Starting new rotation

Monday marked the first day of my new rotation. My last rotation was in Financial and Planning Analysis. This one is Reinsurance Security. This should be a totally new experience for me, and a far cry for the other FP&A roles I have tried.

Reinsurance Security is essentially counter-party risk analysis, analyzing the credit worthiness of various companies we do reinsurance business with. Today, I am already working on analyzing a small company that we will be providing approval/disapproval notices on.

As I get in this, I find it so interesting that government allows some of these corporations to exist. So many of these companies are pure shell companies, pretending to hold on to liabilities of another company, but being wholly owned by them.

Much of this is reminiscent of the sub-prime mess, and in a very real sense, many of the mortgage reinsurers went down for precisely this reason.

As with many things in my life, things seem to always fall on my plate when they are really hot. And this field right now is on fire, with the demand for good credit analysis at ridiculous levels.

This will certainly propel my career along, and at the same time, there's some trepidation that I may not learn all I can in this one-year rotation.

Pay Inequity - Doesn't exist!

Last night, I posted about the "high" pay of financial analysts, and someone posted a comment about how "the priorities of our country" seems a bit askew.

That post bothered me because it implied somehow that the pay for i-bankers was in line with what they did, because the starting pay for teachers is a lot less.

I hate these comparisons because it ignores basic economic principles of supply and demand.

The classic economic question that is relevant here is:
What's worth more? A bucket of gold or a bucket of water?

Most would jump and say gold, follow by a incredulous look and a snide comment about how dumb the questioner is.

But let's consider the context. You've been wandering the desert for 3 days, and you're thirsty. Do you want a bucket of gold or a bucket of water now?

The fact is, as you get more of something, each additional item, referred to as the marginal value, diminishes. Water in general is worth very little, since there is so much of it, while gold is scarce, and therefore valuable. But the cost of water does not suggest that water is not a necessity to life.

The same applies to teachers and i-bankers. Given no teachers and no i-bankers, no one would question the need for teachers before i-bankers. Teachers provide an important service. But, as the number of teachers increase, each additional teacher begins to lose value compared to the value of one more i-banker.

Additionally, the difference between a teacher and i-banker is significant in terms of training, hours worked, and job security.

Training-wise, teachers are given large amounts of scholarships and other educational incentives, while i-bankers spend much of their own capital and borrow to learn their trade.

While teachers definitely work hard, typically teachers would work no more 10 hours a day, and rarely on weekends or during the summer time. I-bankers on the other hand work at least 12 hours a day, and routinely work on weekends and during the summer time.

Finally, an average teacher can hold onto their position for life. For an i-banker, average performance allows for about 2-3 years of work, before they are forced out.

Please understand, I am not saying teachers should be living in poverty. Rather, I am suggesting that the market is efficient, and that teachers are being paid what the market will bear. And while it is easy heart-wrenching to report the low $20K salaries of first-year teachers, my MBA professors are being paid at least $150-$200K for teaching 4 classes a year, while having summer-time off to do other things.

Future Plans

Yesterday, I was blogging about my career thoughts, and today I continue that topic. Many have been commenting about my lack of job experience and how a) I even got into a MBA school and b) why I went.

For me, the MBA seemed like an obvious choice. I wanted the liberal arts experience while studying economics and computer science, and then obtain a professional degree, ensuring I learned everything I could while I was still capable.

In the past two decades, most college graduates entered the work force for at least two years prior to going back, realizing they needed an advanced degree to both advance on the career path or to choose a totally different one. But before that, college straight to MBA was the norm. Waiting seemed odd, so maybe I'm just old fashioned!

Anyway, I've known since I found out it existed that I've wanted to be in asset management. But in order to get there, I need a lot of finance experience, and especially a stint in i-banking. My lack of experience prevented me from obtaining any associate-level job in an i-bank, so I went with corporate finance instead.

I figure, two years there, I can switch to a comparable senior associate-level work at an i-bank. In between, I have been talking with everyone about my interests and my market thoughts (including posting here). My parents recently presented me with an interesting
proposition:

$20K to invest in anyway I see fit, of which $10K is their money and $10K is technically a loan to me. We would split any profits/losses.

I think this could be a great opportunity to start my own track record, while feeling responsible about a "client's" money. At the same time, its always tough to accept money from the parents, in whatever form it comes.

Hot environment for finance jobs

Man, if I hadn't gotten my job so early this year, I would have so many to choose from right now. So many financial companies held back thinking summer would be a lull in business, but instead the market really picked up and now they are hiring anyone with anything related to financial experience.

It's just amazing. 2 months on the job, and I've already been approached by a hedge fund to go over there. A quick search of job sites reveals a whole host of associate-level finance jobs available.

It gets very tempting...although I know if I leave before I do at least one year, it will look bad on the resume.

Jobs, Paying Dues, and Living the Life

If you don't know, I'm about to become a corporate financial analyst for a major bank. One of the most poignant job descriptions I have read can be found at the Princeton Review.

And its very true.

There is going to be a lot of work and sleepless nights. It will be all about purpose and good "soft" skills. Talking, juggling work, and knowing when to drink more coffee will come in handy.

Sure, it's compensated by a nice salary, but boy, to play in this world, you also have to pay a lot.

Most people find themselves in a small group, really "clic"-ing with their co-workers. When you spend so much time together, its inevitable. But when you go out together, the tab can get big!

I just had one such night, and I didn't get a large hit on my wallet, but it certainly could have been. But you need these nights to take a break, and relax with your group of friends.

Sometimes, you just have to spend money to realize that working isn't an end, its a means to get to a fun and happy life.