A Good Beginning To The Semester

It was the 2nd day of classes today, and the first case of the semester in my advanced corporate (case) class. It probably went as well as any class I remember teaching. I intentionally chose a lighter case - some number crunching, but more descriptive/intuitive than computational. But it made for a good warmup and tone-setter for the class.

One thing that helped was that almost everyone in class (with maybe two exceptions) had something to add. Another was that I knew almost all their names already (at the end of the first class, I had them hold a piece of paper in front of them with an assigned number listed on my class roll. I took their pictures one by one with a digital camera, and after shrinking and cropping the photo and putting them on two sheets with names, I had a "cheat sheet" that I could review. The whole process took about less than an hour, and I probably will be able to do it in half that next time. They were surprised, since none of their professors had ever gotten their names down so fast. Of course, at a better school, I'd be given the pictures automatically, but them's the breaks.

I like teaching cases, but having a successful class is largely a matter of student preparation and participation (if they're prepared and participate, most problems are solvable, but if not, you're screwed). And it definitely leads to better preparation on the part of the students if they know that I know who they are and WILL be calling on them - by name.

As for today, in a 75 minute class, we heard from 25 of the 27 students (often multiple times). Even more encouraging, some of the quieter students that I'd had in prior classes seem to be the most vocal.

As an aside, I informed the class on the first day of class that they'd be given a quiz on the third day (i.e. in one week's time) that covers selected skills and knowledge they should have obtained from the principles class (like time value, DCF valuation, NPV/IRR, common financial ratios, etc...). I gave them a very detailed list covering what they should know, so they have no surprises (it's in the syllabus and was even emailed out to the students the week before classes started). This should send the message regarding what they know coming in to the class in order to succeed in the class.

The combination of the high visibility and the quiz on prereqs might have something to do with the fact that of the 30 or so that started the class, six have already dropped after only the 2nd class. It might be that, or it could be the usual adding and dropping that happens in the first week (I call the in-and-outers "tourists"). I guess they went back over the border.

Either way, it's a smaller class, and the remaining ones will get a lot more attention and should be better prepared.

So, the semester is now officially off and running.

Update: Businesspundit links to a piece on changes in the way cases are taught at Columbia here.

How To Pass CFA in 50 Days

Since CFA Level 1 scores just came out, a good number of people who passed L! are now beginning to stress about whether they can pass Level 2 with less than 20 weeks of study time. Without a doubt, it'll be tough. But there are some things you can do to maximize your chances of passing.

One of the best resources out there is Analyst Forum. It's an online forum populated by people who are studying for (or have already passed) the various CFA levels. I read it regularly, and you should too - it's absolutely superb.

One poster (BBD) recently shared his strategy on how to pass the exam on limited study time. I've copied it below. I'd also note that (while the poster recommended the Schweser study notes, Stalla also has good material):

I have learnt several things on this forum during the 3 years I studied for CFA. There were 10 of us who started CFA together and 3 of us completed it 3/3; 4 did not complete the course. I thought I would share some ideas that might help others.

The key challenge in CFA is huge volume of material. The subject matter is generally not very complex (except one or two areas like Derivatives or Bonds). If some folks find the complexity to be severe, they need to a) allow more time to studies and b) perhaps reconsider their reasons for doing CFA. For most people with some financial background, volume and not complexity will be the main issue.

To master the challenge posed by volume I suggest the following steps with consideration that only 50 days are left. These steps apply to all levels. In the brackets I note some anecdotes:

1. Master the basics - this comprises roughly 50% of the volume. This also represents the easiest marks that you cannot afford to lose. The way to do it is noted in the steps below.
2. Get hold of Schweser VCDs. In 2-4 hr sessions you can cover a SS. The lectures give a good overview of the most important points. Jot down the main points in on a note pad as you listen to the CD. [I often found learning new concepts easy by listening to something instead of reading a large amount of text. Also it improved my retention. I bought my set second hand from another friend who also did CFA 3/3 and recommended it highly.]
3. Next read the Schweser Secret Sauce. This is a condensed version of all the notes and consists of roughly 200 pages. After listening to the DVDs, it's quick and easy to do it. On average you could cover SS in 1-2hrs. [Make sure you always have the Secret Sauce notes with you. Read these often. They are the basics and you must master it. I read these during my commute, at breakfast etc and knew it inside out]
4. Go for the kill - attack all the questions you can find on the SS. These must include all the old exam questions. Do not restrict the questions you answer. You must attempt all the questions you can find. Practise, practise, practise. Some questions you will not be able to answer because you dont know enough of the SS. Don't panic. Follow the step 5 below.
5. For the questions you cannot answer, refer to the Schweser notes. Scan through the whole notes, you will already be familiar with most of it by covering the Secret Sauce and VCD, and then focus on the area you find difficult or don't know about.
6. With ~2hrs on DVD + 2hrs on Secret Sauce + 4hrs on questions + 2 hrs on weak areas, you can cover a SS in 8 hours. Depending on the time available, you could comfortably cover a SS in 2 days. That was roughly my average. 18 SS took +/- 36 days and the remaining days were for revision.
7. Volume can only be mastered by revision. Don't try to learn a SS 100% the first time. If you know 70-80% the first time that is good. You will learn an additional 10-20% the next time round and that will be enough to get through the exam.
8. Time management is key. Be very strict on the time spent on one SS. Don't exceed the time on any one SS at the sacrifice of another. Easy marks are available across all SS. [ I know its easier said than done. I too spent much longer on Derivatives than I expected to however that is also because I really enjoyed the subject].
9. Make sure you take a break. Let the mind relax. A tense mind makes many mistakes. That is I noted 50 days above - leave some time to relax and do something else.
10. D-Day is key. In my opinion the exam day stress management is one of the most important factors in passing or failing. Be relaxed on the exam day. I remember in my L3 exam I made a few silly errors in the morning session. I had many friends in the same exam and we ended up asking how it went during the break. When the mistakes surfaced, I left their company and went to my car and sat with the AC on till the end of the break. This helped me relax and I had a good afternoon session.

There is no time left to argue which notes or whether or not to refer to the text books. This is the time to just do it - imagine you are driving at 120mph and focus fully.

Read the whole thing (and the associated comments) here.

While BBD most likely came to the table with a better background than most candidates , a number of his suggestions can be applied (with modification) by almost everyone. Here's what I'd take from it:

1. Time and money are substitutes (to a point). If you can afford to spend the money to buy supporting resources (videos, classes, study guides), it will save you time spent studying. In particular, the DVDs from the prep providers can potentially allow you to grasp material much more quickly than you could reading it from the CFAI material alone. Many people get material much more quickly from a lecture than from reading a book. In addition, study guide are a great way to distill the material down. T his doesn't mean that you don't need the CFAI curriculum. In a perfect world, that's all you'd get, and you'd focus solely on the CFAI materials. But it's not a perfect world. As an example, I've signed up for a two-day intensive review course for the FInancial Statemen Analysis material. I'll gladly shell out $500 if it'll save me 30-50 hours of additional study time.
   
2. Major on the majors. Although there's a lot of material, there's a lot of "low hanging fruit" on the exam. At the minimum, you should make sure you get the key concepts in every section.
   
3. Work questions. It's hard to get material down merely by reading material or watching a video. These are essentially passive learning strategies, and they simply don't work - learning is an active, participative exercise. Work as many problems as you can, and answer as many questions as you can. This is one way that prep providers can be really helpful. Both Schweser and Stalla have test banks. While the quality of their questions can vary, answering ANY question can be helpful. In addition, if you're near a local society that gives a mock exam, take it.
   
4. Time Management is critical. Don't shoot for perfect the first time through the material. Since the curriculum is extremely broad, you don't have the luxury of spending too much time on any one section. For your first pass through a given segment, shoot for 60-70% on the questions at the end of each section, then move on. Once you've done every section, go back and brush up. Remember - you're shooting for a B to a B+, not an A.
   
5. If you do have to focus, focus on the "Big" sections. Financial Statement Analysis (now called Financial Reporting and Analysis), Ethics, Fixed Income, and Quantitative Methods count for almost 60% of the level 1 exam, and Equity, FRA and Ethics are about 50% of the L2 exam. If you nail the "Big 4 (for L1)" or "Big 3" for L2, you'll be in good shape. You still have to cover everything (see #4), but if you have extra time, put in extra here.
   
