Friday, April 29, 2005

Met a fellow classmate lastnight

Since UW doesn't have an official admit weekend, I took it upon myself to meet a future classmate last night over a few beers. Seems like a good guy - much smarter than I in the investing world.

Also sat with an alum who is in the biz and has a great buy-side job, working for a small shop which comes with quite a bit of responsibility.

Hopefully there'll be more beers in the future, as well as some investment ideas.

I gotta learn more about this MLP thing. It seems like it's a great deal, even if the taxes are a little more complicated. Probably not much of a tax advantage in an IRA, though. Lotsa learning to do!

Tuesday, April 26, 2005

I'm such a drone

At work. Yay me. A fellow blogger has stated he is on "cubicle retirement" and I have shamelessly stolen the phrase when I see friends out and let them know what will be happening in a few months.

On another note, I know of a student who said no to Cornell and Duke and will head to UW's ASAP. That speaks to the strength of the program!

Now I'm just really really really really hoping I get football tickets. You see, I will enter a lottery for them. I'm sure that I'll find 'em somehow anyways, but I'm hoping my name gets chosen. For hoops tix too. I'm pretty sure I'll get the hockey tix without problems.

Big time sports. Big time IM program. Why was the process even so hard for me?

Monday, April 25, 2005

I miss the NHL

I realize that I'm in the minority here, but as a hockey fan and player, I really am missing the NHL right now. Football playoffs and March Madness aside, the NHL playoffs are the best spectator tournament we have. Period. The hockey gets so intense and the players leave so much on the ice it is incredible. I just wish we had hockey. The NBA playoffs just don't do it for me, even though it's on my tv this very moment.

On another great note, the smoke-free bars rule goes in effect this summer in Madtown. That's going to be awesome!

Friday, April 22, 2005

Google and the P/E ratio in general

Someone on BW forums posted that the Google P/E was too high to justify the stock's price.

What a load of horsecrap. (Is this expressing my opinion honest enough?)

First off, the P/E ratio is not a very useful metric. It lags. Terribly. An argument could be made for using a FORWARD P/E, perhaps, but certainly not the trailing P/E. But even so, it's not that useful

Why would I say this? Well, look, the efficient market theory would state that if you pull up a chart, all that is publicly known about the company is reflected in its stock price. Thus, if a company, let's say google, which at the very last tick traded at 219.4 is worth 219.4. End of story. Humans have already determined that's what it's worth. Period. End of discussion. It doesn't matter what the P/E is!

Remember, the markets are all about supply and demand, and a stock's price is determined by two humans, or at least two humans who wrote code to agree on a trade. So, when you consider supply and demand, there's much, much more that comes into play in determining a stock's future price! This is where EXPECTATIONS come into play. And that's what analysts try to do, although few are actually skilled at it...

Now, we DO have to make the assumption that people will continue to trade non-physical things like shares of company stock with currency, despite the fact that it's not alot different than humans saying gold or currency has value. That precedent's been set already...

One needs to consider overall market conditions, the company's health and track record (and more - product pipeline, etc). I also think that looking at items such as return on equity, and debt-to-equity ratio are much more useful. Also, look at the current ratio...because, after all, you're looking for some kind of "catalyst" for the stock price to move, right? Well, if a company is about to have a lousy quarter and MISS their EXPECTATIONS, then you'd like to look for some kind of a signal...and upcoming due payments / debts is certainly a nice item to add to your arsenal. Of course, you might be able to just pull up a chart and a poor current ratio is likely to already be reflected in share prices...

There's so much more, and sometimes technical analysis makes it easier than sifting through the info...but I have to stop writing on this...I could go all day...

It just makes me mad when people use P/E as the sole indicator. Seriously, what P/E did Qualcomm trade at in 1999? Yeah, ok, that was internet bubble burst time...point is, it didn't matter. And P/E still matters very little. Remember, I'm a growth guy.

Tuesday, April 19, 2005

And so it begins...

I got email from the director of MBA student services today asking me to politely register for orientation and pay another $300 for a course that will span both years at UW. Oh boy, the nickel and dime (actually it's Franklin's now) university costs are beginning! Ugh...

