Pj de Marigny, DITMo Strategies
Director, GARP, S. California Chapter

Two GARP Conferences (One past, one present):
Go to www.GARP.com (Free membership for all Powerpoint Presentations of Worldwide Chapters)

GARP S. California will be hosting an invitation only conference in Los Angeles sponsored by IBM. Chief Risk Officers of major financial institutions.
Date: 29November2011
Time: 7:30am – 10:30am
Place: Los Angeles Area Hotel

GARP Meeting: Newport Beach, CA
Conference – A Risk-Driven Paradigm for Cash Management

Location Pelican Hill Resort, Newport Coast, CA – Pacific Room
Dates 26 May 2011
Organizer
Contact Trevor M. Saliba (Director, Los Angeles / OC Chapter)
tel.: 3107798500
americade@aol.com
201.719.7210 Nina Lopa, GARP
Cost Free (must Register at GARP.com)
Newport Beach, California Chapter Meeting A Risk-Driven Paradigm for Cash Management Date Thursday, May 26, 2011
Time 5:30PM – Registration 6:00PM – Introduction 6:15PM

Featured Presentation sponsored by Renovatio Asset Management 6:45PM – Q & A 7:00PM – Networking / Reception 8:00PM – Meeting Concludes -

Location Pelican Hill Country Club, Pacific Terrace A 22701 Pelican Hill Road South, Newport Coast, California 92657

Topic A Risk-Driven Paradigm for Cash Management

Speaker Pj de Marigny, FRM, Head of Portfolio and Risk Management Alternative Strategies, Renovatio Asset Management and GARP co-Director, Newport Beach, California Chapter

Synopsis Cash management investment policies may include risk-driven constraints allowing alternative strategies. Pension and endowment liability-driven policies, treasury excess cash and capital budgeting projects and fund of fund redemption vehicles share a common framework for decision-making.

Registration Fee Free. Click here to register.* *Photographs may be taken at GARP Chapter meetings and featured in the photo gallery section of our website. By registering and attending a GARP Chapter meeting, you agree to our photography policy, and understand that your photo may be included in the photo gallery. Please click here to review our photography policy. If you do not agree to this policy please email chapters@garp.com immediately. You must be a member of GARP in order to register. Click here to join our organization free of charge. For more information, please contact GARP co-Directors, Newport Beach, California Chapter: Pj de Marigny, FRM | americade@aol.com Trevor M. Saliba | Managing Director and Chief Executive Officer, NMS Capital Group, LLC – trevor.saliba@nmscapital.com

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Presented by: Pj de Marigny / DITMo Strategies

Tags: ibm cro garp enhanced cash hedge fund hfa conferences orange county

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100th Monkey Phenomenon: A Monkey or a Black Swan?
Pj de Marigny, DITMo Strategies
Director, GARP, S. California Chapter
23Oct2008, Newport Beach, CA. In the Ken Keyes, Jr book “Hundredth Monkey” (http://www.amazon.com/Hundredth-Monkey-Ken-Keyes-Jr/dp/094202401X)there exists a theory that ‘thoughts, views, and concerns are transmitted mind to mind.’

This Hundredth Monkey phenomenon may be used to predict trends in consumer products and is an influence for predicting randomness.

There are those of us (deMarigny is a Hedge Fund Strategist Portfolio Manager / DITMo / americade.com) who believe that the 100th Monkey may predict random events such as the present meltdown (see “demarigny” or “DITMo” on village.albourne.com search term for predictions of unavoidable meltdown late summer 2007). On the side, I even wrote a rock music song (AMERICADE.com / 1995)titled, “100th Monkey Phenomenon.”

However, there is something more basic to the Hundredth Monkey Phenomenon. I believe that when 51% of the thoughts and activities become dishonest, the system fails. Though this view is not widely accepted, I believe this is the cause of the Great Depression. Others try to rationalize after the fact the reason for an outlier event, but the causality was present previous – so why does an event happen when it happens?

