2008 was a “Holy Mackerel” year for us.
It is exactly a year since I was diagnosed with Transverse Myelitis a rare neurological syndrome caused by inflammation of the spinal cord. (http://www.myelitis.org/tm.htm). One day I was well, the next I was paralyzed from the 4th vertebrae below the neck, cause completely unknown. It took them 3 weeks to diagnose it. I was unable to eat and drink for a month. So I spent last April, May and June in hospital. I was struck very hard and lost total motor, sensory, bowel and bladder and there is nothing they can do for you. June 12th I was released to the tender loving care of the family. Not able to feel or move a muscle below the breast (I did have the use of my arms, and through out this I felt well!)
Harriet was in her final year at Newcastle reading English and graduated on the 8th July 2008, we had planned to all attend, that was clearly out of the question. While I was in hospital Suzanne had a horrid time, working, trying to manage my company, looking after the boys and visiting me in hospital (10 mile drive each way). She spent at least 3 hours with me every day. When I was released I could tell she was frazzled! And really needed a break. She should go back to England and the boys would just have to look after me.
Richard was 15 (now 16) and Joshua 13. Some of the things they had to help me with are right out of the realm of a teenager! We had a lift put into garage so I could get my wheelchair into the house. I would never have guessed how expensive a good manual w/c was - >6000 dollars! They had trained me to transfer in and out of the wheelchair but I needed a transfer board to help me, and when I did my first transfer in the bed Suzanne had prepared for me in my study I got it all wrong and fell! Great start, luckily Richard was able to catch me and I came to no harm.
Our home is very poorly set out for a paraplegic! All the bedrooms and bathrooms are either down or up a floor, so I was left to have a show on the deck!
Well I found I had some true friends – four of my JP Morgan buddies arranged to each spend 5 days with me while Suzanne was away! So I did have adult supervision and someone to drive to therapy! 3 flew from NY and one from London. I was so proud of the boys they were marvelous and did all the heavy lifting for three weeks. Suzanne and Harriet arrived back on the 15th July and pooph! The boys were just dust – gone almost to the second the car pulled up outside.
In August Suzanne took me to the beach… we had three weeks there and Harriet lead the program! 30 mins to build upper body strength and then an hour in the pool! And then the moment slowly began, first a toe, then a knee.
By October I could wobble and was able to once more get upstairs and have a bath! It was a major effort but super worth it.
In November the sensory side changed, clearly my nerves must have been repairing but the brain mixes all the signals and I was just in a sea of pain! This has continued since and is the major challenge, but I have felt just the last few weeks that this two is improving.
Today I went to the Quail Hollow golf tournament here in town to watch Tiger and Vijay play the pro-am. I was able to drive myself! I had a golf car to drive me around – I have come a long way and as we enter May 2009! I am sure I am going to be able to resume my life this year. I have booked a cruise in feb 2010! I plan to be at least 90% by then.
Harriet is doing a masters at Durham and comes home for good in July. I am really looking forward to having her around after 8 years in the UK. She has applied to Law school, we will see.
Richard has a job serving dinners to the old folk but I doubt he will go to college. Joshua is great and goes to High School next year.
I closed my business in june 2008 and therefore am now unemployed! All a major disaster.
As for 9-11, we live in Charlotte 650 miles south of NY so there was no reason for me to be anywhere close. My business at that time had crashed and burned in the internet bubble and as a result of a board room coup I was out of my own firm. (the company is still going and doing ok and may do well out this current mess). I had been offered a job in NY and flew up to start work – my first day was Tuesday 9-11 2001! I landed on a clear blue morning at Newark airport and caught the bus/shuttle at 8:20 am to the World Trade center where my new employer was located!. Yes you guessed it I never got there but had a birds eye view of the whole thing. I was unable to get home until Friday. The firm was on the 25th and 55 floors – one person died, the rest got out!
Thursday, April 30, 2009
Wednesday, March 18, 2009
Bye-Bye to Obtaining a Mortgage on a Condo! The condo trap!
Condo market to be murdered by Freddie and Fannie.
Has so much capital ever before been wiped out by the stroke of a pen - and yes this is our government.
I bet you would not guess it is impossible to get a mortgage on a beautiful downtown condo! How is this possible? But Freddie and Fannie have some rule that if 10% of the building is still owned by the developer and the developer has these up for rent, a mortgage lender can not pass the mortgage to the GSE! In this market that means no mortgage. This means the developer cant sell his unsold units, the situation is not correctable. This is what has happened to me – as a result my condo is unsellable.
See WSJ story http://online.wsj.com/article/SB123733304341863319.html?mod=rss_whats_news_us
Here is a letter I wrote to my congress person in the hope of finding out why we have this rule.
Dear Rep. Sue Myrick,
Inequitable Rules from Freddie and Fannie.
In 2003 I purchased a condo in The Arlington downtown Charlotte as an investment. In early 2008 I became very ill and became paralyzed and was forced to close my business (hopefully only temporally) in Matthews. Today my income is limited to Disability.
In October I asked Allen Tate to sell the condo. They valued the property at 850k. Today I have the property on the market at 650k. I have a mortgage with Bank of America for 440k. I have now begun the steps to hand the property over to them as I can no longer make the monthly payments.
The key appears to the GSE’s treatment of condo developments where the developer has a continuing interest. No lender will give a mortgage on the Arlington. There is some rule that if more than 10% is owned by the developer any mortgage is not insurable by the GSE’s. This ensures no condo is re-sellable.
So the only way I can sell my condo is to a cash buyer. I have spoken to the developer and he would love to sell the remaining properties he owns but he is caught is the same trap.
This makes no sense.
I have tried to contact Freddie, Fannie and numerous lenders. The GSE’s will provide me no information. The lenders confirm that they will not make loans.
If this is true these rules will have a very negative impact on the uptown condo market in Charlotte. I have come to terms with handing my condo over to Bank of America as I need to concentrate on my health. But it is my duty to my fellow citizens to bring this inequitable ruling by a government agency to attention of everyone.
Regards
Raymond
Has so much capital ever before been wiped out by the stroke of a pen - and yes this is our government.
I bet you would not guess it is impossible to get a mortgage on a beautiful downtown condo! How is this possible? But Freddie and Fannie have some rule that if 10% of the building is still owned by the developer and the developer has these up for rent, a mortgage lender can not pass the mortgage to the GSE! In this market that means no mortgage. This means the developer cant sell his unsold units, the situation is not correctable. This is what has happened to me – as a result my condo is unsellable.
See WSJ story http://online.wsj.com/article/SB123733304341863319.html?mod=rss_whats_news_us
Here is a letter I wrote to my congress person in the hope of finding out why we have this rule.
Dear Rep. Sue Myrick,
Inequitable Rules from Freddie and Fannie.
