On July 14, Kathy Graham will bring her knowledge and expertise to NYSSA's Career Day. Ms. Graham, principal of HQ Search Inc., has more than 15 years of experience as an executive search recruiter. The following is an excerpt from her book, Graham's Manual of Style for Resumes and Cover Letters, which is included in the tuition for each workshop.
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LYRICAL LIRAS | FIXED INCOME: CLOSER TO INVESTMENT GRADE | TURKISH EQUITIES: FAST-GROWING BUT VOLATILE
In an earlier article, we discussed the strength and attractiveness of the Turkish economy. In part II of Worldview: Turkey, we will look at the currency, fixed income, and equity markets. In brief, Turkey has many attractive emerging market characteristics, but its risk-adjusted performance as an equity investment, while positive, has not been as outstanding as its economic performance would suggest it could be.
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As the US recovers from its deepest recession and worst financial crisis since the Great Depression, many financial practitioners and business people have made dire predictions about the state of the American economy and the country as a whole. In Making Sense of the Dollar, Marc Chandler, chief foreign exchange strategist at Brown Brothers Harriman and former chief currency strategist for HSBC Bank USA, debunks several myths about, among other things, trade deficits, current account deficits, personal savings, capital flows, currency markets, multinational corporations, the rise of China, the specter of socialism and the nature of capitalism. Chandler skillfully challenges these myths and asserts that the US dollar will remain the numeraire or key metric in the world economy in the foreseeable future.
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More Money than God: Hedge Funds and the Making of a New Elite, the catchy title of Sebastian Mallaby's new book, highlights the increased importance of hedge funds. The author documents their rise to prominence, describing some of the key players, huge profits and losses, and their impact on currencies and governments. The potential of incentive compensation continues to make hedge funds an object of fascination for financial professionals.
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After the successive crashes of the past decade, the premise that markets can be irrational is a foregone conclusion for most. Nevertheless, there is no denying that financial theory, which assumes market rationality, has made key financial innovations possible. Justin Fox’s The Myth of the Rational Market is rich in detailed, meticulous descriptions of the evolution of financial theory, presented via a veritable Who’s Who of financial luminaries from the past century. In the course of this history, Fox provides wonderful anecdotes about characters famous, infamous, and obscure, rendering their competitive and sometimes eccentric personalities with skill.
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Portfolio managers and other investors shopping in the high-yield new-issue market have long been in need of a practical tool to facilitate the process of evaluating and
selecting securities. When assessing the attraction of new offerings, portfolio managers will consider such factors as credit quality, ratings, covenants, call features, and spread. For borderline cases, however, managers should take note of the underwriter’s record in structuring and pricing deals that hold up well in the aftermarket.
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Today’s recession has at least one upside—it has elicited innovation in an economy that desperately needs that shot in the arm. Many talented professionals have decided to file away their resumes, pool their financial resources, develop a business plan, and jump into the world of entrepreneurship. And what a jump it can be. Bid a bittersweet goodbye to the security of a regular paycheck, standard hours, and the infrastructure of an established company. Suddenly the buck stops with you. Building the company of your dreams is invigorating—and terrifying.
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A great deal of attention has recently been devoted to examining trends in the housing market and to predicting possible outcomes of the recession. If housing is at the center of the current storm, how soon will recovery in this sector offer the rest of the economy some shelter from the nasty weather? Inevitably, stabilization in the real estate market has to be achieved through reestablishing the broken link between real values and market prices.
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HISTORY AND COMPARATIVE CONTEXT | ECONOMIC STRUCTURE
It is almost cliché to call Turkey a bridge between worlds, but on closer inspection, the country is difficult to describe as anything else. With a foot in Europe and a foot in Asia, Turkey truly is a crossroads between the East, West, and Middle East, a role shaped by its location and cultural geography, as well as its history.
Continue reading "Turkey Navigates the Straits of a Crisis (Part I)" »
As the global economy gradually recovers from the impact of the worst global financial crisis since the 1930s, companies continue to lay off thousands of employees and financial institutions are expected to write down trillions of dollars of toxic assets. In addition, governments have spent or committed to spend exponential sums of money in order to stabilize their economies. Investors have been particularly affected by the consequences of the financial crisis, having suffered a significant reduction in the value of their investments in a number of companies. According to the World Federation of Exchanges, as of February 2009, the global equity market capitalization was estimated to have reduced by $31 trillion since the peak prior to the crisis.
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NYSSA will be hosting an upcoming forum that focuses on the challenges and opportunities for investors in the sustainable infrastructure sector, including renewable energy and transportation. As is typically the case, many of the challenges can be turned into opportunities when the appropriate monitoring and analytical tools are put in place. One prominent investor in the sector, Diana Propper de Callejon, suggests that as part of that effort, the time is ripe for industry stakeholders to adopt formal codes of best practices to address environmental and social risks.
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“It is not what a lawyer tells me I may do; but what humanity, reason and justice tell me I ought to do.”
I invoked these words of the statesman and philosopher Edmund Burke to close my December 31, 2009, letter to Lloyd Blankfein. They now have particular resonance. I don’t know if, as the SEC has charged, Goldman committed fraud. However, to focus on the legal technicalities of the case is to miss the larger point. At its core, Wall Street’s failure, and Goldman’s, is a failure of moral leadership that no laws or regulations can ever fully address. Goldman v. United States is the tipping point that provides society with an opportunity to fundamentally rethink the purpose of finance. That reexamination will extend far beyond round one of financial reform and will be far more transformative.
