|
|
I have been refreshing myself for statistics for two months before I can move on to learn econometrics. At the same time, I just read 'the theory of the firm' topic for the industrial economics. I must say that it is really interesting topic. It deviates from the neoclassical theory of firm, where we learn the notion of profit maximisation in all market structure in our undergraduate courses. This involves Ronald Coase's questions and Williamson (I believe the one who won Nobel Prize in Economics this year) that questions the size of the firm and the solution of the asymmetric information problem in terms of bargaining and contracting. Initially, I found it difficult to cope because there are so much maths work and brief explanation. I spent 1 month to understand the concepts of Williamson, particularly holdup problem and asset specificity.
When I took break from refreshing my mind about statistics, I read the theory of money in monetary economics text. Oh my god, it is open-end discussion in this text compared to what is covered in any Macroeconomics text. It is very insightful because they are arguments over certain particular defintion on each one of three roles of money. In fact, I enjoy reading monetary economics than industrial economics for the first chapter of each text. However, I shall focus industrial economics first because I need to understand why and how firms behave in sophisticated ways for my investment analysis.
I am planning to write international macroeconomics in the next blog entry. It is really interesting as I read the new syllabus of Macroeconomics in my undergraduate course. Clearly, it is better than old syllabus of Macroeconomics I have spent learning for few months. This time, AD-AS model can be viewed differently in the form of short-run, medium-run, and long-rum. AD-AS model is so flexible that you can analyse it in different viewpoint by means of modifying the framework of analysis.
There are so much argument over Macroeconomics ever since Krugman wrote co-op article about the state of Macroeconomics. I largely agree Krugman's opinion. I want to quote Krugman's excellent statement from this article
So by all means let’s have math in economics — but as our servant, not our master.
I also believe from one statement from Narayana Kocherlakota. It seems that his note addressing Krugman's co-op article went offline. From what I recall vaguely, many Macroeconomists says that their works are not fully and well represented in the Macroeconomics. I can vouch for this one. When I was doing notes for my friend based on new syllabus of Macroeconomics, I looked many Macroeconomics textbooks that I never touched before in library. Three out of these Macroeconomics textbooks caught my eyes because they covered topics that are not very common.
In Williamson (not the one who won Nobel Prize this year) text, I saw upward-sloping money demand curve. I thought why the hell money demand curve should be upward-sloping. I read the explanation. I am very impressed that he considered intertemporal choice in the money market, which explains upward-sloping money demand curve. We don't see this in any common Macroeconomics texts. Similarly, I also saw SAS-DAD model in inflation-output space in other text. Recently, Mankiw adopt DAD-SRAS model in his latest edition -7th edition of his Macroeconomics text. I am very interested to learn new models that are not very common in Macroeconomics. I may post how useful they are in the future blog entry.
Analytical Mind
It is not easy to develop the theory to analyse things. Take example of Benjamin Graham. He was genius to create the tools to analyse companies in the context of value investment. The more I study his book, the more realistic his methodology of analysis is. One question that need to be answered. Given its success by Buffett and Graham's disciples, why don't many people use them? I suspect that the details of each metholodogy and each case study are too difficult to condense with. Consider the following example.
My friend from RMIT business course kept coming to my home consecutive 5 days. He needed me to help him to understand his Macroeconomics 1 module for his upcoming exam. I looked at the syllabus of Macroeconomics 1. I was so shocked that there were too little maths and graphs. In addition, IS-LM model was omited, making it more difficult to illustrate the magnitude of the crowding out effect. Furthermore, there is no graphical derviaton of downward-sloping AD curve. Pure theories were difficult to understand very clearly without the aid of maths and graphs. It clearly showed that BSc degree is very demanding about the learning than BB degree. He couldn't understand them well and he could only remember bit and bit of some of concepts. So, I broke down all kind of concepts and bundled them carefully in terms of goods market, money market, AD, AS, and labour market. He understood better step by step. The downside about him is that he did not study, say, once a week. He played PS3 too much during free time (till 3-4am). For me, I found that he could have better divided his hours into playing, studying/practicing, and projecting. It was a pity that he must suffer so much for this kind of simple study.
