OTHERS: 2004 Olympic Games, Athens, Greece

From The Opening Ceremony of the 2004 Olympic Games in Athens, Greece

http://www.athens2004.com/en/

With a magical Opening Ceremony, Athens welcomed the best athletes from around the globe for the Olympic Games, which returned home. Connecting symbolically the Ancient Olympia Stadium with the Athens Olympic Stadium, the beginning of the Opening Ceremony bridged 3,000 years of Olympic Games history ........

OTHERS: 2004 Olympic Games - The Other Sides

Summer Olympic games 2004 in Athens, Greece is starting today August 13, 2004.
Thought I need to put this article on this event here on the blog.

http://www.csmonitor.com/2004/0813/p18s01-hfcs.html
'The healing of the nations'

Since their inauguration in 1896, the modern Olympic Games have mirrored the times in which they have been held. World wars canceled the Games in 1916, 1940, and 1944. Boycotts substantially reduced the number of competitors in Montreal in 1976, Moscow in 1980, and Los Angeles in 1984. And security for athletes, spectators, officials, and the media has been a key issue for the organizers since the Games in Berlin in 1936.

This year in Athens there is more than the usual concern about possible disruption from outside. There are fears that political activists - including terrorists - might seize the opportunity to try to interfere with an event that is the antithesis of what would seem to be their agenda ........

...... The 2004 Summer Games promise to be as valuable as any other in uniting people of all ages and nations in a commitment to give of their best, not only in competition, but toward the healing of nations.

OTHERS: Blogging - Another New Online Trend?

Today is Friday the 13th of August 2004 and coincidentally this is my 13th post on this blog.
Before going any further, I got to start by stating that I'm a newcomer in blogosphere (I set this up in November 2003 but never did anything until last week).

I think blogs have reached the point to where some are actually comparing them with "medias" or "journalism". This is a take from my fellow blogger friend (fling93): http://fling93.com/blog/archives/blogging/2004/blogging_vs_journalism.html

This below article even took it further:
http://ojr.org/ojr/technology/1092267863.php
Transparency Begets Trust in the Ever-Expanding Blogosphere

The openness of Weblogs could help explain why many readers find them more credible than traditional media. Can mainstream journalists learn from their cutting-edge cousins?

At the Aspen Institute's Conference on Journalism and Society in mid-July, a question was put to executives of major news organizations: Whom do you trust in online media today? Most answered with a list of the usual suspects: the Web sites of The New York Times, NPR, the Los Angeles Times.
Jeff Jarvis, a blogger and president of Advance Internet, gave a different answer: "I have learned to trust the voice and judgment of my fellow citizens.".....


This one is highlighting the rising popularity of blogs and relating it to the recent Democratic Party convention, in which some bloggers were invited (not to be outdone, of course the Republican Party is reportedly also giving passes to bloggers):
http://www.lavanguardia.es/public/series/20040810/51159314079.html
Channel that emotion

For those chosen, the excitement of the experience has spilled over into their weblogs. The privilege of experiencing the convention first hand overwhelmed some to such an extent that they were unable to sit coolly back and write about anything above or beyond the logistics, the number of people there, and the circumstances they were working in.

From the journalistic point of view, most of the content in the convention's many weblogs is irrelevant. There are impressions, comments and gossip, but not much in the way of news. But was that what was expected? Does the success of blogging lie in its ability to provide news? ........


I'm not saying that we should trust blogs more or less than mainstream medias. One really still needs to tread carefully in blogosphere what type of information they want to get out of reading blogs as there are really various reasons for people to be blogging in the first place. Although in a way, unpaid blog-ing actually is quite a good "incentive" for bloggers to be "objective" {gee, "unpaid", "incentive" and "objective" in one sentence?} as there is no pressure for bloggers to write certain this and that agenda of interests.

Some like to write, some have opinions on everything, some want to socialize and some prefer to share; some even are blogging for business:
http://www.businessweek.com/technology/content/aug2004/tc2004089_3601_tc024.htm
Blogging for Business

With readers flocking to their Web postings, execs are finding blogs useful for plugging not just their products but their points of view Jonathan Schwartz, president and chief operating officer of server maker Sun Microsystems (SUNW ), first suspected that his blog was a success when his salespeople began reporting that customers were reading his posts and sealing deals faster .....

