After quite the party throughout the Olympics here in Vancouver, capped off by a brilliant victory in men's hockey (take that!), I have had some time to evaluate how I am using my time to maximize the return on my existing skills and to simultaneously build skills that can be used in the future. Long-time readers of this blog know that this blog itself has generated no income, nor was it ever intended to do so. Income has been generated by my own speculative activities and some writing assignments for local financial firms.
Five years ago I made a decision to pursue an education on my own terms. A practical education filled with real-world experiences and a "learn by doing" mentality. My other option was "what everyone else was doing." Going to university, racking up $100,000 plus of debts and coming away with a piece of paper declaring my competence. This piece of paper, I was told, would increase my earnings potential by about 20% for the first 10 years of my working life, at which point it would become more or less irrelevant. The math didn't make any sense. With the interest on the debt, even a high starting salary wouldn't pay it off in ten years. And to top it off, I was surrounded by people who already had degrees but couldn't find work in their trained fields. They went back to coaching tennis or doing security. It really was an easy decision.
Over the past five years I have done proprietary trading for a small financial institution, managed my own account, operated this blog, attained a number of professional certifications in the financial services industry, and spent countless hours reading and researching economic theory, business cycle theory, economic history, the financial markets, capital flows and anything in between that interested me at the time. I have had the luxury of doing all this while living for extended periods of time in Europe and South America, gaining important cultural insights. I'm 27. I have no debt and a little stash of savings.
Far from suggesting that I can't learn anything else (the more I learn, the more I learn how little I know), I have indeed reached a point where this sort of self-directed process has met the law of diminishing returns. It has come time for me to apply what I have learned in another fashion.
I again had two options. The financial services industry was where my training naturally directed me toward. But being under 30 with my qualifications only gave me access to a few entry level positions. Positions abound for "investment advisors" at all the major institutions in Canada. They could just as accurately title the position "Shameless Mutual Fund Salesperson", because that is what they do: siphon their customers into a "balanced" portfolio of instruments that garner the highest sales fees possible. I couldn't, in good conscience, resign myself to this pitiful existence. Alternatively, I could be an "Investor Relations Representative" for a small junior mining company. Being paid primarily in stock options, whose value is dependent on some geologist finding a hot hand? Thanks, but no thanks.
So the option remaining is to use my financial background by pursuing small business development. And as it turns out, there is a family business in need of a new manager. It has a stable earnings flow and significant potential for expansion. Starting now, the majority of my time will be spent improving this business.
What this means for my readers, unfortunately, is that regular updates to this blog will no longer be a priority. I will continue to read a good amount of financial news, and thus, should have no problem keeping the "recommended reading" links updated regularly. Surely, I will at some point get antsy and feel like I should write something (or rant about something). Gone will be watching the markets tick-by-tick as I have for these past 5 years. Perhaps eliminating this short term oriented habit will help me gain a different perspective of the markets.
I'd like to thank my long-time readers for their support, encouragement and advice. I have, indeed, gleaned as much insight from your feedback as I have provided to others. And that was my entire motive of this little project.
Thank You!
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
Friday, March 5, 2010
Monday, February 15, 2010
Market Update 06.10
A week of choppy trading saw the major indices gain about 1 percentage point. There were violent swings in both directions as rumours swirled in Europe of the Greek fiasco. If you've been reading my links on a daily basis, you've probably got a pretty good handle on the issues. I'll summarize the most important points here:
1) The ECB is constitutionally forbidden from acting unilaterally to assist any one nation or group of nations
2) The IMF has a US veto over use of funds and the issue is too large for them to handle
3) Germany and Holland and Scandinavia cannot assist Greece because
i) politics - Germany underwent austerity to facilitate the EU's formation - telling them now to bailout profligate nations is politically impossible
ii) bailing out Greece will immediately lead to eyes laid on Portugal. Then Spain, Ireland, Italy, UK, France, etc.
iii) moral hazard is obvious
iv) adding the debt burdens of Club Med will put Germany's implied debt burden in just as poor shape as Club Med itself. Interest rates on Northern debt would rise
4) Letting Greece fail would cause a cascade of sovereign failures
5) Bank exposure to Greek debts in Germany, France, Switzerland is huge and enough to paralyze their credit markets
6) Nobody can devalue in a monetary union
7) Austerity in Greece, Portugal and Spain is apparently not an option. Workers refuse to accept lower wages. Politicians are resorting to pointing fingers, citing fear mongering and rumour spreading
All routes lead to collapse of the monetary union. Germany bails out one, they must bail out all of them. This will incite political and financial collapse in Germany. Let one fail, the rest will fail by way of precedent and private banks all go down with them. Austerity is politically impossible (unemployment is already sky-high for example). Austerity in socialistically-minded economies will lead to complete depression.