In 2003 I purchased a condo in The Arlington downtown Charlotte as an investment. In early 2008 I became very ill and became paralyzed and was forced to close my business (hopefully only temporally) in Matthews. Today my income is limited to Disability.
In October I asked Allen Tate to sell the condo. They valued the property at 850k. Today I have the property on the market at 650k. I have a mortgage with Bank of America for 440k. I have now begun the steps to hand the property over to them as I can no longer make the monthly payments.
The key appears to the GSE’s treatment of condo developments where the developer has a continuing interest. No lender will give a mortgage on the Arlington. There is some rule that if more than 10% is owned by the developer any mortgage is not insurable by the GSE’s. This ensures no condo is re-sellable.
So the only way I can sell my condo is to a cash buyer. I have spoken to the developer and he would love to sell the remaining properties he owns but he is caught is the same trap.
This makes no sense.
I have tried to contact Freddie, Fannie and numerous lenders. The GSE’s will provide me no information. The lenders confirm that they will not make loans.
If this is true these rules will have a very negative impact on the uptown condo market in Charlotte. I have come to terms with handing my condo over to Bank of America as I need to concentrate on my health. But it is my duty to my fellow citizens to bring this inequitable ruling by a government agency to attention of everyone.
Regards
Raymond
Tuesday, March 10, 2009
The Ten Rules of Good Interviewing:
© Raymond May 2009
Tips for successful interviewing
OK your resume and cover letter were good enough to get you the interview! Can you get to the next step? Here are some thoughts to help you through the interview.
Rule 1. It is all about them, the hiring company, not about you.
They will only hire you if they believe that you will bring a benefit.
So work out how to convey how you can help the company! What benefit do you add! This could be a direct experience, could be local knowledge, you could be local and will not relocate later, could be many things, just do your best to identify what will hold you above the rest.
Companies are getting 100’s of resume for each job search, most are not qualified, and why are you qualified? Make it clear in your cover letter. I say “why can’t they read?” meaning why did you send a resume for this job? Most applicants are not qualified; it is all based on HOPE. If you are not qualified you will not get a response, but if you are – make sure it is clear! Why are you QUALIFIED?
If you don’t know what the company is looking for, why are you applying? (The “I was over qualified” excuse is over done!)
Rule 2. Keep it relevant at all times.
For example, how would you answer the classic icebreaker question? “Tell me about yourself?”
It is very easy to get off topic and just go wide. There are only two ways to answer this question. The first is to answer it with another question – make the interviewer do some work and actual ask what they want answered! So the question would sound like “what specially would you want to know about me?” Alternatively you could answer it with a personal marketing statement. Always have a short marketing statement prepared.
This is what it looks like, prepare a 3 part statement:Part 1 – One sentence summary of career to date.Part 2 – Accomplishment you are proud of that will capture the employer’s attention. (“while I was at ….)Part 3 – One sentence summary of what you want to do next in your career.
All employers are looking for the same three things:Skills, Experience and Stability
Make sure all your answer help the interview answer one of the three things!
Don’t ramble. Keep the length of your answers not too short and not too long, but just right. Don’t bore the interviewer!
Rule 3. Focus on personal accomplishments to highlight benefits you bring. Avoid general statements.
Prepare a list of as many accomplishments as you can come up with. Write these up in short paragraphs. You are going to get many questions in interviews that are skill, knowledge or behavioral based. For example, what’s the most difficult situation you ever faced on a job?Answer questions with examples, so you will be glad you did your homework. Remember rule 1 – it is all about them, how do you benefit them? How do your previous accomplishments and experiences benefit them?
Structure your answers using the STAR method:
Situation
Task
Action
Result
“I was in this situation, I was given this task, I took the following actions and result was…”See how all the accomplishments you prepared for your marketing statement will be very useful?But be prepared to highlight the “intangible” using accomplishments. Saying you are a “good team player, good communicator, hard worker, cultural fit, internally motivated” with no context is hollow.
Rule 4. Be prepared for a resume review. The key will be to understand your career moves. Why you made the decision you have made.
Always key on the positive – for example, I left A to go to a better opportunity at A. Never be negative – for example, I could not stand my boss is a no no.
Be ready to answer the though questions, but be truthful. Be positive at all times.
Rule 5. Listening is harder and more important.
We were given two ears and only one mouth. Make sure you are engaged and when the interviewer is speaking you make it obvious that you are listening.
Rule 6. No Me Questions.
Bring up nothing that relates to you. Like “what is the pay” or “How much vacation do I get”…. These questions leave a very negative impression.
Rule 7. Do your homework. Blessed will be those that do their homework! Know everything in the public domain about the company. Read their web page or accounts if available.
Rule 8. Understand the objective.
Sometimes it is to continue the interview process and get a follow up interview, sometimes it is the decision maker interviewing you and you are trying to land the job.
You need to make sure you keep in mind what you are trying to answer:
Do you understand the opportunity? - ask good questions
Can you do the job?
Do you want the job?
Rule 9. Always be prepared to ask good questions.
Never pass on an opportunity to ask questions, the quality of your questions will greatly help your status.
Prepare questions before hand, use these 3 categories to help you:
- Questions about the job / opportunity
- Questions about the company, however never ask something that is publicly available.
- Questions about the interviewer, how about testing them with “tell me about yourself”
Sample Questions:
- What would you expect me to achieve in the first 6 months?
- Is there anything I can tell you about my qualifications that I haven’t said yet?
- What are the principal challenges I would face in this job?
- Why do you like working here?
Rule 10. Never forget Rule 1, it’s all about them!
Tips for successful interviewing
OK your resume and cover letter were good enough to get you the interview! Can you get to the next step? Here are some thoughts to help you through the interview.
Rule 1. It is all about them, the hiring company, not about you.
They will only hire you if they believe that you will bring a benefit.
So work out how to convey how you can help the company! What benefit do you add! This could be a direct experience, could be local knowledge, you could be local and will not relocate later, could be many things, just do your best to identify what will hold you above the rest.
Companies are getting 100’s of resume for each job search, most are not qualified, and why are you qualified? Make it clear in your cover letter. I say “why can’t they read?” meaning why did you send a resume for this job? Most applicants are not qualified; it is all based on HOPE. If you are not qualified you will not get a response, but if you are – make sure it is clear! Why are you QUALIFIED?
If you don’t know what the company is looking for, why are you applying? (The “I was over qualified” excuse is over done!)
Rule 2. Keep it relevant at all times.
For example, how would you answer the classic icebreaker question? “Tell me about yourself?”
It is very easy to get off topic and just go wide. There are only two ways to answer this question. The first is to answer it with another question – make the interviewer do some work and actual ask what they want answered! So the question would sound like “what specially would you want to know about me?” Alternatively you could answer it with a personal marketing statement. Always have a short marketing statement prepared.
