Reflections on what I've learned...

I was thinking today how different my life would be if I had chosen not to go business school. Man, things would be different. As I look back on the past couple years, I realize just how much I've changed and how much I've learned during my MBA experience. And I'm not just talking about the academic learning (although linear regressions, pension accounting, and organization behavior are important concepts.....hopefully my professors are reading this). I'm talking about learning things like being more sensitive to cultural differences, how to approach a complex problem, and what's really most important to me in life. You have a chance to do a lot of introspection as a student since you're constantly being exposed the myriads of ideas, attitudes, and perspectives that are part of any great academic environment. I guess what I'm trying to say is that I'm grateful I made the decision to not only attend business school, but to attend an intellectualy diverse institution like Cornell.

On a completely unrelated note, there's a lot of great things about Ithaca. If you're attending Destination Johnson or if you just happen to be passing through town, here are some of the sights that you shouldn't miss out on:

• Taughannock Falls, Buttermilk Falls, and the lower part of Treman State Park
• The Museum of the Earth (I'm biased since I did a marketing project for them, but it's a fantastic place)
• The local farmer's market off of Route 13
• Wegman's
• Cornell's Bell Tower

For any of you that are still going through the application/decision process, best of luck. Let me know if I can answer any questions or provide information that would be helpful to you.

Musings on the Financial Markets...

A couple weeks ago I came to the sobering realization that I only have two more months left to enjoy my MBA experience. (Even though the actual graduation ceremonies take place at the end of May, just about everyone is done with classes/finals/projects by the first week of May). Like most of my classmates, I've got mixed emotions about finishing school. On the one hand, it's exciting to think about making the transition to a new career and start getting a paycheck for doing something that I'm passionate about. On the other hand, I've made a lot of friends over the past two years and it's going to be hard to see them all leave at the same time. The social fabric of my class is going to change once everyone leaves Ithaca and disperses all over the world.

On a completely different note, can you believe the news about Bear Stearns that surfaced last week? Astonishing. As I've mentioned in a previous blog, I spent my summer internship with Bear Stearns Asset Management and had a great experience there. Although BSAM was a relatively small piece of the whole Bear Stearns franchise, I was able to meet quite a few people over the course of the summer. The colleagues I worked with on a daily basis and the professionals I met from other divisions were all smart, driven, and very genuine people. My heart goes out to all of my friends and acquaintances at Bear Stearns as I hope things work out favorably for them.

I've been trying to wrap my brain around how it's possible for such an accomplished firm like Bear Stearns to approach the verge of bankruptcy so quickly. Just a year ago every big bank was awash in liquidity and now Bear needs emergency funding from the Fed to keep from going under. I've come to the conclusion that the "self-fulfilling prophecy" effect is a powerful concept in financial markets. Rumors and perception can morph into reality and cause funds and firms to fail. It's really an amazing concept. John Meriwether of LTCM fame said that a "hurricane is not more or less likely to hit because more hurricane insurance has been written. In the financial markets this is not true. The more people write financial insurance, the more likely it is that a disaster will happen, because the people who know you have sold the the insurance can make it happen." To some extent, the same principle applies to a lot of people shorting the same stock. The fact that a large group of investors are expecting to profit from a negative view of the stock may actually cause the fundamentals to deteriorate as customers/suppliers/partners act in a different way than if the negative sentiment wasn't transparent. Rumors of illiquidity are also damaging (although it's unclear how much was rumor and how much was truth in Bear's situation) since it may cause some counterparties to stop trading and some clients to pull their cash, which starts the downward spiral of a rumor turning into reality.

Warren Buffett was recently talking about how he doesn't look at Berkshire's stock price every day and he said "The market is there to serve you and not to instruct you." Maybe it's just because I have a lot more to learn than Mr. Buffett, but I don't know if I completely agree with him. I may be contrarian to the core, but I still think there's wisdom in understanding the movements of the markets.

Decision Time

Over Christmas break, I had a lot to think about. I had just changed my post-MBA plans from launching a fund with some partners in Texas to pursuing something more stable right out of school. I had the option to return to the asset management firm that I interned with, the Cornell endowment fund had given me an offer to be part of their investment team, and I was also considering other buy-side positions that would take me closer to family back west.

Deciding on an internship was easier because I knew I'd only be in the position for 12 weeks and I could easily pursue a different path after the summer was over if the job turned out to be a poor fit. Not only was I was stressing about the full-time decision since I knew it would have an enormous impact on how the rest of my career would unfold, but I was having hard time pinpointing which criteria was the most important. Each opportunity offered something completely different than the others.

