The Limping Bull 4.1

The Resurrection of The Limping Bull

2006-12-17T17:16:00.000+10:00

Take 2.

Over the next few weeks I will try to bring this blog back to life. I'm looking for contributors. Feel free to post your interest.

Sunday Market Patrol

2005-11-18T11:39:00.000+10:00

"The way to stop financial joy-riding is to arrest the chauffeur, not the automobile". Woodrow Wilson

The Limping Bull 4.1

2005-05-03T20:22:00.000+10:00

The Limping Bull is back. Angrier and meaner than ever !
Several months after my last posts my career has finally kicked off. And I mean right off. I had to start the climb as a graduate accountant but the future looks good.

"The most important thing for a young man is to establish a credit... a reputation, character." John Rockerfeller

... and a girlfriend, of course. I guess he was too busy getting a credit and a reputation. I have the girlfriend bit covered (thank god for that. It's so hard to find balanced quality these days.) Now let's get that reputation and credit!

Limping and fuming, the Bull is out on a mission. Outta my way!

Portfolio Total: $51,562.29

2005-03-13T18:52:00.000+10:00

Here's just a quick update on my portfolio. I will skip the details and all. Ok! I just want to show off my ranking ... 2,319th of 14,328! Not bad, hey!

I will not get into the details here. Maybe later. I am running several dummy portfolios. With benchmarks and all. Will give you news later on.
Drop me a line if you too enter the competition. What's your rating?!

The Five Score Years of Investing

2005-03-06T07:46:00.000+10:00

I read an article in the Australian Business & Investment Explorer yesterday. A Score For Life by Graham Hand (Naked Among Cannibals) introduced me to the concept of Five Score Years of Investing. You see, it seems we are now more preoccupied about our old days than our parents -and their parents.

I am a young guy but I am already thinking of the day I will retire. Like all of us, I want to retire comfortable. And there's no secret here: how well I'll live in 40-50 years depends largely on how well I built my financial independence.

"Those who rely on the pension and free public health will be hoping taxes will be sufficient to support a decent welfare system" says Mr Hand

And with a median age of 50 years old by 2051 this means we will need all the help we can get now. That's why planning for retirement starts now.

The Five Score Years of Investing is a framework to help build your long term financial independence. it consists of the following five stages:

First Score Year: Development of of human capital

The first 20 years of our life should be dedicated to build personal human capital by developing opportunities to learn and gain new skills/knowledge. A good way to do this is to get a good education, go to college (or university). But it certainly isn't the only way. Anyway, this is the period during which we study hard, play sports and all.

It may also be a good time to start investing. You know... put some of that money away.

Second Score Years: Asset Accumulation

To be Continued ...

Once I've done the plan ...

2005-02-07T13:09:00.000+10:00

10 Things Your Financial Planner Won't Tell You! From SmartMoney.com, article by Nkiru Asika Oluwasanmi

1. "I got this gig on a whim."

"The bulk of people who market themselves as financial advisers are salespeople," says the Consumer Federation of America's director of investor protection, Barbara Roper.

2. "I'm a jack of all trades and master of none."

6. "Once I've done the plan, I'm outta here..."

"many clients find that a once-attentive planner becomes increasingly elusive as time wears on."

8. "Confused? That's the point."

9. "In fact, I don't even understand your plan."

10. "Good luck busting me for malpractice."

Corporate Robbers

2005-02-02T21:46:00.000+10:00

Good illustration for one of my previous post: The Barons of Bankruptcy. Cartoon by Z. Kaffer (or maybe Zukaffer ... I am not sure. Let me check that so the man gets credit)

Quick Update

2005-02-01T22:25:00.000+10:00

Hi everyone,

I know I haven't been very regular this month. I wish I could make at least one post a day. But the last few weeks have been so stressful. Everything is happening now. Because it all has to happen now.

After work and J.O.B hunting, I don't have much time left. Fortunately, it seems things are getting better. I have several interviews scheduled over the next few days. Yaahooo!! Now I just have to work hard to turn them into job offers.

On top of that, I am working on a stock portfolio. Nothing too complicated. My investment style is GARP (Growth At a Reasonable Price). It is a multi-sector US+AUS portfolio. Right now I am runnig a few screens and checking different sectors that offer the desired risk-to-return ratio. I already have a test portfolio that I am testing in Excel. Next I'll have to come up with a proper benchmark.

Besides this I am trying to finish the Limping Bull Version 1.0 ! I can't tell yet when it will be ready to go. Maybe a few more weeks (at this pace :( .

I have plenty on my plate these days. But it is all going well. Slow and Safe.

I still have a few posts unfinished. I hope to get them done during my two days off. If I remember well, I still have to talk about the Dow Jones Islamic Index, the Sarbane-Oxley Act and IFRS (Pour le Meilleur + Pour le Pire).

I'd better get going now. See you in a few days. Until then take good care.

IFRS: Pour Le Meilleur ...

2005-01-27T08:48:00.000+10:00

In the last few months, the new International Financial Reporting Standards have been the focus of the business press all over the developed world ("developed world" is not politically correct. I should say "Economically Developed Countries"). Since taking effect on January 1 2005, the IFRS/IAS are no longer an issue of remote consequences for businesses and other entities.

