Sunday, September 28, 2008

Collaborative Open Source Financial Analysis.

The Goldman Sachs Forensic Analysis
by Reggie Middleton

Reggie Middleton

Reggie Middleton is the personification of the freethinking maverick--the penultimate nonconformist as it applies to macro strategies, investment, and analysis. He uses his background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation, and financial analysis to pursue, analyze, and capitalize on global macroeconomic opportunities.

Finding most available research lacking, both in quality and quantity, Mr. Middleton assembled his own talented research staff. As forensic research is a lynchpin for his own investing, "to actually put food on the table," he stands behind it as doing what it is supposed to do - illustrate, elucidate and educate.

He does not sell advice or research. He is an entrepreneur who exists outside of mainstream corporate America and Wall Street. This allows him the freedom to do things that many cannot--perform without conflicts of interest and corporate politics. He prides himself on developing some of the highest quality, actionable research available - regardless of price. He welcomes any and all to peruse his blog of freely available analysis, opinion and participatory social media; use his custom tools, download files, interact with the community and make critical comparisons from a results orientated perspective. Reggie believes ideas and implementations are improved and fine-tuned when bounced off of the collective intellect of the many, in lieu of that of the few - in essence, a form of collaborative open source financial analysis.

Visit his blog Boom Bust Blog.

Friday, September 19, 2008

Lead Research analysts - Required

One of the leading broking companies which have presence in 8
cities and total 13 branches is looking for Lead Research analysts to be
based at Mumbai for multiple sectors, namely Banking, IT, Pharma, FMCG,
and Telecom

Job Description:

* Analyst will be responsible for Complete Equity Research
Analysis, from the ideation to the finalization of the report writing to
the presentation to the clients. To be successful in the role, skills
required would be: in-depth understanding of the sectors, Fundamental
Analysis, Financial Analysis, Stock Valuation, and Financial Modeling,
writing Reports & Presentation, Articulating investment ideas to
* In-depth knowledge of banking or IT or Pharma or FMCG sector.
* Preference for candidates with knowledge of multiple sectors

Experience: CA / MBA with minimum 6 yrs and more experience in tracking
one of the above sectors.

Reporting: HOD

Those interested can send their profiles to sheetal.s@vitasta. net or by post to

Sheetal Salvi I Sr. Executive - HCS I
Vitasta Consulting Pvt Ltd I
|311, Ganatra Estate, Khopat,
Thane West,Maharashtra,
India 400601|Tel:91- 22-41021206
Mobile : 9322133424 |
Email : sheetal.s@vitasta. net

Tuesday, April 29, 2008

Interviews with investment professionals on their job

Interview with a stock analyst

An interesting question

What education or skills are need to do this?

A degree in finance or accounting would be ideal. Typically you’ll need high grade point averages too. Then you’re required at my firm, not at all firms but at my firm, to get your CFA which stands for Chartered Financial Analyst before you can start to cover your own company. You don’t have to have it before starting but you have to have it before you start following your own companies. It’s a series of three tests. Typically, you have to pass at least one or two of them before you have much of a chance of getting hired.

So the biggest thing is, an accounting or a finance background and ability to pass the CFA exam. I’d say, you’ve got to have some analytical skills, you’ve got to be good with numbers. You’re dealing with numbers all day long but then at the same time, you’ve got to be able to communicate your message to our financial advisors, so you’ve also got to have some communication skills.

Interview with an investment consultant

Monday, March 17, 2008

Google books - Quantitative Investment Analysis

Quantitative Equity Portfolio Management: An Active Approach to Portfolio ... By Ludwig B. Chincarini, Daehwan Kim

Thursday, March 13, 2008

CFA Study Guide

I am able to make some quick posts in the cfa study guide blog. I am presently posting on reading 60 which deals with valuation using DDM and Multiples. The prescribed reading for this session is Chapter 11 from Reilly brown. The refresher points on that chapter are in this blog.