Joining the Cornell endowment fund would be very rewarding since I would have the opportunity to work for an institution that I truly cared about. Returning to the firm I interned with was appealing since I really enjoyed the team dynamic and the freedom use my own process to pick stocks. My wife and kids are obviously an integral part of my life so work/life balance was important to me, and location was also a big consideration since my wife and I have close family members and friends living in the west.

After countless discussions with my wife, a few alumni, and some friends in the industry, I decided the single most important criteria boiled down to which job would give me the best learning experience and open the widest door to the investment management industry. Once I finally put aside everything else, it quickly became clear that the endowment gig was my best opportunity. I'm excited to report that I'll be staying in Ithaca upon graduation to work for the Absolute Return group at the Cornell Office of University Investments. I've got a few more thoughts regarding my decision process that I'd like to write about, so I'll probably do a follow-up to this post next time...

A Chat with Warren Buffett

One of my most memorable experiences over the past year was meeting the one-and-only Warren Buffett. It was incredible. About 40 Johnson School students flew down to Omaha last spring to glean some insights from one of the world's greatest investors. We spent the morning in his Berkshire Hathaway offices where we had a chance to ask him just about any question we wished. Warren said the only topic that was off limits was what he was currently buying. He even encouraged us to pose "provocative" questions since he meets with students quite often and I'm sure he gets bored with giving the same old responses about how he evaluates a management team, what his thoughts are about the growth of hedge funds, and his experience with the LTCM crisis. (Even though those were most of the questions we asked.)

After a couple hours of drinking free Coke products and listening to some "Sage" advice, we zoomed over to Gorat's where Warren treated all of us to a steak lunch and some conversation. Then came the most surprising part of the trip. Once we finished our meal, Warren was gracious enough to spend another hour in the parking lot to take group pictures with our class and pictures with every student individually. I had already developed an admiration for Warren Buffett from reading his shareholder letters and other writings, but witnessing firsthand his humility, graciousness, and humor was an experience I won't forget.

Asset Management Career Stuff

Before coming back to business school, I used to think that nearly all of the post-MBA careers in investment management revolved around picking stocks. My experiences at Cornell and the exposure I've gotten to the industry have greatly expanded my view of the many different opportunities available for someone interested in asset management. Let me talk about the 3 biggest insights I've gained over the past year and a half...

1. There is an enormous amount of money invested in asset classes other than equities. Although the majority of the on-campus job postings in asset management are for "equity analysts" (which is true for Cornell as well as any other top school), there are many opportunities to do research in other asset classes. Domestic equities actually represent a small piece of the pie when you consider all of the global investment opportunities in commodities, derivatives, fixed income, real estate, etc.
2. There are multiple levels of career paths within the asset management world. Picking individual investments (whether it be stocks, bonds, options, or office buildings) is definitely an exciting, intellectually challenging, and financially rewarding career path. But if you're interested in looking at the bigger picture, you might want to work for a foundation, endowment, or pension fund where you make decisions regarding asset allocation. An equity anlayst, for example, decides if they should buy EBAY or GOOG, while an asset allocator decides if they should be buying Japanase real estate or agricultural commodities. It's two very different levels of investing. If you enjoy relationships and more personal interaction, private wealth management might be a good career fit. There is a whole spectrum of jobs in asset management that range from portfolio analytics to direct investing to institutional consulting.
3. There is more than one way to pick stocks. Even if you come back to school with a clear goal of picking stocks , fundamental research isn't the only path. Quantitative investing has an enormous following especially in the hedge fund world. A lot of the "quant" funds will prefer to hire someone with a PhD in physics or stats compared to a less technical degree like an MBA, but I've still seen a number of job postings come through campus for quant positions.

One Semester Left...

It's amazing how fast 2007 passed me by. It seems like yesterday that I was kicking off the school year with my immersion cohorts during Week on Wall St. We had just finished the first semester (the heralded "core") and were starting our hunt for internships. After the blur of my summer internship and the fall semester, it's hard to believe I've only got four months of class left before my MBA experience is over!

One of the best perks of being a student again is the long winter breaks. It's really a month-long vacation. You only have about 4 weeks off during your first year since final exams are done after the first week of December and you have to be back at school around the first week of January when the immersions start up. (Those 4 weeks aren't entirely free since most immesions load you up with a bunch of readings/projects to complete over the break). But the second year gets better. You get a solid 6-week break since elective courses don't start until the third week of January, you don't have to worry about doing any assignments, and there's a good chance you'll already have your full-time job offer in hand which relieves the stress of preparing for interviews. Many of my second-year classmates are using the time off to travel: I have friends going to China, India, Hawaii, Vegas, and Africa. I'm using part of my time to hang out with family in Salt Lake City and then I'll be in Ithaca until classes start. My daughter is in kindergarten, and it's funny that she doesn't get as much time off from school as I do.

