Dealing with Low Interest rates: Investing and Corporate Finance Lessons

A few months ago, I tagged along with my wife and daughter as they went on a tour of the Federal Reserve Building in downtown New York. While the highlight of the tour is that you get to see large stacks of US dollars in the basement of the building, I considered making myself persona non grata with my immediate family by asking the guide (a very nice Fed employee) about the location of the interest rate room. That, of course, is the room where Janet Yellen comes in every morning and sets interest rates. I am sure that you can visualize her pulling the levers that sets T.Bond rates, mortgage rates and corporate rates and the power that comes with that act. If that sounds over the top, that is the impression you are left with, not only from reading news stories about central banks, but also from opinion pieces from some economists and investment advisors. I know that investors, analysts and CFOs are all rendered off balance by low interest rates, but I will argue that the techniques that they use to compensate are more likely to get them in trouble than solve their problems.

Tiers of Healthcare IB

Can someone that works in Healthcare IB, or that is familiar with the sector give me information about the different "tiers" between the banks? What are the tiers at each level (BB, MM, and boutique)? Has deal flow slowed down at all since December/ January?

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Sharing: Cultural Factor (after the merger, after acquisition), Private Equity Professionals

We have recently purchased a loss-making food and beverage business in Europe. Our plan was to rebuild this company. In terms of the revenue, they have Euro 5 - 20MN p.a. (deliberately vague, but for those in the know, you know what kind of challenges you would face with a company this small). Their brand is relatively well-established and well-known, but their filed isn't a growing area. When we buy a company, we would like to bring in new management.

Chicago Booth vs. London Business School


I will be commencing a Full Time MBA this fall and am considering my options: Booth, Kellogg, Columbia, London Business School, and a couple of other slightly lower ranked schools. I am a finance candidate, but not from a traditional banking/PE/HF background. I will be returning to finance afterwards, although I am not sure exactly in what capacity, and I am open to the off chance that something else (outside finance) appeals to me as I go through B School. I will be an international candidate at any of these schools (I'm keeping this whole thing vague for the sake of anonymity).

Own Your Time: or What I learned from Hodgkin’s Lymphoma

Mod Note: Each day we'll be posting the top WSO forum posts of 2014. This one was originally posted on 11/24/14 and ranks #7 for the year by total silver banana count. You can see all our top ranked content here.

There were times when things seemed to sail along, from strength to strength and from triumph to triumph.

During these periods you can do no wrong.

Other times things go sideways and in spite of your best efforts they can stay that way, testing your mettle with one difficult life exam followed by another.

This is about one of those exams.

A little over a year ago I was on a plane to Toronto and in an attempt to release some painful muscle tension, I discovered an unusual growth near my collar bone. No pain, just one of those things you know is not supposed to be there.

When I got home, my normally easy going doctor was showing an unusual level of concern, and I was sent off for a minor surgery a month later to remove what turned out to be an offending lymph node. There are many reasons for this type of growth, but my doctor knew from prior experience that this type of thing is often a problem.

My surgery was on Halloween last year. 12 days later I had my verdict: Hodgkin’s Lymphoma.

I can assure you that no one prepares themselves for this type of thing, because you can’t. There is no simple explanation for how and why this happens, nor are there ways to describe how you might feel about it.

When your doctor tells you that you have a fight on your hands…that this situation is highly treatable….that there are no guarantees….and that his first patient 30 years ago had the same thing and is doing great…. It is at a moment like this that time seems to stand still.

Lesson 1: The words cancer and chemotherapy generate extreme emotions in many people. If you say you have lymphoma people are open and inquisitive. If you say you have cancer you are considered to have a death sentence and people feel a deep well of fear. Deep down they wonder if they are next. The skillful delivery of my diagnosis thankfully did not include either word.

Thoughts From a Former Navy SEAL

Mod note (Andy): This comment by @"M. Blank" is a response to this thread: Is PE the Best Job in the World? and deserves to go on the homepage for those who didn't see it.

I can't answer if PE is the best job in the world but I can offer a little outside perspective that some may be interested in. Having spent the better part of the last decade in SEAL Teams and other specialized units, I found Seabird’s initial post slightly amusing. If you’ll humor me, I’ll provide a bit of a philosophical context to this whole question of what the ideal job may be.

