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. 

To be considered you’ll need to have a strong GPA, expect to be asked to include a transcript.

Ability

You have to be able to show your interest and experience in the field. There are both very important and an interviewer can see right through you if you aren’t sincere. It is also important to research what EXACTLY you want to do & why. There are many different positions and desks and too many people seem unsure why they’re even applying for the position other than a “desire to be a trader”.

Personality

If you posses the education and ability, the next important thing is personality. Traders work in very close quarters. There are no cubicles or offices, just long desks. You have about 3-4 feet of space separating the staff. Employers want to make sure you’ll fit in with the corporate culture and that you will be able to handle the lifestyle. There are no real breaks, lunch is eaten at your desk. There are many cases of the top student with the perfect CV not getting a second round interview because they didn’t have the right personality ‘fit’.

Drive & Luck

If you don’t get an offer through campus recruitment (and very few do) all is not lost. If you have the ability, education & personality, then all you need is a lot of drive and a little luck. Get experience working in different financial jobs, make as many contacts as humanly possible and don’t be afraid to set up information interviews with firms where you’d like to work. In time, you should land some interviews and if you meet all the criteria, eventually get an offer.

So that’s it, now just spend your summer preparing for your application in September.

Today the Toronto Stock Exchange Index (TSX) hit 15,000 points, its highest number ever.

Even though 15,000 is purely a nominal number, skewed heavily by a small number of companies granted heavy weightings by the indexing formula, now is as good a time as any to reflect on the past 10 years.  

Why 10 years? Well, firstly that is as far back as my graph will go. More importantly, it is a period that encompasses two market cycles (the second is yet to be completed).

Looking at the far left In the above image, we can observe the effect of the tech bubble on the TSX index. A very quick boom was following by an equally quick bust. During the boom, the hot stock in the index was Nortel Networks. At one point, Nortel represented over 32%of the entire index. It was the market darling. It didn’t last. Today, Nortel trades at about 8 dollars, but it is really worth 80 cents after you account for the marketing wonders of stock splits (Nortel had a 1-for-10 reverse split).

Moving on over to the right, we can see that the current bull run does not appear to be too similar to previous bubble. Here we have a much slower and paced increase. There are however, some similarities.

Three companies: RIM, Encana & Potash Corp. account for over 20% of gains in the index over the past 5 years. The good news is that currently we have three firms leading the way, not one. There are also two sectors involved: Tech & Energy.  The last positive note is that the banking sector appears to be regaining steam. The big five Canadian banks haven’t been contributing much to the index the past few months as they struggled with write-offs from the credit collapse. If they continue to perform, it will provide a good hedge against a slowdown in Energy, assuming commodity prices begin to come back down to earth.

It is important to remember that the past will not reflect the future. Do not think that there is anything in the above chart that will hold the magic key to unlocking where the market will go next. Charts are only useful for giving us the ability to take a minute and reflect on how we got to where we are, so that our minds are a bit more focused as we decipher where it will go next.

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”.

The most eye opening book I’ve ever read on finance is hands down Benoit Mandelbrot & Richard Hudson’s The (Mis)behavior of Markets. Who is Benoit Mandelbrot? He is the father of fractal geometry. A mathematician who looks at the markets as a form of organic randomness. But the markets can’t be random, can they? No. Markets are not random. However, understanding randomness is essential when judging technical analysis.

Technical analysis attempts to predict future price movements based on movements in the past. This is done through averages, equations and charts. This data is then used to determine when to buy/sell a stock.

There are a couple of problems with this philosophy.

Firstly, there are a large number of individuals who believe that the past does not reflect the future. Lets say you were thinking of buying 100 shares of Coca-Cola. What is important to you, what the stock did yesterday, last month, or last year? Or is it what the stock will do tomorrow? You probably care about the next earnings report, the next news article, the next executive decision. What happened in the past is done with and already built into the share price. The market is forward looking and all about future expectations.

The second problem with technical analysis has to do with human deficiencies in perception and randomness. It is human nature to look for patterns, even when patterns aren’t really there. In experiments conducted by Mr. Benoit, he created random charts using his fractal geometry and gave them to technical analysts with real charts using market data. The analysts were blind to the fact that some of the charts were computer generated, as they all had no identification, time, or price scales on the axis. The result? The analysts found trends in the random charts. How can randomness have trends?

They don’t. But we think they do.