This is what it looks like, prepare a 3 part statement:Part 1 – One sentence summary of career to date.Part 2 – Accomplishment you are proud of that will capture the employer’s attention. (“while I was at ….)Part 3 – One sentence summary of what you want to do next in your career.
All employers are looking for the same three things:Skills, Experience and Stability
Make sure all your answer help the interview answer one of the three things!
Don’t ramble. Keep the length of your answers not too short and not too long, but just right. Don’t bore the interviewer!
Rule 3. Focus on personal accomplishments to highlight benefits you bring. Avoid general statements.
Prepare a list of as many accomplishments as you can come up with. Write these up in short paragraphs. You are going to get many questions in interviews that are skill, knowledge or behavioral based. For example, what’s the most difficult situation you ever faced on a job?Answer questions with examples, so you will be glad you did your homework. Remember rule 1 – it is all about them, how do you benefit them? How do your previous accomplishments and experiences benefit them?
Structure your answers using the STAR method:
Situation
Task
Action
Result
“I was in this situation, I was given this task, I took the following actions and result was…”See how all the accomplishments you prepared for your marketing statement will be very useful?But be prepared to highlight the “intangible” using accomplishments. Saying you are a “good team player, good communicator, hard worker, cultural fit, internally motivated” with no context is hollow.
Rule 4. Be prepared for a resume review. The key will be to understand your career moves. Why you made the decision you have made.
Always key on the positive – for example, I left A to go to a better opportunity at A. Never be negative – for example, I could not stand my boss is a no no.
Be ready to answer the though questions, but be truthful. Be positive at all times.
Rule 5. Listening is harder and more important.
We were given two ears and only one mouth. Make sure you are engaged and when the interviewer is speaking you make it obvious that you are listening.
Rule 6. No Me Questions.
Bring up nothing that relates to you. Like “what is the pay” or “How much vacation do I get”…. These questions leave a very negative impression.
Rule 7. Do your homework. Blessed will be those that do their homework! Know everything in the public domain about the company. Read their web page or accounts if available.
Rule 8. Understand the objective.
Sometimes it is to continue the interview process and get a follow up interview, sometimes it is the decision maker interviewing you and you are trying to land the job.
You need to make sure you keep in mind what you are trying to answer:
Do you understand the opportunity? - ask good questions
Can you do the job?
Do you want the job?
Rule 9. Always be prepared to ask good questions.
Never pass on an opportunity to ask questions, the quality of your questions will greatly help your status.
Prepare questions before hand, use these 3 categories to help you:
- Questions about the job / opportunity
- Questions about the company, however never ask something that is publicly available.
- Questions about the interviewer, how about testing them with “tell me about yourself”
Sample Questions:
- What would you expect me to achieve in the first 6 months?
- Is there anything I can tell you about my qualifications that I haven’t said yet?
- What are the principal challenges I would face in this job?
- Why do you like working here?
Rule 10. Never forget Rule 1, it’s all about them!
Monday, March 2, 2009
History of Value at Risk or V@R
(c) Raymond May 2008
It was 1989, Angel Court, City of London the swaps trading floor for JP Morgan; Michael Einhoven recently replacing Connie Vostad as group head asked me into his office. With his feet on his desk and picking his nose he complained that he didn't understand all the risks that the group was running, was it not possible to have a single number that described these risks, rather than spread this, gamma that.
In the prior three years I had completed two large system developments using JP Morgan's mainframe infrastructure, the first captured all the Swap deal data and was used to operational support the business and produce accrual accounting results. The second supported mark-to-market accounting, gap analysis and position descriptions. The second system was way before its time, and found no takers, it was many years before any of these models became standard.
So I embarked on a project to describe the risks in the swaps business as a single number. Using a research document produced by Salomon Brothers that stated that all changes in the yield curve could be described in three parameters - as a parallel change in rates, a steepening and a humping. Based on this we generated our first simple number based on the square root of the squares of three simple observations - a 10 basis point parallel shift - a 25 basis points steepening and - a small 5 basis point humping in the middle.
I also began to collect in a spreadsheet all daily pricing parameters. Gradually as this data was collected, day by day options for calculating a more accurate representation increased. I asked our research group in New York if they could provide me with any help. Next thing I knew I was sharing my desk with Dr. Gustav. Together we generated a model to describe a position in terms of the two standard derivations loss based on historical rates. Very simply this stated " the amount of money that the portfolio's loss or gain due to market movements would not exceed 19 out of 20 days" - bingo we had the number! the Value at Risk (note we initially we set it at 95% confidence, the market has since moved to 99%)
I finally had this number which we dubbed Value at Risk in place at the end of 1991. I had developed a spreadsheet which all portfolio managers in the Swaps Group now used. This took a starting position from the mainframe in the morning, added all new deals and calculated the portfolio - inter-day position, daily profit and loss and final Value at Risk.
At the start of 1992 I left London to join the Trading desk in New York where my first task was to introduce my position spreadsheet to our US dollar operations. By 1994 I was the lead trader for US Dollars and one day I was summoned by the current top man Peter Hancock. Peter complained that he had a Value at risk for each currency but he had no overall Value at risk, and he needed one as soon as possible.
I took myself off the desk for a week and constructed a new spreadsheet which expanding the model for all currencies. The spreadsheet automatically extracted data from all the individual spreadsheets without the users even knowing and I was able to run a total picture by 4pm in New York. The results were presented daily at a risk management meeting which would be dubbed the 4:15 Meeting. The spreadsheet I developed would be called the "Ray May Spreadsheet" and would remain in place until eventually being replaced at the end of the 90's by a 40 million dollar project named "Pyramid".
JP Morgan Research Group released the Value at Risk model and the associated data to the general market as Risk Matrix in 1994 as part of a campaign to persuade Congress that derivatives where not a risk to the system following P&G and Gibson Greeting Inc large derivative losses.
It was 1989, Angel Court, City of London the swaps trading floor for JP Morgan; Michael Einhoven recently replacing Connie Vostad as group head asked me into his office. With his feet on his desk and picking his nose he complained that he didn't understand all the risks that the group was running, was it not possible to have a single number that described these risks, rather than spread this, gamma that.
In the prior three years I had completed two large system developments using JP Morgan's mainframe infrastructure, the first captured all the Swap deal data and was used to operational support the business and produce accrual accounting results. The second supported mark-to-market accounting, gap analysis and position descriptions. The second system was way before its time, and found no takers, it was many years before any of these models became standard.
So I embarked on a project to describe the risks in the swaps business as a single number. Using a research document produced by Salomon Brothers that stated that all changes in the yield curve could be described in three parameters - as a parallel change in rates, a steepening and a humping. Based on this we generated our first simple number based on the square root of the squares of three simple observations - a 10 basis point parallel shift - a 25 basis points steepening and - a small 5 basis point humping in the middle.