The posts for this reading start with the following post in CFA Level 1 study material blog.

Monday, February 11, 2008

Books on Forecasting

1. Andrew Flight, Cash Flow Forecasting, Butterworth-Heinemann, Burlington, Ma, USA, 2006 (NITIE Lib access No. 658.15244)

Friday, February 8, 2008

Monetary Policy and Equity Returns in India

Rajiv Kalra, Narayana Rao, and Wolf examined the effect of monetary policy on equity returns in various countries. India is one of the countries.

Monetary Policy and Equity Returns: Evidence from Developing Countries
AND ADMINISTRATIVE SCIENCES,April, 2007, pp. 166-181

The paper is available in and can be downloaded from

Inflation and Equity Returns in India

Narayana Rao and Bhole examined the relation between inflation returns and equity returns in India. Based on the regression between monthly returns on RBI index and monthly inflation based on WPI they came to the conclusion that the relation was negative.

Subsequently Joshi examined the relationship between anticipated and unanticipated inflation and equity returns in India.

Wednesday, February 6, 2008

Consumer Confidence Index (CCI) - India

The ET-TNS Consumer Confidence Index (CCI) has increased by 5% to 128 points in the June ’07 ended quarter, compared to the March quarter.

The CCI is divided into two components — the present situation index (PSI) and future expectation index (FEI).

In the current round of the survey, the PSI has increased by 7%, while FEI has risen by 3% over the previous round. Both PSI and FEI measure consumer confidence according to three parameters, namely business conditions, jobs and income.

19 Jul, 2007

The ET-TNS Consumer Confidence Index (CCI) - Method of Calculation

The ET-TNS Consumer Confidence Index (CCI), India’s first comprehensive measure of consumer confidence, was launched in December ’02.

The ET-TNS CCI is made up of two components: The Present Situation Index (how things stand currently compared to six months ago) and the Future Expectations Index (how things will be six months hence).

Each component is, in turn, based on three dimensions — general business conditions in the respondent’s line of work, availability of jobs and household income. For each dimension, we calculated the ‘relative value’, which is simply the difference between the percentages of positive and negative responses, plus the normalisation factor of hundred.

The CCI and its two components are the arithmetic averages of the relative values of the dimensions. A CCI at 100 implies a ‘neutral’ consumer. A value below 100, in theory, implies prevalence of pessimism and a value above 100 means there are more optimists than pessimists.

The CCI’s movement acts as a leading indicator of consumer behaviour and hence, of the overall business cycle. International experience shows that the CCI essentially indicates the direction of movement, rather than the actual quantum of consumer spending.

Business Confidence Index Analysis in India

29 Jan, 2008

The RBI’s business expectation index for January-March 2008 declined 2.5 percentage points over the previous quarter from 50.2% to 47.7%. This is the lowest that the outlook on the business situation has touched in the past six quarters. Even the overall industrial outlook survey has dipped. These indices have dipped lower than the current levels only during 2002-03.

The indices are compiled after surveying over 1,000 corporates. The survey based on net response (difference between those who were optimistic and those who were pessimistic) on the ‘quarter ahead’ expectation about the industrial performance was less favourable for most parameters. This decline, according to RBI, was on account of lower net responses or lesser optimism for major parameters of the survey such as the overall business situation, availability of finance, production, order books,capacity utilisation, employment, exports and profit margins over the previous quarter.

Research paper on methodology for constructing index by NCAER-_india

India - Economic Indicator Analysis

Articles and papers

Chitre, V. S.( 1982), " Growth Cycles in the Indian Economy ," Artha Vijnana, 24, 293- 450.

___ (1991), " Fluctuations in Agricultural Income , Public Sector Investment, World
Economic Activity and Business Cycles in India ", in H. Osada and D. Hiratsuka (eds.),

Business Cycles in asia , Institute of Developing Economies, Tokyo.
___(2001)," Indicators of Business Recessions and Revivals in India :1951-82", Indian
Economic Review , Vol. XXXVI, no. 1 ,2001.

