Wednesday, March 30, 2005

Today's Bits and Pieces

Well, not a bad day, considering that yesterday THEY promised 15 degrees for today and it was in fact 10 and very windy. I don't know what those guys do there, but please don't tell me that they don't have a big enough sample size to predict the weather! (a little nerdy joke as a result of day-long stats prep :) )

Besides that, I found out:

1. ... that there is an insurance company that deals only with religious associations. The Waterloo-based Society was founded in 1972 as Lutheran Life Insurance Society of Canada.

2. ... the difference between Frequentist and Bayesian schools in statistics.

3. ... Laplace was able to use STATISTICS!!! to calculate the mass of Saturn.

4. ... that when asked by Napoleon about why he didn't mention God in his book on astronomy, Laplace said "I have no need of that hypothesis".


And I also put out a measly 1.5 hours of actuarial studying. What a joke... Those increasing annuities with payments increasing less often than interest in compounded make me sick.

Tuesday, March 29, 2005

Financial Mathematics Exam FM studying

Right now I am studying for Financial Mathematics Exam FM of Society of Actuaries. I will write it on May 26th. When I began studying for it in January I made a pact to finish my study manual by Sam Broverman by the end of March. Well, two days are left to the deadline and I’ve just defeated a half.

This means it’s time to make a plan and actually stick to it!

I have a Statistics mid-term/final on April 4th, final in Economic History on April 19th and a final in Corporate Finance on April 27th. If I manage to get up early every day and put in at least 2-3 hours of actuarial exam study time, it would be ideal.

Let’s see, I will only be able to do that five days a week, Thursday being a rehearsal day and Sunday being a day-off. I will have 22 days until April 27th of 2-3 hour/day studying and 24 days in May of 8 hours/day. So in total I will have: 3 x 22 + 8 x 24 = 258 hours of studying which is more than enough for a person who took some of the material on the exam in a course at the University of Toronto. However, this is a very optimistic view on things, since I would probably have to spend some time on my internship/job in May, because I told my employer that I would be available after school’s over.

Today, I managed to put out 2 hours of actuarial studying, besides some more of Stats prep for April 4th. Let’s see how I manage from now on…



P.S. Never type a blog entry in a browser window. It can always time out and you’ll lose the whole post. This is a second time I am writing the same thing, this time in Word.

Thursday, March 24, 2005

New Feature: Portfolio Snapshot

As I have been browsing different finance-related blogs, some of which appear in my links section, I noticed that some of my fellow bloggers are investing their funds in a portfolio of stocks. Some do it with a significant starting capital, some with pocket change. I don't want to judge the ones who have quite a lot of money to invest, because as a beginning investor I have nothing to say on this matter. But the ones who are doing it with pocket change, playing the market just to get ecperience with it, are loosing money, not on stocks, but on trade costs.

Yes, most online investing companies, E*Trade, Sharebuilder and others offer a certain amount of free trades when you sign up. This goes pretty fast and most of the times they require you to be an active trader.

This is the reason I decided not to empty my penny jar and invest in the stock market. First of all, I don't have a penny jar, nor do I have any money to spare for this matter. Secondly, if I need to experience the look and feel of online trading, I can do so on game.marketwatch.com.
Let me tell you what it is. It is a Virtual Stock Exchange (VSE), which lets you set up your own portfolio with VIRTUAL money, so if you suck, you will not loose your kid's college savings. Neither will you gain if you win. But it surely lets you try investing.

Here's my portfolio, the one I started over one month ago. My reasoning behind picking the stocks was "Pick the companies in the news that day". I don't really think that this is the right strategy, but for the lack of a better one, I picked the following:



The detailed view of the stocks can be found here.

More on these stocks to follow. I will try to make this a weekly type of post for my portfolio.

Wednesday, March 23, 2005

Purchasing Power Parity in Big Macs

Yep, you read correctly. This is an index in the Economist magazine, which I saw quite a while ago, but dismissed it for some reason. Time to bring it back.

