Sunday, December 11, 2011

How much attention Energy Giant pays to renewable energy?


I guess you can imagine how expensive nowadays to extract oil and gas, with the remaining traditional energy running out at such a fast pace - in fact, the cost of exploration has been a major part of expenditure for Big Oil and Gas. It made me think of a question: what are they going to do about it? Do big oil and gas companies (I mean REALLY big ones) continue on using high-tech exploitation technique hunting for and extracting that X% of oil underground? Or they probably are changing their strategy (at least as some of them claim), spending more R&D resource, time and money on developing renewable energy? If so, how well are they doing?

Some of them seem pretty optimistic, like Exxon Mobile. "HALF the cars on the world's roads will be environmentally friendly hybrids or electric vehicles by 2040" - this is what they said (Read more here). But the question remains: what are their bases by saying so? And, how much money do they spend on renewable energy exactly over the years?

Here are some of my hypothesis:

1. Main focus of the Big Oil and Gas is still traditional energy. Instead of spending much attention on R&D of alternative energy, they are spending more time and money on technology with traditional energy.

2. Even if in 2040 (as projected by Exxon in the graph above), the main source of global energy will still be oil and gas (the percentage of its composition will be even higher than it is in 2010). It is thus not a surprise why financial market still account for traditional oil and gas as a reliance so much, and that energy sector are still strongly engined by traditional energy.

3. How long will it take before alternative energy (solar, wind, nuclear, biomass, hydro) can be truly competitive in the energy market? Maybe a few more decades, at least. 2040 or 2050 maybe still be an optimistic estimate.

- Cathy Xuege Lu

Friday, December 9, 2011

Ridiculous Purchasing-Power Parity

Enforced by U.S., China’s currency yuan is sharply appreciated during the past several years. However, the large trade surplus in China is just an excuse for U.S. to appeal for the appreciation of yuan.

Why China has a large trade surplus while U.S. has a massive trade deficit? It is primarily attributable to different saving rates. In China, people have been used to saving relatively large proportion of their income. Meanwhile, compared with U.S. government, China’s government does not deplete its budget to improve people’s living standard. In other words, U.S. citizens have been enjoying their lives with much more consumption and much higher pension, unemployment insurance, healthcare, and so forth. On the other hand, China’s citizens have sacrificed their current enjoyment and happiness, hoping that their elder lives will be better off. Unfortunately, their “hopes” would become “wishes” because yuan is thrusted to appreciate, resulting in significant cuts in exports and GDP.

Worse yet, the so-called purchasing-power parity only takes into account the inflation rates in countries but ignoring the distinct income standards. According to current goods prices, the purchasing-power parity is basically realized between China and U.S.. However, people in China and in the U.S. earn almost the same number of income with different currency units; that is, Chinese people earn yuan, whereas U.S. people earn dollars that is approximately 6-folds of the value of yuan. Apparently, this purchasing-power parity merely focuses on “absolute equality” rather than “relative equality”. If equality is the reason why U.S. enforces China to appreciate yuan, then it will also become the reason that China should depreciate yuan.

U.S. probably further contends that China has a very high trade surplus. But please do not neglect that it comes from China’s less expansionary fiscal policies. China’s reap from exports is at the expense of its citizens’ short-term benefits. If U.S. government would like to increase its exports, it can either employ its fiscal policies to accumulate savings or utilize its monetary policies to increase its real interest rate.

U.S. should not use the purchasing-power parity as an excuse to ask China to appreciate its currency. How come Chinese people thrift and cannot obtain better lives? How come U.S. squanders and keeps squandering by pressuring China to forgo its harvest?

Judy Wang

Thursday, December 8, 2011

2012 Job Application Session


Applications for 2012 are already happening. In some banks they've been open for a few months already. Now is therefore the time to brush up your resume and start applying for student jobs.
I’ve put together a list of banks, with as much information as I can find about when their recruitment process starts, and when the deadlines are. Although we have already missed several deadlines, there are still plenty left. Please find your interested position below. Good Luck!
Barclays Capital
Summer internship applications:
Opening date – 1st August 2011
Deadline – rolling, no date specified
Full time graduate programme applications:
Opening date – 1st August 2011
Deadline – rolling, no date specified
BNP Paribas Corporate and Investment Bank
Summer internship applications:
Jobs already being advertised!
Deadline – 31st January 2012
Full time graduate programme applications:
Jobs already being advertised!
Deadline – 30th November 2011
Goldman Sachs
Summer internship applications:
Opening date unspecified.
Deadline – 4th December 2011
Full time graduate programme applications:
Opening date unspecified.
Deadline – 8th January 2011
Citi
Summer internship applications:
Jobs already being advertised!
Deadline – not specified.
Full time graduate programme applications:
Jobs already being advertised!
Deadline – not specified.

