Niall Ferguson's biography of Siegmund Warburg, High Financier, combines the life of this successful banker with the history of the capital markets of his era. The Warburg family was based in Hamburg as one of Germany's major banking firms. As a refugee from Nazi Germany, Siegmund Warburg came to London as an outsider, started over again, and became an important factor in the London banking world. He changed merchant banking there with the first hostile takeover in England—of British Aluminum. And, in a move that was unusual for that time, Warburg brought modern management into banking. An even greater impact came from his role in creating the Eurodollar and Eurobond markets. At that time in postwar England, London's survival as a major financial center was far from assured.
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NYSSA is pleased to announce the winners of the December 2010 CFA Exam Scholarship Program. Recipients were selected based on experience and/or interest in the investment profession, ethical standards, and commitment to NYSSA and CFA Institute. All scholarship winners receive a free weekly review course from NYSSA and a credit allowance for additional learning materials from Schweser. In addition, CFA Institute will refund the CFA examination and registration fees (less a $225 exam registration administrative fee). NYSSA offers up to five scholarships in both the fall and spring to New York area CFA candidates of all levels.
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In 1994 a group of young, bright JPMorgan bankers from the swaps department met in Boca Raton, Florida, for an alcohol-fueled weekend of frat-house pranks and intense financial discussions. At these meetings they generated an idea that would change modern finance: how to use derivatives to manage credit risk attached to the loan book of banks.
Tracing the history of the derivatives team from the Boca Raton meeting to the beginning of 2009, Gillian Tett describes in Fool's Gold the genesis and fall from grace of the booming credit derivatives market, and how the use and abuse of once-obscure products such as CDSs (credit default swaps) and CDOs (collateralized debt obligations) brought the world to the edge of a depression.
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The public likes simple explanations, especially if they are argued with bombast. For instance, the financial crisis happened because “the young boys with PhDs in physics were conceiving a financial hydrogen bomb” (attributed to F. G. Rohatyn of Lazard Fréres). To me, it sounds like “the laws of fluid mechanics sunk the Titanic.” This is literally true, of course, but the substantive reason was much more mundane (and universal): hubris and the human propensity to throw all caution to the wind—literally and idiomatically—when big money is involved.
Continue reading "In Defense of a Quant (Part I)" »
To be sure, Yale CIO David Swensen believes most institutions and the vast majority of individuals lack the abilities and resources to pursue active portfolio management strategies. That caveat aside, however, his updated edition of Pioneering Portfolio Management provides a comprehensive view of Yale’s highly successful endowment fund, and is an essential tool for those seeking returns and diversification beyond traditional asset classes.
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Stress-test complacency will be a cause of the next financial meltdown.
Economic commentators have been increasingly using the word “uncertainty” as of late. The context has included the business climate, the stimulate vs. austerity debate, and forecasting the investment outlook across capital markets.
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The Career Development Committee
(CDC) has been one of NYSSA’s most active committees over the last several years. The CDC focuses on helping NYSSA members actively manage their careers and achieve professional growth. The committee's programs are targeted toward helping members: (i) develop themselves professionally, (ii) understand and explore career opportunities in the evolving financial services industry, and (iii) advance their careers by marketing themselves more effectively to current and prospective employers.
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In this clip from the CFA Level I Orientation, William A. Trent, director of the exam development division at the CFA Institute, offers 10 essential strategies that every student should follow when preparing for CFA exams. Though Trent warns students that earning a CFA can be a difficult process–with the global pass rate averaging only 40% for the June 2010 exam–he noted that "more and more CFA designation is held in high regard by employers."
If you want to watch the webcast of this entire event or any other NYSSA program, visit NYSSA's On-Demand website.
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In Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff, Christine Richard unravels the story of Bill Ackman's six-year battle in warning the public of a catastrophic $2.5 trillion bond insurance business waiting to happen. As the hedge fund manager of the MBIA (Municipal Bond Insurance Association), Ackman placed a bet against the MBIA and brought in more than $1 billion for his investors from the collapse of the credit markets. Despite his winnings, Ackman was called a fraud in the press and investigated by Eliot Spitzer and the Security and Equities Commission. A Bloomberg News reporter, Richard weaves a compelling narrative around Ackman, while revealing the financial fallacies on Wall Street. Bill Hayes, contributor to the Financial Professionals' Post, had the opportunity to speak with Richard about her book. (Richard will speak at NYSSA on Friday, September 24, 2010. Register now to reserve a spot.)
