Sunday, November 23, 2008

Some Inspirational Quotes

Like I said in an earlier post, this summer I put up quotes around my desk to remind me to work hard and to have a good attitude for those nights when I never left the office. Here are a few to think about:

"To give anything less than your best is to sacrifice the gift."
-Steve Prefontaine

This is one of my favorite quotes of all time. Pre was an amazing runner and this quote always motivates me to work harder.

"That which we persist in doing becomes easier, not that the nature of the thing changes but our ability to do so increases."
-Ralph Waldo Emerson

Another classic that helps when you are just starting out with something you've never done before. Think of it as getting ready to interview. You may struggle now, but with practice and persistence, you ability will increase.

"The heights by great men reached and kept were not obtained by sudden flight. But they, while their companions slept, were toiling upward in the night."
-Thomas S. Monson

This quote really fit well with investment banking. I liked to think that while I was putting up all the extra hours and effort and " the night" I was actually achieving great things and learning valuable skills. Of course, most of the time when you are working in the middle of the night you're doing things that are annoying and mostly useless, but hey - the quote helped.

There are some other things I had up on my wall, many of which I'll post in the coming week. I had a guide on how to make a perfect pitch book (VERY helpful), some "rules for being a great intern" that I gleaned from the analysts over the summer, and a few other things.

Saturday, November 22, 2008


Dennis left a comment on the last post that is, I think, especially important:

"I've been doing all those things, but I think you still need to keep some hope. If you don't some hope that your hard will will come into fruition, then there is no point of the hard work."

Thanks for that Dennis - you're absolutely right. While the point of my last post was to remind everybody the importance of not feeling a sense of entitlement, or sitting back and waiting for everything to come to you, it is vital to believe that your hard work will pay off.

I think having a belief, even if it's against all the odds, is what really helped me and many others to get where we are now. Coming from a non-target school (and frankly any school these days), it's easy to feel like there's no point to hard work, that there's no chance for an opportunity. Granted, nobody knows the future and where investment banking will be come next summer, but you just have to believe that if you do all the right things, you will have that chance. If you study, read, network, learn, prove yourself, and prepare, that hope grows into confidence.

There comes a time when you don't have to just hope it will happen - you will be confident that it will actually happen. That's how you want to feel when you go into those interviews - so confident that you know they would be crazy not to give you a job. You know that nobody has prepared more than you for this interview. You know that, if given the chance, you would work harder and smarter than anybody else they can find out there.

Thanks Dennis for the great reminder - we have to hope. In times like these, we have to believe there will be chances for us to do what we really want to do. And that hope can grow into a confidence that will help you to stand out when you actually do get your chance to shine.

My Investment Strategy

In meeting with various people this week at the Treasury, I learned some pretty good lessons and thought I would share one with you all. While describing the investors out there saying that we should all buy bank stock right now, based on the fact that they think things will rebound and turn around in the financial sector (and I'm not saying whether I agree or not) one visitor said, "Hope is not an investment strategy."

That is a great thing to think about as you are preparing for interviews and trying to get a job or an internship in the coming months. Hope will not get you there, especially this year.

It's not enough to hope that you'll be ready to answer the "big three" questions in the interview:
  • Tell me about yourself...
  • Why do you want to do investment banking?
  • Why do you want to work for [insert name]?
If you're not ready by the time you call people for an informational interview, it's too late.

It's not enough to hope that you won't be asked to walk somebody through a DCF valuation. You have to know that sucker backwards and forwards, inside and out. You have to take the time to pick a random company and build a DCF yourself so you make sure that you know it.

It's not enough to hope that you'll get interviews on campus when the banks come (if they do). You need to be SURE that you'll get an interview by networking with bankers and having them confirm that they'll go to bat for you. You need to be visiting every bank getting interviews everywhere because you just don't know which banks will even be around by next summer. You need to know by January 15th that you'll have interviews at multiple places.

It's not enough to hope that you'll be able to explain in a real general sense what's going on in the economy. You need to be talking with people in the markets, reading blogs and news articles and the WSJ, and making sure that you can tell people why we got where we are and what we need to do about it.

You see, hope is great and it's actually a really healthy thing to be optimistic and hope for the best in these times. But these are days to take action. These are days to be proactive. To rely on your own hard work to really make things happen.

In the immortal words of William Henley's Invictus:

Out of the night that covers me,
Black as the pit from pole to pole,
I thank whatever gods may be
for my unconquerable soul.

In the fell clutch of circumstance,
I have not winced nor cried aloud.
Under the bludgeonings of chance,
My head is bloodied, but unbowed.

Beyond this place of wrath and tears
Looms but horror of the shade,
And yet the menace of the years
finds and shall find me unafraid.

It matters not how strait the gate,
How charged with punishment the scroll.
I am the master of my fate;
I am the captain of my soul.

One of the things that I did over the summer was to put up inspirational quotes around my desk that motivated me to work hard, continue learning, and do the best I could. I'll post in the next day or two some of those quotes that you all can read and get fired up and ready to get those internships and jobs.

Thursday, November 13, 2008

Blog freaking out?

Is anyone else seeing that all of my posts are suddenly double-posted? Please comment...

Wednesday, November 5, 2008

Professional Modeling

Some thoughts on learning to build models. Keep in mind that I still have a ton to learn on my own, but these are some ideas that have helped me to get where I am today.

