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Tuesday, March 13, 2012

On the power of students

I am generally against group decisions... However there is one I always ask my students to do.

In my intro to finance class I like to ask my students to allocate $100,000 to a number of companies.  I do this at the very beginning of the semester, way before we cover anything related to stock valuation. Students generally look at me funny, humor me while thinking there must be something wrong with me.

I aggregate all their responses and create a weighted portfolio. As the semester moves along we begin talking about stocks, risk and portfolios and little by little I show them their own portfolio. They (and me included) marvel at how good a portfolio can be made by people with little or no background.

This year I decided to start sharing these portfolios in this blog and collecting the data in a more formal way.

We opened the portfolio on February22nd 2012. Since then the S&P500 has climbed from 1357.66 to 1395.95 or 2.82%.

My student generated portfolio? --> 4.16%

See the portfolio for yourself sorted by holdings.

Sunday, March 11, 2012

Why everyone should be a finance major

This Sunday's edition of the New York Times Magazine has a short but well written article on Dairy Farming. In short, farming is not local anymore. Therefore all forces from global markets are at play. A farmer in the US today faces an environment as complicated as that of Pepsi or Kia Motors or Johnson and Johnson.
An increase in the price of grains or other feed makes cost go up. Political Risks in Middle east can trigger oil prices changes higher increasing costs, a high dollar makes exports less likely. A recession in Europe means less demand. A rapid economic development in China and Brazil means good news and higher prices.

Just as industrial players have, dairy farming has improved its efficiency dramatically, yet ROE is not there for most farmers.

Finance is ready to help the farmer. This is good news. The bad news is that the farmer does not understand how hedging works.

Large corporations have risk management departmets scouting the enviroment for every risk.

My guess is that in the very near future every medium sized business will have to become serious about financial derivatives. This will create tremendous job opportunities and make the difference between companies that thrive and those fighting for survival.

In the article, Bob Fulper, the farmer summarizes it perfectly. In the past it was possible to work your way out of trouble, "stay in the cowshed a little longer, work harder" "Now if you don't use your head, your hands are not going to help you"

Isn't this the what is at the center of the current struggle?

It does not matter if you want a career in marketing, HR, or dairy farming... We are not in Kansas anymore. We must understand risk.

Consider Finance.

Thursday, March 1, 2012

Want to boost your portfolio?

