World blogger championship of online poker

I have registered to play in the PokerStars World Blogger Championship of Online Poker!

This PokerStars tournament is a No Limit Texas Hold’em event exclusive to Bloggers.

Registration code: 608823

Sign ahead: Crossroad

Oh yes I am alive !!!!

In a slight dilemma right now regarding the road ahead. So I'll spend this post outlining my current thought process (muddled obviously) and hoping that readers (if any are left) will come up with some constructive comments.

Right now I am stuck between deciding whether to pursue an MBA or pursue poker as my longtime career goal (MBA blogs maintain MBA parlance !!).

Each have their own pros and cons, but they aren't mutually compatible. Doing an MBA and getting into a long-work-hour job would essentially mean that between work and family (did i mention im tying the knot in Jan 09) time for poker would be extremely restricted if not completely non-existent. At the same time an MBA is a much much safer option than a high risk venture like poker.

When it comes to taking up poker full-time, heres the kind of timeline based framework I have in mind. My girlfriend finishes her PhD sometimes in 2011-2012, my green-card application wont come through till maybe 2013ish. Thus the earliest I can quit work and start playing pro would be in the 2013-2014 range (remember without a green-card I cant quit work as I'd be booted out of the US in seconds). Also to rake in any kind of decent dough from poker, I would need a poker-bankroll in the 50-60k range, maybe even higher, possibly 75ksih is a good number. My current poker accounts have about 15kish in them, so I have about a 5 year time-frame to get to 50kish. Certainly doable if I dont keep taking my wiinings out and go on binge spending.

Also of great importance is the fact that if I do go fulltime in poker, it gives me the independence of settling down in any city I want, basically in the same place where my girlfriend/wife goes to work. Not to mention the enormous freedom/independence it brings in terms of flexi work-hours.

Just to put things into perspective in terms of numbers, heres this year's numbers:

• 9-5 job : 115kish
• poker: YTD tournament profits: 50k
• poker: cash game profits: havent worked it out yet, should be in 10-15kish range.
• poker: some other significant profits in the 30ksih range
  

I havent done the math regarding how an MBA degree will stack up in terms of ROI versus full-time poker, but might be close, especially if I factor in the feel-good feeling of doing something I love and the flexi-hours and the opportunity of settling down wherever I want. I know of atleast one person (Rizen, see blog on left) who left an accountant job to get into poker fulltime.

Sigh, I hate decisions. Comments welcome

Catching up

Its been a while since I've posted, but unfortunately for the readers of this blog I plan to put them through some more misery before I'm done.

First of: 'Grats to MBA-veggie and Middle of Nowhere for securing the first known admits of the 09 mba blogosphere, and almost surely this is just a start.

As for me life has been kind of meh over the past couple of weeks. Nothing even remotely exciting is happening except that the Indian cricket team is whipping some creamy Australian ass back home. Oh and I finally finished "Frasier" on Netflix. Frasier has almost always been my favourite sitcom, followed closely by Seinfeld, and frankly the deadpan, snobby/snootish, understated and most importantly the refined play-on-word-humor (compared to the blatant physical humor of friends) of Frasier has always had me cracking.

When it comes to the dreaded GMAT preps, much to my non-astonishment I havent made an iota of progress, ah but theres always tomorrow.
Random links/news away from this blog:
Some new priceless sites where I can be found wasting my time:
Engrish
Go-fug-yourself

For you Dark Knight junkies, theres a Bob out there (no seriously the guy's name actually is Bob) making the bat-tumbler and batmobile from scratch. Place your orders with Bob here. View of Bob's home-made bat-tumbler:


Finally some balla-timepieces that successful poker players love to flaunt at the table (snaps taken by Nat Arem at the World Poker Tour 08 Final table):

















Finally heres something that I decided to get for myself as a part of the me-too crowd (this is my first shopping spree of any kind in well over 8 months, so indulge me for a second)

Its a Breitling Super Avenger, waiting for its arrival with bated breath !!!

A quick buck=running good in life

Those of you who follow this blog might remember this post where I said:

In this week's OMG news: I won a seat via an online mega-satellite (1k buy-in) to the Europeon Poker Tour-London No-Limit-Holdem Championship event, starting October 5th at the Victoria Casino, London. By winning the satellite, I get my buy-in (10k) for the tourney waived, free hotel, free food, free air-fare. I only need to get the visa and everything else is pretty much taken care of, EXCEPT of course freaking work. With a bunch of projects being worked on, my manager is going to flip out if I ask for vacation, lets see how things work out. If I cant make it to London, then I can probably keep the value of the seat I won.

Well as it turned out I could not make it to LOndon due to work commitments, but being the degenerate gambler, I wanted a part of the action anyway. So after several back and forth PMs and emails and AOLs, I bought 10% of Eric Liu's action. In the poker world, in big-buyin (entry fee) live tournaments (such as the 10k EPT london), often players will try and get an insurance by selling a part of their action, that is a backer takes a 10% stake in the player's buy-in and whatever profits (if any) the player makes, the backer takes 10% of that.

Anyhoo to cut a long story short, I had a 10kseat already that I couldnt play in, so I redeemed the seat value for money and bought 10% of Eric's action(incidentally I bought 10% stake in 3 other players for a net 4k investment). And while 3 of my 4 horses came out duds, Eric hit the motherload as he finished 4th --> results here , for a $470k payday for him and a $47k payday for me. I am running really really good in life at the moment, but my taxes are going to get super-complicated next year.

Good luck to all those waiting for your MBA admission results, godspeed.....

PS: I found this interesting blog post by Steve Jacobs (known in the online poker world as stevesbets), he is a Upenn undergrad who dropped out of penn's grad school to play poker professionally (over 1/2 a mill in winnings in 2 years he played pro poker) and last year had applied to several top b-schools (got into fordham, nyc), but was rejected by wharton. He went absolutely ballistic because of the wharton rejection and his follow-up with Wharton and the whole experience associated with that is a very very good read.

Quantum of Solace

On Black Monday markets worldwide collapsed by 20%, today we are down just about 9%. Not everything is bad in today's world see !!

In this week's OMG news: I finally managed to ride my first stock to $0.00. I had aggressively bought Wachovia bank-WB when it was part of the financial rally early last month, managing to make a killing as it moved from the 9s (bought a big chunk at 10.x) to the 20s. Even booked a big chunk of those profit, but still held onto a fair number of shares. And today it is at $1.84. Life is good. Oh and yes the market is a bitch.

Cuurently: On life tilt. And contemplating moving my whole equity-portfolio to my poker accounts. To put it in perspective, ROI in poker 35% (essentially it means that on an average everytime I play an online poker game I make $45, extrapolate that to well over several thousand games), ROI in stock (YTD): -13.5%. Did I say life tilt??

United Sovereign Socialist States of America and $700 B

“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency”

Yes this is one of the lines in the current 700 billion USD bailout-bill that the Treasury Sec of the United Sovereign Socialist States of America, formerly known as USA, Henry Paulson (formerly of Goldman Sachs) has sent to the Congress for immediate approval. Please re-read the sentence and try for a second to grasp its ramifications.

What this means is that once the bill is passed putting 700B of the taxpayer's money at super-risk,neither the secretary, nor the financials institutes who would be bailed out, are in anyway accountable to the people for either their past actions (no judicial hearings, no congressional hearings on their shady dealings) or for their future actions (meaning we will have no idea where/how/whether the 700 B will be used).

