Monthly Archives: January 2012

9/11 Memorial and Why Veterans Should be Mentors

 

I went to the 9/11 memorial last Friday with my mentee (from the NYC Mentoring Program) and it was great for two reasons:

 

1) 9/11 was one of the main reasons why I joined the military in the first place, like many of you. I felt a sense of closure as I visited the memorial because that day has decidedly shaped the last 10 years of my life. If I hadn’t joined the Army, I wouldn’t have been stationed in Korea, if I hadn’t been stationed in Korea, I wouldn’t have met my wife, if I hadn’t met my wife, we wouldn’t have had a beautiful daughter together, and without having a loving wife and daughter to fight for, my deployment to Afghanistan would have had less meaning. The memorial itself is very dignified and serene. It just feels right. You want to find some meaning for your deployment? Just look at the thousands of names carved into this memorial and you’ll find your meaning. So if you are a veteran living in the NYC area or visiting NYC during leave, I would certainly recommend visiting this memorial.

 

 

2) Three weeks ago, I went to an event celebrating the 2012 Mentor and Mentee of the Year. It was great to hear the speeches from the runner up as well as the winners because high school kids are so mature these days. My mentee is involved in so many activities, he makes me look like a slacker in high school (and I probably was). Since I’ve been through the MBA application process, I recognize how tough the competition is for college graduates. It looks like everyone has a 770 GMAT, had experience in the Peace Corp in Africa, cured cancer, and looked good doing it.

 

What I didn’t really understand before becoming a mentor was how hard it is just to get into college these days as well. I’m not even sure if it is sustainable. The explosive growth of MBA programs, people taking the CFA, and people from all over the world trying to get into American undergraduate institutions, the stakes seem insanely, ridiculously, high. I don’t have a specific solution to this problem, but I need to start figuring something out, because sooner or later, my own daughter will be starting this ridiculous process.

 

My digression aside, I think veterans should get involved in mentoring. It seems that my mentee’s major weakness is discipline and my other mentor peers feel the same way about their mentees. Discipline is one of the staples of being in the military and just teaching these kids to show up on time is a huge accomplishment. Most veterans didn’t have an opportunity to actively volunteer during their military service because of deployments, frequent PCSs, and all the other things that happen while you are in service. Once you transition to the business world, you are expected to do more than just work. Therefore, I encourage you to do something in the educational sector and mentoring seems like the best fit for transitioning vets.

CFA: Introduction, Strategy, and Ethics

Foreword: I don’t take credit for the strategy highlighted below. It is a combination of my personal experiences taking the CFA level 1 exam and talking with people who have been working in the CFA prep industry.

 

The first question you have to ask yourself when starting the Chartered Financial Analyst (CFA) program is whether you want to stop after completing level 1 or you want to finish all three levels. This is important because the way you study for level 1 affects the way you study for level 2 and 3. Are you going for a 10-miler or a full-marathon? I’ve done both, like many of you, so you can understand the difference in preparation required. Looking at table below, you quickly notice that the level I program covers all the areas and the weights are very stable. This means that if you study appropriately, you should be able to pass. Looking at levels 2 and 3, you notice the diverse range of possibilities they allow themselves to test.

Topic Area Level I Level II Level III
Ethical and Professional Standards (total) 15 10 10
Investment Tools (total) 50 30-60 0
Corporate Finance 8 5-15 0
Economics 10 5-10 0
Financial Reporting and Analysis 20 15-25 0
Quantitative Methods 12 5-10 0
Asset Classes (total) 30 35-75 35-45
Alternative Investments 3 5-15 5-15
Derivatives 5 5-15 5-15
Equity Investments 10 20-30 5-15
Fixed Income 12 5-15 10-20
Portfolio Management and Wealth Planning (total) 5 5-15 45-55
Total 100 100 100

Source

 

Since my goal isn’t to get everything 100% correct, I would recommend on focusing on the key areas that could help me pass, knowing that you will probably be studying persistently until the test date and by forcing the important areas up front, I’ll naturally have less time later on.