The business community has shown hostility (or rather wariness) to the IFRS for, they say, it imposes huge accounting and auditing expenses on reporting entities. But the new standards were elaborated and implemented pour le meilleur (for the best) .

In fact, many observers and analysts remind us that the new standards were developed to "boost economic growth" and cut costs associated with compiling consolidated financial statements. Ultimately, this will lead to greater transparency and understandability of financial statement which in turns means a broader reach for companies wishing to raise capital. And with hamonisation of the reporting requirements there will be less resources needed to "translate" prospectus, financial statements and other documents.

To Be Continued ... Stay Tuned

Made For The Job

2005-01-23T21:10:00.000+10:00

(Click to visit website)

I know I am deviating from the main focus of this blog ( And I am sorry it happens so often). But I had to link this.

Rene Rivkin: Bath Robe Model. Is this the job he was made for?

MyCareer.com.au allows you to vote for your favorite star!

You can vote on whether Donald Trump, John Howard, Paris Hilton, Ian Thorpe, Anna Nicole Smith and more were made for the jobs they are doing.

Go check it out! And vote!

How Much Are You Worth?

2005-01-17T09:14:00.000+10:00

I am a grad' and I wonder how much I should expect to get paid for the first years in the accountancy, banking & finance industry. I mean on average, ok. Here's an indication:

Accountant Assistant ~ Av. $alary: $40,000
Accounts Payable Clerk ~ Av. $alary: $33,000
Accounts Clerk ~ Av. $alary: $30,000

For more see Accountancy Aid Australia's salary survey.

A Socially Responsible Investor?

2005-01-16T13:57:00.000+10:00

Remember last month's post on ethical investing (FTSE4Good Index)? And I promised I'd post on the Dow Jones Islamic Index (Could be called "DJII4God Index" ... ... )! Well, let's put the IMANX aside for a few more days. Instead, here's question for you:

Are you a socially responsible investor?

I know. I know. You'll tell me that rational investors do not factor in a company's social impact to make decisions unless it has immediate implications for the stock's performance. Maybe the term "socially responsible" bothers you.

The way I see it, we shouldn't be stopped by the word socially. Because good social behaviour could be a criteria to find good stocks to invest in (again, this will depend on your investment style). Still not convinced? Here's another question:

Would rather invest in a socially responsible company being given a choice ? (everything else being equal)

For most of us, i think the answer is yes. Well Reputex offers Social Responsibility ratings for Australian companies. Its ratings are based on factors such as Corporate Governance, Environmental Impact, Social Impact and Workplace Practices.

Coles Myer LTD has an A+ rating for instance (and a low rating for its environmental impact).

GE Financial Services has a B rating due to a "very Low" environmental impact. Go figure!

Corporations are increasingly aware of the public cry for my sensitive and responsible corporations. Well, with the torrent of corporate donations to Tsunami victims the public is getting what it was asking for.

Big businesses are being so generous that NGO are unable to accept all their donations much to the frustration of corporations (such generosity ... isn't it amazing ).

For more news on corporate good (and bad) behaviours visit the CSR Wire. But remember, there remains a major flaw in the sort of ratings I just talked about: reliability.

2005-01-16T00:01:00.000+10:00

Past Trends + Ignorance = Trading Stunt-ware

False Accounting Rampant in China

2005-01-15T21:07:00.000+10:00

It is happening! It is starting to make the headlines!

~ Lies, lies and more lies in state firms' audit reports ~ (Asia Times)

It is happening now but it was long long due. With its double digit growth rate China is a bonanza for foreign investors and international corporations. Every week in the papers there is an article on the "Chinese Miracle" or "China, the powerhouse of the world economy". You cannot but notice the market's bullish outlook despite investment bankers admitting that " there will be some very big setbacks along the way" (Merrill Lynch Investment Managers Australia).

Yes, over the next 15 to 20 years the action will be in China. But what kind of action? There will still be "very big setbacks" like David Hudson puts it. And that's the part that we should keep in mind. This has to be done methodically. (Yes, I am against the blind rush to be part of the action thing). The last thing we want is a Chinese economy built on sand.

Remember the Asian Crisis? ( I often come back to this because it is the only financial crisis I've ever witnessed) What was the problem again? Poor legal system and financial framework (or lack thereof). Government corruption and crony capitalism. China escaped unhurt. This certainly doesn't mean the giant could sustain a crisis emerging within its borders.

~ China Confronts Its First Financial Scandal of 2005 ~ (The WeekEnd Australian headline, January 15-16 2005)

It's happening! David Ji, founder and president of Apex was arrested in Shengzen on fraud charges. The scandal involves Communist Party official. Not a nice affair this one.

~ State companies found cheating on audit reports ~ (China View)

Ok, that's not good. But see how bad it is: "An audit of 181 Chinese state owned enterprises found that 120 submitted incomplete financial information, while 13 falsified records" (The WeekEnd Australian headline, January 15-16 2005)

~ Audit Finds US$7.7 Billion Misused ~ (china.org.cn)

? Brr. Now, someone's going to have to deal with this.