I provide the following background in the spirit of full disclosure and so that you can better judge what follows. My career has been pretty non-traditional. I graduated from a pretty good college and went straight into consulting. I actually had a blast with it and had an awesome lifestyle, but deep down, I had always wanted to serve in an elite military unit. So I gave up the suits, fancy hotels, and nice meals with clients for BDUs, a sleeping bag, and a diet of MREs. Some thought I was foolish to give up the consulting career, and others thought joining the military was a waste of my talent.

WSO Weekly Wrap-Up (3/28-4/3)

Happy Good Friday everyone! In case you missed them, here's some of last week's most popular topics:

Critique my retirement portfolio - I'm 27 and want to live life
Post By @cancerous

I would like to quit my current job and take a break to travel the world and figure out what I want to be when I grow up. I want to do this living only on the dividend income and not touch the principal amount.

Annual income will be about 50k a year plus an increase in principal. If the market crashes and dividends are slashed to 25k a year, I'll figure out a way to ride it out. (get a job, bum it out, freelance, etc). The current set up is about a million in individual stocks diversified via sector, and another million in ETFs, covering various sectors and geographic locations.

What do you guys think?

Who are all the "dumb" investors/analysts?

Being in B School I get to hear from lots of successful investors, guest speakers, and current/former professionals teaching classes. There is a common refrain that gets repeated in different formats by lots of people. Its often talking disparagingly about sell-side analysts but also referring to other investors and buyside firms. The statement usually takes some form of, "We've been successful because we do the hard work. Lots of investors don't even [fill in the blank]." I've heard a number of different things like, only model the income statement and don't look at the balance sheet, don't bother reading the 10-k, don't think about Cap Ex and only look at EBITDA, etc.

A good example of this was in this week's Baron's talking the PM's at Lucerne Capital "His experience in valuing small and midsize takeover targets had given him a healthy skepticism for equity analysis. “People don’t do a lot of in-depth work, particularly in Europe,”"

Community College to BB

Dear All,

I used to read WSO religiously as I was dreaming of even just getting an interview at a BB. I spent two years in a Community College in the deep south (to my opinion, coming from up north) of the US. Then finished my BA at a (low ranked) state university where I graduated with a 3.7. I couldn't even get an interview with BBs or smaller shops so after reconsidering my dreams, I decided to apply for and MSc Finance at a top tier school in the UK, w/o taking the GMAT, got accepted and spent the first 4 months of school networking, applying and interviewing.

I landed an offer at a BB in London starting this summer( S&T Equities ). It's only an internship, but the turnover is high, and my bosses are aware that I am a postgrad student looking to stay with them.

Profiting from Twitter

How does one profit from Twitter? You could buy the stock and hope it increases in price or makes a profit allowing it to pay a dividend. Or, you could do what Tashtego is doing, and use it along with other social media to speculate on the US equity markets.

Tashtego, backed by early Twitter Inc. investor Spark Capital, plans to raise a fund that will use consumer sentiment and trader behavior from social networks to bet on and against U.S. stocks, said Chief Investment Officer Arthur Mateos. The Boston-based firm’s Social Equities Fund, which relies on algorithms, is expected to eventually reach $1 billion in capital, the 45-year-old said.

Using social networking site is not a new idea, but using them for equity markets is still fairly novel.

Are we in a bubble?

The phrase ‘bubble’ is thrown around very liberally these days. We had the ‘dot-com bubble’ almost two decades ago, the ‘housing bubble’ almost a decade ago, and depending on who you ask—we are in a ‘tech bubble’ right now. The bubble I am writing about today is near and dear to all of our hearts -- student loans.

Hedge Fund: The Investment Life Cycle

Mod note (Andy): Throwback Thursday, this post originally went up on 4/23/12.

Hey guys, so after some encouragement from a few of you guys I'm gonna go ahead and start a bit of a series of posts on my experience in the hedge fund industry, particularly in how one goes from the start of an investment idea, to taking a position, to monitoring the position, and finally what happens when it's time to close it out. I'll explain all of that and will also try and do Q&A in this thread also to help anyone with specific questions. Before I get into that, here is a bit about my background that will help you guys understand what my investment approach is like.