 

1) Financial Reporting and Analysis – This is the largest weighted area, accounting for 20% of the test
2) Quantitative Methods (QM) – This accounts for 12% but there are actually a bunch of other areas that rely on your knowledge of QM, like Fixed Income, Corporate Finance, and Equity.
3) Ethics – I really think this is a giveaway but I don’t know how to say this without making it seem like you don’t have to study for it. It isn’t common sense, but after doing a few practice questions, you can see the logic behind the questions and it becomes part of your “common sense” at least during the exam
4) Fixed Income – Low amounts of Learning Outcome Statements (LOS) but relatively high weight of 12%.
5) Corporate finance – Ties very well to fixed income and QM.

If we add up the five areas above, you get 20%+12%+15%+12%+8% for 67%. While no one knows for sure, it is estimated that getting a 70% is a safe pass for the CFA level 1. I will spend 80% of my time studying the core five areas above, and 20% of the time on the rest. I’m even tempted to totally ignore Economics (look at the total number of LOS at the end of this post you would need to know just to get 10%) if I don’t have enough time to study that.

 

Also understand that the CFA has grown tremendously in the last decade, something similar to top MBA programs in the past two decades. Roughly speaking, there were 10,000 people who took the CFA exam a decade ago and recently it has been around 140,000 who take it. Someone who passed the CFA a decade ago wouldn’t necessary be able to pass the CFA today.

 

The CFA Institute (CFAI) suggests 300 hours. Hours are often measured by quantity but not quality. I mentioned in an earlier post that I spent a few hundred hours studying for the level 1 but they weren’t quality. I went to classes and studied after work so I wasn’t going in with my mind at 100% capacity. Now I’m using a new strategy of studying on weekends only and spending the weeknights with my family.

 

What we know is that there are 18 study sessions, 67 readings, 559 LOS, and 240 questions on the test. That means that not every LOS will be tested because there will be multiple LOS tested per question. However, the ultimate number of LOS tested will be below 559. Take a look at the list of LOS here and you can see how overwhelming this can feel. CFA is considered a graduate level, self-study program. While some elements are graduate level, some go beyond. The concept of self-studying is tricky because you are undoubtedly better off studying with a group. That’s not to say that people cannot pass all three levels alone.

 

You are allotted 360 minutes for the exam, and you can therefore average 1.5 minutes per question (240 questions). The first thing NOT to do is dive in and start calculating things. The best approach is to take a “tactical pause” and figure out the best way to approach the problem- through calculation or description.

 

If you’ve read the original CFAI text, you realize quickly that the LOS are at the front of the chapter but the contents within the chapter aren’t organized by LOS. You almost have to have a total list of LOS and make sure what you are reading matches what you are reading. Therefore, the best thing to do is just to ignore the CFAI text, except for the Ethics volume.

 

Instead, I would recommend just reading the Schweser Notes and doing 4,000 practice questions. One hour of good practice questions and analyzing answers > one hour of reading. In order of precedence for studying, I would do the following:

1) Read Schweser Notes, once. Read Ethics original text once.

2) Practice questions from Schweser Notes then thousands practice questions from Schweser Q-Bank

3) Mock exams (CFAI and Schweser) in May

**FYI: I’m not getting paid by Schweser to say this, in fact I’m paying them just to get their products because I’ve found them useful

 

The only original CFAI text I would read is the ethics, which is the one area that I’ve done consistently well. I have to say here that ethics ≠ common sense, and ethics > the law. Remember their examples and you can’t go wrong with this section. It’s a freebie almost.

 

My Level 1 Status as of 1/30/2012:

Hours studied: 6.5

Practice questions taken: 0

 

CFA Level 1 Posts Starting this Monday

Starting this Monday, I’ll be posting a series of posts related to the Chartered Financial Analyst (CFA) level 1 exam preparation.