I couldn't be more excited about my last semester at Cornell. In addition to the Cayuga Fund, I'll also be taking Behavioral Finance, Search for Alpha, Intermediate Accounting, and a self-study course to prepare for the third level of the CFA exam. You're probably thinking how anyone could be "excited" over that line up, but it's easy to develop a passion for the capital markets when you're so intensely immersed in studying them. My plan is to soak up as much learning and experience as I can over the last semester since this is the last opportunity I'll have to be unemployed (at least I hope it's the last opportunity...)

Some Random Photos

If pictures are truly worth a thousand words, this is going to be the most I've ever written. I thought I'd post a few snapshots to give you a visual sense of where I spend most of my time when I'm hanging out at school. Let's start with Sage Hall, a view of Cayuga Lake from campus, and a photo of two future Cornellians. (Disclaimer: I'm not a professional photographer. I know how to turn the flash off and on, but that's as far as my camera skills go).

The Parker Center is one of the most valuable assets of the Johnson School in terms of absolute dollars (the software licenses and data feeds are worth almost $2 million in annual fees) and in terms of what makes us different from other top business schools. Using industry-standard analytical tools to manage a real hedge fund as an MBA student is a very unique opportunity. Here is a shot of the Parker Center classroom (available to all Johnson students) and the adjacent Parker Center studio (used exclusively by the student portfolio managers of the Cayuga Fund). When I'm not in class, chances are you can find me in the studio.

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I thought I'd throw in a couple more shots of places a prospective student might find interesting. This first is the Atrium - literally the center of Sage Hall. With a vaulted glass ceiling and plenty of room to eat or hang out, the Atrium is the most social location in the building. The second photo is the student lounge in the basement. It comes equipped with leather couches and two flat-panel TVs so you can catch CNBC and SportsCenter in between classes. There's also a microwave and fridge near the vending machines. The third photo is one of the main classrooms. Not much to elaborate on there.

Well, I hope you enjoyed the show. If you're interested in seeing something that's not on the school website, shoot me an email and I'll see what I can do to post a photo.

And the Trophy Goes to...

One of the most high-profile events held at the Johnson School is the annual MBA Stock Pitch Competition. I was involved with sending applications to other schools and helping the directors with the logistics, so it was a relief that the competition ran smoothly. This past Thursday and Friday, we hosted teams from Darden, Wharton, NYU, Columbia, Wisconsin, Chicago, Kellogg, Maryland, UNC, Duke, and Michigan. Each school sent 3 of their best stock junkies to vie for a chance to impress recruiters and to take home the $3000 prize.

This year's competition didn't disappoint. Kellogg's two-year winning streak was broken by Maryland, whose final-round pitch of Under Armour Inc impressed the judges the most. Here's how the format works. All of the teams were given the same stock (Home Depot), and a list of stocks from two industries (satellite radio and athletic apparel). The teams had exactly 12 hours on Thursday to anaylze their stocks and prepare their presentations. On Friday, they pitched their stocks to a panel of buy-side analysts and portfolio managers. The first two rounds consisted of the teams pitching Home Depot (long or short) and pitching their choice from the sat radio industry (long or short). We broke for lunch while the judges deliberated on which 4 teams would make it through to the final round.

The mood was intense when the final 4 teams were announced: Wicsonsin, NYU, Maryland, and Kellogg. Just minutes later, the first team was standing in front of the judges recommending a long position in Under Armour. It was kind of interesting that the teams could choose from 4 different athletic apparel companies (Under Armour, Nike, Lululemon, and Crox), yet 2 of the final teams recommend a long in Under Armour, and the other 2 teams recommended shorting it. The quality of the presentations were excellent, especially since most of the teams were composed entirely of first-year students and since they only had 12 hours of preparation.

A Day in the Life of a 2nd-Year MBA Student...

I thought I'd do something I've never done before on my blog and give you brief snapshot of what I do on a typical day. (An original idea for a blog, I know). I chose last Monday, October 22nd...

Monday
After checking email, I caught the bus to school for Cayuga Fund class from 8-10am. We did some training with a financial software application called StockVal and then a couple of student portfolio managers pitched some stock ideas for inclusion in the Fund. All of the stock pitches received the required two-thirds majority vote, which meant the trades would be executed after class. Directly following class, I met with Rich Marin (former CEO of Bear Stearns Asset Management and current Executive in Residence at the Johnson School) for a half-hour to get some career advice. I spent the rest of the afternoon doing research on the stocks I cover in the Fund and responding to a handful of emails before coming home to spend time with my family. After eating dinner and putting the kids to bed, I finished up a take-home midterm exam for my Equity Derivatives class while watching the monday night football game. Peyton threw a late TD to keep my undefeated season alive in my fantasy football league, so I'd say it was a good day.

