On Dara Shikoh

The Mughal Empire- Backstory

The Mughal empire, founded by Babur of the Timurid dynasty in 1526, has contributed much to the cultural legacy of the Indian subcontinent. The Mughals, originally Turkic-Mongol foreigners to the subcontinent, managed to merge and morph their culture with that of the subcontinent in their three hundred year-long rule. The resulting architecture, literature, and art produced has been a part of the cultural heritage of the hundreds of millions of people in the sub-continent.

Flag of the Mughal Empire

Flag of the Mughal Empire

The deaths of Delhi

Much has been lost or destroyed subsequent to the decline of the Mughal Empire. Delhi, which used to be one of the most cultured cities in the world, with beautiful palaces and mansions to employ its many poets and artists, is now no different from any other third world city. The massacre of 1857 by the British annihilated the local population, turning Delhi from a world cultural capital to the haunted husk of a once-regal city. One of the biggest cultural atrocities committed by the British was the destruction of the caravansary at Chandni Chowk, named after the moon-lit canals which ran through it and built by Shah Jahan’s daughter Jahanara in the 17th century. Only accounts of travellers passing through now remain of the caravansary and keep it alive. Despite the destruction caused by the British, Delhi slowly rebuilt itself, only to be struck again by the mass migrations and violence that took place leading up to Partition in 1947.

An illustrated map of Old Delhi from 1858

An illustrated map of Old Delhi from 1858

The beautiful havelis which had survived the massacres of 1857 were abandoned by their original inhabitants in 1947 and taken over by waves of new migrants coming in from the Punjab and elsewhere. These havelis and other associated buildings, the culmination of centuries of Mughal architecture, were turned into much more functional apartment blocks and government buildings for the new Delhi. And so the final strands of Mughal culture on Delhi, and more broadly on North India, were slowly coloured in and erased. Both mass migrations and the accelerated impoverishment of the aristocratic class dealt the death blow to what was already a fading culture of patronage of and protection for the arts and architecture. The old was taken apart brick-by-brick and replaced by the necessary.

1785 view of the Red Fort from the east. In the foreground the Rang Mahal is on the left, the Khwabgah Jharoka in the centre and the Moti Masjid on the extreme right.

1785 view of the Red Fort from the east. In the foreground the Rang Mahal is on the left, the Khwabgah Jharoka in the centre and the Moti Masjid on the extreme right.

Aurangzeb the Pure

The seeds of the Hindu-Muslim animosity which caused Partition, and which was so cleverly exploited by the British to build their empire, were sown by Aurangzeb, successor to Shah Jahan and emperor of the Mughal Empire from 1658 to 1707. Aurangzeb was the third of Shah Jahan’s four sons, and younger brother to the heir-apparent Dara Shikoh, who had been picked by Shah Jahan as his successor.

A painting from circa 1637 shows the brothers (left to right) Shah Shuja, Aurangzeb and Murad Baksh in their younger years.

A painting from circa 1637 shows the brothers (left to right) Shah Shuja, Aurangzeb and Murad Baksh in their younger years.

Aurangzeb had always been a soldier and an accomplished tactician. He considered himself above the hedonistic entrapments of the Mughal court and accused his brothers of being alcoholics and womanizers. He was a devout follower of the more literal interpreters of the Quran and was against the spiritual and mystical writings and research of his older brother Dara. Aurangzeb, as well as being a brilliant tactician and general, was also the head of a very extensive network of informants and spies at the Mughal court, a network he had developed along with his sister Roshanara for his own needs.

Dara the Mystic

His older brother Dara was a Sufi mystic of great repute and the author of several important books and translations on Sufism. Dara worked with Sufi philosophers and Hindus pandits to integrate the religion of the Mughal court, Islam, with Hinduism, the religion of the majority in the Mughal Empire. Dara was a known ascetic, giving up the trappings of the Mughal court for a life of research, academia, and development of the arts. He was well-loved by the people for his tolerance of the diversity of religions and culture in the Empire, similar to his great-grandfather Akbar. He had also developed a love of research and academia, which his great-great-grandfather Humayun was known for.

