Monday, June 7, 2010

“Investment Policy Pitfalls - Yahoo Finance” plus 3 more

“Investment Policy Pitfalls - Yahoo Finance” plus 3 more

Investment Policy Pitfalls - Yahoo Finance

Posted: 07 Jun 2010 01:14 PM PDT

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It has always been a standard practice to have a robust investment policy statement (IPS) for institutional investors, but what's interesting is that this practice has become more common among individual investors. In fact, it has become a requirement for investment firms to have this statement drafted and agreed upon by the investment manager and his or her clients. This is also one of the first documents the Securities and Exchange Commission (SEC) will sample during an audit. This is not a bad thing: A good policy not only keeps the overall investment plan well grounded, but it also provides a road map to develop specific asset allocation strategies and detailed investment guidelines. Here we take a look at this document, and show you some of the common pitfalls investors fall into.

Do It Yourself
There are some basic must haves for any good investment policy, including specific details unique to each investor, investment time frames, investment goals and basic starting points for each asset class. It is also important to actually follow the policy and remember it is the backbone of your long-term plan.

While it's tempting to grab any off-the-shelf policy, there are some common pitfalls with this method that are avoidable if you know how to spot them. The importance of an investment policy tailored to your personal characteristics has become even more apparent during the multiple market gyrations over the last 10 years. In fact, the investment policy statement is now considered to be the main step in using a sound investment philosophy to set detailed investment guidelines.

Elements of a Good IPS
Typically, an investment policy statement is a formal agreement between the investor and the institution managing the assets on the investor's behalf. If you are managing your own assets, it still makes sense to develop a policy to keep your strategy in line. Whether the IPS is generated by the investment manager or the investor, one common pitfall is to gloss over many areas and not drill down to quantify the details. Considering how important the IPS is - it's actually required by law under ERISA and most RIA applications - it's clear that this step is not to be taken lightly. Here are the basic must haves for a good basic policy:

  • Specific factual data unique to the investor (such as personal preferences)
  • Time horizon
  • Goals
  • Risk tolerance
  • Rebalancing guidelines
  • Asset classes to avoid
  • The control framework that will guide the strategies in every market condition

Never Enough Time
Time horizon is one of the most misunderstood concepts when it comes to investing. Many investors assume their time horizons are much shorter than they actually are. This leads to the same asset allocation mistakes over and over again. Your time horizon is not the day you retire or even the day you pass away and leave your financial legacy for your beneficiaries. An investment time horizon can be much longer than most people think - it can even extend into the next generation if the investments are to be passed on. Ensure your time horizon is appropriately identified prior to the start of the investment process.

Eyes on the Prize
Investment goals are vital when developing an investment policy statement. A common mistake is to choose goals that are either too general or simply not realistic. Goals like "make money" or " get good returns" are just not relevant. Goals should be specific to your long-term philosophy, creating a natural stepping stone to your investment guidelines. For example, a goal may be a 10% return on risk capital with the plan of using that 10% return for an annual vacation. This goal sets a distinct target return and a potential use of those returns. This is a short-term goal that can fit in a longer term philosophy melding lifestyle and wealth goals.

Let's Talk About You
There should also be some specific language relating to the investor's unique characteristics, including liquidity needs, minimum yield requirements, fiduciary responsibility and specific delegation of authority. This type of information is unique to the investor, so it is impossible to use an off-the-shelf IPS. As the IPS becomes a legal requirement for various kinds of asset managers, there is the temptation to just fill in the blanks of a template, but the best method is to construct them from scratch.

Follow Through
The IPS is a written document signed off and agreed to by both the investor and investing company, so there is no excuse for not following it. For those who are relatively new to the IPS concept, it is quite common for the first run through on the IPS to be off slightly. In this case, the investor naturally tends to move away from the original version.

Since the IPS is an extension of the investor's philosophy and leads directly into his or her specific investment strategies, there is room to adjust. Just remember to make the adjustments early on to create a plan you can stick to as soon as possible. It is generally against the law for investment firms to stray from their previously agreed upon IPSs. Also, switching strategies too often will not only make it impossible to give your strategy a fair test, but it will also incur fees because you will have to alter your portfolio to match your strategy. However, it is always OK to take a step back, make adjustments and have both parties agree on the changes.

Use Plain English
Another common pitfall in the development of an IPS is to use language that is either too broad or too restrictive. Both are fatal errors that can create confusion and make it very difficult to follow the IPS. It is not necessary for an IPS to be a long, drawn out document with never-ending legal language. It helps both parties when the IPS is both easy to understand and interpret - that is, clear and consistent with the investor's well-defined goals.

