Archive for September, 2008

The end of the world as we know it? I feel fine.

September 30th, 2008 by under Uncategorized. No Comments.

endoftheworld.jpgOn Friday, the Smith school hosted a town hall meeting to discuss the financial crisis. I think there were two reasons for it: 1. to make sure the students are properly aware of the situation, and 2. so we can react to the situation in an educated way (and not with the hysterics of a television media personality). Frankly, the discussion got very heavy into financial information, and I was a bit lost. The most clear part of the discussion was the risk of default of the American government. Apparently (and the news stories aren’t covering this) the US Government’s “risk rate” on bonds and treasuries has been traditionally very low, to reflect the fact that no one thought the US Government could default. This rate is reflected in the cost of CDS (credit default swap) insurance policies taken out to cover the risk involved with buying US bonds. Over the past few weeks, the cost of a CDS policy to cover a US Govt bond has increased almost 200%. That signals a worldwide loss of confidence in the US Government’s ability to pay its debts. That was a scary part of the meeting for me. I had never really considered the fact that the government could go bankrupt. But the US Government’s strength is in it’s size and in the trust people have in it. If that trust somehow eroded, the government would be unable to issue bonds to raise capital. And without that ability, it would have to declare “bankruptcy”.

In truth, no one seems to expect that to happen in the short-term. But how many financial problems can we face before people around the world get worried about their investment in the US Govt? A part of me wants to say, “The government is too big to fail”, but we’ve heard those dangerous words many times in the past few weeks, and even more over the course of history. The Roman Empire was too massive to fail, right? The British empire was too powerful to lose its worldwide influence, right?

The ending point of the meeting was related to our perspective of the future. If we want the US economy to thrive (as I do), we have to think about how today’s decisions will affect the economy 50 years down the road. Financial “crises” seem to occur about every 20 years, usually when people have forgotten the concept of equilibrium. It could be the end of the world, if we don’t learn anything from the experiences of today.


Why are you in school?

September 24th, 2008 by under Uncategorized. No Comments.

I’ve been asking myself over and over why I am in business school. There are lots of answers, really: I’ve always been a business-minded person; I’m an analytical thinker; I want to develop my leadership abilities; etc. These are true and justifiable reasons for wanted to get an MBA. They don’t capture the full reason, however.

This is the real reason:

If it weren’t for my family, I’d probably be just as happy living my life as a starving artist, living with my parents. I don’t have any shame about that. Making money only for vanity is useless to me. But I want to own a home (well, rent a home for the near future), and I want to be able to afford college for my children. I want to be able to afford the most healthy food. I want to be able to spend my leisure time with my family, doing adventurous hiking or thrill-seeking. I want to be able to retire (at some point) and do volunteer work with my wife.

No matter what my motivations were for coming to business school, I’m committed. I’ve been forced to think in new ways and work harder in the past month than ever before in my life. I’m growing in confidence and I’m growing in understanding. So, even if my post-MBA job isn’t the most lucrative initially, it will all be worth it, as long as I can provide for my first priority–my family.


I may be wrong

September 18th, 2008 by under Uncategorized. No Comments.

Ok, well I probably underestimated the magnitude of the Lehman Bros. collapse in my previous post. Now that the government has stepped in AGAIN to keep AIG afloat, I’m rethinking my position about whether all this hoopla affects me on an individual basis. I have a lot of savings (relative to my earnings, that is), but most of it is in 7-year savings instruments (CD’s). I opened most of them when the rates were better, and for the moment it provides me with a sense of security. My more recent investments (403b, IRA, etc.) are in securities, but I frankly haven’t even logged in to check the balance in the past few weeks. Why? I’m in for the long haul. I don’t depend on day trading to make profits. I’m banking on the fact that the stock market, as a whole will continue to grow over the next 30-40 years I’m working, despite these ups and downs we’re experiencing.

