Fifteen Dollars' Worth of Smug

Totally agree with Daniel on this issue - The whole charitable act doesn't even cost the law firm anything extra!

And I agree with the following statement too - "Only in this new gilded age could a $15 lunch for a 23-year-old student be seen as a self-abnegating act." Converted to Singapore dollars, that is S$22.50, mind you! Some young law punk could be eating ribeye steak or a japanese buffet spread with that kind of money and still proudly proclaim: "This is my sacrifice, so that my company can give S$67 to charity..."

What a New York law firm's charity-lunch program reveals about America.
By Daniel Gross (Source: http://www.slate.com/id/2170561/nav/tap3/)

Sometimes it takes a brilliant, carefully crafted novel, such as Anthony Trollope's The Way We Live Now or Tom Wolfe's The Bonfire of the Vanities, to capture a culture of money, ambition, and corporate avarice. And sometimes it takes just a few paragraphs, as with this 224-word article by Louise Kramer (fourth item down) in the Sunday New York Times business section, which describes a philanthropic trend at big New York law firms. Under the Chow for Charity program, now in its fifth year, summer associates at the giant law firm Simpson Thacher can elect not to enjoy a $60 per person lunch with a firm lawyer. Instead, if they choose to eat with the lawyer at a more down-scale joint and spend $15 or less each, the firm will donate the difference ($45 per person) to a nonprofit legal group like Legal Aid.

How does this small piece neatly encapsulate several important trends?

1) A Touch of Conscience.
These days, any company that markets to or needs to hire well-educated proto-yuppies must take bold action on topics of concern ranging from global warming to poverty. Or, if it doesn't actually want to take the action, it must at least appear to be concerned. Doing good isn't a serious commitment or an end in itself. Rather, it's an ornament, like a wall sconce, that makes consumers or employees feel good about themselves and the company. The Times paraphrases a recruiter who notes that such efforts "are part of an emerging trend to add a touch of social conscience to lavish recruiting practices for top students in a competitive market." The greatest desideratum of firms is to undertake publicity-generating good works that don't require them to spend extra money or change the way they do business. Buy some renewable energy, by all means, but continue to maintain that fleet of corporate jets. Chow for Charity is a perfect case, since it doesn't cost the firm a dime.

2. The New Gilded Age. This is a golden age for corporations, and for the professional firms that service them, such as Simpson Thacher. According to the American Lawyer, Simpson racked up profits of $2.5 million per partner in 2006. (Given that, loudly trumpeting a program that generates about $50,000 in charitable donations seems a little gauche.) But this style of philanthropy neatly encapsulates the frequent obliviousness of the very rich, and of the publications that cater to them, to the nation's glaring income inequality. (Last week, the New York Times ran largely unironic articles about $60,000 beds and $225,000 parking spots.) Only in this new gilded age could a $15 lunch for a 23-year-old student be seen as a self-abnegating act. I can assure you that it is quite easy to gorge yourself on excellent food in New York for $15—a fine all-you-can-eat Indian buffet, a sublime pastrami sandwich from Katz's Deli, four street-side schawarmas. And plenty of New Yorkers would be thrilled to have $15 a day to spend on food. In the recent congressional food stamp challenge, several solons tried, without much success, to live for a week on the average food stamp budget: $3 a day.

3) Defining Public Service Down.
For more and more of us, public service is something that other people do—other people with lower incomes, smaller apartments, and less nice stuff. (For the Iraq war version of this trend, see National Review columnist Jonah Goldberg.) The Times article quotes a recruiter who says law firms do this sort of charity because their recruits are really interested in community work. Now, law school is very expensive, and students take on large sums of debt to pay for it. So it may well be that many of Simpson Thacher's summer associates are just working there for the summer so they can go toil as community organizers upon graduation without excessive debt loads. But most are there because law firms such as Simpson pay massive salaries ($160,000 to start) and provide entree to even more-lucrative gigs at consulting firms, private-equity firms, and investment banks. Today, thanks to the benevolence of Simpson Thacher, you can pursue community work by taking your lunch at Pret a Manger instead of Le Bernardin.