I. Financial Knowledge

If you are going to build a financial model, it just makes sense that you need to have some basic knowledge of finance in order for it to be a functioning model. The goal of a good model is to be fully integrated and dynamic, meaning that changes flow through the entire model and everything still balances. Models also need to be flexible enough to test different scenarios and to make changes according to management projections and the projections of your associates who sometimes like to "massage" the numbers.

If you just want to build a basic DCF model, then read the Vault Guide and you will be ready to go. If you're going to be interviewing, you should be able to "walk somebody through a DCF" anyway, since you WILL get this question in most interviews you will have.

For more complex models, you might need to study up on accretion/dilution, purchase accounting, and other more in-depth accounting and finance issues in order to conceptually understand what is going on in your model. There are a ton of good valuation books out there, so grab one and learn something!

II. Start with somebody else's model

Before you just start from a blank screen, get a hold of another model (preferably a simple model so it's easier to follow) and begin by working your way through. Go line-by-line and make sure you understand not only how the model works, but why the functions are set up the way they are, and what happens when you change inputs.

You need to understand the "flow" of a model before you can build one. As you go through a model, try to see how the different financial statements link and fit together. Notice how changes on one statement flow through the model and affect your outputs.

Once you've gone through the entire model and feel like you understand what is going on, it's time for the hard(er) work to begin.

III. Re-build the model

At this point it's good to either pull the 10-K and 10-Qs from the company of the model you've already worked through, or you can just copy the numbers out of the original model. I think it's better to pull the SEC docs because that's how it is when you make your own model.

Work through building a model that's just like the one you already looked at. You are basically just rebuilding the exact model that you are familiar with so that you can say you've done it yourself. Hopefully as you go through this you will start to learn better how to use Excel and how to save time using shortcuts.

As a side note, most firms have some kind of coloring system in their models. I like to make inputs (numbers that I get from 10-Ks and -Qs) blue and calculated numbers black. I've also seen people putting numbers pulled from other tabs/sheets in green and negative numbers in red, but whatever is easiest for you.

Once you've completed the model, making sure that everything works just as well as the original, then do it a few more times! Each time try to rely less and less on the original and more and more on your own intuition and understanding.

IV. Build your own model

Now that you feel comfortable re-building a model, pick a company that you would like to model out. Go to and find their 10-K and most recent 10-Q. Build a model with their numbers, reflecting all of the nuances of a different company. You can still refer to the original model if you get stuck, but hopefully by now you are figuring out how to build a basic operational model with all three statements (and a debt schedule and depreciation schedule if you're getting a lot better).

Building models for various companies is good practice and really causes you to learn the more nuanced parts of a model.

The final test will be to see if you can open Excel, pull some SEC docs, and build a dynamic operational model. Once you have mastered the operational model, you can move on to more complex models like LBO models or merger models. They all require the basic understanding of how financial statements fit together and how changes in one place flow through the rest of the model.

There are lots of training programs out there that can teach you modeling skills. I personally think the best learning comes when you just figure things out on your own, especially since you will get formal training when you start at a bank. But I can also see great benefits in learning things the correct way the first time, instead of teaching yourself incorrectly.

Like I said at the beginning, this is just a BASIC overview of a process, and there are a lot more things I could have mentioned about modeling. I'll probably continue to post about modeling as I get farther along in the model I'm building, just because that's what's on my mind these days.

As a personal goal, I want to be able to build solid LBO and merger models before I start. I figure that if I build a model a week, I'll get there by next summer. Who wouldn't want an analyst to come in already feeling comfortable building models. From the various types of models I saw over the summer, it's obvious that no matter what preparation I do there will still be tons to learn, but I figure the more I can come up the learning curve on my own, the faster I'll be able to take in the more advanced stuff on a real deal.

Good luck, and good modeling!

And congrats to President Obama.

Tuesday, November 4, 2008

Learning to build models

Hey all,

I'm working on a post about modeling, and wanted to share some thoughts about learning how to build a model. I'm building one right now based on another model, as you can see below. Stay tuned for some info on learning how to build models and learn excel.


Hey all -

Don't forget to vote today! I woke up early and stood in line for two hours, but still voted and made it to work on time. My personal thoughts on who to vote for are largely based on the economy and a desire to be able to be the one to decide where my money goes instead of letting the government do it for me. But however you decide to vote, just get out and do it!

Good luck -

The Analyst

Saturday, November 1, 2008

Short-lived idea

So the ring-management tool already exists. But not yet on my blackberry, and apparently not on the phone of that CEO...

Invention Idea

As I was sitting in a meeting the other day with the CEO of a major investment bank, and the head management teams of two other major financial services firms (thankfully none of them asked what I was doing in the room!), I was surprised that three times cell phones went off in the middle of the meeting. I guess it doesn't just happen in high school and college classes.

Then an idea came to me. Why not make your Outlook calendar or Google Calendar have the capability of synching with your black berry to adjust the ring setting on your phone based on what you have on the calendar? It seems like most of the time, people just forget to put their phone on "Silent" before they go to class/a meeting. If your phone did it for you, you wouldn't have to worry at all.

As you put in new events into your week, there could just be one more option asking you to choose the ring setting on your phone for that time. You could have an option on your phone to turn on or off "Calendar Ring Mode" in which the ring settings automatically follow the calendar. No more embarassing ringing in class/meetings/church/movies.

We already have phones that will ring differently depending on who is calling, so it can't be that hard to just set a ring schedule based on your Outlook calendar. Maybe this already exists, but I haven't seen it anywhere. Can someone make an iPhone app that does this and let me know about it?