A portrait of Dara

A portrait of Dara

Dara, along with his sister Jahanara, was a disciple of Mullah Shah Badakhshi, who initiated them into the Qadiryyia Sufi order. The guidance provided by the Sufi saint led both siblings to turn their backs on the life of excess and plenty found in the Mughal court, and to live closer to their subjects in the Empire. The Sufi order emphasised struggling against the ego and the trappings of a worldly life. This made both siblings immensely popular within the Empire. Dara’s popularity, his keenness of mind, and his humility led Shah Jahan to appoint him as his chosen successor, much to the consternation of the three other Mughal princes. Dara was a renowned philosopher, a distinguished intellectual, and an accomplished poet, however he was not a general and lacked the cunning that turns a Prince into an Emperor.

Dara Shikoh (with Mian Mir and Mullah Shah Badakhshi), ca. 1635

Dara Shikoh (with Mian Mir and Mullah Shah Badakhshi), ca. 1635

Dara had an unparalleled knowledge of the peoples of the Mughal Empire, more extensive than even that of Akbar. He spent considerable time in travel and contributed to the restoration of several Hindu monasteries and temples. This put him at odds with the more conservative Islamist figures at the Mughal court, who gathered around Aurangzeb as their chosen favourite Mughal prince. These figures viewed Dara’s progressive blending and acceptance of other religions as a threat to their own power, which centered around their presumed authority on religious matters. So when Shah Jahan fell ill and was feared dead, these figures lent their support to Aurangzeb in his attempt to usurp power from Dara Shikoh.

Dara with his army

Dara with his army

Dara’s Betrayal

Dara was no match on the battle-field for Aurangzeb’s military experience. Due to being in ill-favour with Shah Jahan, and showing an earlier aptitude for military command, Aurangzeb had been in almost constant warfare with forces on the Empire’s frontiers. His military experience was bounds ahead of Dara’s and, added with his network of informants, proved to be an insurmountable obstacle for Dara. Dara was betrayed by his own chief commander, who recommended he dismount his war elephant to lend support to the generals who had been decimated in the flanks. His forces, seeing Dara’s elephant without him, thought him killed and the battle lost. The ensuing rout saw Dara flee to Delhi, then to Lahore, mount another unsuccessful challenge to Aurangzeb at Surat with a much smaller force, then finally flee to Sindh where he was betrayed by a friend whom he had twice saved from Shah Jahan.

Sepoys loyal to the Mughal Emperor Aurangzeb maintain their positions around the palace, at Aurangabad, in 1658

Sepoys loyal to the Mughal Emperor Aurangzeb maintain their positions around the palace, at Aurangabad, in 1658

At every turn Dara found himself short on luck and military success. This philosopher and theologian lacked the military experience or the cunning necessary to defeat Aurangzeb. Dara was brought to Delhi and paraded around bound and disgraced on the streets, a humiliation surprising in its harshness as Dara was still a Mughal prince. One account has a fakir approach Dara, who is being paraded in rags on an old war elephant. The fakir taunts Dara by asking “What can you do now Prince, you who were once so generous to the poor?”

In response, Dara rips the cloth from his body and drops it for the fakir to scavenge. Dara, who had left behind worldly possessions in his search for spiritual understanding, was now left with little but rags, just as he had sought. This prince, whose love for the arts and knowledge, whose tolerance of diversity and empathy for his people could have spurred a new Mughal golden age was instead decapitated a few weeks later by nobles who accused him of heresy.

Aurangzeb had feared the popularity enjoyed by Dara and could not afford to have him survive for long. Dara’s young son watched as his father tried to defend himself with a kitchen knife. The court nobles employed by Aurangzeb to assassinate Dara fell upon him with swords, and his son could do little but watch.

Shah Jahan, who had been imprisoned by Aurangzeb in Agra, was being tended to by his daughter Jahanara. Shah Jahan was given little information of the going-ons of the Empire after his imprisonment, and so became ecstatic when a messenger announced a gift from his son, Aurangzeb. Upon opening the chest presented by the messenger, Shah Jahan is claimed to have wailed in despair as the chest contained the decapitated head of his eldest son and heir, Dara. Shah Jahan, unable to recover, died of grief soon after.