I also began to collect in a spreadsheet all daily pricing parameters. Gradually as this data was collected, day by day options for calculating a more accurate representation increased. I asked our research group in New York if they could provide me with any help. Next thing I knew I was sharing my desk with Dr. Gustav. Together we generated a model to describe a position in terms of the two standard derivations loss based on historical rates. Very simply this stated " the amount of money that the portfolio's loss or gain due to market movements would not exceed 19 out of 20 days" - bingo we had the number! the Value at Risk (note we initially we set it at 95% confidence, the market has since moved to 99%)
I finally had this number which we dubbed Value at Risk in place at the end of 1991. I had developed a spreadsheet which all portfolio managers in the Swaps Group now used. This took a starting position from the mainframe in the morning, added all new deals and calculated the portfolio - inter-day position, daily profit and loss and final Value at Risk.
At the start of 1992 I left London to join the Trading desk in New York where my first task was to introduce my position spreadsheet to our US dollar operations. By 1994 I was the lead trader for US Dollars and one day I was summoned by the current top man Peter Hancock. Peter complained that he had a Value at risk for each currency but he had no overall Value at risk, and he needed one as soon as possible.
I took myself off the desk for a week and constructed a new spreadsheet which expanding the model for all currencies. The spreadsheet automatically extracted data from all the individual spreadsheets without the users even knowing and I was able to run a total picture by 4pm in New York. The results were presented daily at a risk management meeting which would be dubbed the 4:15 Meeting. The spreadsheet I developed would be called the "Ray May Spreadsheet" and would remain in place until eventually being replaced at the end of the 90's by a 40 million dollar project named "Pyramid".
JP Morgan Research Group released the Value at Risk model and the associated data to the general market as Risk Matrix in 1994 as part of a campaign to persuade Congress that derivatives where not a risk to the system following P&G and Gibson Greeting Inc large derivative losses.
Monday, February 23, 2009
A History of Mark to Market Accounting
Accounting for Derivatives and
How bonuses are paid.
© Raymond May 2008
It was a Monday morning in 1995, at that time I was the head trader of US fixed income derivatives in New York for JP Morgan. I arrived at my trading desk at 60 Wall Street later than usual, just after eight having battled through my commute from New Jersey to find a post-it attached to my computer screen to "call Bill". I soon got the message that I was "done"- "oh not to worry the trade had been done at very good levels and a printout was on my desk". "Done" meant a trade had been executed and I owned the resulting position. I quickly scanned the one page and realized it was a very BIG trade, the biggest I had ever seen, at least $15 billion! This was the first time I had ever had a trade executed on my book without consulting me for pricing information. The bond market was open, futures opened in 10 minutes but were trading on the electronic platform. Shock! the futures were printing red, very red, indicating a very large downward market movement. A big market movement on an ordinary day was 10 basis points or one 10th of a percent. This Monday the screen was RED and down big, the futures were showing down more than 50 basis points, the market was not yet open, there was nothing I could do but wait. We were down $25,000,000 before we started, why was I the last person on the planet to know about this trade? As the futures opened the prices continued to fall, now down 75 basis points – I felt ill?
Come bonus time, the bank had lost 25 million but the great and good Investment Bankers that put the deal together claimed to have made 25 million. Now it was all politics and Bill was king and his word was all that counted. So the bank loses all the way round, 25 million on the deal and then pays out a bonus! I of course am blamed for losing 50 million as if it was separate and no one was interested in the truth or it ensuring it did not happen again.
This is a small example of the bonus situation in 2008. And this example occurred in 1995! it has got much worse since then. The best way to get a bonus is to arbitrage the accounting system! There are many ways to take advantage of the accounting system but the simplest is to record a profit based on some model today that will not be realized until sometime in the future.
If there was ever a case when the fixed / variable explanation for high investment banker bonuses 2008 was it, this is the true test. The argument put forward is that investment bankers receive low salaries and a majority of the remuneration is paid in the form of a bonus based on performance. In 2008 all these institutions have lost huge amounts of money and the variable piece should be "zero" but that is not what is happening. "I made money, not my fault someone else lost it" goes the cry. There is some truth to that and anyone truly adding value should be paid, but who is the judge of this value? they certainly don't have my confidence based on my experience. Very few people add much above the benefits offered by the organization (systems, network, processes, brand).
Many good analyses are available on this crisis including in January 09's Economist, which highlights how well the financial models in interest rates, foreign exchange and equities performed. And that it was the poor performance of the CDO (collateralized debt obligation) that lies at the root of this crisis. Although this is a good analysis one element of the investment bank that stands out from my own experience of 13 years in the City and Wall Street which is the true root cause is the accounting model, which revolves on the "bonus pool". Or as I like to say, "getting close to the pig trough".
I remember someone saying to me in the 80's "why invest in Merrill Lynch? if the company makes money the management takes it and if Merrill loses money you take it" it really made me think, and it has disturbed me every since. And now the whole world knows.
When an investment banker claims to have contributed a "$50mm" profit, this is very debatable, but until this year no one debated it. First the 50mm is usually "revenue" not profit and second the revenue is based on very unclear mark to market models and respective allocations.
The basic aim in the accounting model it to align the employees self interest with that of the organization. Make them make money and the rewards are shared. In a classic sales role a salesman is rewarded with commission on successful sales. This is a model well understood in all businesses, but in the financial markets when you are talking CDO or Swaps, what is the "profit"? It all depends on the accounting method. In many businesses "commission" depends on "cash-in" and not just profit. This has not been the case on Wall Street.
Lets go back to the beginning. At JPM we began executing "swaps" in the early 1980's based out of London. A swap (or interest rate derivative) is a relatively simple concept - combine a floating rate note with a fixed rate note allows only the net coupons payment over time between a fixed interest rate and the later market interest rate. This introduced the now popular LIBOR index. This allowed Treasurers to manage interest rate payments without having to call and re-issue bonds and debt. When I joined the accounting group at JP Morgan in London the few deals that had been executed were accounted for as two loans! One fixed and one variable. Each month the accounting department calculated the interest receivable and payable and the net total was the monthly earnings... nice and simple. Accept we did it all by hand, can you imagine that today! 1000 deals computed one at a time! It took all month, so we calculated the monthly earnings just in time to start again. The month earnings number did not vary much month to month, it was very stable.
There is a funny story here, each month we had to report earnings to New York on the 4th day of the month, we never had a chance – we knew the big number – e.g. 4 or 5 million, it was something close to last month, but in order to get the rest of the number we would need many more days, so we simply made them up by taking the last 6 figures from a random 10 pound note!
