< The Finance Professionals' Post: June 2012

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15 posts from June 2012

06/28/2012

Advice to Female Professionals: Be a Bit More Selfish and a Lot Less People-Pleasing

EfinancialCareers

No doubt about it: Women need to be more focused on themselves and their career goals and less interested in pleasing their supervisors if they really expect to advance, says Canadian careers expert Leah Eichler.

Eichler confides that one of the best pieces of advice she ever received from a manager came during a performance appraisal very early in her career while she was a Reuters reporter focusing on digital media.

As the conversation began to wind down, she asked him what else she could do to provide value to the company.

Continue reading "Advice to Female Professionals: Be a Bit More Selfish and a Lot Less People-Pleasing" »

06/27/2012

Investing in the New World of Biophysical Limits

Two years ago, while researching an article for NYSSA’s The Investment Professional, I interviewed one of the most eminent alternative economists of our time, Herman Daly. It was the spring of 2010 and the global markets were reeling from the impacts of the 2008 financial crisis. Policymakers in the developed world were focused on one goal—to stabilize their economies and put them back onto a robust growth track. Meanwhile Daly, a former senior IMF economist, was warning—as he had for many years—that the relentless pursuit of economic growth as measured by GDP, far from being the antidote to the world’s ills, was diminishing human well-being and pushing the earth’s ecosystem to the verge of collapse.

Continue reading "Investing in the New World of Biophysical Limits" »

06/26/2012

Limericks Économiques: Unqualified Interest

Limericks Économiques

As a primary task of the Fed, it
Should cheapen the cost of our credit,
Which would help a lot more
If the mean credit score
Would qualify many to get it.

Continue reading "Limericks Économiques: Unqualified Interest" »

06/25/2012

More than the Mainstream: Bronte Capital

More than the Mainstream

For years, people would complain about what they saw as the inherent partisanship of the mainstream media, “The Times is too liberal!” a Republican would yell. “The Journal is too right-wing!” Democrats would yell.

While I found this to be true, what really bothered me was the inability of mainstream media to create a connection between the day’s headlines and the larger picture.

So while I would use sources like the Wall Street Journal, the New York Times, and Bloomberg to monitor the headlines, I always was searching for sources that would help me bring context to them.

Continue reading "More than the Mainstream: Bronte Capital" »

06/21/2012

Book Review: A Decade of Debt

A-Decade-of-Debt

In the wake of the global financial crisis, mainstream economists have begun to realize that financial markets need to be incorporated into their theoretical frameworks. The traditional view holds that asset prices ultimately reflect underlying economic activity. But it turns out that economic activity is, in turn, directly affected by asset prices, which is why the pathbreaking work of Carmen M. Reinhart and Kenneth S. Rogoff, economics professors at the University of Maryland and Harvard University, respectively, is so valuable. Their research offers a wealth of empirical data concerning the impact of debt on macroeconomic activity, as well as an analysis of the data. Because their analysis tends to be in the form of narration rather than econometric equations, it is highly accessible, even to nonspecialists.

A sequel of sorts to their acclaimed best-seller, This Time Is Different: Eight Centuries of Financial Folly (Princeton University Press, 2009), A Decade of Debt (Policy Analyses in International Economics) is shorter and summarizes some of the authors’ research that has appeared in academic journals since the publication of This Time Is Different.

In A Decade of Debt, Reinhart and Rogoff document that the public and private debts of industrialized nations have grown to unprecedented levels relative to their GDPs. Historically, high public debt levels have been reduced not through higher macroeconomic growth but, rather, through a combination of austerity measures and default. Default can occur through repudiation and restructuring, which is how debt incurred during World War I and the Great Depression was typically unwound. Default can also occur through what has been called financial repression, which refers to such government-imposed measures as ceilings on interest rates, regulatory requirements that effectively create captive audiences that extend credit to the government, and direct governmental influence on the ownership or management of financial institutions.

Financial repression is how governments of advanced nations dealt with the debt they ran up during World War II. It is likely also—Reinhart and Rogoff hypothesize—how they will deal with the debt incurred in the effort to support national banking sectors during the recent financial crisis. Because historical episodes of delevering have tended to last as long as seven years, the authors suggest that we are currently in the middle of “a decade of debt,” extending from 2008 to 2017.

Continue Reading "A Decade of Debt" >>

06/20/2012

Educating the Educated: More Requirements for the CFA Charter?

If you are a CFA® (Chartered Financial Analyst) charterholder, congratulations on your hard work. To become a charterholder, you have earned a university degree, worked as a professional for at least four years, and spent at least three years taking each of the three required levels of the CFA exam—which only a minority of test-takers usually can pass each year (in 2011, 43% of June [all levels] and 38% of December [level I] candidates passed).

However, while just earning your CFA charter is a major undertaking, it’s what happens after the exam that you should consider. At a previous NYSSA panel, an attendee asked whether CFA Institute should require charterholders to pursue continuing education (CE). This discussion reflects a perennial debate among CFA Institute members regarding the importance of CE standards for ensuring high professional conduct.

Continue reading "Educating the Educated: More Requirements for the CFA Charter?" »

06/19/2012

They Call It Innovation

Two sessions at the CFA annual conference typified the nature of the discussion of “innovation” in the investment world.

The first was a plenary session that featured Harold Bradley of the Kauffman Foundation, Bill Hambrecht of WR Hambrecht, and Duncan Niederauer of NYSE Euronext. It was titled, “Has Innovation Helped or Hurt the Integrity of Markets?”

Continue reading "They Call It Innovation" »

06/18/2012

Is the CFA Charter Really Useful in Getting an Investment Banking Job?