I have mentioned a bit on why I decided to start blog-ing here: http://hedonistix.blogspot.com/2004/08/personal-blog-ing.html ; I'm not sure how credible I am as a blog-er or how much I can maintain my "objectivity" on more serious issues (i.e.: politics, etc.) but as far as I'm concerned, it's more about "this is what I think about these" instead of "here is what I think things should be".

I am also not expecting heavy traffic and interactions on my blog, instead I hope it will also serve as some kind of archiving space for topics or articles that I find interesting and may need to re-read sometime in the future {I'm still waiting for Google/Blogger Support team to get me the Google search capacity within my blog}. Additionally, it will also serve as a journal for me to share with others; be it about my opinion on issues or about what I am thinking as I write my posts, which I think will be quite fun to read - if I'm still interested - in the next 20-30 years of my life.

--H

OTHERS: Why Am I NOT Surprised?

Thought this is an interesting article to share.
Don't think I can make any comments on this one.


http://www.economist.com/world/europe/displayStory.cfm?story_id=3064790
After Babel, a new common tongue
Aug 5th 2004 RIGA From The Economist print edition

It turns out to be English

IN THE 17th century, educated people across central Europe could still communicate with each other in Latin. By the mid-19th century, the handiest language for a traveller through Mitteleuropa was the German spoken by the Habsburg monarchs who reigned over Hungarians, Czechs and many others. A little more than 100 years later, the dominant tongue was Russian.

.... What has happened to the other main languages? A majority of central Europeans have eschewed Russian as firmly as they have rejected the communist ideology which was once articulated in that tongue. Russian remains the second-most-studied foreign language in the Baltic countries, where there are large minorities of native Russian speakers and a thriving Russophone culture with them ......

German has languished partly because Germany has been shy about promoting its language and culture in a region ravaged by Hitler's war. No such shyness has affected France. Its cultural diplomacy in the region has been vigorous and generous. Handsome French cultural centres ornament the capitals of the region: the newest of them will open in Riga, the Latvian capital, in October. But admiration for France's culture does not translate into widespread use of its language. Only in Romania—whose own vernacular is of Latin origin—does it exceed English in popularity.

The choice of English has been made easier by the demands of foreign investors. The first to move east were the most international European companies, which tended to use English as their international working language regardless of their base. The biggest foreign direct investor within central Europe for most of the past decade, Siemens AG of Germany, an engineering and telecoms firm, made English its main “corporate language” in 1998. “German companies are very pragmatic,” confirms Bernhard Welschke, head of European policy at the Federation of German Industry. They value a single language for business, he says, even if it is not their own.

..... One big question now is whether the generalised use of English as a first or second language will accelerate the political integration of the EU. The spread of English will lower the language barrier which has, arguably, obstructed pan-European political debate. It will open the way to the formation of pan-European public opinion, and to politicians with pan-European appeal. But there have been empires, like the Soviet one, which had common languages and still fell apart. A language can help a good political system work better, but it cannot rescue a bad one.

POLITICS: The Left and the Right - More in Common than We Think?

I have always been 'amused' by the recent popular trend of "Americans are more polarized today than ever" or "America is divided into two today more than ever" and have actually just discussed about this subject with a friend couple days ago, before I saw the below article.

I also have never believed that America today is more or less divided than ever before and have always believed that the division has always been there. I am actually attributing the advancement of technology, internet and news to be the main contributors of making America is "seemingly" more divided these days than in the past.

I also believe this is not the case only applicable to America. If you're not Americans and reading this post/article, ask yourself or look around you: "Are people from polar political sides in my country more or less or equally divided today than in the past?", which is why I believe it has more to do with the flow of information from different medias than anything or anyone else.

At the end of the day, I guess the below article indicated - and so I believe - that "labels" and generalizations mean a little. I personally can't label myself as a "conservative" or a "liberal" because I am always opening the possibilities of aligning myself with either sides on different issues, which is probably why I can't take comments (or "analysis" as they like to call them these days) of pundits from the extreme section of both sides.


http://www.csmonitor.com/2004/0811/p09s02-coop.html
Left and right have more in common than you think

• David Boaz is executive vice president of the Cato Institute and author of 'Libertarianism: A Primer.' ©Los Angeles Times.

