ask Dcifrths...well, anything...about finance/mkts/ports that is.

[dp13368]

Thanks for the answers about your MBA, appreciate it barron.

[DcifrThs]

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Also...why aren't you returning there.

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well firstly, i was let go so returning isn't an option. if given the choice though, i'd do it again (i.e. work there and get fired). i think this will probably work out best as the requirements there didn't play optimally into my strengths. i can't wait to see what lies ahead.

on the plus side, i learned a lot (vast understatement). more importantly though, i think i learned a good process for improving and constantly learning.

further, my managers will all give me solid recommendations and the fact that many highly successful people worked there and left or got fired (including former fed economists) means that it doesn't say much about the quality of the employee, only the fit with the firm.

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Barron, what was the basis for your being fired? (not for surfing 2+2 from work, I hope)

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well we're getting a bit off track here and this isn't supposed to be "ask barron about his personal life"...

but short story i was in a position where it was about 30% analytical research type stuff and 70% client service/project management type stuff. i wasn't good at the latter but i was great at the former. their interview process heavily weights the analytical and personal discussion group interactions so despite me "sailing through" the interviews, i wasn't cut out for the position itself.

further, i wasn't getting up to speed with the 70% stuff quick enough and after 6months it was apparant it wasn't likely that i would.

i had lunch w/ 2of my 3 manager people and they've been great and are looking forward to being references for me. in addition they have put me in touch w/ some friends at other similar places.

hope that answers your Q sniper. turns out i was not fired for surfing 2p2...theres always next job though.

i will though say that this will be the last personal/non-finance question i'll answer.

thanks,
Barron

[Sniper]

Sorry Barron, wasn't focused on the personal aspect. The takeaway should be that in any job there may be aspects that don't play to your strengths, and it pays to determine the true nature of a job during the interview process. Hopefully that's a useful lesson to some of the people here heading into interviews.

[edtost]

barron,

wrt managing a portfolio of assets, how do you view the relative importances of predicting returns, predicting covariances, and optimizing the portfolio? how is this influenced by the relative difficulties of each of these and the amount of error even doing them well imparts on the process?

thanks,
ed

[dazraf69]

Barron

Thanks for taking the time to do this. Can you ellaborate a little more on this?

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i think i would have used my alumni more. i don't think i took full advantage of that resource. partly my school's fault. mostly my fault.

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I am 26 and a math teacher. I am looking at a career change and an MBA seems to be my best bet. I have 5 years of solid management experience with good references. I am trying to decide weather I should go full time and leave my job which would take 1.5 yrs to complete. Or part time which would take 3 yrs to complete. I have the benefit of summers off which may give me a chance at an internship or extra credit hours to shorten the time length. My concern is that taking the part time track would give me an MBA (focus will be finance) at close to 30. I worry that I will not be as marketable due to my age (maybe this is just a mid life crises fear). Any thoughts suggestions? I will likely still do it part time as I do enjoy my job and I can’t justify the loss of income to my self. TYIA!

[BDaws]

What is your personal approach to understanding what is going on with the market well enough to trade profitably? Is it reading the Economist and WSJ, talking with informed friends, or some other process?

Thanks for your help.

[Scorpion Man]

1) You are a standup guy for disclosing the adversity of not fitting at that job...I am a big fan of candor and disclosing weaknesses.

2) You write this:
in terms of prediction, they are pretty worthless. but ironically, the use of the fundamental drivers that come from understanding what is trying to be conveyed by predictive models can be hugely useful in trading. especially where there are non-profit seeking participants.

the fed, though, does a pretty good job as far as managemnet goes and they use predictive models to think about this stuff, so that is aplus for "economists."


I am not sure I understand...to the extent that understanding the efforts of predictive models are useful in trading...doesn't it follow that they themselves need to be predictive? How can understanding what is being attempted by non-predictive economists lead to a predictive strategy?

