< The Finance Professionals' Post: May 2012

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21 posts from May 2012


Video: How the Economy Will Effect the P/C Insurance Industry in 2012

NYSSA's 16th Annual Insurance Conference featured presentations from a number of leaders in the insurance industry. Dr. Robert Hartwig, PhD, CPCU, President and Economist, Insurance Information Institute, gives an overview of how the current economic climate will affect the insurance industry. Hartwig's overall perspective is optimistic.

Predictions for 2012:

  • Although exposures are at their highest since 2004, they will not be restored until mid-decade.
  • No traditional hard market will emerge this year.
  • Increasing private sector hiring will drive payrolls/WC exposures.
  • Demand for commercial insurance will accelerate.
  • Auto insurers will see growth with a recovery in auto sales.
  • New home construction will continue to see very little growth.


Book Review: Breakout Nations

Breakout-NationsInvestors have been drawn to the rapid growth and what some see as "economic miracles" among countries described as the emerging markets. A potentially profitable strategy is to spot the next country growth stock in advance, and to cash out of those countries before their growth peaks. As head of Emerging Market Equities at Morgan Stanley, author Ruchir Sharma is well-qualified to help investors in this process.

What makes Breakout Nations: In Pursuit of the Next Economic Miracles so fascinating is the author's experiences visiting and investing in so many of the emerging markets. He is well-versed in all the relevant economic statistics and financial trends. In addition, he is a writer who knows how to grab the reader's attention and keep the reader engrossed. Most importantly, Sharma challenges the popular consensus on many countries, and presents many observations and conclusions that emerging market investors must consider.

Continue reading "Book Review: Breakout Nations" »


NYSSA Announces 2012 Award Winners

For over 75 years, the New York Society of Security Analysts has been a pillar in the investment community. Since its founding in 1937 by the “father of securities analysis,” Benjamin Graham, NYSSA has provided an independent forum for the investment industry that promotes best practices and the highest professional ethical standards. NYSSA volunteers are the living embodiment of Benjamin Graham's goal of enriching and advancing the investment profession.

This year's awards will be presented to five exceptional NYSSA volunteers for their commitment to furthering the society's goals at the 75th Anniversary Dinner, June 26, 2012. The dinner will take place at the Museum of American Finance.


Janet-ManganoJanet Mangano, in her 30-year career in investment research and management, has held senior positions as director of research, equity analyst, and portfolio manager. She has worked at some of the industry’s most important firms, including Merrill Lynch and Smith Barney. Most recently, she served as senior investment advisor at PNC Wealth in Morristown, NJ, managing assets for affluent individuals and charitable trusts. She has been a member of NYSSA and CFA Institute since 1984. Mangano is co-chair of the Private Wealth Management Committee at NYSSA, and recently served as a professional mentor in the local CFA Institute Research Challenge and as a judge in the quarter- and semi-final Americas Regional competitions.

Louise-HowardLouise A. Howard, CFA, CAIA, vice president—marketable securities, has been with the YMCA Retirement Fund since 2005. She is responsible for sourcing, evaluating, reviewing, and recommending the fund's external public equity and fixed income investment managers globally. Howard has more than 20 years of investment experience, including foreign exchange trading, fixed income portfolio management, and hedge fund-of-funds due diligence. Howard has been a volunteer with numerous organizations including NYSSA, company-sponsored mentoring programs, Literacy Volunteers, and New York Cares. 


William_HayesWilliam Hayes started his financial career in the investment department of New York Life Insurance. Later, he was director of pension fund investments at ITT Corp, and at Hughes Aircraft. In 1981, he joined Walter Frank & Co, a New York Stock Exchange specialist firm, becoming research partner. Hayes served two terms as president of the NYSSA (1995–97), and was the chair of the Career Development Committee for many years. Currently, he writes book reviews for NYSSA's Finance Professionals Post, and is in charge of NYSSA's Authors Series™ program.



