< The Finance Professionals' Post: August 2012

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18 posts from August 2012


Book Review: What Chinese Want


An understanding of the Chinese worldview is essential for anyone doing business or investing in China. We may think that we know what the Chinese want, but our assumptions are often faulty. Tom Doctoroff is well qualified to enlighten us. He is Northeast Asia area director and Greater China CEO at J. Walter Thompson, and has lived and worked in mainland China for 14 years. As an advertising executive, he knows how to hold our attention. He organized his recent book What Chinese Want: Culture, Communism and the Modern Chinese Consumer into short and focused chapters.

China’s primary goal is stability. This reflects a long history of traumatic change, including foreign occupation, famine, and Mao’s Cultural Revolution. The Chinese do not take survival for granted, and personal identity is tied to the family and the nation.

Continue reading "Book Review: What Chinese Want" »


Video: Regulatory Insights from Eliot Spitzer

Former New York Governor Eliot Spitzer recently joined NYSSA for an interview with Bloomberg Television anchor, Pimm Fox. Spitzer gave his observations and opinions about the top regulators of the current economic recovery effort—Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.

On Ben Bernanke:

  • Bernanke is "the last man standing." He is the only one who has been willing to make the hard economic decisions as policymakers have remained in gridlock.
  • He has used monetary policy to the fullest extent, but now there is little more that he can do.

On Timothy Geithner:

  • Geithner did not have an adequate understanding of the structural failures that existed in the financial services sector.
  • After the financial crisis of 2008, Geithner did not request enough from the banks in return for being bailed out. He simply did not comprehend how much reform was actually needed.



Sailing South: Investment in North African Emerging Markets


The North African states of Morocco, Algeria, and Tunisia lie just beyond the borders of Southern Europe. As investors look around for undiscovered emerging markets, how do these countries look?

Following the Arab Spring of 2011, the entire Arab world has received more attention in terms of the possibilities for democratization, economic revitalization, and also in terms of risks and opportunities for investment. The three western-most countries in the Arab landscape are all relatively small markets and exhibit differences both in their economies and the political risk factors they face.

Morocco is a liberalizing constitutional monarchy with a well-liked king devolving power in a more decentralized manner. Algeria is technically structured as a republic, but with tightly controlled political parties and little rotation of power-holders over time. It is effectively an authoritarian regime. Tunisia is an early transitional democracy in the process of consolidation, having ousted a regime not unlike Algeria’s. Although there is hope for meaningful change and advancement in Tunisia, the range of possible outcomes is currently quite wide. Although many people picture North Africa as a land of desert, the coastlines along the Mediterranean and the Atlantic Ocean are actually fertile, meaning that agriculture is still an important contributor to both the economy and employment in these countries. The entire region was known as a breadbasket as far back as Roman times. However, agriculture is an industry sensitive to drought, and so changing climate and rainfall patterns can wreak havoc with both economic and political stability in this region.

Continue reading "Sailing South: Investment in North African Emerging Markets" »


Podcast: Why Zombie Banks Remain Undead

Author Series Podcast

Zombie Banks author Yalman Onaran spoke with NYSSA about the aftermath of the 2008 financial crisis and the barriers blocking the road to recovery. Onaran's book asserts the inconvenient, but rational, view that recovery efforts are actually postponing the problem rather than addressing it—creating "zombie banks." Zombie banks are banks that should have died, but are being artificially preserved by government capital.

Continue reading "Podcast: Why Zombie Banks Remain Undead" »


Dealing with Failure

CFA Exam Prep

The CFA® exam is no ordinary exam, so the high failure rates generally mean that there is significantly more disappointment than the average qualification. Also, CFA candidates tend to be overachievers—i.e. not used to failing. I had my own bittersweet experience in this once in Level II.

Here are the steps you should take if you didn't manage a pass this time around:

Continue reading "Dealing with Failure" »


Limericks Économiques: Swing States

Limericks Économiques

It's an axiom proven and tested
By candidates besting and bested:
If you're looking to win,
Mind the jobless rate in
All the states where the outcome's contested.

Continue reading "Limericks Économiques: Swing States" »


Investing in High-Tech in Russia, Part II: Challenges and Opportunities

In Part I of this article, I dealt with misconceptions about Russian high tech and Russian markets in general. I now explore investment opportunities outside of the familiar defense, oil, gas, and commodities sectors. I also examine financial and cultural barriers to investing, and macroeconomic considerations.


Continue reading "Investing in High-Tech in Russia, Part II: Challenges and Opportunities " »


My CFA Experience (Level II): Vy Bui


After almost eight weeks of waiting from June 2nd to July 24th and another five terrifying hours of waiting on the day results were released, it was a great feeling to know that I passed the CFA® Level II exam. I couldn’t be happier knowing that all my hard work and support from family members, friends, instructor, and coworkers paid off in the end.

Following up on my previous two articles about my CFA Level I exam experience, this article will emphasize what did and did not change in my study strategies that helped me successfully overcome the daunting challenges of moving from the Level I to the Level II exam.

