Contrarian and Value Investing

Contrarian and Value Investing

Du bist alles was Ich brauch… Du bist die Große Liebe – Fler

Contrarian investing refers to investing contrary to what most other investors are doing. As per the name, contrarians buy stocks at distressed prices when all seems to indicate that the stocks are an unlikely win. In theory, after a while such stock would go up in price and value and thus the contrarian investor would make a profit. Remarkable contrarian investors include Warren Buffet, one of the richest billionaires in the world. Warren Buffet has been quoted as saying that the only way to get ahead in finance in America was to believe the world was flat (paraphrased).

Value investing is similar to contrarian investing, and at times the two have been compared to the point of showing no clear distinction. Again value investing relies on buying and owning shares of companies which are going down in the market. Contrarian investing has a lot to do with behavioural finance. Behavioural finance is a field of finance involving input from other social sciences, such as psychology, sociology and political science. Psychologically speaking, going against the herd is rather a rarity, although contrarian investors are often very successful.

Fire Place. Photo by Elena

The Gambler’s Fallacy is another paradigm involved with behavioural finance. According to this theorem, many people lose a lot of money at the slot machines in the casinos. For example, they sit at the same machine for hours, delusion ally believing that the machine is about to win since it has not reached the jackpot in a while. Such misunderstandings of reality have to do with poor understanding of probability theory. Indeed, the machines are programmed in such a way that the chances are the same of hitting the jackpot regardless of how long the machine has delivered.

Stockbroking

Stockbroking

A stockbroker is a broker who buys and sells securities on behalf of clients on a stock exchange market. Securities refers to certificates documenting ownership of stocks, bonds or other financial instruments. Stockbroker is a regulated profession in the financial services industry, typically licensed after passing a series of professional examinations. The FINRA (Financial Industry Regulatory Authority) has an explanatory list of all the professional designations that stockbrokers use.

In Canada, a stockbroker is usually called a Registered Representative or Financial Advisor. In order to provide investment advice and practice other services related to the profession, the individual must successfully pass the CSC (Canadian Securities Course), in addition to other exams and certifications. The financial services industry is indeed a very regulated one, both for the protection of investors and the general public.

Growth. Illustration: Elena

Historically, Wall Street and brokers were associated with a lot of glamour, power and money. However, since the financial crisis and various scandals affecting the trading and exchange industries, stockbrokers’ reputation has somewhat taken a turn downwards. Still, many professions in finance and accounting (a closely related industry) continue to command very impressive salaries. For example, it is not uncommon to see online job boards advertisements with salaries hovering around six figures for professions such as Controller or Comptroller (British spelling). A Controller is usually a senior accountant overseeing all accounting activities and financial operations of a company, with a professional accounting designation and extensive experience in the accounting field.

Other related professions include, but are not limited to, Investment Advisor or Financial Advisor. Notwithstanding, a Financial Advisor may or may not be a stockbroker, since depending on the license they hold they may or may not be allowed to sell stocks. Still, some persons hold several licenses and are thus capable of providing a wider range of financial advice and financial services. On a different note, Wall Street and stockbrokers have often been depicted in the popular media, in movies such as Wall Street with actor Charlie Sheen and the sequel Wall Street: Money Never Sleeps.

Angel Investing and Venture Capital

Angel Investing and Venture Capital

You are my angel – Massive Attack

As the name implies, angel investors help start-up businesses providing initial financial capital. Hence, angel investors, also called business angels, invest into start-ups, usually in exchange of debt or equity. Historically, the term “Angel” came from Broadway, where affluent or wealthy individuals sponsored theatrical plays. Professor William Wetzel from the University of New Hampshire was the first to use the expression.

Interestingly, many angel investors are entrepreneurs or executives who have retired, but support firms for other reasons than purely monetary ones. Also, future entrepreneurs often meet angel investors at investor conferences and symposia. Moreover, angel investors often form groups to facilitate due diligence and to pool investment capital into one investment vehicle. Further, in the United States of America, the Center for Venture Research keeps track of how many active angel investors there are in any particular year.

Listen what the crystal ball say – ASAP Rocky. Image: Elena

Alternatively, venture capital is another type of investing for start-ups. Venture capital is start-up capital usually given to high potential, high-tech companies, such as in the biomedical engineering field. Along these lines, the venture funds earn equity capital to venture capital investors because they now own part of the company invested in. Many people want to be venture capitalists, a dream or desire only normal given that it is safe to say that most people want to be rich or richer. In Canada, venture capital is not necessarily obtained from individuals, but also from grant distributing companies such as the BDC (Business Development Bank of Canada).

Indeed, the BDC represents a major venture capital investor in Canada. Moreover, venture capitalists take significant risks by investing in companies which often do not qualify for bank loans, but they also gain the advantage of owning a fundamental part of the company. Moreover, venture capital corresponds to private equity. Further, a venture capitalist is a person who makes venture investments. However, such persons also help companies in other ways, such as by bringing their managerial or technological expertise. A venture capital fund refers to a pooled investment vehicle.