Aurangzeb’s Reign

Aurangzeb’s 49 year reign expanded the borders of the empire farther than ever before. However, the policies adopted by Aurangzeb created internal divisions which made it impossible for him to hold together the Empire he had inherited, and Aurangzeb spent the latter years of his reign rushing to quell rebellions in different parts of the Empire. His imposition of a jizya tax on non-muslims, the destruction of Hindu temples, and the execution of the ninth Sikh Guru Tegh Bahadur, created divisions which would in time destroy the empire. The Mughals had always managed to rule only because of the religious tolerance they showed to the diversity of beliefs in India. From Babur to Akbar, Mughal rule had been broadly secular in nature, with Hindus and Muslims both being involved in government and administration.

Aurangzeb in prayer. Parables have him praying in the field of battle.

Aurangzeb in prayer. Parables have him praying in the midst of battle.

Aurangzeb was the last ‘great’ Mughal. After his death the empire slowly fractured into several smaller soobas ruled by local Nawabs. These nawabs fought amongst themselves for land and resources, making easy picking for the East India British company, which played the nawabs against each other. This fracturing was a direct result of the divisive policies pursued by Aurangzeb and the constant warfare he subjected the Empire to. It is an interesting but ultimately pointless exercise to think of how different the world would be today if Dara had triumphed over Arungzeb, if the philosopher had won instead of the soldier. Instead of a legacy of religious division and strife, exploited and further entrenched by the British, it is tempting to think of a united, harmonious and multi-cultural subcontinent. If instead of constant warfare depleting the royal treasury as under Aurangzeb, if Dara-the-Emperor had been able to spend on the construction of universities and seminaries, on researchers instead of soldiers, world history would have been very different.

The capture of Orchha by imperial forces led by Aurangzeb (October 1635)

The capture of Orchha by imperial forces led by Aurangzeb (October 1635)


The history of India is one marked by a narrative which always seems to take the wrong turn, whether it be at the Battle of Plassey, the ill-fated campaigns of Tipu Sultan, or the looting of Delhi by Nadir Shah and his troops. The ascension of Aurangzeb over Dara Shikoh is no different. It is impossible to escape the temporary joy derived in asking- what if things had been different?

Near the end of his days, Aurangzeb seemed aware that he was leaving behind a broken legacy. Dying, he confessed to his son:

                “I came alone and I go as a stranger. I do not know who I am, nor what I have been doing”


A portrait of Aurangzeb in old age

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January 14, 2014 · 9:21 am

The AUS job- Part 8

Now we get to what for me was the most interesting (and strategic) part of my mandate. While taxes were being filed, and frosh reports were being made, I had to come up with a game plan to make sure the AUS did not ever find itself in the same position again, with regards to both taxes and annual audits. Like I’ve said before, the biggest hurdle to getting the audits and taxes done were the externalized departments.

AUS Wars Episode I: The Phantom (financial) Menace

Externalized departments had autonomy without any real responsibility. If they issued a cheque without any receipts to back it up, it would be the AUS’s problem to deal with. Also, problems with record-keeping were usually discovered near the end of the year, at which point it was too late to penalize.

There were two immediate solutions available- either reduce the autonomy they had or to increase their level of responsibility. The first required internalizing their bank account, which meant closing down their bank accounts and moving their funds to the AUS account. The second required the departments getting accredited and becoming completely autonomous of the AUS. In this case, they would need to complete their own audits and file their own taxes.

AUS Wars Episode II: Attack of The (McGill Admin) Clones

In our discussions with the Deputy Provost, the McGill admin did not appear too keen on the second option, as the more ‘radical’ departments were the ones seeking accreditation. Getting legally accredited would allow them to hold strike votes in case of a student protest movement, as they had wanted to do in the previous year against the raise in tuition proposed by the Quebec government. There were only a couple of departments interested in this, and I was all for helping them seek accreditation, if that’s what they wanted.

AUS Wars Episode III: Revenge of The (PSSA) Sith

I had to use whatever tools and leverage I had to get the restructuring implemented as quickly and with as little controversy as possible. I set up separate meeting with the Presidents and VP Finances of each of the affected departments, to break the idea of internalization vs externalization to them. As expected, the smaller and less radical of the departments were willing to internalize with very little contention. This got four of the eight external departments out of the way. Out of the bigger departments, both the ESA and DESA were willing to go along with internalization and the PSA wanted to get accredited. This then left only the PSSA, the biggest department in the Faculty of Arts, wanting to keep things as they were.