Now, the other question I’ve been pondering is: whose fault is all of this? Clearly the companies themselves showed very poor long term contingency planning. How is it that, over and over in our financial history, we can start to think “this [insert product or financial concept] will only continue to grow at this exponential rate!”. Everything that economists have published seems to disagree. Economists have shown how the overall “pie” in terms of the world economy continues to grow, so an overall diversified investment in “the world economy” is always a good idea in the long run, right? But unusually high rates of growth are always a danger sign to economists, because their models have shown that there is always a market correction following unwarranted earnings.

The economists never forget this rule. Why do financial companies, governments, and the general public keep forgetting & relearning the hard way, over & over & over again.

I wish I were good enough at high-level math to be a brilliant economist…


Good time to be in b-school?

September 16th, 2008 by under Uncategorized. No Comments.

With all the excitement on wall street over the weekend, it makes me wonder: is it a good time to be in business school? Not that I have any choice about the matter at this point, but it’s a proper time to look at what the employment market might be like in two years when I’m looking for a full-time job. The truth is, I haven’t yet been personally affected by the bursting of the housing bubble. I still can’t afford a house (I have no income right now), I don’t have any investments that are highly focused in real estate, and I don’t intend to work for an investment bank. I’m sure there are other ways that the OVERALL trend will affect me, but for the most part, the people who are losing out are those who invested directly in real estate or in investment companies who in turn invested heavily in real estate.

eggs-basket.jpgThe real irony here is that investors, who are always touting the benefit of a diversified portfolio, seem to have forgotten their own advice. Real estate and mortgage-backed securities were such a hot growth item that it seems they put too many eggs in one basket.

So, in the end I hope the overall market is on an upswing in 2010. Except I’d like home prices to stay low…at least until I buy my first home.


I never thought of my self as a risk-taker, but…

September 12th, 2008 by under Uncategorized. No Comments.

zionnp.jpgMy friend Howie sent me a link to a news story about a couple who died while hiking a slot canyon in southern Utah. They were carried away by a flash flood, while their son and daughter survived. It’s a horrible story, and it’s even more poignant because last September, Melissa and I left our kids with Nana & Dr. Grandpa to hike “The Narrows” in Zion National Park. We were the first group in the canyon after a rain storm, so the water was running muddy and deeper than usual. It never seemed like our lives were in danger, except when we were in sections of the canyon with huge cliff walls and you were walking through the water. You realize that there is NOWHERE to go if a flood comes. There is nothing to anchor you, there is no way to get a cell phone signal. So, I’m very sad for the family that lost their parents in such an awful way. You can read the article here:


Groups Think?

September 12th, 2008 by under Uncategorized. No Comments.

This week I started working in my first MBA team for a marketing consulting project. We’re working on a strategy project for a mobile marketing company. The prize for the winning group is an ipod, but at the moment the greatest prize would be to be done with the project. Our group has a variety of backgrounds (include one with experience in advertising, which is EXTREMELY helpful), and I’m really impressed with all the ideas everyone has come up with. Now we just have to figure out if our ideas will make sense to anyone else. I’ve already noticed that business people (including me) get so entrenched in their ideas that it’s hard to see them objectively.


Back to school

September 9th, 2008 by under Uncategorized. No Comments.

After four years away from the classroom, I’ve taken the plunge back into school. Classes started on August 27th, and it’s been nonstop since then. Actually, the stress started earlier in the summer, when we started our online Quantitative Analysis (QUaC) course through Harvard Business Publishing. And when you add in the five rigorous days of orientation and some additional career workshops, I was already well into the MBA program on my first day of classes. After coming from an office of 2 people, this experience is amazing. I love being surrounded by smart, ambitious people all day.

I’ll post some pictures as soon as I get this blog thing figured out…



September 8th, 2008 by under Uncategorized. No Comments.

Disclaimer:  The opinions expressed by the student bloggers are theirs alone and do not reflect the opinions of the Robert H. Smith School of Business or the University of Maryland or any employee thereof. The Smith School is not responsible for the accuracy of any of the information supplied in this blog.