N

Issue 1 - Sept. 29, 2011 Message From the Executive Board A brief word from the Finance Society, and a look at some upcoming events and some changes in the society. Page 1 Find Your Own Street The Reality Behind SAT Scores SAT scores around the country are falling drastically, according to a recent study. Page 2-3 So You Think Youre Good At Trading? A look into the value of market knowledge while investing. Page 3 Turkey: A Source of Middle Eastern Cooperation In the midst of constant ux and confusion, one country has emerged as a possible solution to the tension in the Middle East. Page 3 Tech No Logical? With the US currently facing a nationwide unemployment rate of 9.1%, the tech segment is enjoying almost full employment. Page 4 Give Me a Break. What do you think about Warren Buffets recent statement on our nations income tax? Page 4

Page 2

Message From the Executive Board

September was a busy rst month at the Finance Society. We saw great turnouts at our weekly events that featured our leaders presenting on topics such as Introduction to Finance and Networking 101. In addition, we supplemented these presentations with two special events, the Wall Street Tour and the Bloomberg Site Visit. We hope that you have gained a solid foundation and understanding through these events and are prepared to expand your network at our upcoming events. We have also attempted to build a stronger community with the help of the mentorship program. We are proud to have over 10 superstar seniors and 30 members participate in the program and we would like to give a sincere thank you to our mentors for their participation and dedication. To complement our events, we will also highlight notable stories every two weeks in our newsletter and provide you with opportunities to expand your network. The executive board and committee members, who are the key contributors to this newsletter, also post weekly on our blog, which you can nd on our website. Be sure to Like us on Facebook to keep up with all of our latest updates. Going forward, we will continue to provide you with high quality events that give great exposures to the different facets of nance. We will begin our journey inside the Investment Banking Division with three great events from Morgan Stanley, Barclays Capital and Credit Suisse that will provide you with an overview of Investment Banking, M&A and the IPO process. We will subsequently begin exploring other business areas such as Sales & Trading, Capital Markets and Asset Management in the upcoming weeks with great presentations from Goldman Sachs, Royal Bank of Canada and JP Morgan. We hope to see as many of you as possible at these events, as it is a great way to meet seasoned professionals. Thank you for your interest in the Finance Society. We hope you will enjoy reading the newsletter!

nance.society@stern.nyu.edu

DILLANOMICS

Find Your Own Street

by Abhi Kanakadandila, Columnist & Oracle A line of ofcers, no more than ten, engages in a staring contest with a determined assembly of stoic, sundrenched faces. A young man tries not to cringe as a droplet of sweat enters his eye. A husband wipes the brow of his wife as she holds a sign devoted to her cause above her head, refusing to move until recognized. To most outside the Tri-State area, the event described may appear to be a prime example of squatting. Squatting is a protest technique popularized by impoverished citizens of rural, agrarian communities who refuse to who budge from untilled private property so that the government may choose to redistribute the land to the farmers. Unfortunately, theyd be mistaken. We on East Coast have the pleasure of witnessing a rich world emergence of similar fashion by the name of Occupy Wall Street (Stylized on Twitter as #OccupyWallStreet), which has recently received considerable mention from the media and prominent gures in pop culture. In the aftermath of the 2008 nancial crisis, all Americans should agree that corporate greed over the past decade has gone grossly unchecked, and that measures should be taken to correct for this. Thus is the objective of #OccupyWallStreetto be a peaceful catalyst for reform; a revolution asking its members to peacefully set up camp in the nancial district. The movement is championed by rapper Lupe Fiasco, as well as Professors Cornell West and Noam Chomsky. Now I must admit, Cornell West is smarter than me. Anyone reading this, Cornell West is smarter than you too, and Noam Chomsky is the father of modern linguistics (which you will never be). Nonetheless, it is critical to understand the negative repercussions of the trending project. The problem with #OccupyWallStreet is that it resonates with misunderstanding of the industry it aims to x and thereby undermines the overall goal of tempering Wall Street

inuence. For starters, it perpetuates the misconception every Goldman MD is a failed modern day Gordon Gecko a la Madoff or Adoboli, still trying to nd a way to cheat grandpa out of his pensionthis is simply untrue. By tailoring their language to denounce the all of Wall Street, rather than just the top tier executives, they imply that the hardworking, honest majority of employees are also to be dismissed as crooks. Certainly this is not the view of West or Chomsky, but it is the view that emanates nonetheless. In doing so, a movement fueled by college educated men and women seems immature and forfeits its legitimacy. #OccupyWallStreet protestors have compared themselves to participants in the Arab Spring, in that they represent the educated youth coming together to preserve national equity. However, the key difference is how they chose to dene the movement. Youth in Lybia, Egypt, and Syria made it quite clear that their enemy was dictator of each respective nation and this message was embraced on a global scale. Even in the case of squatting, the protestors direct their actions to the landowner alone. The Arab Spring was a success, squatting has proved effective, but #OccupyWallStreet is counterproductive to common national interest. The local government has not reacted well thus far, as multiple videos of police brutality using pepper spray have become viral. This is rarely a solid PR move for a police force. That being said, #OccupyWallStreet must be subject to popular scrutiny not only by those who intend to pursue a career in nance, but also everyone who calls for a long-term solution to corporate excess.

