CFA Society Chicago NewsBrief
Dec. 2, 2014

Bond funds load up on cash
The Wall Street Journal
Large bond funds are holding the most cash since the financial crisis as portfolio managers brace for potential price swings and unruly trading ahead of an expected Federal Reserve rate increase in 2015. The top 10 U.S. bond funds by assets held an average 6.6 percent of their portfolios in cash at their latest reporting date, said fund tracker Morningstar Inc. That is double the sum they set aside last year and the most since 2007.More

Are you ready to discuss compensation?
CFA Chicago
Managing your career and searching for a new position brings many challenges to light. At this event you will gain valuable insight and recommendations from internal and external recruiters and HR professionals on how you can prepare for your career search, navigate successfully through negotiating and discussing compensation and best practices for networking. Other points for discussion will include what to expect during the interview process and how to effectively partner with internal and external recruiters. Join us on Tuesday, Dec. 9 at 3:30 for a discussion featuring panelists Katie J. Banks (Institutional Capital LLC), Danielle Dutcher (Northern Trust), Laura Pollock (strategic advisor to leading asset management firms) and Jim Schroeder (Executive VP - Financial Services sector).More

Get prepared with Kaplan Schweser
CFA Chicago
The June 2015 CFA exams will be here before you know it! You are invited to join leaders from CFA Chicago and members from Kaplan Schweser to find out how to best prepare for the CFA exam. Join CFA on Thursday, Dec. 11 from 5 p.m. - 7 p.m. for a CFA Exam study group kick-off party & open house. Those in attendance will have an opportunity to win a scholarship for a prep-course study package awarded by Kaplan Schweser. More

Bullard: President of the Federal Reserve of St. Louis
CFA Chicago
James Bullard, as president and chief executive officer of the Federal Reserve Bank of St. Louis, participates in the Federal Open Market Committee (FOMC) and directs the activities of the Bank's head office in St. Louis and of its branches in Little Rock, Ark., Louisville, Kentucky, and Memphis, Tennessee. An economist, Dr. Bullard joined the Bank in 1990. His research has appeared in numerous professional journals, including the American Economic Review, the Journal of Monetary Economics, Macroeconomic Dynamics and the Journal of Money, Credit and Banking. A peer reviewer for many periodicals, he currently serves as co-editor of the Journal of Economic Dynamics and Control. Join CFA on Jan. 16 at 12 p.m. for the Distinguished Speaker Series featuring James BullardMore

Book review: The Lunacy of Modern Finance Theory and Regulation
CFA Institute's Enterprising Investor
The introduction of The Lunacy of Modern Finance Theory and Regulation reproduces the following headlines of Financial Times articles explaining short-term movements in stock prices: “Wall St Rallies as Crude Tumbles” (Nov. 4, 2004); Wall St Lower as Falling Oil Hits Energy Sector” (May 12, 2005). As University of Melbourne senior lecturer Les Coleman points out, the well-respected Financial Times implies in one instance that a drop in crude oil prices causes stock prices to rise and in another that it causes them to fall. This illogic may faintly justify the “lunacy” in the title of Coleman’s book, but it is an example drawn from journalism, rather than financial theory or regulation, his primary targets.More

Chicago tech IPOs are aging well — except you-know-who
Crain's Chicago Business
A flurry of initial public offerings by local tech companies has been widely regarded as evidence that Chicago has arrived as a player in the digital economy. After all, an IPO seems like a crowning achievement, a long-sought dream come true. They're celebrated with Champagne toasts, bell-ringing and congratulatory speeches. But it's a mistake to regard the IPO as the ultimate corporate accomplishment.More

Rauner on Illinois pensions: 'Don't change history'
WMAQ-TV
Gov.-Elect Bruce Rauner changed his tune to defend retired state employee's pensions, remarking that it's most important to "protect what is done — don't change history. Don't modify or reduce anybody's pension who has retired, or has paid into a system and they've accrued benefits. Those don't need to change." Rauner's public comments came several days after a Springfield judge declared unconstitutional the 2013 pension reform bill passed by predecessor Pat Quinn, who remains in the governor's office through mid-January. More

Most investors follow modified versions of buy-and-hold or valuation-informed indexing
Seeking Alpha
Most of Rob Bennett's columns argue for the merits of Valuation-Informed Indexing (the model for understanding how stock investing works rooted in the research of Yale Economics Professor Robert Shiller) over Buy-and-Hold (the model for understanding how stock investing works rooted in the research of University of Chicago Economics Professor Eugene Fama). The reality is that most investors follow modified versions of one of the two research-based models, strategies that Bennett refers to as Strategy C (the modified version of Buy-and-Hold) and Strategy D (the modified version of Valuation-Informed Indexing).More

Investors pull back on home purchases
Chicago Real Estate Daily
The big-money investors that gobbled up thousands of local homes aren't as hungry anymore. Institutional investors accounted for 4.7 percent of Chicago-area home sales in the third quarter, down from 7.6 percent a year earlier, according to Irvine, California-based RealtyTrac. Investor activity peaked at 10 percent of the sales in first-quarter 2013, according to RealtyTrac, which defines institutional investors as business entities that have purchased at least 10 homes in a year.More

Combine growth and value to win
Real Money
Tim Melvin of The Street had a little free time this week so he spent it testing numbers and theories of investing. Melvin has long been fascinated by the theory of Cliff Asness of AQR Management and a few others that combining growth-oriented momentum investing with a value approach inside a portfolio would outperform the overall market. It is a great theory, but a lot of the great theories deal with such large subsets of stocks they cannot be easily replicated in real life. More

The Fed is rattled by elusive inflation, but loath to sound alarm
Reuters via Business Insider
With the U.S. economy humming along at its fastest clip in more than a decade, the Federal Reserve should be confident about its ability to weather a global slowdown and start lifting interest rates around the middle of next year. But then there is inflation. Interviews with Fed officials and those familiar with its thinking show the mood inside is more somber than the central bank's reassuring statements and evidence of robust economic health would suggest. More

Questions surround IMET's decision to buy repurchase agreements
Chicago Tribune
An Oak Brook investment pool, which recently disclosed a $50 million trading loss involving taxpayer money, didn't follow the same safeguards to minimize risk as similar funds in Illinois and around the country, the Tribune has found. Starting last year, the Illinois Metropolitan Investment Fund, or IMET, began buying complicated securities tied to government-backed loans. More