fxguy1234 Wrote: ------------------------------------------------------- > Name some of these HUGE holes bromion… Well, you might be in a different boat because you have an accounting degree, but here goes: 1) The accounting is a joke. A serious joke. You learn to calculate a few ratios and about things like percentage of completion accounting. I’ve looked at hundreds of companies in the last year across many industries, and percentage of completion was applicable to ONE of them (and then only just barely). Whew, glad I learned that! 2) The economics / business analysis stuff has nothing to do with actually analyzing a business intelligently. They briefly refer to Porter’s 5 Forces as if it’s some kind of template that you can just overlay onto a business or industry. In practice, it is much more difficult than that. 3) The valuation section is a joke. “This is a P/E. Here is how you calculate P/E.” Most of the “real” investors I know don’t even use P/E ratios because they’re difficult to compare across companies due to tax and capital structure decisions and because earnings are so widely manipulated by management (some of which is hard to detect). The other valuation metrics receive insufficient coverage at best. Sure, you learn to caluvate the ratios, but not actually how to use them or what they are good for in the real world. 4) I think the fixed income stuff was pretty much a joke, too. Instead of learning interesting and applicable things about the bond markets, you get minutiae on how to calculate decision trees for putable bonds and all kinds of similarly useless crap. I actually don’t know the first thing about the bond markets (I work in equities) other than how to value some obscure bonds, which is pretty sad for someone who finished the CFA program. I could go on, but I think those four areas are significantly large and are obvious examples of things that pretty much any investor or aspiring finance student would want to know about, but which the CFA exams completely fail to address on an adequate level.
Well, I won’t argue with you on some of the minutiae on the interest rate trees, I agree with that. I also think Fixed Income is terribly complex field that probably deserves it’s own designation. As far as addressing things on an “adequate” level … I think you could say that about any “education” then. Your bachelor’s degree probably didn’t teach you how they do everything in the real world did it? I bet a PhD is stats still needs to take a few days to get adjusted to how the show runs at a hedge fund. I think formalized education will always lag the real world to some extent, the practitioners are continuously evolving and I only got a new text book every other year. My point is that new practices and methods are coming out all the time and it would be impossible to try to incorporate all of that when the goal is to merely show people hey this is the heart, here is the kidney, before explaining the amount of detail to people on how to do open heart surgery. That’s probably something you could only learn from observing. My point is hopefully you’d learn the specifics and details of your practice when you are doing just that, since you’ve heard of what a P/E is using P/CF isn’t too much of a stretch for you. I learned 20x more about FX from talking to people and on the job than I did from the measly study sessions in Econ in level 2. But still I feel it would give a layman at least the tools to know wtf is going on when I say “I bid on a Yen Put Dollar Call @ 36 delta” or something… There will always be lapses in how stuff is done in practice versus academia. I’m sure there are differences between shops and how they use the tools. I don’t think you can argue that learning what a P/E is and does is a waste of time just because no one actually uses it in the field. I think the takeaway is the concept which can be applied to other methods.
Some study can be too narrow as well - my wife has a PhD that was gained by spending three years studying a fungus that lives in sheep shat
bromion, you say the CFA helped a lot in getting your current job. While you also speak to that the CFA knowledge does not assist you in excelling at your job. So in 2-5 years down the line, when you look to hire a junior, how much weight will you give to the CFA?
Bromion, it seems like you’re saying that all this booklearnin’ is a waste—you can learn everything you need to know on the job. I know someone who tried that. He became an equity analyst with a top bank in Wall Street and that is all he has ever known. As times have gotten harder, he has watched his career slide backwards every year. That is a risky approach to take, and it’s very narrow. I remember studying for Level 2, thinking that all this stuff on MBS was so US focused that it really made the CFA’s claim to be international a stretch. But now what would you think about a European equity analyst who had no clue about how MBS or CDS markets functioned? I currently have virtually no use for 60% of the curriculum, but I am very glad that I have been exposed to concepts like commodities swaps and private equity valuation because I can see how that might be relevant some day and it gives me more flexibility in my future career. The whole US education system is built on the idea that learning is theoretical and when you graduate you can’t really do anything. So you then have to get on the job training. European systems have a more practical internship program as part of their undergraduate curriculum. The CFA also gives you a broad theoretical framework and then it is up to you to specialize. I don’t think having Excel modeling modules in a fourth year would make the program stronger. I also think that is a reason why the CFA has a work-requirement component—they recognize that just a theoretical basis is not enough to certify someone as a finished product that they are ready to stamp their brand on. The assumption is that with several years in an industry, you should have some kind of specialization and practical skills that you bring to the table. I also disagree that the valuation and accounting techniques taught are so thin. They go way beyond what most analysts use in their reports (and they also go way beyond PE). I am willing to bet that most people with the CFA at my job are more skeptical and more capable of spotting shady accounting than people without it. Yeah, there’s a lot of crap about LIFO liquidations and such but, again, hopefully you will never need it, but if you do see it in a report, at least you won’t have to turn the page and pretend you never read it.