Stella-AlvoStella Alvo is CEO of Westfield Consulting LLC, an independent technology marketing firm. For more than 15 years she has worked in developing new digital products for multi-channel sales avenues. Alvo served as a board director at NYSSA; elected as its first outside director, she was nominated for her expertise in advanced digital product development. She is acknowledged for founding two NYSSA student programs: first, as founder and chair or vice chair for 15+ years of NYSSA’s SEMI Program; and second, as co-founder of NYSSA’s Investment Research Challenge (now the CFA Institute Research Challenge).


Walter-SchlossWalter Schloss grew up in Manhattan, attended the Franklin School and the New York Stock Exchange Institute, where he studied under Benjamin Graham. At the end of WWII, he was invited by Benjamin Graham to join the firm of Graham Newman as a securities analyst. In 1955, Schloss set up his own investment management partnership, Schloss Associates. Warren Buffett referred to Schloss as a "super investor." In his 2006 Letter to Shareholders, Buffett said, "Let me end this section by telling you about one of the good guys of Wall Street, my long-time friend Walter Schloss, who last year turned 90. From 1956 to 2002, Walter managed a remarkably successful investment partnership, which he did not take a dime from unless his investors made money. My admiration for Walter, it should be noted, is not based on hindsight. A full 50 years ago, Walter was my sole recommendation to a St. Louis family who wanted an honest and able investment manager."

Schloss has been profiled in numerous financial publications including Barron's, Forbes, and Fortune.

Video: How to Make Your Skills and Accomplishments Stand Out

Constance E. Melrose, managing director of eFinancialCareers North America, gives her advice on how  to communicate your skills and accomplishments to gain more career opprotunities. Based on eFinancialCareers research and working in the online job search industry, Melrose has unique and valuable insight into advancement in the financial field.


  • The top three motivators for financial markets professionals are:
    1. Accomplishment
    2. High compensation
    3. Being on a great team
  • Talk about your unique strengths in terms of what you will provide to your future employer. Let hiring managers know specifically what you bring to the table.
  • Think about whether you will read "similarly" or "dissimilarly" to hiring managers. If you read similarly, think about how to stand out and have specific examples.
  • "Think of me first." – Make your accomplishments visible so that you will be the first one thought of when an opportunity opens up. A good reputation will help you later on.
  • The indsutry is constantly changing. Always stay open and ahead of the pack.


Blogs for the Buyside: Bronte Capital

Blogs for the Buyside

The problem with many financial blogs I find is that they seem to mainly offer brief comments on the day's major headlines. While these are helpful in giving the day's news some context, I had been pining for a fellow buysider to offer a submarine-deep dive into specific stocks.

I found it in Bronte Capital.

Continue reading "Blogs for the Buyside: Bronte Capital" »


It’s Almost CFA Exam Time—Can You Afford Not to Take It?


Now that you’ve already achieved your Charted Financial Analyst (CFA) designation, you can pity the thousands of anxious financial pros preparing for the next round of exams which are coming up soon. (weekend of June 2-3).

But more importantly, what do you intend to do with those three letters after your name?

After all, you just spent between $3,600 and $7,500, depending on how many times you had to take the exams or purchase extra study supplies, not to mention the hours of study to take three exams, each at a level more difficult than the last over a three- to four-year period, just to be able to claim the CFA designation.

Continue reading "It’s Almost CFA Exam Time—Can You Afford Not to Take It?" »


The $1 Conspiracy


Credit: Wikimedia Commons

How Ralph Kramden brought down Casey Jones, in which a cartoon rabbit and a very real civil-rights heroine also appear...

Conspiracy theories are endemic to politics and big business. Vast library shelves groan under the weight of hundreds of volumes revealing “the truth” about or debunking lurid tales of assassinations, movie stars, organized crime, and smoke-filled rooms. Most of the theories fall flat after a moment’s sober reflection, but the stories seem deathless.

A great irony of the unending fascination with conspiracies is that one of the very few that was not just proven, but for which the perpetrators were tried and convicted, lies forgotten. Among a dedicated few the debate over the National City Lines (NCL) continues to rage. But few people outside the wonkish world of transit advocates know that for the middle half of the 20th century a coalition of oil, tire, and automobile companies created a front company to buy up municipal streetcar lines and convert them to buses.