The reason is that when 51% of thoughts and activities become dishonest an outlier event of randomness becomes certainty. Sometimes the system is to blame – a bad design. Government and Legislative bodies engaging in social engineering cause adverse impacts at the expense of the system; and there are those who will exploit it. This creates a fertile environment for dishonesty, and when 51% of the activities and thoughts become dishonest (the point where good faith or destructive activities begin) the system melts down. Fortunately, capitalism affords a self-correcting system so that dying leaves in the form of mulch recreates a fertile system (until the next cycle).

This cycle may be viewed as far back as the evil Israel Kingdom of Ahab/Jezebel (OMRI) in which wealth was greatest until 51% tilted to injustice, leading to reform by subsequent kings but ultimately resulted in Assyrian capitivity. The same fate is before the United States in that if the system disappears there will be nothing left to correct or reform. I believe the system will recover but if we were to truly reform the system to an imposed honesty, we would overturn the Federal Reserve Act in favor of a world central bank that controls central banks through a non-governmental body of non-market participant experts in financial risk.

The Hundredth Monkey Phenomenon will change the meltdown into stability in 2009 but by 2011 (see demarigny article on village.albourne.com “Financial Collapse and Creation of the World Currency Unit 2011″) there will be a universal currency that requires a world tax for legal tender. It is said that fear of punishment is the only true form of crime prevention, but the rules on white collar crime provide no clarity – violation is not clear and derived after abuse rather than providing avoidance by clarity. A world organization of financial expert non-market participants is needed, not government regulators, not more criminal proesecution. The system needs change. *.*

Tags: 100th Hundredth monkey black swan randomness ditmo trend fed

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DITMoHedgeStrategyMonthly Sept11-Issue2 by Renovatio Asset Mgt

Tags: probabilities ditmo hedge fund hfa garp ldi alpha risk wealth skybridge highbridge ESL man moore apaloosa shaw davidson landsdowne aqr elliott renaissance winton avenue king farallon baupost angelo bl

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Is there a better system than the U.S. Fed?

Pj de Marigny / DITMo Strategies
Director, GARP, S. California Chapter

14July2011, Newport Beach, CA. Alternative systems to the U.S. Central Bank such as a proxy currency, free banking sytem and commodity system. The balance between Fed and Treasury is all but unsustainable in the U.S. deficit trajectory within our political system. In my view the Euro will be history in three or four years even with Capital Market securitization of sovereign debt in return for austerity.

So, what’s the next step? Wait for the Fed to layoff agencies, futz with monetary policy, hope for deficit mitigation by Congress, and hope the business cycle can stand without Fed Meds?

Perhaps we can take a page from former Fed Chief Paul Volcker and consider a common currency which monetary policy is set by standards of Basel and executed by the present consortium of central banks – The Bank of International Settlement. BIS can easily be chartered to act as the executing entity with BASEL by-laws.

And by the way, for Mr. Bernanke who today said the popularity of gold is due to a perception of tail risk, the true tail risk is money, gold’s value changes not, supply and demand of it is a function of currency value.

Last, what risk manager wouldn’t be interested in a real-life stress test of U.S. default? Even posing the question unmasks the U.S. Fed purpose as credit facilitator. Currency, like capital, should be fungible. *.*

Tags: fed eu ecb euro ditmo

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“The NEW Roman Empire: Fiscal & Monetary Unity”

Pj de Marigny / DITMo Strategies
Director, GARP S. California Chapter

03Aug2011, Newport Beach, CA. “Today we are all Romans.” Mitteleuropa, the extension of the Roman Empire from the days of Otto the Great seen by Bismark in 1915 is a present reality. It is the panacea for restoring growth and ensuring fiscal stability in the U.S. and Europe.

As the U.S. and Europe suffer with political problems that is structural cause of imbalance between the monetary and fiscal policies, we are forced to see a path to restoring that balance.

Both Europe and the United States have suffered the futility of their respective political regimes to deal with fiscal realities that destabilize their currencies. The answers bandied about have to do with growing our ways out of debt – a buildout paydown, so to speak.