Now for those who are still unclear of what some of these so-called "shady" dealings that the big financial instituions have been practising for so long (out of pure greed) heres a primer (for all you mba applicants/students/alumni/b-school adcoms/faculty, remember while reading , that business ethics is something that the mba machinery has preached like for-ever, to me at this point it looks like eye candy at best, at the end of the day what matters to the mba machinery is $$$$ and nothing else):

• Sub-prime : This is something we all know, but the real problem arose when Lehman and its clique developed financial instruments via which they started trading these mortages as equities.
• Credit Swap: AIG owns a piece of a $500 million sub prime paper (packaged and sold by Lehman), but it aint sure whether the mortagee can pay him back. They go to a $100 million Hedge fund and ask him to cover/insure this mortgage they are holding. Now the insurer (the hedge fund here) has to provide some collateral, usually of the same value as the object being insured (500 mill). But the hedge funds get greedy, AIG hopes no one will notice, and a 100 mill hedge funds acts as an insurer for a 500 mill package. This is credit-swap. Currently the credit-swap market is worth 45.5 trillion dollars (twice the enitre worth of the whole US stock market).
  
• Leveraging : A typical Hedge fund takes 2% of Asset under management (AUM) as management fees and 20% of all profit as benefits packet. For a 100 mill break-even hedge fund that means that 2mill is what the fund-runners get. But hey, thats monopoly money on Wall street. Sheeeeshh. Hold on, suppose we leverage 10:1, so now instead of 100 mill AUM, our books will show we have 1000 mill AUM. What about our management fees, oh yea they went up 10 fold too. Lehman. Goldman, Merryl and the whole brotherhood was leveraged upto 30:1.
  
• Coming soon to a Wall street near you: ARMs (adjustable rate mortages), credit defaults, retail non-housing loan defaults etc etc.
  

But unfortuntaley the near Armageddon that these financial executives have brought in has not yet ended. With the govt sponsored free money (a mere 700 billion) that will soon be in Wall street heres how the bankers are reacting to it (via NYT)

• Wall Street is lining up at the trough for a piece of the action, lobbying to run some of the $700 billion fund — and take huge fees — for their own mess.
• And then there is the jockeying among the banks so they can sell their absolute worst stuff to the government — even loans that have nothing to do with mortgages — and change the rules in the process. The Financial Services Roundtable, which represents big financial services companies, wrote an e-mail message to members on Sunday suggesting, laughably, that “the government bid for the assets should not count as a mark-to-market value for accounting purposes.”

Next time some Bschool reps start preaching about their new course on the ethical business, be prepared for some chosen profanities coming your way. Oh and in the meantime, for those of you still writing your essays, please dont forget to leverage your lies 30:1 or more. I know I'll be doing it. After all its an excellent prep for the business world, especially the finances.

When pictures say a thousand words

For many of us wannabe MBAs, especially those interested in finance, the week of Sept 12-Sept 19th was a once-in-a-lifetime joy(?)ride. Call it a black swan, call it the beginning of the end for I-banks, call it a mere blip for the think-long-term advocates, call it whatever you want, but sure as hell this was one unforgettable week (actually this is turning out to be one unforgettable year !!).

If you fell asleep on the 12th. and are just waking up, heres a view of last week's mayhem (via tradermark):



Interestingly inspite of the absolute carnage in the market (driven almost in whole by the financial crisis), on Friday Sept 12th (week before the carnage) the S&P 500 closed at 1251.7 and on Friday Sept 19th it closed at 1251.3. So if you were truly asleep ala Rip-Van-Winkle, you would have woken up a week later, fired up google finance, and said to yourself "Blaaah, what a boring market, the indices havent moved an inch". Is anybody reminded of the Japanese markets of the mid 90s ?

As I get ready for my MBA apps, I wonder how this market will effect the ROI of a 150k+ MBA education. Will it be something like this for us fin wannabes:



In this week's OMG news: I won a seat via an online mega-satellite (1k buy-in) to the Europeon Poker Tour-London No-Limit-Holdem Championship event, starting October 5th at the Victoria Casino, London. By winning the satellite, I get my buy-in (10k pounds) for the tourney waived, free hotel, free food, free air-fare. I only need to get the visa and everything else is pretty much taken care of, EXCEPT of course freaking work. With a bunch of projects being worked on, my manager is going to flip out if I ask for vacation, lets see how things work out. If I cant make it to London, then I can probably keep the value of the seat I won.

Diamond and Kashyap from GSB on the current market

There is an interesting piece at the Freakonomics blog, where Doug Diamond and Anil Kashyap from the GSB give us a rundown on the current turmoil in the financial sector. They talk about why Lehman had to fail, Freddie and Fannie had to be rescued, AIG and the bleak scenario going forward for the fin service sectors.

A part of this post for the utter layman goes like this:

I do not work at Lehman or A.I.G. and do not own much stock; why should I care?

The concern for the man on Main Street is not the bankruptcy of Lehman, per se. Rather, it is the collective inability of major financial institutions to find funding.

As their own funding dries up, the remaining financial firms will be much more cautious in extending credit to normal firms and individuals. So even for people whose own circumstances have not much changed, the cost of the credit is going to rise. For an individual or business that falls behind on payments or needs an increase in short-term credit because of the slowing economy, credit will be much harder to obtain than in recent years.

Yesterday a friend of mine with a spotless credit record, super high credit score was denied a car lease, on the grounds that his credit history was not "sufficient for him to lease a second car when he already has one", his is a 150k income household.

Interesting times ahead.

Lehman Layman

The I-Bank behemoths have been crushed, the S&P has broken the 1175 mark (Bear-Sterns low of earlier this year), the Russian stock market has been halted, the retail investors have their hides nailed to the wall and on the back of these crushing news heres what the compensation/retirement/severence packages for the executives of these greedy, unregulated jackasses look like:

(1) The demi-god of I-banking Richard Fuld,CEO Lehman:
Awarded $71.9 million by his board for bringing down Lehman. Interestingly I learnt via Tradermark that in Lehman's board (supposedly in place to rein in rogue jackass CEOs like Fuld, who is best known for launching scathing public attacks on his executives in meetings) 9 are retirees, 4 are over 75, 1 is a navy admiral, 1 is a theatre producer, only 2 on the board ever had any direct contact with the finance industry. The board has a risk assessment commitee that has met atleast twice in both 06 and 07 (via SEC filings) and to them everything was fine.

(2) Merryl Lynch mariachies:

• Current CEO John Thain took up Merryl's reins in Dec 1 of 07, after being offered a 15 million USD signing bonus. Since Mr.Thain's first day in office Merryl's shares have fallen a mere 60% . If he decides to leave after the merger he is guaranteed another 11 million USD.
  
• Trading Chief at Merryl Thomas Montag who is at Merryl for less than 6 weeks (joined Aug 6th, 2008) is expecting 76 million USD in accelerated compensation of he decides to leave.
  
• Strategy head Peter Kraus who is at Merryl for less than a week now (yes you heard it right) will get 95 million USD for his hard work over the past week.

In the meantime 8%+ of my portfolio has been shaved off in the past 2 weeks. God bless Corporate America.

Apple geniuses now launch the iThing

Attention: All marketing MBA aspirants,students read and read and re-read this post.

Gotta hand it over to the marketing geniuses at Apple It started with the mac followed by the ipod, then a million versions of the iphone (a million models of which are now on their way to be re-called) and now ladies and gentleman :
#################################################################
APPLE LAUNCHES: iThing (image below)
#################################################################

From Apple's press release:
World renowned cool company Apple Inc. has launched their latest product, the iThing – a strange, minimalistic handheld device with no apparent features or uses. Now available in stores globally, the iThing is unbelievable sleek, sexy, desirable and useless. While even Apple has admitted that they have no idea what it actually is, this hasn’t prevented millions of Mac fans from lining up outside retail outlets from the wee hours of the morning to be among the first to own one.