Language that is too broad can lead to trouble down the road, especially during volatile market times when investors are tempted to make short-term decisions not clearly defined by their IPSs. It is also important not to overwrite the IPS – something investment managers may do to cover all their risk areas. The problem with a very long IPS is that the meaning can get lost in the language and it can be open to legal interpretations in the case of investment losses or errors. It's a good rule of thumb to keep it simple, use bullet points where the details need to be highlighted and make certain that the document is reviewed at least annually to make sure it still applies.

How Long Should It Be?
While there are no direct rules on how long an IPS should be, you can expect between three and eight pages to cover the needs of most individual investors. A document any longer than that will lead to complications; a document any shorter than three pages may just gloss over key areas.

Bottom Line
The IPS is an excellent way to come to a long-term agreement on how you or an asset manager will manage your portfolio. If you avoid the common pitfalls many investors and investment managers make when drafting your IPS, you will have a time-tested road map for the future of your investments.

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Avoid Disaster: The Merits of Hindsight in Advance - Huffingtonpost.com

Posted: 07 Jun 2010 02:54 PM PDT

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In a June 2 interview with the Financial Times, BP Chief Executive Tony Hayward openly admitted BP was not prepared for the kind of disaster that has been unleashed on the Gulf. In classically understated form, he said, "What is undoubtedly true is that we did not have the tools you would want in your tool-kit."

While the American public expresses their entirely justified, though impotent, rage with BP for causing this horrific tragedy, virtually everyone is asking BP the same question: How can you have no disaster plans in place in the event something like this goes wrong?

BP spokespeople assertively state in television interviews that "we had backups," "we had checks in the system," "we followed the established procedures that have allowed these drill sites to operate safely for years." Such misdirected answers only serve to further enrage us because they essentially say, "This should have worked," rather than fully acknowledging it didn't and that the consequences will cost America, indeed the world, dearly for generations to come.

What we're seeing with BP is a gigantic manifestation of a common pattern I see routinely in human behavior that, in my opinion, people just don't recognize nearly enough. It's a pattern that occurs in corporations and governments, and exists at the level of individual lives as well. Consider these varied examples:

  • A bridge in Minnesota collapsed several years ago and killed unfortunate drivers crossing it. Structural engineers had said many years earlier that a collapse was imminent unless repairs were performed right away. They weren't.
  • More than 50 million Americans poison themselves one cigarette at a time and end up in shocked disbelief when they receive a cancer diagnosis. Their entirely preventable smoking- related diseases cost the health care system, and we who help pay for it, huge sums of money. Furthermore, their untimely deaths cause irreparable harm to those they leave behind.
  • Teens become pregnant without realizing that their freedom to party has changed and their level of responsibility has increased exponentially. When they resent the new restrictions, they harm the well being of their child who is treated as little more than an inconvenience.
  • People spend money they don't have on things they don't need, only to find themselves way behind with no options beyond bankruptcy.
  • Consider yet another huge example: Former President George W. Bush confidently told the country that, "The Iraqi people will welcome us with open arms as liberators. They will celebrate the American people." Great. But...what if they don't?

I can go on giving endless examples of the same destructive pattern. The pattern I'm referring to, if you haven't yet figured it out, is the focus on now to the exclusion of realistically considering what may come later. It's acting without thinking ahead, doing without regard for possible consequences.

What might happen later, for most people, is so far removed as to be invisible and irrelevant. Why? Is it human nature to want what we want without the foresight to realize that what we want can harm us (or somebody else)? Is it simply sloppy thinking that can be retrained to help people better anticipate and extrapolate from current conditions?

As a clinical psychologist, I am routinely dealing with people's life problems. There are many different ways to categorize people's problems, of course, but one way is to distinguish those problems that we had no part in creating from those that we caused ourselves through our lack of foresight. Most of the problems I treat are in the latter category, and I'd be willing to bet that most clinicians would say the same thing. People do things without foresight and then pay the price later in symptoms and misery that just a little bit of forethought would have prevented.

The "philosophy of now" is currently very popular. No surprise, because it emphasizes that "the past is gone, the future hasn't happened yet, so this moment is all there is." It's an unintended consequence and the product of misinterpretation, but too many people absorb the wrong message by taking to heart the idea that the future can't be predicted. They absorb the philosophy that "life is what happens to you when you have other plans" and use it as an excuse to "live for the moment."

The "philosophy of now" discourages planning, discourages detailed consideration of possible consequences for the actions of now, and makes it possible to delay dealing with whatever seems easier to avoid right now. Avoidance of the unpleasant is a poor problem-solving strategy. It's not pleasant to consider what happens if the regulator fails at 5,000 feet below the surface, but it's essential if you want to prevent an environmental disaster of global proportions. It's also essential if you want to resolve tough issues such as global warming, immigration, and just about every other problem you can name.