Continue reading "My CFA Experience (Level II): Vy Bui" »


Mind the Gap

A 45-year-old like me with two young sons and parents in their 70’s is pretty screwed when it comes to effective communication. My kids run away from a ringing phone as if it were a shrieking demon. My parents adore the phone, but only in my wildest dreams would they think of responding to an email. For all I know, emails to them are forwarded to some Arctic wasteland.

Continue reading "Mind the Gap" »


Video: Family Offices in the US, Europe, and Asia

NYSSA recently held its 4th Annual Family Offices Conference, focusing on the latest trends in private weath management for  ultra-high-net-worth clientele. Based on her work as the executive director of the Institute for Private Investors, Mindy F. Rosenthal gave a comparative analysis of family offices in the US, Europe, and Asia.
  • US
    1. Offices typically have about 4 to 6 employees.
    2. Fully integrated wealth management shops are becoming increasingly rare, with small targeted offices becoming more prevalent.
    3. Larger, (usually) older family offices are looking to sustain infrastructure and keep younger generations engaged by partnering and sharing services with other offices for noncore services.
    1. Offices are relatively large with an average of 13 employees.
    2. Europeans are more likely than Americans to use concierge services that provide everything in one shop, but are looking to outsource more specialized services.
  • ASIA
    1. Family offices in Asia are smaller than those in the US and Europe.
    2. Over 80% of families' wealth is tied into their primary operating company. They will often use people in their business for personal financial dealings.
    3. Because family offices in Asia are still in the beginning stages, the focus should be on hiring quality staff and building.

In both the US and Europe, wealth is often tied to a business that is not necessarily the primary source of wealth. A major focus for wealth managers should be educating and engaging the next generation, along with finding the best resources.


Career Podcast: Are You Deferring Your Goals Rather than Attaining Them?

Career Coffee Podcast

We live in a society that glorifies deferred gratification as the end-all and be-all of success. We are taught that if we work hard enough to make enough money, afterward we can finally pursue our passions. The problem, says Life Architect Stever Robbins, is that we may never reach fulfillment because we have spent our entire lives deferring it.

Robbins, who attended MIT and Harvard Business School, has done everything from writing books and performing musical theater to computer programming and becoming a #1 iTunes business podcaster.

Continue reading "Career Podcast: Are You Deferring Your Goals Rather than Attaining Them?" »


Nobody Likes a Know-It-All


It’s a given. When you show up for the interview, it’s important to show your knowledge of the market, but more specifically, you need to have firsthand knowledge of what the division does and how you can be a top producer for them. You’ll be asked to offer solutions to an endless barrage of questions from a variety of interviewers, often looking for you to solve some unsolvable problem facing the bank or investment firm.

Continue reading "Nobody Likes a Know-It-All" »


Recent Research: Highlights from August 2012

"Diversification Return and Leveraged Portfolio"
The Journal of Portfolio Management (Summer 2012)
Edward Qian

It is widely accepted that portfolio rebalancing adds diversification return to fixed-weight portfolios, but this is only true for long-only unleveraged portfolios. Qian provides analytical results regarding portfolio rebalancing and the associated diversification returns for different kinds of portfolios including long-only, long-short, and leveraged. He shows that portfolio rebalancing is linked to underlying portfolio dynamics. For long-only unleveraged portfolios, rebalancing amounts to a mean-reverting strategy, and the diversification return is always non-negative. But for short (or inverse) and leveraged portfolios, portfolio rebalancing on the top-down level amounts to a trend-following strategy that detracts from diversification return. Qian analyzes diversification returns of risk parity portfolios and shows that the diversification return of a leveraged long-only portfolio can generally be decomposed into two parts, both of which are related to a scaled unleveraged portfolio. The first part is the positive diversification return from rebalancing among individual assets at the bottom-up level, which is amplified by leverage. The second part is the negative diversification return caused by the leverage of the overall portfolio. His numerical examples show that diversification return is, in general, positive for leveraged risk parity portfolios when the leverage ratio is not too high. In addition, he shows that low correlations between different assets are crucial in achieving positive diversification return and reducing portfolio turnover for risk parity portfolios.

"The Rubber Starts to Meet the Road: Achievable Results in US Housing Finance Reform"
The Journal of Structured Finance (Summer 2012)
Chris DiAngelo

This article begins by noting that the US Congress and the Administration both remain stymied in the area of housing finance reform, notwithstanding numerous “white papers,” “requests for information,” “roundtables,” and the like. After almost four years, Fannie Mae and Freddie Mac remain in conservatorship, with no clear exit plan. Looking past the top level (Congress and the White House), however, one will see that the two government-sponsored enterprises (GSEs) themselves and their regulator/conservator, the Federal Housing Finance Agency, have begun to make real progress in several areas. In early 2012, the FHFA released a strategic plan for the GSEs and followed that up with a “scorecard” that sets forth in some detail a “to do” list of items that the FHFA intends to get done, along with target dates for those items. The article focuses on four items in particular: the REO disposition program, the “new securitization platform” initiative, the “single security” concept, and the possibility of privatizing the multifamily business. The conclusion is that more progress is being made than the public generally believes.