Similarly, if one study Microeconomics, Macroeconomics, Corporate Finance, Accounting, Valuation, and Financial Statement Analysis in the first place, one will be able to interpret what Benjamin Graham's works really mean. In my humble opinion, Economics and Financial Statement Analysis can create analytical mind in you because they have a lot of interesting analytical tools to use.
Theory of Investment
After reading so many investment-related books, I come to one conclusion. Given many different styles of investment, the taste and behaviour of human will determine the choice of the only one investment style. Benjamin Graham suffered badly during Great Depression. Because of that, he prefers value shares to growth shares where growth is not easily analysed quantitatively or qualitatively. On top of that, he adopt the margin of safety with the 'net-net' and 'quick assets' analysis. Looking at the investment style of Soros, his experience to trade real goods in the market to survive and interest in Karl Popper's Open Society leads to his theory of dis-security analysis. For those who are interested in investing, it is very important to know your own feeling before finding the suitable investment style that fit nicely towards your own feeling. Given my lifestyle, I can see that I am very much inclined towards value investing in early stage. However, I believe that, in later stage, I will involve in growth investing once i acquire certain understanding on how to value growth quantitatively and qualitatively.
Ability to troubleshoot the problem on your own without books
In last two blog entries I have made, I mentioned something to 'some tips'. I once wrote as follows:
The experience of my friend clearly explains why you need to go through many rounds. Going through many rounds of understanding will strength your thinking and creativity. I strongly believe that if you have gone through this, you will develop certain skills which people who have not gone that path do not have. I am sure that you don't want to be the person who ask too many questions in your workplace about what these things are about. Consider that you are working in the commerical bank. You see a 'Interest Rate' chart and commentary about this chart. With poor foundation of Finance and Macro, you don't understand why the commentary is written like that. Attempting to understand, you will need someone who understand this very well. This will lead to asking too many questions. However, in different persective, if you have good or strong foundation of FInance and Macro, you will not be able to understand too. But, if you have gone through rounds of understanding in your student days, you can do that in attempt to understand interest rate path and that commentary. In conclusion, it is a kind of discpline you need to develop on your own. Some analysts and professionals do that way!I have two interesting and better real-life illustration from Derman's book. I am attempting this to encourage more people to do like this. Briefly, Emanuel Derman did the first time to learn and understand things on his own when he was doing for his thesis. First, Derman recalled that Emden Ganser has calm and undistracted ways which Derman himself was envious of. Emden never asked for help with debugging, but read whatever manuels were neccessary and then patiently dug deeper, struggling for as long as it took to solve the problem. In the case of Derman, he simply ran for help at the first panicky opportunity. Emden is a kind that many people need to do when they are in trouble. Unfortunately, they do not fully understand the purpose of they will do. I tried to replicate this kind of thing that I tell Yuan Xiang to solve his minor software problem which is apparently simple. A little of struggle with an aid of information will do good to him.
Second, Derman has graduated from PhD Physics and therefore he has no knowledge or background for finance. He got into Goldman Sachs for his programming skills which he acquired in the course provided by his previous firm. His boss, at that time, told him to learn options (finance terminlogy) in order to create a program for the traders. To be specific, he was to learn the standard Black-Scholes equation and understand the modified Black-Scholes equation (this was modified by his boss in order to best fit to particular scenarios that traders faced). As far as we can see, Derman has acquired certain amount of option theory. Finally, he has the chance to work with Fischer Black together with Bill Toy. The project they were working is to solve the problem of short-term interest rate associated with the bonds. The mentioned modified Black-Scholes equation has a problem. Therefore, Derman has spent considerable amount of time to understand the time movement of the short-term interest rate. Eventually, Derman, Black, and Toy developed BDT (Black-Derman-Toy) model. This model was ready for traders to deal with short-term interest rate for their trading purposes. During that time, Derman was banging his head against the same problem. Eventually, they notice some results before they reached the conclusion why the aforementioned problem was like this. At the same time, Derman admired Fischer Black's trait. When they discovered mean reversion of short-term interest rate, Black wanted to begin all over again. It is because he thought that they can do better if they stop everything and started again from scratch. Therefore, the reason why Derman had this admiration is that Derman did not have the stomach to stop everything and then restart over again.