Leading a Team: Four A

Four A - Leading a Team

One of the most important roles of a leader is to lead and increase the performance of his team. Researchers have shown that the dynamics of teams go through comparable phases. The common themes of these phases can be summed up in Four A: awakening, antagonizing, assimilating, accomplishing.

Awakening

This phase is the first and here individuals get to know one another. This period is characterized by the following:

    Desire for acceptance

    Serious issues avoided

    Impressions being made

    Individuals working independently.

The leader of the group guides and directs his team which is dependent on him. The leader must be prepared to answer a lot of questions and provide a shared understanding of the team’s purpose. He must clear expectations about the roles and responsibilities of team members and set values and acceptable behaviors for working together.

Leadership is the art of getting someone else to do something you want done because he wants to do it” (Dwight Eisenhower). Photo: Megan Jorgensen (Elena)

Antagonizing

After a team has formed, it goes through a challenging time characterized by team:

    Addressing issues and beginning to solve problems

    Opening up and challenging each other’s ideas and points of view

    Spitting into factions

    Competing for power and attention

    Developing negative feelings such as confusion and low trust.

In this difficult phase, a leader needs to clarify the big picture and overall objectives. He is also required to restate the values, goals and objectives of the team. His communication skills are also important here, in providing constructive feedback and facilitating open and honest discussion.

Assimilating

During Assimilating, the team begins to positively assimilate with one another, characterized by the team:

    Developing shared goals

    Developing trust and respect

    Giving up some of their own ideas and adopting those of others.

The leader of the team is required to reinforce the positive integration of the team. He should encourage the building of trust, the sharing of perspectives and also recognize the successes of the team.

Accomplishing

In the final phase, the team begins accomplishing, and this phase is characterized by a few important elements:

    Clear understanding of objectives and mutual plans

    Open and trusting communication

    Shared responsibility and working together for the success of the team’s goal

    Respect and appreciation for one another

    Positive feelings such as confidence and high morale.

The leader’s role becomes one of facilitation and enablement. It is important to recognize the team’s achievements and provide new challenges, opportunities for growth and learning.

Overall, leading a team means recognizing that it is not enough to simply get the tasks done well; it is also important to develop and maintain the group’s cohesion, harmony and unity. The role of the leader is to move the team through the different stages of development. This assumption also means that if the team regresses and goes back to an earlier stage, it is necessary to apply the leadership suitable for that circumstance. Ultimately, a good leader is one who achieves a high-performance team that has little need for their management.

Bibliography:

• Adam Riccoboni, Daniel Callaghan, The Art of Selling Yourself.
• Ken Blanchard, Situational Leadership
• Robert Tannenbaum, Warren Schmidt
• Bruce Tuckman, Form, Storm, Norm, Perform.

Thalamus and Vision

The Thalamus and Vision

The Thalamic Involvement in Vision

Aside from Bruce Willis starring movies such as The Sixth Sense, humans are generally believed to have five senses: vision, hearing, touch, smell and taste. In neuroscience, these are subdivided into the sensation, perception and interpretation stages. Thus, vision would first be acknowledged by receptors (rods and cones in the retina at the back of the eye), then transmitted to the brain’s “relay station” — the thalamus, and finally processed in the visual cortex in the occipital lobe.

Further, the thalamus is composed of three elements: the lateral geniculate nucleus, the pulvinar and the thalamic reticular nucleus. Moreover, thalamic neurons come in three types: magnocellular, parvocellular and koniocellular; each contributuing diversely to visual input processing and connecting to dissimilar layers of the visual cortex.

Saalmann & Kastner (2009) explain that there is agreement in the literature that the thalamus relays sensory signals to the brain. However, in their account, the researchers demonstrate that the real picture is much more complicated, engaging the contribution of the pulvinar and geniculate nucleus, and awarding greater control to the structure over vision in general.

When objects move too quickly, they are seen as blurry. Fantasy art girl. Image: Megan Jorgensen (Elena)

Rees (2009) adds credence to the above affirmation, reiterating that evidence is growing that the thalamus is more active in directing the specific perceptive ability. So, it may be that thalamic nuclei determine where observatory attention is allocated.

Whether the role played by the brain region of interest in this brief essay is primary or secondary in administering this particular human sense, fMRI, electrophysiological and histological data are continuing to shed light on the subject. For a more detailed mapping of the brain area, one is referred to Krauth et al. (2010).

References:

• Krauth, A., Blanc, R., Poveda, A., Jeanmonond, D., Morel, A. and Szekely, G. (2010). A mean three-dimensional atlas of the human thalamus: Generation from multiple histological data. NeuroImage, 69: 2053-62.
• Rees, G. (2009). Visual attention: The thalamus at the centre? Current Biology, 19 (5): R213-4.
• Saalmann, Y. B & Kastner, S. (2009). Gain control in the visual thalamus during perception and cognition. Current
• Opinion in Neurobiology, 662 (19): 1-7.[Article in Press; available online at http://www.princeton.edu/~napl/pdf/Saalmann_Kastner_09.pdf ]

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