Be open minded and be curious…that’s what you need!

Managers, encourage your workers to ask “why?”.

So why do we exchange gifts?

When is it economically reasonable to do so?

Is it only a strange human behavior? (I mean, under an economist perspective, we are not maximizing our utility)

We exchange gift on the fact that everyone does it and therefore we should. Some behavioral economist have similar studies demonstrating this fact.

But is it always a zero-sum gain? Personally, I find that gift giving is a zero-sum gain BUT there is some occasions where this is not the case:

1) When the gift in question nourishes someone’s knowledge (the recipient) like a book or even a video game! We can’t put a monetary value to that.

or

2) When the giver feels intrinsically good by giving a gift (not because everyone else does it)

Is there any other occasions where gift giving is not a zero-sum gain or even negative?

Only then, should HR pursue with interview questions that are particular to the position (i.e. if they have the required skills set). If HR starts with these 3 questions at the start of the interview, they will see pretty fast if they can be considered real potential candidates for the job.

Would you have any good questions that you would suggest to a HR person?

side note: I believe that opened minded is one of the best quality of a human being.

But now, the number of people doing the CFA exams and hopefully getting the full accreditation (after 3-4 years of work) keeps on increasing, where the supply surpasses the demand. This is the case here in the city of Montreal. There are too many CFAs according to some portfolio managers I met. They told me that now that they want to hire candidates with a master degree plus CFA. And when all the students will have a Master and CFA, what else will they need? Ph.D? It has to stop! I seriously hate this stupid academic inflation!

This month, I have to make a decision to see if I want to do the CFA level 1 exam in June or not since I can apply for a bursary where the cost of doing the CFA drops to $220 instead of $800 or so. However, next year from September 2009, I will start my Master Degree in Finance. Should I do my CFA after my Master or should I give it a shot now and do level 2-3 after my master degree? Seriously, I wish I didn’t have to do the CFA. Level 1 exam is similar to what you do in your undergrad finance studies and Level 2 is well covered (not all) during the Master Degree. It sounds pointless to me. But I do hope that I am wrong.

So what do you guys think? Too many CFAs? Should they put tougher rules and restrictions for those who want to do the CFA? I just think that the CFA has lost a lot of its value… agree?

In the old days, when you met a CFA holder, you were mostly sure that this person was very professional and serious and skilled, but now with all this increase in CFA holders… don’t tell me that everyone is skilled and professional enough to work in the finance industry and I think this seriously hurts the financial industry.

Bill Bonner, writer of the Daily Reckoning sends (for free via email) a great newsletter about the world of finance, and of course today he talked about Lehman. I wanted to share with everyone is little comparaison of Long-Term Capital Management and Lehman Brothers:

“From the peak of 2000 ’til today, stock market investors have earned
nothing for their trouble. In nominal terms, stocks are about where they
were 10 years ago. Adjusted for inflation, they are down 25%-80%,
depending on how you measure it.

Wall Street made a fortune selling stocks to naïve investors. When the
stock marked topped out, the financial industry might have gone back to
sleep. Instead, it got a double dose of caffeine. The Greenspan Fed cut
rates in 2001-2002 while the Bush administration boosted spending and cut
taxes. All of a sudden, every hand on Wall Street turned to pumping out
credit – derivatives, SIVs, CDOs, MBS. They didn’t really have to invent
any new theories, they merely recycled the same numbskull ideas that sank
LTCM – basically, that you could eliminate risk by modeling historic price
movements. If Lehman Bros., for example, had never failed in more than a
century and a half – the odds that it would fail this year were so close
to zero as to be not worth discussing.

But…

“Lehman lurching closer to liquidation,” says the front page of today’s
International Herald Tribune.

Now, it’s Lehman that is failing. And no consortium of Wall Street banks
is willing, or able, to bail it out. Lehman has some $80 billion of
dubious credits. These were the products of its own – and many other –
whiz kid financial engineers. Lehman hired some of the best talent on Wall
Street. It has some of the world’s top financial mathematicians on its
payroll. It could compute the risk of loss down to 3…4…heck…as many
decimal places as you like. But it could do so only as LTCM did – based on
past history.

