Guest Post: Global Equities Market Update

Tahsanul Hoque is working in Internal Accounts Payable in Morgan Stanley. He is a postgraduate of Ohio State University in Finance and a graduate of North South University. Even though he is More »

Corporate governance checks – Chapter 3

In the last post, I mentioned some methods for generating investment ideas. Now, I will talk about some corporate governance checks and balances we should conduct to ensure we don’t get burned. More »

Screening for investment ideas – Chapter 2

Before starting this post on investment ideas, I would like to recommend all beginners (who have little to no experience in stock markets) to read The Little Book That Still Beats the More »

The equity investment process – Chapter 1

After a lot of procrastination I have finally decided to start the series on the equity investment process. The aim is to give some big picture guidance on investment to the layman. More »

Skills needed to become a good equity analyst

In my experience as an equity analyst for the last 5 years I somewhat came to realize that a good equity analyst needs to have diversified knowledge and skills. I have tried More »


Guest Post: CFA Exam Preparation Tips – Acing the Ethics Section

By Andrew Jones

Andrew delivers both CFA® exam preparation courses and non exam finance training for Fitch Learning. Having passed all three levels of the exam as well as gaining a wealth of experience as an industry practitioner he understands the pressures of studying for this prestigious qualification.

Many CFA exam candidates aren’t quite sure how best to prepare for the ethics section of the test. Sometimes, this uncertainty can cause it to become more of a stumbling block than it needs to be.

But not to worry. With a few straightforward tips, it’s possible to streamline your CFA exam preparation and ensure that you’re adequately prepared for everything the ethics section has in store.

So what steps do you need to take to get ready?

1) Study the ethics section last

The ethics section builds on everything that has come before, so it will make the most sense once you’ve reviewed the other sections. Spending time here before you’ve gone over everything else simply won’t be efficient, and is likely to give you an incomplete grasp of the material.

Since this is the last section you’ll review, you can take advantage of short term memory for this section. This strategy will help you use your time as effectively as possible.

2) Know the case studies

In your CFA exam preparation materials you will have an extensive number of fictional scenarios, with in-depth ethical explorations of those situations’ implications.

Make sure that you utilize this resource to the fullest. Spend time working through case-study chapters in detail, paying careful attention to the ways ethical standards are explored and applied in each scenario.

3) Familiarize yourself with the question format – as well as the source material

In order to answer questions in the ethics section effectively, you have to know what the test is going to throw at you. That means understanding which keywords to watch out for, recognizing and anticipating common traps, and knowing when to ignore irrelevant information.

The trick here is that ethical concepts aren’t tested individually. Instead, as the CFA levels progress, more and more of these concepts will be introduced into the exam questions. This is why case studies and sample questions are so important – you have to be familiar with how these concepts are applied in a range of different contexts. Practice sample questions extensively as you study to get a feel for how the exam approaches the ethics section.

If you study with these tips in mind, and you take care to build on a solid foundation of knowledge with the other sections of the exam, you should be ready to tackle the test confidently – and to ace the ethics section. Good luck!

Quora – supercommunity of knowledge seekers

‘Put article title here’ has to be Quora. Quora is basically a platform where people can ask questions and answers those posted by others. This feature was once part of Linkedin but for some weird reason Linkedin has decided to remove it.

The quality of questions and answers on Quora has pretty much blown me away. There are also a few famous people answering questions as well. For those who thrive on knowledge this IS the social network to spend time on (and get rid of facebook addiction).

For finance enthusiasts I have found a few good Q/A threads which I am listing below.

Where can web startups learn about financial modeling that accounts for the important metrics and costs?

What are the best practices when modelling in Excel?

What should everyone know about investing?

What should everyone know about mergers and acquisitions?

How does one avoid blowups in (deep) value investing?


Thinking and biases

I am reading The art of thinking clearly by Rolf Dobelli. The author has compiled a pretty comprehensive list of biases (99 in total) that effect our decision-making and often lead to incorrect decisions. The biases are explained using meaningful and sometimes quite humorous stories which is useful in retaining the stuff. Quite an entertaining and useful read in my opinion, particularly because many of them can be related to the investment profession.

It is however a coincidence that I started reading this book around the same time as another personal project. That project involves looking back at the mistakes I made as an investment analyst and trying to reduce those mistakes.