Dua, P. and A. Banerji ( 1991 ) , '' An Index of Coincident Economic Indicators for the
Indian Economy", Journal of Quantitative Economics, Vol. 15, No. 2

____(2001) ,"An Indicator Approach to Business and Growth Rate Cycles : The case of
India ", Indian Economic Review, Vol. 36, No. 1 .

Hatekar, N. (1994), "Historical Behaviour of the Business Cycles in India: Some Stylized Facts for 1951-85", Journal of Indian School of Political Economy, Vol.6, No. 4.

Mall O.P. (1991),"Composite Index of Leading Indicators for Business Cycles in India ", RBI Occasional Papers , Vol 20, no. 3.

Nakamura J. (1991), "Fluctuations of Indian Economy, " in H. Osada and D. Hiratsuka
(eds.), Business Cycles in Asia , Institute of Developing Economies, Tokyo .

Reserve Bank of India (2002b), Report of the Working Group on Economic Indicators.

Jaya Mohanty, Bhupal Singh and Rajeev Jain (2003), Business Cycles and Leading
Indicators of Industrial Activity in India.

Chitre presented evidence of synchronous movements in respect of a large number key economic processes including non-agricultural NNP, industrial production, capital formation, money stock, bank credit, etc. Chitre (1982) identified 15 indicators of growth cycles in India and constructed diffusion index and a composite index of these indicators and on the basis of these, characterized the Indian economy as having passed through five growth cycles in the overall economic activity during the period from 1951 to 1975.

Dua and Banerji (1999) have used the NBER approach to determine the dates of Indian business cycles and growth rate cycles and have reported six business cycle recessions in the Indian economy:

Business cycle recessions (India)

􀂾 November 1964 to November 1965
􀂾 April 1966 to April 1967
􀂾 June 1972 to May 1973
􀂾 April 1979 to March 1980
􀂾 March 1991 to September 1991
􀂾 May 1996 to February 1997

In a subsequent paper (2001), they have identified leading indicators and constructed a CLI index designed to anticipate business cycle and growth rate cycle upturns and downturns. However, the component series are not published in the above study.

Mall (1999) studied the cyclical behaviour of output variables such as real GDP,
non-agricultural GDP, GDP from manufacturing, trade; IIP, index of sales of private
corporate sector, etc. and has concluded that non-agricultural GDP can be taken as a
reference series for tracking business cycles in India. Using spectral analysis method, he has constructed a composite index of leading indicators to forecast cyclical movements in IIP from manufacturing sector.

A Working Group of the Reserve Bank of India (2002) on economic Indicators in
2001 examined the information base for the analysis of business cycles and explored the leading indicators approach for study of business cycles and forecasting. The working group seems to have taken the recommendation of Mall (1999) and used IIP as the reference series of non-agricultural GDP. Considering the IIP as the reference series, six series viz., Narrow money (M1), Non-food credit, WPI(raw materials), Production of coal and aluminium, and rail good traffic originated have been identified as leading indicators and the composite index has been constructed based on principal component analysis.

Chitre (2001) studied the business cycles in India for the period 1951-1982 and,
presented a selected list of leading, coincident and lagging indicators and the turning points and the diffusion index for the indices. Some of the
selected leading indicators are production of iron and aluminum, electricity generation, cheque clearances, etc.

Mohanty et al (2003) attempted dating of business cycles in India based on Bry-Boschan procedure and have identified 13 growth cycles of varying duration from 1970-71 to 2001-02. They have reported that average duration of recessions is higher at 16 months as compared to expansions with average duration of 12 months and the average of the cycles is 27 months.

Saturday, February 2, 2008

Friday, February 1, 2008

Algorithmic Trading - A report

A New Report from Aite Group

Algorithmic Trading 2006: More Bells and Whistles

Algorithmic trading has hit the mainstream in the U.S. equities market. For operational efficiency as well as a continued drive for capturing alpha, algorithmic trading is increasingly becoming the execution tool of choice for both the sell-side and the buy-side traders. Aite Group estimates that at the end of 2006, the share of algorithmic trading will approach 33% of the total equities trading volume. By the end of 2010, Aite Group estimates that approximately 53% of all equities trading will be done through algorithmic trading.