 

1-January 30: Introduction and Strategy

2-February 6: Quantitative Methods, Portfolio Management

3-February 13: Financial Reporting and Analysis

4-February 20: Financial Reporting and Analysis

5-February 27: Financial Reporting and Analysis

6-March 5: Corporate Finance

7-March 12: Equity

8-March 19: Fixed Income

9-March 26: Fixed Income

10-April 2: Derivatives, Alternative Investments

11-April 23: Economics

Pre-MBA Internships, Summer Internships, Interesting Full-Time Jobs

Pre-MBA internships are pretty hard to find. You really have to go digging on LinkedIn and each company’s website to find it. By the way, some of the internships I’m going to post are typically summer internships, but I’ve spoken to a few recruiters and converting that into a pre-MBA is not that hard if you are motivated. Some are just interesting full-time jobs I’ve found.

 

Here is a list that I’ve compiled so far, with notes and emails if I’ve already established contact. FYI, I am guilty in focusing on finance and consulting.

 

Veteran specific or veteran inclusive:

Investment BankingJ.P. Morgan MBA Early Advantage: Thank you for interest in the program. MBA Early Advantage is a two-day program typically held in late July for diverse individuals about to start a full-time two-year US-based MBA program. We accept applications on our website between roughly mid-April and mid-May. Please check back on our website during that timeframe to learn more about how to apply at that time.

Finance: USAA MBA Career Development Program

Finance: Goldman Sachs 2012 Veterans Internship Program: Interviews starting around Feb 21st

Investment BankingCiti Pre-MBA Fellowship: This application is live. This isn’t a pre-MBA internship, it’s a fellowship that you apply for pre-MBA.

 

Anyone qualifies:

ConsultingDeloitte Consulting Immersion Program

Consulting/Research: Institute of Defense Analysis Summer Associate

Finance: Federal Reserve Bank of New York Graduate Summer Analyst Program

Government: Department of Commerce

Government: Department of Treasury Office of Economic Policy, Office of International Affairs

Finance: Apple

Diversified: Facebook (New York City)

 

Companies that absolutely do not offer pre-MBA internships:

Amazon

Valve Software

 

These lists will continue to be updated as I get more information so bookmark this page. More to come! Had great interviews with Booz Allen Hamilton, will be posting a company profile on them. Have an interview with Amazon next Friday. Also, will be posting some GI Bill analysis for NYU.

One Step Back and One Step Forward

Just received my Chartered Financial Analyst level 1 exam results today and I failed.

 

Since I didn’t pass, I decided to sign up for a retake of a class through the New York Society of Security Analysts. All in all, I spent about 100 hours studying and I ended up with a score band of 7. A score band of 10 means you are in the top 10% of failures. You figure out the rest.

 

Always being the optimist, I’ve realized a lesson to be learned here. My major failure was not doing a lot of practice questions. Because I sat in a class for a few months, I thought that all the  info would go into my brain through osmosis. Because I “worked hard” at it. But what really matters isn’t the overall number of hours spent on a certain project, it is the quality of hours spent.

 

Now I must decide whether I should go for a second attempt. My wife says no. I think I might, because of a story I heard from an informal mentor of mine. He is the CFO of a Fortune 100 financial services firm and he told me it took him three tries to get a certain certification. The certification isn’t what got him to the top, it was his tenacity, and a lot of luck as well.

 

So I took one step backward as I was hoping to provide a mega-update to some MBA programs that I plan to hear results from in the next two weeks. Instead, my “medium” update will suffice for now.

 

The good news today is that I’ve been networking like a monster through LinkedIn and I’ve basically made contact with the top recruiters of junior military officers (JMOs). Most of these recruiters are former JMO themselves and their advice has been purely candid and absolutely on point. I will start writing company and school profiles once my future gets settled a bit and I hope to shed some light on some of the top JMO recruiting firms.