Yet most market analysts continue to believe that "something will get worked out." It is only their optimistic mindset that supports this view, not any kind of sound logic. And the buoyancy of markets is reflective of this. The second leg down in the Great Credit Crisis will be led by the unwind of this baseless optimism toward solutions that don't exist.
See above the multiple 10-15 point swings last week on their way to nowhere. As I often repeat, "oversold conditions can work their way off by either time, price, or both." This week's choppy rise has successfully rooted out many of the oversold readings, and it has done so without inflicting much technical damage to the downtrend.
Also notice the evident complacency among traders, who, despite violent swings in both directions last week put a much lower price on options. Implied option volatilities are worth 23.3% less on the 1075 close friday than they were at about 2:30pm the previous Friday with the S&P at 1044. If that sounds excessive, it's because it is.
We'll see if the greater downtrend prevails this week. Another week of gains would likely put it in jeopardy.
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
1) The ECB is constitutionally forbidden from acting unilaterally to assist any one nation or group of nations
2) The IMF has a US veto over use of funds and the issue is too large for them to handle
3) Germany and Holland and Scandinavia cannot assist Greece because
i) politics - Germany underwent austerity to facilitate the EU's formation - telling them now to bailout profligate nations is politically impossible
ii) bailing out Greece will immediately lead to eyes laid on Portugal. Then Spain, Ireland, Italy, UK, France, etc.
iii) moral hazard is obvious
iv) adding the debt burdens of Club Med will put Germany's implied debt burden in just as poor shape as Club Med itself. Interest rates on Northern debt would rise
4) Letting Greece fail would cause a cascade of sovereign failures
5) Bank exposure to Greek debts in Germany, France, Switzerland is huge and enough to paralyze their credit markets
6) Nobody can devalue in a monetary union
7) Austerity in Greece, Portugal and Spain is apparently not an option. Workers refuse to accept lower wages. Politicians are resorting to pointing fingers, citing fear mongering and rumour spreading
All routes lead to collapse of the monetary union. Germany bails out one, they must bail out all of them. This will incite political and financial collapse in Germany. Let one fail, the rest will fail by way of precedent and private banks all go down with them. Austerity is politically impossible (unemployment is already sky-high for example). Austerity in socialistically-minded economies will lead to complete depression.
Yet most market analysts continue to believe that "something will get worked out." It is only their optimistic mindset that supports this view, not any kind of sound logic. And the buoyancy of markets is reflective of this. The second leg down in the Great Credit Crisis will be led by the unwind of this baseless optimism toward solutions that don't exist.
See above the multiple 10-15 point swings last week on their way to nowhere. As I often repeat, "oversold conditions can work their way off by either time, price, or both." This week's choppy rise has successfully rooted out many of the oversold readings, and it has done so without inflicting much technical damage to the downtrend.
Also notice the evident complacency among traders, who, despite violent swings in both directions last week put a much lower price on options. Implied option volatilities are worth 23.3% less on the 1075 close friday than they were at about 2:30pm the previous Friday with the S&P at 1044. If that sounds excessive, it's because it is.
We'll see if the greater downtrend prevails this week. Another week of gains would likely put it in jeopardy.
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
Saturday, February 13, 2010
Note To Readers
Posting will be light over the next few weeks. The Olympics have rolled through my neck of the woods. I took a part-time gig just to be a part of the action, which has naturally turned into full-time with more responsibility than planned. I'd also like to spend some time mingling with the foreigners, etc. Oh, and I'm battling chronic tonsillitis. Nice!
I'll at least keep the links updated and some charts on the weekend, but suffice to say I'll only have one eye on things. I'm sure you'll all be totally lost without me.
I kid.
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
I'll at least keep the links updated and some charts on the weekend, but suffice to say I'll only have one eye on things. I'm sure you'll all be totally lost without me.
I kid.
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
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