Monday, April 18, 2005

Are you ****ing kidding me?

The scene: Kelley admit weekend, Friday April 8, 2005. I arrive early only to find out that I can't obtain internet access on the IU campus, but a guy in the tech center says to go to the public library for free computer usage. Cool. So I go. And whalaa, I can log on with my own computer and wireless card! Sweet. A little while later I need to move my car so I walk out, but on my way out, I notice a guy kind of huddled at his monitor...and I think he's looking at porn. On my way back in - sure enough...he's looking at porn - IN A PUBLIC LIBRARY! Are you ****ing kidding me? Who does that?

Writing from my apt...

More great "productivity" today - the entire IP based network went down. Phones, internet, email, everything. In fact, I am at home 2.5 hrs later and the internal network is still (presumably) down, because I can't get inside the firewall via a VPN connection. This is rare, but I guess it gives me an opportunity to catch up with my this blog, and my fund work. The markets are always interesting, and I think a sucker rally is coming soon...which I plan to use to my advantage (aka dump some of my funds in my 401k)

Update

My money is in and now I'm looking for an apartment. I will live with a good friend of mine, presumably within walking distance of Grainger Hall, but far enough away so that the typical undergrad drunkenness is rarely seen out our windows. Classes start on the 22nd of August with "The MBA Experience" - or, in one word: Orientation. I'll keep posting things as I learn more. Right now I am in the process of trying to find a gift for my only Female recommender who happens to NOT drink coffee. The two male recommenders both got a UW coffee mug filled with chocolate. That was easy to find, not sure where I'm going to find something for Sue....but something will come along.

Monday, April 11, 2005

IT'S OFFICIAL! -> UW

I am going to be in ASAP at the University of Wisconsin, starting on August 22, 2005. Sweet. I'm on cloud 9. I've maintained all along, that despite UW's absence from top MBA rankings, that ASAP was a unique program, and a top 5 or 10 in the nation. Today I even saw data that puts UW at #7 overall in the Investment Management, in terms of placement.

This is pure heaven for a Badger fan....and I am so excited that not only am I going to a great school that can get me to the buy-side, I am also going to the city I always wanted to - Madison. And, I get to cheer for my favorite college sports teams at the same time. It's the perfect fit; I can't believe that there is a program in this state like this...

If any fellow ASAP students come across this, or any people who are interested in working in the IM business or already do, please be sure to drop me a line!

Sunday, April 10, 2005

Kelley Admit Weekend - Thoughts

I swear blogspot.com went haywire for about a week. I couldn't post...so the gap in posts isn't my fault!

Anyhow, with regards to Kelley Admit Weekend: what a great school. Coming to Kelley admit weekend clouds my decision, and, as I write this from my hotel room inside the IU Memorial Union, I can say that this is a hard decision. I'm eligible for $$$ from IU, and this place really takes alot of pride in the MBA program, and wants to continually make the program stronger. And, I know that in general, IU has a stronger program overall...but for IM it's kind of a toss up. Sure, some of the stuff I've heard this weekend is fluff, but the quality of admits is pretty impressive. I wish UW would create an admit weekend, because that would help make this decision easier. Anyhow, I'm not going to make the decision until next week, when I can remove some of the emotions of having just been at IU for 2 days.

I met several people from China, 1 from Korea, a slew of New Yorkers, and Left-coasters too. Of course there's a big contingent from 45 minutes north (where, on the drive down on one of the Indy bypasses a tow truck hit a shredded semi-tire sending it in the air only to land on and subsequently dent the hood of my car somewhat severly!) There's even a guy who I met at UW prospective weekend and several other fellow cheeseheads. B-School admits have a very addictive personality, as a whole. We're entreprenuerial, and we don't see alot of limts. It's soooo refreshing, and I wish that school started tomorrow. Soon enough...soon enough...

Friday, April 01, 2005

Making My MBA School Choice

I'm going to Wisconsin. I am now 99% sure of this fact.