The Reservist Equilibrium

I heard a great phrase during a hiring conference at Booz Allen Hamilton last week: “The Reserve Equilibrium.” The speaker’s point was that transitioning military officers are usually pretty ambitious and end up doing too much: full-time job, family, graduate school, National Guard or Reserves. The “Reservist Equilibrium” is picking 3 out of 4 so you don’t break yourself. I wish I heard this phrase earlier because I actually did all 4 for almost a year, and burned out. Since then, I have withdrawn from the graduate degree as well as left the National Guard.

 

This post will focus specifically on the National Guard and Reserves as a full-time or part-time career. You have probably not fulfilled your 8-year military service obligation (MSO) prior to transitioning out of active-duty. There are two types of federal appointments, Regular Army (RA) and United States Army Reserve (USAR). I could be wrong on this, but I believe every officer gets a USAR appointment until they compete for Major. If you join the National Guard, you will basically hold two commissions, the USAR federal commission and then the State commission. Your State commission needs to be federally recognized.

 

There used to be, and still could be, a bonus and MSO reduction for joining the Guard or the Reserves. However, I don’t see that being such a big issue with the Iraq War finished and the  Afghan war winding down.

 

My main argument against joining the Guard or the Reserves is that these units are often undermanned, especially by junior officers. Therefore, what you are expected to do is way beyond the so-called “1 weekend a month, 2 weeks a year” duty. This is ok, if you can balance the Reservist Equilibrium, but I find that if you are trying to transition into a new career, that career will take a lot more of your precious time. If anything, I recommend settling into your new job or career first before thinking about joining the Guard or the Reserves.

 

However, if you decide to pursue a career in law enforcement or emergency services, i.e. police officer or fireman, I would recommend joining immediately so you can supplement your income. I recommend this because since a lot policemen and firefighters are already in the Guard or Reserves, their supervisors are more accommodating to their frequent departures for drill duty.

 

As far as my own experiences, the unit’s leadership promised me one thing before I signed on the dotted line and everything changed after I joined. So now I was legally bound to do things that made my own career a challenge, i.e. come back to my home station for drill or go to my assignment which was out of state? I have seen great units and bad units, so it is a matter of due diligence. I thought I did a good job, but not good enough.

Series 3 Exam

The Series 3 exam is the starting point for beginning a career in futures trading. I didn’t take this exam to become a commodities trader. I took the Chartered Financial Analyst (CFA) level 1 exam in December 2011 and I knew that I should keep my knowledge fresh whether I end up taking level 1 again or moving onto level 2. I’ll know my results next Tuesday. There are many financial tests out there but Series 3 is one of the shorter and easier ones so I decided to study for and take it. I’m not a finance expert but I scored 80% after a month of studying utilizing a Kaplan study guide. Ideally, by next Tuesday, I can use my Series 3 (yes), CFA 1 (not yet), and a new job offer (not yet) to create an uber-update for my waitlist as well as other MBA programs that I didn’t hear results from yet.

 

I’m going to share some notes and you may find this useful if you are also taking the Series 3. I’m leaving out all of the regulations because they tend to change so don’t take my word for it, just double check the NFA website before you take your exam.

 

Long Hedge / Buying Hedge: Protect a later cash purchase or short actual position:

Future contracts are purchased
Substitute purchase
Protects against rising prices
If prices increase, the profit on futures offsets the higher cash market price
If price decrease, the loss on futures is offset by a lower cash market price to buy the commodity
The hedger is short the basis
The long hedger wants the basis to weaken
Interest rates are declining, buy calls or futures (as rates decrease, prices increase)
Short Hedge / Selling Hedge: Protect inventory by locking in a selling price for later cash sale:
Future contracts are sold
Substitute sale
Protect against falling prices
If prices decline, the profit on futures will offset cash market losses
If prices rise, loss on futures is offset by a higher sale price in the cahs market
The short hedger is long the basis
The short hedger wants the basis to strengthen
Bull Spread / Long Spread / Debit Spread:
Long nearby
Short distance
Normal market: Profit if spread narrows
Inverted market: Profit if spread widens
Buy calls and call spreads
Write puts and put spreads
Bear Spread / Short Spread / Credit Spread:

Long distance
Short nearby
Normal market: Profit if spread widens
Inverted market: Profit if spread narrows
Sells calls and call spreads
Buys puts and put spreads

Break-even:

Call spreads: CAL – Call Adds the net premium to the Lower strike price
Put spreads: PSH – Put Subtracts the net premium from the Higher strike price
Long call: Strike + premium
Short call: Strike + premium
Long put: Strike – premium
Short put: Strike – premium

 

Product characteristics:

T-bills: discounted and yield difference between purchase price and maturity price
T-notes, T-bonds: semi-annual interest payments (coupons), similar to bonds
S&P 500 futures: last trading day is third Thursday of contract month, settlement price is opening day of third Friday of contract month
Security futures: common stock, ADRs  (no preferred stock, no broad-based stock indexes)
Single stock futures: does not reflect dividends

 

Export/Import:

Exporter from A, receives currency B. Needs to hedge long B by selling B futures.

The First Acceptance!

My “scorecard” on January 17 was as follows: I was rejected from 5 of the 6 business schools that I first applied to and waitlisted for the remaining school. I hated my job, but it was high paying and I had a family to feed. My wife doesn’t work. My daughter recently fractured her collar bone and I had some medical bills to pay. I had to give my landlord my decision to extend or close out my lease by the end of the month. I think it was safe to say that my future was uncertain.

 

On January 18, I received an unexpected admissions from NYU Stern. On January 19, I went for a very successful interview at a consulting firm. Things can really change fast so keep your head up!

Foreign Service Officer

When I was in the process of separating, I was so interested in becoming a Foreign Service Officer (FSO) for the U.S. Department of State that I actually read three books about it– Career Diplomacy: Life and Work in the U.S. Foreign ServiceInside a U.S. Embassy: How the Foreign Service Works for AmericaRealities of Foreign Service Life –and even took and passed the Foreign Service Officer Test (just barely). I mention the “just barely” part because if you are seriously interested in becoming a FSO, study at least 20 hours for it. I didn’t and barely passed, but why risk it if you are serious about that as a career? Ultimately, I decided to not continue with my application for a variety of reasons.

During my self-education on FSOs, I learned that there are FSOs  not only in the U.S. Department of State and U.S. Agency for International Development (USAID), but in the U.S. Department of Commerce and the U.S. Department of Agriculture as well. Just some food for thought. It’s kind of like being in the Army (with deployments overseas) but without much of the hardships. Don’t get me wrong, there are some FSOs who do travel outside the wire. But let’s be honest with ourselves, if you have served in Iraq or Afghanistan, you know that they don’t get out there with anything close to the frequency of the military (which we shouldn’t expect them to), and they have very nice billeting and comforts while serving overseas. And it’s not just the war zones they serve in, they also get to serve in the U.S. Embassy in Paris.

The second prominent FSO position would be working for USAID. However, they seem to be the red-headed stepchild of international affairs and they received a lot of cuts in 2011. It seems that many House Republicans will continue the trend to defund USAID in this election year, and perhaps beyond, barring a huge loss in this election cycle. Like many other JMOs, I dealt a lot with the Commander’s Emergency Response Program (CERP) while deployed. It is easy to be frustrated to see American tax payer dollars paving roads in Baghdad or Kabul vs. Detroit or Cleveland and I do understand the other side of the argument of using international development to promote U.S. interests being cheaper than using military force. After considering both sides for a while, I’m pretty much neutral in my stance on USAID. However, I do advise that a JMO would probably do better trying to become a FSO at State vs. trying to become a FSO at USAID based on budgetary and other considerations.

