In This Business, You Need A Hobby—I’m A DJ

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Things are okay now, but I got shithoused in the LEH bankruptcy. My stock went to zero, I had no income, and my portfolio got cut in half. Those were dark days.

I vowed two things:
1) To never put myself in a position where I could lose it all again, and
2) To have some fun for a change, for crying out loud.

Seriously. I had just spent the last nine years trading and didn't do anything fun. I went about 3-4 years between vacations once, without even taking a day off. When I got home at night, I would get right on the Bloomberg terminal. On the weekends, I read financial books.

All that dedication has paid off, but it was a crummy way to live.

BULL MARKET UNIVERSITY

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In my to-read pile has been some stuff on Singularity University, the Ray Kurzweil/Peter Diamandis thing, Kurzweil being the guy who wants to live forever and Diamandis being the guy who wants to mine asteroids and become a trillionaire. It's a school for billionaires and futurists and maybe writers like me. But I doubt it.

It's not an accredited university, but people really want to go there, because they have the most famous thinkers in the world teaching stuff on neurology and artificial intelligence and stuff like that. Your main homework assignment is to come up with an idea that will help a billion people. That's an easy one. Re-elect Narendra Modi.

But as you can see, that's just the way I think, like, I think if I got accepted to Singularity University (which costs $25K for a couple of weeks) I would have a pretty different perspective. It's funny, in my reading on SU, all I heard about was Moore's Law this and Moore's Law that, about how computing power will always grow at an exponential rate. Maybe not. This is an easy one. Has banking innovation grown at an exponential rate? No. Has utility innovation grown at an exponential rate? No. Computers have grown at an exponential rate because the government gnomes have left them alone. If you leave something alone, it will grow at an exponential rate.

The Floor

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As you guys probably know by now, I was a floor guy. I wasn't technically a floor trader, just a clerk, but I was clerk for over a year and knew how to make markets in options, and the only thing keeping me from doing it full time was Le Coast Guard, so maybe you can call me a trader.

Back then there were no computers. Okay, there were computers, but back in the booth. If you were a market maker in the pit, the way you knew your risks/Greeks is if your clerk printed out a report and ran it back to you in the pit. After a few trades, it would get stale, so he would go get you another report. When things were moving fast, you had no idea what your risk was.

BUND UGLY

Mod Note (Andy): Originally published 1 May 2015 in The Daily Dirtnap. WSO readers qualify for a $100 discount to Jared's Daily Dirtnap daily market newsletter...just email [email protected] and mention "WSO Monkey Discount" You can follow Jared on twitter at @dailydirtnap

No secret that I'm a bond bear, but I've shut up about Europe, because, why impale yourself?

Source: Bloomberg

Party is over.

Why I Bought A House

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Some context is needed. Yes, I just bought a house. But it is the fifth house that I have owned in my lifetime. I bought my first house shortly after I turned 25. I have no fear of residential real estate.

So it is kind of an interesting experience when I buy a house, because, by anybody's definition, I am a financially sophisticated guy. In fact, you could probably put me in the top .01% of financial sophistication. I am a macro expert, I have an informed opinion on the future direction of interest rates and home prices. But interestingly, the most money I ever made on a house was that first one when I was 25, when I didn't know my ass from a hole in the ground.

Most people who buy a house are financially unsophisticated. They don't know jack about interest rates. Likely they have never seen a mortgage amortization table, or have any idea how principal amortizes over time. They have never seen statistics like the Case-Shiller index, or building permits or housing starts or new home sales. They don't care. They like a house, they buy the house. Oftentimes, people make money in spite of themselves.

So just because I know all this finance stuff, don't mean that I am much better off. But hear this. 3.75% on a 30-year fixed rate mortgage is a generational low and is not going much lower. If someone is offering you the chance to borrow money for 30 years at 3.75%, you should probably take it. Just saying. I actually had no debt on my last house, and I gotta tell you, the best thing in the world is not having a mortgage payment. I had the ability to pay cash for this one, too, but...at 3.75% I am going to borrow the money.

30 years is a long frickin' time. Imagine you take out a mortgage in 1965 for 6%. Inflation is 2%. In the 70s, inflation goes much higher (including wage inflation). By the time you get to your last payment, in 1990, it is almost an afterthought, it is so small. Of course, if you take out a 30-year fixed in Japan in 1990, you are really not happy, because of deflation, but that seems unlikely here.

Don't Be A CF

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I used to go to this barbershop back in the day. All the barbers were drag queens. No kidding! It was great. They were also practical jokers. They used to do things like leave remote-controlled fart machines out on the sidewalk and blast people as they walked by.

So after the haircut you would go in the back room to pay, and one day they had their appointment book out, and I looked, and next to some of the names it had the letters "CF." I asked, "what is CF?"

"Cheap f*ck," he said.

I got a kick out of that. I was relieved to see that there was no CF next to my name. But that's only because I tipped more than normal at that place, because it was so awesome. Usually I was a pretty bad tipper. At restaurants, I would tip the minimum necessary, 15%, which is below average by most people's standards.

Especially for a Wall Street guy.