EfinancialCareers

In September 2006, when I was a second-year Goldman analyst, one of my associates texted me to “show off” that he had just passed Level III of the Chartered Financial Analyst® program. I have to admit that I was jealous! I knew it was a definite plus on his resume because I’d heard that it was extremely challenging.

I thought, “If he has the time to study for the CFA [exam], I can make time too!” It was September already but I still applied for the December 2006 Level I exam. I passed. I passed the next two levels in June 2007 and June 2008, respectively.

Continue reading "Is the CFA Charter Really Useful in Getting an Investment Banking Job?" »

06/14/2012

Will the JOBS Act Create Any Jobs in the Hedge Fund Industry?

EfinancialCareers

The Jumpstart Our Business Startups Act, which is better known as the JOBS Act, is expected to create thousands of jobs and some of them, say industry insiders, are going to be created in the “startup” center of a financial services sector, the hedge fund industry.

The bulk of these jobs will be in marketing, investor relations, and client relations, and we can expect additional jobs to be created at vendor companies that either offer these services or will likely spring up as a result of the JOBS Act. Don’t expect an avalanche of new positions, but there should be an uptick.

That’s the opinion of several industry observers.

Continue reading "Will the JOBS Act Create Any Jobs in the Hedge Fund Industry?" »

06/13/2012

Investment Management Fees Are (Much) Higher Than You Think

CFA Institute

Although some critics grouse about them, most investors have long thought that investment management fees can best be described in one word: low. Indeed, fees are seen as so low that they are almost inconsequential when choosing an investment manager. This view, however, is a delusion. Seen for what they really are, fees for active management are high—much higher than even the critics have recognized.

Continue reading "Investment Management Fees Are (Much) Higher Than You Think" »

06/12/2012

Recent Research: Highlights from June 2012

"Some Like It Hot: The Role of Very Active Mandates across Equity Segments in a Core-Satellite Structure"
The Journal of Investing (Summer 2012)

Frank Nielsen, Giacomo Fachinotti, and Xiaowei Kang

This article reviews the active management opportunity in different market segments, and discusses the role of very active mandates across segments in a core–satellite portfolio structure. Research based on manager performance data over the last 10 years indicates that there is little evidence that average emerging market or small-cap managers have produced higher or more persistent risk-adjusted returns relative to their developed market large-cap peers. Therefore, institutional investors may consider active and passive management as complementary strategies across all equity segments. Due to the outperformance of high active risk mandates over the analyzed period, a simulated core–satellite structure across different equity segments achieved a higher information ratio than a combination of low active risk managers. The outperformance of high active risk mandates may reflect links between higher manager skill, higher investment conviction, and/or fewer constraints. Depending on investment beliefs, institutional investors might explore such a core–satellite structure to implement the global equity allocation.

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

06/11/2012

Worldview Podcast: Not Just BRICs and Mortar

Worlview Podcast

In recent years, Brazil has been touted as one of the most promising and fastest growing emerging markets for investors. Although growth has recently slowed down, events such as the 2014 World Cup and 2016 Olympics still on the horizon may recharge the market. Geoffrey Pazzanese, Vice President of Federated Global Investment Management, gives an overview of Brazil's current and potential investment opportunities.

Notable facts about Brazil:

  • With the upcoming 2014 World Cup, Brazil will increase its investment in civil infrastructure, transportation, and stadiums.
  • Public housing is one of Brazil's largest investments at R$ 1 trillion (BRL).
  • The poverty level is at 26%, in line with India and higher than Mexico.
  • By 2014, the poverty rate as a percentage of the share of population is expected to be below 10%. (In 2003, it was 30%).
  • The recent rise in the middle class has increased consumer spending on items like white goods, cars, clothes, and homes.
  • Ease of doing business in Brazil is relatively poor because of heavy bureaucracy and a shortage of lawyers to help cut through the red tape. This is a major hindrance of growth.

Play-clip-button

06/06/2012

Flawed, Ignorant, and Dangerous: A Bain Capital Partner’s Worldview

“At base, having a small elite with vast wealth is good for the poor and the middle class.”

This is how Adam Davidson’s piece in the New York Times Magazine summarized the frustrated former Bain Capital partner Edward Conard’s worldview, as expressed in his forthcoming book, Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong.

The article reveals the logic of what we might call the “extreme compete” elite investment class, as expressed by one of its highly “successful” participants—Conard ran the New York office for Bain Capital.

Continue reading "Flawed, Ignorant, and Dangerous: A Bain Capital Partner’s Worldview" »

06/05/2012

Should a CFA Charter Be in Your Future?

CFA Exam Prep

More than 150,000 candidates sat for the CFA exams this past Saturday. Some will move to the next level or earn their charter. But many will have to decide if they should try again next exam.

The charter is not easy to get—which can make it very desirable. But is it right for you? Here are some things to consider:

Continue reading "Should a CFA Charter Be in Your Future?" »

06/04/2012

From Gilt-Edged to Blue Chip - The Evolution of a Stock Market Term

Philippine-stock-market-board

Credit: Wikimedia Commons

When the stock market was in full-scale panic mode in 1893, the New York Herald reported that “there was no relation whatever between prices made on the tape and the intrinsic value of the securities sold.” The paper noted that “the fall was perhaps sharpest in gilt edged, dividend paying stocks which have been comparatively firm while others were tumbling.”

Today even the most casual followers of the financial markets would describe those as blue chip stocks, while the term “gilt- edged” is now applied to one particular segment of the bond market.

How did this change in the language of investing come to pass? Perhaps the Stock Market Crash of 1929 played a role.

Continue reading "From Gilt-Edged to Blue Chip - The Evolution of a Stock Market Term" »

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