Reading 16: Organizing Production

SCW (8 Pages), CFAI (25 Pages)

Lessons Learned:

• Comparing explicit versus implicit costs
• Accounting only recognizes explicit costs
• Lots of cost-benefit references
• Lots of general business terminology, pretty self-explanatory
• Implicit rental rate = economic depreciation + foregone interest
• Table 4 on page 107 (CFAI) excellent summary of the different types of business organizations
• Table 6 on page 112 (CFAI) another great summary of the major market types and their characteristics
• Four firm concentration ration (100% monopoly, >40% competitive, <60% oligopoly)
• Herfindahl-Hirschman Index (10,000 monopoly, 1000-1800 moderately competitive, 1800 not competitive)

Post-Tests:

• CFAI: 64%
• Schweser: 77%

Reading 8: Probability Concepts

I found this reading the most difficult out of all the quant topics.  In general I find probability tricky, only because the formulas get so messy once you really get deep into the concepts.  As far as comprehension goes, the text is quite clear.

Lessons Learned:

• Even more high-school math I have forgot, particularly fractions
• The use of Venn Diagrams really helped me understand non-mutually exclusive results with the addition rule
• I originally laughed at the tree diagram…..now I am humbled
• Covariance, correlation and portfolio variance severely whooped my a$$
• Empirical v. a priori v. subjective probability
• The sign for “given/conditional likelihood”
• Multiplication rule of probability
• Remembering the and (x), or (+) rule
• Bayes formula was not as hard as I thought it would be
• Permutation formula was made much easier with the trusty financial calculator
• I’ve marked pages 206 – 216 to be fully review again, as I don’t think I have even a basic grasp….it was these few pages that comprised the hardest part of quant for me

Behind every good man…..

Is a shitload of redbull & full-throttle…….

Seriously though, i’d like to take this moment to thank red bull for allowing 4 hours of sleep to be more than enough.  Lets all bow our heads in appreciation.

Studying Starts Tommorow…..

Tomorrow starts my CFA mass studying.  Only about 3.5 months behind the regulars…..which is both motivating and slightly depressing.  However, I chose in January to take the CSC and CPH before the CFA and so far I don’t regret it.  Ask me in a couple days and I will likely have a different answer for you.  None-the-less its time to buckle down, log-in some insane hours, hope there is enough red bull to sustain me the next 2 months.  I have developed a system in excel that tracks my progress within each reading, including the pages read and the time spent.  Its extremely practical and requires very little attention.  I like to see progress, and what i have left to do so I think it will be a valuable addition to my efficiency and effectiveness.

Tomorrow the plan is to start on the first page of the first book.  My calendar says reading 1 and 2, but that is a guideline.  I will likely try to hammer out all of ethics, or at least a large majority of it.  Right now I am not sure what kind of pace I will be proceeding through the material, and that will affect any initial revisions I complete at the end of next week.  I also have a study group on Sundays which is just starting up, which I have chosen to not participate in. I can’t assume the meetings will be more effective then personal study time, as the CFA-L1 is said to be almost entirely conceptual.  Working in teams has to many complexities in setting up and administration that I don’t have the luxury to waste.  Furthermore the travel time is only justified if I can justify the end result, which I can’t in this case.  I can justify the 3 times a week I travel to the gym to train for some upcoming marathons.

My plan for this blog (hopefully) is to complete a post per day on all of the items I have covered.  If I cover three readings, I will make one post with all those reading.  Unlike the CSC and CPH I wont be making an individual post for every reading as that would detract from my studies to much.  I think a post per day in relation to the material I have covered is adequate.  I will try to upload other content as it becomes relevant in the course of my studying.  From here I am going to upload some links to the site, and play with the lay out a bit and then head over to analyst-forums for a quickie.  I have a bunch of odds and ends to wrap up today as well, so hopefully the red bull lasts long enough to keep the blood flowing.

- Steve

Schweser thought it had the secret sauce……plllllllllease