The road ahead

This summer is going to be the most intense summer I have ever lived I believe. While trying to keep up with all the things I loveto do in the summer I will be involved in one school course as well as the Canadian securities course (basically another school course).

I will be pursuing one mian hobby throughout the summer, photography. I have noticed after being at university for a few years now that I have totally lost touch with my creativity side. Maybe if something turns out well enough ill share it.

This weeks game plan:

1. Complete week one of my business course. This includes all the required material to be covered in the outline.
2. Cover at least module 1 for the CSC and if I can grasp the material, possibly venture into module 2.
3. Obtain 4 photographs that I am proud of.

Cheers!

Exams are done!

Well I didn’t realize how long I was gone for until I received a email letting me know that a comment was posted. Thank paperdreamer! (her blog is on the side bar, over there —>  ) I actually barely used my computer and the internet for a good two weeks, which is very uncharacteristic of myself.

Anyways I got pretty involved in my studying for finals to try and finish the year on a high note. I was pretty confident with my performance. I only received two marks back, A+ and B+. Not too shabby! I hope for the other two to be similar as well.

Overall it was a great semester. This summer I will be enrolled in one course at school and I believe I will be taking the Canadian Securities Course to further my education and open up more job opportunities.

Now its time to surf some blogs

PS I need a job for the summer… anyone wanna hook me up? lol

Country Risk

It is always wise when becoming involved with investing abroad to identify the riskiness of doing such actions in another country.

There are ways to calculate this risk which is very important for any bank determining if it should loan to firms abroad especially. Country risk is one determinant of such dealings. Country risk can be thought of in two different parts:

• transfer risk - being the inability of the borrower to convert the payments into the lender’s currency
• sovereign risk - the borrower is either unable to repay or not willing to repay the principal or the interest or even both of the loan

Here is a link to the risk levels calculated by the OECD http://www.oecd.org/dataoecd/47/29/3782900.pdf

These risk calculations do take advantage of some easily identifiable information of course, which seems to be very consistent. Political turmoil seems to play a large role in the higher risk values whereas stable economies (both politcally and economically) have values at or near 0.

It seems to be updated on a monthly basis and could be a useful tool to determine how economies are changing globally to help with investing.

Do you like to socialize?

I have been fortunate to have come across a very significant forum (message board) dealing with finance focused mainly for Canadians…. sweet!

For myself, this is a great bookmark to have because I have been involved in many forums over the years and found they are one of the best learning tools you can have. Being able to ask questions on something and have responses from others in a short period of time is amazing. The fact that they network people so easily is something I think more people should get involved with. Also just discussing or even debating topics is a fantastic way to learn.

The financial forum is FINANCIAL WEBRING FORUM. They have several sections, including one I know I will be frequently using, the beginners section.

 I could have wrote up a big long post on the site and forums in general but I thought it would be better to keep it short and just advertise the site to you. Check it out and sign-up, its free. Knowledge is powerful and we should all seek to expand it any chance we get.

 Cheers!

Monetary Policy - A student’s perspective Part 2

Alright this is the second edition of the monetary policy examination relating a bit to the current Canadian economy covering flexible exchange rates. After I complete the analysis maybe it can be applied to the current CDN to US exchange rate somewhat without taking into account the many factors that actually influence the exchange rate. A simple economy examination would be an appropriate title.

 Again the Bank of Canada can increase the money supply to ease liquidity constraints as is shown in today’s markets. In a money market diagram this would shift the supply of money and decrease interest rates. When converting this to a IS-LM model it will show us that the decrease in an interest rate will cause investment spending to increase.

How does the interest rate effect the exchange rate? Well we would expect interest parity to be present in an open market of course. If there wasn’t then there would be a large flow of investment to the country with higher interest rate and eventually causing the interest rates (domestic and foreign) to hit equilibrium. If interest rates are expressed in an equation with exchange rates then an equilibrium exchange rate can be achieved. I wont go into detail on how to find the exchange rate in the diagram but when the two interest rates are equal (at parity) then we can determine the exchange rate.

Therefore if the domestic central bank were to increase the money supply, lower the interest rate, this would ultimately change the exchange rate with a movement along the interest parity curve. In this case, the exchange rate would increase making it more expensive to purchase 1 unit of foreign currency.

