Every time I see an Italian coffee percolator, I think of Jess

I heard from a good college friend today, none other than Ms. Jess P.  You will one day see her on SNL, or doing stand up, I predict.  

Typical Smithie... A very accomplished flutist (is that a word), I think a Music major, possibly double major in Italian too.  She now lives is San Francisco (again, typical Smithie behavior to migrate to cool cities, what can we say?) and is getting ready for an MBA in finance/economics.  Clearly she and I took similar different paths from Smith by starting career paths that appear to have absolutely nothing to do with anything we studied in college.  In addition to intramural soccer and the community orchestra, Jess is now doing Venture Capital analysis and research for Dow Jones.  That is precisely what I love about Smith though.  Jess knows what I'm talking about here... must be a Smith thing.  

Anyway, whenever I think back to my time and friends at Smith, images of Jess are never without a coffee percolator.  I'm not really sure what branded such a distinct mental image, but I pity everyone else who sees coffee percolators and does not have the pleasure of remembering Jess P. stories and laughing.

35% pass rate on the December CFA Level I exam.

The results for the December 2008 CFA Level I exam (offered twice a year) were released yesterday, with 35% of candidates sitting for the exam passing it.   This is down from 39% a year ago.  

Interestingly, 25% more people took the exam too.  It is not surprising that more people took the exam due to the high level of industry uncertainty, nor is it surprising that the pass level declined. More importantly, as I am preparing for the June 2009 exam, I don't find this the least bit discouraging.  

I heard a statistic in college that has stuck with me since then.  It said that 90% of students who attend class 100% of the time receive either an A or B grade in the class.  Clearly, you could assume that students who attend class are also completing homework and studying too, but those are pretty high success odds just for showing up in class every day.  

No doubt the CFA exam is the same.  More people took the exam this year, including many more unprepared candidates.  The CFA Institute recommends a minimum of 250 study hours, and the curriculum covers 18 different study topics broken down into about 75 different readings. A shaky job market means more people attempting to translate their past experience to join an elite club providing industry clout.  

The CFA exam maintains its reputation as elite through its rigorous process and relative scarcity of successful charter holders versus applicants- to complete all 3 exam levels requires a minimum of 3 years, assuming all levels are passed on the first try.  I've invested about $1500 so far on level I for study material and test registration.  Cheaper than an MBA, but much harder to graduate.  

Also, the time commitment is tough.  Like many others, I work full-time in the financial industry.  And in capital markets, "full-time" is not the government's definition of a standard 40 hour work week.  Spending all day Saturday and Sunday drilling down theoretical bond yields and diminishing marginal utility is not easy.  

If the exam were easy and anyone working in the financial industry could just show up and pass, then the pass rate would be higher.  It remains low because the test is in fact challenging, but also because it requires a great deal of preparation and a deep knowledge of a wide range of financial and accounting concepts.  

For example, 2 people I know who took the exam both studied finance and economics in college and assumed they had a leg up.  One ended up passing his exam, eventually plowing through all 18 study sessions, but overall in far less than the recommended 250 hours.  Another passed, but also incorrectly assumed she could skip the economics unit study guide entirely because she studied it in college.  

Don't forget that I am also part of the "you're special" generation- a group who has been overly showered with praise, inflated grades, and evolved to assume we're entitled to success, happiness, an A, a job, a bonus etc, because we're "just that good."  Over confidence leads to under preparation.

So far, I've realized that nothing in itself seems particularly difficult- some things more complicated than others, of course, but even with a liberal arts background and meager capital markets experience, no topic is over my head.  The difficulty lies in the scope of the material though.  I've heard that the exam is quite qualitative, which tests understanding and application of a concept over memorization of a formula.  

If we go back to the class attendance statistic, 90% of ALL students certainly do NOT get either an A or a B.  (Actually, probably more accurate to say "earn" rather than actually "receive" after adjusting for grade inflation).  

Even though the CFA pass rate is only 35%, I would bet money that that the pass rate is much higher for candidates who study 100% of the recommended study material.  At least, my plan of attack is pure preparation.  

Carnage on Wall Street hits close to home

I've been at BNP Paribas now for 3 1/2 months, after Bank of America decided to sell my group, Prime Brokerage.  We had layoffs at BNPP last week- no one in my immediate group (now Strategy & Corporate Development) was let go, but many of the people I used to work with were laid off.  That is hard to see.  And at the same time, part of me almost feels guilty that I didn't loose mine.  I don't have kids or a family to support (just a mortgage), and I'm young enough and relatively flexible enough in my career that I could rebound if something did happen.  

Right after BofA sold my group, they bought Merrill Lynch.  Or from my new perspective, BofA threw itself in front of a speeding train to save a solid gold baby, only to find that the baby is radioactive and highly toxic.  

As a loyal employee and shareholder, I was looking forward to exercising my voting rights and voting the proxy.  I accidentally shredded the official voting form, and after 4 hours and double-digit attempts to get a new voting card, I never did get to vote anyway.  

The deal went through January 1st.  We heard today that Merrill employees were paid bonuses on December 30th (totaling ~$4 billion).  And on January 15th, Merrill disclosed a $21 billion operating loss.   That is convenient.