That was a fairly typical day for me. It's not unusual during your second year at B-school to only have one or two classes scheduled a day, which is due to the structure of the elective courses. And it's great to have a seasoned Wall St. exec like Rich Marin available to speak with. Now that I think of it, I'm really amazed at the quality of professionals (guest speakers, alumni, faculty) that I've come in contact with over my short time at Cornell. Jim Chanos, Seth Klarman, and Michael Mauboussin are some heavy hitters in the asset management world, and I've had the luxury of sitting in a classroom with each of them. And when I think that my classmates are going to be the next generation of leaders, it's even more humbling.

Calling All Career Switchers

I've noticed that my last few posts touch on some things that make Cornell different. Every school has innate strengths and weaknesses and every MBA candidate is using a different lens to determine which program best suits their situation, learning objectives, and career goals. With that said, I thought I'd reflect on my decision to attend business school in general and why the past 14 months have been such an enriching experience.

Almost every student I know at Cornell is a career-switcher of some form, myself included. This makes perfect sense since most people don't quit their jobs and pay tens of thousands of dollars to pursue other career possibilities if they were already content with the job they have. The ironic thing about business school is that you really don't have two years to figure out what you want to do. Decisions about which classes to take, which clubs to join, and which corporate breifings to attend, are decisions made within the first few weeks of the first year in the program. I was one of the few students who had a very defined set of career goals from day one. I wanted a job on the buy-side, specifically with a value-oriented equity fund, and being focused freed up a lot of time to get prepared for my internship.

If I had to choose one thing that surprised me the most about business school, it was the amount of work I had to do outside of class to prepare for a job on the buy-side. I was expected to know how to value a company, disect an industry, and analyze economic data by January when interviews started. Since these concepts aren't covered in the fall semester (the "core" classes), I did a lot of work on my own, with friends, and with the Investment Management Club to get up to speed. Although I found it to be especially true of asset management careers, you will undoubtedly have to prepare outside of class whether you're pursuing an internship in marketing, investment banking, consulting, or corporate finance. The learning curve is steep for any new career, so knowing what you want to do before you come to school will give you a definite headstart.

I'm certainly not suggesting that you can't change your mind while you're here. An internship is the only thing that I know of that let's you "try before you buy" your career. If you don't like the summer you spent on Wall Street, you can always switch directions and take a new path during your second year in school. An MBA is also the perfect platform to get exposed to other fields that you didn't know would ever interest you. Developing basic skills in stategic consulting, corporate valuation, and general leadership has been an amazing experience for me, and I think I'd be happy taking a job in any of those areas. The opportunities in the business world are literally endless and there's no better time to identify and formulate your passions at the sunrise of your career. I guess what I'm trying to say is that being focused and having a clear goal will improve your chances of getting where you want to go, but being open-minded and reasonably flexible while you're in school will only serve to sharpen and expand your career possibilities.

OK, I've waxed way too philosophical for the Johnson Blog. I'll think of a joke or something next week, but hopefully my thoughts were helpful to someone out there.

A little bit about Ithaca, NY...

If you can't already tell, I'm one of the few MBA students who came to Cornell with a family. My wife and I have three kids so location was a HUGE consideration for us when we were deciding which school to attend. I wanted my family to enjoy the two years and not be crammed in a one-bedroom apartment in the middle of a big city. Ithaca has been the ideal location for us - in fact my wife has been surprised how attached she's become to this place.

If you've ever been to Ithaca, you won't have to look longer than a couple minutes before you see a bumper sticker or t-shirt with the saying "Ithaca is Gorges". There are more waterfalls, lakes, gorges, and trails around here than you could possibly have time to visit in two years. The finger lakes area of upstate NY is one of the most spectacular parts of the contiguous states. I have to admit though, it does get painfully cold here in the winter time. But with places to go like Wegman's, the ScienceCenter, and the Museum of the Earth, there's always somewhere for the family to have fun no matter how much it's snowing outside.

And you don't even have to have three kids to like Ithaca! The Johnson School has such a close-knit community since nearly all of your classmates live within a mile of campus and you're always hanging out together. NYC is only 4 hours away, and it's easy to hitch a ride since there's usually a classmate or two taking a trip down on the weekends. Ithaca even boasts a small airport that will connect you directly to NYC, Philly, or Detroit. Of course there's a trade-off of not going to school in a major metropolis (like being further away from recruiters and industry events), but the quality of living and the intimate social environment have definitely been worth it.