With this experience, in few years later, Derman decided to take the challenge to find out why 'smiles' problem exist. This problem came from the price of the options on the Nikkei 225 index. It is because standard Black-Scholes equation would produce the answer, whereby 'smiles' problem does not exist. Obviously, this did exist in the real world. Therefore, Deman decided to work with Iraj Kani and Alex Bergier to build better model that give answer that involve 'smiles'. This means building a new model. They spent so much time to find the right answer to explain this 'smiles' problem. But they couldn't until one day they played around. A miracle appeared and they got the answer. It took around 3 years to arrive the answer. You need to remember that there is no journal or textbook (at that time) that explains that problem.
That is why we must develop our own skills that are the result of our doing. We should always remember that it is not done within few minutes or few days. It usually take few weeks or months or even years to find the answer to the problem. Look at John Nash. He was so desperated to find the theme for his thesis. He was verge of failing his PhD course. One day, he saw the vision between women and men (who will be the lucky man to dance with that woman). Therefore, he developed Nash Equilibrium work for his PhD thesis. On top of that, John Nash won Nobel Prize in Economics for his Nash Equilibrium work. The conclusion here is that we, even the genius ones need to spend time to find the answer. There is no short-cut to the success.
Books
Book Title: My Life As A Quant: Reflections On Physics And Finance
Author: Emanuel Derman
Rating: 9/10
Remark:
It is excellent book that bring me clear picture of how Goldman Sachs' working environment like as well as its Salomon Brothers'. He offer great description on how he experienced in PhD in Physics, and his workplaces. It is extremely interesting to see how he has developed financial models to address the problems he was either assigned to or took up the challenge (in attempt to explain phenomenon). Best of all, he clearly pointed the weaknesses of the financial models. Like what I says many times, mathematics can never address human behaviours and psychology succinctly. Actually, his life in Goldman Sach enhance my good opinion regarding Goldman Sach. It is a great read for anyone who are curious about the life and environment of quantitative-based careers in investment banks.
Book Title: Irrational Exuberance
Author: Robert Shiller
Rating:7/10
Remark:
It is fine book that we can understand how and what the irrational investors behave during bull and bear periods of the stock market. Robert Shiller cleverly cite the results of survey at certain date that will show strong significance towards psychology effect on that date. Upon reading, the readers should be able to understand how financial market operates in qualitative terms in one aspect of many current viewpoints.
Book Title: Soros On Soros: Staying Ahead of The Curve
Author: George Soros
Rating:7/10
Remark:
I have read the biography about George Soros. However, that book offers extra details that are missing in that biography. It is good that someone is interviewing Soros. This certainly unearth a lot of interesting facts. Anyone who is wondering about how to embark investing career should read that book. The first few chapters in that book offers an idea how Soros embarks his investing career. That book give me an impression of Soros that he has acquired great deal of knowledge about politics in Europe as well as foreign exchange market. Because of that, Soros develops his own theory to test the market whether it acts according to the prediction of his own theory. It may justify his understanding. Not many people have such understanding and knowledge like that.
Book Title: How To Lie With Statistics
Author: Darrell Huff
Rating:9/10
Remark:
I happen to know this book through the recommendation from the subject guide of Statistics 1. Out of curiousity for just this title, I find it informative and interesting. 10 chapters clearly explain how media make use of statistics to inflate the reports that are easy to catch in our eyes. As a result, this can bring such impression that there is a good or bad news. I think that everybody should read this to have such awareness regarding how media tries to use statistics in their newspaper, magazines, and other media sources.
Movies and Dramas
Hot Fuzz (United Kingdom Movie 2007)
Synospsis:
This movie centres its focus on the most law-abiding police officer, Nicholas Angel. Angel was doing so well in reducing the crime rate in London. As a result, he was winning awards after awards. The higher rank police officers decides to transfer Angel to Stanford as a sergeant. It seems to be that they are afraid of Angel taking over their position. However, Angel did not want to do police job there and he want to be in thick action catching all criminals. What kind of action did Angel see in Stanford?
Rating:7/10
Remark: It is very fresh and interesting action movie coming from UK, which is relatively funny compared to its US counterpart. It is good to hear british accent. The story is so sweet and attractive that you are on driving seat from the start of the movie till the end of the movie.