Ken Lewis, BofA CEO claims he only knew how severe ML's losses were in mid-December, but rather than disclose this to shareholders (who might vote it down, or demand new deal terms), Lewis claims "the government made him go through with the deal."  The government promised $138 billion to help absorb ML's losses because not going through with the deal would be too devastating to the economy.

So instead, BofA shareholders are surprised with Merrill's $15 billion net loss (talk about dirty baggage).  And BofA employees... are the ones getting laid off.  Financial Times reported on Tuesday that BofA expected to lay off 4,000 people in  Capital Markets (where I used to be) this week alone.  The catch--the majority of people were expected to be legacy BofA employees.

I spoke with a friend from college this afternoon at BofA and could not believe how entire groups were simply disappearing... all of the former BofA teams were just slashed.   She said first year analysts (she had taken a year off to take a Fullbright Scholarship), were let go with 3-moths severance pay plus 2 weeks.  And no bonus.  

Three months after BofA sold their Prime Brokerage to BNP Paribas, BofA bought an entire investment bank, including.... more Prime Brokerage.  Today I am counting my blessings that I actually made it out of BofA in a single piece and as of today still have a job.   Keeping a job (forget performance, as in not getting laid off) is the new "crushing it" on Wall Street.  This is really tough.

"Dear BofA.  Thanks for saving our butts and not letting us go bankrupt like Lehman Brothers.  We promise you won't regret it.  Thanks for taking care of that little mess we left under the carpet too.  It's a jungle out there- we're so lucky you care enough to make sure we all still get our jobs and our bonuses this year.  Make sure you don't let the door slam on your way out.  F***K you, ML."

A faux-faux pas for your French boss

This is actually sort of a mean birthday joke... But not too mean.

Tomorrow is our Boss's birthday.  He is French, and by that I mean, he is very French.  He detests nothing more than cheap things.  

So, my job was to bring the spray cheese and crackers.  One colleague is bringing boxed wine, and another a tacky sheet cake (think plastic balloons).  

Normally, such a desecration of the Frenchman's wine, cheese, and pastries could be a detrimental career move for us, but, this is all a quick hoax, of course. 

The corollary to our French boss hating cheap things is his appreciation for nice things- bring out the Champagne and "Chocolate Chiboust Tart Cake" from Payard Patisserie. 

Did I mention we work for a French bank with very French standards when it comes to commemorating your boss's birthday?

Normally, I would feel incredibly guilty about buying fake decoy food.  However, we sit on a Wall Street trading floor.  Traders, for the most part tend to be a fairly affluent bunch (fyi I am not a trader).  Still, you would not imagine how quickly free food set on a counter for a bunch of traders disappears.  

Who knows if it is the American or the French traders, but rest assured, as long as it is free, that spray cheese will be devoured.

13 highlighters so far and counting

A very pink page

A very yellow page

I'm on book 5 of 6.  Major accomplishment.

Ice Skating at the Pond at Bryant Park

I was supposed to go ice skating this afternoon at the Pond at Bryant Park for an event hosted by the Smith College Club of New York City.

In theory, that sounds great.  In reality, observe the following points:

1) It is currently about 20 degrees and snowing outside.  I just spent the last 2.5 hours outside running, and I couldn't run fast enough to not be freezing the entire time.  Voluntarily skating around in slow circles, outside, sounds like pure torture.  I don't think I own enough clothes to dress warmly enough for that to sound fun (though that would soften the blow should I fall).  A slightly more appealing idea would be to paper cut my eyeballs and then squirt them with grapefruit juice.

2) I've already paid whether I attend or don't attend.  In the world of finance, people buy and sell "options."  Basically, a buyer enters a contract by paying a small premium that gives them the right, but not the obligation to either buy or sell the asset at a future date.  In this case, I am "long a call option" on ice-skating.   And, based on current conditions, this option would be considered "out-of-the-money."  That means my only investment loss is the premium I already paid- buying in advance gave me the right (but not the obligation) to go ice-skating, and now, by letting the option expire worthless, I get to keep all 20 fingers and toes frostbite-free.  The seller of the option, Smith Club, has earned a profit equal to the $10 ticket price premium I paid.  However, instead I choose to call it a donation.

3) According to the Bryant Park website, skating rink admission is free.  I paid for both admission and skate rental.  Hence why I call the whole thing a donation, and instead happily sip hot chocolate this afternoon in my cozy apartment.

Like sand through the hour glass...

This June I'll be taking level I of the CFA exam, which stands for Chartered Financial Analyst.  The CFA institute recommends a minimum of 250 study hours, which I meticulously log in hour and 1/2 hour increments on an ever-increasing list of pages taped to the inside of my study folder.  

I thought what could be more fun than logging hours and hours studying for part 1 of a 3-level exam, sacrificing the absolute non-essential remnants of any social life, also when you're a 20-something living in New York City?

The answer, my friends, is your very own hourglass to track all those hours.  Somehow cramming your brain full of portfolio optimization techniques, thoughts of diminishing marginal utility or the causes of a mispricing anomaly all become so much better when you can take a break just as soon as the green sand flows through.  

The small guy, 15 minutes, lives on my piano.  

To all, I highly recommend an hourglass (you can get them at CB2).  They'll make your studying life complete.  And if you're not studying for anything, you can act out scenes from the Wizard of Oz. (Ha ha ha, my pretty!).