For the people who suggest we go "back to the old days and old ways," sorry, but that ship has already sailed. New conditions that human beings have never faced before can't be resolved by old strategies. For those who think you can't be too conservative, and liberal is a dirty word, the rules of conservativism can too easily demand conformity to principles of unfettered freedom that cater to companies like BP, willing to sacrifice others in their pursuit of selfish interests.

The view that freedom matters more than responsibility no longer works well in a world where an oil "spill" (a weak little word for a disaster of such huge proportions) or an unregulated industry can unleash a level of damage that can doom us all. For the people who believe you can "drill, baby drill" without ever paying a massive price when human error is inevitable, you should know that anything that has the potential to devastate both people and the planet that relies on human foresight is simply a foolish risk. (Oh, did I mention the radioactive waste water found leaking at the nuclear plant last week?)

The future can't be predicted? Actually, that's not true. Aspects of the future can't be predicted, but a lot of the future can. If you smoke, I can predict your health years from now. If you cheat on your spouse, I can predict what will happen when you get caught. When you abuse your child, I can predict what his or her future will look like.

How can we encourage foresight in people when we only teach them the philosophy of now? The first step is teaching this most basic principle: It's possible to have hindsight in advance.

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Videre Design™ LLC Introduces the ERA-XTD: A New ... - PR Inside

Posted: 07 Jun 2010 03:01 PM PDT

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2010-06-08 00:02:28 - A Low-Cost, Powerful, and Ready-To-Run Platform That Speeds Application Development

Menlo Park, CA - For Immediate Release – Videre Design LLC, manufacturer of stereo vision cameras and the powerful Erratic™ family of mobile robots, announces the availability of the ERA-XTD robot platform. The ERA-XTD offers a fully loaded mobile robot with a complete set of sensors, a stereo vision camera, an integrated PC, and advanced open-source software. With ERA-XTD, researchers

and commercial developers have everything they need to begin their robotics development.

"Through the use of off-the-shelf, high quality components, Videre Design is able to offer compact, affordable and powerful mobile robot platforms said Janet McLaughlin, CEO of Videre Design. "The ERA-XTD is an all-purpose robotic platform that saves researchers and developers time and resources, and provides them with a solid test environment for their applications

The Potential of Robotics and Videre Design's Philosophy
Robotics technology holds the potential to transform the performance of many day-to-day tasks. It is likely to become as pervasive over the next few decades as personal computing technology is today. From assisting an aging population, to tracking endangered species in the Gulf of Mexico, today's robotic applications are found in a wide range of areas that are pragmatic, affordable, and provide real value. Countries around the world recognize the indisputable need to advance robotics technology. Yet, according to a report by IEEE Spectrum published in April 2010, the overall number of service robots sold in 2009 is still quite low. Why? There are a number of reasons – certainly, the economy and budget cuts are contributing factors; however, there is a large investment of time and difficulty in developing a robot from scratch.

Videre Design employs a design philosophy that incorporates a set of qualities based on the vision of Dr. Kurt Konolige, designer of the Erratic family of robotic platforms. Founded on the fundamental tenets of simplicity, power and affordability, the Erratics use readily available, high quality components. Further, the Erratics use the open-source Player/Stage software system. The result is a compact, powerful and versatile robotics platform that jumpstarts robot application development, making it easier for researchers and developers to prototype and build proof of concept robots.