The average length of the deals at that time was approximately five years. Even with no computers this business generated stable positive income. This was a result of how the business was managed, simply and conservatively - by executing new deals in groups. First a transaction was executed and later one or more equal and opposite transactions where grouped together, leaving a closed group with a positive earning stream. There was no market to market at this time.
My first task was to develop a computer system to help manage this portfolio. It took six months and many long nights. It was at this time that I was approached by the banks external auditors to confirm that the portfolio did not hold a "future loss". Oh what a question? What was the present value of this portfolio? At this time we had no model, the zero curve was a thing of the future. It took 12 months to answer the question. The first model we developed we named 1 plus i, or principal plus interest.
The One plus i model:
From the observed yields on treasury bonds for all maturities and credit spreads we were able to define a current yield curve. All cashflows from all deals are calculated and complied into a single list of date and cashflow amount, the sum of all cashflows by day – as a result each day had either a positive or negative daily total. Moving to the most far out cashflow and dividing it my the appropriate current market rate (i) giving a P amount and an I amount (example - cashflow of 20mm and i =10% on12/31/2020, gives a P = 18.18mm and I = 1.82mm. The P is saved and the I amount is added/subtracted to each original amount listed on each 12/31 annual anniversary. This is performed for each date back to the present date stepping forward one day at a time. The sum of all the P's is the present value of the portfolio. I hope you followed that! Quite simple really and required no complex models. The difficulty was to generate an accurate list of all cashflows. At this stage all the deals where nothing more than paper deal confirmations.
The first run of our model took place on the 8th August 1988 (8.8.88) and we valued 66,666 cashflows! we did this on a mainframe and those two numbers were printed on the top of the green striped computer paper! very chilling. But the value was minus a few trillion and needed much further reconciliation. Between August 1988 and the final audit in January 1989 we were able to calculate the correct number with much certainty, including accounting for future hedging and operational costs. This opened the debate on mark to market accounting, which was easily won and implemented at JP Morgan in 92 based on that first 1988 model. The business head had told me before we started out that “there was over 250mm in NPV”, he was right on the mark!
Once we had developed a method for calculating the mark to market or current value we needed a model to do this daily not just annually. This was accomplished by reversing the 1+i model and creating the zero coupon curve which was first accomplished in that same year 1988, and now a market standard. We reached the zero curve in two places quite independently. In the late summer of 1988 I received a visit from Bob Barker a New York based researcher that had been given the take of developing a pricing model for a swap. He wanted to compare his model to mine. It was amazing we had reached exactly the same conclusions and our models matched exactly. I would have to assume that at the same time others around the street were reaching the same answers. I still have my first zero coupon curve workings – hand written proofs. (Bob’s spreadsheet model later became know as 3 + I and was used through the organization until the late 90’s)
The computation of the net present value of this complex portfolio allowed us to develop two further advances. The first was model position and risk management, the representation of this historically portfolio in terms of today’s market – and allow for the accurate hedging of the whole portfolio and no need to use "matched groups" and secondly the accurate reporting of daily profitability – the change in mark to market over time.
The current positions where calculated using two different methods - one was simply to add the P's that resulted from the 1 + i calculation into annual buckets and the second was to "tweak" the current market rates used as inputs one at a time, recalculating the NPV each time. By changing or tweaking just the 10 year treasury yield by one basis point and re-calculating the NPV the portfolio sensitivity to the ten year rate could be calculated and therefore the correct hedge amount. This allowed large portfolios to be accurately managed.
In the summer of 1989 I now had six month data on the mark to market and was able to monitor the performance on a monthly basis of the business - I was shocked they were making a LOSS! I decided to bring this up with management, who informed me I must be mistaken - they were making record profits! Now it was true that the portfolio was making money, but that was being generated by the historical portfolio, all new business was all being added at a loss. My information was not helpful and certainly could not be true. Sound familiar? My word against all those more knowledgeable managers. Eventually after what was years I was able to win the argument but not before many bonuses were paid along the way. But the power of mark to market accounting was demonstrated for all time.
The next question to resolve was how to allocate profitability (or rather new revenue). From 1989 the best model I developed was the "change report" this allocated the change in NPV from one day to the next to all the possible reasons. Classical interest accrual, movement in market rate, new business etc. This needed the market conditions at the time of all new deal to be captured. This was done in a spread sheet and required a "mid market rate" to be agreed, from which new revenue or bid.offer to be calculated. How should this be allocated between the "marketer" and the "trader" to ensure they were incentives to help each other. It was decided to generate a normal bid.offer margin this was subtracted first and allocate this 60% to the trader and 40% to the marketer, excess profit would be allocated 60% to the marketer.
As you can see the trader was incentivized to "shade" his mid market and the marketer to gain an attractive mid market.
Back to the 1995 trade example: The accounting revenue allocation model was set up for normal business and required a tacit agreement between the trader and the marketer. However the trade executed in 1995 was huge, so huge that the ability to hedge was very uncertain in normal times and certainly very tricky when it was public knowledge and the simple revenue allocation set out above would and could not apply, certainly not based on a prior Friday end of day closing prices when by Monday the market knew of the distress the trade was causing and any hedge could only be executed at very reduced pricing. This irresponsible was small compared to the events that occurred in 2006-2007 but indicated what was likely to happen!
The second issue is the use of revenue, uncertain revenue rather than fully costed profit and loss in setting investment bankers bonuses. It is amazing how little interest senior investment banks have on costs and processes allowing operations to run hog wild in these big organizations. Costs don’t affect how senior peoples bonuses are calculated, so why care? If you have even been in a meeting with senior investment bankers and operations managers and watch the bankers eyes glaze over. No they like everything to key of revenue only.
This is my perspective from inside JP Morgan, at that time nothing or very little was shared across the industry. Today these models are available to be purchased.
How bonuses are paid.
© Raymond May 2008
It was a Monday morning in 1995, at that time I was the head trader of US fixed income derivatives in New York for JP Morgan. I arrived at my trading desk at 60 Wall Street later than usual, just after eight having battled through my commute from New Jersey to find a post-it attached to my computer screen to "call Bill". I soon got the message that I was "done"- "oh not to worry the trade had been done at very good levels and a printout was on my desk". "Done" meant a trade had been executed and I owned the resulting position. I quickly scanned the one page and realized it was a very BIG trade, the biggest I had ever seen, at least $15 billion! This was the first time I had ever had a trade executed on my book without consulting me for pricing information. The bond market was open, futures opened in 10 minutes but were trading on the electronic platform. Shock! the futures were printing red, very red, indicating a very large downward market movement. A big market movement on an ordinary day was 10 basis points or one 10th of a percent. This Monday the screen was RED and down big, the futures were showing down more than 50 basis points, the market was not yet open, there was nothing I could do but wait. We were down $25,000,000 before we started, why was I the last person on the planet to know about this trade? As the futures opened the prices continued to fall, now down 75 basis points – I felt ill?