Observe and Report (Hollywood Movie 2009)
Synopsis:
Ronnie Barnhardt, a head of security team in the shopping mall, is attempting to catch two major crimes happened outside and within the shopping mall respectively.The first major crime is that a flasher shows his naked body to the female passerbys outside the shopping mall. The second one is that there is a massive shoplifting in the shopping mall. These two major crimes are being repeated over again and again. Can he crack the two cases as soon as possible?
Rating:6/10
Remark: The script is average. It is nothing to shout.
The Monster X Strikes Back Attack: The G8 Summit (Japanese Movie 2008)
Synopsis:
Suddenly, a monster arrived at Sapporo from the space. At the same time, there is G8 meeting held in Japan discussing with the problem of Kyoto Protocol. This monster destorys the buildings and kills people with breathed fire. How does Japanese government and G8 deal with this monster?
Rating:5/10
Remark: It is very traditional japanese movie. But the story is not quite good.
Next Day Air (Hollywood Movie 2009)
Synopsis:
A mob boss in Mexico is sending the drug to someone in Philadelphia by mail. This mail was under red coloured tape, indicating 'Next Day Air'. This mail is expected to reach to that someone's home at Philadelphia. The postman, having the effect of smoking weeds mistakenly send that mail to the wrong door. People living in the wrong door discovered the drugs in the mail. What will they do?
Rating:5/10
Remark: It is just another baddie movie. The story does not excite us at all.
Knowing (Hollywood Movie 2009)
Synopsis:
John Koestler (Nicholas Cage) discovers the meaning of numbers that are written on a piece of paper. The paper is merely a list of horrible accidents that have already taken its place. Apparently, there are three horrible accidents that are not yet taken place. That is what the piece of paper says. John is attempting to protect his son and himself from these accidents. In doing so, John tries to unravel the mystery of this piece of paper .How shall he do it?
Rating:5/10
Remark: Nicholas Cage may be name that most households will know. It seems that he is starring in so many boring movies in recent years. I am quite surprised with the flow of the story. The ending of this movie may make you to open your mouth wide.
Pandora (Japanese Drama 2008)
Synopsis:
The drama is using pandora box to describle human feelings. The story evolve around a medicine that 'kill' cancer. This medicine is developed by Suzuki Hideki, who spent 18 years to research that medicine. Evil came around the corner. His workplace, university hospital, does not believe him and his research. As he found that medicine, he need someone with cancer to test on. That someone happened to be main suspect of the murder. When the result on the test of that someone turns out to be positive, everybody including government want to have this medicine. What will happen within 8 episodes?
Rating: 8/10
Remark: It is a good story. It is very convincing that everything is happening. Emotions are spread all over. You even want to know what happens in the end!
G.I.Joe: The Rise of The Cobra (Hollywood Movie 2009)
Synopsis:
The story starts how McCullen, owner of MARS that produce weapons, tried to steal warheads (that MARS made with NATO funds) from NATO army. McCullen sent his own army to do this job. However, nobody knew that McCullen has this intent. G.I Joe army intervened McCullen's army from stealing the warhead. Two soliders from NATO army survive from high-tech attacks made by McCullen's army. What will McCullen's army do in order to get the warhead? What plan does McCullen want to do with warhead after he get it?
Rating:8/10
Remark: The sound effect and action are excellent. The story looks decent. At least, we know how important characters' lives are like. Finally, we have good idea how Cobra team formed.
Transformer: Revenge of the Fallen (Hollywood Movie 2009)
Synopsis:
Fallen wants to revive his Deception team with the aid of Starscream while Megatron, as a dead robot, was banished into the sea. Fallen need Matrix of Leadership as a key to a machine to kill the sun. But Fallen does not know. Therefore, Fallen needs to get information of the location of Matrix of Leadership. That information comes from a shard that Sam is holding right now. Deception robots are on hot mobile to revive that shard. Meanwhile, Autobots robots are protecting Sam and preventing Deception from destroying the earth. How shall Deception robots achieve this mission? How can Autobot robots win the battle?
Rating:6/10
Remark: The story is slow and dragging. Unfortunately, it is not top-notch story to listen while watching fighting and shooting action between Deception and Autobots. Excellent sound effect and solid bass.