the thing is, finance isn’t that deep or theoretically challenging for most part. don’t think that just cause you get into more details you actually “know” more. the accounting was enough for me to go through the annuals. with the CFA and some common sense and history, you have enough knowledge to pick good stocks.
newsuper Wrote: ------------------------------------------------------- > My main complaint about CFA is that it’s largely a > short-term cramfest. You try and overload your > brain with info over a short period of time, dump > it all out on paper over 6 hours and sadly that’s > really it for a lot of the material. Four weeks > after the L1 exam I couldn’t for the life of me > remember most the crap I had just been examined > on. > > I think the material is acceptable (you will never > make every happy on that one), just not convinced > about the structure/methodology of the > qualification. Agree with this. I have finished the program and am reading stuff again to learn what I have forgotten. I think what Bromion is getting at is that the CFA fails to give the 30,000 feet view of how to use many of the tools in real life. The analogy to the car was fairly relevant. The CFA program was built with the encouragement of Benjamin Graham. I’d still love to know how best to properly evaluate a company. I’ll admit I dont. I do however have an overload of information. I can sure as hell calculate a Dupont ration anyway you want. Or a three stage DCF model. Hopefully I will *get it* in this read through at my leisure. Wouldn’t it be great if we had his pupil take a look over the curriculum and say this is how I would evaluate a company. We need more signposts. Other than that it does commit you to work hard at reading a lot of material quickly. Not sure if that is effective, but there is no alternative if you want to pass.
Mr. Tambourine Man Wrote: ------------------------------------------------------- > Bromion, it seems like you’re saying that all this > booklearnin’ is a waste—you can learn everything > you need to know on the job. I know someone who > tried that. He became an equity analyst with a > top bank in Wall Street and that is all he has > ever known. As times have gotten harder, he has > watched his career slide backwards every year. > That is a risky approach to take, and it’s very > narrow. I remember studying for Level 2, thinking > that all this stuff on MBS was so US focused that > it really made the CFA’s claim to be international > a stretch. But now what would you think about a > European equity analyst who had no clue about how > MBS or CDS markets functioned? I currently have > virtually no use for 60% of the curriculum, but I > am very glad that I have been exposed to concepts > like commodities swaps and private equity > valuation because I can see how that might be > relevant some day and it gives me more flexibility > in my future career. > > The whole US education system is built on the idea > that learning is theoretical and when you graduate > you can’t really do anything. So you then have to > get on the job training. European systems have a > more practical internship program as part of their > undergraduate curriculum. The CFA also gives you > a broad theoretical framework and then it is up to > you to specialize. I don’t think having Excel > modeling modules in a fourth year would make the > program stronger. I also think that is a reason > why the CFA has a work-requirement component—they > recognize that just a theoretical basis is not > enough to certify someone as a finished product > that they are ready to stamp their brand on. The > assumption is that with several years in an > industry, you should have some kind of > specialization and practical skills that you bring > to the table. > > I also disagree that the valuation and accounting > techniques taught are so thin. They go way beyond > what most analysts use in their reports (and they > also go way beyond PE). I am willing to bet that > most people with the CFA at my job are more > skeptical and more capable of spotting shady > accounting than people without it. Yeah, there’s > a lot of crap about LIFO liquidations and such > but, again, hopefully you will never need it, but > if you do see it in a report, at least you won’t > have to turn the page and pretend you never read > it. Totally agree with everything you had to say. Bottom line is: You have to hire one of 3 guys who all graduated from the same undergraduate program, one of them completed all 3 levels of the CFA, the second got an MBA right after school and the third didn’t do anything, which one would you pick? For me the choice is clear, no questions asked, at least I know that the guy with the CFA knows a little bit about a lot of finance areas (which can’t be said with certainty for any of the other two), he can deliver under tough exam conditions, and he has a strong commitment to the industry.
I think the problem here is choice. You can choose not to get the CFA, but a lot of employers these days want you to have it. The educational value is limited by the focus of the curriculum, which is why you are starting to see combination’s of CAIA+CFA or CFP+CFA, CPA+CFA…you can’t really expect to walk out of one program and be a full fledged risk analyst, accountant, and economist (among others). It’s really about a foundational learning. No I don’t think its the be all end all to getting you ahead or making you that much better then the next guy, but it is definitely a good starting point for a lot of people.