Continue reading "The $1 Conspiracy " »


Forensic Accounting Careers

You probably already know that being a CPA can be a lucrative and rewarding career. But did you also know that there are specializations within the CPA profession? Forensic accounting is one such specialty area. Forensic accounting, also referred to as financial forensics, is a career in demand within the CPA profession, which focuses on litigation and investigation. Yes, it is similar to what you might see in popular crime television shows like Law and Order, CSI, and so forth.

Continue reading "Forensic Accounting Careers" »


The Weak CEO: Five Danger Signs There Is Trouble at the Helm

Investing in a company whose top management is weak and ineffective is wasteful, even dangerous. Smart analysts go beyond a company's bottom line. They know how to figure out whether the company they are investigating has a CEO with integrity, judgment, and ethics.

Here are the five danger signs that the company lacks a true leader:

Continue reading "The Weak CEO: Five Danger Signs There Is Trouble at the Helm" »


Emerging Markets Warrant an Overweight Position in Investor Portfolios, Says David Hale

CFA Institute

Economist David Hale told delegates at the 65th CFA Institute Annual Conference that steady increases in exports and capital spending, combined with favorable demographics, will allow emerging market countries to continue to grow their economies at rates superior to those found in the more developed economies of “old industrial countries.” Given the comparatively strong growth outlook, he argued, emerging markets warrant an overweight position in investor portfolios.

In building his case, Hale noted that emerging markets have doubled their collective share of global GDP, exports, and capital spending over the past two decades, with China playing a key role in this growth. China displaced Germany two years ago as the world’s largest exporter of tradeable goods, amassing foreign exchange reserves of $3.3 trillion today (versus $3.4 trillion for all developed countries combined).

Continue reading "Emerging Markets Warrant an Overweight Position in Investor Portfolios, Says David Hale" »


The Covered Bond: A Vehicle for the Shift to a Low-Carbon Economy?

In our first two articles focused on the emerging climate bond market, we spoke with Nick Robins, Director of HSBC’s Climate Change Center for Excellence, and to Sean Kidney, Cofounder and Chairman of the Climate Bonds Initiative. Here, we look at how the covered bond might be adapted as an investment vehicle to catalyze the funding of the critical transition to a low-carbon economy.

The International Energy Authority now estimates that $1 trillion will be required in annual “low-carbon” project funding out to 2050 if the global economy is to avoid the most catastrophic impacts of climate change. Meanwhile, the fallout from the global financial crisis has left both governments and the capital markets severely constrained in their ability to support those funding needs.

Continue reading "The Covered Bond: A Vehicle for the Shift to a Low-Carbon Economy?" »


Time for Regulatory Change?

The shocking news out of JP Morgan this week about a $2 billion trading loss is a stark reminder that even Jamie Dimon, the CEO of such a major firm, can be completely in the dark about what's happening inside the very firm he runs. Dimon has said publicly that this surprised him.

Nonetheless, the timing is perfect for the politicians and regulators to pile on with their solutions to fix the banking industry. There are several regulations that will be referred to in the media and blogosphere during the next few weeks in relation to the JP Morgan trading losses.

Thankfully, you don't have to go to Washington, DC, or Wall Street for the debate. The New York Society of Security Analysts (NYSSA) is hosting a program called "Regulatory Changes as an Opportunity" this September. The speakers for the event will be Jim Allen, CFA, Head of the Capital Markets Policy Group for CFA Institute; and Kim Olson, a principal with Deloitte & Touche LLP.

Continue reading "Time for Regulatory Change?" »


Is Your Resume Getting Read By Robots Instead of Humans?


Recruiters report that due to the overwhelming supply of talent today, desperate job seekers are flooding every position—but that 50% or more of applicants are unqualified for the position to which they are applying. To save companies time and money, the hiring process has become largely automated. Almost all Fortune 500 companies and nearly 95% of all large firms use software filters to examine digital submissions.

Before your application gets seen or touched by human hands, it is almost certainly first examined by software. The Applicant Tracking System (ATS) is an automated system which scans and scores your profile, determining whether or not you are worthy of human review. It eliminates much of the chaff in the selection process. However, the down side is that a lot of wheat is left unharvested as well.