However, in reality, the U.S. cannot buildout paydown in any formula that restores monetary/fiscal balance. In the U.S. we see that politically is impossible to restore monetary/fiscal balance – even with the cushioning provided by the U.S. Fed – without detiorating GDP, especially in an expanded regulatory environment. If the U.S. legislators truly conducted a cost/benefit coincidentally with an adverse impact study on all of their regulatory legislation, they would perceive the reality of their constraints to GDP growth, i.e. joblessness.

For Europe, recent events have forced the solution that the 27 members must have political unity. Enter, the New Roman Empire. Germany relies on trade with their theater and Basel is the guideline for capital. Europe has seen that the 27 members can rediscover their political roots and offer this solution: Creating a political unity and governing monetary policy where the individual states’ fiscal and monetary regimes are structured into a wheel and spokes New Roman Empire.

The United States needs a monetary union with this consortium to ensure that our political process does not undermine our fiscal policy and the way to do that is to unify our monetary policies with this New Roman Empire. When economic interests are aligned and monetary policies are unified markets are created and political peace will ensue and systematic risk factors are mitigated.

Bill Gross estimates that unfunded liabilities for the U.S. are projected to be $66 Trillion. The political system of the U.S. was just not designed to operate in an unrestrained monetary, fiscal, and regulatory environment. The process must be re-engineered, in the words of Michael Hammer. What is need is an over-arching monetary authority with a unified monetary regime, as envisioned by former U.S. Fed Chief Paul Volcker.

A New Roman Empire political union with monetary standards of Basel at the Bank of Int’l Settlements (the central bank of sovereign central banks) can provide a central framework to solve our joint fiscal and monetary dislocation with a unified currency. The currency could be fiated or reserved with an Occidental, Oriental, and Europe/Middle East monetary consortium that would represent the three theaters. *.*

Tags: eu fed ecb roman fiscal monetary ditmo 666

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Saving Europe and Disposing of Gold
Pj de Marigny, DITMo Strategie
Director, GARP, S. California Chapter

05Sep2011, Newport Beach, CA. Is there a panacea for Europe and the United States to avert an economic meltdown?

For the United States, supply and demand side solutions include extending unemployment benefits, employment tax credits, rolling back regulatory burdens, Fed monetary manipulations and infrastructure spending (a federal bank has been tried before and is even more susceptible to fraud and waste than the stimulus failure).

For Europe, restructuring sovereign debt, austerity, and nationalization of banks seem to be the course. But what will work? Is there a panacea?

First, the U.S. should face the fact that the Fed’s role of balancing monetary policy with the treasury (fiscal policy) is now impossible. QE, manipulation of interest rates, reserves and paying interest on resoerves, discount window, TARP, and repo securitization – we’ve heard it all – but there is no cushioning a fall from 1000 feet. Creating law through regulatory regime without understanding adverse impact to trade and innovation increases business volatility (risk) and is not conducive to entrepreneurialism (releasing the power of creativity) to compete effectively. Last, our political, legal, and tax system are antiquated and are constraints to the free flow of capital’s best use. Jefferson today would never be elected, he would obviously be an independent. We do not have runoffs in the U.S. the virtually ensures an intractable fiscally irresponsible Congress. What Congress won’t legislate, the executive branch empowers agencies to regulate. The tax regime is a ridiculous mechanism for funding government and the budget process is just as broken. So, what the government overspends, the Fed monetizes and the economy grows to compensate to offset devaluation of the currency. That balance can be continued until the debt can no longer be monetized to the degree of growth. That is where the U.S. is today.

For Europe, the problem faced is more simple. Europe has a monetary union without a political one. Austerity imposed on its constituents is like demanding fish from a country without fishermen. Monetary union was doomed the day the eurozone voted down political unity. Brussel’s answer was to first save the failing sovereignties with a 30% paydown and restructuring. Next, Lagarde proposed to nationalize banks since the banks are the major monetizers of sovereign debt. Ex a central bank power to control money supply, this should sound familiar and is the course of the United States.

