I always get a lot of question asking how someone becomes a trader. The truth is that there is no simple answer, it is a combination of education, ability, personality, drive & luck. I’ll quickly go over them below:  

Education

At a minimum a University Bachelor in Commerce/Economics and preferably some industry courses. All the large institutions recruit at the major Universities in September for positions beginning after graduation in June/Aug. There are usually two types of positions, Analyst & Associate. Analyst is for Undergrads and Associates for MBAs.  Read the rest of this entry »

According to a new Bloomberg survey, the world wide CreditCrunch™ appears to be slowly fading away.

You might be wondering what the heck is this CreditCrunch? There has been a lot written on the subject, but not too much explained at a basic level. So here goes…..

The current issues with credit is that it has become more expensive. What does that mean? Well, essentially it means that the funding of lower credit investments have become more expensive. Why? Because people were afraid of risk and wanted only the safest investments. Treasury Bills (T-Bills).  Read the rest of this entry »

Quote of the day:

“[Citigroup] is so deep in a black hole that even renown physicist Stephen Hawking could not help the ailing company” - Banking analyst Meredith Whitney (via NY Post)

Ouch!

Some curious US economic numbers were released this morning. April’s retail sales fell 0.2%, however, when excluding auto sales the number becomes an increase of 0.5%, beating forecasts calling for a 0.2% rise.

The first curious observation is that retail sales were up, even with the recent drop in consumer confidence numbers. This can partly be explained by strong sales in defensive retailers like Wal-Mart and Costco that were reported for the same period.

The second curious observation is not that car sales dropped, as that has to be a no brainer given gas prices and the auto industry’s snail pace at responding to changing market conditions.  It is that sales at filling stations also dropped. One would think that it would be very difficult to produce lower sales when your product is in-elastic and at record prices. This has to be the most compelling evidence that people are changing their driving habits. Specifically, they are driving less. Car companies should take note, as less driving will undoubtedly lead to even lower sales.

When I first got interested in markets I thought technical analysis was a great tool. It was easy to learn, made logical sense and most importantly, appeared to work.

I was fooled by this cunning, seductive mistress. Technical analysis is the fools gold of finance. It is an illusion that is as real as Michael Jackson’s face. But to quote Levar Burton’s Reading Rainbow: “You don’t have to take my word for it”. Read the rest of this entry »

One of the classic indicators that determine if people believe they are in a recession is retail sales. This ties into consumer confidence and jobs data that help determine the health of the economy.

Today we learn that both Wal-Mart & Costco reported sales data that increased more than analysts estimated. How does this show that we’re in a recession? (or at least acting like we are)

When consumers believe that times are tough, they will make decisions that help them build an economic cushion. Luxury goods will be cut, frivolous spending reduced, and penny pinching will begin.

Where do consumers go to penny pinch? Wal-Mart & Costco!

These companies are often coined as defensive stocks because they tend to hold their own during economic downturns. People still need to consume, just at bargain prices.

So ultimately this shows that consumers are tightening their belts and therefore behaving as if times are tough. And that’s the bottom line, isn’t it? Do you need an economist of government official proclaim that you’re in a recession to feel it? No. All that maters is how you feel and currently, Americans clearly feel like they are.

Forget techincal or fundamental analysis. Forget digging through earnings reports, crunching numbers on “trends”, or shooting darts at a list. The easiest way to make money in the market is insider trading. Unless of course, you get caught.

This probe is being carried out jointly by both the Securities and Exchange Commission in the USA and the Ontario Securities Commission in Canada. They allege that a US based law firm that advised on 11 merger transactions over the past two years had a connection to a Toronto business consultant who profited $1.1 million through purchasing shares in the target companies before the mergers were made public.

Insider trading probably happens a lot more than the regulators want us to believe. It’s just so easy. There are usually dozens if not hundreds of people who have access to information that can materially affect how a stock performs. All it takes is a quick phone call to a broker or accomplice and bingo-bango, profit!

OK, I know I made it sounds a lot simpler than it truly is. Having worked in the industry I know what compliance departments focus on and how red flags can appear on your account. I’m not about to start disclosing that for obvious reasons. What I will say is that for all the accounts that are caught, there’s a good chance many get through undetected. Those are the people who are smart enough to fool the system and keep their mouth shut.

Microsoft is turning into quite the hussy. Shortly after breaking up with Yahoo! before they even officially dated, Microsoft has been seen holding hands with Facebook…. and they might even kiss.

I never liked the proposed Yahoo merger. This one, however, might have legs.

Firstly, lets ignore the $15 billion valuation that Facebook claimed to have in October. That number is just silly. Facebook is still a new kid on the block, they’re still working on a business model that will work in the long run.

Although it is still growing like vile weed, I have noticed that fewer and fewer people on my Facebook account update their profiles in a regular basis. Facebook could just be an Internet trend. A flash in the pan. Not a $15 billion dollar company.

Microsoft could bring a lot of help to ensure that Facebook becomes a long term juggernaut on the Internet. They have the reach, the knowledge, the experience and most importantly, they are just as evil.

Facebook has built a reputation for having poor privacy controls and whoring out users to advertisers. Microsoft has a reputation for whoring out user’s rights to media lobbies. Together they can ruin your online experience and share it with the world.

Seriously though, these two firms would benefit from each other. Microsoft would gain a growing Internet database of consumer information, Facebook would get a grownup to steer it in the right direction.

I say go for it! 

Another day, another round of layoffs at an investment bank. Today’s casualties are the employees of UBS AG, a Swiss based bank that has come onto hard times.

The firm’s investment banking division lost $17.3 billion in the first quarter. You can bet that the majority of job cuts will be from that division.

The 5,550 jobs represent about 7% of UBS’s 83,800 worldwide employees. That number is actually less than the rumored 10% cut that was floating around the market yesterday.  

This newest round of layoffs brings the total reductions in the industry to over 53,000 since this whole mess began. There is still no sign that the credit market has turned around, so expect more cuts to come during the next few months.

Not too many people pay attention to contrarians. They often remind me of the kids in school who ate paste. Sitting in a corner by themselves, ostrasized by their peers. Loners. What you forget is that these kids are often the ones who grow up to do great things. Their minds are complex and cavernous, sparkling with nuggets of information that every investor should pay attention to.

Contrarians are not the ones shouting from atop desks, playing silly sounds and acting like crazed lunatics when discussing the stock of the day. In fact, one could argue that a contrarian is the exact opposite of Jim Cramer. Read the rest of this entry »