The PSSA president said it was duplicitous of me to meet with the departments one-on-one, instead of all together. This, of course, was exactly the point. Meeting one-on-one gave me more leverage. She then asked for a list of the affected departments and set out to arrange a meeting for the departments to discuss the restructuring imitative independently of the AUS. Out of the eight departments affected, only four showed up to the meeting: PSSA, ESA, PSA and DESA. The others had already made their decisions and were committed to them- all except for the ASA, which would wake up a few months down the line and realize it didn’t want to internalize after all.

AUS Wars Episode IV: Return of the (ESA) Jedi

I wasn’t invited to this meeting, so the departments drew up a list of questions to send me by email. Out of the four that attended, the ESA was still okay with internalization, the PSA still wanted accreditation, but DESA now seemed to be on the fence. I was in close contact with the ESA during all this, as I had been in the ESA the year before and knew the President fairly well. They kept me in touch with what was going on throughout.

AUS Wars Episode V: The (AUS) Empire Strikes Back

To be sure, the PSSA had legitimate concerns; it was just that something had to give for the AUS to be financially responsible again. The PSSA started reaching out to the media and other organizations on campus, to see if any other ideas could be brought to the table. I kept up communication with DESA, ESA, and PSA throughout the intervening time-period, to keep them up to date and to get a firm answer from them regarding their position as I wanted the restructuring to be completed as soon as possible. Firm answers form them would’ve also meant less support for the PSSA’s position to keep things as they were.

AUS Wars Episode VI: A New Hope

At this point, I had come up with and discussed a possible third solution with our accountants, who after much convincing, said it was workable. I set up a final meeting, and got the assembled departments together, and let them know that there was an alternative available. Everyone immediately accepted it as the best option, something which allowed the AUS to track departmental finances while allowing the departments to continue operating their bank accounts.

The PSA still wanted to seek accreditation, but everyone else was satisfied with what I had proposed. The departments would now have to input all their revenues and expenses on our accounting software before being allowed to conduct any transactions. They would still be responsible for the paperwork, but the idea was this would help keep their paperwork organized and help identify where mistakes had been made. This was also exactly how the AUS retail store, SNAX, functioned.

Throughout this process, I had to manage keeping the departments happy and keeping the media from blowing this up into a big political debate while accomplishing what I wanted for the AUS.

In the next post, I will go over what I had wanted done with the third option- what my ideal outcome would have been.

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The AUS job- Part 7

Before I go into the AUS restructuring that took place in my year, let me talk a little bit about some of the other things I was doing at the same time.

Frosh or nothing

Over the summer, one of the biggest challenges faced by the incoming executive each year is organizing Frosh. Although it is chiefly the VP Events responsibility, any other exec who are staying behind in the summer are supposed to help out too. The VP Events, along with the Frosh co-ordinators, work on everything from the logistics to sponsorship and communication over the summer to make sure that incoming freshmen have a safe and memorable start to their college years. Frosh also sets the mark for how the new AUS executive will be seen for the rest of the year- get it wrong and you spend the year under its shadow, get it right and it lends credibility to the competence of your executive team.

A good frosh is a safe frosh

It is very important to emphasise the word ‘safe’ here. Safety was our primary concern when organizing Frosh. Frosh usually involves a lot of alcohol consumption for people who may never have had alcohol before, and so managing people who do not yet know their limits and are in a new city is of the utmost importance. We were also trying to shift the culture of Frosh from being alcohol-centric to more about getting to know Montreal and meeting new people in a comfortable environment, but such change takes time.

Frosh and finance usually don’t go well together

As VP Finance, I was responsible for providing financial planning and support and for approving the Frosh budget. I also helped out with getting sponsorships, but the majority of that work was handled by the Frosh sponsorship coordinators. Financially, AUS frosh had seen many controversies over the previous few years, with the theft of $12,000 in 2011-12 and a $35,000 loss in 2009-10, so I had to make sure that frosh finances were completely airtight in my year.

Stress test

The one week period before the start of frosh was incredibly stressful. For the last three days of registration, I had difficulty sleeping as we were looking at $40,000 dollar loss if registrations had not picked up significantly. I also had to deal with constantly thinking about the thousands of dollars flowing from the registration table to the AUS office being lost to theft, as had happened in the year before. When registration ended and I deposited all our frosh funds at the bank, then only could I relax a little.