The Reality Behind SAT Scores

by Zeena Advani, Executive Committee We are all too familiar with the SAT-months of studying, then four short hours to prove to colleges we are worthy of admission. While it is the dreaded exam of junior year, it is perhaps one of the strongest indicators of our most basic quantitative and qualitative skills. That is why a recent article by the Wall Street Journal is highly disturbing; scores are falling, and drastically. Only 43% of students were able to score a 1550 out of 2400, indicating that they were at college level. The implications of this on our K-12 education and the challenge to improve it require a closer look into the SAT score. The writing portion of the SAT has been consistently viewed as the lowest scoring section. Since its inception in March 2006, scores have declined every year, dropping from 497 in 2006 to 489 this year. Experts have attributed the change to a transforming population of test-takers. Students striving to go to college are now much more diversied. A greater percentage of students speak English as a second or third language, making it harder for these students to reach the targeted, college-level writing score. This is consistent with SAT math score results. They have remained fairly stable over the same time period as language has not served as a hindrance to student performance. SAT scores also dipped as the testing population was increasingly comprised of students from lower-income households. 20% or about 400,000 students were able to waive their testing fees for the exam this year based on household income. It is encouraging to note a larger number of lower-income students are planning to attend college. However, the discrepancy in SAT scores emphasizes the severity of the problems in our U.S. K-12 public education system. Students from wealthier families are distinctly at an advantage for educational resources, and 2

nance.society@stern.nyu.edu

are ten times more likely to graduate from college at age 24. Given these facts, it seems a continuously diversifying population will continue to shape U.S. student performance measures. More importantly, it raises the question of how our current and future presidents will resolve the challenges we face. President Bush has made his suggestion through the No Child Left Behind Act, and President Obama has signed the Education Reconciliation Act of 2010. The educational policies the U.S. administration will follow in this decade will strongly depend on our new president elected in 2012. Whether a GOP candidate or Democrat, the issue will become increasingly important as new superpowers emerge and rival us in intelligence, innovation, and productivity.

The next week I decided that I was going to start playing to the projections. I began dropping, trading, and picking up players in an attempt to maximize the expected points for my next weeks matchup. By the time I was done, NFL told me that I was going to win by 70 points and I couldnt help but smile to myself. Whether it was luck or not, I had a winning team, and potentially one of the best in the league. That week I lost by ten points. The point Im trying to make is that any knowledge of markets or industries will help you with investing about as much as my roommates knowledge of football helped him beat me, or my projections helped me in week 2. Consider Michael Vick, two seasons ago. Fresh out of jail, and picked up by the Eagles, he was projected to go nowhere. One could compare him to Fannie Maes stock which at one time, fresh out of the recession, was priced at near $0. Today, Vick is considered one of the top 10 quarterbacks in the league. Whats even more ironic is that he was the third pick in our leagues draft, but his performance this season so far would never suggest such. So what is it that makes a good trader? What makes your portfolio better than the monkey throwing darts at a random board? Ill still have to do more research into that, but for now you can count on the fact that your knowledge of football will get you nowhere.

major concern in the Middle East. What allows Turkey and especially its popular prime minister to be successful is the fact that they are able to straddle two worlds at once. Whilst Turkey is still an Islamic country, it has not allowed itself to become a zealous religious nation. Rather, it has maintained a democracy and introduced more secular laws than most of its neighbors. On the other hand, because it is still placed rmly in the Muslim world, Turkey is better

So You Think Youre Good At Trading?

by: Vikram Nayar, Executive Board aka Mark tha IV Youre not. How do I know youre not? Two words: Fantasy Football. This year for the rst time in my life I joined a fantasy football league in an attempt to learn more about the sport that seems to turn even the most hipster NYU students into statisticians every fall. I entered a $15 league with a few fellow Sternies, not knowing a thing about the latest news or trends in football, and expecting to perform at a level equivalent to my knowledge of the game. My friends, on the other hand, were fantasy veterans and experts on every aspect of the game. My rst week I was matched up to play one of my roommates, a kid whos childhood was as centered around football as mine was math. NFLs projections had me losing by 10 points, and the only player on my team whos name I even recognized was Tom Brady. Sunday came around and I could honestly say my expectations of winning were quite low. The games start. Brady gets a touchdown. Jamaal Charles, my second round pick, tears his ACL. Out for the rest of the season. Brady scores another touchdown. My opponents tight end, Tony Gonzalez, makes an unbelievable catch in the end zone. Brady throws one more touchdown and single handedly gets my team 35 points. The weeks games end and my team nishes with 20 points more than my opponents. This week, my team won. My portfolio was better. Beginners luck? Either way its not bad for a kid that knows nothing about a single one of his players.