The country is polarized, we're told. Bush-haters versus Clinton-haters. Mel Gibson versus Michael Moore. Red versus blue states. Liberals and conservatives read different books, watch different networks, go to different churches.

But conservatives and liberals have more in common than you might think.

Both believe in government magic. And they want you to believe in it too. They want you to believe the president can be Superman, Santa Claus, and Mother Teresa all in one, and that he can cure poverty and racism, keep kids off drugs, and hold families together. But the world is complicated, and legislative actions often fail, backfire, have unintended consequences, or disappear into bureaucratic sinkholes.

Both ignore history. Liberals look at the 20th century's grand experiment of capitalism versus socialism and somehow conclude that what the US needs is more socialism. National health insurance, a more centralized educational system, government regulation for our most dynamic industries - in every case ignoring the historical triumph of competition and freedom. Conservatives think government can restore the world of the 1950s, ignoring the most basic lesson of history: Things change.

.... Both involve the nation in unnecessary wars. Conservatives think the US should send troops anywhere its vital interests are threatened, and they have a very expansive definition of "vital interests." Liberals like to send troops anywhere US interests are not threatened - it seems less greedy and Republican. That's why they get excited about sending troops to Somalia, Liberia, and Bosnia.

..... And the No. 1 way liberals and conservatives are alike: Both think they can run your life better than you can. Liberals want to raise taxes because they can spend your money better than you can. They don't believe in school choice because you're not capable of choosing a school for your children. They think they can handle your healthcare, retirement, and charitable contributions better than you can. Conservatives want to censor cable TV because you're too dumb to decide what your family should watch. They want to ban drugs, pornography, gambling, and gay marriage because you just don't know what's good for you.

The reality is, Americans aren't as polarized as the pundits say. Most want government out of their pocketbooks and personal lives. They want civil liberties and lower taxes. And they feel free to reject both liberals and conservatives when their ideas don't make sense.

OTHERS: San Francisco for Virgins

Having lived in San Francisco for almost 6 years now, I actually am not too familiar with some of the usual tourist-y spots and am glad that I found this article which is an excellent recap of what to do/to eat/to visit in San Francisco.

Hope it can be useful for SF virgins.
Feel free to post questions or comment here or e-mail me for various Q&As related to the city.

http://www.sfgate.com/cgi-bin/article.cgi?file=/gate/archive/2004/02/06/sfvirgins.DTL&type=travelbayarea
Tour For San Francisco Virgins

From "San Francisco As You Like It: Over 20 Tailor-Made Tours for Culture Vultures, Shopaholics, Neo-Bohemians, Frenzied Foodies, Savvy Natives, and Everyone Else," to be published in its second edition this spring by Ulysses Press.

Even though I grew up here and can never fully realize the wondrous revelation of seeing San Francisco for the very first time, I imagine that for many it's a life-changing experience. I mean -- if I can still get a lump in my throat at the sight of a cable car silhouetted against the evening sky atop Nob Hill, or the sound of an audience singing "San Francisco" at the top of its lungs before a movie at the Castro Theatre, just think what it could do for an someone who's never been out of Kansas.

Playing tour guide to an SF virgin is a wonderful thing for a number of reasons:

1. It's easy -- everything's new and exciting and amazing -- even that lady with the space-alien lights in her hair that plays the accordian and sings "Feelin' Groovy."

2. You're required by the laws of hospitality to go to all those "tourist" places you'd never dream of visiting on your own (but were secretly dying to see), and you can blame it on your guests.

3. There's nothing quite like seeing your old, familiar haunts through the eyes of a neophyte -- a great way to renew your romance with the city ......

FINANCE: Hedge Funds

I admittingly do not know a lot about "hedge funds". It is included in the CFA curriculum under the sub topic of "Alternative Investments" (together with "real estate investments" and "commodity investments" among others). Other than that, I do have some friends who work for "hedge funds" and regularly read "Institutional Investor" magazine, a monthly magazine on hedge funds, investments and corporate finance.

I do know that "hedge funds" have been increasingly popular the last couple years and the regulations in the industry - if any - are still minimum at best. With this limited knowledge, I actually made a call couple months ago - OK, I'm officially making this on public record now - wildly guessing that "hedge funds" would be the next "big exploding thing" here in the US (as far as I know, "hedge funds" is much more popular here than in any other developed countries) based on the very premise of the lack of regulations and disclosure requirements.