I still had to go through frosh itself, making sure that everything was running smoothly and helping out where possible. Beach day was terrible, as it almost always is, with no organization for the bus lineup and thousands of students waiting to go back home. Beach day is organized by SSMU so the onus was on them, however we inevitably ended up helping organize the departure along with some MUS coordinators and the SSMU president.

Early taste of success

AUS frosh our year was considered an overall success. The few problems we did have were mostly things completely out of our control, and the response and level-headedness shown by the frosh coordinators was all we could have asked for. The hats we provided with the Frosh kits were a brilliant idea, and have since become almost a cultural phenomenon in the college-student demographic in Montreal. Overall, frosh our year was a resounding success, people loved the hats, the boat cruise was re-introduced, and we had alternative all-age events for every single night.

Financially speaking, frosh turned out to be incredibly successful too, much to my surprise. I had been expecting a small profit of $3000 to $5000, but after all the revenue had come in and all payments had been made, we ended up with a net profit of $17,000. This was a nice break from years past, where frosh had always marked the start of a financially turbulent year for the AUS. So not only were we able to provide a great experience to incoming Arts freshmen, we also managed to make a nice profit out of it for the AUS.

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The AUS job- Part 6

Tax Filings

With our student fees released, I could finally pay back the multitudes of people we owed money to. This took much more time than I had anticipated. I was then able to turn my attention towards getting those of our funds frozen by Revenu Quebec released.

This required getting up-to-date on all our tax filings, as the AUS had been tax-delinquent since 2008. Although most of the important filings had been done already, there were a few which were holding us back, mostly involving the small retail operation the AUS runs called SNAX.

These tax filings were taken care of by our accountants, and I was relegated to a support role which required digging up old documents and trying to re-construct missing financial history. This article goes into a bit of the history which led to our funds being frozen by the Quebec government. I was interviewed for this right around the time we had made our final submission to Revenu Quebec and were expecting our funds to be released in 30-60 days.

This article is a follow-up to the previous one. The exact amount held back by Revenu Quebec was indeterminate and depended on how much they assessed the AUS owed in charges for delinquency and the like. I was expecting we would get back $100,000 but we ended up receiving $114,000. This amount was immediately transferred to our savings account, which had been hurting over the last few years (as discussed in the articles).

Getting our student fees released and finally being up-to-date on our tax filings were immensely important. Failure in either of these would probably have meant the AUS filing for bankruptcy. It may seem negligent for an organization to get to the point where it has to cover years of ground in financial reporting over a few months, but understanding what caused the AUS to come so close to bankruptcy was critical in making sure this didn’t happen again.

To prevent the AUS going down the same path in the future, it was clear the AUS needed to be restructured, at least as the very first step. I will cover this restructuring in the next post.

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Back from finals!

I haven’t posted anything for the last few weeks as I was busy with finals. Now that I’m (almost) done, I will have a lot more time on hand to do (and read!) interesting things which I can then write about.

This semester was my last at McGill and it feels a bit strange to think that I’m done with my undergrad. As I hadn’t done any elective courses over the previous three years, I had completed all my degree requirements but still had a few credits left over to do with as I pleased. I picked a few upper-year courses in Philosophy and Computer Science, and although I probably should’ve picked courses which would have been better for my GPA, I couldn’t turn these courses down.

Algorithm Design 

The COMP course on algorithm design I have done this semester has been the most interesting computer science course I have done so far. It dealt with graph theory, network flows, and dynamic programming. To illustrate, here is a sample problem on network flows:

As a response to natural disasters, we want an algorithm to assign ‘n’ injured people to k hospitals. There is an unlimited supply of ambulances, but everybody should be transported to a hospital within a 30 minute drive of their current location. Finally, in order to balance the load, every hospital should  receive at most ‘n/k’ people. Describe a polynomial time algorithm to accept as input an ‘nxk’ array of driving times which will decide if a balanced assignment of people to hospitals is possible, and provide an assignment of each patient to each hospital.

Network flow solutions and algorithms find particular application in matching problems (as the one above), so I’m thinking one application could be in Auction Theory or perhaps in market micro-structure design. I will have to read more into both these categories to see if and how network flow algorithms are applied. I also read a paper a while back which used network flow analysis to determine the spread of a liquidity crunch across financial institutions. Interesting stuff.