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Survival is a realistic goal for many professionals in what has become the most challenging job market since the 1930s. But most financial professionals want more. Their cultural and personal goals are to move forward and upward. For those who are unemployed, worried about their jobs, or want to be in a place with advancement opportunities, Roy Cohen's new book, The Wall Street Professional's Survival Guide: Success Secrets of a Career Coach, will prove invaluable.
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Media reports in recent months have been filled with accounts of CDSs (credit default/derivative swaps), those complex, opaque instruments sold by AIG that
nearly toppled the global financial system. They are the cornerstone of a $700 trillion worldwide industry that has sliced, diced, and shifted astronomical amounts of risk around the financial services sector at dizzying speed and—according to critics—within a regulatory vacuum. On the subject of disclosure, for instance, Fed chairman Ben Bernanke recently lamented the insufficiency of contract-for-difference regulation, noting that few regulators, investors, AIG employees, or AIG shareholders ever knew that the once-mighty AAA-rated insurance behemoth was actually a giant hedge fund that happened to be strapped onto an insurance company.
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Many politicians argue that letting Wall Street sort out the CDS risk problem itself, without massive government intervention, is like letting foxes regulate their own access to the chicken coop. Nonetheless, in recent years, coordinated efforts between the Federal Reserve Bank of New York and industry participants working through the Operations Management Group have made notable progress in addressing public concerns about the CDS market.
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The establishment of exchanges and centralized clearing for the CDS market may not necessarily be a panacea for risk, according to Darrell Duffie, professor of finance at the Stanford Graduate School of Business. Duffie argues that the clearing platforms that have been launched to rationalize the CDS market will not remove nearly as much risk as regulators hope.
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"A Valuation Study of Stock Market Seasonality and the Size Effect."
The Journal of Portfolio Management, Spring 2010. Zhiwu Chen and Jan Jindra.
Existing studies on market seasonality and the size effect are largely based on realized returns. In this article, Chen and Jindra investigate seasonal variations and size-related differences in a cross-stock valuation distribution. They use three stock valuation measures, two derived from structural models and one from the book-to-market ratio. The authors find that the average valuation level is highest in mid-summer and lowest in mid-December. Furthermore, the valuation dispersion (kurtosis) across stocks increases toward year-end and reverses direction after the turn of the year, suggesting increased movements in both the underand overvaluation directions. Among size groups, small-cap stocks exhibit the sharpest decline in valuation from June to December and the highest rise from December to January. For most months, small-cap stocks have the lowest valuation among all size groups and show the widest cross-stock valuation dispersion, meaning that they are also the hardest to value. Overall, large-cap stocks enjoy the highest valuation uniformity and are the least subject to valuation seasonality.
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The quantity of distressed commercial real estate assets (properties and loans) in the United States will continue to increase as the deleveraging process unfolds over the coming years. The implosion of the global financing market coupled with the longest and deepest economic recession since the Great Depression has increased stress on both properties and their owners. A shutdown of the securitized lending market (CMBS market) is increasing the demand of properties needing to be refinanced, but the dislocated financing market is limiting the supply of new loans available.
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During financial crises correlations among security returns approach one.
Therefore, diversification fails just when you need it.
Therefore, MPT (modern portfolio theory) is of no use.
The first of the statements above is correct; the second is partially true; the last statement is false. In order to understand the assertions of the last sentence, we need to review what MPT is and is not, what it offers and what it does not promise.
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A good number of CFA® charterholders consider adopting the RIA (registered investment adviser) business model. There are several reasons to do so. Some institutions and individuals only hire RIAs. Even clients who do not require that an adviser be registered may find registered advisers more appealing. (It should be noted, however, that a federally registered adviser may not make any inference that government registration equals government approval of the adviser; most if not all states are likely to have the same restriction.) In addition, a charterholder might be attracted to the structured disclosure form (Form ADV), which allows the adviser to provide clients with detailed information about his or her business, including advisory personnel, fees, and any conflicts of interest.
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“My hockey philosophy kicked in full force,” Keith McCullough writes at the beginning of Diary of A Hedge Fund Manager
. “I clung to the concept that only harder work could separate me from the rest of the pack. ” This is the story of a Canadian Junior A hockey player who, after failing to make it to the NHL, went on to captain the hockey team at Yale, where he earned a degree in economics. McCullough then spent a decade on Wall Street, enjoying greater success than he ever had on the ice.
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An upcoming NYSSA forum will explore how companies can begin to view their mandates to operate more sustainably as opportunities to drive future performance and mitigate risk rather than as societal burdens that must be addressed at the minimum cost.
Arlene Meritz, a strategic organizational consultant with 25 years experience leading centers of excellence in organizational effectiveness, change, and talent at Cadbury Schweppes, admits that it is difficult for companies to take the long-term view required to implement sustainable practices when financial markets and investors are so focused on short-term performance. That said, she notes, consumers' needs and interests ultimately drive a food and beverage company’s profits.
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PDAs (personal digital assistants) have capabilities way beyond scheduling, e-mail, Internet access, and phone calls. These essential pieces of business equipment can now perform scaled-down spreadsheet functions that can be greatly enhanced with templates to perform analysis quickly when a few inputs are entered. Although Microsoft Office Excel’s functions are limited in the PDA environment, the template described below only requires the PV() function.
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The first question the reader may ask is, "Why another book on the financial crisis?" Many of these books are repeating much of the same material, adding less and less to our understanding. This is not true of The Fearful Rise of Markets: Global Bubbles, Synchronized Meltdowns, and How To Prevent Them in the Future (FT Press, 2010). This new book offers a new approach and conclusion. It is systematically organized, easy to read, well researched, and shows a sophisticated understanding of the capital markets. The author has had a good vantage point to observe the crisis, and what caused it. John Authers is investment editor and columnist at the Financial Times.
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