All markets are valued by a simple function between supply and demand; or at least that is how it seems throughout the typical economics 101 course. However, in reality, the components of supply and demand are highly complex and, some will argue, might be too overwhelming to effectively use as a speculative tool. Nonetheless, even those looking to trade commodities via technical analysis should have an overall idea of what might be impacting the data displayed on a price chart. It would be impossible to delve into market fundamentals in great depth within the scope of this writing, but I hope that you gain an understanding of price determinants and the ability to prioritize available information.
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“This book wasn’t written simply to help analysts improve, but also to give them the competitive advantage to move to the top 10 percent of their peers,” writes James J. Valentine, CFA, in the preface to Best Practices for Equity Research Analysts: Essentials for Buy-Side and Sell-Side Analysts. Ranked by Institutional Investor as one of the top three analysts in his sector for 10 consecutive years, Valentine served as Morgan Stanley’s associate director of North American research and director of global training and development. He brings his 16 years of experience to bear on problems faced by today’s analysts and offers real-world solutions that either he or the professionals interviewed in the book have implemented.
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On behalf of NYSSA’s Board of Directors, I am inviting members to submit names of potential candidates to serve on the Board of NYSSA. During the coming months the Board will be searching for people with the experience, wisdom, and diligence to serve on your board as it continues to invigorate and solidify its governance foundations. You can help by suggesting the names of individuals who are qualified and prepared to serve. Candidates do not need to be members of NYSSA, nor do they have to be directly involved in the investment decision making process (our by-laws allow for a number of non-member Directors). The ability of the Director to understand the needs of our Society’s present and future is as important as the candidate’s employment background.
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NYSSA is pleased to announce the winners of the June 2011 CFA Exam Scholarship Program. Recipients were selected based on experience and/or interest in the investment profession, ethical standards, and commitment to NYSSA and CFA Institute. All scholarship winners receive a free weekly review course from NYSSA and a credit allowance for additional learning materials from Schweser. In addition, CFA Institute will refund the CFA examination and registration fees (less a $225 exam registration administrative fee). NYSSA offers up to five scholarships in both the fall and spring to New York area CFA candidates of all levels.
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NYSSA is delighted to announce the launching of a new online refereed journal to continue the tradition of the Investment Professional. Our first issue will launch September 2011.
We are particularly interested in articles on financial regulation and risk management and will accept articles on other topics as well.
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Brazil is a country that has become an industrial and agricultural superpower in the world market. However, it is a country still not well known to many and “hardly on the radar screen" to most Americans. Larry Rohter’s new book, Brazil on the Rise: The Story of a Country Transformed, is an excellent introduction to Brazil. He was in Rio de Janeiro for 14 years as a correspondent for Newsweek and the New York Times.
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Googled: The End of the World As We Know It is one of the best business books I have read. With an extensive knowledge of the tech industry and exceptional writing skills, Ken Auletta takes an in-depth look at a company that has transformed the Internet.
“[A] company that questions everything and believes in acting without permission,” Google “has succeeded like few companies before.” Founders Larry Page and Sergey Brin—both having an elite education and an early fascination with computers—are archetypes of the whiz kid turned business creator. Modern-day John D. Rockefellers, Page and Brin “always assumed Google would be a defining company.” Like Facebook, Google is a prime example of how quickly a tech company can achieve dominance in the market.
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I sure got that one wrong.
At the end of my 2009 year end letter to Lloyd Blankfein, Chairman and CEO of Goldman Sachs, the third in an exchange that took place during the depths of the financial crisis, I predicted that Goldman clients would begin to defect, either of their own volition, or because their own clients would force them to. I predicted “civil war (inside Goldman) could break out after Goldman loses the Facebook IPO for one reason alone: the Goldman Sachs brand.”
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In The Facebook Effect: The Inside Story of the Company That Is Connecting the World, David Kirkpatrick offers a detailed account of the birth and growth of one of the most important companies of our time. A former senior editor for Internet and technology at Fortune, Kirkpatrick makes use of liberal access to founder Mark Zuckerberg and other Facebook executives to explore the company’s history, future, and global impact.
Like the founders of Google, Zuckerberg is the product of an elite education and early involvement with the Internet. Kirkpatrick portrays him as a dramatic visionary and gifted creator. Despite the college dorm culture in which he lived, Zuckerberg made connections with several influential CEOs and Internet venture capitalists. His key contributions to the growth of the social media tool were the news feed, applications translation tools, and ability to handle photos. Like many Internet pioneers, he focused on growth, market dominance and social impact; he had little interest in generating revenue and relied on external financing.
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The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.
–John Maynard Keynes
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No stock market goes up forever. Indeed, most world stock markets have declined to zero at one time or another. The buy-and-hold strategy so popular in the U.S. today is based on a statistical anomaly. It is a strategy based on a survival bias in the U.S. and the U.K. markets, the only countries in history, so far, whose markets have not completely disappeared at some time (Burnham, 2005). This has caused a misleading assumption that U.S. stocks and stocks in general will necessarily continue to rise. “It would be naïve to expect the future of U.S. stocks to be as bright as the past” (Burnham, 2005, p 175).
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There are basically two categories of dividend paying stocks: preferred shares, all of which pay dividends, and dividend paying common shares.
Preferred shares are a sort of cross between shares of common stock and regular corporate bonds—generally providing higher income than either, but with certain disadvantages compared to both.
