Authority, European Central Bank and the US Federal Reserve.

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Further eyebrows have been raised on this matter which according to FT, has raised many questions. For example, about Deutsche Bank’s Internal systems for watching huge transactions like that. Why was the error was not spotted under the “Four Eyes Principle” which in a business context, is a requirement that two individuals review and approve a business action or transaction before it can be taken? More questions have been raised about the bank’s operational controls and risk management.

A lot has been going on lately at Deutsche Bank AG especially on issues targeting leadership, restructuring, management, strategy and on top of it,  joint resignations of the giant bank’s co- Chief executives, Jürgen Fitschen and Anshu Jain, which according to an article by Wall Street Journal, has left investors with questions about the future direction of the bank.

(Why the two Deutsche Bank Co-CEOs Jain and Fitschen are Resigning )

Nevertheless, since July 2015, the German bank which is now under new leadership with co-CEO John Cryan, is determined to work on improvement in areas technology, internal processes and it’s relations with it’s regulators. A full article about the Deutsche Bank $6bn “Fat Finger” error can be found here