Dynamic Programming

Dynamic programming was, for me, the most difficult to get my head around. Both network flow and dynamic programming problems remind me of the types of problems you would see in a math puzzle book, just made more formalized and mathematical. As an example, here is a dynamic programming problem:

“Consider a 2-D map with a horizontal river passing through its center. There are ‘n’ cities on the southern bank with x-coordinates a(1) … a(n) and ‘n’ cities on the northern bank with x-coordinates b(1) … b(n). You want to connect as many north-south pairs of cities as possible with bridges such that no two bridges cross. When connecting cities, you can only connect city ‘i’ on the northern bank to city ‘i’ on the southern bank. Write an algorithm which gives the best possible pairs of cities to connect such that no bridges overlap.

The problems associated with both network flows and dynamic programming look deceptively simple. Once you start working on them you realize their complexity and after you have been working on them for a while, they become simple again. You begin to reduce new problems you encounter to old ones you’ve already seen and structure their solutions accordingly. For example, the one above can be reduced to something called the ‘Longest Integer Sequence’ problem and the solution can be obtained fairly easily after that.


Applications in finance? Glad you asked!

The key fact about dynamic programming is that it provides global solutions (as opposed to local solutions) for multi-variable decision making problems. This means that, unlike greedy algorithms, it doesn’t get stuck in local maximums. Thus we can be reasonably certain that the solution we obtain is the ‘best’ one.

One interesting paper I found is this one from Cornell, which explains the use of dynamic programming for portfolio optimization where the drift in market prices from state to state is modeled by an unobserved Markov chain. Information on the state of the Markov chain is obtained by both stock prices and signals at random discrete time points (which model ‘expert opinion’ in the market). These signals model expert opinion by helping gauge what the stock price will be by revealing the state of the Markov chain. Using dynamic programming, we can determine an optimal portfolio allocation under these conditions.

This is another paper from the International Journal of Business and Management .The problem here is kind of a simplified version of the one above. We basically have many asset classes with known returns across a known time period. Our problem is to determine the optimal allocations across the different time periods. This is more of a backward-facing problem and a purely theoretical exercise but useful nonetheless in understanding how dynamic programming could be applied to asset allocation.

I also found these slides very useful in understanding the application of dynamic programming to asset allocation, minimization of execution costs, and option pricing.

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Web Links-Nov 7th 2013

More reading goodies to share! Here’s what’s good from what I’ve read over the last couple of weeks. Enjoy!


  • This is a brief article on why QE may not be behind the bull run as much as some people say it is. It argues that rising earnings and the bottoms hit in early 2009 are also big contributing factors, among other things. In saying this, the article is arguing against statements made by the likes of Michael Cembalest, Chairman of Market and Investment Strategy at JPM. It also contains a very interesting graph mapping the S&P to the various QE measures over the last few years.
  • FT Alphaville has a detailed article by Cardiff Garcia on the downsides of QE and why, despite these risks, he is still in support of QE. Long read but well worth it.
  • This is a very interesting post by Antonio Fatas, of the INSEAD Business School, on how southern European countries in the Euro-zone would’ve weathered the financial crisis had they not been tied to the Euro, and followed Bernanke monetary policy. He also looks at how capital flows, asset prices, and interest rates would’ve reacted to ECB policy in the US, had the US been a small European country (with American problems). His conclusion: “One of the biggest costs of Euro membership was the bubbles that the Euro facilitated in the years before, not so much the inability to adjust once the crisis exploded”.

  • William Gross, MD at PIMCO, chimes in on much needed tax reform in the US to address growing wealth and income inequality. He talks about how wealth has been created for the fortunate riding the credit boom over the last three decades, “where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living”. He then discusses how, even with low growth in sales, corporations have grown earnings and earnings per share. This is indicative of companies cutting expenses to send ever higher proportions of their sales to the bottom line. He then compares QE to a share-buyback program and how that is increasing inequality and detracting from the effective functioning of the US economy. Overall great read- would highly recommend.


