Tag Archive | Finance

Surprise, Surprise – Bernanke Shocks Markets Again

This time last year, I wrote my first blog post for the Leader’s Edge about the Federal Reserve’s decision to implement a new quantitative easing program. The Federal Reserve Chairman Ben Bernanke introduced a surprising twist – the program was open-ended, setting no predetermined limit for purchasing bonds. Markets surged in reaction to the unexpected news. Since that time, the Fed has consistently bought $85 billion of treasury and mortgage-backed securities per month, aiming to dampen interest rates, boost the housing market, and encourage spending and investment.

Bernanke

Bernanke surprised markets announcing the Fed will not begin tapering the quantitative easing program.

This past Wednesday, Ben Bernanke surprised markets yet again – but this time, by announcing that the Fed will not begin tapering the quantitative easing program. Prior to Wednesday’s announcement, investors and economists were convinced that the Fed was going to cut its monthly bond purchases by $10 billion. After assuring investors this Wednesday that the Fed will continue at its current pace, the S&P 500 and Dow Jones Industrial Average reached all-time nominal highs.

These press conferences from September 2012 and 2013 both defied investors’ expectations and fueled optimism in the markets. Even more so than last year, investors today obsessively analyze Bernanke’s statements, attempting to forecast the Fed’s future plans. Analysts are already anticipating the next Federal Reserve press conference, debating whether quantitative easing will be tapered before the year’s end. This sensitivity to the Fed’s policy decisions has contributed to market volatility.

Given the Fed’s inconsistent announcements in recent months, Nrayana Kocherlakota, the President of the Federal Reserve Bank of Minneapolis, has admitted that communication has been an issue for the central bank. In June, Bernanke announced that tapering would begin before the year’s end, sparking a media frenzy. Analysts forecasted the dramatic consequences of reducing the flow of cheap money into the economy. On Wednesday, Bernanke counteracted his prior statement and emphasized that the program is not on a fixed course. In a Reuters’ poll, economists agreed that the Fed’s communication has been unclear in the past few months, resulting in market uncertainty and widespread distrust of the central bank.

How do you think the Federal Reserve should improve its communication strategy? Do you think the media contributes to market uncertainty and confusion?

– Kara

How I Got Into Venture Capital With A Dual Degree In Biomedical Engineering and Applied Math & Statistics, And A Minor In Entrepreneurship & Management.

I began thinking about what I wanted to do with my life and what type of career I wanted back in high school. Thanks to some pretty stellar and unique engineering internships, I decided I wanted to be an engineer, but wasn’t sure which kind. I was also interested in being a doctor so Biomedical Engineering seemed like a solid compromise.

Boom!  In the blink of an eye I am picking out my classes for my first semester at The Johns Hopkins University.  I selected Introduction to Business since the topic was of interest to me and the course would help me satisfy several graduation requirements. While at the time I thought this course would just be an interesting elective, it turned out to be a pivotal course for shaping my future career path.

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Over the next two years, I would spend the summers and winter breaks working at a DOD lab back home as an engineer. However, through those internships and my BME coursework I learned I did not enjoy being an engineer. What should you do if this happens you?

1. Don’t freak out.

Biomedical engineering is by far the most interesting technological field right now.  To date, I pride myself on keeping up to date with advances in both the “science” and the “techniques.”  Yet, I had decided that I did not want to be an engineer and I had decided that being a doctor was also not in the cards.  So I asked myself, “What have you done on this campus that you truly have enjoyed? Not just intellectually, but the actual process of completion?”

2. Go to “first meetings of the year.”

Go to as many first meetings as possible for any organization you might be interested in.  While there is no way you can (or should) do them all, it’s a great way to find some niches of which you had been previously unaware.  I had the great privilege of being a part of many groups on campus including (but not limited to) SGA, AKPsi, The Pre-Law Society, the Politik, Senior Leadership Consultants, and the club Ice-Hockey team.

3. Listen to yourself. 

When I self-evaluated I realized my true day-to-day passion revolved around business. Mind you, this is not the most reassuring realization. Fortunately, there was some precedence for this type of thought. The solution for most Hopkins engineers is to go into some sort of consulting. Which makes sense; you can use a lot of the same equations and all of the same analytical skills. Instead of optimizing a cell pathway, you’re optimizing logistics for some big corporation.