Credit Suisse
Summer internship applications:
Opening date not specified.
Deadline – 11th January 2011
Full time graduate programme applications:
Opening date – not specified
Deadline – 30th November 2011
Deutsche Bank
Summer internship applications:
Opening date – 1st September 2011
Deadline – 13th January 2011 or 17th February 2011 (depending upon programme.)
Full time graduate programme applications:
Opening date – 1st September 2011
Deadline – 11th November 2011
HSBC
Summer internship applications:
Opening date –early September 2011, but website hasn’t been updated yet to allow applications.
Full time graduate programme applications:
ICAP
Summer internship applications:
Jobs already being advertised!
Deadline – 29th January 2012
Full time graduate programme applications:
Jobs already being advertised!
Deadline – 27th November 2011 
J P Morgan
Summer internship applications:
Jobs already being advertised!
Deadline – 8th January 2011
Full time graduate programme applications:
Jobs already being advertised!
Deadline – 11th November 2011
Lazard and Co
Summer internship applications:
Opening date – 4th July 2011
Deadline – 16th November 2012
Full time graduate programme applications:
Opening date – 4th July 2011
Deadline – 26th October 2011 
Macquarie
Summer internship applications:
Opening date – not specified
Deadline – 4th January 2011
Full time graduate programme applications:
Opening date – not specified.
Deadline – 7th November 2011
Morgan Stanley
Summer internship applications:
Opening date – some open already.
Deadline – Varies. Some close 4th December 2011 (eg investment banking).
Full time graduate programme applications:
Opening date – some open already.
Deadline – Varies. Some close 6th November 2011 (eg equity research)
Nomura
Summer internship applications:
Jobs already being advertised!
Deadline – 8th January 2011
Full time graduate programme applications:
Jobs already being advertised!
Deadline – 20th November 2011
RBS Global Banking and Markets
Summer internship applications:
Opening date – 1st August 2011
Deadline – 31st January 2012
Full time graduate programme applications:
Opening date – 1st August 2011
Deadline – 13th November 2011
Standard Bank
Full time graduate programme applications:
Opening date – 1st September 2011
Deadline – 6th November 2011 (UK Graduate Programme)
UBS
Summer internship applications:
Jobs already being advertised!
Deadline – 30th December 2011
Full time graduate programme applications:
Jobs already being advertised!
Deadline – 7th November 2011
-Maisy Zhou

Sunday, December 4, 2011

New President - New Team

All,

The past 12 months have been very busy for the Equity Analyst Team.  From the numerous trips to NYC and Boston to working seven days a week on analysis we had an opportunity to learn from one another and to create an organization which is second to none.  All of the ups and down brought our team closer and though many times we felt that the work load was too much for us, overall we benefited tremendously.  I created this team as a training ground for those that want to enter the asset management industry and want to bridge the gap between academia and real world application.  Though I have enjoyed my time as President I think it would be best if I step aside and let another capable person take over the responsibilities.  As we conclude this year I will be giving up my position as President and will become an Advisor of the team.  As I leave my position I will be replaced by Maisy Zhou who will continue to build upon the success which we have experienced.  Maisy will be supported by Dr. Ken Yook and Nathan Foley-Mendelssohn (Portfolio Manager) who have been serving as Advisors.  I hope that you will continue to support the team as you have supported me.

Happy Holidays!
Saliq Khan

Discussion Topic 5/12/11 (Mon)

Topic: China Stocks Rally, Rate Swaps Slide on Reserve Requirement Cut

Link: 
http://www.bloomberg.com/news/2011-12-01/china-stocks-rally-most-in-5-weeks.html

Questions:
1. Do you agree that "China’s decision to cut the reserve-requirement ratio will benefit small banks, brokerages, material producers, property developers and insurance companies the most"? If so, why? If not, who are the biggest beneficial entities instead?
2. It is said that China is shifting its focus from anti-inflation to economic growth stability, do you agree or not? Try to answer the question based on what you know about the overall economic growth, inflation rate, and other indicators of China in the past few years.
3. Please briefly comment on what impacts you think yuan (RMB) will continue to have on global market.

Brief Introduction to ADRs (Part I)

By Rui Li

Based on what we have discussed today, I would like to share my internship experience in Deutsche Bank with you guys. I interned in Global Equity Service Department this year and mainly focused on ADRs. The followings are the brief introduction to ADRs, which is from the Deutsche Bank's advertisement materials to clients. Hope it may be some help.

What are Depositary Receipts?