20 Students Running $14 Million

Let me tell you about one of the biggest reasons I chose to attend Cornell. I wanted to learn the asset management business and Cornell is home to this thing called the Cayuga Fund. It's a student-run hedge fund, established as a separate entity from the school, that has grown to about $14 Million in AUM. The remarkable thing about the Cayuga Fund is that the money we manage belongs to legitimate investors expecting a return - it's not play money from a university endowment like most other student-run funds. I wasn't involved with the Fund during my first year at Cornell since it's designed for 2nd-year students only, but now that I'm one of the student portfolio managers, the Fund literally takes up half my time. It's a sweet deal - I get class credit for doing what I love to do.

Here's how it works. The Cayuga Fund has a proprietary quant model that spits out recommended stocks to buy and short. There are 20 student PMs (portfolio managers) each assigned to a specific sector (capital goods, energy, tech, consumer cyclicals, etc.). The PMs take the model-generated list of stocks and then perform fundamental research on each of the names in their respective sectors. When a PM has conviction to add a stock to the Fund on either the long or short side, the student pitches the idea to the group and then we vote on it.

I'm truly amazed at the amount of resources we have as students working on the Fund. Not only do we get to use systems like FactSet, StockVal, eSignal, and CapitalIQ, but we also have access to some of the best minds in the investment management industry. Student PMs on the Fund recieve instruction from Sanjeev Bhojraj (extremely talented professor at Cornell) and Dan Burnside (adjunct professor who runs a quant fund at Clover Capital). If there are any readers out there interested in applying to Cornell because of the Cayuga Fund (assuming I have any readers :), I would be happy to share more of my experience. Email me at crs63@cornell.edu.

Goodbye paycheck, Hello more student loans

It's hard to believe how fast my internship flew by. Time again for tests, deadlines, and group assignments...

After spending over six hours in the car for what should've been a four hour trip (weekend traffic was herendous), my family and I rolled into Ithaca on Friday night. Although it's nice to be back, my mind has yet to switch to "school" mode and classes start tomorrow at 8am. The nice thing about your second year in B-school is that every single class is an elective as opposed to required core classes. Now I can focus on things I really want to learn like Investing in Distressed Companies and Equity Derivatives (two out of the four classes I'll be taking this fall).

I expect that the time spent in the real world during my internship will give me a better framework and perspective for my second year at school. I'm looking forward to sharing my experiences with first-year students so they can be better prepared for the grueling process of finding an internship on the buy-side. There were things I would've done differently (like not being picky about the city I wanted to work in) and things I definitely would've done again (like building relationships with second-year students who had previously worked in the industry). One of the truly great things about the Johnson School is that I'll have ample opportunity to be a mentor to first-year students since there are so many ways to get involved. I'll be a tutor, a co-president of a club, and a work group leader all during the fall semester! Oh, and I still have to attend class.

Intense summer

After nine weeks of reading 10ks, building financial models, digging through research, and pitching stocks to my portfolio managers, my internship is nearly over. The large cap value team at Bear Stearns Asset Management has been a perfect fit for me, so it's going to be hard to head back to Ithaca in a couple weeks. Not to mention that I'd forgotten what it's like to get a bi-weekly paycheck. :)

My summer has been everything I expected it to be, and more. Not only did it give me an opportunity to use all of the tools I picked up through the CMAM immersion and the Investment Management Club, I also learned a great deal about the risks/rewards of running a business in this industry. Reading about your firm every other day in the Wall Street Journal definitely made the experience real.

My wife and I have 3 kids, so moving to New York City for the summer was quite an adventure. We found a furnished condo in New Jersey that worked out perfectly. And getting around the Big Apple has been easier than I thought. During the weekends, we've made family trips to the Bronx Zoo, the Disney Store, Central Park, and more. I think my wife is ready to return to "normalcy" at our home in Ithaca, but we'll all remember the wonderful times we've had this summer.

My wife and I are originally from Salt Lake City, UT and we have three beautiful kids (they obviously take after their mom). After spending three years within the Private Wealth Management unit at Goldman Sachs, I returned to school to follow my dreams of running an equity fund. Cornell has been the perfect place to gain the network, experience, and skills needed to succeed in the investment management industry. I spent my summer internship at Bear Stearns Asset Management and I’ll be part of the Cayuga MBA Fund this year. I love sports and enjoy traveling with my family.