6. Don't neglect any section. Although the "Big 4" (See above) count for a lot of the exam, you only get 20 item sets (with 6 questions each). If you miss one of them, that's 5% off your grade right there. As an example, a lot of the L2 candidates who failed last time around noted that they completely missed an item set on Treynor-Black.
   

Good luck - it's a lot of material, but there's a big payoff.

CFA Level 1 Results

I got my results from CFA Institute for the Level one exam, and yes, I passed. CFAI doesn't provide detailed results, only whether a given section you scored <> 70% on Financial Statement Analysis (mostly accounting). I had planned on getting only half of that.

Ah well, winning ugly is still winning. My reward is that I now get to start working on Financial Statement Analysis for Level 2 - only 135 days till the exam.

In case you're interested, someone hacked together a crude calculator that converts CFA Institute's crude scoring report into an approximate percentage score. Based on it, I got 74%. Not great, but it passed, and that's all that matters.

Here's the scoring calculator link.

Scott Adams on Board Governance

A few years back I read a study on board practices. It said that the typical director averaged less than three hours a week on board-related duties. This cartoon by Scott Adams of Dilbert fame pretty much nails it.


Since I'm teaching Corporate Finance this spring, I'm sure this will make it into the class somehow.

The Latest Addition to My Office Door

Matthew Henry Hall's latest:

HT: Inside Higher Ed.

One Kidney (and One Tumor) Gone, and He's Going Strong

Unknown Son went under the knife today. And a long day it was.

We got to the hospital by 9:30, and had him on the table by around 11 or so. They completed the first step of the surgery - made a small incision, cut a piece of the mass off, and examined it (by about 1:00 or so).

The good news is that, while it is cancer of some sort, it does NOT appear to be recurrent neuroblastoma. The surgeon said that it seems at first look to be either a mesoblastic nephroma or a sarcoma (we don't know much about these types of cancers, so we'll get back to you with more information later). However, both these possibilities are far less serious than recurrent neuroblastoma, so we take it as good news. We won't know for sure until the full pathologist report comes back, probably on Thursday or Friday.

The next step was to remove the kidney (a "nephrectomy" in medical terms). It took quite a while -- about 7 hours (rather than the expected 4) because of the scar tissue from his previous surgery and radiation. But that's just fine with us - the surgeon wasn't in a rush to get home, so we'd rather he took as long as necessary.

The Little Guy is resting comfortably in the PIC (Pediatric Intensive Care) unit. He'd better be with all the drugs they pumped into him. In fact, since he's got a breathing tube, they'll keep him well sedated until tomorrow morning at the earliest. So, he's sleeping about as soundly as possible, and probably a lot better than his folks.

He's comfortable, and there won't be anything happening until morning. So, since She Who Must Be Obeyed and I will probably have our share of sleep-deprived nights in the near future, we took the option of going home to sleep in our own bed. We'll come back in the morning for the waking of the lad and the removal of the tube.

Unknown Son has lately gotten interested in Greek Mythology ( was a big fan when I was his age, and I think I gave him the bug), so I'm sure I'll be reading some (actually, a lot of) stories from the books on mythology I got from the library yesterday (we figured he'd be here for a while, so we did plan ahead).

Stay tuned - I'll update when we know more.

Ditch Surfing

You might be a redneck if you've ever gone ditch surfing

I never saw this when I lived down South, but it looks like fun.

HT: Neal Boortz.

Another Cartoon For My Office Door

I hope I'm usually the guy on at the front of the desk.

Some Disturbing News

The Unknown Household just got some disturbing news. As I just wrote, Unknown Son has had some stomach issues lately. We thought it was just severe constipation, but we has an additional scan done today just to be sure.

The ultrasound revealed a mass of approximately 2 inches in length near his right kidney.

Unfortunately, without further tests, we can't tell if this is a recurrence of his original cancer, a new cancer, or just a benign mass. So, we go in for more tests tomorrow - an MRI, a bone marrow sample (he's mildly anemic), and a consult with his local oncologist and a surgeon. After that, we will likely have a biopsy on Friday or Monday. Until then, we won't know much, so it's still early to panic.