Algorithmic trading continues to grow, according to a new Aite Group report. The adoption of first-generation algorithms appears to be nearing its end in the U.S. market. Instead, most brokers have moved on to develop more sophisticated algorithms that are capable of supporting portfolio trading, adapting to real-time changing market conditions, and seeking darks pools of liquidity.

This report provides an update on the state of the algorithmic trading market and focuses on identifying new market trends and highlighting market challenges. The report also provides an estimated adoption rate for algorithmic trading services in the U.S. securities industry.

According to Brad Bailey, a Senior Analyst at Aite Group and co-author of the report, "The role of the buy-side trader has become very complicated. There are so many routes to getting trades done and finding liquidity; the landscape for trading is evolving quickly, as are algorithms."

Job Opportunities

The increasing use of algorithmic trading will benefit those with the right combination of IT skills, trading knowledge and expertise with quantitative trading strategies.

Especially in demand are those with quantitative research skills, as well as individuals who can bring their own trading strategies to hedge funds and bulge bracket firms, according to Lou Ricci, president of the Hagan-Ricci Group, a New York City firm specializing in front office hiring in IT, trading and quantitative research.

"On the lower end, the ideal job candidate in the algorithmic trading arena is the person with the right programming skills. At the top of the game are the Ph.D. types who can build the algorithms, as well as traders who can bring together the strategy and IT side of it," Ricci says.

Annual pay ranges from $250,000 to $1 million or more, he adds, depending on skill sets, job experience and rank.

Job opportunities are also increasing abroad, as firms in Europe and Asia adopt algorithmic trading models.Large brokers have already moved into major European markets and, to a lesser degree, Asian markets to provide their various automated trading strategies to the global buy-side clients.

Risks of Trading

Sept. 19, 2007

BOSTON (MarketWatch)

Morgan Stanley said it saw "significant trading losses" in its quantitative strategies in the fiscal third quarter. The company said the losses partially offset record results in derivatives and prime brokerage and record trading volumes in its core equity business. Morgan Stanley said equity sales and trading net revenue rose 16% from a year earlier to $1.8 billion.

Economic Times article on 27 October 2007 (page 20) gives the figure of loss as $480 million from the trading desk that employed computer generated models to trade and make money.

Thursday, January 31, 2008

A Blog for CFA course

I started a blog to develop material for CFA Level 1. I started posting for the study session 18 Alternative Investments. It will take around 15 days to complete the initial lesson material. Then I have to think of practice questions and problems for topic. May be by June I shall post material for 5 to 6 topics.

Saturday, January 26, 2008

Confessions of a Wall Street - Book

Book Description

What Eliot Spitzer never told you--here is the true story of a top Wall Street player's transformation from a straight-arrow believer to a jaded cynic who reveals how Wall Street's insider game is really played.

Dan Reingold was one of the top analysts on Wall Street for fourteen years and Salomon Smith Barney analyst Jack Grubman's chief competitor in the red hot sector of telecom. Reingold was part of the "Street" and believed in it.

But in this action-packed, highly personal memoir written with accomplished Fast Company senior writer Jennifer Reingold, the author describes how his enthusiasm gave way to disgust as he learned how deeply corrupted Wall Street and much of corporate America had become during the roaring stock market bubble of the 1990s. He shows how government prosecutors, even New York Attorney General Eliot Spitzer, never got to the heart of the ethical and legal transgressions of the era. And how they completely overlooked Wall Streeter's pervasive use of inside information, leaving investors--even sophisticated professionals--cheated.