4) It's Good To Be the King.
In this economy, management and owners of capital always win. The partners of law firms have been among the most fortunate owners in this economy. They don't face competition from China. They mark up the labor of junior associates and then pass on the costs associated with that labor—copying, car services, long-distance phone calls—to their deep-pocketed clients. Summer associates are already a great deal for law firms—their hours are billed out to clients at hourly rates of between $200 and $300, but the firms don't have to pay any benefits. Not surprisingly, this charitable endeavor presents the partners with yet another opportunity to profit. "Lawyers like having lunch with a summer associate because it means a faster meal, not the typical time-sapping 1.5 hours," the article notes. Translation: It's a double-winner when kids pick the cheap meals over leisurely lunches. First, senior lawyers don't have to spend as much time feigning interest in the ambitions of 23-year-olds. And it leaves one more hour of daylight in which they can bill out their own time—and that of the community-minded summer associates.

Trading With Confidence: How You Can Develop More Confidence In Your Trades

Confidence is contagious. So is lack of confidence.
~Vince Lombardi

Have you ever opened a magazine and seen a full-page ad of some luminary sporting a "milk mustache"? I like the question, too. "Got Milk?" Everyone from Wentworth Miller to Jessica Alba has appeared on a print or TV ad with the milk mustache and the famous tag line. The ads insinuate that the success of these stars is attributed to drinking the nutritious liquid.

So, if we lined up the finest traders and had to put a tag line under their picture, what would it be? There is one characteristic that distinguishes the "haves" from the "have-nots" - a quality that's decidedly different for a top trader when he's at the height of his game versus when he's struggling (all traders have times of struggle)… What would the tag line be? Got Confidence?

Does trading success develop confidence, or is it the other way around? It's a fair question, but probably not the "right" one. A better question would be, "Have you ever seen a consistently profitable trader who lacked confidence?" Or, "When you have had a string of trading excellence, did you feel more or less confident than usual?" Here's why trading with confidence is crucial to your trading success, and how you can get it by focusing on three key elements…

Forming A Foundation For Confident Trading
As applied to the world of trading, let's call confidence the ability to act without reservation. Confidence is developed when key underlying characteristics have been put into place. One needs to have his trading psychology in place, a strategy or system that is proven, and execution proficiency.
When these three elements come together, they form a foundation upon which a trader can act with great confidence. Let's look at each of them, and see what steps you can take to help put them in place…

Confidence In Your Personal Trading Psychology
We'll start with the most important item - your personal trading psychology. To have confidence when you trade, you will need to develop a keen sense of who you are and how you will react to both common and extraordinary trading situations.
For example, how will you feel after losing six trades in a row? How will this affect your performance on trade seven of this string? What will be your plan to develop the patience, discipline and other attributes needed to provide consistent performance while trading? If you are not completely satisfied with your psychological state of readiness, your confidence as a trader will constantly be in doubt.

Confidence That Your Trading Strategy Works
The second area that you need to develop is your trading system or strategy. While this is an area that traders spend most of their time on, I find that they spend very little time developing confidence that the strategy works. This takes time and patience.

Can you state succinctly why your system works? Do you know what types of market conditions are best for your system's performance? In what types of markets does it perform poorly? What kind of losing streaks can you expect every month or quarter with your strategy? What size drawdowns will these loosing streaks produce? Too often, people buy a strategy or quickly develop one over a weekend and then start trading it without getting to know why, how and when the system works. So be prepared to spend the time required to really know the "nuts and bolts" of your trading strategy.

Confidence In Your Own Definitive Trading Plan
Once you have developed your trading psychology, and taken care to build a strategy that you know works, you need to be able to execute it consistently. There is a psychological element to this part of your trading (many traders have trouble "pulling the trigger"), but there are also some key logistics that you need to take care of in order to trade with confidence.

If you are worried that your trading software won't work or that you don't understand it, or if you're concerned that power outages and Internet issues will keep you from executing your exits, or if you think that the market makers and specialists are "out to get you," then you are definitely going to have trouble trading with confidence. The tool that can help you overcome these concerns is a well-defined trading plan that includes a "disaster plan" and a good understanding of how your trades are executed.

Confidence is not an end in itself, but it is a desired result of having a comprehensive trading process that works. If you struggle with achieving a state of confident trading, I suggest that you dissect the three areas that we talked about in this post. If you find one or more areas that need upgrades, then put together a plan to increase your mastery in that area - a psychology investment plan or a system upgrade plan, etc. Look toward improving your confidence to improve your trading.

Managing Risk

Lessons From Warren Buffett: Two Ways To Avoid Getting Burned By "Competition-Style" Investing

By D. R. Barton, Jr.
Quantitative Analyst, Mt. Vernon Research

When this guy speaks, economists, investors, and the financial media across the globe sit up and take notice. He's one of the most well-known, successful, and respected investors in the world - and with a personal fortune of $44 billion, one of the wealthiest.