SM

[DcifrThs]

[ QUOTE ]
barron,

wrt managing a portfolio of assets, how do you view the relative importances of predicting returns, predicting covariances, and optimizing the portfolio? how is this influenced by the relative difficulties of each of these and the amount of error even doing them well imparts on the process?

thanks,
ed

[/ QUOTE ]

the answer varies if you are talking about a passive long only portfolio or an active managed portfolio.

in the latter, it depends on the leeway you have as a manger (can you short? use leverage? use derivatives?)

i'll take the passive portfolio since it is easier to explain.

the most important thing is thinking about how an asset class HAS VARIED in the past by itself (and why), how it HAS VARIED in the past against everything else in your portfolio (and why), and most importantly, how you logically think they can and will vary in the future both individually and together.

predicting returns is far easier in the asset class example. an easy way to go about it is to assume each asset class has a sharpe ratio of between 0.2 and 0.3 (which makes sense and is backed by data)...all asset classes except commodities that is (i'd give them a 0.10-0.15).

then you simply back out the "expected return" of that asset class from the volatility estimates you've worked hard to think about (if ever you're not sure, you can increase/decrease these estimates & see the effect on your expected portfolio #s).

from there, you can optimize your portfolio. most people do this with a simple mean-variance optimization (i.e. run the calcs one time). i think this is a big mistake since the optimal allocations are highly sensitive to small changes in correlations & variances. therefore, you'd want to do a 10k run monte carlo with ranges around each of those factors (and since the "expected return" is a function of "expected volatility" that will back itself out). the ranges you can tweak as well to be wider around assumptions you are not as sure about.

in this way, you can try to minimize big and common mistakes in constructing an optimal portfolio.

this is FAR more complicated if you're talking about an actively managed portfolio.

hope this helps. did i asnwer your question? or did you want me to give an opinion as to which part of this is the hardest?? imo that isn't all that important b/c all of it needs to be done right .

Barron

[DcifrThs]

[ QUOTE ]
Barron

Thanks for taking the time to do this. Can you ellaborate a little more on this?

[ QUOTE ]
i think i would have used my alumni more. i don't think i took full advantage of that resource. partly my school's fault. mostly my fault.

[/ QUOTE ]

I am 26 and a math teacher. I am looking at a career change and an MBA seems to be my best bet. I have 5 years of solid management experience with good references. I am trying to decide weather I should go full time and leave my job which would take 1.5 yrs to complete. Or part time which would take 3 yrs to complete. I have the benefit of summers off which may give me a chance at an internship or extra credit hours to shorten the time length. My concern is that taking the part time track would give me an MBA (focus will be finance) at close to 30. I worry that I will not be as marketable due to my age (maybe this is just a mid life crises fear). Any thoughts suggestions? I will likely still do it part time as I do enjoy my job and I can’t justify the loss of income to my self. TYIA!

[/ QUOTE ]

im sorry.

i'm not a recruiter and i dont know about this. but i can tell you that at the age of 26, i was on the left end of the age distribution at my MBA.

Barron

[DcifrThs]

[ QUOTE ]
What is your personal approach to understanding what is going on with the market well enough to trade profitably? Is it reading the Economist and WSJ, talking with informed friends, or some other process?

Thanks for your help.

[/ QUOTE ]

it involves reading and thinking. more thinking and then researching. then talking to people smarter and more experienced than me. the latter is part of the reason why i posted this thread. i'd like to get some tough questions from smart people and really have to try to dig into them.

reading WSJ is more of data collection and keeping up with the news. reading the FT is more about getting into analysis and seeing what is going on in the world. and reading the economist is the absolute best because it gives great articles about finance & global political & economic factors that make you think and relate it all together.

you'll never know everything, or even close. taking it a piece at a time and seeing what happens when you add the next piece both in expectation and then checking with data is the way to learn imo.

overall, you should always ask yourself 3 questions when thinking about something in finance:

1) what has happened that caused this thing i'm thinking about to change drastically? and why?

2) what COULD happen that could cause this thing i'm thinking about to change drastically? and why?

3) what does this tell me about the overall thing i'm thinking about? and how sensitive is this thing to other factors it depends on, or that depend on it? and why?

from there, you can then try to get a sense of what that thing is and that understanding should help you see the signs of change in the wind before others who don't thinkn that hard about each aspect that they learn.

is that what you were looking for? let me know if you need/want clarification on anything.

thanks,
Barron