< The Finance Professionals' Post: October 2014

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12 posts from October 2014


Book Review: The End of Copycat China

CopyCat-ChinaIn 2005, Shaun Rein founded China Market Research Group, a strategic market intelligence firm based in Shanghai. Their clients included private equity firms, hedge funds, as well as Chinese businesses and multinationals. In the course of his market research, he comments, "As I traveled, I realized the changes and reforms were happening so fast that they were hard for people outside the country to follow." In his previous book, The End of Cheap China, and now, with The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia Shaun Rein shares with the readers his knowledge of the rapidly changing Chinese economy, and how businesses and investors are adapting, and must adapt.

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How to Manage a Tough Job Environment for Equity Research

The job market for equity research in 2014 is highly competitive. What with across-the-board consolidation, tightening regulation, and a slimmed down banking sector, how can a candidate stand out given the crowded, narrow space?

Increasingly, specialization is sought after. Sector focus—rather than a generalist background—is more favorable, be it in biotechnology, insurance, or any niche.  

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Recent Research: Highlights from October 2014

"Lightning Strikes: The Creation of Vanguard, the First Index Mutual Fund, and the Revolution It Spawned"
The Journal of Portfolio Management 40th Anniversary Issue 
John C. Bogle

“Lightning Strikes” tells the story of how Vanguard founder John C. Bogle came to create a unique mutual mutual fund structure in 1974, and how the index fund strategy almost inevitably followed. Paul Samuelson’s essay in the first issue of The Journal of Portfolio Management was published at almost the same moment that Vanguard began. In “Challenge to Judgment,” Samuelson urged that somebody, somewhere, somehow form an index fund. Inspired, Mr. Bogle accepted the challenge, and in 1975 created the world’s first index mutual fund. Vanguard’s two disruptive innovations—mutuality and indexing—have combined to make Vanguard the largest firm in the mutual fund industry. In the second part of the essay, Mr. Bogle summarizes 10 of the 13 essays he has written for The Journal of Portfolio Management and provides a perspective on his works.

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Video: The Challenges Women Face on Wall Street

Citigroup executive Linda Descano, CFA, and Carla Harris, vice chairman of global wealth management for Morgan Stanley provide concrete, practical career advice on building a network, achieving work-life balance, and why Wall Street is lagging corporate America in hiring/promoting women.



Book Review: Succession Planning for Financial Advisors



The author provides a step-by-step guide to implementing a succession plan. The book is directed primarily at owners of independent advisory firms but should also be of considerable interest to their employees, their clients, and regulators, as well as investment professionals at larger firms who are considering the establishment of their own practices.

Financial professionals who serve retail clients balance two primary tasks: providing expert investment management or advice and offering consistent and superior service to clients. Those who work for larger brokerage or advisory firms have much of the expertise, infrastructure, and procedures provided by their employers, but the growing number who choose to start and run their own businesses must develop these features by themselves. Despite independent advisors’ success at attracting clients—they are growing at a much faster pace than their larger competitors—author David Grau, Sr., finds that independent advisors fail miserably in one key area: succession planning.

Continue reading "Book Review: Succession Planning for Financial Advisors: Building an Enduring Business" »


What Happened to the U.S. Constitution? Effects of Changing Interpretations on International Debt and Banking—Part I

Contrary to the wishes of originalists, the U.S. Constitution evolves. However, it evolves in strange, almost incomprehensible ways.

For instance, the reach of the First and Second Amendments has increased drastically. The “freedom of speech” clause in the First Amendment, once admitting restrictive Comstock obscenity laws, now has extended to freedom (and anonymity) of money spent by corporations on political advertising, thanks to the Supreme Court’s ruling in Citizens United. The Second Amendment entitles every citizen, age and mental state notwithstanding, to obtain firepower on the scale of a post–Revolutionary War battalion—and much more accurate at that.

Continue reading "What Happened to the U.S. Constitution? Effects of Changing Interpretations on International Debt and Banking—Part I" »


The Courage to Lead

This post previously ran on the Huffington Post as part of the “Plan B for Business” series to help articulate a Plan B for Business.

Henrik O. Madsen joined Norway’s DNV, the world’s leading ship and offshore classification company, in 1982.  Thirty-two years later, as Group CEO of the recently merged DNV GL, now a Euro 2.5 billion global enterprise, Henrik made a speech few CEOs will ever have the opportunity to attempt.

