< The Finance Professionals' Post: October 2015

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8 posts from October 2015

10/29/2015

Elections and Financial Stability

When Hillary Clinton unveiled her proposals to assure financial stability earlier this month, few people bothered to notice. Nonetheless, one central piece of legislature Clinton proposed to increase trust of the everyday investor in our financial markets, a “tax on the high-frequency trading that makes our markets less stable and less fair,” has potentially far-reaching consequences. The Clinton proposals elicited 550-something comments on Bloomberg, with criticism coming from the usual suspects. We are all acquainted with a contemporary practice whereby political operatives stuff “comments” sections with their talking points and completely flood the exchange between the readers.

Heretofore, I took notice only when Larry Harris, a highly respected expert on market microstructure and the author of a seminal textbook, Trading and Exchanges: Market Microstructure for Practitioners, suggested that “any tax on high frequency trading firms’ trading activity will increase the cost of trading for retail investors and for pensions that serve retirees.” In the preface to my 2009 book, Microstructure and Noise in Financial Markets: Rigorous and not-so rigorous results in market microstructure, I quoted his testimony to the US Congress as a model explanation of market microstructure to the laypeople.

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10/20/2015

Three Critical Steps for Extracting Great Insights (Step 1: Identify Parameters)

Icepic1Think of your favorite CNBC journalist and ask why he or she is likely to get more information from a CEO than a typical analyst. If you don’t have an answer, it’s because the top journalists have been trained to use best practices for interviewing (or even “interrogating”) which can make them incredibly effective.

Throughout my career as an equity research analyst, I observed some analysts were much better than others at extracting insights from information sources (e.g. proprietary industry sources, company management, etc.), but I didn’t know exactly why. Now in the role of training analysts, I’m routinely asked, “How do I get more insights from others?” In my effort to answer this question and determine why some analysts are better than others in getting insights from others, I identified the best practices in this area, which primarily come from journalism, the legal industry and law enforcement (yes, some of the most sophisticated interviewing practices are used by law enforcement).

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THE GREAT MISMATCH PART II: The Barriers to Efficient Capital Flows

Efficient cross-border capital flows—allowing investors to search for reliable returns, and in the process, meet legitimate capital needs wherever they are—would be a more effective way to finance the global economy than today’s system. In theory, few dispute this. In practice, many barriers have been erected that hamper efficient flows. The deliberate or inadvertent barriers to efficient global capital flows have been erected by a unique combination of regulators, governments, historical conventions and path-dependencies, investor mindsets and capital-seekers themselves (see below exhibit).

1Part2

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Not game over for China

Chess
If popularity has its price, then major investors in China are now paying those consequences. Chinese stock markets have taken a plunge and continue to face a roller-coaster path of sorts. There’s no telling how long the ride is or what turns lie ahead, which means investors have been increasingly concerned over the uncertainty.

But it’s not the time to panic. It never really is. The foundation of investing isn’t and never was based on making flash gains. It’s always been about making strategic decisions for a potential haul in the long term.

We still believe in China’s potential because many companies still have attractive long-term growth prospects, in our opinion. The challenge for us as stock pickers, of course, is what to buy.

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10/07/2015

The Great Mismatch: Addressing Barriers to Global Capital Flows

Executive Summary

Cross-border capital flows are at an inflection point. While in aggregate they
have not returned to pre-crisis high watermarks—primarily driven by a significant decline in bank lending—they are increasingly varied in their scope and direction. More countries around the world are seeking and providing capital across borders than ever before. And asset managers and asset owners—not just governments, corporations and banks—are becoming increasingly influential in determining the scale and stability of global capital flows.

Yet capital around the world is being deployed inefficiently—large pools are not getting the returns they should, even as many needs for investment, both public and private, go unmet. This “great mismatch” is driven by a confluence of governments focused on near-term electoral cycles and rent-seeking, emerging-market financial institutions lacking investment management expertise and depth, and investors prioritizing short-term gains over sustainable long-term investment priorities.

Correcting this mismatch represents one of the most significant opportunities for global growth over the next decade. Success will require both long-term institutional investors and policymakers re-thinking long-standing assumptions and re-shaping their role in global markets. This report provides the backdrop and lays the case for six key recommendations over both the nearer and longer term:

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10/05/2015

Credit sources fairly in your financial blog posts

IntegrityYou want to do the right thing when you find an interesting idea, statistic, or quote that you use on your blog. That means crediting your source. How much information must you provide?