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“Celebrating 10 Years of ETFs in Europe.” The Journal of Index Investing (Summer 2010). Deborah Fuhr, Shane Kelly.
This article is a comprehensive report on the history and outlook for the exchange-traded fund industry in Europe. It covers both ETFs and exchange-traded products (ETPs). ETFs are open-end index funds that provide daily portfolio transparency, are listed and traded on exchanges like stocks on a secondary basis, and utilize a unique creation and redemption process for primary transactions. ETPs are products that have similarities to ETFs in the way they trade and settle, but they do not use a mutual fund structure. The use by ETPs of other structures, including grantor trusts, partnerships, notes, and commodity pools, can create different tax and regulatory implications for investors when compared to ETFs.
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Act 4, Scene 1—that’s where we are in the drama over corporate clawbacks. Put on stage by SOX (Sarbanes-Oxley), the clawback drama took its latest turn with the passage of the recent financial reform legislation, which goes farther than either SOX or the SEC have moved to date.
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In this edition of Friday Career Coffee, "How to Choose the Right Career: Self-Evaluation, Counseling and Research," Michael C. Pastena talks about choosing the right career. Pastena, a career management coach, stresses the importance of having a career that is fulfilling while avoiding the pitfalls of burn-out, constant
stress, and stagnation.
For the full audio of Michael C. Pastena's talk, see NYSSA's On-Demand website.
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Whitney Tilson and Glenn Tongue join a long line of value investors, stemming from Benjamin Graham, who both practice and teach the art of value investing. More Mortgage Meltdown
is the latest addition to Tilson’s body of pedagogical work: he’s also the cofounder of the semiannual Value Investing Congress and of the newsletters Value Investor Insight
and SuperInvestor Insight
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Abby Joseph Cohen, CFA, is the president of the Global Markets Institute at Goldman Sachs, and the firm’s senior investment strategist. She’s been with the company since 1990, and became a partner in 1998.
Cohen’s career, which started when she joined the Federal Reserve Board in Washington, DC, as an economist, has been the subject of a Harvard Business School case study. She is the former chairman of the board of AIMR (Association for Investment Management and Research, now CFA Institute) and the recipient of that organization’s Distinguished Service Award.
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“When people think about renewable energy, they have visual images of solar panels and windmills,” says Rob Wilder, manager of the benchmark index Wilderhill Clean Energy Index. “They never think about ugly old transmission.” But just as green technology has suddenly made those engineers with pocket protectors the cool guys at cocktail parties, ugly old transmission may well be on its way to becoming the darling of Wall Street.
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“Doubt is not a pleasant condition, but certainty is an absurd one.” –Voltaire
You have to love those who state with certainty that stocks have made their lows and a resumption of the bull rally is underway. God may favor the bold, but fools do rush in where angels fear to tread.
Who knows if various stock market indices, which have produced a wonderful bounce from the lower end of their trading ranges, will broaden out and help numerous other indices reverse their bearish Mega Trend (“death cross”) signals? Who knows if the US economy has evolved into a private sector driven sustainable path of growth and, thereby, can avoid an economic backward slide into hell?
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John Authers has written a great book called The Fearful Rise of Markets, and he took some time to speak with me about the book.
Authers is a long-time investment columnist. He now runs the Lex column for the Financial Times and is quoted all over the place. He was honored by State Street Institutional Press Awards as the UK’s Investment Journalist of the Year for his coverage of confidence in investment theory.
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In order to not only stay competitive but also simply survive in this tough economy, organizations must be nimble, light on their feet, and ready and willing to change gears quickly to respond to a rapidly evolving environment. The phrase “business as usual” no longer means same old, same old, but rather changing with the times.
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As students begin to prepare for this round of CFA exams it's interesting to look back at the history of the charter. In the mid-1940s a debate raged in the finance community over whether or not there should be a professional rating for security analysts. In this excerpt from the Analysts Journal (January 1945), Benjamin Graham, the man widely considered to be the father of security analysis, argued for the creation of a professional rating, and Lucien O. Hopper argued against the need for certification. Graham's side eventually prevailed, leading to the formation of the CFA in 1959.
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