We Are All Here to Feel a Little Stress

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Quick story from the associate training class, Lehman Brothers, 2001.

The businesses would come in and give presentations to the MBAs. Some of them were good, some were bad, some were boring, some were funny. We got about 25 of them, and they all started to sound the same after a while.

I don't know why this sticks out in my head, but one day we were hearing from the FX research guys. This very European fellow had finished the boring presentation and had moved on to the Q&A. I had mostly tuned out because this wasn't about trading, and all I wanted to do was trade. Some noob in the back asks the FX research job if his job is stressful.

I'm like, what the hell kind of question is that? Plus, he's a research guy, so how stressful can that be?

European guy takes it in stride, thinks for a moment, and says, "You know--we are all here to feel a little stress, no?"

To this day, that is one of the most profound things I've ever heard.

I think this is where you have to ask yourself, what are you trying to do here? You know that a career in banking or the capital markets is stressful, right? Do you know how stressful? Sure, there are scary stories, like about the banker kid at BofA that actually died, but if you're like a lot of people, there's a good chance that you haven't been mentally or emotionally tested even once in your life, not remotely. Even competitive sports doesn't really count in a lot of cases--just because it's physically demanding, doesn't mean it's stressful.

Final Round Interviews: The Wall Street Rain Dance

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I was cleaning out my office a few months ago, when I came across some sheets of paper with microscopic handwriting that looked like a cheat sheet from some class I had taken in business school. I was wrong. It was interview notes back from the year 2000, when I was looking for jobs on Wall Street. Pages and pages of tiny handwriting, with rehearsed answers to interview questions, an overview of the banking industry and its competitive landscape, my opinions on the financial markets, and more. I must have spent hours putting this together. And you know what?

It was a great use of my time.

In general, a lot of those generic interview questions tend to end up in interviews because they are pretty useful in sizing people up. And there's nothing wrong with a rehearsed answer if it's well-thought out. Preparation is good. A lack of preparation is bad. Level 10 of the video game is rehearsing it and then getting it to sound spontaneous.

It's also good to spend all that time learning about the lay of the land in the banking industry. Wall Street Oasis would have been helpful back then. The internet was still pretty young, and while I did plenty of online research, there weren't any useful forums like there are today. Firms want to know that you've gathered some kind of intelligence and you know what the culture is like. If you're interviewing at 10 different places, it's hard to keep it all separate in your head, but I have to tell you, back then I was largely ignorant of why Lehman was different from Merrill was different from Solly/Citi.

I think ultimately, what people are trying to figure out in interviews is a) can this person make money for the firm, making me richer directly, or indirectly, as a shareholder, and b) is this person going to fit in and be fun to work with. If you are sitting in the interview, you have already made it quite far. Everyone who has made it to this point is smart. Everyone who has made it to this point is talented. When I was interviewing people, in these final rounds, everyone was super-qualified. But it got down to a) and b). Can this person produce, and are they cool? This is where the boring people and the bullshit artists get tossed.

I Need The CFA Like I Need Hantavirus

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Who doesn't love letters after their names? Jared Dillian, PhD. Jared Dillian, MD. Jared Dillian, Esq. Jared Dillian, CFA.

My favorite is when someone puts "MBA" after his name. John Smith, MBA. Whoever does that, is the biggest tool known to mankind.

I first explored getting the CFA designation when I was in business school, back in 1998. Some dude from AIMR (that's what they called the CFA Institute back then) came and spoke at the career center. He was a slug. I couldn't possibly think of anything more boring to do with the next three years of my life. Besides, I had plenty of other shit to do. The CFA would have to wait.

If memory serves me correctly, I decided to give Level One a shot in 2002, when I was working at Lehman. I passed. The following year, I was dealing with some personal stuff and wasn't really emotionally available, but I took Level Two anyway, and flunked.

After that I gave up.

Top 5 Memories

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One of my favorite scenes in TV history is when Charlie on LOST is sitting around trying to think up his five greatest memories ever, because he knows he is going to die. I remember when I saw that on TV, I spent a lot of time thinking about what my five greatest memories were.

If you have a couple of hours to kill on a weekend, it's a pretty interesting exercise, you might want to try it. I am going to tell you all five of mine right now. Some of them were from a long time ago. The first was on July 4th, 1989, the day I met my wife. I will tell you the story of how I met my wife. I was at gifted and talented camp, and all of us nerds, about twenty of us, this big clique we used to run around in, were goofing off in the dormitory lounge, after study hour and before bed, and the boys and girls started pretending to kiss each other tonight. I was pretty bold and random as a teenager, I would literally do anything, so there was this girl I had my eye on, sitting on the couch, so I flopped down on the couch on my back, put my head in her lap, and asked for a kiss, kind of expecting that she'd push me off onto the floor. But she actually gave me a kiss, like a real kiss, and there was so much electricity that everyone in the room just stopped what they were doing and stared, and as I went back up stairs to the boys' floor with my buddies, they were like, what the hell was that? I had no idea. The two of us spent the entire next day on the balcony of the dorm, talking. We didn't even come down to eat.

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