~ China Punishes Companies for Accounting Fraud ~ (People's Daily)

Look it seems the Ministry of Finance is working on the problem.

What Makes a Stock SEXY?

2005-01-08T21:10:00.000+10:00

I started a group in Google Groups today! (Google rocks ... really). I started it because I am curious to know how other investors really pick stocks. And by investors I mean "mum & dad" investors rather than professionals. People who invest others' money are ususally (and they should be) restricted to an investment style. Mums & Dads often lack the resources and the expertise to choose the stocks that will give them maximum return for a given amount of risk. But this doesn't mean they don't make money. They simply do not realise abnormal returns.

After three years studying finance at university I came to realise that there is always a bias when "picking" stocks. Because we tend to identify with a certain company or a particular sector.

I have a favorite stock. Not that it is a particularly good stock (of course, depending on your investment style -Aggressive Growth, Value, Growth At a Reasonable Price - you will find that it is/isn't a good stock). It is Rayonier REIT (RYN: S&P 400). And I have been following it for a year now. It was part of an assignment I had to do at university. And it became my "Sexy Stock". Do I own it? Won't tell you ... But I find it sexy.

Now here's a question:

Is sexiness a criteria for choosing a stock?

Most definitely not. Never. But I still like the RYN.

Now if you have a sexy stock then go to http://groups-beta.google.com/group/SexyStock and tell us about it and why you think it is sexy. Or if you want send us an email at SexyStock@googlegroups.com.

I hope to get a few replies this week. If not, I will open another topic. I already have a few ideas. If you too have ideas then drop me a ligne or your link.

It's time for me to go (I have a few resumes to send).

Next post on the Sarbanes-Oxley Act.

The J.O.B Market and Extravagant CEOs

2005-01-05T19:25:00.000+10:00

And back for anther year. It isn't exactly starting the way I wished: I didn't get any reply from the positions I applied for prior to the Christmas holidays.

But that's ok. I am still in an optimistic mood. I mean, with the current shortage of accountants employers are more flexible when selecting candidate. Hay Accounting & Finance reported that employers prefer to "match personality and cultural fit rather than solely technical skills, when assessing potential employees".

That's good news because the competition is intense between accountancy job-seekers (and employers). Employers want to make sure they get the best candidates. The Acountancy Employment Activity Report (by Hays Accounting & Finance) concludes on an optimistic note for job-seekers:

With counter offers rising as a severe shortage of candidates continues, staff retention has become an important issue. We expect vacancy levels to grow as the healthy labour market continues. [...] Strong market confidence and continuing secondments of staff to Sarbanes-Oxley and IFRS project work will also create backfill temporary vacancies. Overall, activity should be strong as market confidence remains high and employers continue to expand staffing levels. As such, the next quarter [July- September 2004] should provide fascinating times for candidates and employers alike.

And it was! See for yourself! Check the July - September 04 Accountancy Employment Activity Report.

I hope this month will bring me good responses. We shall see.

Meanwhile here is one very cool book you can buy yourself on amazon.com. It looks to me like good summer reading.

CEOs Gone Wild?

Note: We'll discuss the issue of corporate governance another day. But for now let me clarify one thing. I have no problem with executives who receive (or pay themselves) fat cheques. I hope to be one of them one day ;) .

However, they should land big bonuses and perks only when they create maximum value for the shareholders. Definitely not when the company goes bust. It is a lot like the risk-return principle. Think about it: executives get compensated for the risk they take. That is the risk of being held liable if things go sour. High risk, high return.

We will talk about this is in a more constructive way another day. Until then take care.

Find-A-Career: Investment Banking

2005-01-05T16:20:00.000+10:00

"AUSTRALIA was the third most active market in the world for merger and acquisition last year, as investment banks gorged on takeovers in the booming property and resources ectors" (Geoff Elliott for The Australian)

And it seems this will continue in 2005. Now, that's good news for investment banks! This year they cashed in on $US90.4 billion of business in Australia alone.

The investment bank UBS "scored the most M&A work in 2004, with a role in $US61.94 billion worth in announced transactions and $US45.28 billion in completed ones." Morgan Stanley and Macquarie bank followed in 2nd and 3rd respectively.

For the industry this is excellent. I am sure investment bankers are looking foward to cash in (secretly ?!) the five-figures fruit of their hard work.

I wassurfing on UBS website - graduate section - and found some very interesting info. Thinking of a career change? How about investment banking ?

FTSE4Good Index

2004-12-30T20:56:00.000+10:00

It is a basic assumption upon which finance theories and the conceptual framework (Accounting) depend:

Good governance is vital to ensure effective management of a company, improve
its reputation, and maintain the confidence of the financial markets.

And these days reputation is everything. In fact, investors are increasingly concerned about corporation's anti-social behaviour. Environmental sustainability has become a key issue for many small investors. Accounting fraud, embezzlement and negligence don't go down well with investors either. But how do we know? How can small investors like you and I obtain information on a company's social and environmental impact? I mean, this isn't disclosed anywhere. Or is it?