Confessions of a Wall Street Analyst provides a front-row seat at one of the most dramatic--and ultimately tragic--periods in financial history. Reingold shares details of life on Wall Street that few can risk disclosing. He recounts his introduction to the world of Wall Street leaks and secret deal-making; his experiences with corporate fraud; and Wall Street's penchant for lavish spending and multimillion dollar pay packages.

Reingold spars with arch rival Grubman; fends off intense pressures from Wall Street bankers and corporate CEOs; and is wooed by Morgan Stanley's CEO, John Mack, and CSFB's convicted uber-banker Frank Quattrone.

Reingold describes instances in which confidential deals are whispered days before their official announcement. He recalls the moment he learns that Bernie Ebbers' WorldCom was massively cooking its books. And he is shocked to have been an unwitting catalyst for a series of sexually-explicit emails that would rock Wall Street, bring Jack Grubman to his knees, and contribute to the stepping aside of Grubman's boss, Citigroup CEO Sandy Weill.

Some of Reingold's stories are outrageous, others hilarious, and many are simply absurd. But, together, they provide a sobering expose' of Wall Street: a jungle of greed and ego, a place brimming with conflicts and inside information, and a business absurdly out of touch with the Main Street it claims to serve.

The book ends with a series of important policy recommendations to clean up the investing business. In the tradition of Liar's Poker and Den of Thieves, Confessions of a Wall Street Analyst is a no-holds-barred insiders' account that will open the eyes of anyone who invests in the stock market.
Table of Contents


PROLOGUE: March 15, 2005

CHAPTER 1: THE PLUNGE: 1989-1991
This is the street where they fool people.
From consulting to communications: MCI
My first run-in with Jack Grubman
Street Smarts
Ed comes knocking
From the jetway to the attic
"…we do not make negative or controversial comments about our clients"
Climbing Over the Wall
"You're the Only One"
"Hi, I'm John Mack…"
Privatization Pandemonium
The Perils of Papadam
Mississippi Madness
Fraud 101
Tone and Notice
Jack's Knack
Afternoon Tryst
My Major Opinion Change: Upgrading the Bells, Downgrading AT&T
The Power of the Poll
"Just to make things interesting."
M&A Mania
Nothing personal?
Internet Ignorance
My Failed Quest for Qwest
Fido Loves WorldCom
Irrational Exuberance
The Case of the Secret Document
MCI/BT: the "Bloodbath"
Jack and Bernie: Inextricably Linked
Jack plays loose: I play banker
How I lost my bank $25 Million
My Multi-billion Dollar Mistake: AT&T
"You're Missing the Fucking Boat on Level 3"
"You Know He Can't Keep his Mouth Shut"
The SEC's Deadly Mistake
"How can your best friends become your worst enemies?"
To Publish or Not?
"Shame on them"?
The $14 billion leak
The Ambush
A piece of the action at CSFB
Merrill: I'm outta there
"Any idea what the hell they were talking about?"
The $1.5 million mistake
The Dupe: Jack's AT&T Upgrade
"I've never had a conversation like this."
Playing with the Devil
My Mountaintop Message
Who wants to be a millionaire?
Two Minutes to Midnight
The beginning of the end
The Guidedown Game
A week from hell
The Crash
The Show Must Go On
Global's Insider Game
Nacchio's Wrath
The Analyst Plays the Villain
Jack, the all-knowing
Qwest and Global: The Swapstakes
Vindicated-but so what?
Outed: Qwest's Accounting Gimmicks
"How Do You Know This?"
The Worm Turns
Hearings from Hell
"What's a Level 3?"
Sex, Lies and Videotape
So Long to the Street

The Middleman's Dilemma
Why Spinning Off Research Won't Work
A Critique Of Actual And Proposed Reforms
What Needs To Be Done

Friday, January 25, 2008

Dow's Editorials - Financial Criticism

This is an editorial of Dow included by Nelson in his book ABC of Speculation.

The editorial deals with the writings on stock market by various news papers and periodicals.

