I decided to skip about half of the second book on Economics because I didn’t find it interesting and it was becoming difficult to find the motivation to read. So I started the third book and am well over 200 pages into it after just two days.
I’m through the first book – 16.6% done I suppose. I was happy to find that the last 100 pages or so were appendices and the index. Each reading also concluded with several pages of practice questions and solutions which I skipped but plan to go back to over the Easter long weekend.
Basically everything I read I had been taught before and I found that, after the initial material on CFA best practices, I did learn a fair amount about the preferred methods of calculating performance return and other financial measures.
I now turn myself to the book on economics – a strong point of mine and a subject that became a focus of my upper-year education.
Received my books yesterday – all 18lbs of them. They are certainly intimidating. I’m currently taking a break from reading and looking down I see that I am on page 224, which is the end of Reading 5. So far everything I have read was covered during my finance degree.
Whether or not I will be able to read all six of these books before June 5, let alone have time to review once I am through them all, is questionable.
More updates to come.
I wrote the following for a local newspaper…
For those that don’t know, Greece has recently been pressured by the other 16 nations with whom it shares the Euro to control its federal spending habits. Greece has a debt well over 50 per cent of its GDP and the Euro nations are concerned that investors are going to lose faith in Greece’s debt and stop purchasing Greek bonds.
What good is giving someone a loan if it is only backed by other loans?
Aside from the US dollar, the Euro is considered by some the most important currency in the world. Luckily for those who share it, Greece has a GDP smaller than Ontario so its affect on the Euro is limited. If Greece were to default it would be devastating to the Euro but at least it would have 16 other nations, including the economic powerhouse that is Germany, to support it.
The United States of America, on the other hand, has no one to support it. The US is also drowning in a pool of debt. To make things worse, the US buys more than it spends. In January alone, the US bought $4.1 billion more than it sold – and that’s just with Canada.
That’s great for us, but maybe not for long.
The US, quite frankly, is a ticking time bomb. The debt bomb may not go off this year, it may not go off this decade or it may just be a dud. Chances are though, it is only a matter of time before investors, primarily China, say enough is enough and refuse to buy anymore US debt.
When this happens, the US dollar is going to plummet relative to other currencies, including the loonie. That is going to leave Canada in a very dangerous position.
The US’s money is going to be worth less and it will take more of it to buy Canadian goods. This wouldn’t be a big deal if it were Zimbabwe we were talking about, but this is the United States. This is the country that buys three-quarters of everything we sell and suddenly they won’t be able to afford it – or at least not as much of it.
Canadian jobs will be lost, businesses will close and recession will be upon us.
There isn’t much that can be done to prevent it, either.
First and foremost, fiscal responsibility must be addressed in the US, but unfortunately, the US’s track record is bleak and their partisan political ideologies make agreeing on a strategic plan a problem.
Second, Canada needs to diversify its trade – quickly. Lesser developed nations are growing rapidly and Canada needs to take advantage by negotiating agreements for them to buy our goods. We’ve got plenty of desirable things to sell here in Canada and they may just be our saving grace.
Third, Canada needs to depreciate the dollar so that our goods are cheaper to other countries, and it’s going to be difficult because downward pressure is already on the Euro, the greenback and even the pound sterling.
This is made even more complex due to increasing demand for oil that is developing as countries exit the recession. As the price of crude rises, so does our oil-soaked currency.
Another thing Canada can do is follow India’s lead and buy a pile of gold. Because gold is priced in US dollars, when the value of the greenback declines it takes more of them to buy gold than it did before, meaning the price of gold goes up. Although it won’t save any Canadian jobs, it is an ideal hedge against the US dollar and at least the government could use the profits as stimulus.
In a global economy, exports to another country are an investment and, just like any stock portfolio, you don’t want to put too many of your eggs in the same basket. That is a mistake that Canada has been making for too long.
Unfortunately, the US basket is doomed to drop.
Mr. Harper, although I long ago made the decision never to define myself as a member of any particular political party, at this time I am writing to you in concern of your best interests and the best interests of your party.
This whole Afghan detainee issue is starting to look like it could be your demise. Parliament has asked you many times to present documentation related to the treatment of Afghan detainees and you have failed to oblige. There is now the possibility that you, your ministers and the government in general may be held in contempt of parliament.