Well good news! It is starting to be disclosed voluntarily by the companies themselves in their financial statements. Yep. There are no disclosure requirements provided by regulatory bodies but we are getting there. Is it a good thing? Look, yes it is more costs for the company. And yes the neutrality of such disclosures is questionable. But like I said, it's a start.

Ever heard of Triple Bottom Line?

But wait, there's better. How about a rating agency ranking companies according to their social and environmental impact? Better still! An index listing socially responsible companies?!

Well for those of us who are concerned about "transparent management" or "socially responsible products" there is the FTSE4Good Index!

Not sure it is approved by Green Peace though.

************************************************************************************

Next post: IMANX, the Dow Jones Islamic Index. Until then take good care.

I Will Be Away

2004-12-27T08:38:00.000+10:00

Oh! No!. I will be away for a few days, boys and girls. Mainly working and looking after some business. But I will be ready for more posts next week.

I am also building a new template for my blog. Given that I have no knowledge of HTML and all it is taking me forever.

More Traffic! More Comments!

2004-12-19T18:42:00.000+10:00

Hey hey ... BlogPatrol recorded 20 page views for The Limping Bull! Yahoo! That's good but I hope to get much more traffic. no, what I want more than traffic is comments. I feel like I talk to myself. So if you like my blog (or even if you don't like it) drop me a line or two. And give me your blog's address as well.

It is time for me to get back to my job search. I re-wrote my template cover-letter this afternoon. Let's see if it works. Keep you posted.

The Barons of Bankruptcy

2004-12-19T18:00:00.000+10:00

The Barons of Bankruptcy

Now, this is an interesting book with an interesting front page. The picture screams "Cover Your @$$!". When I studied Australian Company Laws at university it seemed to me that directors and other executives could be found liable for the losses of a company when in breach of their duties.

At the time I thought it would be an easy task to catch a negligent or incompetent CEO. Second thought ... maybe not so easy. A lot of them actually get away with a fortune.

If you are interested you should see the Barons of Bankruptcy list. You will see, not what they get away with but how much (in $US million) they get away with.

Some others stand to face the music. Ray Williams who helped building the insurance giant HIH resigned from the board on December 15, 2000, "three months before it crumbled with debts of $5.3 billion". The Australian reported on Thursday that Williams pleaded guilty to a series of charges:

Williams has consistently maintained his innocence but made a
brief appearance in court yesterday to plead guilty to criminal charges of
misleading and "reckless" corporate behaviour.
He now faces up to 12 years' jail for his role in the
country's biggest corporate failure.

12 years! Unless he has a medical condition like Mr Rivkin I recommend he purchases Andy Borowitz's CEO's Guide to Surviving in Prison.

A Guide to Amateur Day Trading ...

2004-12-19T17:23:00.000+10:00

... And how to get in debt before you get your first job.

Or maybe amateur day trading isn't so bad. I suppose if you are good you could pay for your studies ... that's if you are good. If you aren't, here is a book you want to read:

Day Trading to Pay University Fees and Become a Trillionaire.

Who Moved My Soap?

2004-12-19T16:46:00.000+10:00

Summer/Xmas Reading For Unscrupulous Executives

1,000,000,000,000 copies sold !? ;) Funny. In reality, Mr Borowitz can't expect to get rich with this book. It isn't exactly COEs' favorite topic.

But maybe he's foreseen a future trend. I mean this book is the only guide available for executives facing jail sentences. I am sure you'd find this book under Martha Stewart's pillow if you searched her cell.

The Biggest Resume Blooper of All

2004-12-17T15:39:00.000+10:00

Remember Monster.com’s 10 resume bloopers to avoid? Well, you’d better make that 11. And the 11th is the worst of all.

When I started this blog I added the web address to my resume so that employers or recruiters could check what I am up to. Only, I typed the wrong address. I know what you think: ‘It doesn’t matter if the address was wrong. Internet Explorer would display the “This Page is Unavailable” thing. And they will probably think that your blog is down temporarily.’
I thought so too. After all, it was just an extra ‘s’ … you know. Blogspost.com and Blogspot.com … Nothing dramatic, right?!

Well, yesterday when I saw the mistake I clicked the link to see what it would lead to… And then BAM! I was directed to the homepage of some porn web site (Yes. With pictures and all). It wasn’t the most offensive or even explicit site but it surely was enough to upset me. Not that the content made me uncomfortable but that is not exactly the kind of publicity I want associated with my name (… Had enough of that in high school, yeah).

Now I hope no one paid attention to the link in the Personal Details section of my resume. Because if they did, it would explain why I had so few replies over the last week.

I sent apologies to the recruiting agents and the managers to whom I know I had sent the embarrassing link.
And hey, Maybe it will attract attention on me … … I know. I know what you are thinking. I did not type the wrong address on purpose.

So when you send a link to your blog make sure it is the correct address because you could inadvertently be sending your friends, family or boss on some twisted sites instead.

You can't raffle off a dead donkey!