Try some of these levered ETFs

AGA   PowerShares DB Agriculture Double Short ETN
AGQ   Ultra Silver ProShares ETF
BIB   Ultra NASDAQ Biotechnology ETF
BIS   UltraShort NASDAQ Biotechnology ETF
BDCL   UBS 2X Leveraged Long Wells Fargo Business Development Company ETN
BDD   PowerShares DB Base Metals Double Long ETN
BGU   Direxion Daily Large Cap Bull 3X Shares
BGZ   Direxion Daily Large Cap Bear 3X Shares ETF
BOM   PowerShares DB Base Metals Double Short ETN
BRIL   Direxion Daily BRIC Bull 2x Shares ETF
BRIS   Direxion Daily BRIC Bear 2x Shares ETF
BUNT   PowerShares DB 3x German Bund Futures ETN
BXDB   Barclays Short B Leveraged Inverse S&P 500 Total Return ETN
BXDC   Barclays Short C Leveraged S&P 500 Total Return ETN
BXUB   Barclays Long B Leveraged S&P 500 Total Return ETN
BXUC   Barclays Long C Leveraged S&P 500 Total Return ETN
BZQ   UltraShort MSCI Brazil ProShares ETF
CMD   UltraShort DJUBS Commodity ProShares ETF
COWL   Direxion Daily Agribusiness Bull 3x Shares ETF
COWS   Direxion Daily Agribusiness Bear 3x Shares ETF
CSMB   The 2x Monthly Leveraged Credit Suisse Merger Arbitrage Liquid Index ETN
CURE   Direxion Daily Healthcare Bull 3X Shares ETF
CZI   Direxion China Bear 3x Shares ETF
CZM   Direxion China Bull 3x Shares ETF
DAG   PowerShares DB Agriculture Double Long ETN
DDM   Ultra Dow 30 ProShares ETF
DEE   PowerShares DB Commodity Double Short ETN
DGP   PowerShares DB Gold Double Long ETN
DIG   Ultra Oil & Gas ProShares ETF
DPK   Direxion Daily Devloped Markets Bear 3X Shares ETF
DRN   Direxion Daily Real Estate Bull 3X Shares ETF
DRR   Market Vectors Double Short Euro ETN
DRV   Direxion Daily Real Estate Bear 3X Shares ETF
DSTJ   JP Morgan 2X Short US Long Treasury Futures ETN
DSXJ   JP Morgan 2X Short US 10 Year Treasury Futures ETN
DTO   PowerShares DB Crude Oil Double Short ETN
DUG   UltraShort Oil & Gas ProShares ETF
DUST   Direxion Daily Gold Miners Bear 2x Shares ETF
DXD   UltraShort Dow 30 ProShares ETF
DYY   PowerShares DB Commodity Double Long ETN
DZK   Direxion Daily Developed Markts Bull 3X Shares ETF
DZZ   PowerShares DB Gold Double Short ETN
EIPL   Monthly 2x Leveraged ETRACS Internet IPO ETN
EMLB   iPath Long Enhanced MSCI Emerging Markets Index ETN
EMSA   iPath Short Enhanced MSCI Emerging Markets Index ETN
EDC   Direxion Daily Emerging Markets Bull 3X Shares ETF
EDZ   Direxion Daily Emerging Markets Bear 3X Shares ETF
EET   Ultra MSCI Emerging Mkts ProShares ETF
EEV   UltraShort MSCI Emerging Markets ProShares ETF
EFO   Ultra MSCI EAFE ProShares ETF
EFU   UltraShort MSCI EAFE ProShares ETF
EPV   UltraShort MSCI Europe ProShares
ERX   Direxion Daily Energy Bull 3X Shares ETF
ERY   Direxion Daily Energy Bear 3X Shares ETF
EUO  ProShares UltraShort Euro ETF
EWV   UltraShort MSCI Japan ProShares ETF
EZJ   Ultra MSCI Japan ProShares ETF
FAS   Direxion Daily Financial Bull 3X Shares ETF
FAZ   Direxion Daily Financial Bear 3X Shares ETF
FOL   FactorShares 2X Oil Bull/S&P500 Bear ETF
FSA   FactorShares 2X TBond Bull/S&P500 Bear ETF
FSE   FactorShares 2X S&P500 Bull/TBond Bear ETF
FSG   FactorShares 2X Gold Bull/S&P500 Bear ETF
FSU   FactorShares 2X S&P500 Bull/USD Bear ETF
FXP   UltraShort FTSE/Xinhua China25 Proshares ETF
GLL   UltraShort Gold ProShares ETF
GASL   Direxion Daily Natural Gas Related Bull 2X Shares ETF
GASX   Direxion Daily Natural Gas Related Bear 2X Shares ETF
IGU   ProShares Ultra Investment Grade Bond ETF
INDL   Direxion Daily India Bull 2x Shares ETF
INDZ   Direxion Daily India Bear 2x Shares ETF
ITLT   PowerShares DB 3x Italian Treasury Bond Futures ETN
JGBT   PowerShares DB 3x Japanese Govt Bond Futures ETN
JPX   UltraShort MSCI Pacific exJpn ProShares ETF
KRU   Ultra KBW Regional Banking ETF
LBJ   Direxion Daily Latin America Bull 3X Shares ETF
LBND   PowerShares DB 3X Long 25+ Year Treasury Bond ETN
LHB   Direxion Daily Latin America Bear 3X Shares ETF
LSKY   ETRACS Monthly 2xLeveraged ISE Cloud Computing Total Return Index ETN
LTL   Ultra Telecommunications ProShares ETF
MATL   Direxion Daily Basic Materials Bull 3X Shares ETF
MATS   Direxion Daily Basic Materials Bear 3X Shares ETF
MFLA   iPath Long Enhanced MSCI EAFE Index ETN
MFSA   iPath Short Enhanced MSCI EAFE Index ETN
MLPL   UBS ETRACS 2x Leveraged Long Alerian MLP Infrastructure Index ETN
MVV   Ultra Mid Cap 400 ProShares ETF
MWJ   Direxion Daily Mid Cap Bull 3X Shares ETF
MWN   Direxion Daily Mid Cap Bear 3X Shares ETF
MZZ   UltraShort Mid Cap 400 ProShares ETF
NUGT   Direxion Daily Gold Miners Bull 2x Shares ETF
PST   UltraShort 710 Year Treasury ProShares ETF