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Real Eff ects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans


AcharyaThis paper shows that the sovereign debt crisis and the resulting credit crunch in the periphery of the Eurozone lead to negative real e ffects for borrowing firms. Using a hand matched sample of loan information from Dealscan and accounting information from Amadeus, we show that firms with a higher exposure to banks a ffected by the sovereign debt crisis become financially constrained during the crisis. As a result, these firms have signifi cantly lower employment growth, capital expenditures, and sales growth rates. We show that our results are not driven by country or industry-specifi c macroeconomic shocks or a change in the demand for credit of borrowing fi rms. Thus, the high interdependence of bank and sovereign health and the resulting credit crunch is one important contributor to the severe economic downturn in the southern European countries during the sovereign debt crisis.


–Viral V. Acharyaa, Tim Eisertb, Christian Eu ngerc, Christian Hirschd

Continue reading "Real E ffects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans" »

The authors appreciate helpful comments from Matteo Crosignani, Giovanni Dell'Ariccia, Daniela Fabbri, Rainer Haselmann, Jhangkai Huang, Yi Huang, Victoria Ivashina, Augustin Landier, and Marco Pagano, Sjoerd van Bekkum, as well as from conference participants at the 2014 EFA Meeting, the Bank performance, financial stability and the real economy conference (Naples, Italy), and at the International Conference on Financial Market Reform and Regulation (Beijing, China) and seminar participants in Mainz, Konstanz, at the European Central Bank, and at the 2014 Tsinghua Finance Workshop. Eisert is grateful for financial support by the German National Scientifi c Foundation. Hirsch gratefully acknowledges support from the Research Center SAFE, funded by the State of Hessen initiative for research Loewe. Email addresses: vacharya@stern.nyu.edu (Viral V. Acharya), eisert@ese.eur.nl (Tim Eisert), ceufinger@iese.edu (Christian Eu nger), hirsch@finance.uni-frankfurt.de (Christian Hirsch)

aNew York University, CEPR, and NBER bErasmus University Rotterdam cIESE Business School dGoethe University Frankfurt and SAFE


Visit the Wall Street Collectors Bourse IV

During the Revolutionary War, Jonathan Trumbull, then-governor of Connecticut and after whom Trumbull, Connecticut, is named, raised a lot of money to help its funding. Connecticut was the main source of supplies for the northern and middle states, and more of its debt instruments survive from the period than from any other state. In 1864, this certificate was issued to recall the sacrifices made by Trumbull, also known as “Brother Jonathan.” As General George Washington’s close friend, advisor, and aide throughout the war, the General gave him his nickname. "We must consult Brother Jonathan,” is used in New England to this day, an iconic symbol of the part the northern colonies played in our independence from Great Britain.

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Plain Language: Let’s Get Parenthetical

Plain language makes your documents more appealing and easier to understand. But circumstances may require you to use jargon. For example, you may be a financial marketer or professional working for bosses or departments that insist on using technical or unfamiliar terms. You can help reader comprehension by explaining the term in the sentence where it first appears. Parenthetical explanations are useful, whether you literally enclose the explanation in parentheses or set it off using some other technique.

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More than the Mainstream: Media

More than the Mainstream

In reading Alexandra Scaggs' recent article in the Wall Street Journal  titled "Dow Closes At Record High As Fed Reassures On Rates," I was struck how different the mainstream thinks from some of the people with whom I find myself in simpatico.

Scaggs quotes Curtis Holden, senior investment officer with Tanglewood Wealth Management, "We're not looking for any sudden moves by the Fed, and the comments were confirmation of that…Stocks look OK, and at the same time they don't look cheap either," said Tanglewood's Mr. Holden. "But relative to [bonds], stocks look pretty compelling…"

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What Type of Financial Advisor Advises You?

For individual investors seeking advice, the world they enter can be a confusing place. I’m thinking here of the different types of financial advisors that offer to help investors deploy their capital.  Non-finance people shouldn’t need to bother themselves with subtle elements of the investing regulatory landscape, but there are some things they’re better off knowing. Financial advisors don’t all operate with the same set of objectives. Some, who work for investment advisory firms and are Registered Investment Advisors (RIAs) are bound by the 1940 Investment Advisors Act to conduct themselves as a fiduciary, meaning they’re legally obliged to put their clients’ interests first. It seems like a sensible standard, but it’s not the only standard. There’s another class of financial advisor who work for broker-dealers rather than investment advisory firms. Their activities are bound by a lower standard of suitability and disclosure.

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