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CFA

Crunching time for CFA test

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(Update) Two miners survived after 14 days of Sichuan earthquake. My inspiration.

(Original) You may notice I have not updated my blog as frequently as usual, one reason is I am busying preparing for the CFA level I exam this Saturday. Although the outcome of the test is far too early, let me offer some guidance and thoughts as I am a stock junkie. I did not realize how big the task is untill lately: in other words, I spent too much time on TV, which includes CNBC, election and NBA; I should have spending more time in Starbucks or Panera reading 🙂

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CFA

Bet against Buffett?

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It seems there is lots of confusion about Berkshire (NYSE:BRK.A, BRK.B) options (paper) loss in its Q1 earning report, especially among individual investors. First, let me quote Buffett’s take on those options in his recent annual shareholder letter (link to letters):

“The second category of contracts involves various put options we have sold on four stock indices (the S&P 500 plus three foreign indices). These puts had original terms of either 15 or 20 years and were struck at the market. We have received premiums of $4.5 billion, and we recorded a liability at yearend of $4.6 billion. The puts in these contracts are exercisable only at their expiration dates, which occur between 2019 and 2027, and Berkshire will then need to make a payment only if the index in question is quoted at a level below that existing on the day that the put was written. Again, I believe these contracts, in aggregate, will be profitable and that we will, in addition, receive substantial income from our investment of the premiums we hold during the 15- or 20-year period.

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401k and Personal Finance CFA

CFA, 401k, Berkshire shareholder meeting

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I printed out the CFA exam admission ticket yesterday, the test will be hold on June 7. Still got to read up the economics (my least favorite topic). So far I have read “financial management and statement analysis”, “quatitive methods”, “equity analysis and portfolio management”, and I’ve almost completed the “Options and derivatives”. Another thing I need to read is “Ethics”: I intentionally put it off and prepared to read it right before the test. As I get older, my memory is not as good 🙂

401k
I checked out the 401k and Rollover IRA at Vanguard this morning. I was surprised to find, after all these craziness, my portfolio is down 3.77% YTD. One thing I noticed is April was a good month for stocks. All the major indices went up.

Berkshire shareholder meeting

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CFA

Coffee, espresso, coke and investing: II

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The Coca Cola stock vs. Starbucks stock
In last 10 years (Mar 6 1998 to today Feb 28 2008), according Google Finance, SBUX went up from 4.93 to 18.78 (+280%, split adjusted, SBUX has not paid any dividend). That’s about 14% price appreciation annually.

On the other hand, KO went from 68.66 to 59.56 (-14.44%). But there is a caveat, Coca Cola pays out a cash dividend each quarter, so we should adjust the dividend when calculate Coke’s return.

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CFA

Less blogging and more CFA studying

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Study for CFA
Not just for the passing of the test, or the certificate, but also to learn the knowledge, which is more important for me. Actually as I read the quantatitive fundmental, I can connect the dots with my portfolio performance. Very practical stuff.

Blogging
It’s likely I will reduce the number of posts I write everyday, which is probablly a good thing, because I may actually come up with better blogs. More substance, less crap (aren’t the financial/stock blogsphere full of too many craps, no offense to any sincere blogger).

Advice from Vanguard Chairman
I received the Vanguard news letter in mail last week. Very good stuff. One thing I want to share is: don’t follow the headlines. Have a long term plan, and try to stick to it.

Categories
CFA Stocks

Stock option helps cash flow for Crocs?

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I was reading the cash flow statement of CROX Q3 2007 10-Q. One thing caught my attention is the “Excess tax benefit on share-based compensation”, about $38.6 m for first 9 months of 2007, plus the “Exercise of stock options” $ 14 m., the total “Cash provided by financing activities” is $ 52 m, compared to the cash from operating activities for about $ 22 m.

This is a bit strange because normally we want the cash comes from operating activities, i.e., a company’s main business. For instance, in the case of Crocs, its main business is manufacturing and sale of Crocs sandles. It’s not a financial service company: a bank, or a lender of student loans something.

I did a little research on this topic. I found a paper written by Marc Siegel which describes what companies do these days to artificially boost cash flow statement (legally), and a newspaper article from Rocky Mountain News explains this a bit in plain English.

Categories
CFA

Go for CFA level I test

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I decided to go for the June 2008 CFA level one test, due to several reasons:

1) Learning: I am interested in learning more about finance, since it is not practical for me to enroll a formal academic program, nor do I have the discipline stick to my own study plan. Enrolling in CFA exam and learn from the program itself is better suited for me.

2) Basics: I do have some previous training on economics and accounting, no formal courses on finance (financial management) though. I did took other fundamentals such as statistics in college.

3) Recognition (and potential benifits): I believe CFA will bring some credential for a guy like me if he/she wants to be a fund manager, or managing an investments partnership.

In today’s world, people simply won’t hand money to a person without formal finance education and/or investing experience. Although personally I still believe successful track record in investing matters more (vs. education), when I look at fund managers for my 401k 🙂

schweser CFA study guide

(picture above: Schweser CFA study guide, from schweser.com)