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...)