My Girlfriend Is An Agent [7급 공무원 ](Korean Movie 2009)
Synopsis:
The story starts with a lady who is a government spy, pretending to be travel agent in front of her boyfriend. Each time she goes on the mission, she has to make lies to her boyfriend. Eventually, being sick of her lies, her boyfriend left Korea. In 3 years later, he met her on her mission. Unknowingly, he was also on mission for the government. When is the day they realise that they are working the same company?
Rating:8/10
Remark: It is somewhat mushy-mushy love story built with actions. The main actress in this movie shines the most. It is entertaining movie.
Bleach:Fade to Black [君の名を呼ぶ] (Japanese Animation Movie 2008)
Synopsis:
The story started with Mayuri Kurotsuchi, captain of twelve division, having the sucess of completing his project. Suddenly, something bad had happened. That bad thing occured when intruder came. Apparently, Mayuri's memory was wiped out for no reason. Because of that, Mayuri was confused where he was at and who his colleagues were. As a result, he used his sword to destory his laboratory. This damage caused a white-coloured liquid coming out of the machine. This liquid destoryed part of Seireitei. Due to this serious damage, commander-captain decided to declare red code alert. Meanwhile Rukia was going to Seireitei from the real world at that time. Suddenly, the same intruder wiped Rukia's memory in the same way as what he/she did to Mayuri. Eventually Rukia was disappeared from every Shinigami's memory. No one remembered or knew her but not Kurosaki Ichigo! What will happen to Rukia? How shall Ichigo save her?
Rating :7/10
Remark: It is meaningful story that it tells us how important the bond of friendship is. The meassage is that you can never forget the days you had with your friends.
The Triumphant Return Of General Rouge [ジェネラル・ルージュの凱旋](Japanese Movie 2009)
Synopsis:
Tojo University Hospital has recovered from the scandal from the previos movie called 'The Glorious Team Batista'. One day, Kohei Taguchi receives a letter. This letter says that Chief Surgeon Hayami is receiving a bribe from a medical care firm named Medical Arts. On top of that, another letter that is written similar to that received by Taguchi is sent to Minstry of Health and Labour. Keisuke Shiratori, Secretariat from Ministry of Health and Labor, goes investigate this scandal.
Rating: 9/10
Remark: Yet again, it is excellent piece of movie. Hiroshi Abe is top-class actor acting a real detective to track down who profit from the fact that the letter is sent. The ending of the movie is also classic! It is highly recommended to watch.
Lupin The Third vs Detective Conan [ ルパン三世 vs 名探偵コナン](Japanese TV Special 2009)
Synopsis:
The TV special evolve around two well-known animation characters namely Lupin The Third and Conan. It is like a battle between kiddy thief and intellgent detective. The story starts with a case that look like accidental shooting during hunting. There is a surprise package between Mouri Ran and the princess of the country. Because of that, Conan is introduced indirectly to investigate that case. Meanwhile Lupin is assigned to steal a crown.
Rating:7/10
Remark: The story is ok. I think it will be great to see Detective Conan Movie 13. I am looking forward for this movie.
The Taking of Pelham 123 (Hollywood Movie 2009)
Synopsis:
This movie was remaked from the same movie that was filmed in 1974. The story starts a small team hijacking the subway train that is running alone the track in New York. The leader of this small team was asking US$10 million for his ransom. His demand is that this $10 million ransom is to be delievered within an hour. Will the hijacking team succeed?
Rating: 8/10
Remark: The conversation between the head of hijacking team and Garber, the person working for the train firm and talking with him. The motive of this hijacking leader is not revealed initially until the audience including me can see his motive. I recall that this movie was shown on the same week as Transformer 2. Given the choice, 'the taking of pelham 123' movie is obviously better deal than Transformer 2.
Public Enemies (Hollywood Movie 2009)
Synopsis:
At the beginning stage, John Dillinger, who was just released eight weeks ago, stages a prison break to get his close prison mates out of prison. After that, he and his close prison mates go on robbing the banks in Chicago. As a result, Dillinger is deemed to be public enemy no 1 in USA. The special agents in Chicago are going to catch him sooner or later. How shall they do it? How long will Dillinger survive?