Depositary Receipts (DRs) are a derivative-type instrument issued by a depositary bank, an agent of the underlying issuer of securities.
DRs evidence ownership of certain rights and entitlements to the underlying shares, as well as imposing obligations on the holders and beneficial owners of DRs by virtue of such ownership.
Shares underlying DRs are held in custody in the applicable local market of the foreign issuer by the depositary bank are registered in the name of the depositary bank or its appointed nominee.
DRs are customarily issued in book-entry form through the U.S. clearing system of DTC and/or the European clearing systems of Euroclear and Clearstream, depending on the structure of the DR program, but may also be issued in physical certificated form in the case of American depositary receipts.
DRs trade in U.S. dollars and settle and clear in either the U.S. markets (through DTC), in the Euromarkets of London and Luxembourg (through Euroclear and Clearstream, Luxembourg), or in a combination of both the U.S. and Euromarkets with settlement through all three clearing systems.
Historically, DR program establishments tended toward international public offerings listed on major U.S. stock exchanges by blue-chip, mostly European, non-U.S. issuers.  More recently, tendencies have seen greater focus from emerging market issuers completing international offerings listed on European stock exchanges.

Why Do Investors Buy Depositary Receipts?
DRs enable investors to acquire and trade non-U.S. securities with ease of settlement, foreign exchange procedures, absent the need for local custody set up and associated costs
DRs are usually denominated in U.S. dollars with dividend and other payments paid in a foreign currency other than U.S. dollars in respect of the DRs being converted into U.S. dollars by the depositary bank and distributed, net of conversion and distribution costs, to DR holders
DRs diversify an issuers investor base and widen the portfolio pool available to investors in satisfying U.S. and European investor appetite for overseas, particularly emerging, markets
DRs simplify the trading and settlement of foreign equities - trading and settling just like U.S. or European securities
Many U.S. bank and pension fund portfolios may be prohibited by their charters from purchasing foreign securities.  American Depositary Receipts (ADRs), however, are recognized as U.S. domestic securities and are eligible for investment by such portfolios

Why Do Companies Issue Depositary Receipts?
To raise capital by extending into a wider pool of capital and investors
To facilitate higher valuation of stock
To diversify shareholder base into wider geographies
To increase visibility and issuer name recognition in international markets
To improve liquidity of underlying shares
To create an equity financing tool for use in mergers and acquisitions
To enable the structure and set-up of Employee Stock Option Plans

(to be continued...)




An illustrative graph to adopt for stock pitching

10 for 2011 Q3.png
*The above graph is created by Tom Konrad CFA

So...as we were talking about stock pitching today during the meeting, I found this amazing graph that fits my interest a lot. As you may know, I am in for everything about energy. But I am not talking purely about energy sectors - what I am saying is, it may be a good idea to start looking at your portfolio (if you have one) and break down to their performance - you would then realize whether you are making the right choice:

1. Choose your benchmark (ex. PBW as above)
2. Pick up ten (or more/less as you want) stocks
3. Trace down their performance by looking at their quarterly financial statement
4. Done!

As you can see, the graph above shows a not very fortunate picture: 5 out of 10 stocks were completely slipping downwards. But, my suggestion is to be very cautious towards holding/selling some of these stocks - because remember, this graph only shows very limited information of the whole company. You definitely want to dig into more details on its exact stock price and more importantly, I would suggest looking around, see what other stocks in the same sector are performing, especially its macro environment and outlook - after all, stock pitching is about investment in future (no matter short-term/long-term), as well as picking up the "comparative advantage".

But still, one question I haven't figured out, how do you choose benchmark(s)?

- Cathy Xuege Lu

Friday, December 2, 2011

Discussion Topic 2/12/2011 (Fri)


Topic: Stocks soar after central banks ease banks' access to dollars, reducing fears of credit crunch

Links:
1. http://online.wsj.com/article/SB10001424052970204012004577069960192509068.html
2. http://finance.yahoo.com/news/stocks-leap-central-banks-coordinated-144638713.html

Questions:
1. What do you think are the reasons behind the move of central banks this week?
2. Considering the positive performance of stock market after central banks' sudden action, do you think it will sustain, and for how long?

Jobs Lost = Weight Lost

I thought it would be interesting to do a regression analysis on the unemployment rate in the U.S. vs. weight loss vs. weight gain, but unfortunately there is only one type of correlation and that is time vs. weight gain in the U.S.  The line just goes up every year....we are one rich (fat) economy.



Back to the main topic.  The unemployment numbers were posted today and it seemed like a good portion of the college students became optimistic about the prospect of finding a job.  The economy added 120,000 jobs last month, but someone should let them know that the reason the unemployment rate dropped from 9% to 8.6% this month is not because there are that many more jobs which became available over the course of this month, but because people are so frustrated and discouraged with this economy that they have decided to sit on the sidelines.  At 64% participation rate in the labor force, we have just experienced the lowest level of participation since the early 1980s.  The other element was the number of people who decided to part-time jobs so they could to pay their bills.  Both of these factors played into the massive drop in the unemployment rate.  Sorry to burst your bubble, but it was going to happen sooner or later!

The good news which came out of today's jobs numbers is that the number of jobs created in September and October were revised up and this had a positive impact on the unemployment rate.  Once again I have to be the bearer of bad news: the unemployment numbers tend to be better during the year end due to temporary employment for the holiday season.


- Saliq Khan