"Kicking the Habit: How Experience Determines Financial Risk Preferences"
The Journal of Wealth Management (Fall 2012)
Joachim Klement and Robin E. Miranda

Conventional explanations for the diversity of risk preferences among individual investors offer only limited insight. Recent research in neuroscience, genetics, and behavioral decision making underscore the importance of experience in financial risk taking. The authors review these findings and argue that not only does individual experience influence risk taking, so do the collective experiences of groups. Additionally, there seems to be a significant genetic component to financial risk taking, suggesting that “evolutionary experience” also needs to be considered when analyzing the risk preferences of individual investors. The authors introduce some simple tools to identify the influence of experience on financial risk preferences. These tools can help financial advisors to accurately assess investors’ risk preferences to help them achieve their goals at an acceptable level of risk.

NYSSA Discount on Journals


Podcast: How Your Memories Cost You Money

Speaker Series: How Memories Cost You Money

If history repeats itself, why not change our actions? Surely this would prevent us from making the same mistakes over and over again—right?

Ken Fisher, author of Markets Never Forget (But People Do) and the "Portfolio Strategy" column in Forbes, says that our bad memories are to blame. Citing events and patterns from the not-so-distant past, Fisher believes the answer to America's latest financial woes can be found if we just look at our history.

What we forget:

  • Our memories fail to recognize the repetitive patterns of events we live through.
  • The 1990 recession, which strongly compares to the 2008 financial crisis, is rarely analyzed in public commentary.
  • In Republican presidential election years, returns are great; but in inaugural years, they are negative. Returns are negative in Democratic election years, but great in inaugural years.
  • Republicans and Democrats never look at their own weaknesses in terms of cycle history.



Off-Grid Financing

The ramifications of the Libor scandal—what Warren Buffett glibly called a can of worms that affects the whole world—grow by the day. Criminal indictments of individuals, even if firms are too big to indict, appear to be in the making as the tsunami’s shock waves are about to spread to many of the usual suspects. One can only imagine the trial lawyers licking their chops. Has there ever been a class action lawsuit on behalf of the whole world?

Central bankers and regulators, understandably panicked at the height of the crisis, may have been complicit in some of the distortions in an effort to create the pretense of financial system stability. However, like the so-called “war on terror,” we find the war on financial system collapse is filled with ends-justifying-the-means moral and legal questions.

Continue reading "Off-Grid Financing" »


Career Podcast: The Key Components of an Elevator Pitch

Career Coffee Podcast: Elevator Pitch

Can you answer the question, "What do you do?" concisely, without hesitation, and in a compelling way? If not, you may need to work on your elevator pitch. Career coach Pat Drew talks about the key elements of a solid, effective pitch and why this commonly overlooked career management step is so important. 

Things to remember:

  • Five questions a good elevator pitch should answer:
    1. What do you do and what are you passionate about?
    2. What is the problem or challenge your services address?
    3. What benefits do you bring to the table?
    4. What is your credibility?
    5. What is your goal?
  • Advertise your value to others – otherwise, they'll never know.
  • Think about your pitch objectively. You're not bragging; you're presenting essential facts about yourself.
  • Be able to communicate clear career goals for the future.



Book Review: Why Good People Can't Get Jobs


Each day, whether we want to hear it or not, we learn of more colleagues who are being laid off from investment banks, brokers, and even advisors. State unemployment rates in New Jersey and New York are again at or approaching 10 percent. While the climate for employment in our industry has selectively stabilized since 2008, many are being severed as their companies simultaneously search for the “purple squirrel”: the perfectly skilled employee who can fit right into the precise specifications of the company’s posting. “Perfect” skills may betray an “imperfect” age, job title, or current employment situation.

Continue reading "Book Review: Why Good People Can't Get Jobs" »


At the Institute

This posting marks the end of a very long series about CFA Institute’s annual conference. Today’s title doesn’t refer to that Institute, though, but to a post-conference visit to the Art Institute of Chicago and the musings about the conference, the business, and the profession that it triggered.

For insight, it’s hard to beat a world-class museum. You come face to face with beauty one minute and brutal reality the next. Your perspectives are altered and your beliefs are challenged. You see the sweep of history—the connections across time reveal themselves and the true innovations seem mysterious and remarkable. You think about notions of quality and the nature of genius, of art and craft, of inspiration and perspiration.

Continue reading "At the Institute" »


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CFA® Level I 4-Day Boot Camp

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Instructor: O. Nathan Ronen, CFA

CFA® Level II Weekly Review - Session A Monday

Monday January 11, 2016
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CFA® Level III Weekly Review - Session A Wednesday

Wednesday January 13, 2016
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CFA® Level III Weekly Review - Session B Thursday
Thursday January 21, 2016
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CFA® Level II Weekly Review - Session B Tuesday
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