Come bonus time, the bank had lost 25 million but the great and good Investment Bankers that put the deal together claimed to have made 25 million. Now it was all politics and Bill was king and his word was all that counted. So the bank loses all the way round, 25 million on the deal and then pays out a bonus! I of course am blamed for losing 50 million as if it was separate and no one was interested in the truth or it ensuring it did not happen again.
This is a small example of the bonus situation in 2008. And this example occurred in 1995! it has got much worse since then. The best way to get a bonus is to arbitrage the accounting system! There are many ways to take advantage of the accounting system but the simplest is to record a profit based on some model today that will not be realized until sometime in the future.
If there was ever a case when the fixed / variable explanation for high investment banker bonuses 2008 was it, this is the true test. The argument put forward is that investment bankers receive low salaries and a majority of the remuneration is paid in the form of a bonus based on performance. In 2008 all these institutions have lost huge amounts of money and the variable piece should be "zero" but that is not what is happening. "I made money, not my fault someone else lost it" goes the cry. There is some truth to that and anyone truly adding value should be paid, but who is the judge of this value? they certainly don't have my confidence based on my experience. Very few people add much above the benefits offered by the organization (systems, network, processes, brand).
Many good analyses are available on this crisis including in January 09's Economist, which highlights how well the financial models in interest rates, foreign exchange and equities performed. And that it was the poor performance of the CDO (collateralized debt obligation) that lies at the root of this crisis. Although this is a good analysis one element of the investment bank that stands out from my own experience of 13 years in the City and Wall Street which is the true root cause is the accounting model, which revolves on the "bonus pool". Or as I like to say, "getting close to the pig trough".
I remember someone saying to me in the 80's "why invest in Merrill Lynch? if the company makes money the management takes it and if Merrill loses money you take it" it really made me think, and it has disturbed me every since. And now the whole world knows.
When an investment banker claims to have contributed a "$50mm" profit, this is very debatable, but until this year no one debated it. First the 50mm is usually "revenue" not profit and second the revenue is based on very unclear mark to market models and respective allocations.
The basic aim in the accounting model it to align the employees self interest with that of the organization. Make them make money and the rewards are shared. In a classic sales role a salesman is rewarded with commission on successful sales. This is a model well understood in all businesses, but in the financial markets when you are talking CDO or Swaps, what is the "profit"? It all depends on the accounting method. In many businesses "commission" depends on "cash-in" and not just profit. This has not been the case on Wall Street.
Lets go back to the beginning. At JPM we began executing "swaps" in the early 1980's based out of London. A swap (or interest rate derivative) is a relatively simple concept - combine a floating rate note with a fixed rate note allows only the net coupons payment over time between a fixed interest rate and the later market interest rate. This introduced the now popular LIBOR index. This allowed Treasurers to manage interest rate payments without having to call and re-issue bonds and debt. When I joined the accounting group at JP Morgan in London the few deals that had been executed were accounted for as two loans! One fixed and one variable. Each month the accounting department calculated the interest receivable and payable and the net total was the monthly earnings... nice and simple. Accept we did it all by hand, can you imagine that today! 1000 deals computed one at a time! It took all month, so we calculated the monthly earnings just in time to start again. The month earnings number did not vary much month to month, it was very stable.
There is a funny story here, each month we had to report earnings to New York on the 4th day of the month, we never had a chance – we knew the big number – e.g. 4 or 5 million, it was something close to last month, but in order to get the rest of the number we would need many more days, so we simply made them up by taking the last 6 figures from a random 10 pound note!
The average length of the deals at that time was approximately five years. Even with no computers this business generated stable positive income. This was a result of how the business was managed, simply and conservatively - by executing new deals in groups. First a transaction was executed and later one or more equal and opposite transactions where grouped together, leaving a closed group with a positive earning stream. There was no market to market at this time.
My first task was to develop a computer system to help manage this portfolio. It took six months and many long nights. It was at this time that I was approached by the banks external auditors to confirm that the portfolio did not hold a "future loss". Oh what a question? What was the present value of this portfolio? At this time we had no model, the zero curve was a thing of the future. It took 12 months to answer the question. The first model we developed we named 1 plus i, or principal plus interest.
The One plus i model:
From the observed yields on treasury bonds for all maturities and credit spreads we were able to define a current yield curve. All cashflows from all deals are calculated and complied into a single list of date and cashflow amount, the sum of all cashflows by day – as a result each day had either a positive or negative daily total. Moving to the most far out cashflow and dividing it my the appropriate current market rate (i) giving a P amount and an I amount (example - cashflow of 20mm and i =10% on12/31/2020, gives a P = 18.18mm and I = 1.82mm. The P is saved and the I amount is added/subtracted to each original amount listed on each 12/31 annual anniversary. This is performed for each date back to the present date stepping forward one day at a time. The sum of all the P's is the present value of the portfolio. I hope you followed that! Quite simple really and required no complex models. The difficulty was to generate an accurate list of all cashflows. At this stage all the deals where nothing more than paper deal confirmations.
The first run of our model took place on the 8th August 1988 (8.8.88) and we valued 66,666 cashflows! we did this on a mainframe and those two numbers were printed on the top of the green striped computer paper! very chilling. But the value was minus a few trillion and needed much further reconciliation. Between August 1988 and the final audit in January 1989 we were able to calculate the correct number with much certainty, including accounting for future hedging and operational costs. This opened the debate on mark to market accounting, which was easily won and implemented at JP Morgan in 92 based on that first 1988 model. The business head had told me before we started out that “there was over 250mm in NPV”, he was right on the mark!
Once we had developed a method for calculating the mark to market or current value we needed a model to do this daily not just annually. This was accomplished by reversing the 1+i model and creating the zero coupon curve which was first accomplished in that same year 1988, and now a market standard. We reached the zero curve in two places quite independently. In the late summer of 1988 I received a visit from Bob Barker a New York based researcher that had been given the take of developing a pricing model for a swap. He wanted to compare his model to mine. It was amazing we had reached exactly the same conclusions and our models matched exactly. I would have to assume that at the same time others around the street were reaching the same answers. I still have my first zero coupon curve workings – hand written proofs. (Bob’s spreadsheet model later became know as 3 + I and was used through the organization until the late 90’s)
The computation of the net present value of this complex portfolio allowed us to develop two further advances. The first was model position and risk management, the representation of this historically portfolio in terms of today’s market – and allow for the accurate hedging of the whole portfolio and no need to use "matched groups" and secondly the accurate reporting of daily profitability – the change in mark to market over time.