Turkey: A Source Of Middle Eastern Cooperation

by: Meha Patel, Executive Board The Middle East and its collective relationship with the West have always been topic of both concern and confusion. Various countries in the region have aligned themselves with both each other and Western countries such as the United States, only to break off the alliance some time later. In the midst of this constant ux, one country has emerged as a possible solution: Turkey. Whereas both the United States and Europe have most often failed to successively intervene in the Arab world, Turkey has been able to both position itself on the side of change in the Middle East and maintain relationships with various neighboring countries. As quoted by Soli Ozel, a professor of international relations in Istanbul, Turkey is the only country that has a sense of where things are going, and it has the wind blowing on its sails. Most recently, Prime Minister Recep Tayyip Erdogan toured Tunisia, Egypt and Libya, bringing attention to both Turkey and its foreign initiatives. More interestingly, all three of those Arab countries have experienced revolutions, which are a source of

able to build relationships with its often unstable neighbors in a way that the United States has thus far been unable to. For example, Foreign Minister Ahmet Davutoglu recently spoke of a relationship between Egypt and Turkey. According to him, such a connection would be the dawn of a new establishment in the region. Both the trip and this new partnership with Egypt signal a new phase in Turkeys relationship with the Arab world, which has been rocky to say the least. In the 1990s, Turkey had even been an ally of Israel, which is one of the most contentious states in the region. However, following that, Turkey made signicant efforts to develop ties with both Libya and Syria. The main objective behind Turkeys new interest in cultivating ties with the Arab world is economic integration. Country ofcials believe that Turkeys near tripling of exports since 2002 and economic strength make it the perfect candidate to facilitate such integration. The Foreign Minister went so far as to suggest a possible union in the Middle East similar to the European Union which would not only require economic cohesion but also political organization. He stressed the importance of a collective, regional identity rather than multiple national visions. However, the plan is ambitious to say the least. Despite its growing ties with the Arab world, Turkey has still encountered various problems in the region such as gas rights in the sea, strained ties with Israel, a bitter Iran, and collapsed talks with Syria. Nevertheless, Turkey remains condent in its ability and power, perhaps too condent, and it remains to be seen if it can pull together the Arab world.

nance.society@stern.nyu.edu

Tech No Logical?
by Nona Makeeva, Executive Committee Considering the current technology boom, Im beginning to wonder whether or not it was a mistake to quit my job at a tech-startup in favor of nance. With the US currently facing a nationwide unemployment rate of 9.1%, the tech segment is enjoying almost full employment with its measly unemployment rate of 3%. Firms, particularly tech start-ups, are fending over software and computer engineers, who in the past couple of years have become a hot commodity in a market with over 20% projected growth over the next 10 years. These companies are throwing them lavish parties; offering free food, $50,000 signing bonuses, and huge onsite benets. Sounds tempting, no? Due to the erce competition for employees, engineers and tech developers are receiving multiple job offers, seemingly impervious to the current recession. Companies are awaiting major organizational change, as can be seen in Oracle and Ciscos alleged upcoming layoffs all to nab their well-qualied employees for themselves. Some companies, such as I Love Rewards, have even resorted to providing rewards as nice as luxury trips for employees that refer new hires. Furthermore, rms are forced to offer richer stock options to prospective employees in order to offset their increasing labor costs. Therefore, while the tech boom immensely benets the labor side, companies must now hire and retain their employees at a much greater cost. Yet, these workers still seem to be at the mercy of the labor market. Given the current exponential growth of the tech segment, new technology surfaces almost on a daily basis, making a vast majority of workers fairly obsolete in a couple of years. And instead of retraining and retaining these workers, companies are simply laying off mass amounts of employees to exchange them for a fresher and more updated labor force. Plus, with all the speculation surrounding the present tech bubble, how long will these desperate-to-hire businesses truly last? I guess well have to wait and see how the next couple of years play out. Until then though, I think Ill stick to nance.

Your Opinion: Give Me A Break

by Taraz Bull Gator Darabi, Executive Board In a recent statement in the New York Times, Warren Buffet expressed his views on our nations income tax structure: While the poor and middle class ght for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as carried interest, thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if theyd been long-term investors. These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. Its nice to have friends in high places. Last year my federal tax bill the income tax I paid, as well as payroll taxes paid by me and on my behalf was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income and thats actually a lower percentage than was paid by any of the other 20 people in our ofce. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent. If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine most likely by a lot. To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. Its a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot. What do you guys think? Is the current structure of our nations income tax fair? Aside from being fair, is it economically reasonable? Let us know what you think by submitting feedback to nance.society@stern.nyu.edu. Your comments might be posted in our next newsletter!

Upcoming Events
9/30/11 - Tour of Wall Street (Special Event) 10/06/11 - Morgan Stanley Presents: What is IBD? 10/07/11 - Bloomberg Site Visit (Special Event) 10/12/11 - Barclays Capital: M&A Overview 10/20/11: Credit Suisse: The IPO Process

Any Suggestions or Comments? Email: nance.society@stern.nyu.edu We love feedback! Thanks for reading.

http://www.facebook.com/nyusternnancesociety

http://people.stern.nyu.edu/nclub/ 4