One of the mistakes I identified is ‘not thinking enough’. An analyst not thinking enough!!! Let me clarify.

I actually feel that the daily routine goals, the chaos, the deadlines etc does not really leave much time for focused thinking on its own unless we try actively to make time. This is the kind of thinking where we can forget everything else, clear our minds and think about potential investment decision. Most (not all) of my conclusions in the past were drawn quite instantly while I was working on the financial models or interviewing company management. In my opinion this is an inferior method and even though our brain is constantly working at back of our minds, it does make sense to have some dedicated times for thinking.

Dobelli and other people who have written on biases and particularly biases related to investment decisions agree that however hard we try we cannot completely get rid of them. It’s the same case where we happen to be great at giving others, great relationship advice but suck when it comes to our own lives. This is where my second suggestion (to myself) comes handy. Since we can never be bias free, it makes sense to share ideas and conclusions with few others (preferably one or two good honest friends or colleagues) who can give their views.

For now try out these two suggestions (Have more time for thinking and have some devil’s advocate around you). I will write about my other mistakes in another post.

Consolations of philosophy

I mentioned in an earlier post that I had decided to broaden my horizons and start reading up on subjects like philosophy, psychology, history etc instead of only focusing on finance, economics etc. In that quest, I had listened to a great podcast series on some of the greatest philosophers the world has heard of. The name of this series is Philosophy: The Classics and it can be downloaded for free. The author of this series is Nigel Warburton who has authored a number of books on philosophy including one with the same name as the podcast series.

Nigel has done a pretty impressive job of covering the important message by the great philosophers which includes people like Plato, David Hume, John Stuart Mill etc. The best part is that the podcast can be understood by complete beginners to philosophy (I am referring to myself).

One of the key observations was that, the greatest philosophers of different time periods often gave wise messages that are more applicable to that specific time period. Some of the thoughts of Plato or Aristotle can be considered downright cruel if we forget the time in which they were born. This is same mistake we all tend to make when we tend to interpret religious verses. Taken and read out of context, many of the verses from religious scriptures can be taken very out of context.

Now, we come to the key message of this blog post. Amongst all the philosophers in that podcast series, one really caught my attention. Boethius. The reason Boethius really stood out was because I never heard his name before. Secondly, some of his thinking really resonated with me and while listening I could feel myself agree to his theories. The major work of Boethius is the book called “The Consolations oh Philosophy” which he wrote from prison in the year 524 AD. I haven’t read the full book but I thought I would like my readers to get a teaser of what it looks like. To do that I am taking the liberty of providing a summary from Wikisummaries.

Boethius may have written his book, The Consolation of Philosophy, from prison in the year 524 AD, but the issues he addresses are every bit as relevant to modern life as they were to life in the 6th century. A philosopher, statesman, and theologian, Boethius was imprisoned by Germanic King Theoderick on trumped up charges. In his Consolation, Boethius creates a dialogue between his imprisoned self and Lady Philosophy to examine the true nature of happiness.

Philosophy initially finds Boethius despondent because of his changed circumstances. A respected scholar and politician, he has lost everthing: his wealth, his position, his friends and even all contact with his family. He is bemoaning his fate and the false charges that have put him in prison. Lady Philosophy diagnoses his illness: he has forgotten who he truly is and exactly what is his nature and purpose. She reminds him that the world was not created by chance but by a divine creator. She then turns her attention to human happiness. Fortune she asserts, cannot bring true happiness because the things fortune brings are transient: wealth, power,and honor. She reminds Boethius that although he is not with his family they are still alive. She then goes on to examine the ways in which people seek happiness and shows that when humans have those things they tend to become slaves to them for fear of losing them. She further asserts that bad fortune is actually good because it frees one from bondage to transient, earthly things.