The panacea for both the Eurozone and the United States (and the Americas) is the formation of a New Roman Empire, a political and monetary union into a new central currency that is regulated by Basel and authorized under BIS which constituents are Occidental, EMEA, and Oriental central banks. The U.S. currency simply cannot be sustained independently by unconstrained institutions of Congress’ fiscal policy, the Executive branch’s regulatory and tax regimes, and the Fed’s monetization powers.

The eventuality of these meltdowns is the nationalization of the banking industries in the U.S. and Europe, but under auspices of a new political and monetary regime: A New Roman Empire. The Euro and eurozone simply cannot survive in its present form for more than three years. The New Roman Empire as a political consortium with a monetary consortium under new Basel guidelines can create a central currency that would resolve the threats of monetizing unfunded and current debt for Europe and the U.S. The probability of the Euro failing into a new unfiated currency is the same probability of gold being valued by its industrial use. At that point, investors will be throwing their gold on the streets. The eventuality of gold’s value falling off a cliff is certain, it is more a matter of timing. *.*

Tags: gold europe eu fed bis ditmo roman

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What Is The #1 Financial Risk Today? I was speaking to a European (Swiss) colleague recently. He was a top executive for Rothschild Private Bank and he is an FRM. He asked me a question, “What is the number one risk today?” He had a surprising answer. He explained his answer from his clients’ viewpoint on the subject.

He told me the answer is “CONFISCATORY RISK.” That is, the risk of government’s confiscatory policies. He went on to explain to me how I was viewing financial risk from a parallax view in that financial risk is in aggregate, the collective behavioral view of markets. He then educated me on historical occurrences of government confiscation. That led to a discussion of gold.

What may be a plausible event of confiscatory risk? In my view, a forced conversion of USD/Euro, et. al, would be an event, and is a likely outcome of a failed Euro leading to a USD death spiral. It must be occurring to ECB, the Fed, and other BIS constituents, that a new currency and a new monetary political authority is the answer to the threats of a debt collapse. In the face of a forced currency conversion, is the answer to pack suitcases with gold (the maximum is 40 lbs, about 1.5 million USD per suitcase per person)? Yes, if it weren’t for the threat that the new world currency would cause gold to be valued at its industrial use value.

A world currency would foster pro growth monetary policies, create trading markets, and lessen systematic and geopolitical risks. *.*

Tags: risk confiscation fed gold garp ditmo

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Basel Under Attack!

12Sept2011 Pj de Marigny, DITMo Strategies
Director, GARP S. California Chapter

13Sep2011, Newport Beach, CA. Just so the argument is understood: Basel critics claim Basel is:

1 – anti-American favoring European institutions

2 – over-regulating larger institutions

3 – causes an agency problem in that Basel is not a body under United States authority or voted on by our electorate

4 – futile in application because fungible capital will be deployed around the regulated institutions or thru affiliates

5 – detrimental to capital formation and credit facilities

Global Association of Risk Professionals (GARP.com) publishes several papers and sponsors educational programs for Basel integration.

To quickly juxtapose, Basel III is:

1 – a risk based standard rather than a subjective US money center bank derived Fed Reg standard

2 – risk centered on issues that are peculiar to larger institutions that is the point

3 – a body to represent the consituents of BIS including the Fed which itself is a private bank not voted on by the US electorate but is a money center facilitator, money market regulator, and treasury intermediary

4 – a mechanism for the deployment of capital around regulated institutions is precisely the point of Basel III – it supersedes a country’s banking rules to create a single standard cross collateralizing risk evenly across international banking

5 – a definitive ruler of bank arbitrage risk that set will aid banks not only in defining constraints but will pinpoint the threshold of operating and financial leverage so financial institutions may operate in confidence providing liquidity and credit facilities with certainty *.*

Tags: basel dimon fed euro ecb garp ditmo

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Gov’t Partnerships: 8a, NIB, SBIC, Good or Bad?

Pj de Marigny, DITMo Strategies
Director, GARP, S. California Chapter

26Sept2011, Newport Beach, CA. I have witnessed the adverse impact of Gov’t programs through a family-owned small business manufacturer. We employed about 55 mostly minorities in inner-city Brooklyn. The work was difficult, the working conditions were uncomfortable, and the profitability was marginable, but everybody worked…hard.