Here is an excerpt from one great article from Bill Gross of PIMCO from his Investment Outlook column in August 2004 on what he thinks about "hedge funds":

http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2004/IO_August_2004.htm
Lemonade for Sale

Horatio Alger stories which allude to finding the proverbial toy at the bottom of the manure pile or turning lemons into lemonade are a reflection of the American dream – rags to riches, something from nothing, a pot of gold at the end of your own personal rainbow. Still while dreams and wishes upon a star do come true for some of us in this Jiminy Cricket world, there can be a cost to fantasies ungrounded in reality and everyday common sense. In the world of money we have our oft-cited historical examples: tulips, portfolio insurance, NASDAQ 5000. Pop went these bubbles and the savings for that matter of investors lured in at or near the top. It’s a story of the ages, an endless ticking of the human metronome setting a cadence swinging from fear to greed then back again. What isn’t always obvious, however, and what makes the game go on and on is that the lure morphs into a different shape, sometimes during the same generation of investors. A good fisherman knows that if the fish aren’t biting you change the bait and a good salesman knows that if you can’t sell lemons, push the lemonade.

So it is with today’s craze for hedge funds. Longer term returns for both stocks and bonds are sinking through the double-digit return line and moving perilously close to 0% for a growing number of longer term time periods. Since Wall Street has left the real estate commissions to the Century 21s of the world, there seems few attractive investments left to generate the fees upon which to support that summer home in Amagansett. Enter stage left – the hedge fund. Now let’s be honest here. Wall Street does benefit enormously from the growing boom in HFs. Such funds are estimated to provide $10 billion annually or more than 7% of the Street’s total revenue via trading commissions. In addition, fees for loans, back-office clearance, and even matchmaking or client introduction services run into the billions as well. But the Street is not the only seller of mining equipment in this hedge fund gold rush. There are now over 7,000 hedge funds managing nearly a trillion dollars of assets, all offering the hope of near double-digit returns in a much lower return investment world. And the price tag averages 2 and 20 – 2% annual fixed expenses and 20% of the profits.

...... What is a hedge fund? Supposedly the genre revolves around an ability to buy assets that will go up in price, sell ones that go down in price and if things don’t move too much, to capture yield or carry during the wait. Somehow, with the exception of shorting, that sounds like the standard active management dictum that has been around for nearly half a century now. Of course proponents claim that HFs attract the industry’s best talent and that the fees provide a significant incentive to identify and focus on winning strategies. Poor babies; thanks to capitalism, HF managers have had the ability to move out from under the oppression of investment management firms that are paying them a paltry few million dollars in bonuses a year at their own shops where they can wring 5, 10, 15 million or more if they make really good lemonade.

Actually their wizardry in my opinion has little to do with buying or selling the right stocks at the right time and everything to do with leverage. Hedge funds in reality are just unregulated banks, operating on a poorly disclosed amount of equity capital and taking the spread between their cost of funds and their riskier and longer dated assets. How much equity capital and therefore how much leverage is a fair question without reliable answers. Grants Interest Rate Observer in a recent issue, while asserting that nearly three quarters of HFs use leverage, surprisingly released their own survey showing $3 of assets on average for every $1 of capital, a figure that would stand in conservative contrast to banks at $10 per $1 of capital ........

Which brings me back to my premise of the eventual demise of the hedge fund craze through the route of competition, excessive fees – and an ultimate realization by sophisticated investors that they can do whatever their hedge fund manager can do at 1/100 of the price. If the magic of a bank, or an unregulated bank – a hedge fund – comes from its ability to borrow more money at a cheaper price than the everyday Joe or Jane, then Houdini’s “Metamorphosis” has now been exposed. Because ANYONE can now borrow more than enough money to make almost any investment they want at the same interest rate that banks and hedge funds do. Such financial wizardry these days comes rather commonly via the use of financial and commodity futures as well as supercharged options on any or all of them .......

....... So if you’re thinking about a hedge fund to bolster your portfolio returns, give it a long think. They’re risky and they’re generally overpriced. You can do better elsewhere or even on your own. On a broader perspective, the growing fascination with hedge funds and indeed the ability to lever almost any asset at minimal borrowing costs which was the heretofore province of strongly regulated banks, promises excessive speculation that inevitably will follow the financial metronome’s pendulum towards greed then back to fear, producing a number of near certain bubble poppings in the process. America’s and, therefore increasingly, the world’s economy is unstably founded on a base of cheap money used as leverage to support certain asset prices of dubious value ......