As an avid BWer, and reader of MBA blogs all over, UW (The real UW - Wisconsin was founded before Washington, it's bigger - barely, and it has better athletic teams - arguably) has very little representation on these boards. It's not a Wharton, or a Harvard (though the football, basketball, and hockey teams could kick these schools' asses). Sometimes I worry that I might not find a job with a UW MBA. But then there are times like last night when I went back to http://www.uwasap.org and reminded myself that this program puts people in great buy-side jobs. Consistently. And the alumni network among the ASAP students is unlike anything I've seen before. Perhaps some of this is simply not known because ASAP was an MS just two short years ago. There are so many buy-siders out there with this degree, but they get left off the major surveys of MBA's...because they don't have an MBA!

It's going to be a good two years there, I know it. I hope they fill the class with the maximum 21 students in ASAP because that will mean I have 20 people who love the same thing as me, and I can learn from 'em. Plus, then we'll have the maximum number of heads for sector research when we run the fund in '06-'07!

As for Kelley - well, it's a great school too. If you look inside the rankings (take with a grain of salt), you'll see that UW and IU are practically the same for finance...IU is 19 and UW is 21 (USN&WP). And, as for IM, well, the ASAP program is probably in the top 5-10 in the country, with Texas, Cornell, UW, and Tulane the only schools that give students the ability to manage the amount of money that they do. The best part about it: Estimated cost for UW when I am done: $45k. When I'm 50 and [hopefully] giving dinero back to the school, I'll realize how good of an opportunity it was/is.

Market Efficiency

Market Efficiency might be my favorite topic in the whole world to talk about. And if you feed me drinks, I just might get even passionate about it.

It's a "debate". Eugene Fama (Chicago GSB prof) has been credited with this theory. In fact, I think he won a nobel prize for it in 2003. He defined it as pretty simple: Everything that is publicly known about a stock is priced into its current price.

I believe this. The second you pull up a chart, you're up to date. Of course, if you want an "edge" you need to do more research.

One of my favorite books is "The New Market Wizards" (it has caused me to create my blogspot username), by Jack Schwager. The first sentence of the book starts: "The markets are not random. I don't care if the number of academicians who have argued the efficient market hypothesis would stretch to the moon and back if laid end to end; they are simply wrong."

Talk about a great opening, huh?

Well, my opinion on this efficient market hypothesis is that with the definition given above, I believe that it's true. With some wiggle room. First, why I believe it is that if you pull up a chart, you'll notice that EBAY shares took a big nosedive in early 2005. Well, nobody expected them to lower EPS guidance for the entire FY - news that was definitely not known. I believe pretty strongly that if EBAY had reiterated their guidance, shares would have done nothing. I also believe that had they raised guidance as much as they lowered it, shares may have gone up, SOME, but would have been somewhat anticipated. Certainly I do not believe that they would have gone up as much as they fell, therefore, expectations were perhaps a bit lofty. I believe that it's continually increasing expectations that are one major cause of bear markets. People get greedy. And that's where I disagree with the random walk theory.

Human emotions. Behavioral finance. You see it all the time. Biogen and Elan are two of the latest victims. Elan fell from $30's to $3.5 in a month because they pulled their main drug. I would have called a short at the first fall a "high probability trade". Why? Because any hint of bad news causes more sellers. "Well, you can't be sure that more bad news is coming!" you say. You're right, I can't be sure. But, let's look in probabilities... When Clinton was accused of Lewinski - then suddenly Jennifer Flowers and that Paula girl. I watch alot of law and order. Let's say a man is arraigned on sexual assualt charges. Then, blam, another woman comes out and accuses as well. Then a third...now you have a pattern. Bad news tends to stay hidden until the bubble bursts...it begets more bad news. It's human nature.

Now the wiggle room. You see, if Ebay shares, which currently trade in the $37 range, are worth $36, you'll note that there can be profits made, even here. It has traded as low as 36.54 and as high as 37.86 today. Thus, I believe that volatility can be your friend, if you're paying attention. But, to use volatility to your advantage, you need to be nimble. And that's not investing.

All in all, this is a great game that companies have invented, and I look forward to learning more every day of my life...as it will become my new career. To my new classmates (who probably will never read this blog), I look forward to learning from you as well.