Another example:

Our parent company runs a website called ConquerClub, an online game of world domination that involves “virtual dice”. When programming the dice they wanted to ensure complete randomness so the programmer turned to random.org as source for the data. Study after study has concluded that the dice rolls on ConquerClub are random. However, the largest complaint from users is that they are *positive* that the dice are in fact not random. They call them streaky.

Streaky dice & Stock trends.

It’s the same thing. An illution created by our brain in an attempt to understand randomness.

So now we know technical analysis is junk. Why is it still important?

It has become a self fulfilling prophecy. 

People are the ones making investment decisions. If many people believe that a stock will go up once it crosses a $35 dollar barrier, what happens? They buy the stock! When people buy the stock, it drives the price up and the system works! Another successful technical analysis prediction.

So go on looking for trends you crazy technical analysts, you control your own destiny.

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.

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! 

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.

That shouldn’t really surprise anyone. After all, Jim Cramer is the most popular investment personality on the most popular investment television station. A contrarian prefers to act in the opposite from the conventional norm, and as weird as it sounds, Mr. Cramer is as norm as you get.

I myself have fallen victim to the same trap of ignoring the contrarian. A perfect example of this was my recent discovery of iTulp.com, a website dedicated to the contrarian view of investing. This website has been around since 1998, an eternity by web standards. It has been written up by very credible news agencies, varying from Barron’s to CNBC. Impressive. I am, however, not alone in my ignorance in knowledge of this website. Alexa ranks iTulip outside its top 100,000 sites. I have seen many sites in existence for less than a year easily crack the top 100k.  Therefore, many people appear to be ignoring the Contrarian, hence my post.

Perhaps the most famous, if not the simplest contrarian strategy is the Dogs of the Dow. It is also the first investing strategy that I read about, so I will always hold a special place for it. The premise couldn’t be simpler. At the end of the calendar year purchase equal dollar amounts of the 10 Dow Industrial Average stocks that have the highest dividend yield (the dogs). Hold for a full year and re-balance annually. The theory is that your returns will outperform the full 30 stock Dow Index. It didn’t work the year I tried (on paper).

Even though my first experience with contrarian strategy was a failure, I still believe in reading up on what contrairans are currently talking about. They are often very smart people who make astute arguments on where the market has been, currently is, and will be heading. I encourage you all to do a bit of research and study this methodology. You might not agree with their outcomes, but there are definitely some nuggets of knowledge that will benefit you in future investments.

Today we learn that there are rumors that T-Mobile is looking into combining with Sprint. Although in the US Sprint is the larger company, T-Mobie’s German parent Deutsche Telekom AG could easily handle the required costs. Sprint has been struggling financially of late, having its credit rating cut to junk status by Standard & Poors last week.

If successful, the new entity would represnet the largest wireless company in the US.

The market, to no surprise, doesn’t like the news and shares for Yahoo have plunged 21% in pre-market trading. Bloomberg reports that Citigroup Inc. has downgraded the stock to a “sell” after the news came out.

Yahoo’s future is not as bleak as some apparently want to believe. It is still  arguably the #1 or at worst #2 brand on the Internet. They are currently rumored to be in talks with with Google to iron out an advertising deal, and there are also rumors of a possible deal with AOL Time Warner.

I’m sure this is not the last time we’ll be discussing Yahoo! mergers this year.

May is not doing too shabby either. Two days into the month and the Dow is up 1.4%. Aren’t we supposed to be in the middle of a Bear Market with a looming recession? What gives??!?!

What gives is that prior to April, the market went down too much, too quickly, thereby attracting buyers. From October 1st to March 31st, the Dow tumbled almost 13%. That’s quite a haircut for a 6 month period. Based on where we are today, the market still needs another 8.3% in gains just to break even with October’s numbers.

So here’s the big question: Is this just a blip correction, or do we call out the bulls and shout recovery?

 Lets take a look at what we know based on data from the last few weeks:

- The US Federal Reserve has been slashing rates. This usually leads to a boost to stocks, as companies will be able to borrow for less, and consumer get access to cheaper money (so that they can spend it).

- Job numbers for the month of April weren’t as bad as expected. The results were a quarter of the street consensus.

- GDP also topped analysts expectations in April.

- Oil & Food prices continued to rise rapidly, with no real end in sight.

So overall there’s been more positive than negative economic news this past month. However, and this is a BIG however, the continued rise in oil and food prices can lead to high inflation, which can undo a lot of the positives from the past month.

The good news is that things aren’t so bad after all, but we’re not out of the woods yet.