2004-12-15T15:42:00.000+10:00

"Creative Accounting" you said? Not necessarily a bad thing. People using the Activity Based Costing method can use their creativity to improve costs control and decision making. But if you can't tell that a creative accounting technique breaks the law you can still judge if it right or wrong. Some techniques are just dodgy. Here is a joke that captures theintricacies of the issue:

A city boy, Kenny, moved to the country and bought a donkey from an old farmer for $100.00. The farmer agreed to deliver the donkey the next day.
The next day the farmer drove up and said, "Sorry son, but I have some bad news, the donkey died." Kenny replied, "Well then, just give me my money back."
The farmer said, "Can't do that. I went and spent it already."
Kenny said, "OK then, just unload the donkey."
The farmer asked, "What ya gonna do with him?" "I'm going to raffle him off."
"You can't raffle off a dead donkey!" the farmer said.
"Sure I can. Watch me. I just won't tell anybody he is dead."
A month later the farmer met up with Kenny and asked, "What happened with that dead donkey?"
Kenny said, "I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00." "Didn't anyone complain?" "Just the guy who won. So I gave him his two dollars back."

So? If you were the auditor of the city boy's firm would you bring his case to the attention of the directors? Even if he offers you generous cut? He didn't hurt anyone really... did he?

Just passing

2004-12-15T13:25:00.000+10:00

I am just passing by today. I am writing from the university (still no internet at home - withdrawal symptoms start to appear).

I have so much to do this week because my job applications and other business have to check in with the recipients before they all leave for Xmas holidays.

So far, job hunting hasn't yielded anything. Disappointing it is.

I have to go now.

Merry Christmas & Happy New Year

Graduate Accountant (Fresh not Cooked)

2004-12-12T21:41:00.000+10:00

I am online chatting with a friend right now. We went to several classes together and both graduated last month.
He is just telling me that he went shopping for clothes. Let me tell you I never thought of him as the kind of guy to go around shopping malls trying pants and shoes and all. But he went today because he got a job! Graduate Accountant! I congratulated him. It seemed like he hit the jackpot: landing this kind of job less than two weeks after graduation … that’s ... euh ... excellent.
They just got themselves a Grad fresh from university! Not tainted in any way. Ready for programming. That’s my idea of fresh too. And to be honest I wouldn’t mind being called next week to be told to come down for an interview. If they are into freshness, I got a whole lot for them.
Anyway, that’s for the good news. He is real happy (definitely some celebrating to do this week). That’s good encouragement for me too. Tomorrow, I will get into the hunt with more fervour. Surely going to pay off.

Note: I have no internet connection at home these days. And I can’t go to the university all the time. So there won’t be many posts until at least this week end. Until then … take good care.

"Get Richest Quickest" ~ Part I

2004-12-09T16:12:00.000+10:00

Euh ... I have to apologize for the typos and grammar errors I let through in my previous posts. I hadn't exactly proof-read everything.

Now's test time. Who in the banking and financial services industry get richest quickest?

Investment Bankers
Hedge Fund Managers
Financial Analysis Managers
Bank Branch Manager

Well, it seems the Hedge Fund Managers get wealthier faster than other banking & financial services professionals. Hardly a surprise when you consider what a hedge fund is:
A fund usually used by wealthy investors or institutions (because of legal restrictions) which uses aggressive, techniques including selling short, leverage, program trading, swaps, arbitrage and derivatives to offset or reduce the risk associated with an existing investment or group of investments. The keyword here is "aggressive".

Now don't get fooled by the name! Some of these funds do not actually hedge against risk (Hedging being the attempt to reduce risk). In fact, there are different styles of hedge funds who pursue different investment strategies in terms of returns volatility and risk. These funds are called "Hedge Funds" maybe because they are often used by investors as a means to diversify away some risk in a particular portfolio. Or the name prevailed because despite controversy surrounding the $US1 trillion industry , most of these funds do seek to reduce risk.

"Yeah. So what's the problem then?" you will ask. This sounds very much like a mutual fund with a little more liberty to meet investors demands. Well, not exactly.

Continues ...

"Get Richest Quickest" ~ Part II

2004-12-09T16:11:00.000+10:00

That's basically where the controversy stems from: Hedge Funds not being required to register these activities (other than those allowed to mutual funds) with regulatory bodies (SEC in the US or APRA & ASIC here in Australia).

The problem requires even more attention given that it concerns a rapidly growing industry (over $AU15 Billion in Australia). Critics of the push for more regulation of the Hedge Funds industry claim that these funds attract the most sophisticated investors who understand the different strategies used and require the highest level of competency. This is the "we can regulate ourselves" argument. And they have a point. Working for demanding institutional investors requires greater skill, knowledge, and talent. "Not surprisingly, the incentive-based performance fees tend to attract the most talented investment managers to the hedge fund industry." as Dion Friedland puts it.