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Although the US Securities and Exchange Commission has yet to make up its mind on whether the US will abandon US Generally Accepted Accounting Principles (GAAP) in favor of the International Financial Reporting Standards (IFRS), that doesn’t mean financial statement accounting is standing still. Rule changes and clarifications by various US based accounting standards boards affect a number of areas in US financial statements.
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Legendary trader and market wizard Victor Sperandeo, aka Trader Vic, will be at NYSSA on February 4th to teach a Master Class with NYSSA commodity instructor Michael Martin. Many of you know Martin's blog MartinKronicle.com, where he's interviewed several other market wizards such as Jim Rogers, Tony Saliba, Linda Raschke, and Sperandeo.
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“The StressVaR: A New Risk Concept for Extreme Risk and Fund Allocation.” The Journal of Alternative Investments (Winter 2011). Cyril Coste, Raphaël Douady, and Ilija I Zovko.
In this article the authors introduce an approach to risk estimation based on nonlinear factor–models—the “StressVaR” (SVaR). Developed to evaluate the risk of hedge funds, the SVaR appears to be applicable to a wide range of investments. The computation of the StressVaR is a three-step procedure whose main component is to use the fairly short and sparse history of the hedge fund returns to identify relevant risk factors among a very broad set of possible risk sources. This risk profile is obtained by calibrating a polymodel, which is a collection of nonlinear single-factor models, as opposed to a single multi-factor model. The authors then use the risk profile and the very long and rich history of the factors to assess the possible impact of known past crises on the funds, unveiling their hidden risks and so called “black swans.”
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When Fool's Gold opens in 1994, a group of young, bright JPMorgan bankers from the swaps department meet in Boca Raton, Florida, for an alcohol-fueled weekend of frat-house pranks and intense financial discussions. At these meetings they generated an idea that would change modern finance: how to use derivatives to manage credit risk attached to the loan book of banks.
Tracing the history of the derivatives team from the Boca Raton meeting to the beginning of 2009, Gillian Tett describes the genesis and fall from grace of the booming credit derivatives market, and how the use and abuse of once-obscure products such as CDSs (credit default swaps) and CDOs (collateralized debt obligations) brought the world to the edge of a depression.
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The university model of education emphasizes theory over practice, the opposite of what the corporate model favors. This creates discordance between approaches that alternately emphasize the why and the how. The university model shares clear similarities with the corporate model, but the differences, especially in the compensation structures, deeply divide the two. Rather than attempting to make one domain more like the other, a bridge should be built that allows everyone to benefit from the conceptual approach of academia and the practical know-how corporations earn in the trenches.
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The natural gas industry has recently been the beneficiary of the Obama administration’s efforts to strike a bipartisan pose in the wake of the Republican midterm-election ascendancy. At a news conference the day after the elections, when asked if there were ways he might find to collaborate with the new Congress, Obama responded that there was certainly broad agreement that the country has “terrific natural gas resources.” He went on to ask, “Are we doing everything we can to develop those?” His response was welcomed by the natural gas industry but viewed with mixed emotions by environmentalists. On the one hand, the latter acknowledge that natural gas is a significantly cleaner burning fuel than oil or coal and is a necessary complement to renewable sources of energy. According to the Environmental Protection Agency, the burning of natural gas produces a third of the quantity of nitrogen oxides, half the amount of carbon dioxide, and only one percent of the quantify of sulfur oxides as the burning of coal. Natural gas also emits negligible amounts of mercury compounds. But environmentalists are equally concerned about the environmental impacts of the boom in hydraulic fracturing—a technology used to extract natural gas from rock formations.
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Andrew Carnegie’s essay titled “Gospel of Wealth” published in 1901, is the touchstone of the great American philanthropic tradition. Its central thesis warns against extreme wealth being passed on to heirs or even charitable institutions ill-equipped to administer its effective disposition. Carnegie’s position on the “duty of the man of Wealth” is quite clear:
First, to set an example of modest, unostentatious living…to provide moderately for the legitimate wants of those dependent upon him; after doing so to consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer, and strictly bound as a matter of duty to administer in the manner which, in his judgment, is best calculated to produce the most beneficial results for the community – the man of wealth thus becoming the mere agent and trustee for his poorer brethren, bringing to their service his superior wisdom, experience and ability to administer, doing for them better than they would or could do for themselves.
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INDEX: INDIAN PUBLIC EQUITIES | VALUATIONS IN INDIA ARE REASONABLE | CURRENCY: SHOULD ONE BE A RUPEE GROUPIE? | CONCLUSION: PORTFOLIO DHARMA
The first part of this article discussed recent economic developments in India and the prospects for high growth rates over the long term. Part II covers the performance of the equity and currency sectors and offers compelling reasons to include India in either a global or EM (emerging-markets) portfolio.
India has been on investors’ radar screens since at least 2000, but it has rocketed to even greater prominence in the post-crisis recovery. Its major stock index, the Sensex 30, has grown more than 125% since its low in March 2009, outpacing the S&P 500 Index (up 82% since March 2009), China’s Shanghai Composite (up 65% since October 2008), and even the highly popular Brazilian Bovespa (up 115% since December 2008). India-related ETFs have proliferated, allowing easier access to Indian market returns. The emphasis on the centrality of China in the global economy can make it easy to miss the opportunities offered by China’s neighbor.
Continue reading "Returning as a Tiger: The Economic Reincarnation of India (Part II)" »