Continue reading "Is Your Resume Getting Read By Robots Instead of Humans?" »


Recent Research: Highlights from May 2012

"The Death of Diversification Has Been Greatly Exaggerated"
The Journal of Portfolio Management (Spring 2012)
Antti Ilmanen and Jared Kizer

Diversification is famously referred to as the only “free lunch” in investing, but it has been under assault since the 2007–2009 global financial crisis, when virtually all longonly asset classes moved down together. Ilmanen and Kizer argue that the attacks are undeserved. Most investors were never as diversified as they thought they were, and there is ample room for improvement by shifting the focus from asset class diversification to factor diversification. They show that diversification into and across factors has been much more effective in reducing portfolio volatility and market directionality than asset class diversification. The benefits are greatest for long–short investing, which requires shorting and leverage but are also meaningful in a long-only context.

Continue reading "Recent Research: Highlights from May 2012" »


CFA Institute Integrity List: 50 Ways to Restore Trust in the Investment Industry

CFA Institute

The CFA Institute Integrity List is a collection of 50 tangible steps that investment professionals can take to restore trust in the industry. The list was inspired by “real-world” ideas from CFA charterholders and members.

Continue reading "CFA Institute Integrity List: 50 Ways to Restore Trust in the Investment Industry" »

Counting Down to the CFA Exams



By now you should have finished your first reading of the CFA curriculum. If you haven’t, then get a move on it—time is ticking away.

Make a plan for the critical phase that’s coming up: revision. There are lots of ways of planning your study time, but the simplest technique is to just divide your days up into blocks of study time, say a 2.5-hour block in the evenings after work or three 2.5-hour blocks on weekend days. This may sound obvious, but it’s crucial that your blocks are dedicated exclusively to study. Do, however, ensure that you give yourself time off in between your study blocks too.

Continue reading "Counting Down to the CFA Exams" »


The Checklist Manifesto


In 2009, Atul Gawande published The Checklist Manifesto: How to Get Things RightThe Checklist Manifesto. Sometime later, a copy arrived at my office, courtesy of a money manager, but it sat unread for many months.

I shouldn’t have waited and, if you haven’t read it, neither should you. I knew of Gawande from his articles in The New Yorker, but despite the favorable notices I read when the book was published, I really didn’t expect much. Checklists? OK, right.

Continue reading "The Checklist Manifesto" »


Insuring Lives and Protecting Families - The Early Years of the $5 Trillion Life Insurance Industry

NY Life Check

19th century blank check from the New-York Life Insurance and Trust Company

It’s hard to believe that life insurance, a $5 trillion industry in the United States, was once considered profane. After all, many initially thought it would be offensive to put a dollar value on a person’s life.

But the insurance industry, which already had been insuring ships and later the lives of marines in England as far back as the 16th century, began informally protecting human lives in the United States in the mid-18th century.

Continue reading "Insuring Lives and Protecting Families - The Early Years of the $5 Trillion Life Insurance Industry" »


Diversification in Funds of Hedge Funds: Is It Possible to Overdiversify?


Many institutions are attracted to diversified portfolios of hedge funds, referred to as Funds of Hedge Funds (FoHFs). In this paper we examine a new database that separates out for the first time the effects of diversification (the number of underlying hedge funds) from scale (the magnitude of assets under management). We find with others that the variance-reducing effects of diversification diminish once FoHFs hold more than 20 underlying hedge funds. This excess diversification actually increases their left-tail risk exposure once we account for return smoothing. Furthermore, the average FoHF in our sample is more exposed to left-tail risk than are naïve 1/N randomly chosen portfolios. This increase in tail risk is accompanied by lower returns, which we attribute to the cost of necessary due diligence that increases with the number of hedge funds.

Continue reading "Diversification in Funds of Hedge Funds: Is It Possible to Overdiversify?" »


Book Review: Ben Graham Was a Quant

CFA Institute


The author, unlike many others, views Benjamin Graham’s work as the origin of quantitative investing. He reviews the history of quantitative investing and uses Graham’s investment methodology to introduce such concepts as alpha, the Sharpe ratio, and the Fama–French model.