What you must understand, Mr. Harper, is that a lot of Canadians don’t care if Afghan prisoners were abused. These people were, after all, shooting at, or heaven forbid actually killed, any of the men and woman of the Armed Forces that we back home are so proud of.
What Canadians are going to care about is a government that doesn’t oblige to an order from the House of Commons. This is our democracy at stake here, and no government of Canada is going to mess with that and live to see past the next election.
We all believe that no Canadian soldiers took part in the abuse, and therefore, no one in government can be held responsible. By withholding theses documents one can only start to wonder if something more serious was going on, especially when you’re claiming the documents are a matter of national security.
You’re giving the opposition an opportunity to frame you as a Prime Minister who doesn’t respect the democratic process or, at the very least, a Prime Minister with something to hide. This would be great shame considering Mr. Ignatieff has completely expelled any credibility by exiting Ottawa for the return of parliament after his relentless criticism of your recent proroguement.
Regardless of Mr. Iacobucci’s decision, this issue will not go away. The opposition knows something is awry here and will force the issue until it explodes.
You will lose if an election is held over this issue. A government will never lose support for being honest but a government behaving as shady as yours is destined to.
Do the right thing, show us the documents, and be done with it.
Sincerely,
A concerned, nonpartisan citizen
Sorry kids, that I have posted less regularly than usual. I recently decided to write the Chartered Financial Analyst Level I exam in June of this year and my time is all but consumed by it.
Everything I have heard tells me that I am in for the most strenuous of study sessions for the next two and a half months. I have a degree in finance and have completed the Canadian Securities Course (CSC) so I feel that I am adequately prepared to write the CFA, even on such a short time line.
I will be updating my progress periodically from now until the exam so any interested individuals can get a feel for what they are getting themselves into.
First impression: the first two readings (slightly over 100 pages) are all about the Code of Ethics and Standards of Professional Conduct. Important, yes, but also very dry material. It is also very obvious and simplistic, especially for anyone with experience in the industry.
Wish me luck.
It may be easy for foreigner investors to make fun of its name, but it is certainly not easy for them to throw it to the wayside.
The economic crisis that we underwent over the past two years, and the subsequent debt crisis that seems to be developing now, have levelled the global playing field. Canada seems well positioned to take advantage of this new opportunity, having kept public debt to reasonable levels and having ensured regulation was in place to avoid the type of bank collapses experienced in the United States.
Canada is poised to take advantage of the misfortune of some less fiscally responsible nations. The economy experienced an impressive five per cent annual growth rate in the fourth quarter of 2009 and now that it appears Bank of Canada Governor Mark Carney will actually come through on his promise to hold the benchmark rate at 0.25 per cent through the end of Q2, similar growth rates should be expected.
Carney’s determination to make good on his promise also creates a sense of comfort to potential investors – displaying a sense of commitment and honesty not often present in other countries.
Stimulus spending will result is budget deficits for the coming years, however public debt will still remain under control, especially when compared to the debt levels of some other developed nations. As investors become increasingly more weary about the US debt situation, the loonie is likely to serve as an attractive substitute for their US holdings.
Add to this the potential for increased demand in the commodity sector, especially from China and India, and the Canadian dollar suddenly looks ready to skyrocket.
The big question recently is whether or not Greece’s credit rating will be downgraded, and to what extent will this affect the Euro?
The debt concerns of Greece, as well as Spain and Portugal, are posing a threat to the value of the European currency. Any depreciation of the Euro would indirectly appreciate the price of the US dollar, putting downward pressure of the price of gold. However, Greece only contributes a small percentage of the overall GDP of the Euro-zone, so it is unclear how the Euro would react to a downgrade.
The time horizon for a decision to be made about Greece is not clear. Reports from the S&P suggest that a downgrade could happen in a month, although this could be affected by Greece’s forthcoming plans to cut spending and reduce the deficit. If Greece can appease investors, a downgrade may not be necessary.
If Greece is downgraded and the Euro plunges as expected, then one must consider how long it will be before investors turn the same sort of attention to the United States. The worst kept secret in economics is that the US is in just as much financial trouble as Greece.