The current positions where calculated using two different methods - one was simply to add the P's that resulted from the 1 + i calculation into annual buckets and the second was to "tweak" the current market rates used as inputs one at a time, recalculating the NPV each time. By changing or tweaking just the 10 year treasury yield by one basis point and re-calculating the NPV the portfolio sensitivity to the ten year rate could be calculated and therefore the correct hedge amount. This allowed large portfolios to be accurately managed.
In the summer of 1989 I now had six month data on the mark to market and was able to monitor the performance on a monthly basis of the business - I was shocked they were making a LOSS! I decided to bring this up with management, who informed me I must be mistaken - they were making record profits! Now it was true that the portfolio was making money, but that was being generated by the historical portfolio, all new business was all being added at a loss. My information was not helpful and certainly could not be true. Sound familiar? My word against all those more knowledgeable managers. Eventually after what was years I was able to win the argument but not before many bonuses were paid along the way. But the power of mark to market accounting was demonstrated for all time.
The next question to resolve was how to allocate profitability (or rather new revenue). From 1989 the best model I developed was the "change report" this allocated the change in NPV from one day to the next to all the possible reasons. Classical interest accrual, movement in market rate, new business etc. This needed the market conditions at the time of all new deal to be captured. This was done in a spread sheet and required a "mid market rate" to be agreed, from which new revenue or bid.offer to be calculated. How should this be allocated between the "marketer" and the "trader" to ensure they were incentives to help each other. It was decided to generate a normal bid.offer margin this was subtracted first and allocate this 60% to the trader and 40% to the marketer, excess profit would be allocated 60% to the marketer.
As you can see the trader was incentivized to "shade" his mid market and the marketer to gain an attractive mid market.
Back to the 1995 trade example: The accounting revenue allocation model was set up for normal business and required a tacit agreement between the trader and the marketer. However the trade executed in 1995 was huge, so huge that the ability to hedge was very uncertain in normal times and certainly very tricky when it was public knowledge and the simple revenue allocation set out above would and could not apply, certainly not based on a prior Friday end of day closing prices when by Monday the market knew of the distress the trade was causing and any hedge could only be executed at very reduced pricing. This irresponsible was small compared to the events that occurred in 2006-2007 but indicated what was likely to happen!
The second issue is the use of revenue, uncertain revenue rather than fully costed profit and loss in setting investment bankers bonuses. It is amazing how little interest senior investment banks have on costs and processes allowing operations to run hog wild in these big organizations. Costs don’t affect how senior peoples bonuses are calculated, so why care? If you have even been in a meeting with senior investment bankers and operations managers and watch the bankers eyes glaze over. No they like everything to key of revenue only.
This is my perspective from inside JP Morgan, at that time nothing or very little was shared across the industry. Today these models are available to be purchased.
Monday, February 16, 2009
COBRA - Health Insurance and the risks
The danger of COBRA! it is "one strike and out.........."
My family is in trouble with no answer. As millions lose their jobs how many more will get caught in the COBRA trap?
How to start? My wife and I have three children; one has flown the nest and is at graduate school, the two boys are teenagers. During the 17 years we have lived in the United States I have worked for three U.S. corporations and as a result health insurance has never appeared to be a problem, not that I made many visits to the doctors. But at the start 2007 of founded a small business here in Charlotte. Of all the many things that need to be taken care of, finding office space, finding and installing a telephone system, buying and installing desks and computers, hired employees - Health Insurance didn't get much of a look in. But there is COBRA! so it doesn't matter! Least so I thought.
A year later it was time for me to find my own insurance, oh boy what a run around, I spent a month and got quotes from a number of leading National Health Insurance companies. It felt as if it was a huge bait and switch operation! Not one of the quotes came close to the initial grids I have been presented. At that time my wife and I were very healthy, my wife goes to the gym nearly every day and weighs the same 110 pounds she did when she was 20 year old. Oh well, I still had six months to run on my COBRA so I would come back to it, there was no way I could award the bad behavior I had experienced. It was very frustrating, just awful.
Four months later it was seven o'clock on a Monday morning and I was at my desk to get the week off to a fast start, but by eight I felt queasy and felt I would vomit so I took myself home – maybe I had food poisoning. For the remainder of the week I was unable to eat or drink and by Friday asked my wife to take me to the emergency room at our local hospital. At 2:00 AM I was finally admitted to hospital for observation. The following Wednesday I lost all my motor ability below the breast! I was fully paralyzed or at least a paraplegic. Three weeks later I was diagnosed with Transverse Myelitis a rare syndrome caused by inflammation in the spinal cord, I had been struck at the forth vertebra below the neck which left me with no movement below the breast but I had use of my arms. Wasn't much they can do for me apart from a heavy dose of steroids and to feed me intravenously?
I was released from hospital on the 12 June two weeks before my COBRA expired! After ten weeks in hospital going home was a relief and a worry. I was still a paraplegic and used a transfer board to move between the bed and my wheelchair. Gradually one toe and one kneecap at a time I slowly got some motor ability back. It is how almost a year later and I have made a wonderful partial recovery. I can walk up to 2 miles an hour but now suffer horrendous nerve pain.
Once I was able I looked at replacing my COBRA! Oh what a shock! I am now one of the great uninsured. In NC under the HIPPA rules Blue Cross Blue Shield must give me a quote, but at $3,880/ month just for me I cant afford that seeing I no longer can work. So I have no alternative but to have no insurance. After all those years paying into a system, when you need it, the system is not there for you.
My family is in trouble with no answer. As millions lose their jobs how many more will get caught in the COBRA trap?
How to start? My wife and I have three children; one has flown the nest and is at graduate school, the two boys are teenagers. During the 17 years we have lived in the United States I have worked for three U.S. corporations and as a result health insurance has never appeared to be a problem, not that I made many visits to the doctors. But at the start 2007 of founded a small business here in Charlotte. Of all the many things that need to be taken care of, finding office space, finding and installing a telephone system, buying and installing desks and computers, hired employees - Health Insurance didn't get much of a look in. But there is COBRA! so it doesn't matter! Least so I thought.
A year later it was time for me to find my own insurance, oh boy what a run around, I spent a month and got quotes from a number of leading National Health Insurance companies. It felt as if it was a huge bait and switch operation! Not one of the quotes came close to the initial grids I have been presented. At that time my wife and I were very healthy, my wife goes to the gym nearly every day and weighs the same 110 pounds she did when she was 20 year old. Oh well, I still had six months to run on my COBRA so I would come back to it, there was no way I could award the bad behavior I had experienced. It was very frustrating, just awful.
Four months later it was seven o'clock on a Monday morning and I was at my desk to get the week off to a fast start, but by eight I felt queasy and felt I would vomit so I took myself home – maybe I had food poisoning. For the remainder of the week I was unable to eat or drink and by Friday asked my wife to take me to the emergency room at our local hospital. At 2:00 AM I was finally admitted to hospital for observation. The following Wednesday I lost all my motor ability below the breast! I was fully paralyzed or at least a paraplegic. Three weeks later I was diagnosed with Transverse Myelitis a rare syndrome caused by inflammation in the spinal cord, I had been struck at the forth vertebra below the neck which left me with no movement below the breast but I had use of my arms. Wasn't much they can do for me apart from a heavy dose of steroids and to feed me intravenously?