The index measures Purchasing Power Parity of different countries using Big Macs as the basket of goods. Purchasing power parity is the measure of relative purchasing power of different currencies.

The index table takes the price of a Big Mac as it is in United States as a base. The PPP of different countries is computed by taking a ratio of the price in, say Canadian Dollars in Toronto, to the price in US Dollars in New York.
Price of Big Mac in Toronto - 3.20
Price of Big Mac in New York - 2.65

PPP price = 1.22

Take the current exchange rate - 1.2093
Now compute the under/over valuation by taking the difference between the above PPP and the exchange rate and divide it by the exchange rate. Multiply it by 100 to get percentage!

U/O = [(1.22-1.2093)/1.2093]*100=.8848%
I.E. the canadian dollar is undervalued by .1151% agains the american dollar.

Now, don't go selling short you FX positions, because like everything else in the modern world, the PPP Big Mac index revolves around the US. ;)

For a most recent article about the Big Mac Index look here.


P.S. The prices of Big Macs in Toronto and New York were taken from the Economist data as of 2003, most likely it has changed since then. The exchange rate is of March 22, 2005.

Tuesday, March 22, 2005

Capital Pool Companies

Over the past week I was supposed to read two policy documents of Toronto Venture Exchange, Policy 2.4 and 4.1, for my summer internship at an Investment Banking Company.

Policy 2.4 talks about the Capital Pool Companiy and the procedures required to set one up. What is fails to mention is the purpose. So I had to look it up elsewhere. Here's what I found:

This CPC program, authorized in Québec and Ontario since the end of 2002, introduces investors, with financial market experience, to entrepreneurs whose development and growth stage companies require capital and management expertise.
The program enables seasoned directors and officers to form a CPC, with no assets other than cash and no commercial operation, to list on the TSX Venture Exchange and proceed with an initial public offering. The CPC will use these funds to seek out an investment opportunity.


:: Terms and Conditions (Summary) ::

1. An initial investment of $100,000.00 to $500,000.00 by directors and officers at a price generally varying between 5 cents and 20 cents per share.

2. Initial public offering by way of a prospectus approved by Securities Commissions at twice the initial share price to a minimum of 200 shareholders for total proceeds not exceeding $2,000,000.00 including the initial investment.

3. The CPC is listed on the Exchange for a maximum of 18 months.

4. During this 18 month period the only expenditures allowed are for the identification and evaluation of opportunities to complete a qualifying transaction.

5. he qualifying transaction is the acquisition, by the issuance of treasury shares, of a business, either an active company or assets which would result in the CPC meeting the regular listing requirements on the TSX Exchange.

At the meeting with my employer he told me that CPC was the most popular way of raising capital for a private placement in Canada, Ontario in particular. After I asked why, he said that it is the easiest to set up and proved to be quite effective.

Sunday, March 20, 2005

Hello there!
Welcome to my blog, I guess. Never did I believe that I would be sucked into this cyber mess.
Let's see, what brought me to this?

Let me tell you about myself first. I am a student in University of Toronto, studying Economics and Statistics. I am also pursuing the career path of an actuary. I took the first Exam P (Probability) of Society of Actuaries last Spring and planning to take Exam MF (Mathematics of Finance) this time around.

To explain why I am writing all this down:

1. I was looking for work/internship/volunteering for this summer and looked all over the place for advice. I found some great stuff and would like to share all this, so that someone in my position would not be as lost as I was.

2. I have secured a position as a volunteer-intern in one of Toronto's Investment Banking companies. It's a small company with a finite number of projects and they do everything from M&A, IPOs, Corporate advisories etc. I am a complete newbie in all this. I'd like to document my learning curve for others to take note of.

3. I would like to document my progress in exam taking/passing of SOA, because I believe it will make me more organized.

For now that is all.