Citation rules for blogs aren’t as clear as for books, where sources such as The Chicago Manual of Style lay out rules. I’ve developed suggestions for you based on my experience, Ann Handley’s Everybody Writes: Your Guide to Creating Ridiculously Good Content, and other resources.

 

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Positive Psychology: Assessing Personal and Professional Performance

Applied psychology has historically focused on the treatment of emotional/behavioral disorders and the remediation of conflicts and life problems.  This focus has been enshrined in the reimbursement system, as insurance entities require Diagnostic and Statistical Manual codings of illnesses to justify reimbursement. 

In spite of this “medically necessary” emphasis, a parallel industry has sprung up around self-help, coaching, and work with normal populations.  Much of this work stresses the enhancement of positives rather than the elimination of negatives.  Until recently, very little research guided this positive branch of applied psychology.  With the pioneering work of Seligman, positive psychology—the study of optimal functioning and well-being—has become a legitimate research focus in academic psychology.  A health-based classification system has gained traction and a wealth of resources, including validated psychological tests, are now available.

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10/01/2015

Warning! Don’t make these interview mistakes

So you landed a fantastic interview opportunity, and now you need to seal the deal to get the job offer. Whether you are interviewing at a bank, asset manager, hedge fund or any other type of financial institution, it’s hard to predict the type of interview you will have. 

As an executive and career coach, I work with many clients on preparing them for high-stakes interviews. Having interviewed several hundreds of finance professionals throughout my career either as a coach or, formerly, as a fixed income sales professional at investment banks, I have started to notice the following patterns. These three behaviors are surprisingly common and detrimental to your success:

Thinking that if it’s on your resume you don’t need to mention it

I can’t tell you how frequently I hear, “It’s on my resume, so I figured I don’t need to say it again.” Your resume on average will have about 400 words. I can guarantee that even if your interviewer was thorough when reviewing your resume, they paid attention to no more than 100 of those words. Don’t let your resume jewels fade into the background. Make sure you have a method for bringing them to the forefront during your interview. Preparing and practicing your stories with a mock interview is a great idea! 

Not engaging in casual banter with your interviewer

What is it about interviews that make people throw their awesome personality out the window? Think about it. If you were interviewing someone, would you prefer to hire a robot with no personality or a charismatic and engaging person with whom you share common interests? We spend more time with our colleagues than we do with our family and friends. Your interviewer is trying to figure out if you would fit the culture of the firm and if you would be fun to sit next to on a plane for six hours. Next time you are asked “What do you like to do for fun?” don’t over think the answer and let your personality shine through. Also, if at the mention of tennis, your interviewer starts to talk about his high school tennis years, indulge him. Don’t worry that your interviewer isn’t peppering you with technical questions, instead see this as a bonding opportunity. The more shared interests you and your interviewer have, the greater your chances of getting hired!

Not asking the interviewer about themselves

Most people are quite selfish in their interviews.

“I did this…”

“My background is this...”

“My weaknesses/strengths are these…” 

Yes, the interview is a meeting where the sole agenda is for you to talk about yourself. However, if you want to land this job, you will make your interviewer feel that he/she is the interesting one.  Most interviews end with the dreaded question of “Do you have any questions for me?” This question is the interviewer’s chance to shine after having to listen to you for 30-60 minutes. Don’t disappoint them with generic questions such as,

“What are the next steps?”

“What is the culture here?” or

“Tell me about the needs of role for which I am interviewing.”

Instead, I encourage you to ask a question directed at the interviewer and about the interviewer. Here are some examples: 

“What are some of your favorite projects you have worked on here?”

“What has been your path at the firm and prior?”

People love to talk about themselves. As Dale Carnegie teaches us, by encouraging others to talk about themselves, we are ultimately getting them to like us more. And isn’t that the point of your interview?

-Helen Dayen is the founder and CEO of Dayen Group. She is a career development & communication coach.

NYSSA is proud to announce that we are launching a new interview prep coaching package in collaboration with the Dayen Group - an executive coaching company focused on the financial services industry. Please click here to explore our coaching packages and schedule a mock interview appointment.

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