So let's say that most hedge funds are, to a different extent, self-regulated. Good news. But we are talking about $US800 billion to $US1 trillion here. So even a few rogue players can do serious damage to themselves (I mean their investors) and the market. In addition, this argument is coming under fire from regulators who claim that more and more small investors turn to hedge funds. In Australia, access to retail investors was facilitated by low minimum investment (down to $AU2,000). The Reserve Bank of Australia also reports that "more flexible investment conditions, a greater number of hedge funds being rated by fund rating agencies and, associated with this, a growing number of funds appearing on the approved product lists of financial planners" all help bringing hedge funds to retails investors. The central bank also counted "increased advertising and promotional activity aimed at retail investors" as determining factors.

My point is: Can we afford to let hedge fund managers decide of what's best practice?

Continues ...

"Get Richest Quickest" ~ Part III

2004-12-09T16:10:00.000+10:00

This is not a question about the professionals' competency but rather an issue about safeguarding smaller investors' interests. It may sound wrong to question the integrity of our hedge fund managers but what we should really think about is what is at stake.

These are issues difficult to address without engendering unease among fund managers. After all the funds would not perform so brilliantly but for the hard work, experience and even talent of managers. But that's not to say either that they should be let alone all together. No one particularly like to have someone (SEC, IRS, APRA or ASIC) standing in our back while we try to do our job. Shareholders and investors do that well enough, some would say. But we've seen enough market disasters to know not to assume all fund managers are rational and risk averse or that we all act with integrity. Given the size of, and the growth experience by the industry is experiencing, can we say that self regulation will keep the boat dry?

See, I am not a great supporter of government intervention. But I believe there is too much at stake here for the industry not to be monitored by a regulatory body. Note that I said, monitored not regulated. I am not ready yet to say that hedge funds must be regulated. Simply because restrictions on their activities may well mean the end of hedge funds. I think hedge funds can make above market returns because they have much more prerogatives than mutual funds for example.

What I am ready to support though is more regulation on speculative hedge funds. But this would require all funds to registers and nominate one or several investments styles. That also seem to defeat the concept of hedge funds.

In the end? Well scrutiny for now until a compromise is found. That's all I can say. I will continue to post on this topic. Because I learn about the hedge funds every day in the news and other readings.

That being said, I am not a professional so the argument I put forward could be fatally flawed. Maybe it is. If you think so then drop me a line or two.

"OSAMA.CAPTURE.JAN05" Futures Contracts

2004-12-06T21:34:00.000+10:00

To all finance students,

Graduating or near graduation? If you are like me, you don't have much cash. And you can't afford to put your savings in the stock market. Or simply, you're a bit intimidated. I know how you feel. You've studied finance for three years but still can't tell what to buy to make money.

Well don't worry there is a solution (quite a few in fact): you can trade in all sort of securities, on line and without risking your hard-earned dollars (or giving your credit card details for "free trials"). There are several very good simulation websites where you can test your understanding of market mechanisms. And if you are really serious about trading on the real market then you can still do so without putting in your drinking money.

I am sure you'll find what you want among the following sites:

Hollywood Stock Exchange.This is great for cinephiles. You can trade celebrity bonds and film stock and even futures. New releases stocks can be bought at the movie's Initial Public Offering. It's a lot of fun.

Foresight Exchange. This site allows members to trade in claims on future events in politics, art, entertainment, science & technology and many other fields. You can buy and sell USNKorea claims (It stands for US attacks North Korea).

Tradesports.com. This also a good site. I would register but I am already involved in the Hollywood Stock Exchange. You can even trade OSAMA.CAPTURE.DEC04 claims. Great site!
Newsfutures.com. This is similar to foresight Exchange. very interesting.

Reuters.com. If you want to trade in real securities, create an account with Reuters.com and you will be able to add securities to a virtual portfolio. (Click "Portfolio" in the menu)

That's it! you are ready to trade. When you go to that big interview you'll impress the board with your fluency with basic trades. Ah ah ah ...

Have fun!

Gut Spread with Terrorism Futures Option ~ Part I

2004-12-06T13:34:00.000+10:00

A few weeks ago at work we did a function for JB Were. I wasn't working on that night, thank God. One of my lecturer was there I heard. One tough guy (or at least he wanted us to think so). He did a good job of setting a high standard for the course. He gave us the single hardest assignment I ever had at uni. But I am still very disappointed by his class. It was representative of my whole degree in a way.

I made it through university, learned a great deal about market mechanisms and finance theory. We were fed tons of research papers on CAPM and alternative asset pricing models (you know, multifactor models and all). We were taught Black-Scholes option pricing model. All this based on so many assumptions that at first I thought it was a joke. Ah, and the Efficient Market Hypothesis (EMH). Great stuff too.

But we were rarely told the reality of the Market. We only brushed the idea that actual models are flawed because the assumptions upon which they are based are violated every day. Many of the models we studied are to varying extent reliant on or derived from the CAPM. Now recall some of model's assumptions:

Investors are risk averse
Investors maximise expected utility of the portfolios over a single period planning horizon
Individual investors are price takers
Investors are rational mean-variance optimisers
Investors have homogeneous expectations

Great stuff. But until now, I am convinced that investors have a tendency to over and under-react to information released. Wait, not only do they over-react but their decisions are affected by non-economic factors (or remotely economically relevant factors). In my opinion, this isn't just a few rogue investors and speculators but rather the large majority of market participants.

