financial alchemy

The first time I saw this presentation (it was emailed to the administration head at my office), I screamed “WTF mate?” multiple times and in quick succession. Go through this presentation and give me one decent reason for why you would ever want to invest in this attractively packaged recipe for financial alchemy?



Slide #29 is a classic Warren Buffett trap. But if you’ve been following this blog, you already know that, if someone puts before you a financial offer that uses the words “you,” “Warren Buffett,” and “invest” in the same sentence, you should run away as fast as you can. And, you shouldn’t look back.

Awareness Fridays is an initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Today’s topic is an easy to understand and informative read for the weekend. It’s a speech delivered by Dr. D. Subbarao, Governor, Reserve Bank of India at the RBI-BIS Seminar on “Mitigating Spillovers and Contagion – Lessons from the Global Financial Crisis” (click to download) at Hyderabad earlier this month.

Of significance is this quote (a close friend and I had discussed precisely the same point in January of this year):

Forgotten in the euphoria of financial alchemy is the basic tenet that the financial sector has no standing of its own; it derives its strength and resilience from the real economy. It is the real sector that should drive the financial sector, not the other way round.

Financial alchemy. I love the term — a new one for my arsenal! A few examples for financial alchemy that we see on a daily basis include:

What do you think?

Awareness Fridays is an initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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