So it's not surprising that his investment decisions almost always make news. Most of them simply notch up more wealth for him, his shareholders, and the folks who take heed of him.

I'm talking about Mr. Warren Buffett, the 76-year old brains behind Berkshire Hathaway. But some people are questioning the merit of one of his recent decisions. Are they right, will we be learning lessons from Warren Buffett, or will he prevail? Let's take a look…

"The Apprentice"… Warren Buffett Style

What would you do with $5 billion in two years?
At the annual Berkshire Hathaway shareholder meeting earlier this month, Buffett surprised attendees by announcing that he will search for his successor by jumping on the reality show bandwagon.

Buffett will select three or four top candidates for the position and give them $5 billion to manage for two years. The winner of the $5 billion challenge will get the nod to run Berkshire Hathaway.

On the surface, it sounds like a nifty idea. And while it won't be on TV (at least not yet), Buffett's "reality show" has the makings of great drama. But if you look a bit deeper, this type of selection strategy has some serious flaws, because of the mistakes and rash decisions that such "competition-style" investing can trigger. And it's got some important lessons for us, too…

Win At All Costs? Not So Fast…

Warren Buffett's selection process has obviously caught the eye of the media, most notably in Austan Goolsbee's New York Times article, where he likens Buffett's tactics to Donald Trump's reality show, "The Apprentice."

There's certainly one aspect of this that is a big concern: Is a "win at all costs" reality show strategy the appropriate way to invest or choose an investment manager - especially one running the massive Berkshire Hathaway operation?
After all, if one of the contestants makes $3 more (on a $5 billion investment portfolio) over the course of the two years, is that significant? But the key issue here is that this type of competition easily encourages participants to take undue risks in order to be first past the post.

For the record, I'm sure Mr. Buffett and his staff has taken these issues (and plenty more) into consideration. But investors would do well to avoid the pitfalls inherent with competition-style investing. Here are some things to watch out to make sure you don't fall into one of these traps.
Monitor Your Risk When Seeking Higher Returns

If you want higher returns, you usually have to take on a little more risk to get them. But one of the most prevalent investing concerns is that investors don't fully understand these risks often dazzled by the potential upside and ignoring the downside when evaluating opportunities. Stay disciplined.

Don't Increase Your Risk Just To Make Pre-Determined Performance Goals

It's one of the classic mutual fund manager mistakes. They're notorious for taking inordinate risks to attract new clients or make a certain amount of money. If a fund has a chance to make a top 10 list at the end of the year, they know that such acclaim and publicity will lead to much greater capital inflows - with higher fees and bonuses to follow. That means managers can be tempted to take bigger risks with existing investors' money. If the risk works out, they reap some fat rewards. But if the wheels fall off, the fund will lose capital and credibility.

If you find your investment returns lagging your goal for any given month, quarter, or year, don't fall into the trap of hiking up your risk to make up the shortfall. Doing so, just to get to an arbitrary performance mark, will more than likely put you on the fast-track to lose money, not make it.

Basics in Equities Investing

There are basically 2 schools of thought when it comes to investing in Equities - Technical Analysis & Fundamental Analysis. What are they?

Technical Analysis (TA) is the study of historical price movements through the use of charts. The 3 main charts that most Technical Analysts use are the Line chart, Bar chart and Candlesticks. Personally, I prefer the use of Candlesticks for its more descriptive visuals. Technical analysts look for patterns in the charts and using the basic assumption that "History repeats itself" to forecast future price movements. They look for signals or indicators within graphs to tell them if a stock will continue its upward/downward trend or is heading towards a reversal. Proponents of TA will tell you that it is simple to use, signals can be quickly detected and the investor psychology is incorporated within the analysis. Some arguments against TA are that the indicators/signals are highly subjective to the user and that the value of indicative values will change over time (since they are dependent on a large number of variables)

Fundamental Analysis (FA), on the other hand, is the determination of a company's underlying value by analysing the company's financial statements, business model, its future prospects, management team and internal controls. Fundamental Analysts invest on the assumption that "an undervalued stock will always catch up to its underlying value in the future". Proponents of FA will tell you that since financial ratios such as Net-Asset-Value (NAV), Earnings-per-Share (EPS) and Return-on-Equity (ROE) are rigorously calculated, estimate of a company's underlying value will not differ too far from such tangible quantifications. Criticisms of FA are that even if the undervalued stock will rise to its underlying value, investors will never know when this will happen (via TA).

If you ask me, I suggest the use of both analysis - Use FA to identify which stocks to invest in, and use TA to determine when to do so (Timing).

Happy investing!