Gold

With only 50 days left I have been asked to step up as Chairman for the Canadian Investing Conference (CIVC).  Due to personal reasons, our previous chair has had to step down, and has left me with quite the challenge.  In the last week CIVC has gone through an extreme makeover – the only thing that has remained constant are the keynote speakers and workshop leaders.

The focus of CIVC is investing in a modern society.  Due to recent ethical misconduct throughout the industry, many people believe that investment management strategies may need to change.  A range of topics will be covered including ethical investing, environmental investing, sustainable investing, future trends, investment strategy, and others.  The CIVC intends to stress the importance of global business collaboration within the industry and make a positive difference in the marketplace.

After all of these changes, our marketing strategy has completely changed.  We have had to rework our budget and allocate money towards different marketing promotions.  Due to such a short time between the event and today, the VP Marketing Creative and I have spent the last 3 days getting quotes and drafting strategies, designs, and different ways to attract students.  After marketing this conference all summer at a different venue with a different agenda, I am now faced with the struggles of marketing a similar product with an already established brand.

Tickets go back on sale Monday Sept 27th and will be available for purchase online and in CA Hall of the Henry Angus building.

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.

Totem Park (Dante's Gates of Hell)

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.

Dan diBartolomeo

“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.

Every week, my father insists on sending me his weekly updates on the market.  These updates are intended for his colleagues at Grosvenor, who are specialist developers, investors and fund managers in several sectors – residential, retail, office and industrial property.  Until recently I would just ignore the updates – attempting to understand the meaning of the colourful lines and pie charts only confused me more.  Considering that my fathers title is “senior director, research and investment strategy” of the North America department, the update specifically deals with the Canadian and American market in all aspects.

Fortunately I have been able to take things out of the classroom and do my best to understand this gibberish.  I know – my parents must be so proud…

Here is my first attempt at fully attacking and understanding the weekly pdf file that has haunted my inbox for the last year or two.

Included in this update:

The Federal Reserve raised its discount rate – the rate it charges banks for temporary loans.  This occurred on Thursday by 25 basis points to .75%, which was noted as the first increase since June 2006.  On top of this the Fed commented that they intend to keep the rate low for an “extended period” of time in order to push the banks to rely more on money markets for credit rather than the Fed itself.

Secondly the report compares consumer prices in both countries.  In America, prices only rose by 0.2% in January from December.  This number is less than the forecast and an indicator that the “pace of recovery is not fuelling inflation”.  The CPI is now 2.7% higher than where it stood one year ago.  The Canadian consumer price also rose.  The .4% jump in January from December, and 1.9% annual rise is thought to be due to gasoline prices.

Canadian retail sales rose .4% in December, after their decline of .5% in November.  This adds up to a 6.7% increase from one year ago.

US “housing starts” rose in January by 2.8% with an annual increase of 21.1%.  This increase follows the .7% decline in December.

Finally, the Canadian government announced “tighter standards” for mortgages to take effect beginning April 19th, 2010.  This is a response to a housing market that has shown strong improvement since last Spring.  Consequently there exists a fear of a “housing bubble”.

Being able to interpret the numbers and lingo is the next thing on my to-do list.   Maybe that will come to me next week – for now thats my updated update.

TED – The Paradox of Choice

Barry Schwartz raises a somewhat comical version of a sad truth.  By raising awareness to the increasing choices that consumers face, Schwartz comments on why consumers actually suffer from the plethora of choices.  He says that it has two major negative effects.  The first being “paralysis rather than liberation, with so many options to chose from people find it very difficult to chose at all.”  As ironic as this seems, its true.  For me it has never been more evident in my life than something so simple as choosing a topic for an English 112 paper.  Two weeks ago I was given the assignment of writing an argumentative research paper.  My professor did not assign a topic or give a list of any, instead he left it up to us.  I still have yet to come up with a topic that I am happy with writing extensively about which leads into Schwartz second point.  “Even if we manage to over come paralysis, we end up less satisfied with the result of the choice if we had less to choose from…. Its easy to imagine a different choice that would have been better.”  Every topic that I have come up with is not good enough or not enjoyable enough with the sense of there always being a better choice.  Hopefully soon I will solve my topic dilemma, however during the stress from this uncertainty – its nice to get a good laugh.

“We do not find support for the argument of host city backers that the Olympics delivers positive economic benefits,” said Tsur Somerville of the Sauder School of Business.

Despite the optimistic projections from the BC Government over the past couple of years, the reality of the Olympics now is unavoidable.  A report on November 20, 2002 projected $10.7 billion worth of economic growth and 244,000 new jobs.  Unfortunately, when compared to reality and recent results from the Sauder School, these optimistic numbers far exceed the only one-tenth of one percent gain in economic growth.

Despite the lack of boost or bust Somerville comments in his report of the feel good factor.  “While the findings suggest no economic gain, the Games still present a very real opportunity to celebrate excellence, athleticism and human achievement. The societal impact of valuing the Olympic ideals goes far beyond economic and politics. Hosting the Games ultimately reflects pride in our athletes, city and country.”

This feel good factor however in the long run could be very positive for Canada.  The sense of nationalism and pride in ones country can go a long way.  Although economically controversial in regards to the allocation of assets, the Olympics provide a sense of togetherness that is second to none.

Retailers are constantly faced with a major issue – consumer choice.  Being able to tailor ones products to capture consumer’s choice is vital in both marketing and manufacturing.  If you do not know what the consumers want, how will you be able to run an effective company?

When looking at Dell, it is clear that being able to meet consumer choice is positively correlated with inventory turnover and revenue.  In the year of 1993 Dell reported a loss, and in the following year withdrew from retail.  However in 1996 with the creation of Dell.com, Dell saw massive increases in inventory turnover and decreases in week inventory.  Since Dell was able to offer more to the consumer from the website, allowing them to successfully tailor each order to the customers requests and to earn more revenue simultaneously increasing inventory turnover.  With increasing competition from such companies as Apple and shifts in consumer demand, Dell decided to re-enter the retail market by selling its products through Walmart and other retailers worldwide in 2007.  Being pushed back into the retail market, Dell is forced to get it right the first time when manufacturing its products.  Consequently by not being able to offer every option at the retail level, Dell has shown almost a %50 decrease in inventory turnover.  With the limits on consumer choice offered at the retail level and more appealing products from its competitors, Dell has to become innovative and meet consumers constant changes in taste.  From this it is clear that consumers choice highly affects inventory turnover and most importantly revenue two crucial numbers in determining effectiveness.