SOCIOECONOMIC: Work to Live or Live to Work?

As a person who likes to observe things and who have had experienced living/working for organizations based in the US, Asia and Europe, the issue of the quantity of working hours always gets me interested. Additionally, my 2 sisters live/work in Australia, making it the 4th subject of comparisons.

It is widely believed that American workers work too long of hours ("live to work") and do not have enough vacation days (10 - 20 days/year is my rough estimated averages) while our (Western developed countries) European counterparts work shorter hours ("work to live") and have abundant of vacation days (20 - 40 days/year). Australia and (more developed countries in) Asia probably fall between the US and Europe in working hours and vacation days ranges. With that said, I'm kinda using the US and Europe as proxies as I perceive them to be at the two opposite extreme sides.

The immediate term that is usually associated with this is "productivity", meaning American workers have a higher "productivity" than their European counterparts. I'm not sure if I'd agree or disagree with this as I think "productivity" is as vague a measure as it can possibly be measured. With that said, one favorite indicator of mine is the measurement of market capitalizations between comparable US and European companies, i.e.: Citigroup (US) vs. Deutsche Bank (Germany) vs. BNP Paribas (France) or AIG (US) vs. Allianz (Germany) vs. AXA (France), clearly shows that the US companies trump their German and French counterparts in term of market values despite comparable, if not smaller, in size.

I'm not writing this in the interest of pitting the US against Europe or trying to come up with which one is better, but more interested in discussing or trying to analyze what cause and what the impact of the differences.

Here are some studies and articles highlighting such differences:


http://www.cnn.com/2001/CAREER/trends/08/30/ilo.study/
Study: U.S. employees put in most hours

You're not imagining it. The United Nations' International Labor Organization (ILO) has the proof: "Workers in the United States are putting in more hours than anyone else in the industrialized world." Lawrence Jeff Johnson -- the chief labor market economist who has led the ILO team in producing its new "Key Indicators of the Labor Market 2001-2002" study -- also says American workers are, per person, more productive than their counterparts in other countries .......


http://www.timesizing.com/1vacatns.htm
Americans have the shortest vacation in the developed world


http://www.iht.com/articles/533325.html
Should Europe work more, or America less?

Americans are materialists, Europeans civilized; Americans hardworking, Europeans lazy. Old stereotypes die hard on both sides of the Atlantic, and now they have taken on a new dimension: work time. Last week the International Monetary Fund made headlines by calling on Europeans to work more as a way to combat high unemployment, low job growth and comparatively low income levels.

There is, of course, an element of truth in these stereotypes, but as descriptions of two supposedly different cultures, they are far too simplistic ......


http://www.iht.com/articles/528334.html
Western Europe takes look at longer workweek

...... Like millions of his countrymen, he is struggling to accept the stark new reality of life in a global economy: Germans are having to work longer hours.

And not just Germans. The French, who in 2000 trimmed their workweek to 35 hours in hopes of generating more jobs, are now talking about lengthening it again, worried that the shorter hours are hurting the economy. In Britain, more than a fifth of the labor force, according to a 2002 study, works longer than the European Union's mandated limit of 48 hours a week.

..... Since the 1970s, Europeans have been willing to accept somewhat slower growth in wages as a price for fewer work hours and longer vacations. The French have an average of 25 vacation days a year, while the Germans get 30 days. The average in Japan is 18 days and in the United States, 12 days.


http://www.csmonitor.com/2004/0709/p11s02-lign.html
Is paid leave near for all US workers?

Thirteen million Californians are covered by the law, which took effect July 1. They account for nearly one-tenth of the country's workforce. For them - and for the rest of the nation looking on - the law may help answer the oft-asked question: Is the United States ever likely to provide European-style paid leave?
In a new study of labor codes in 168 countries by the Labor Project for Working Families at the Harvard School of Public Health, the US ranks near the bottom in terms of paid leave.

..... Among industrialized countries, only the US and Australia provide no paid leave. Australia does offer 52 weeks of unpaid leave to all workers. By contrast, the Family and Medical Leave Act in the US provides 12 weeks of unpaid leave for 50 to 60 percent of American workers.