It is a fact that USAID has become basically a contracting agency, with private companies such as the Louis Berger Group, BearingPoint and Chemonics International doing the actual delivery of foreign aid. If you are a JMO that has deployed to Iraq or Afghanistan, you have probably dealt with one of these companies, and you probably have an opinion on these companies, just like me. I just finished reading Washington Rules: America’s Path to Permanent War by Andrew J. Bacevich, a retired Colonel from the U.S. Army, so my opinion may be biased towards these so-called Beltway Bandits.

Father Forgets

Many military men become fathers at an early age and it adds another dimension to the challenges that they already face. I deployed when my daughter was only 6 months old and when I came back, she seemed all grown up as an 18-month old girl!  At first, everything she did seemed cute and funny. But the small things do wear your patience at times, like cleaning up their mess, refusing to sleep, refusing to eat, whining, etc. Kids will be kids. I actually found this essay or poem online and it always calms me down after reading it. I have implemented a policy in my house where if my kid pisses me off for whatever reason, my wife hands me a printed copy of this essay. Since I know it by heart now, I basically chuckle at whatever was making me ticked off just a second ago. Maybe it will provide you with some perspective as well. Love your children!

 

Father Forgets

by W. Livingston Larned

Listen, son; I am saying this as you lie asleep, one little paw crumpled under your cheek and the blond curls stickily wet on your damp forehead. I have stolen into your room alone. Just a few minutes ago, as I sat reading my paper in the library, a stifling wave of remorse swept over me. Guiltily I came to your bedside.

There are things I was thinking, son: I had been cross to you. I scolded you as you were dressing for school because you gave your face merely a dab with a twoel. I took you to task for not cleaning your shoes. I called out angrily when you threw some of your things on the floor.

At breakfast I found fault, too. You spilled things. You gulped down your food. You put your elbows on the table. You spread butter too thick on your bread. And as you started off to play and I made for my train, you turned and waved a hand and called, “Goodbye, Daddy!” and I frowned, and said in reply, “Hold your shoulders back!”

Then it began all over again in the late afternoon. As I came Up the road, I spied you, down on your knees, playing marbles. There were holes in your stockings. I humiliated you before you boyfriends by marching you ahead of me to the house. Stockings were expensive – and if you had to buy them you would be more careful! Imagine that, son, form a father!

Do you remember, later, when I was reading in the library, how you came in timidly, with a sort of hurt look in your eyes? When I glanced up over my paper, impatient at the interruption, you hesitated at the door. “What is it you want?” I snapped.

You said nothing, but ran across in one tempestuous plunge, and threw your arms around my neck and kissed me, and your small arms tightened with an affection that God had set blooming in your heart and which even neglect could not wither. And then you were gone, pattering up the stairs.

Well, son, it was shortly afterwards that my paper slipped from my hands and a terrible sickening fear came over me. What has habit been doing to me? The habit of finding fault, of reprimanding – this was my reward to your for being a boy. It was not that I did not love you; it was that I expected too muchof youth. I was measuring you by the yardstick of my own years.

And there was so much that was good and fine and true in yourcharacter. The little heart of you was as big as the dawn itself overthe wide hills. This was shown by your spontaneous impulse to rush in and kiss me good night. Nothing else matters tonight, son. I have come to your bedside in the darkness, and I have knelt there, ashamed!

It is a feeble atonement; I know you would not understand these things if I told them to you during your waking hours. But tomorrow I will be a real daddy! I will chum with you, and suffer when you suffer, and laugh when you alugh. I will bite my tongue when impatient words come. I will keep saying as if it were a ritual: “He is nothing buy a boy – a little boy!”

I am afraid I have visualized you as a man. Yet as I see you now, son, crumpled and weary in your cot, I see that you are still a baby. Yesterday you were in your mother’s arms, your head on her shoulder. I have asked too much, too much.