All people are seeking happiness, Philosophy asserts, but most of them are seeking in the wrong places. She then equates happiness with the good and further asserts since God the creator is the Supreme Good, all people are actually seeking him even if they do not know it. Boethius counters with the questions: how then can there be evil in the world with if it has a Good and Perfect creator? Philosophy says that evil is really nothing because it has no power over good, because all men seek good and those who are evil cannot achieve that which they seek. Every action she says, requires will and power. Those men who seek good but do not achieve it thus have no power. Boethius still questions this because he is unable to understnd why it often seems that the evil prosper and the good suffer. This is a one of the most difficult problems a philosopher will face, Lady Philosophy admits. She then explains that what we see as fate, God sees as Providence. We cannot always understand what God intends but his intentions are always good for the correction of evil and the reward of good. However, this only brings Boethius to another question: If God knows all things and his Providence guides all actions, then how can man possibly have free will? Philosophy explains this by showing that just because God knows what will happen does not mean he wills what will happen. She says that man cannot put our own limitations on God. He is outside of time so all times look the same to him and his view is different: he sees a never changing present.

Thus Lady Philosophy provides consolation to Boethius for his situation. God foreknew it and it is part of his providential plan. Boethius happiness can be based in his virtue and in his knowledge of truth rather than in the ups and downs of circumstances. And indeed, good did come out of Boethius’ imprisonment even though he never left his prison save to escape to death, he left us this book to help us learn to rise above our circumstances and never to let our circumstances controll us. Boethius may have phisically died in prison but in addition to a place in paradise, he gained immortality through his message which is still providing consolation to readers today.

Thailand trip and a few comments

Last month I went to Thailand for a 8 day vacation. It was my first trip to Thailand and second in the region (I have been to Malaysia before). The trip went very well and completely fulfilled my expectations. I had a few simple observations about the trip and I wanted to share those in this post.

  1. The Thai people are well-mannered and humble: In tech terms, Thailand is the most ‘user friendly’ place I have visited. For the first time visitor like me, everything was super easy. Full marks to the Thailand government for making this such an excellent tourist destination. However, more than the government I feel that there is a cultural/religious angle to it. The people were genuinely nice.
  2. The Indian influence in the culture cannot be missed: Starting from their names to architecture, I could see many similarities between Thailand and India. Once I came back to Dhaka, I decided to investigate this further and did a bit of digging. There was indeed clear linkages between India and Thailand in the forms of marriages and other ways. Therefore, there is no wonder that the culture looked similar.
  3. There are clear trade-off to growth of foreign tourism: Tourism can bring in a lot of foreign currency and ultimately become a massive driver of the economy. However, I do not see that happening in the case of Bangladesh even if infrastructure (roads, hotels etc) improves significantly. The reason is once again cultural and religious because alcohol and swimwear are considered taboo in Muslim majority countries like Bangladesh.

These are simple observations of a tourist and might not be of particular interest to my readers. Since, my blog focuses on finance I thought I should add a few more lines on the tourism industry that are more relevant to finance and economics students.

The hotel business is heavier on the fixed cost side. They have to incur these cost regardless of whether they get visitors or not. Therefore, in off-seasons they would prefer to price the rooms in such a way that they get most room occupancy (as long as marginal revenue>marginal cost). That is why, room rates fall so sharply in off-seasons and you see exceptional ‘value deals’ in online booking sites like Agoda and HOWEVER, if the tourist goes without a hotel booking and asks for room rates physically, rates will invariably be higher. With the absence of the ability to compare room rates, the scope of price discrimination is much higher.

The pricing mechanism of tourist attractions and packages are also interesting. The prices quoted in the brochures are always the peak season rates. In fact I would guess that they even put a premium on the going rate and then quote that in the brochures. When a tourist goes to buy a trip or a tour they would first show the brochure and ensure that we are ‘anchored’ to the high rates quoted there. Then they slowly offer small discounts giving the illusion of a bargain to the unknowing tourist.


Guest Post: 3 CFA Exam Preparation Mistakes — and How to Avoid Them

by Andrew Jones

For access to over 3,000 sample CFA exam study questions and 90+ hours of instructional videos, check out our Fitch Learning CFA Exam Prep app – now available for a free 7 day trial with unlimited access.

About the author: Andrew delivers both CFA® exam preparation courses and non exam finance training for Fitch Learning. Having passed all three levels of the exam as well as gaining a wealth of experience as an industry practitioner he understands the pressures of studying for this prestigious qualification.

Many Chartered Financial Analyst (CFA) exam candidates carry serious misconceptions about both the test and the most effective ways to approach CFA exam preparation. Unfortunately, these common mistakes often trip up otherwise dedicated and qualified candidates, making the difference between a pass and a fail on the exam.

So what are these misperceptions, exactly? And how can you avoid them to make sure all your hard work pays off?