Complete coverage and details can be found here. I am off to the Apple stores, how about you???

Vote for OMG

Since September is turning out to be a sucky horrid month, I decided to change careers, hoping for some serious support from the mba blogosphere

Dont forget to vote-->OMG

The Good, the bad and the ugly

I found this flowchart on things to say after sex depending on the quality of the said sex.

Some of the usable ones:

Good sex:
- Animal sounds ---> RAWRRR--> T-Rex mating cry
-Inner sounds------> Mmmmmm, Oh, Oh, Oh Yeaaa
- Romantic--> You are beautiful like the moon.
-Foreign/Subtitled Passion----> Anything french

Bad sex:
-Animal sounds---> Whoooliluii --> Whale mating cry
----> Baah Baaah-> Sheep
-Inner sounds--> Booooo, blaaaahhh, Yabba doobie Dooobe Dooo
-Romantic---> I love (not your partner's name) (not their gender) soooo much
-Foreign/Subtitled Passion-----> Heil hitler

Some addendums on the bad sex (via Amit Varma ):

-Can you atleast cook?
-I need to blog some pictures of this. Say cheeeeeese.
-Done. 100 girls in 100 days. I won the bet. I don’t need to do this any more.

Good luck picking.

World Championship of OP (WCOOP '08)

It is that time of the year, the time to burn a big hole in ones pocket. Today marks the start of the 2008 World Championship of Online Poker over at Pokerstars. It is a 20 day long series with more than 30 championship events and close to 30 million in prize money (schedule below in the image). Unfortunately the start times are horrendous (afternoons in the US) and I will defi not be able to play most of the weekday events (though I havent takes a day's vacation this year, hence ......)

Even then I am playing about 12-15 of the events and thats 15kish straight in buy-ins. Sigh.

Also there are a whole slew of sidebets and being the degenerate gambler, I am part of both the team and individual sidebets over at P5s. Rules for the sidebets :
(1) For teams: 3 memeber teams each team putting up 6k, top ten finishes by each player in a team will be tracked for points, currently there are 7 teams in on the sidebet, winning team takes it all (42k).
(2) Individual: 2k per person, same tracking rules as above, winner take all.

Now for the schedule (courtesy moorman):



Going to be a bad bad month of September, I already feel like a degen donkey. Oh well.

btw are I-bankers/hot-shot consultants allowed to write off gambling losses on their expense account?

Shipppp itttttttt sonnnnnnnn

Got my biggest online tournament score in poker yet---> on sunday--->on full-tilt,


Wait for it wait for it wait for it

$ 7 5 , 0 0 0 . 0 0 0 0

YUPPPIEE ....
SHIP IT ALL BABY
ZOMG
ZOMG

that should pay for a year's tuition at B school and cover one essay's material too right????

weeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee, as you can see OMG has been zapped with an even bigger OMG, would be difficult to concentrate on any stuff over the next few days... forgive thys pottiness for the moment.... though a good part of sunday late night, after the win, was spent at a certain posh gentleman's bar blowing $1 bills with friends ;-), that 75k could have gone way bit lighter by the time the night ended ;-)

but still

OMG

Fit fitter fittest

Mirror mirror on the wall who is the fittest of them all

Reading this post about business school selection and a gazillion more posts of this kind, in which people fret and fret and fret yet again about finding their "fits" for a B-school, I decided to make a small post to highlight my thoughts on this issue.

Warning : this post does not not apply to anyone who is going for a very narrow particular focus, that only a tiny handful of schools might offer, but for the rest of you read on. Note: binge drinking, bar-hopping across Europe, social treks to somalia, mount everest expeditions dont interest me, so all that would be left out of of the fit equation as well.


To begin with I am fairly simple person with fairly simple needs when it comes to a MBA program. First and foremost it needs to be a top 10 program, a top 15 at worst, there would be no justification for me to leave my current job (which I like, not love as most of us mortals have a hard time finding jobs that we are doe-eyedly in love with) if its not a top 15 program atleast.

Now as soon as you set up this filter what happens is that most of everything else that you want from a MBA program (salary, strong alum network, good courses, plenty of diverse opportunities), kind of fall straight into your lap.

After all a top 15 MBA program will NOT in God's worst day have a dismal placement record, it will almost always have a decent balance between grads it sends out to consulting and finance (2 of the most commonly sought after post-mba professions), it will have a strong alum network, courses offered by them will be more or less on an even keel in the ball-park sense, yes some may be more strong in a p'lar field, and some in another, but that is again way over-exaggerated. Believe me a couple of course in a p'lar subject/concentration/field is not going to make you an expert in that. Having specialized in a particular field myself take it from me that specalization in any field comes from research work and not course-taking, courses give you an idea (note that it is just an idea not even an in-depth grasp) of the fundamentals, and an expert then builds on those fundamentals through independent research. And anyway an MBA is not designed to make you a specialist, go for fin PhD for that.

So why the all the hulaboo about finding schools that "fit" you or as it is more popular to say "Finding my fit in schools" ??? Barring the most miniscule of subtleties, what the effing difference does a MC wannabe MBA applicant care if he is going to Wharton/Kellogg?? If you have a festish for the Kellogg campus, well and good, good for you (I btw have negative fetish for HBS, in the sense that I absolutely loathe them), but apart from that, from a holistic big-picture MBA point of view it doesnt make an iota of difference whether you land up in either of the two.

A much better, more practical question and more realistic question is the following:
"Given my interests, background, my so called profile etc etc, in which school do I have a realistic chance of getting in".
Once you've identified schools based on the above filter, you can then go about in a logical fashion trying to decipher the school's other vital stats of interest, which, again, if its a top 10 school, the subtleties with be 19-20 at best. And I guess in a way many applicants mix and mash and muddle up the question of their chances of getting in with the "fit" factor.

In other OMG news: I have gone through Montauk !! Maybe I 'll review that bible sometime down the line, reviewing bibles though are oft considered to be the work of heretics !!!

Till next time, cheerio baby.

New badass setup

Finally this weekend I got around to setting up a kind of formal office at home for playing poker. My current setup looks like this:

I have 2 dual screens with 1600X1200 resolution, this will confortably allow me to play 8 tables at a time without any kind of overlap or glitch in resolution. The box itself is pretty standard and nothing fancy except that it has a kickass graphics card.

And now for your visual pleasure here are some real real badass poker setup from the pros:

This is Tiller's setup, he has a TV hooked up to his desk as well, the two right screens are where he is playing online (8 tables, the 8 ovals).

This is Dag "dmikkel" Mikkel's setup. He is a high stakes cash/tournament player playing at nosebleed levels of $100/$200 and above (meaning at ay given time he is sitting with 30k+ plus on the table).

This is Cole "cts" South's setup, you can see the number of tables (the ovals on the left screen) he is playing at a time. And on each of those tables he is sitting with atleast 20k. (do the math)

This is Tom "Durrrr" Dwan's (guy on the right) new office, on the process of being setup. Durrrr is currently the most prolific high-stakes player on the net, winning and losing a ferrari a day.

Here is a recent 150k worth hand between durrr and phil ivey on full-tilt (this is what the online tables look like, the ovals in the pics above):

Ok, lets play some poker now!!! I can almost hear the money train going CHI-CHINGGGGGGG !!!