Rating:7/10
Remark: Johnny Depp, who was acting as John Dillinger, look like another person. It is amazing that I do not recognise him until i 'imdb' that movie about the casts. It can justify that he is top notch actor in Hollywood. The story is abit slow. Nevertheless, it is quite comfortable to watch the show. Interestingly, this movie is based on the real life that happens in 1930s but the story is somewhat edited slightly.
Tidal Wave [Haeundae - 해운대] (Korean Movie 2009)
Synopsis:
Kim Hwi is trying to get the public authorities about the possibility of incoming megatsunami that will hit Busan, South Korea. His proof is that there is frequent earthquake that is happening from Japan towards South Korea each day. The public authorities rule that possibility out because of historical low record of earthquake. Therefore, they are not preparing anything for safety measure to evacuate the public out of the Busan especially huge beach there. Little wonder, that possibility turns out to be true. What will Busan look like after this natural disaster ended? How shall the public authorties deal with it? What will happen to the people in the Busan?
Ratng:7/10
Remark: It is remarkable to see how people suddenly scream for help as the megatsunami is about to pounce them in few minutes later. The graphics effect of how megatsunami affects Busan is quite amazing. The story is average but it is great to see people's expressions. It is very humanly thing.
Adventureland (Hollywood Movie 2009)
Synopsis:
The story starts with James Brennan, who was about to get into Columbia. However, his father was transferred to another department, making his pay tight. Because of this, James cannot go to Columbia and his parents want him to work. The place he is going to work at is Adventureland which is an amusement park. At the workplace, he discovers a young lady named Em Lewin. Love blossom there. On the way, there is a scandal about Em Lewin. What will happen between them? Will love last forever?
Rating:6/10
Remark: It is slow story telling about a young man who embark his life, learning interesting things that are not taught in the school.
Battle for Terra (Hollywood Animation 2007)
Synopsis:
Humans are finding a suitable planet to live in. It is because their earth is dying as humans use up non-renewable resources. Eventually, humans are considering whether they can settle down in Terra planet. Mala, a Terrian teenager, enters into this picture. She saved human from being dying when there is no oxygen in the atmoshphere. She even went to a spaceship where all humans live in. Eventually, a military general decides to take the matters in his hand. He want to invade Terra without the authority of the president.
Rating:6/10
Remark: It is good story.
Ice Age 3: Dawn Of The Dinosaurs (Hollywood Animation 2009)
Synopsis:
Manny is awaiting for a baby from his wife, Ellie. Diego wants to have some adventure and he is embarking for one after leaving his friend, Manny. Sid see them go apart and he decides to start his own family by stealing three eggs. He is caught by the mother of three eggs. As a result, he is dragged by that mother into dinosaur land. Manny, Ellie, and Diego decide to start an adventure to save Sid from that mother.
Rating:5/10
Remark: It is decent story. It is just saving someone from the strange land.
Desperate Housewives Season 4 (Hollywood TV Serial)
Synopsis:
Bree is trying her best to disguise as a pregent woman. Each time she meet her neighbour who want to touch her fake belly or hug her, she has to devise anything to avoid getting hugged or being touched. Meanwhile, Gabrielle has found her love in her ex-husband, Carlos after she overhead how she was used as political trophy by her new husband, Victor in the secret discussion between Victor and Victor's father. Each time Victor goes out, Gabrielle wants to enjoy sexual acts with Carlos. Lynette is suffering cancer, losing her hair during chemotherapy. Lynette wants to keep secret about her cancer from her neighbours as well as her friends. Only her mother, her husband, and her two sisters knew her cancer. She is trying her best to keep her cancer secret as long as it can. Susan finds out that she is pregnant. When her baby borns, she and her husband, Mike are trying to find suitable name for their baby. There is a new neighour, Katherine, who is moving back to her old home, which used to be own by her aunt. She is trying to run away from stalker, who wants to be with her current husband, Adam. At the same time, she is trying to keep her secret away from everybody including her daughter. What will happn to them?
Rating:7/10
Remark: This TV serial is getting better. The plot of each family is very interesting.
Tony Del Piero wrote and posted at at 12:06 am