1) Don’t underestimate the test.

This one is key. All too often, candidates imagine that the exam is easier than it actually is — so they don’t put in the necessary study time. The CFA Institute guidelines call for 300 hours of preparation time, and that’s not an arbitrary suggestion. You will need to put in every one of those hours.

2) Leave yourself enough time.

Which brings us to the next mistake. Even when candidates aren’t consciously underestimating the exam, they often don’t leave themselves enough time to put in the study hours they know they need. Those 300 hours represent a major time investment — a significant sacrifice — and making them happen takes careful planning well in advance for most people, not to mention continuous motivation.

3) Don’t neglect what you already know.

“I’ve already learned this material — I can skip to the next topic.” Sounds reasonable, but it can spell failure. Many candidates decide they don’t need to study topics they’ve already learned, but CFA exam preparation isn’t the same as studying for a college degree. The CFA exam tests topics in specific detail, and the volume of information covered means it’s important to study what you already know.

Study Techniques

Now that we know which mistakes to avoid, how can candidates sidestep these pitfalls and achieve the best possible results on the exam?

First, start early. That means at least five months before the exam. Make sure you can dedicate 10-15 hours per week until you take the test. Otherwise, passing is simply unrealistic.

When you prepare, it’s important to blend study techniques. Don’t simply read over the material, but take a blended approach so you can think through the topics from multiple angles and keep the material fresh. Read a chapter, then watch an instructional video, then work on practice questions. Those practice questions are particularly crucial.

By applying your knowledge, investing in CFA exam preparation time regularly, and continuously shoring up your knowledge, you can give yourself the foundation you need to succeed. It’s not easy — but the reward for all the time and effort you put in is worth it.

A late realization

Since I completed my undergraduate studies in early 2009 I have read a lot of books. I spent a painstaking amount of time researching which books to read and mainly employed Amazon and Google to rank them. There was one small problem. Most of the books I read focused on Finance, Economics, Accounting and business strategy. There was some fiction in my book list and a number of self-development books.

5 years later, I feel that it was a mistake on putting my concentration on such a narrow focus area. The world is much bigger and anyone passionate about gathering knowledge should definitely widen his horizons. Thus began my late entry into other topics such as Philosophy, Psychology, Religion, History etc. Last couple of weeks I did a bit of research on these topics and shortlisted the following books which I plan on reading.


A little history of the world by E. H. Gombrich (Currently reading)

A short history of nearly everything by Bill Bryson


The Consolations of philosophy by Boethius

History of western philosophy by Bertrand Russell

The story of Philosophy by Will Durant


Predictably Irrational by Dan Ariely

Emotional Intelligence by Daniel Goleman

Drive – The surprising truth about what motivates us by Daniel H Pink

How we decide by Jonah Lehrer

Mastermind – How to think like Sherlock Holmes by Maria Konnikova

Influence – The psychology of persuasion by Robert B. Cialdini

Quiet – The power of introverts by Susan Cain



Looking back into the Bangladesh stock market crash

Today I gave a presentation at a private university in Dhaka. I was trying to explain to the audience what caused the Bangladesh stock market crash. I am embedding the presentation here for my blog readers.

Understanding the GDP growth rate of Bangladesh

I have always had a hard time understanding why the GDP Growth rate of Bangladesh had so little volatility over the last decade or so. Not only was it growing at a decent 6% or so but the fluctuation of the growth rate has also been very low. While I strongly believe that 6% growth is not very hard to meet given our favorable demographics, low per capita income, low wages etc., I do feel that the numbers do not adequately show the business cycle fluctuations.

Let us take the case of FY 2013-14. According to our statistical agency, the GDP growth for the present fiscal year ending June 2014 would be 6.2%. This comes as a surprise as the GDP growth rate in the preceding year was 6.0%. The present fiscal year of 2013-14 in contrast faced political problems and low business confidence and consumer confidence, and if one were to make a guess we would have expected it to be below 6.0%.

So we are left with no other option but to cross check with other economic indicators. Let us go through the big three indicators.

Banking sector credit growth
Credit growth in the banking sector has been lower at around 10-11%, which is much lower than the mid-term average of around 20%. In the first quarter (Jan-March), most banks reported negative credit growth. This clearly indicates that private investment has been relatively weak.