The roots of value investing can be traced back to the 1934 publication of Benjamin Graham and David Dodd’s classic, Security Analysis. Graham later disseminated his views to the general public in the highly regarded book The Intelligent Investor. The influence of Graham’s methodology is indisputable. His disciples represent a virtual who’s who of value investors, including Warren Buffett, Bill Ruane, and Walter Schloss. As a measure of his enduring impact on the field, a search of “Benjamin Graham" on Amazon.com yields more than 900 results concerning Graham’s writings and works about his investment philosophy. Given the success of the master and his students, it is no wonder that Graham remains an investor of immense interest to practitioners.

Ben-Graham-Was-A-QuantThe title Ben Graham Was a Quant: Raising the IQ of the Intelligent Investor (Wiley Finance) will probably cause readers to envision a book that traces Graham’s remarkable life and dissects his use of quantitative techniques that have become prevalent in modern finance. In reality, Steven P. Greiner has written a very different type of book. Greiner, the head of Risk Research for FactSet Research Systems, is the stereotypical Wall Street quant, holding a bachelor’s degree in mathematics and chemistry from the University of Buffalo and a PhD in physical chemistry from the University of Rochester. Greiner’s background in the hard sciences is evident in the quotations from either Albert Einstein or Isaac Newton at the beginning of nearly every chapter and in the author’s extensive use of examples from the hard sciences.

Throughout the book, Greiner pays homage to Graham, using his investment philosophy as the catalyst for examining quantitative investing. In the early chapters of the book, however, Greiner focuses mostly on his own view of quantitative investing. In spite of his strong quantitative background, he does a good job of making his ideas accessible to readers with a wide variety of backgrounds.

Greiner starts with a review of the history of quantitative investing. In most accounts, the story begins with Harry Markowitz’s seminal work on portfolio theory in 1952. For Greiner, however, the origins of quantitative investing date back earlier, to the work of Benjamin Graham. Greiner points out that Graham’s 1949 classic, The Intelligent Investor, lists seven criteria that defined the “quantitatively tested portfolio." These criteria include such factors as the size of the enterprise, earnings stability, financial condition, dividend record, earnings growth, price-to-earnings ratio, and price-to-book ratio. As Greiner points out, the definition of a quant as someone who designs and implements mathematical models for the pricing of securities does not mention the use of a computer.

As the pages go by, the link between Graham’s methodology and quantitative analysis becomes clearer. Chapters 4–6 begin to delve into the quantitative factors that Graham used in formulating his investment philosophy. Throughout these chapters, Greiner tests the empirical validity of Graham’s factors with a Fama–French type of model. Greiner criticizes the factors used by many MBAs that are linked to academic theories but may have no empirical validity. He writes, “Empiricism suggests the main drivers of stock returns are often market trading forces more than business financials." In testing Graham’s model, Greiner finds that such factors as book-to-price ratio, price-to-earnings ratio, and dividend yield do extremely well in predicting performance.

Using the Graham factors, Greiner goes on to build a factor model for predicting returns. Because he cannot confer with Graham on which factors to include in the model, Greiner does not use stepwise regression to identify the best ones. Rather, he elects to use all the factors in order to remain true to the Graham methodology. Throughout the book, Greiner provides numerous tables and graphs to document the effectiveness of the Graham factors in predicting security returns and to support the fundamental tenet of the book—that empiricism should trump theory in modeling security returns.

Continue reading "Liquidity Level or Liquidity Risk?" »


How Do You Find a Job in the New Economy? Use a New Approach


There is little question that the new economy has brought changes in the way business is done. It is painfully obvious to those seeking positions in the financial industry that business-as-usual is anything but the same-as-it-ever-was. The good news is that the changes can work to your advantage.

The new economy is one that requires workers to be far more adaptable; always on the prowl, and in a state of perpetual job search. What you have done and what has worked in the past (and what is most comfortable) in most cases will not work for you anymore.

Continue reading "How Do You Find a Job in the New Economy? Use a New Approach" »


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CFA® Level I 4-Day Boot Camp

Thursday November 12, 2015
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CFA® Level II Weekly Review - Session A Monday

Monday January 11, 2016
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Wednesday January 13, 2016
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