Work and family experts see growing support for paid leave in the US. In the past several years, five states have passed laws requiring private-sector employers to let workers use their own sick leave to care for a family member who's ill .......

POLITICS: Global Perception on the U.S.

The below is excerpted and slightly edited from one of my posts at the Motley Fool discussion boards. Comments (especially from foreigners outside the U.S.) would be very much appreciated.

----%-%-%-%-%-%-%-%-%----


My recollection since I was a kid growing up outside the US (late 70s and 80s) was the perception of the US like to be the 'police of the world' and I was always rooting against the US (and rooting for the Eastern block) in world sport events. No logical reasons other than rooting for the seemingly 'underdog' against the 'favorite' (both attributed to news I watched/read in local medias).

College days in late 80s and early 90s started to change my perception. Some friends from high school went to the US for college as foreign students, I did some research but decided not to go. Majoring in Economics/Accounting, I started to read a lot about US Multinational Corporations operating in the country and paid particular attention to Citibank (for some reasons, banking has always been my favorite interest). Almost every prominent local bankers started their career with Citibank. Fascination about 'everything America' is very apparent in the campus: music, movies, outfits, etc.

Arrived in the US after graduation in 93. Everything was better here and believe it or not, one 'disappointment' as a single young person at that time was how 'less liberal' people here are (I arrived in Los Angeles just in case you think I landed in a 'conservative' state) unlike what's always portrayed about America in the movies I've watched.

Worked and went to graduate school in the 3rd year I was here. Had a chance to travel to quite a lot of different states and places related to the job. Again, very positive impressions in both counts and day-to-day lives (not perfect, of course but I'd probably rate a 9.0/10 on overall quality of life). At that time, the initial plan was to go back and work at the home country (though I started to have serious doubts if I could adjust back to the 'old way' of lifestyle there).

Went back in late 97 and landed a lucrative job that also allow me to work on project basis in a country in Europe. Hated the times I spent in the home country. Lots of personal soul-searching and comparison done in this period among the 3 countries: home country, 2nd European country, and the US. Decision appeared to be less hard when I got an offer to move to the head office located in the European country I worked at. For some unexplainable reasons, the move was not approved by local management and I had to stay in the home country.

Political riots erupted in mid 98 left a serious trauma and I had to make a tough (or easy?) decision to leave my job/parents/friends back to the US. And so I did come back, started to look for job from scratch, settled down, and got naturalized as US citizen in 2000.

Story-exchanges with my wife (who grew up under the Sovyet influences) informed me that under the old Sovyet Union 'propaganda'; apparently people there were told that in the US people don't have enough food, etc. contrary to them over there which were provided by the government ... :)

Those who read this far probably wonder where I am going with this personal stories/biography. What I'm trying to gesture is that my wife and I have experienced lives in several different countries outside the US enabling us to make comparison. A former co-worker told me before I decided to go back to the home country "Kiddo, you're sure about your decision to leave? You know the US is not a perfect place to live at but surely is the best according to most".

I understand that probably lots of our foreign policies and ways of life are deemed to be unfair to some outside the US but at the end of the day, people who live and work in 'normal' democratic countries just work, live their lives, and still be vocal and critical toward the US. But they probably won't start to blow themselves up in our embassies in their countries anytime soon, will they? Who can say that all our foreign policies/lifestyles are fair and agreeable to Mexicans or Koreans? So now suddenly the US (or is it really Bush? "We don't hate Americans, it's Bush that we hate") is the bad guy and "inviting" terrorism against its interests? Really hard for me to "accept" this logic.

This is why I don't really buy to this argument and put most of the blame to the leaders and systems of the countries where terrorists are from.

Despite many flaws, I consider the US to be one of the best places to live at and I still can say that I overall still trust the US government trying to do the right things. I don't base my opinion on news I read on the internet/newspaper or I watch on TV; but simply from my personal life experience and comparison.


CHEERS,
--H

FINANCE: Portfolio Management – Individual Investors

As I’m writing this post, I am (nervously) waiting for the result of my level III CFA (Chartered Financial Analyst) exam that I took last June. The following are links to the CFA Institute as the body for CFA Charterholders and Candidates and the CFA program itself:
http://www.cfainstitute.org/
http://www.cfainstitute.org/cfaprogram/

When I was studying for level III (I started about January 2004), I made some flash-cards of some of the subjects included in the curriculum. One of which, that I’d like to share is on “Portfolio Management – Individual Investors”. These are basically a small summary of materials for the said subject included in the curriculum for this year’s exam.