Continues ...

Gut Spread with Terrorism Futures ~ Part II

2004-12-06T13:22:00.000+10:00

The rise of terrorism to the very mainstream, very public domain is an example. Investors overshoot every time a terrorist attack makes it to the headlines.

The argument here isn't that economic data is not factored into securities prices. Because it is. However, information with little or remote economic consequence is overweighted in investors' decisions.

Look, maybe the collective mind that is the market actually has moods. And because geopolitical elements have such an impact of the Market one could almost predict future events by gauging the mass of all investors’ sentiment. How about that? Yes, I know: it’s a stretch. But wait, wait. Before you dismiss this whole post as ridiculous add a touch of inside information that circulates in certain classes of investors. The Pentagon thought it was a good theory.
They came up with “Terrorism Futures” to help predict terrorist strikes. The scheme was aborted a day after the proposal was made public. The Policy Analysis Market (PAM) program would allow individuals to invest money on the probability of terrorist attacks. No wonder it was a short-lived plan. Can you imagine adding Terrorism Futures to your portfolio? That's certainly volatile material. Speculators and gamblers would have loved it. But the Senate wasn't impressed. It is a very sinister idea; particularly coming from a government agency.

Now putting the moral issue aside, I can't help admiring the initiative. They went to the trouble of elaborating a trading program for the grotesquely-named scheme. It was a good idea. Actually, I should say it would have been an interesting experiment. The results could have proved something about investors behaviour. Indeed the fact that they seriously considered implementing such a plan demonstrates that the Market is thought to capable of sensing or foreseeing major events.

Do you think the Market sensed 9/11 attacks?

I know. This is rather sinister but it shows that there is much more at work than Beta, risk free rate and market return. University could have done more to develop student critical view of finance.

Can I Buy Your Broken Leg, Champion?

2004-12-05T15:19:00.000+10:00

I can still see myself, two years ago, sitting in a theatre listening to my lecturer talking about China's Non-Performaing Loans (NPLs).

The class was "Asia-Pacific Capital Markets" and at the time, I got the impression that the NPLs plaguing the Chinese banking sector was an omnipresent threat to the sustainability of the country's 7% growth. The discussions in class were dominated by this question:

How is China going to fix its Non-Performing Loans problem before it comes in direct conflict with the liberalisation reforms?

In fact, China joined the World Trade Organisation on January 1st 2002, after 15 years of marathon negotiations. In doing so the country accepted to implement reforms targeting the dinosaur State Owned Entreprises (SOEs), the telecom, insurance and the banking sector. China's Special Economic Zones (SEZ) were seen as a showcase of China's future as a major player on the WTO.

The Special Economic Zones Hainan Province, Shantou, Shenzhen, Zhuhai and Xiamen cities started as "experiments" indeed. And after little more than 20 years existence they have accomplished miracles:

Shenzhen has an average annual growth rate of 31.2% (at 2000)
26 Fortune 500 companies have invested in Xiamen
The volume of overseas investment in Xiamen alone from 1990 to 2001 totals $US3.904 billion
In Shantou (growth rate is 27%), 3,518 overseas-backed projects funded by $US5.07 billion over the last 20 years
Hainan Province, the largest SEZ, counts more than 7,200 overseas-funded enterprises

China's WTO membership was bundled with a host of market access measures to be implemented. The package-deal require the country to open-up to foreign investment sectors of the economy dominated by SOEs. Privatisation: the ticket to free markets and economic prosperity.

Only the level of Non-Performing Loans of the SOEs and the banks worked to keep risk-adverse investors away from Chinese heavy industries (together with the CCP's reluctence to privatise pillar industries).

Now, foreign investors have so much confidence that the Chinese miracle is not a mirage that they start buying the country's NPLs! Two years ago I would have never thought that anyone would spend a penny purchasing loans that probably won't be repaid. Worst, I never thought that Chinese Central power would allow this to happen.

Now I am confused. I was first puzzled when Patricia Cheng, from the Sydney Morning Herald wrote:

"Foreigners want China's bad debts"

Why would this be? I mean there clearly is an investment opportunity here but the risks associated with it should be a major discouragement for foreign investors. At least it ought to be the case if we are talking about a few institutions buying large chunks of the Chinese banks and Asset MAngement Companies (ACMs). No? The CCP has far too much influence on the approval process for this to worth the risk. And at what discount rate? 7%? Come on.

But as I read William Pesek Jr's column for Bloomberg News I understood why Citigroup, Goldman Sachs and Morgan Stanley have bought more than $US4 billion of distressed assets. The column is titled "The Next Great China Gold Rush -- Dodgy Debt". "Gold Rush" captures quite well the nature of the phenomenon, in my opinion. Pesek writes this:

"[...] investors are scrambling to get in on the next Chinese gold rush: More than $450 billion of bad loans held by China's four-biggest commercial banks and their asset management companies. The hope is to buy dodgy loans at a fraction of
their face value and sell the assets at a profit as the world's fastest-growing
major economy expands."