As we explained, once investors came to consider stocks as a riskless way
to get rich, they bid up prices to the point where they were all
risk…and no reward. And when their models told them that they could make
money by lending money to people who couldn’t pay it back, practically
every loan they made took them closer to bankruptcy.”

—————————-

I bolded the word PAST HISTORY. Remember, we can predict the future with the past. (A blow to Technical Analysis People)

I encourage everyone to sign to Bill Bonner free daily newsletter. Its a must!

The insight of knowledge you can gain from these letters are absolutely amazing. From more advanced asset allocation, to understanding the current economy, to individual stock analysis (for active investors), to new asset class, etc… Just anything you can imagine. I first heard about newsletters when I read “The Dick Davis Dividend” (2007). Dick Davis has a 40 years old and more experience in writting newsletters (the funniest thing is that he never recommended a stock). Dick Davis newsletters are not free but you MUST check is book to have an amazing overview of its understanding of investment from the past 40 years.

But are there any FREE and GOOD newsletters? YES THERE IS!

First one, my favorite is John Mauldin’s Thoughts from the Frontline. This is a great overall letter that covers multiple financial components on a weekly basis.

Second one, the American Association Individual Investor (AAII) is excellent too.

A third letter is not about finance, its about Geopolitics. George Friedman, founder of Stratfor has a weekly free newsletters (only the newsletters on his website is free but the rest is not) about anything that goes on in the political world in deep analysis, well written and easy to understand. For instance, I didn’t know much about why Russia and Georgia went to war but thanks to these letters (1) (2), I got a pretty good deep understanding of this war. But why am I talking about a newsletters that covers Geopolitics and not Finance. Easy! To be successful in the world of finance, you must understand what goes in the political world.

That’s it! Enjoy these newsletters! You won’t regret it and you’ll be hooked and addicted to them…that’s for sure!

So what are the asset classes for the 80% passive?

——————————

My 20% active part, I only focus (as for now) on value mostly conservative stocks. As for instance, I bought Wells Fargo (WFC) and Johnson and Johnson (JNJ) last month because I both thought that their price was undervalued (I certainly got that right for Wells Fargo — which gained 8% since I bought it 2 weeks ago). I don’t do anything fancy when I analyze stock to see if it is a good value to stock to buy. I mostly use PE versus historical PE, see what Value line has to say, other bloggers’ opinions, I keep an eye on all the stocks Warren Buffets carries, and with my guts…that’s about it! And when I buy a stock, its for the long-run.

This portfolio’s inception date is June 18 2008 (so yeah..just started), and its performance is in the negative: -4.01%. The reasons why I haven’t invested my cash all at once, is to do a “little” dollar-cost average strategy.

So, you might wonder how well it did versus the market…see below (CMF is my fund):

	Beating	Today	MTD	QTD	YTD
CMF		-0.00%	-0.30%	-1.08%	-4.12%
S&P 500		-0.56%	-0.56%	-1.39%	-13.14%
DOW		-0.45%	-0.45%	-0.21%	-14.61%
Nasdaq		-1.65%	-0.63%	0.78%	-12.87%

As you can see it did better than the market so far. I will keep this portfolio updated on this blog and hopefully start new passive portfolios (i.e. 100% all passive). You can see here a fully detailed performance for each assets and stocks since inception.

“Like a boxer, the investor’s first step toward winning is knowing what to expect from his adversary…. He should know that the market goes to extremes in both directions, that it can be both the supportive, caring, seductive lover and the cruel, cold, insidious antagonist; that it can cause euphoria and exhilaration or anger, fear and despair. He should know that the market can change its mood on a dime; that it can be capricious, enigmatic, and ornery; and that mostly it can be dull, listless, and boring.”

Just simply well said… I wanted to share it with more people.

This Idea is taken from the great great book “Dick Davis Dividend” by Dick Davis“.