< The Finance Professionals' Post: December 2013

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11 posts from December 2013


The Quality Dimension of Value Investing

Buying high quality assets without paying premium prices is just as much value investing as buying average quality assets at discount prices. Strategies that exploit the quality dimension of value are profitable on their own, and accounting for both dimensions of value by trading on combined quality and price signals yields dramatic performance improvements over traditional value strategies. Accounting for quality also yields significant performance improvements for investors trading momentum as well as value.

Benjamin Graham will always be remembered as the father of value investing. Today he is primarily associated with selecting stocks on the basis of valuation metrics like price-to-earnings or market-to-book ratios. But Graham never advocated just buying cheap stocks. He believed in buying undervalued firms, which means buying high quality firms cheaply.

–Robert Novy-Marx is assistant professor of finance at the Simon Graduate School of Business at the University of Rochester, New York, and a faculty research fellow of the National Bureau of Economic Research.

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Eight Ways to Improve Your Resume over the Holidays


December is a pivotal time of year to get your resume and social media profiles updated, in sync and given to the right contacts to land your next job faster for the New Year. Whether you are simply updating your achievements, landing a new job or switching careers, it is key to capitalize on the remaining few weeks of 2013 to position yourself to thrive in 2014. Here are eight tips that you can do right now to get your profile and resume up to speed fast and ready for the New Year.

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Personal Branding: Networking

Once you have taken the first step in developing your personal brand—creating a resume—you need to test your brand in the marketplace.

Network to find out if people perceive you the way you see yourself.

There are two kinds of networking: online and in-person.

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Ammo for Your Plain-Language Battle with Compliance

writing for dollars, writing to please

“Our compliance officer makes us write like this.” That’s the complaint I sometimes hear when I push financial professionals to write better. If you’d like to push back, consider  the point made by Joseph Kimble in Writing for Dollars, Writing to Please: The case for plain language in business, government, and law. Kimble is a lawyer who has taught legal writing for 30 years at Thomas Cooley Law School.

Lawyers and compliance professionals say that legal jargon is necessary to protect your firm. However, Kimble suggests that jargon may be part of the problem. How’s that? Readers often fail to understand legalese and other jargon. As Kimble says, “…this in turn will be more likely to engender disputes and litigation that never should have happened in the first place.” This makes me think of some of my pet peeves, such as the use of “mitigate.

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Book Review: Mission in a Bottle

Mission-In-A-BottleMission in a Bottle: The Honest Guide to Doing Business Differently--and Succeeding is the story of the start up and building of Honest Tea, authorized by co-founders Seth Goldman and Barry Nalebuff. This is an entrepreneurial story with a happy financial ending, when the company was sold to Coca Cola. While you have read your share of entrepreneurial autobiographies—this is unique, simply because of its comic-book presentation. The format engages the reader in a fascinating way.

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Harvard and Brown Fail Moral Leadership Exam

At a time when institutions of business and government continue to fail society, two of our leading academic institutions missed the opportunity to provide essential moral leadership on the most pressing challenge ever faced in the history of human civilization.

Harvard President Drew Faust issued her October statement first: She and her colleagues on the Board do not believe “that university divestment from the fossil fuel industry is warranted or wise.”

Brown President Christina Paxson followed three weeks later with her own statement: “Our consideration of divestment [from coal] is over.”

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15 Frightful Reasons Why Job Hopping Could Kill Your Banking Career


Are you a banker in Asia with a track record of moving between banks after short stints? You may want to stick with your current role for many more years.

Job hopping is high on hiring managers’ lists of pet hates in Asia. Bin Wolfe, managing partner of talent at EY for Asia Pacific, told us yesterday that China was awash with job-hopping candidates. And earlier this year, Nicholas Johnson, an MD at J.P. Morgan in Hong Kong, bemoaned receiving “bits-and-bobs CVs”, while Andrew Hendry, Asia managing director of M&G Investments, said there were too many job hoppers in Singapore.

But the tide may now be turning against career flip-floppers as cost-conscious banks in Asia shy away from investing in candidates who may not be with them for very long. “Most investment banks now count the number of jobs you’ve had, and if it’s more than one firm every two or so years, you’re ruled out,” said Vince Natteri, a Hong Kong-based director at recruiters Pinpoint Asia.

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Book Review: The Effective Investor


Although certain passages of The Effective Investor are specific to South Africa’s economy and markets, the book has broad applicability beyond that country’s borders. A true renaissance man, author Franco Busetti renders the arcana of markets and modern portfolio theory accessible to both the novice investor and the experienced practitioner.

Franco Busetti, the author of The Effective Investor: The Definitive Guide for All South Africans, is a seasoned investment specialist. Trained as a chemical engineer, he also holds degrees in artificial intelligence and economics and is a CFA charterholder. In the 25 years that Busetti has worked in investment management, his “tours of duty” have included research director at Absa Securities and strategist and head of quantitative research at JPMorgan and Credit Suisse Standard Securities. The Effective Investor serves as a handy compendium on stock selection, portfolio management, and modern portfolio theory, with an emphasis on their practical application. Written in a tongue-in-cheek style, Busetti’s book not only informs but also entertains.

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Corporate Culture and Adverse Selection in Banking

JP Morgan’s $13 billion regulatory settlement is the latest case of banking indigestion attributable to long-tail liabilities stemming from practices almost a decade old – well over $100 billion so far, with more to come. Most people thought the global financial turbulence would have passed by now - a time-span longer than World War II - even allowing for lethargic growth in the world economy and the need to patch a lot of financial potholes.

Meantime, banks like Morgan are painfully adapting to new rules of the game designed to make the system more robust, the inevitable costs being passed along to customers and long-suffering shareholders. One can hope the high tuition pays-off down the road in better financial stability.

Still, memories are short. Redirection of financial flows through the shadow banking system, creation of new products, persistent regulatory faultlines, and renewed erosion of due diligence in some markets show the persistent need for vigilance. Meantime, banks have been called on the carpet for an amazing variety of transgressions that encompass fixing Libor and foreign exchange benchmarks, aiding and abetting money laundering and tax evasion, rigging metals and energy markets, and an assortment of fiduciary and consumer protection abuses. Most of these allegations are independent of the crisis legacy, and have surfaced despite what were thought to be adequate legal and regulatory safeguards. All of them first came to light at individual banks. But most of them later turned out to be “industry practice.”

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CFA Institute - Global Policy Summit 2013

The Global Policy Summit is an annual event organized by the Standards and Financial Market Integrity (SFMI) division of the CFA Institute. It takes place in Washington DC and it brings together about eighty CFA Institute staffers as well as volunteers.

Similar to prior years, this year’s summit included members of the five global policy councils that are part of SFMI: Asset Manager Code (AMC), Capital Markets (CMPC), Global Investment Performance Standards (GIPS), Standards of Practice (SPC) and Corporate Disclosure. In addition to the five councils, the attendees also included delegates from the Advocacy Committees of regional and local CFA Societies with the largest number of members.

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Will the Fed Need a Bailout? Nonsense!

“As stimulus tab rises for Fed, worries grow it may require a bailout” is the title of an article published in Los Angeles Times and blogged in CFA Institute's "Future of Finance."

I'll say it bluntly: This is nonsense. The logic goes that as interest rates rise, the value of the bonds on the Fed's balance sheet lose value and the central bank will be bankrupt—requiring the taxpayers to bail it out. This is wrong on many different levels.

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