But what about transparency? The Chinese government is not exctly the most transparent when it comes to its crippled banking sector.

There are also reports that the Government issued rules to facilitate the sale of bad loans to foreigners? Despite what credit rating agencies say (that this sale of bad loans is going much too slow) I still think no one should rush. Let's not make this another disaster 98-Asian Crisis style where everyone runs in because the saw that big boys go. Looking at the fundamental picture, China still is largely, if not entirely, underdevelopped in terms of its financial sector's infrastructures and framework. It is maybe too early to literally "rush in".

Recall that crony capitalism still runs wild in the ranks of Chinese officials and business people. Quick sale of Non performing loans is a good way from many to get out of trouble rich.

Anyway, I am just a grad. Maybe I'll understand the situation better later.

These days I am doing a bit of research on Corporate risk management. You know? Hedge funds and all. Well, there too I think wierd things happen. I'll keep you posted.

Resume Bloopers to Avoid

2004-12-04T09:50:00.000+10:00

Final results were published yesterday. I did well. I scored a Credit in Econometrics. Yahoo! It was actually the most challenging subject of my degree. And I am quite proud of my grade.

For those of you who wonder, econometrics can be seen as the mathematical modeling of economic relationships. For example, we all know that there is an positive relationship between household income and household expenditure. But this economic theory does not specify the magnitude or significance of this relationship. In fact, an econometric model allows us to measure the impact that a change in income has on household expenditure.

But that's not the point of this post.

I intensified my efforts to find a job after I got the results. And I thought a complete revamp of my resume was in order. There is always room for improvement. So I surfed about for resume-writing tip. And I found some very useful advise. Monster.com, for example, warned against 10 classic resume bloopers ("classic" here is an overstatement but "bloopers" certainly captures dumb nature of the mistakes ). Here are a few not-so-classic real-life resume blunders:

"Directed $25 million anal shipping and receiving operations." Either this person is showcasing compulsively stubborn management qualities, or he has a challenging product packaging/storage problem.

"Experienced supervisor, defective with both rookies and seasoned professionals." Many of us have had a boss like this at some point in our careers, but you usually don't find them being so up-front about their leadership inadequacies.

"Consistently tanked as top sales producer for new accounts." Sales managers aren't likely to be impressed with this self-proclaimed underachiever.

"Dramatically increased exiting account base, achieving new company record." If customer accounts were leaving in droves as this statement implies, it's probably fair to assume that this candidate also tanked as a top sales producer.

Monster.com is a web-based job search engine. They surely process thousands of applications a day. So when they call these bloppers the Classic Ten, I am worried for the other 9,990x applications. One thing is sure: these guys must have a blast at work, reading stuff like this.

Wait here is one who doesn't want to find a job. Career Objective section reads:

"Internship at a growing, reputable company bent on world domination, or similarly grand aspirations. Preferably in a business-oriented role, while working near the latest and greatest technology.
A friendly environment, with crazy ideas and having fun being the norm. Ideally
located somewhere with warm, gentle ocean-front weather. "

This will certainly get the attention of the manager. But I don't think the guy will get the interview.

Ok, I am going to work now. Be back tonight. Until then, take care.

Some Crude Mood Swings

2004-12-03T21:33:00.000+10:00

"The All Ordinaries Index lost four points to 3,951. The benchmark ASX 200 was off two points to 3,940. Dragging the market down was an overnight fall in commodity prices. Oil is now at a three-month low of $US43 a barrel." ABC News

$US43 a barrel? What happened to the "terror premium"? Now most analysts and experts explain this sharp fall as being the results of higher-than-expected crude oil, gasoline and petroleum distillate inventories. The data released by the Energy Information Administration helped dissipating concerns about short term supply levels.

So the Market is working fine. Participants reacted instantly to the new information made available by the EIA. What a re-adjustment! But, hey, Market is at least semi-strong form of efficiency, right? So info comes in, it is assessed by the rational investors and builds up in the price shortly after. So again, what happened to the "terror premium"? Disappeared? Or is it the $15-$20 above the $30-$35 long-term price estimate?

And is $US50 the resistence level or should we tell investors that there is an attack on pipelines and refineries almost every day in Iraq?

I came across an article on Aljazeera's website where they questioned the relationship between oil prices, economic theories, politic and of course the theme du jour, terrorism. It was an interesting piece I should say. The author, Adam Porter, claims that the theory of "Terror Premium" may well be unfunded. In fact, if it was, oil prices could and would rise well above the $US50 mark.

So S&P 500 Index' three year high record makes sense. Remember: "markets rise because of oil price falls, oil prices fall as the markets rise". Remember? No? Well, the Washington Times explained the concept quite well when Patrice Hill sais that the latest fall in oil prices is good news for retails stocks. Us consumers do not seem to be overly bothered by high energy prices as evidenced by 0.7% consumer spending increase in October. So they should be even happier if oil prices start to tumble down. And happy spending consumers means good news for the stock market.

You must have realised by now that I am confused. It is late. I'll think about it at work tomorrow. Until then take care.