Non-food inflation rate
Another important indicator for understanding the underlying aggregate demand in the economy is inflation (in particular non-food inflation). Here again we see we very weak in month-over-month inflation numbers. The average month-over-month inflation in the last 4 months stood at a paltry 0.13% (annualised 1.6%) resulting in a year-over-year number of only 5.23%. So, as far as inflation is concerned consumer confidence remains quite low.

Imports have, however, fared a bit better. The first 9 months saw a growth of 14% compared to the previous year. However, we must not forget that imports are growing from a low base. That is precisely why our current account surpluses continue, along with growing Foreign Exchange reserves.

Thus it seems to me that the major economic indicators show a growth rate below 6.2%. For proper economic policy-making, the decision makers surely need access to correct data which show the business cycle movements. I for one would surely be interested in looking at how the growth had been calculated.

Originally posted in The Daily Star

Guest Post: Global Equities Market Update

Tahsanul Hoque is working in Internal Accounts Payable in Morgan Stanley. He is a postgraduate of Ohio State University in Finance and a graduate of North South University. Even though he is a banker by profession he is also an avid investor by choice.

Tahsanul had earlier warned investors to stay away from emerging markets in his earlier post in February.


Wow what a difference three months make. US economic growth totally halting to 0.1% due to extreme cold weather, Russia forces still lingering near border of Ukraine and China showing much worse slowdown than expected. So how should your game plan change?

US Equities

It is very much clear US growth is accelerating in the near future. The recent economic data indicators point to growth recovering. However some hidden plays are already happening in the market. We are seeing growth stocks being hammered and value stocks rising up. Defensive sectors such as utilities have shown a strength. This is purely a warning sign of an impending market correction (not market crash) of 10 to 15%. We had a phenomenal bull run in 2013, possibly one of the best of all times. With Fed slowly but surely on course to end QE by August/Septembers, markets have shown weak technicals for going up now. The downside risk is getting bigger. All that liquidity that FED has pumped is now slowly crawling back and that will definitely pull back stocks.

For the next 1 or 2 months till June, I would suggest people still remain in value stocks in financial and tech sectors. I have Wells Fargo (WFC), Discover (DFS)etc in financials just to capture the positive economic growth news due to Spring rebound and tech stocks like AAPL which have lots of positive (maybe even negative) catalysts coming up in the next few months so little downward risk, MSFT (just playing their turnaround game since new CEO came in although I will sell it soon as I am unclear the impact of Nokia purchase on its financials) and YHOO (speculative proxy play based on Alibaba IPO; probably will keep on rising in entire summer). However I intend to sell my financial stocks by June and will probably short some bubble stocks like PLUG, LNKD, YELP, TWTR at that time.

After market correction ends around September or October, I will definitely add back WFC and DFS when they become cheaper. Possibly might add exposure to American Express (AXP), some good growth biotech stocks like Gilead (GILD) and Biogen(BIIB) and possibly even Facebook since I think FB might be a great growth play for 2015 and I hope it comes back to around $40 after market correction. I will keep my AAPL position till end of 2015 at least.

Emerging Markets

I clearly warned readers to avoid emerging markets in my earlier post. I still think with Fed’s QE ending near in fall, there is even higher chance of emerging markets correcting. And China is already slowing down. Either way, these are not good catalysts for emerging stocks to move up. So if you are a short-term investor, I suggest you still avoid emerging markets and wait till the smoke clears in Fall 2014. However I will say if you are a long-term investor, then definitely on valuation level, emerging stocks are getting cheaper everyday. I would suggest buying them if you are playing the long game as surely, for long run the emerging markets are undervalued. But I am sure you will get good entry point if you decide to wait 6 months more.

Europe Markets

I believe Euro is quite overvalued. And Eurozone faces the risks of clear deflation. I am not a Europe stock market expert but since ECB are clearly aware of deflation risks, they have a good chance of initiating quantitative easing within next 6 months and that will definitely push stock markets higher in the long run. I might add some index funds based on Europe since I have less stock selection expertise about that market.

Either way, I can’t wait to see what happens around August/September around the world. And I also can’t wait to see what happens with my AAPL investments. I always believed it was undervalued but I never like Tim Cook; he is too slow to realize the competitive changes. This year it will break or make the stock. Either way, I will become richer or bust surely.