I was released from hospital on the 12 June two weeks before my COBRA expired! After ten weeks in hospital going home was a relief and a worry. I was still a paraplegic and used a transfer board to move between the bed and my wheelchair. Gradually one toe and one kneecap at a time I slowly got some motor ability back. It is how almost a year later and I have made a wonderful partial recovery. I can walk up to 2 miles an hour but now suffer horrendous nerve pain.
Once I was able I looked at replacing my COBRA! Oh what a shock! I am now one of the great uninsured. In NC under the HIPPA rules Blue Cross Blue Shield must give me a quote, but at $3,880/ month just for me I cant afford that seeing I no longer can work. So I have no alternative but to have no insurance. After all those years paying into a system, when you need it, the system is not there for you.
Friday, January 30, 2009
So you think a recruiter can find you a job?
By Zebriod (c) 2008
(planning to find a new job)
If it has not happened to you yet, it happens more and more often, the work disappears and you need to find a new job. When this happens the first thing you need is a plan, a plan to land a new job. It is always easier to land a new job when you have a job, but you don’t have the time and that is not the situation I intend to cover here.
The plan needs to be more than finding a recruiter and sitting back. You need to be in control of your search, a recruiter can only help if they have the right client. In this market a recruiter will actually have no jobs either. You are more likely to land a job yourself.
Step 1. Ground work
Get you paperwork in order:
1a. Review your resume (See my article on writing your resume)
- Your resume is a "MARKETING DOCUMENT" not a history book!!
1b. Review all your accomplishments – write them up, no one is going to hire you because you need a job, they will only hire you if you bring something they need (See my article on accomplishments)
- You will only be hired if you solve "THEIR" problems and bring benefit!
1c. Make a personal marketing statement (see creating your elevator pitch)
- You will need to pick up the phone and call people yourself! DONT USE EMAIL! plan what you will say when you get someone on the phone, don't make it up on the phone. "One sentence to summarize your career, one major accomplishment, why you are looking" - all in 20 seconds.
1d. Get copies of transcripts – many companies require these if you have post grad education.
1e. Prepare your references – this is very important, networking can land you the job you need. Call everyone you know and ask them if they would be willing to provide you a professional reference if needed – don’t be proud.
Step 2. How to stay in control.
Make sure all recruiters have your permission directly from you prior to submitting your resume to any employer. Recruiters have a natural incentive to send your resume to as many companies as possible, just in case you get hired. Normally they can claim a fee if you go to work for any of these within a year of submitting your resume.
Create a spreadsheet of possible companies. Use the internet to research companies in your location or in your sector
Number Co Name Website Co Contact Call date Recruiter Date sent Notes--->
Only self submit through the website as a last resort. Try to place a call into the company, use you marketing pitch and attempt to get someone in the company to get you in. If you submit through the website will be joining hundreds of “chef s and chauffeurs” and as a result your resume will first be read by a machine, so make sure you have as many “key words” as possible.
Step 3. Network
USE THE PHONE!!! not email! email does not work - see 1c above, practice practice......
Most mid career job changes are a result of “networking” not recruiters, it is expensive for companies to find quality staff and as a result networking has a distinct advantage over using a recruiter. It maybe difficult to call previous colleagues and admit that you are searching for a new job, but it has to be done. Call them all, make sure you are prepared to market yourself even when you think they know you. Use an indirect approach “Do you know anyone that is hiring”, “Do you have anyone over at xyz company that I can call?”.
This is difficult, but do it. Finding the next job is a full time job.
Step 4. Be prepared
The first step is to get an interview, but an interview is not the end, just the end of the beginning. Be prepared to interview well.
Try to be nice and well mannered at all times.
(planning to find a new job)
If it has not happened to you yet, it happens more and more often, the work disappears and you need to find a new job. When this happens the first thing you need is a plan, a plan to land a new job. It is always easier to land a new job when you have a job, but you don’t have the time and that is not the situation I intend to cover here.
The plan needs to be more than finding a recruiter and sitting back. You need to be in control of your search, a recruiter can only help if they have the right client. In this market a recruiter will actually have no jobs either. You are more likely to land a job yourself.
Step 1. Ground work
Get you paperwork in order:
1a. Review your resume (See my article on writing your resume)
- Your resume is a "MARKETING DOCUMENT" not a history book!!
1b. Review all your accomplishments – write them up, no one is going to hire you because you need a job, they will only hire you if you bring something they need (See my article on accomplishments)
- You will only be hired if you solve "THEIR" problems and bring benefit!
1c. Make a personal marketing statement (see creating your elevator pitch)
- You will need to pick up the phone and call people yourself! DONT USE EMAIL! plan what you will say when you get someone on the phone, don't make it up on the phone. "One sentence to summarize your career, one major accomplishment, why you are looking" - all in 20 seconds.
1d. Get copies of transcripts – many companies require these if you have post grad education.
1e. Prepare your references – this is very important, networking can land you the job you need. Call everyone you know and ask them if they would be willing to provide you a professional reference if needed – don’t be proud.
Step 2. How to stay in control.
Make sure all recruiters have your permission directly from you prior to submitting your resume to any employer. Recruiters have a natural incentive to send your resume to as many companies as possible, just in case you get hired. Normally they can claim a fee if you go to work for any of these within a year of submitting your resume.
Create a spreadsheet of possible companies. Use the internet to research companies in your location or in your sector
Number Co Name Website Co Contact Call date Recruiter Date sent Notes--->
Only self submit through the website as a last resort. Try to place a call into the company, use you marketing pitch and attempt to get someone in the company to get you in. If you submit through the website will be joining hundreds of “chef s and chauffeurs” and as a result your resume will first be read by a machine, so make sure you have as many “key words” as possible.
Step 3. Network
USE THE PHONE!!! not email! email does not work - see 1c above, practice practice......
Most mid career job changes are a result of “networking” not recruiters, it is expensive for companies to find quality staff and as a result networking has a distinct advantage over using a recruiter. It maybe difficult to call previous colleagues and admit that you are searching for a new job, but it has to be done. Call them all, make sure you are prepared to market yourself even when you think they know you. Use an indirect approach “Do you know anyone that is hiring”, “Do you have anyone over at xyz company that I can call?”.
This is difficult, but do it. Finding the next job is a full time job.
Step 4. Be prepared
The first step is to get an interview, but an interview is not the end, just the end of the beginning. Be prepared to interview well.
Try to be nice and well mannered at all times.
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