QID   UltraShort QQQ ProShares ETF
QLD   Ultra QQQ ProShares ETF
RETL   Direxion Daily Retail Bull 2X Shares ETF
RETS   Direxion Daily Retail Bear 2X Shares ETF
REW   UltraShort Technology ProShares ETF
ROLA   iPath Long Extended Russell 1000 TR Index ETN
ROSA   iPath Short Extended Russell 1000 TR Index ETN
ROM   Ultra Technology ProShares ETF
RSU   Rydex 2x S&P 500 ETF
RSW   Rydex Inverse 2x S&P 500 ETF
RTLA   iPath Long Extended Russell 2000 TR Index ETN
RTSA   iPath Short Extended Russell 2000 TR Index ETN
RUSL   Direxion Daily Russia Bull 3x Shares ETF
RUSS   Direxion Daily Russia Bear 3x Shares ETF
RXD   UltraShort Health Care ProShares ETF
RXL   Ultra Health Care ProShares ETF
SAA   Ultra Small Cap 600 ProShares ETF
SBND   PowerShares DB 3X Short 25+ Year Treasury Bond ETN
SCC   UltraShort Consumer Services ProShares ETF
SCO   UltraShort DJUBS Crude Oil ProShares ETF
SDD   UltraShort Small Cap 600 ProShares ETF
SDK   UltraShort Russell Mid Cap Growth ProShares ETF
SDOW   UltraPro Short Dow 30 ETF
SDP   UltraShort Utilities ProShares ETF
SDS   UltraShort S&P500 ProShares ETF
SFK   UltraShort Russell1000 Growth ProShares ETF
SFLA   iPath Long Extended S&P 500 TR Index ETN
SFSA   iPath Short Extended S&P 500 TR Index ETN
SICK   Direxion Daily Healthcare Bear 3X Shares ETF
SIJ   UltraShort Industrials ProShares ETF
SJF   UltraShort Russell 1000 Value ProShares ETF
SJH   UltraShort Russell2000 Value ProShares ETF
SJL   UltraShort Russell Mid Cap ValUE ProShares ETF
SKF   UltraShort Financials ProShares ETF
SKK   UltraShort Russell 2000 Growth ProShares ETF
SMDD   UltraPro Short MidCap 400 ETF
SMK   UltraShort MSCI Mexico Investment ProShares ETF
SMN   UltraShort Basic Materials ProShares ETF
SOXL   Direxion Daily Semiconductor Bull 3x Shares ETF
SOXS   Direxion Daily Semiconductor Bear 3x Shares ETF
SPXU   ProShares Ultra Pro Short S&P 500 ETF
SQQQ   UltraPro Short QQQ ETF
SRS   UltraShort Real Estate ProShares ETF
SRTY   UltraPro Short Russell 2000 ETF
SSDL   ETRACS Monthly 2x Leveraged ISE SSD Index ETN
SSG   UltraShort Semiconductor ProShares ETF
SSO   Ultra S&P 500 ProShares ETF
SZK   UltraShort Consumer Goods ProShares ETF
TBT   UltraShort 20+ Year Treasury ProShares ETF
TBZ   UltraShort 37 Year Treasury ETF
TLL   UltraShort Telecommunications ProShares ETF
TMF   Direxion Daily 30 Year Treasury Bull 3X Shares ETF
TMV   Direxion Daily 30 Year Treasury Bear 3X Shares ETF
TNA   Direxion Daily Small Cap Bull 3X Shares ETF
TPS   ProShares UltraShort TIPS ETF
TVIX   VelocityShares Daily 2x VIX Short Term ETN
TVIZ   VelocityShares Daily 2x VIX Mid Term ETN
TWM   UltraShort Russell 2000 ProShares ETF
TWQ   UltraShort Russell 3000 ProShares ETF
TYD   Direxion Daily 10 Year Treasury Bull 3X Shares ETF
TYH   Direxion Daily Technology Bull 3X Shares ETF
TYO   Direxion Daily 10 Year Treasury Bear 3X Shares ETF
TYP   Direxion Daily Technology Bear 3X Shares ETF
TZA   Direxion Daily Small Cap Bear 3X Shares ETF
UBR   Ultra MSCI Brazil
UBT   Ultra 20+ Year Treasury ETF
UCC   Ultra Consumer Services ProShares ETF
UCD   Ultra DJUBS Commodity ProShares ETF
UCO   Ultra DJUBS Crude Oil ProShares ETF
UDNT   PowerShares DB 3x Short US Dollar Index Futures ETN
UDOW   UltraPro Dow 30 ETF
UGE   Ultra Consumer Goods ProShares ETF
UGL   Ultra Gold ProShares ETF
UJB   ProShares Ultra High Yield Bond ETF
UKF   Ultra Russell1000 Growth ProShares ETF
UKK   Ultra Russell 2000 Growth ProShares ETF
UKW   Ultra Russell Mid Cap Growth ProShares ETF
ULE   Ultra Euro ProShares ETF
UMDD   UltraPro MidCap 400 ETF
UMX   Ultra MSCI Mexico Investable Market
UPRO   ProShares Ultra Pro S&P 500 ETF
UPV   Ultra MSCI Europe ETF
UPW   Ultra Utilities ProShares ETF
URE   Ultra Real Estate ProShares ETF
URR   Market Vectors Double Long Euro ETN
URTY   UltraPro Russell 2000 ETF
USD   Ultra Semiconductor ProShares ETF
UST   Ultra 710 Year Treasury ETF
UUPT   PowerShares DB 3x Long US Dollar Index Futures ETN
UVG   Ultra Russell 1000 Value ProShares ETF
UVT   Ultra Russell 2000 Value ProShares ETF
UVU   Ultra Russell Mid Cap Value ProShares ETF
UWC   Ultra Russell 3000 ProShares ETF
UWM   Ultra Russell 2000 ProShares ETF
UXI   Ultra Industrials ProShares ETF
UXJ   Ultra MSCI Pacific ExJapan
UYG   Ultra Financials ProShares ETF
UYM   Ultra Basic Materials ProShares ETF
VZZB   iPath Long Enhanced S&P 500 VIX MidTerm Futures ETN
XPP   Ultra FTSE/Xinhua China 25 ProShares ETF
YCL   Ultra Yen ProShares ETF
YCS   UltraShort Yen ProShares ETF
ZSL   ProShares UltraShort Silver ETF