Bad beat slayer

I am on a horrible 15k downswing in poker over the past couple of months, and a good chunk of my YTD profits have been wiped out. GRRRRRRR !!!!

Poker can be a brutal game and without proper discipline it can break a player. There could be extended periods where you put in the money as a 80-20 favorite only to see your donkey opponent catch a miracle card to bust you. This is what we poker players term a BAD BEAT.

One of my favourite online tournament pros Chetna "Rex55" Joshi puts it best in her blog, and curiously this does not just apply to poker, it applies to any difficult journey that anyone might decide to take up (an MBA app process for example).:

Bad beats are non-exclusive. They are blind to race, creed, and gender. They are merciless. Every single player that sits down to play cards, takes bad beats. The more you play, the more you take... the more hands you are dealt, the more likely it is statistically that you will take a bad beat.

So now if every single poker player is taking bad beats across the globe.. how is everyone dealing with them?

What is your standard reaction when you get bad beat?

*Do you curse and chat box spew?

*Do you donk out of all other tournies that are going well?

*Do you throw things or punch walls?

*Do you reach for alcohol and/or drugs?

*Do you tilt off your roll?

*Do you copy and paste your hand history and send it to all your buddies on messenger so they can now relive your bad beats along with their own?

*Do you take it out on your family and/or significant other?

*Do you take it out on yourself?

or..............

-Do you assess your play, your own decision, your role in the hand, learn what you can and move on?

The true damage of a bad beat isnt the hand itself....it is the aftermath that ensues...It is our inability to accept it for what it is...The damage lies in the snowball affect it has on everything else... when we allow it to permeate into other tournies... into a bankroll we grinded so long and so hard for... into our personal lives.... that is where the true damage of bad beats take place.

How many poker players are equipped with the armor to tolerate the "blows" poker will undoubtedly fire at you?

The field is narrow...Most fall victim to the grimy hands of 'Tilt,' and SELF-defeat...
Don't let this be you...

Poker is all about perspective.

Don't wallow in your defeats or self-pity...
Don't question your abilities or skills...
Don't let yourself fall into a cold, dark abyss, with a tape recorder on repeat playing
"you suck at cards...you are a loser...how could you not have folded that hand? you donkey...stick to your day job...you have no hope...."

And Please don't surrender to bad beats...

It's all about our perspective...
Mind over matter...it is amazing how powerful self-perspective can be...
it is what we make of it...
what our mind creates of it...
it is what it is...
what we allow it to be...

Once you are able to keep bad beats in proper perspective for what they are.. an inherent part of the game that every participant has the choice to deal with, in his or her own way... then you will see how much more of your time and energy is spent constructively, as opposed to destructively...

and not only will you emerge a stronger Poker Player...but a stronger Person...

The game of poker is like a lifetime of experience/emotions squeezed into one 8 hour playing session. You can experience the full spectrum of emotions ranging from complete boredom to utter frustration, to gut wrenching disappointment, and pure fist pumping adrenaline rush infused joy in that 8 hour period. And like life what is important is that throughout you maintain your perspective, your focus and most importantly your self belief, else the game will break you.

I am taking a week long break from poker, and hoping to hit the tables next week, with renewed enthusiasm, a clear mind and much much better focus.

OMG an mba post

One of my undergrad juniors got into HBS, class of '10. Weeeeeeeeee !! Very nice. I havent sopken with him in length, but am planning to do so soon. He was a really really bright chap, was the topper (in the top 3 atleast) in perhaps the toughest discipline at my undergrad alma mater (Mech Engg.), an accomplished tabla player and drummer, and a very very good quizzer (though my undergrad quiz team did dish out some serious hidings to them in various inter-college competitions... ok brag time, I was a univ blue in dramatics having won the quizzing event in the 2002 edition of All India University nationals, end of brag), went onto HLL (Unilever of India) as a management trainee I beleive (the toughest job to crack in campus placements at that time), and is now all set to come into HBS. Way to go !!

I also recently discovered that another of my UG junior is in Darden right now, set to graduate next year !!!

Anyhoo as per my MBA goes, I have taken the first baby steps towards the GMAT, meaning ordered the books (whole of manhattan, OG, and ahem ahem cough cough Richard Montauk's book!!)

Now I dont have anything personal against Montauk, but these self help, self development, chicken soup for the soul/mba/life kind of books really get under my skin. Dont get me wrong, I read a lot, but I once tried to read "The world is flat" and then "The monk who sold his ferrarri" (both came highly recommended), and I was cursing in utter frustration within the first 50 pages, the plethora of cliches in those books are mind-numblingly astronomical. Hopefully Montauk lets me get past 50 pages.

But the signs are ominous, another of my friends apping for Fall 09 was all ga-ga over some Morpheus-que matrix that the book supposedly has that can allegedly lay bare your life as soon as you fill it up. Dont know about him, but I would like to believe that my life cannot be strait jacketed and matrixifed as easily as that. But it is supposed to have some adcom winning essays, so it shouldnt be all bad, though my Bullshit-quotient detector will be on high alert. Maybe I'll post a detailed review once the book comes in.

What else, o yea, a shoutout to Forrest Gump for his replies to my email queries. One of the main points of which were, whether an interest in finance (which is probably the reason for my mba quest) should be mentioned in my apps, given that there is NO supporting evidence to back that up. His line was that one can potray oneself as a career changer and thus weave stuff around it, but I am still ultra-skeptical about that. I have a strong case for SC for the energy and commodity space, and as someone pointed out (Soni??), that you should stick with things that you can tie up (Background--->Past exp--->Future goal) into one cognitive entity for the adcom. (This is beginning to sound like a cliche now, belaboring the same point over and over... GAAAHHH)

And to finish this piece off, an OMG sized howler to the Clearadmit folks, somehow my blog never features in their Friday-Frontline reporting !!! Sacrilege !! Clearadmit folks you need some Paris Hilton spice to keep your piece interesting, yea yea I know you have volumes of pages covering essays of all and any school on the planet earth and all that blaah. BUT that gets a bit boring after some-time, what with the often used phrase accompanying any and every essay analysis "Now remember to tie up your experience no.X to your School no.Y fit", "This is a modified version of the career gols essay, but with a few caveats". Guys guys, c'mon, get Paris on board and see your eyeballs double (well maybe not double but you are guaranteed one extra narcisstic eyeball from houston,texas).

Till next time, happy essaying applicants....

Sunday schedule

Having spent the whole of saturday in the office, I am ready for a stress-filled fun sunday (was that an oxymoron--oh w/e). Sunday is the BIG day for online tournament poker. Most of the online sites run some of the bigger buy-ins and big-payout tournaments on sunday. And this week there is some added juice.

Today is the last day of Full-tilt's Full-Tilt Online Poker Series IX (FTOPS IX), and having missed out all of the previous events in FTOPS IX ( due to work grrrrrrrrr) I am gonna play both of today's events.

My schedule for today (on FTOPS IX):
2:00 PM EST: $129 No-Limit Holdem Knockout, $400,000 guaranteed
6:00 PM EST: $535 No-Limit Holdem Main event, $2,500,000 guaranteed

Also might play (on Pokerstars):

3:30 PM EST: $215 No-Limit Holdem Sunday Million : $1.5M guaranteed
6:00 PM EST: $215 No-Limit Holdem Sunday Second chance: $700,000 guaranteed


One freaking time!!!!!!!!!!!!!!

Hedge fund tracking

J over at Market Folly has started his hedge fund tracking series as hedge funds, with $100 million+ in AUM (asset under mgmt), start disclosing their holdings as of Jun 30th 08 to the SEC . And as always it is extremely interesting to see where and in what sectors the "big and smart money" is going in and out off.