 I am pretty sure this is one of the targets of the Bank of Canada in the turmoil that has begun in both the American and Canadian economies. With the Canadian dollar rising exports become less attractive to the US and strangling the manufacturing sector and other exporting industries tremendously. If exports were more diluted throughout the world this would not be such a problem however so much goes to the US. With increasing the money supply the Bank of Canada can hope that the Canadian dollar depreciates and promote exporting activities (US importing). But ultimately it does not help that consumer spending is contracting as demand for goods decreases.

Its a tough time to live for many but a great learning experience at the same time. I don’t really know how applicable everything I talked about is to today’s economy because of the simplicity, but its one of the foundations on which we learn the more advanced and complex topics.

Monetary Policy - A student’s perspective Part 1

MONEY MARKET DIAGRAM (www.staff.ncl.ac.uk)

IS-LM MODEL (Wikipedia)

Monetary Policy - A student’s perspective Part 1

Monetary policy is one of the biggest topics covered recently in the news on a regular basis. It has been seen that the Bank of Canada (and of course the Federal Reserve of the United States) has been conducting such policy to inject liquidity into the market.

I have been fortunate enough to be taking a macroeconomics course since the new year began. One major topic that we continue to cover is the supply of money in the economy. I thought it would be interesting to bring all the concepts together and apply them to today’s monetary policy.

We will start with a basic financial market diagram covering the supply and demand for money and the effects it has on interest rates. The bank adjusts the money supply in the market by conducting open market operations (the buying and selling of bonds in the bond market). In the case of today’s market, the Bank of Canada is printing newly created money to buy bonds and thus increasing the money supply.

The equilibrium interest rate would occur when the supply of money is equal to the demand for money. By increasing the money supply this will shift the money supply (right) and ultimately lower the equilibrium interest rate. This is the description provided by a simple Money Market Diagram.

Now this can also be identified in terms of the IS-LM model which shows the relationship between interest rate (i) and aggregate output/income (Y). If you do not know what this model looks like it is basically a supply and demand graph where IS would replace demand and LM replaces supply. The interest rate is on the y-axis and aggregate output/income is on the x-axis. Ultimately only the LM curve is changed by a change in the money supply. Therefore incorporating the previous model with an increase in the money supply leading to a decrease in the interest rate can be applied. The LM curve shifts to the right (down). The equilibrium point has moved along the IS curve. Interest rate as we noted in the other model, is lower while the aggregate output/income is higher.

Just through this last model we can say that as the Bank of Canada increases the money supply the interest rate falls. However why would the aggregate output/income rise? Well let us define aggregate output/income (Y) in terms of an equation to better understand this. Y = C + I + G      Where C is consumption, I is investment spending and G is government spending. If  ‘I’ varies inversely with the interest rate (i) then it becomes a bit more clear. As the interest rate falls investment spending rises and increasing Y, as we mentioned happened in the IS-LM model. Investment spending rises when interest rates fall because the cost of borrowing is lowered and firms can borrow the money to buy more capital. This is one of the goals of the Bank of Canada that is seen every time they lower interest rates. They are trying to steer the economy in the ‘right’ direction to avoid a slowdown in the economy.

This is the first part on this topic, next will be dealing the exchange rate. Now off to class!

Monetary Policy - A student’s perspective Part 2

MONEY MARKET DIAGRAM (www.staff.ncl.ac.uk)

IS-LM MODEL (Wikipedia)

In the Classroom: Canadian Bank Act

I thought a great way to share some topics I am currently learning in my classes would be to start up “In the Classroom” posts on the various topics I think are important, interesting or just something to know.

What better way to kick it all off with some history that involves the financial sector since this is what the blog is all about. I hope to make this just a simple overview using class notes, my text books and a few websites. As you know from the title I will be covering the Canadian Bank Act.

What does the Bank Act do?

Regulates (governs) the chartered banks and members of the CBA (Canadian Bankers Association). You can click the link above “Canadian Bank Act” to be directed to the full version of the Act on the government website.

Key Dates:

1867 - Confederation of Canada. The federal government now had exclusive jurisdiction.

1871 - The first Bank Act came into effect. The important points were that the Act was to be revised every 10 years (now it is revised with interim dates approximately every 5 years) due to evolving changes in the financial industry. Also this gave the government legal jurisdiction over the chartered banks. The government monopoly on the issue of money began to arise starting with small Dominion notes of 1 and 2 dollars in value.