  • This is an interesting article on whether you should enter the market now, or stay away given the incredible bull run we’ve had. Again, my take is it depends on what kind of investment you are making. If you are a value investor and find a good business to invest in, everything else considered, you should most likely invest it if it is underpriced and you have a sufficient margin of safety. If you’re a short-horizon index investor (Graham might call you a speculator), you may want to read the article and see what it says. Key takeaways: S&P usually has 10% pull-backs annually, hasn’t had one since Dec 2011, commodity stocks may be the way to go (depending on your macro outlook) as they’ve taken a beating.


  • This article discusses an interesting report on the gold and silver mining sector published by Citigroup. Using a spot gold price of $1,320/oz, the report finds that  up to 98% of gold companies are cash flow negative. Over the last year, cash cost per ounce has grown by 11.8% on average. The report paints a gloomy picture for gold miners. I also want to add that we had a hedge fund speaker come in who specialized in the mining industry and who talked about all the creative accounting tricks gold mining companies use to hide their true costs and to show paper profits. That’s why looking at cash costs is even more important. Many of his other claims are also substantiated in this report, and it made for a pretty good read overall.


  • I cannot overstate the usefulness of this post on Wall Street Oasis. It is a detailed description of the due diligence process by a hedge fund analyst when picking a business to invest in, with links to several other resources. I personally will keep coming back to this post and I’d highly recommend bookmarking it.
  • Pretty short article on the dangers of investing as a hobby. It links to several other articles as well which talk about it in more detail. Key takeaway: Don’t leave your good sense behind. True words for any investor, but hard to stick to without hard-earned discipline. As the saying goes “Be humble, or the market will humble you”.


  • Want to know the thoughts of all three generations of the Buffets on their philanthropy work? This link leads to a transcript of an interview with Warren Buffet, his son Howard G Buffett, and his grandson Howard W. Buffet discussing their book on hunger, farming, and poverty and their efforts to do what’s good. They discuss the inefficiencies in global agriculture, the impact of technology on farming, and how value investing compares to philanthropy. I am tempted to buy the book after reading this.
    BONUS: Video of the three Buffets on Bloomberg. Watch the video for quotes such as:

    “And we’re not – how you came out of the womb has really nothing to do with what kind of person you are. You decide what kind of person you’re going to be. It does decide whether maybe you never have to do an item of work in your life and maybe determine whether you’re fighting uphill all of the time, but where in my life, in my eyes is we’re all created equal, and but we don’t all have an equal opportunity by a longshot.”

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Insight from interviews (continued)

Last I wrote, I talked about an interview that I thought didn’t go so well. Turns out, it went better than I thought and I’ll be starting as an investment analyst this July, working from Toronto! The job itself is in the investment department of a large financial services firm. It is a rotational program with four rotations each in the investment division’s various sub-departments (Private Placements, Private Equity, Public Equity, Real Estate…etc).

I am VERY excited to be joining the program as I think the broad exposure will make me a better investment manager overall, compared to working as a fixed analyst in one department. It will also be a perfect complement to the theoretical CFA learning I’ll be doing. I am very eager to start on my investment management career and feel incredibly fortunate to be starting a career AND following my passion at the same time.

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Insight from interviews

So I had a couple of interviews today with the investment division of a large financial services firm. The interviews could have gone better, but I was able to pick the brains of some very experienced investment management folk on their investment philosophies. In particular, I asked one of my interviewers what he thought of the markets, seeing as they are in a flipped relationship with economic activity. That is, weak jobs reports cause the market to rise, strong jobs reports cause the market to fall, for fear of the dreaded tapering.

His response was very interesting. He basically said that markets don’t matter, what you should focus your attention on is the business and how well its run. I can see where he is coming from. I may have been focusing too much on market movements when determining whether to invest or not, and which stock to choose.

So this is something to keep in mind for next time, although I still feel that market movements are important and should be factored into any investment analysis.

As Keynes said “The markets can stay irrational longer than you can stay solvent”.

Overall, it was an interesting day today and I learnt quite a bit from some very experienced investors.