Some of the hedge funds he will be tracking and reporting on are:

-Blue Ridge Capital (John Griffin)
- Lone Pine Capital (Steve Mandel)
- Maverick Capital (Lee Ainslie)
- Viking Global (Andreas Halvorsen)
- Tiger Global (Chase Coleman)
- Touradji Capital (Paul Touradji
- Tudor Investment Corp (Paul Tudor Jones)
- Moore Capital (Louis Bacon)
- Caxton Associates (Bruce Kovner)

"Straight up beastly funds" which you have to keep an eye on due to their awesome returns over the years:

- Atticus Capital (Timothy Barakett)
- Tremblant Capital (Bret Barakett)
- Clarium Capital (Peter Thiel)
- Pequot Capital Management (Art Samberg)
- Harbinger Capital (Philip Falcone)
- BP Capital (Boone Pickens)
- Greenlight Capital (David Einhorn)
- Paulson & Co (John Paulson)
- Jana Partners (Barry Rosenstein)

A few deep value & activist funds:

- Third Point (Daniel Loeb)
- Pershing Square (Bill Ackman)
- Okumus Capital (Ahmet Okumus)
- T2 Partners (Whitney Tilson)
- Tontine Partners (Jeffrey Gendell)

And, a few new funds on the scene:

- Conatus Capital (David Stemerman, ex-Lone Pine)
- Highliner Investment Group (Anand Parekh, ex-Citadel)

A massive shoutout to J for his huge effort in going through the 13Fs and coming up with his reports. Much appreciated.

Why so serious??

For one because I've been a busy-bee at work. A new technology is being shipped out of the lab, going in for its first "production" run, and OMG being the lead on this technology, you can guesstimate the busy-ness of this bee. And since no-one from work reads this blog, I'll go out on a limb and leak some juicy bit of privy info--> the "production run" of this new technology is going to be on one of the biggest oil-discoveries of our times (think chevron, think back a couple of months).
Shhhhhhhh.... dont tell anyone... mums the word... else i'll have to shoot you... etc etc.

Anyway what else is going on in the OMG world??

Oh yes, of course the stock market AND IT--IS-----> EARNINGS SEASON!!!!
Trum-La-La-La , Drumrolls and bring on all that jazz please
Did I mention that we are in a market where the current trade is : oil=natural gas=coal=iron-ore=fertilizers=global-growth. What that means is that the whole commodity sector is trading as a group. If oil goes down, then so does fertilizer (did I mention on the back of stellar earnings, eg Mosanto, Potash, etc etc ), of course lets forget the fact that fertilizer has nothing to do with crude-oil, but for now, for the hedge fund computers atleast, anything even remotely commodity-sounding has to be puked out.

Most of the charts of my fav stocks in these sectors have broken down, and I am going to open positions/reload soon (soon btw is not this week). On the radar: CHK(nat gas), MOS(fertilizer),MEE(coal),ANR(coal),RIG (oil-drilling),CLF(iron-ore mining) to name a few.

I recently read a hedge fund guru's comments (I forget whether it was Stephen Mandel of Lone Pine Capital or Louis Bacon of Moore Capital Management) that they try and catch a lot of bottoms, because that is where the big profits are going to come from. Their mantra goes something like this:
Catch the bottom, not the middle, definitely not the top-->reiterate that fundamentals are in place--> have the balls to pull the trigger and place "big bets" on that bottom.

Note the huge emphasis on the balls-worthiness and big bets, that is the key because if you are not going to place a big bet on what you think is a bottom then your profits arent going to be spectacular. On an average what they said is that if they catch 4-5 right bottoms and place big bets on those per year, they will usually return 30%+ that year. Another interesting part of this article was the fact that hedge funds usually consider I-bankers as glorified pencil pushers at best. This is, kind of, in-line with my thinking that sell-side finance is crap.

And the point of all this bottom-talk is that I think I caught a bottom in this Russian ex-superstar. Bought a big chunk at $20. And we had caught a bottom in early July in this potentially huge Chinese growth story in the high 7s.

Anyhoooo

Lets see what else.... anything that relates to an MBA. Essays, GMAT blues, school-fitting, anything... what about an IB/MC debate...... Naaaahh!!!!! Too boring.... And Oh-My-God, we dont want to be boring do we. Thats so not Paris Hilton baby.

Disclosure: Long CHK, RIG, MTL, MOS, CFSG in Personal account

Easy money

I ran into this fabulous Cole South blog via Andrew's, and frankly I was amazed at some of the discussions and strategies that Cole has. For a novice like me, the blog is an absolute goldmine.

For the uninitiated Cole South aka CTS is one of the most feared high stakes online cash game poker player. He is 24, an undergrad at Cornell (or South Carolina i forget which), and had reported earnings of 1 million USD+ in 06 and 07 (solely from online poker, he doesnt play live much).

Since a picture speaks a million words, here is one of his daily earnings graph (click to enlarge, y-axis is earnings and x-axis is number of hands played):



He has averaged 100k p.m. almost like clockwork over the past few years.

Sigh !!!!

As an aside here is another inspiring story of my favourite student-poker player. Gaucho is a great friend of mine and an absolute beast of a poker player. He is currently on a mini sabbatical from poker having recently joined one of the premier law practices in NYC (not to mention a marriage is on the cards as well) . He financed his NYU law degree (200k+ in student loans) via his poker exploits. He used to play in one of those really big poker games in Long Island with high-flying IBankers, HFund-managers, lawyers and cardiologists and absolutely raped them. It was fascinating to hear his stories about how these super-rich guys used to sit down with bundles of 5k wads and there was dear old gaucho, the poor NYU student all ready to dish out anal rapings !! Incidentally one of these houses where this game took place was (is) owned by his current boss, which is where he got his job offer from, after one of the anal raping he dished out to him obviously. Talk about networking !!!!

Time for more sighs !!!!

In other OMG news: I have taken on 2 new poker students for August. That makes stuff even more hectic as both of them have booked up three 4 hour slots each for the upcoming week. But both of them seem very very sincere and keen on learning and picking up some of the stuff as well as plugging some obvious (and not so obvious) leaks in their game (I spent a couple of hours today watching them play), so in a way it should be fun working with them.

Stop that---be serious

Ok after jerking around in some of the earlier posts lets move on to some serious topics for a change.

(1) Many many thanks to those readers who emailed me with resume/essay swapping and peer-reviewing suggestions , but unfortunately for you I am not a 09 applicant, I am a 2010 applicant. So you would have to make-do with somebody far less briliiant than me. And for the 5 of you who sent in your million word long essays, I will try and go through them over the weekend and get back to you, but remember the operative word here is TRY. I am already doing sessions with 2 of my closest buddies (09 applicants), and dont really have much time.

(2) The majority of the coming one year will be spent, from an MBA point of view, on building a community service track record, something which I feel is an utter laggard on my resume. I have started as a volunteer computer instructor for underprivileged kids with Salvation Army, and already the shit has bored me out of my mind (4-6 fucking hours every weekend and when my weekends are tied up I do after hour weeks, talk about the fucking pain, but apparently com-service is a big deal with the stupid fucking adcoms, so screw me) . On a brighter side, the only available alternative to comp-literacy-nights right now, with Salvation Army atleast, is Bingo-nights with elderlies, so in a weird way I should be thankful.