I also have google-d some links related to the development processes of the Investment Policy Statements (IPS) for individual investors:
http://www.iamadvisors.com/ips.htm
http://www.lpnonline.com/eWebPages/Featured-Articles_id,999073452,2001.eWeb
http://www.raymondjames.com/Grande/Iasips.pdf
http://toolsformoney.com/ips.htm

{I am not associated with any of the above-referenced links}

Too many times, we have got questions like "what do you think of stock ABC?", or "should we buy fund 123 now?" or "is index fund XYZ now under- or over-valued?"

Nobody can answer this type of question - at least in a meaningful way - without knowing the whole financial profiles of the persons who asked them. The financial profile of an individual investor is the very issue that this summary about IPS trying to address. In other words, individual investors should (have been) be aware of their profiles summarized in their IPS before the above questions they ask (and the answers they will get) will become "meaningful" and "relevant" to them.

In short, one should know themselves before trying to know what they should invest in and a reasonably-developed IPS is the most immediate tool to get to know one's financial profile.

Hopefully it can be useful and I’d always welcome comments/feedbacks to be added to this thread, or better still, if you have any suggestions/recommendations for certain subjects, let me know so I can start the thread(s).

----------------------------------------------------------------------

Three steps in the portfolio management process:

I. Planning:

i. Evaluating investor objectives and constraints:
- Objectives are related to the risk and return expectations of the investors
- Constraints are factors that limit or restrict certain decisions or investment choices

ii. Capital market expectations
- Macro issues deal with the overall state of the economy
- Micro issues deal with sector, industry and industry-specific considerations

iii. Developing an Investment Policy Statements (IPS)
- Formalizing objectives and constraints, which will guide investment decisions and formalize the investment strategy

iv. Determining an Asset Allocation Strategy
- Securities are evaluated as to how they will fit into a portfolio that meets the objectives and constraints of investor


II. Execution:

i. Portfolio selection and implementation


III. Feedback:

i. Measuring portfolio performance:
Portfolio evaluation portion of the feedback results in performance measurement, so that the sources of performance are indicated. Two common sources of performance:
- Market Timing, measures the ability of the manager to add value by moving into asset classes that are expected to outperform and move out of asset classes that are expected to underperform, while holding security selection constant
- Security Selection, measures the ability of the manager to select individual securities that are expected to outperform, while holding asset allocation constant

ii. Portfolio monitoring and rebalancing

----------------------------------------------------------------------

Structure of a typical Investment Policy Statement (IPS):


Return Objectives:

Desired returns
the level of return indicating how much the investor wishes to receive from the portfolio

Required returns
the level of return that must be achieved by the portfolio to meet the target financial obligation


Investment Constraints:

Liquidity
expected or unexpected cash outflows that will be needed at some specified time
why it is important: depending on marketability, certain assets may generate only a portion of their current value in the marketplace for immediate conversion to cash

Time Horizon
the time periods during which a portfolio is expected to generate returns to meet major life events (i.e.: paying for children’s college education, retirement, etc.)

Tax Concerns
some institutional investors (i.e.: pension funds and endowments) do not have to pay much attention to tax considerations due to their tax-exempt status, however income generated from individual portfolios is taxable

Legal and Regulatory Factors
externally generated; mainly impact institutional investors, usually associated with specifying which investment classes are not allowed or dictating any limitations placed on allocations to particular investment classes. This constraint does NOT usually affect individual investors (except for trust portfolios)

Unique Circumstances
internally generated and represent special concerns of the investors, i.e.: endowments may not allow investments in companies selling tobacco, alcohol or defense products


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Elements of an IPS:

- A client description that provides enough background for any competent investment advisor to gain a common understanding of the client’s situation

- The purpose of the IPS with respects to policies, objectives, goals, restrictions and limitations

- Identification of duties and responsibilities of involved parties

- Formal statement of objectives and constraints

- A calendar schedule for both portfolio performance and IPS review

- Flexibility and rigidity on modifying the strategic asset allocation

- Guidelines for portfolio adjustments and rebalancing

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