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Good reads from around the Web


  • This is a break-down of some of the key stats from the recently released Global Wealth Report. It goes to highlight the staggering levels of wealth inequality in the US compared to the other top countries in the list, arranged by median wealth per-capita. In the US, the mean wealth is 6.7 times the media wealth whereas in Australia, this ratio is only 1.5. More juicy stats to be found at the source.
  • Business Insider does one of these posts every now and then. This one is very audaciously titled ‘The Most Important Charts In The World’ in all caps, so it demands at least a quick look-through. There are a few charts in there which I found insightful. One was the chart (charts #7,#15, #91) showing the effects of shale gas on US petroleum imports (here is an interesting article on it). Decreasing reliance on Middle-Eastern oil has very big geopolitical ramifications.  Other interesting charts were #41, #45, #54, #56, #60, #69, #74, #77, #82, #83, #87, #89, #101.
  • This article lists the flows out of money-market funds and a flight-of-safety into equities. A flight-of-safety into equities, you say? In this market? What has the world come to?
  • This is BIG news. A trade deal giving Canada preferential trade access to the EU, increasing bilateral trade by 20% to $35 Billion, add an estimated $12 Billion extra to the Canadian economy and create 80,000 jobs. Sounds so rosy. These two articles (CBC and Reuters) provide more details. Canada is now the only country with preferential trade access to both the US and the EU, a good position to be in.
  • Ahh Scott Sumner talking about NGDP targeting again. He makes some very good arguments, if you go through his previous posts, but he hasn’t manged to convince the right central-bankers and policy-makers yet.


  • What has gold been up to these days? It’s been trading in the $1,300s for the last quarter, going up to low $1,400s for a bit in August and intermittently dropping down to the upper $1,200s. At the Commodities Week conference in London last week, head of  commodities research at Goldman labelled gold as a ‘slam-dunk sell’. This article provides some good background reading material and this one some good analysis on why gold has been going down.
  • Brent is up above $101, fueled by demand from China. This article provides some helpful stats.


  • GOOG just breached $1,000! My Applied Investments team have been at our 5% ceiling on Google so we have made a decent profit off it over the last few months. Where is GOOG headed now, after having hit the $1,000 mark?  I’m personally bullish on it over a 3-5 year horizon, but this article advises caution.
  • Over here is a decent summary of bull and bear cases for the equities market. Not a lot to read, so you can quickly glance over the points.


Other stuff

I still need to continue with my AUS story, post details on the few portfolios that I’ve created AND post the code for the ARMA-GARCH strategy. All three of these things coming up soon!

un → en

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The AUS job- Part 5

The summer of ‘12
After all the negotiation work had been done, it was time to be an accountant! I was tasked with rebuilding AUS financial history for the last 4 years using the boxes of documents and receipts left over. It is safe to say that I spent most of my summer in the AUS office, with over 12-14 hours per day easily going into organizing the documents left over from the previous years. After I had organized the receipts, cheque requisition forms, deposit slips and all other transaction records in chronological order, I had to go through them again, one-by-one, to enter them into Quickbooks, our accounting software.

After that had been done, I had to go through the bank statements for four years, month-by-month, and reconcile our Quickbooks accounting records item-by-item with the bank statements. One of my motivating factors while working through this was the incredible insight I got into AUS operations by going so thoroughly through the financial records. You cannot get to know an organization better after you have been through each dollar of cash coming in and going out for the last four years three times over.

One of my other motivating factors was to have everything perfectly organized in the way I wanted. There is something beautiful in organizing things, giving structure to what was before an ungodly mess. Organizing these documents and databases was like running a marathon, or solving a very large puzzle. Completing it is its own reward, in addition to any other positive ramifications that may be obtained.

Externalized Departments
The records I had available were for all the non-externalized departments, i.e. departments which did not have their own bank accounts. Records for externalized departments were incredibly irksome to obtain. None of the departmental executives were in Montreal over the summer and the banks wouldn’t release their information to me as I did not have signing authority on their accounts. Many of their records were locked up in their offices for the summer, their bank statements were impossible to obtain, and I could not get the NTRs processed without these documents.

Getting these documents delayed the process. I had to send frantic emails to account managers at the bank, departmental executives (both old and new) and our accountants to coordinate the whole thing, so that we didn’t miss any of our debt repayment deadlines.

In the end, I managed to gain access to these locked up documents by talking to the building manager where the departmental offices were located, and by talking to the account managers at the bank to obtain the bank statements for these accounts. As they can only allow access to these documents/ offices to the specific departmental executives, what they did wasn’t technically legal, but it helped save the AUS.

Once I had all the information compiled, organized and reconciled on both our accounting software and on paper, I delivered it to our accountants. We subsequently had the NTRs made and delivered to McGill on time and got our student fees released.

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