We're big believers in the power of prayer. So if you have a minute, send one up for us.

And we'll keep you posted.

Like Father, Like Son

Unknown Son has had a tough month. In Mid December, he had pneumonia. The antibiotics took care of that in short order, but he's continued to have intermittent stomach cramps - usually about an hour after eating.

We finally took him to to pediatrician, and the CAT scan showed that he's seriously constipated. Without going into too many details, let's just say that with fiber supplements and suppositories, we're working on the problem from both ends.

And yes, my friends have almost to a one said that he comes by the condition honestly - after all, just look at his father.

Meanwhile, even though Unknown Daughter only just got her order form Friday afternoon, she's already sold over a hundred boxes of Girl Scout cookies. She hit up everyone in our neighborhood by Saturday afternoon, and is already plotting her attack on all the nearby developments.

Unknown Son even did her a solid by asking the technician giving the CAT scan "if she'd like to support my sister by buying some Girl Scout cookies." He signed her up for five boxes - peanut butter patties, in case you're interested.

Now THAT's teamwork.

Boring Empirical Results

I just got done reviewing a piece that was mind-numbingly, stultifyingly boring. I think I know now who wrote it. Who knew Satchel was an academic?

The Math Princess

I often talk about the Unknown Son. All in all, it's not surprising given his struggles with cancer. But today I'm going to brag about the Unknown Daughter for a bit.

She gets $4 in allowance per week. Since we started giving the kids allowances, they've had piggy banks that are divided in three parts - the Church, the Bank, and the Store. They have to put 10% of their allowance in the Church, and this is put in the plate at Sunday School. The remainder goes half in the Bank (their long-term savings) and half in the Store (the amount they can s0pend). Any additional money they earn or get can be spent as they please.

They already know that 10% of a number is just throwing away the last digit. So, the other day, Unknown Daughter (7 years old and in first grade, BTW) asked how much $3.60 (the amount remaining after she takes 10% out of her $4.000) was when split in two. I asked her how much SHE thought it was. She went into the other room, and came out a few minutes later, saying $1.80. I asked her how she got this number, and this was her answer:

• I couldn't split $3 into two, but I can split $2 into 2 $1's . So this left me $1.60.
  
• I Don't know how to split $1.60, but that's just $1 and $0.60.
  
• So, I split the $1 into 2 $0.50's and the %0.60 into 2 $0.30's
• Then I added up the pieces - $1 + $0.50 + $0.30

I thought that was pretty sophisticated reasoning for a first grader (heck - even for a third grader) - and she did it without paper and pencil, too. So, I asked her how much $12.80 was if you split it into 2 pieces. Then I asked her how much $6.40 was split into 2, - this gave us 4 pieces of $3.20. Then we split it into 8 pieces of $1.60, and so on. Finally, we put the whole thing into a table - 1 $12.40, 2 $6. 40's 4 $3.20's, and so on all the way to and so on down to 256 0.05's. And yes, SHE did all the calculations.

She then noticed that the left hand column (the number of pieces) twice as big each time going down the column and the right hand side (the $$ value of each piece) got twice as big going UP the column. We did a few more examples at HER request (she thought the whole thing was a blast).

Finally, she went into her room and came out a few minutes later with a drawing of a girl with a crown on her head, titled "Unknown Daughter - The Math Princess".

Not bad for a first grader, eh? Of course, I'm totally unbiased.

Update (1/4/08): Unknown daughter came to me today and said "Daddy - I decided I don't want to be called the Math Princess. From now on, I want to be called the MATH RULER." That's my girl.

Happy New Year

Here's wishing all of you a safe, happy, and prosperous New Year.

I've taken a few days off from working (a little blogging and a little studying for CFA but that's all). But tomorrow it's back on the hamster wheel.

Two of my revise and resubmits are coming back to me from my coauthors- both require a bit of work on my part, but not much. I also have two papers I'd like to have ready to go for the FMA submission deadline. One is with a former student and was part of her dissertation. We've been working on it for the last 3 months. The other was a pilot study another student and I did a while back with a small data set - we've now expanded the data set significantly, with a lot more analysis.

So, I'll be busy the next few weeks. It's good to get back in the saddle.