While a Greece downgrade could send gold falling, any new attention to the US’s similar trouble could sent it skyrocketing in the other direction. The US’s situation is sure to garner more media attention eventually; it is the timeline that has investors puzzled.
Therefore, in the short-term, I expect gold to fluctuate with the latest developments surrounding Greece and other debt-laden nations – the United States included. It will only take one US budget announcement to set off a firestorm of media attention to the US’s debt problems – sinking the greenback and boosting gold. When this will occur is uncertain, and makes the short-term performance of gold very difficult to predict.
One must also remember that India made a massive gold purchase recently. Either they believe gold has plenty of room to climb, or they are simply preparing for the inevitable fall of the US dollar.
The long-term outlook is much more clear. As long as gold is priced in US dollars, the price of gold will be an approximate inverse to that of the greenback. Luckily, the fate of the US currency is clear – it will be devalued substantially as it struggles with debt and new powers enter the global marketplace, cutting into revenue.
If you’ve got a medium to long-term time horizon, gold is a must have in your portfolio.
Ben Bernanke has confirmed that the Federal Reserve is investigating the role of Goldman Sachs in Greece’s recent public debt concerns. It is widely believed that Goldman Sachs has been using derivative instruments to bet against the fragile nation.
These instruments are essentially what put the markets over the edge in September of 2008. They are almost exclusively used by institutional investors, who created them as a way to hedge against risk of default. Documents from 2001 show that Goldman used the same instruments to help Greece hide the size of its debt load. This implies that Goldman had inside information about Greece’s problem and could benefit by betting against them.
Regardless of what happened 10 years ago, Bernanke is taking advantage of the new supervisory powers put in place in order to prevent the bank-induced type crisis that we’re now stuck in. It is one of the first examples of any central bank making the most of past mistakes by using it as opportunity to make sure they never happen again.
Kudos.
The policy of injecting financial stimulus into struggling economies makes sense on a lot of levels; however, it can create a boom-and-bust scenario if it is not properly designated.
There has been a lot of talk in the media lately about a jobless recovery, a prospect that I find both avoidable and worrisome. The problem with stimulus money is that it is short-lived: once the bridges are built and the train tracks laid, the jobs go away. This poses a problem for several reasons.
For one, the kind of optimism that develops from a quarter or two of stimulus-induced declining unemployment gives people the impression that a recovery is in the works. This may be true, but the recovery is certainly not as quick as the stimulus makes it seem. The jobs are coming from unsustainable government funds, not investment from private businesses and households. This inflated sense of security can persuade citizens to spend more aggressively than they would have if not for the sudden turnaround that stimulus seems to create.
Private borrowing is often considered a necessary component of any economic recovery so when things turn sour, central banks lower the interest rate to tempt businesses and households into using borrowed money. When households are once again borrowing, this money gets passed through the economy from the purchaser to the supplier and back to individual households in the form of employment income.
This is about the point in economic recovery the world is currently experiencing. Corporate profits have improved over 2009 and after a few quarters of improved employment, new concerns about long-lasting unemployment are beginning to push to the forefront.
So what’s next? Interest rate increases.
After flooding the economy with cash, the governments of the world are going to have to rein some of it in to prevent widespread inflation. They have no choice but to increase interest rates, how long to wait is the only decision left to make. That decision has already been made by economists everywhere; the consensus answer being sometime in the third quarter of this year.
The rate increase, which will be fast and steep, will force all those households that were convinced to borrow to pay more in interest each month. Some of these households will default; but almost all of them will have to par back spending in order to avoid it. This will plunge nations back into periods of stagnation.
That is what we have to look forward to as a result of stimulus spending targeted towards projects that are temporary in nature.
The argument I am trying to make is that all the stimulus in the world will not pull a country out of recession if it doesn’t do a good enough job of creating permanent employment. It is for this reason that countries should use a recession as an opportunity to start exploring new sources of revenue. Rather that building roads and bridges, which are temporary projects, a country will be much more successful delegating that money towards a new and flourishing industry. Not only does support for emerging industries creating long-term employment, but their success can produce revenue through exports.
Returning to corporate profitability and GDP growth is important but a country cannot expect sustainable recovery to emerge without employment. A jobless recovery is an extremely difficult recovery and will only result in a boom-and-bust cycle of stagnation.
the grain 