GSA, the procurement arm of the federal government, and other independent agencies like GPO and DoD post bid requests for annual or one-off supplies contracts. A part of the contract is set aside for small business to bid on in a sealed bid. The set aside small business portion became smaller every year, the reason? Minority set asides (8a) and National Industries for the Blind were given automatic awards of an increasing portion of the small business contracts.

The facade is that the government is leveling the playing field and championing the cause of the underprivileged. Proponents like Colin Powell, Al Gore, et. al, would cite how minority-owned, women-owned, and the blind industries were gaining their share of the American Dream.

In reality, the 8a contract in our case, was going to one minority who then subcontracted out with a markup to non-minority owned contractors. The price the government paid for the supplies was significantly higher and the shipments were often shipped late. The government gave free bills of lading and preferential treatment to these contractors to the adverse impact of hurting firms like us.

We took a tour through the NIB (Blind) facilities and found state-of-the-art machinery, a huge facility, and very few workers, and even fewer who were blind. The set-aside to NIB was a sham for political payback. As the contracts to small business got smaller, we were forced to fire and lay off hard-working, decent, mostly minority workers.

We made our own machines and most of the time we were the low cost producer because our customized machinery built from scrap yards and wooden jigs was more efficient than the big business sophisticated machinery. Small business works because it releases the creativity of the individual. We received no government incentives, no subsidies and no free government bills of lading.

The same SBA created another program called SBIC, small business investment companies. Here is a worthwhile program championed by the late senator Ted Kennedy. The difference between Obama green and SBIC is simply this, that SBIC lets the VC experts make the choices with their own skin in the game based on merits of the investments in a sea of competitors vying for good deal flow and portfolio companies competing for capital.

In the case of the SBIC program the government is not making the choices of portfolio companies; rather, they fund deals that meet their requirements. The program is saturated in contradictory rules and red tape as with every government activity, but the VC community has made the program work well. The difference is that the venture community chooses portfolio companies, not the government.

Tags: 8a sbic gore colin powell ditmo gsa

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SDR Currency & Emerging Markets Meltdown

Pj de Marigny, DITMo Strategie
Director, GARP, S. California Chapter

22Sep2011, Newport Beach, CA. Just after two years, the SDR allocation increased to $400B (+$161B) for Emerging Markets liquidity bailout 28Aug2009. The SDR, a reserves mechanism facilitating the Bretton Woods’ currency-fiat-pegging system set the USD at .888671 grams of gold per dollar. In 1973 (Nixon) BW failed and the SDR became a 4 currency basket. Just FYI, if the BW convention was in force, the USD would be worth (where 28.3495231 grams/oz) approximately $55.75! Imagine using this as the measure of inflation? The SDR was to restore a balance to Emerging Markets current accounts.

The point of this short article is to reinforce a point made by George Soros today on CNBC, that it is Euroland that is the main source of liquidity to Emerging Markets, and Emerging Markets progression through the IPLC (International Product Life Cycle) that provides markets for U.S., Asian, and EMEA growth.

The IMF now has the right to create allocation units of SDRs as it deems necessary to provide liquidity to members – especially Emerging Markets. This is a second derivative monetary regime. The IMF also has the right to change its currency basket in 2015 which it should do and replace the SDR with a new world currency that is envisioned by former Fed Chief Paul Volcker.

The answer here is to revamp the IMF/G20 and BIS members into a new monetary consortium with BASEL standards thereby removing monetary autonomy from central banks forced to monetize fiscal irresponsibility. In the U.S. Barney Frank has even gone so far as to declare that Congress should control the central bank. The EC should reconstitute into a political/monetary system of only the ten strongest constituents with the U.S. to create a central currency. The remaining EC states and others may adopt the new SDR as their currency reserve. This may all be executed through BIS with a new mandate under the standards of BASEL. *.*

Tags: soros sdr emerging markets fed ditmo

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