Dow cautioned the readers by writing that the press has all kinds of writers. There are ultraconservative and pessimistic writers in contrast to the majority who are inclined to optimism. There are honest and corrupt writers. The moral conditions of writers are governed by the individual and his environment.

Dow said the usual method employed in corrupting the writers is to promise them a call on the shares of a particular company. The method is to offer them to sell the shares of the company at a particular price so that the writer is benefitted if it goes above that price. The writers agree to "boom" or "apply the hot air" to the stock in their stories.

But Dow stands on the side of his men by saying majority of Wall Street financial writers are honest men and they sacrifice the financial incentives offered by manipulators in order to do an honest job.

The stock market reporter or critic's job is to find a reason or explanation for the day's fluctuation. He has to searc out the primary cause.

There are rumours always in the street. A financial writer reports a rumour if he believes there is likely to be some fact in it. But the speculator who uses the rumours for his trade should study the relative values of rumours and learn to take advanatage of their market effects, always remembering that 90 percent of them are not true, but that fiction as well as fact prevails in price making.

It is not the function of the financial writer to win or lose money in speculation for the reader. His duty is to discuss those factors which govern the financial and economic situation giving to each its proper place with even temper and mature judgment. He is not a doctor or a lawyer and does not prescribe.

But if he prescribes, similar to the lawyer or a doctor, he is not responsible for mistakes of judgment. The speculator pays the bill.

Wednesday, January 9, 2008

Cap Gemini Consulting - Investment Banking Area - Case Note

Capgemini - Services

New Technologies - Decision Making

The Capital Markets industry continues to be significantly impacted by:
A rapidly changing business environment,and The volume and rate of speed in which new technologies become available.

For organizations to remain competitive and profitable they must adapt to this changing business climate.

The selection of new technologies and industry-leading practices (“solutions”), in
conjunction with the timing of such solutions,will significantly effect an organizations competitive position.

The winners of tomorrow will have to answer the following questions:

Which solutions available today are most relevant to my current business needs?
Which solutions available today are most relevant to my long-term plans?
How adaptable are the solutions to my future requirements?
Whether it’s speed of execution, reduced time to market for new products and offerings or simply the horsepower required to create new products and services based on sophisticated near real-time analytics, speed is a prerequisite
to success.

When considering the following list of industry trends, speed becomes increasingly more important, but speed alone is not the answer.

To remain competitive, market participants must simplify and optimize processes,
adopt the best technologies, accelerate implementation time, remove or reduce the
complexity, remain flexible to changing needs and/or demands and realize financial savings and a greater return on investment dollars.

Capgemini handled an assignment to develop a global strategy for its retail asset management business, covering both mutual funds and defined contribution pensions of an European investment bank.

Web Sites -Technical Analysis

Saturday, January 5, 2008

Friday, January 4, 2008

Look at the Jockey - CEO and Value the Company

there is an article Smit Jalan, investment banker with CLSA in ET dated 12 Sep 2008 page 7

Tuesday, January 1, 2008

Pearls of Wisdom from Financial Wizards in 2007

In early July 2007, Chuck Prince, then chief executive of financial behemoth Citigroup Inc., rightly noted that “when the music stops, in terms of liquidity, things will get complicated.” At the time, he remained optimistic: “as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

William Conway, one of the founders of private equity firm Carlyle Group. In his annual letter to the firm’s staff earlier this year, he acknowledged that “this liquidity environment cannot go on forever […] the longer it lasts the worse it will be when it ends.”

Collapse of top companies - Sec. Analysis Dilemmas

“Forbes100” from 1917 to 1987:
39 members of the Class of ’17 were alive in ’87;
18 in ’87 F100;
18 F100 “survivors” underperformed the market by 20%;

just 2 (2%), GE & Kodak, outperformed the market 1917 to 1987.

S&P 500 from 1957 to 1997:
74 members of the Class of ’57 were alive in ’97;
12 (2.4%) of 500 outperformed the market from 1957 to 1997.

Source: Dick Foster & Sarah Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the Market