(3) My interest is in Sales and Trading/buy side of finance (sell side is for dummies if you want to know the truth), but I am sure that each and every adcom in this big bad world will scamper for the nearest trash-bin if I dare mention a word of that in my apps. So, instead, I'll weave mind-blowing consultant stories (with the obvious energy focus (core competency), b-schools love the energy buzz words these days) in my apps. But then assuming I get into an MBA (I'm pretty sure I would), come interview time those buy-side hedge funds will again make a beeline for the trash-bin with my resume. Hence I decided to get a CFA level 1 (date is June 09) before starting an MBA. An year is time enough for that I hope.

(4) Euro schools seem to be out for now, as my girlfriend is doing her phd in finance in the US and shes going to have my ass for lunch if I mention that I am apping into euro schools, London though looks very very promising (maybe I should go beind her back and apply to Euro schools anyway, one of her friends did get into E&Y, london after her phd, something to think about, but for now "sweetheart only US schools" is my official girlfriend-pleasing tagline).

(5) The GMAT is set for Dec, it shouldnt be a big deal, as far as I can tell.

(6) I dont wanna be in serious debt when I go for the MBA, hence poker must account for 80-90k in the next 20 months to help pay for my BS-elevating vocation. Looks very doable at just about 5k pm (time permitting).

In today's OMG news: I crushed wed's live poker tourney for about 1k and chump-change.

/end of serious post, back to work

As an afterthought: Most b-schools keep on recycling and spitting out the same essays year over year, how come serious applicants then find these so nerve-rackingly tough??? I mean if you know 90% of what you are going to asked in an exam, atleast an year in advance, shouldnt you be ace-ing it?? Seems logical.

Why an MBA, goddamit WHY NOW????

Always asked and probably the most common Q for an MBA, and along with that something that people/blogs/adm-consultants/your-next-door-neighbor-and-his-maternal-uncle-from timbuktoo spend the most bytes (sonic and binary) discussing about.

And thereby, progressively, adding more and more rationale/theories into the already 1 billion (could be 1 trillion) strong "why mba, and even the more foreboding why now" case-book.

Apparently plentiful of soul searching is required in order to answer this question, which creates a major hurdle for people like me. People who either lack a soul or do not have the means to search for it.

So this post is meant for us, that particular group of "me, myself and us- who would rather leave the soul-searching business to the afterlife".

So without further adiue, here are the much anticipated answers:
Insert drumrolls, fireworks and make for a dramatic entrance

Part 1--> Question:Why an MBA?
Answer: You are not bill gates neither are you steve jobs, meaning you can never on your own, in your backyard garage, come up with a product design/idea(s) that would change the face of the world and in the process make you a shitload of money (which you can then dump off to charitable foundations, to the utter and complete disgust of your children). Hell you arent even Steve Cohen, you are sure you dont have the skills, confidence, know-how to learn managing and making tons of profit on big money. But you know that you like big-money and even bigger and fatter paychecks. And thus, lacking the brain-power/intellect that most successful greats (as a simple statistical enquiry try and look up the % of MBA who have actually made a path breaking product/company) have, you realize that there is just one way you can atleast get a chance to pretend to be a great-one. It is by increasing your bullshit quotient and having an official tag for that aka MBA FROM AN ELITE SCHOOL.

I kid you not, when I tell you, that this is your one and only meal-ticket to be a Bill Gates/Warren Buffet impersonator of the future.
And anyone who tells you otherwise, in the form of sentences that go "I want to see myself in an advisory/consultant role for bigger and bigger companies and thereby change the way the corporate world operates" or "OMG it turns me so damn on when I dream about helping clients seal M&A deals", are plain and simple lying. The MBA is their one-and-only ticket to green-villa.

So stop searching for your soul, realize you like the color green, cut the bull and start spinning your tales, and dont forget that you are mother teresa (community service), isaac newton (acads, not einstein, einstein you see didnt have a college degree, thereby debarring him from the mba admission process) and jack welsh (industry leadership) rolled into one. I know I am.

Godspeed

Blaaaahh !!!

I had a horrible monkey tilt session in poker yesterday. On the weekdays, I usually play in the nights mainly on Full-Tilt , and yesterday I proceeded to drop ~5kish+ in less than 90 mins to an absolute donkey in Heads-up (one-on-one, for the poker uninitiated) cash at the $5/$10 No-Limit level.

Needless to say I am mega pissed. I am still up about 10kish for the month on the back of very little paying time, but the bottomline is I AM PISSED and ON SUPER MONKEY TILT.

Anyway, I'll be playing (well atleast planning to play) three live tourneys this week (live tourneys are by definition 1000-X-easier than online ones, as live players are god-awful horrid BAD, and have no idea of even the extreme basics of tournament poker strategy):
(1) Today: a rebuy tourney, rebuys are mega fun and complete donkfests.
(2) Saturday: $250 buy-in tourney, 1st place is about 4-5kish, I should win this if for once my AA>J8o
(3) Sunday: $100 buy-in tourney, 1st place is about 2-3kish, I have won this thing about 4-5 times this year and depending on my tilt-factor I should win this one too.

But for today its BLAAAAAAAAAAH.
F Poker. Bring on the MBA apps.

In other OMG TILT news: the bullshit rally in stocks continue, for the second week now. Stupid Wachovia Bank (WB) has rallied from a low of 8s to the 18 in less than a week (brace yourself for this) on the back of a mere "5 billion USD loss". The whole fucking nine-yards of those shitty banks and the fin sector (ETF XLF), with the help of those dastardly stupid Feds , have rallied upwards of 35% in one week (apart from GoldmanS which is dropping faster than a hedge fund on cocaine), while 5 of them who've reported earnings this Quarter have declared collective losses to the tune of "just 12 billion USD+". Not to mention even the stupid retailers are rallying.
It is official : Reason has no place in today's market anymore. I still like shorting here, even though we seem to be in a weird bull market anchored by bullshit sectors. I like SKF, FXP here.

Disclaimer: On life tilt, 30% cash position

Assessment

Acads:
strength: top ug school (7.2/10), top grad school in discipline (3.8), widely published in leading journals lending credibility to acads (UG gpa maybe low, but i can manage that, especially with my publications, anybody have any comment on the relevance of publications in leading journals to academic strength)
weakness: dropped out of THE top phd program (have story)

Serious XC: sport: poker.. stellar 3 year performance track record, winner of numerous big field-large prizepool tournaments all over the place including important world poker tour circuit events, stories aplenty
community service: computer teacher for underprivileged kids (4 hours/week) with salvation army
weakness: no leadership exp in XC (impossible really with an individual sport like poker and a teaching volunteering activity)

Career: strength: good progress, developed several leading cutting edge technology with direct and very visible impact on company's bottom line , related to this worked on atleast 2 of the company's most important projects in the past 1 year, atleast one HUGE project obtained by company on the merit of technology developed
weakness: no traditional leadership exp, could be typecasted as tech (and no not software/IT)


MBA essay underlying theme: Career changer.

And that is that... in a nutshell, comments, critiques, observations welcome.

A hedge fund in action

Hedge funds are usually passive position holders, meaning that even though they might have a pretty decent stake in a company, it will not usually use that stake to try and take over boards (unlike say the Jerry Yang/Yahoo board versus Carl Icahn ongoing saga), though it will of course keep a big bad eye on the operations of its bigger holdings. What this essentially means is that a hedge fund is a "passive investor" and not an "active" one. However, hedge funds, are trading entities and seldom will they let a good trading opportunity pass.

A recent development occurred in a commodity play in the US equity market this week that shows how hedge funds can suddenly turn active investors in search of a very profitable trade and thereby hurt the retail/individual investor heavily.

