Month: April 2010

Volcanic Ash May Weigh On European Economy

Due to the recent volcanic explosions in Iceland, a cloud of volcanic ash has covered most of Europe. This has caused thousands of flights to be cancelled.  TUI, the largest travel operator in Germany, was forced to take a pricey manoeuvre to get passengers from the Spanish island of Mallorca home.  After getting to Barcelona, 540 customers were provided with a hotel room for the night, and than tossed on a 20-hour bus ride to Frankfurt.  Wow.  I’ve had a flight be cancelled before, and have been compensated with a night in a hotel, but there was always a later flight.  Imagine having to take a 20-hour bus ride for only a 2 hour-ish flight?  Ouch!  On top of the current economic crises in Europe due to Greece, the effects of this ash cloud effecting more than just airlines, could potentially be catastrophic to an already weakened economy. Daniel Gros, director of the Center for European Policy Studies in Brussels stated,”Given that the recovery of the euro-area economy is anyway so weak, it might have an impact.”  This ash cloud is effecting any occupations form airlines to agriculture.  Unless the cloud clears up soon, Europe needs to do whatever they can to cover their ash.

So yesterday I went to convert American Dollars into Monopoly Money – sorry I mean Canadian Dollars.  For the first time ever in my life I lost money on the conversion.  WHAT IS GOING ON!  The Canadian Dollar, also known as the Petrodollar, due to increasing oil prices has gotten stronger, while the American Dollar due to the increase has gotten weaker.  This is due to the fact that Oil is denominated in US Dollars.  Because the majority of countries rely on oil imports, they are forced to purchase large sums of US Dollars.  Basic economics teaches us that high demand results in high prices.  Since Oil is denominated in US Dollars, causing demand to be so great, many still purchase US Dollars regardless of contingent economic situations.  Consequently, US interests rates on bonds are able to be lower than average, allowing the US government to run higher deficit spending.  Due to the fact that recent Oil prices have increased, the US Dollar has severely depreciated, compared to Canada (one of the greatest exporters of Oil), whose Dollar has seen drastic appreciation.

What does this all mean?  If Canada allows their Dollar to get any stronger, this could be troublesome to their economy.  Although the stronger Canadian Dollar gives them a better conversion to other currencies, with that comes massive imports.  When a currency becomes stronger to another country it is less expensive for that country to import than to locally produce and export.  If Canada allows the Dollar to become any stronger than par with the American Dollar, the economy will take a massive blow as Canada becomes a nation of imports not exports.  The Canadian Bank must do what is in the best interests of its citizens and its economy.  Yeah, Canadians can go on holiday or shop for cheaper in the United States, however, if they lose their job they’ll have no money to spend!

So to be honest, I have never considered myself “Green” – I’ve actually been kind of ignorant, or as most of my friends call me – American.  I have never really done my part in the Green Revolution.  I barely recycle and I waste things, I am not proud of it and I am VERY aware I need to do a better job.  Ever since the move to Vancouver, however, I have been able to do a much better job.  As you can see my total output is 5.596 tonnes of CO2 per year.  When that number was displayed from the carbon footprint calculator, I was actually extremely surprised.

I guess it had to do with the fact that currently I reside in a dorm room and and could not answer half of the questions regarding utilities because I personally have no clue how the Totem Park Residence at UBC manages them.  Seeing that I will no longer live in a dorm room after this year for the rest of my life (I’ve been living in one for 5 years straight), I am very excited.  With this in mind however, I am positive my carbon footprint will go up.  I will have to commute longer not living on campus, cook my own food, manage my own utilities and all that jazz that comes with having your own place.  So what can I do?  Knowing that my footprint will increase in the coming years, I can do my best to make that increase as minimal as possible.

During a discussion with one of my Teaching Assistants, I was informed of the UBC Portfolio Management Fund (PMF).  “The Dean of Commerce (UBC) Portfolio Management Foundation (PMF) is a two-year extra-curricular program for students that begins at the end of their second year of university. It consists of two summers of internships, an academic year as a “Research Associate” (assisting the students one year ahead in the program) and an academic year as a “Fund Manager.” The FMs’ and RAs’ task is to add value to a real portfolio of stocks and bonds, currently valued at about $2.5 million.”

Thanks to my TA, I have been able to do my best to prepare myself for this program.  Meeting with various current team members, simultaneously scheduling lunches and appointments with PMF Advisors and Faculty, and attending market mingles, I plan to build a solid background in Capital Markets.  As a first year in business my background knowledge of Capital Markets is minimal.  Over the summer, through my internship at Northfield Information Services, books, and the news, I plan to further my knowledge.  Even though I am a first year, I have always been conscience of what I want to build a future career in.  When applying to Sauder, I knew I knew I was going to major in finance.  With that in mind, learning about the PMF was like striking oil.  I am eager and am doing my best to become a member of the team.  Hopefully, all of my preparation and small head start will provide me with a solid background.  I guess we’ll just have to wait and see.

Since the summer of 2006, I have been fortunate to hold a paid internship at Northfield Information Services – mainly due to the face that the President Dan diBartolomeo is an extremely close family friend.  Besides running and owning the a market leading risk modelling firm, Dan diBartolomeo also provided the mathematical calculations for Harry Markopolos testimony, revealing Bernie Madoff’s Ponzi scheme.

“Northfield is a market leader in providing investment professionals analytical and operating efficiency tools to enhance individual portfolio and firm-wide performance.

Founded in 1985, Northfield has developed open, analytical models to identify, measure and control risk. These risk models cover most marketable securities traded world-wide. Based upon sound investment theory, Northfield’s products and services have stood the test of time from users within the global institutional investment community.”

Throughout my experience at Northfield, Dan has taught me so much about the world of finance.  Originally, I was just the office errand runner.  I would deposit checks, get coffee, copy data and information to disks, nothing theoretical – purely technical.  During my second and third years, I was exposed to REITS and the NIS Global Equity Risk Model creating various Excel notebooks, running single and multi variate regressions – still nothing theoretical and only technical.  This summer I will be “graduating” to a different level of risk modelling.  I am beyond excited to say the least (Im not a loser – I think at least) that he will be taking me under his wing for the fourth summer in a row.  This year I will be taught Visual Basic, Visual Basic for Applications, and other programming Macros.  Although my work will still be for the most part technical, I will be able to take away more from my work in a theoretical aspect.  In order to write these programs, I will need to gain a better understanding of how each model works.