1881 & 1891 - Banking operations were opened up to allow for commercial lending. However a new barrier to entry was created in the form of a need for higher start-up capital.

1901 - The CBA was given the power to oversee the member’s actions and activities. Provided by the CBA is a interactive Banking Milestones section covering the major events in Canadian banking history.

1914 - Finance Act is created to make the government a lender of last resort.

1935 - Minor changes to build-in the addition of the Bank of Canada. Reserve requirements created.

1954 - Banks could now begin mortgage practices.

1967 to 1981 - Deposit insurance is created, reserve requirements continue to change, regulation continues to degrade to allow chartered banks to stay competitive by allowing them to engage in financial leasing and data processing. Canadian Payments Association is created to clear and settle payments between the banks.

1991 - A major revision took place due to fast technological advancement and innovation within the financial sector. Deregulation continued to allow banks to own trust companies, reserve requirements were abolished, chartered banks must be widely-held and the Four Pillars are essentially eliminated.

1998 (interim) - Bank mergers are denied.

2001 - Continued deregulation however still many barriers are in place to restrict things like mergers, insurance and non-financial activities. Still high restrictions of foreign banks from entering. An agency is created to promote consumer protection by ensuring financial institutions follow the policies created by the government.

And that is where we are right now in history. It is amazing how far we have come as a country in such a short period of time in history.

Book of reference: Money, Banking and Financial Institutions by Pierre Siklos

Keep in mind I am human and may have made a mistake in the writing of this so please consult other sources if you are using this as a resource or reference.  

Resource Review: Vault (Online Career Library)

A university library is an extremely resourceful tool that is often underused from my experience.

Just through the website of the university you have access to a plethora of information whether it be journals, newpapers etc. which many are provided free from the school’s subscription base.

There is one tool that is available called Online Career Library (powered by Vault). This site is the most useful resource I can find regarding career planning for students. This thing is so powerful and no one knows about it unfortunately.

To help better describe how great this site really is, we will use the Investment Banker as an example.

It beginsby giving a brief overview of what an investment banker is, some history, and the types of investment bankers. Also a great feature is the pros and cons of the career and the common personality traits that would make a good match as well as those that probably wouldn’t like it so much. The career path is also a nice touch.

 There is also the advice section that is comprised of several articles with a few I found very exciting “A Day in the Life”, “Sample Cover Letter” and “Investment Banking Breakdown” going into great detail to explaining a typical investment bank.

Some other resourceful portions of the site for students looking for employment: cover letter examples, resume examples, internships, thank you notes, interview advice and of course networking.

The Company Information section is very nice since its all very simple to read and well organized. They have virtually everything too.

A Message Board is available on the site but I found the layout messy and could be improved tremendously in that respect. For that reason I did not go through much of it but it does cover a lot of topics and could be very useful.

The greatest tool on the site, hands down, the guide sectionwith topics covering interview/resume, employer, career topics and industry careers. Large PDF files with a very large amount of information, you just cant beat it.

The birth of The Canadian Investor Within

While surfing the web for resources I could use to help plan my future in the financial industry, I found it very difficult to get all the answers I wanted and needed. Since becoming involved in the blogging community not too long ago I decided that it would be a great idea to create this blog to help map my way to achieving my dreams. I thought of it also to create a useful tool for others as a place to find information starting from a beginner’s level.

Currently I am in my early twenties and attending university in Ontario. When I first came to university I was enrolled in science focusing mainly on Biology and Chemistry. After two years of trying to find my way through the many different courses I took, I decided that although science is a huge interest to me, maybe it was not actually a career I wanted to take. It still amazes me that students should know what they want to do for a living when entering post secondary education. Anyways, I asked myself what I wanted to be, I knew what I really wanted was to dress up in a suit everyday and have a life where I was happy and well off after seeing my parents have a hard time taking control of finances. I want to say we were in no way poor by any means but living was tight (paycheck to paycheck). Not what I want. So I did some research, emailed academic advisors and decided on economics. Unfortunately business was not an option due to my poor quality marks in many classes previous. Now currently enrolled in Economics, I think I really found my fit. I absolutely love the classes, readings, history, application to everyday and the opportunity is provides me to achieve my dreams.

So here I go into to creating the blog tracking my progress, topics I find interesting, networking with other blogs and ultimately creating a useful resource for others to use that need help finding their way.