The background: Yesterday Cleveland Cliffs (CLF), USA's biggest iron-ore producer announced that it would acquire Alpha Natural Resources (ANR), USA's biggest coal exporter, for 8 billion USD+, the offering included a 35% premium on ANR's current share price.

Now those who follow the market will know that commodities are in a bull market and both these companies have been flying fast and high over the last 1 year. So obviously when these two top dogs decided to merge, shareholders expected a huge surge in the price pf both.

Hedge fund comes in: But curiously after a small rally, ANR's shares started to plunge in an alarming rate and as of today ended up trading lower that CLF's, completely confusing me and all other individual/retail investor, as this completely defies all logic. A company offered a premium over its current share price, cannot by any logic trade below that price.

Well on further digging we found that Harbinger Capital, an Irish based hedge fund, which owns 18%+ of Cleveland Cliffs - informed the co. they were going to be fighting it. That is they believed this deal to be against CLF's interest and suddenly turned an "active investor" from a "passive one", creating a huge short opportunity for the big money (hedge funds) causing the price to plunge.

The follow up play after Harbinger's decision for hedge funds would be --->Short ANR--> ANR plunges-->make profits on the drop in ANR due to this decision--> get out of the short position with a killing--->explains the complete weird stock price behavior of ANR

Hedge fund's fundamental trait: Remember, that unlike a value investor like Wbuffet, HFs have no interest in improving a company's operations and such things, they are in there to make profitable trades. And this sudden filing made for a perfect trade. Moreso if you understand that this deal would ,infact, have been a booming winner for CLF !!

Moral: Follow the big money, follow where HFs are going in and out of. But right now the HFs are really working in a weird and unpredictable manner, mainly because the downright wretched US market has completely spooked them and most of them are losing a LOT in this market, something which their investors are definitely not going to like. Remember HF investors are wealthy affluent folks (high net worth individuals) who put in obscene amounts into these HFs and therefore the HFs have to work under tremendous pressure to generate big returns for them or else have those funds pulled out , even in shabby bear markets like we have now. It is pretty funny to track these HF panic buys and sells in the current bear market. The trades are downright whacky !!

Now for the million $ Question:

OMG HowTF is this relevant to my MBA: For somebody interested in the buy side of finance, understanding of the market is almost a necessity. You cant just land up in B-school, and suddenly become a star trader overnight. Like any sport, learning trading and way trades are being done is a long drawn learning process with a fairly steep learning curve, not an overnight "stock -pitch" cram.

Disclosure: Long ANR in personal account

Mss.market and poker

I got into an interesting discussion last week as to whether the market is actually beatable by retail investors (or hedge funds and mutual funds for that matter) in the long term. The basic idea that my friend was trying to push through was that it is NOT BEATABLE. Majority of funds and even a bigger majority of the retail investors are either market trailing or will probably return at best the index's performance. He describes it as being a game of chance and those that are making money just happen to be on the positive side of variance.

In some ways I agree and disagree with him (more disagree ob). The market by nature and like poker is a game of incomplete information. Unlike, say chess, the information set needed in either poker or the stock market is not complete. Thus it is almost impossible to design a sophisticated algorithm running on a supercomputer with a teraflop performance that can play profitable poker, while Deep Blue and its cousin Blue Gene can always give Kasparov a run for his money.

I will try and highlight what I see as the biggest problems and of course potential remedies while trying to beat the market. I will talk primarily about hedge funds and retail investing, not about Mutual funds, as they have a bit of a disadvantage, being primarily LONG (but there are some top notch ones out there, Ken Heebner's CGM group of funds).

Now money is there to be made both in poker and the market. But key for both are the following:

(1) Bankroll management: This is absolutely critical. Bankroll management essentially refers to managing you roll/money/AUM. People get greedy and start placing bets way over their heads or way over their AUM limits via crazy leverages. The hedge funds that go down the drain and return 0$ to its investors for every $ invested are primarily guilty of this (and right now hedge funds are going down like pinballs) . It is hard to believe that funds supposedly run by such smart folks can make such horrible calls and place such atrocious bets. A recent case of a hedge fund's misfortune is this. The reason for the collpase of this family of hedge funds, Horizon funds, is the insanely crazy leveraged risks that the fund took. In some cases they were leveraged at 12:1 or more. While such huge leverage will print money in the first few years (Horizon returned 40% for the first 2-3 years) but it is a sure shot recipe of disaster (net assets turn to ZERO).

Another more bigger fall that highlights the poor bankroll management that hedge funds tend to practise is that of JWM Partners launched by Meriwether of Long Term Capital Management fame (i mean absolute infame). LTCM if people remember is that crazy hedge fund that was a yester-year bears sterns meaning that it was so big that it could not fail and had to be bailed out !! Details here. Now after the LTCM debacle Meriwether and his cronies having not learnt an iota of a lesson from thier past debacle, this time went about placing leveraged bets on mortage-related securities. And well once again they are close to being history, having pumped into the gutter more of investors' wealth (approx 1.4 billion). The story here.

(2) Atrocious bets: By definition a hedge fund is supposed to hedge risks, a market neutral hedge fund for example must always be that---> market neutral. But the reality is of course a bit more distant from that. Hedge funds are known to place some heavy and I mean really heavy bets on SINGLE POSITIONS, and in most cases via their star traders. So whatever the prospectus say, these HFs make some sorry ass bets that can turn against them faster than you can say bob's my uncle. Amaranth Advisors for example (I am choosing the famous/infamous ones here) had 50% of its portfolio (starting AUM of about 5-6 billion USD) bet on natural gas via their star commodity trader Brian Hunter. Such brash bets made huge returns in the first couple of years but then in one week of trading that 50% position dragged Amaranth's AUM down to 4.5 bill from 9 bill causing the fund to collapse.

I have heard and read that discpline is one of the first thing that a trader in a fund is instilled with --> Hedge your risks, dont fall in love with your positions, dont take leveraged risks, exit losing positions fast etc etc. But reality shows that discpline is something that the majority of the funds lack. Black Swans are supposedly once in a lifetime happening, but these days it happens once a few months !!! So for an outsider or an investor who sees these collapses, it is quite natural for him to turn extremely sceptic. But of course there are some good ones out there (though it is getting increasingly difficult to find the good ones) , SAC Capitals for example. But hedge funds can get bad to worse really fast when they forget the basic underlying principles of maintaining strict trading discipline and not making crazy bets (though it is very common, and driven almost exclusively by gut wrenching greed).

As for me Sales and Trading still remains a potential career option and poker continues to remain profitable. I am up over 20k YTD on the back of very very limited playing time. Touch wood.

Ooops this has turned into a huge post, part 2 later, part 2 will be for the retail investors..... one last parting word ---> there is nothing like self-learned knowledge, Wbuffet spends 99.9% of his time doing nothing but reading 10ks and 10Qs and prospectus.

CFA Level 1

I have decided to take the CFA level 1 exam. This could be a spur of the moment decision, but it would be very helpful to pass level 1 before I start apping for B-schools. I am targetting the June exam date. At this point I have little idea about the content, but it surely is not rocket science. I am expecting a 6 month prep time for the level 1 exam maybe more for someone with no-finance background.

Godspeed.

Are star fund managers and traders MBAs?

Are they MBAs or do they have a much more solid background in finance or econ or maths (PhDs). My belief is that star managers (and star traders) working with small teams (eg Ken Hebner of the CGM fund group and the infamous Bryan Hunter, probably the greatest trader the Wall Street has ever seen, who was the energy desk chief of the now bankrupt Amaranth Advisors Hedge Fund) have to have a much more stronger foundation in finance/econ/maths than what the MBA courses usually offer.