The ERA-XTD: Robust and Ready-to-Use
The ERA-XTD is built with this design philosophy in mind. Whether it is used as a platform for research or as a prototype of a commercial application, the ERA-XTD provides everything that a developer needs, factory-integrated and ready to use:
• A robust mobile platform – The ERA-XTD utilizes the Erratic platform with its industrial-strength motors and 500-step motion encoders, an integrated controller and motor driver for precise control of the drive system large, and a large, flat top to support a multitude of sensors.
• An integrated PC – The Mac mini™ is a full-featured PC with a 2.26GHz Intel Core 2 Duo processor, a FireWire 800 port and five high-speed USB 2.0 ports, running the Linux (Ubuntu 10.04) operating system.
• Laser range finder - One of the best sensors for mobile robots is a scanning laser range finder. These devices mechanically scan a laser beam, producing a distance map to nearby objects. The ERA-XTD comes equipped with the Hokuyo URG-04LX-UG01, a light-weight, low-power, small-footprint laser range finder. It has a 10 Hz scan rate with a 240 degrees range and 0.36 degree angular resolution. The laser range finder is located in front of the camera.
• Videre Design's STOC-9CM stereo camera – With the processing performed on the camera, the STOC camera off-loads the stereo computation from the PC, freeing up resources for the developer's own application. The 9 cm baseline STOC comes with a standard FireWire interface cable, stereo analysis software, a choice of miniature lenses, the option of color or monochrome, and a tripod. The STOC-9CM is pre-installed on the pan-tilt unit for immediate use.
• IR sensors – Enabling a robot to cope with its environment is important. Using Sharp's GP2D15 IR distance sensors, the ERA-XTD determines drop-offs and prevents the robot from falling down stairs.
• Sonar ring - Because of their wide admittance angle, sonars are good at detecting obstacles and their distance. Eight MaxSonar EZ1 sonars from MaxBotics fit into a custom ring on the front of the ERA-XTD, just under the top plate.
• Pan-tilt unit – The Hitec SPT200 Direct Drive Pan and Tilt system included with the ERA-XTD provides bi-directional mobility for the STOC camera.
• Player/Stage software - The Player/Stage robot server is probably the most widely used robot-control interface in the world. The ERA-XTD is compatible with the Robot Operating System (ROS).
• Lithium Iron Phosphate battery – Rated at 12.8V, the 20AH battery allows for incredible life for the ERA-XTD. Operating times are at least twenty hours under normal use.

The addition of the ERA-XTD creates a complete line of mobile robots tailored to meet a range of customer needs: The ERA-BASE is designed for those with their own computer. The ERA-MOBI includes a PC, and lets users pick-and-choose the sensors best suited for their application. Finally, the ERA-XTD is available for those looking for a complete system, pre-configured for immediate use.

"With these industrial-focused components, the ERA-XTD meets a pressing market need for a low-power, small-footprint, sturdy, high-performance and highly intelligent robot platform stated Janet McLaughlin. "We are pleased to provide a true, out-of-the box experience and to continue to extend the line of Erratics

Pricing and Availability
The ERA-XTD robot platform is available immediately. List price is US$7,200. Please contact Videre Design at 1.650.323.6769 or email sales@videredesign.com for more information.

###
About Videre Design LLC
For customers performing basic research, educating robotics students, or developing industrial applications, Videre Design offers stereo cameras, mobile robotic platforms, and intelligent robots with the perfect balance between features and price.

Videre Design is the only single-source manufacturer that marries stereo imaging systems and robotics – built for strength and ease of use. At the heart of our products is our advanced, intelligent software that offers more control over calibrating, capturing, processing and displaying images. Whether our cameras and robots are purchased individually or altogether, we offer a complete package, all available for immediate use.

Our products have been used in over 40 countries in a myriad of applications from the world's largest book digitizing project to university-level robotics classes and RoboCup Competitions.

Founded in 1998, Videre Design LLC is headquartered in Menlo Park, CA, USA, and has an extensive international client base including BMW, Caja Granada Museum, Deere & Company, IBM, MIT, NASA, NOAA Fisheries, Siemens, Toyota, the US Defense Department and most universities that study vision and robotics.

Contact:
Janet McLaughlin
865 College Ave
Menlo Park CA 94025
P: 650-323-6769
E: janet@videredesign.com
www.videredesign.com
###

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Warsaw ghetto hero Edelman dies - Examiner

Posted: 07 Jun 2010 02:32 PM PDT

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A man who knew first-hand about the ultimate need for an armed citizenry has died. From the Associated Press:

Marek Edelman, the last surviving leader of the ill-fated 1943 Warsaw ghetto revolt against the Nazis, died Friday at the age of 90.

Here's the underlying truth of Mr. Edelman's life's philosophy--one that we'll fail to understand at our peril:

"When you cannot defend freedom through peaceful means, you have to use arms to fight Nazism, dictatorship, chauvinism"...

Compare this to some "leaders" in U.S. Jewish communities who preach citizen disarmament. As George Santayana wrote:

Those who cannot remember the past are condemned to repeat it.

The only way "never again" works is if you mean it.

*Photo information from AP: "In this April 19, 2007 file photo, Marek Edelman stands in front of the Warsaw Ghetto Heroes monument during ceremonies marking the 64th anniversary of the uprising, in Warsaw, Poland. Marek Edelman, the last surviving leader of WWII Warsaw Ghetto uprising, died Friday, Oct. 2, 2009 in Warsaw at the age of 90."

Additional Resources:

"The Warsaw Ghetto Uprising" by Marek Edelman

United States Holocaust Memorial Museum: "Warsaw Ghetto Uprising"

 

 

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