I am not at all convinced as to whether MBA fin courses gives the correct/desired training for such careers. For starters they tend to be the over-simplified or the broad-overview kind. When I was at Stanford a bunch of my friends were in a Masters in management program and they had these required cross core-courses from the MBA program like corporate finance, DA, accounting and so on. And frankly, having a math heavy background I found those courses naive at best, due to the simplicity in the actual maths involved. Accounting is of course jargon heavy and once you get that straight, the rest is a walk in the park. DA which was probably the most feared course is also in reality a pretty simple one. One peculiar thing about DA though, is sometimes it doesn't exactly follow the probability laws (especially Bayes' Theorem) !!

And now I see my girlfriend doing her PhD in finance and the mathematics is extremely involved. A pretty decent grasp of real and complex analysis is almost mandatory. Theories developed on Mutual funds, ETFs and the varied kind of investing methodologies (value, growth, momentum) are very very math intensive. For example the starting point in the Stock market for fin/econ grads, the Black-Scholes model for option pricing, is stochastic to start with. It needs random walk kind of solutions (something like a Monte Carlo simulation for example) as it cannot be solved in a closed form deterministic manner. That makes me wonder whether MBAs going for their fin specialization actually have the expertise to deal with such sophisticated maths or do they stay more in the overview plane. If they do stay in the overview ball park, then how the heck do they perform their corporate jobs ?? Wouldn't an econ/fin PhD be a much superior analyst/trader simply because they have a much more thorough grasp of the subject matter.

And then I also hear of the numerous models that I-bank newbies/interns need to run on a daily basis. And curiously most of these models that they run are done with Excel. Now I have always believed (instilled by my co-advisor at Pennstate) that Excel is the stupidest black box that Bill Gates has ever designed (it is dumber that Windows, if you know what I mean). So what models do these I-bank whizzes run??? No sophisticated heavy duty modelling (especially stock price modeling which is a highly non-linear problem and notoriously unstable to solve) can be run on a single node PC on excel. All known computational and computing laws would be severely violated. I have exactly one friend in I-banking so I dont know the answer to these modeling thingy that they keep talking about. But I have some friends over at motley fool who are analysts for motley fool in their stock picking business, and they shared a model-running exercise of theirs.

I'll walk you through it since I presume that these are the typical Excel models that I keep on hearing about. The thing here is that one of their top equity holdings X has taken a severe beating, and they want to analyse whether buying more of this X at today's prices would yield a S&P 500 beating profitable return in the next 3-5 year time frame. So heres what they model in essence ( I highlight in red my comments from some feedback):

1. Trailing 12 Month (TTM) Revenue = $217.9M (from balance sheet)
2. Estimate 3 yr. Revenue Growth = 11% (Different bunch of numbers are plugged in for this based on their estimate/forecast depending on a myriad of macro-economic conditions, this is their estimate and not a hard data point)
3. TTM Revenue in 3 yrs. = $217.9M * (1.11^3) = $298.0M
4. Estimate Net Profit Margin =9.5% (Again Different bunch of numbers are plugged in for this based on their estimate/forecast depending on a myriad of macro-economic conditions, this is their estimate and not a hard data point )
5. Net Income in 3 yrs = $298.0M * 0.095 = $28.31M
6. Current Shares Outstanding = 6.4M
7. Estimate Share Dilution Rate = 2% (per historic levels)
8. Shares Outstanding in 3 yrs. = 6.4M * (1.02^3) = 6.8M
9. Estimate EPS (earning per share) in 3 Yrs. = $28.31M / 6.8M = $4.16
10. Estimate P/E ratio = 12 (This is reasonable for current growth level of 11% and 25% in favorable times. The P/E ratio might be higher, but let’s stay on the reasonable side, more different values to test here.)
11. Estimated Price in 3 Yrs. = $4.16 *12 = $49.92

Once they have a price target calculated they then go for potential return calculations based on current prices, essentially to identify favorable buying points:

Let’s look at buy target prices:

Expected Return          Buy Target
---------------          ----------
      15%                  $32.82
      20%                  $28.89
      25%                  $25.56
      30%                  $22.72

And that in essence is a typical stock analysis. Not rocket-science level by any means is it, but almost wholly common-sense and logic driven. And then they add layers of complexity to this to come up with a ton of scenarios and potential outcomes/risk/profit analysis etc. I am beginning to think that this is what Excel modeling is all about. Correct me if somebody has more know-how on this.

Now hedge-fund traders though are a very different breed and I know for certain that they crank up huge computational power/time (statistically the biggest user of computational power in the US are : (1) defense (2) oil and gas industry (3) finance ) crunching sophisticated algorithms to come up with buy/sell triggers for equities/options etc. And again it is my feeling that the MBA wouldn't be a good fit here because of his over-view based background. But he might be a good interpretor of the numbers that hedge fund computers crunch out, but such interpretation skills can come from pure experience, why do an MBA for that?

While I was pretty excited about I-banking (particularly portfolio mgmt/Pvt Equity/Trading) some time ago, but I strongly feel that an MBA is not an adequate training enough to make someone a star fund manager, which is where I would have wanted to go to if I had opted for the fin route. As of now I am sticking to consulting where arm-waving has been made into an refined art.

OMG -The economics of an MBA

One important question that well settled professionals have to be think about before their MBA apps is the economics of the whole thing. Cos, barring those ludicrous few who would want to join the peace corps in Africa at minimum wage, most MBA applicants are looking for a substantial pay-hike, post MBA. So lets get some numbers going.

I will stick to the oil and gas space cos thats what I have been doing in grad school and then at work (for a combined total of 6 grand years). For this simple exercise I'll use MK as an example. MK is one of my closest buddies, we went to undergrad together, we were room-mates in the first year at undergrad, we applied to US grad schools together, and to top it all like me MK works in Houston in the oil and gas space for the past 3 years, with one of the 5 biggies. MK was contemplating an MBA last year after 2 of his office-mates got their Havard tickets. But after some fairly large amount of thinking he decided against it, from a simple economics stand point. Heres his arguement against the MBA:

(1) Cost of MBA in a top school : 120k
(2) Loss in salary for 2 years : 250k
=================================
Loss : 370k

Expected mean/median/mode salary package post MBA: 120k
Salary package at current job in 2 years if no MBA: 135k
===============================================
Salary loss at end of 2 years: 15k

=============================================
Loss in 2 years: 385k
Loss in Matching 401K @7% of salary/annum: 17k
==============================================
Loss in 2 years: 400k
===============================================
Actual Loss (amount he would have saved in those 2 years): 190k
(20% savings+120k mba cost+401k contributions)
=================================================

Assuming he continues to save post MBA, and he can save on avg 30k/annum, he will break even only after 6 years. This is a bit of an unknown part of the equation as salary projections post MBA in terms of growth rate is not something I am too familiar with, so I have just assigned 150k as an avg for the first 7 years post MBA. But for those 7 years that ~200k which he lost in his MBA would have grow to about 400k on a 10% compunded basis. If you tweak the numbers even further and put in the fact that for each of those 7 years he would be contributing an additional 25k per annum, the number stands at 660k.

Yes you read it right thats -660k USD.

No wonder he isnt planning on doing an MBA.

PS: If you are wondering about the accuracy of the math, assign 40k in savings per annum post MBA for the first 7 years, and use a compounding rate of 10%.

Next post: Do MBAs make good analysts in the stock market in other words do they have the expertise to be a good analyst or is it more jargon bombarding and fancy verbosity of the obvious is what they do??