4. Don’t rush a decision.

If you are already pivoting from what you are studying, make sure you pick the right pivot. A lot of my peers went on into consulting. Yet, personally, something didn’t “feel” right. Basically, I would be engineering for businesses, not actually doing business. “And what about the science?” I asked myself. Shouldn’t I stay involved somehow?

The semester before I was having this conversation with myself, I was taking an E&M course called “Managing Social Enterprises” which was all about how management styles differ between social and for-profit companies as well as startups vs established companies. It was from this class that I finally found my answer. I would love to join the Venture Capital/Startup world. This would allow me to practice business plus stay connected to the biomedical world. The question was–how?

5. Talk to everyone.

It is not so easy to be a BME/AMS double major and decide you want to go into VC.  Most VCs have been to business school and/or worked for a successful startup.  I had not.  Fortunately, one night I happened to be in DC visiting some friends.  While hanging at a local bar, I started talking to someone who knew a local VC and he put us in contact.

6.  Internships!

You may or may not be paid, but such is the nature of internships in 2013. The most important thing is the experience the internships provide, not the paycheck, so be sure to take advantage of internships even if they are unpaid.  During my senior spring I interned for Fortify Ventures, an early-stage tech VC firm located in DC. While I was what you would call a gopher, I learned quite a few valuable lessons. I was able to turn this internship into another internship, joining the investment team at the Center for Innovative Technology, an early-stage VC firm located in Herndon, VA. Fortunately for me, CIT invested in not only technology firms, but also green energy and biotech companies. So it was at CIT that I finally began evaluating companies, thus gaining some true VC experience while still only being an intern.

7. Leverage where you are to get one step closer.

Before I could be considered a viable candidate for full-time (non-intern) position at a VC firm, I needed to either go to business school, get my Ph.D., or join a successful startup. I chose the third option. While my true passion is biotech, I chose a tech company for a practical reason. Biotech startups take ten years to grow and tech startups take just two to three years.

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Last October, a video-processing company called Veenome came and pitched CIT. Being on the investment team at CIT, I was able to get a clearer picture of Veenome than most of the other applicants and was thus able to land a job with Veenome. Here I am, six months later, truly enjoying work everyday and very well poised for the career I want. Yet, I often think about what would have happened if I had not listened to myself and had stayed an engineer.

– TJ Bozada

Federal Reserve Announces Open-Ended QE3 – Markets surge, but will it last?

Following disappointing employment data and sluggish economic growth, investors have been eagerly anticipating further stimulus from the Federal Reserve (also known as the Fed). This Thursday, as reported in the Wall Street Journal, Federal Reserve Chairman Ben Bernanke announced the widely anticipated third round of quantitative easing, but QE3 came with surprising features that differ from the prior programs. In the past, the Federal Reserve purchased Treasury securities, but QE3 provides for purchasing $40 billion of mortgage-backed securities each month. The Fed set no limit for these purchases, and instead will stay committed to QE3 until the economy actually improves.

Ultimately, the Fed’s mission is to promote economic growth by stimulating the markets, boosting investment, and encouraging spending. The stock market’s immediate reaction to Bernanke’s press conference speaks well for QE3’s impact on investor confidence, with the Dow Jones Industrial Average jumping 206.51 points on Thursday to close at 13539.86, its highest since December 2007. This stock market gain represents a positive reception of the Fed’ s press conference by investors, indicating that the QE3 program could be the boost that the economy has been waiting for to get back on track. According to Bernanke, the mortgage-backed securities purchases under QE3 will lower long-term interest rates and guide investors to assets like stocks and gold, while helping housing markets stabilize.

Although the stock market responded exuberantly to the Federal Reserve’s announcement on Thursday, this surge could be fleeting. Many economists remain doubtful of its future success, and even Bernanke qualified QE3’s economic impact at the press conference on Thursday when he admitted, “We’re not promising a cure to all these ills, but what we can do is provide some support.” The Fed considers ‘these ills’ to be largely indicated by unemployment data, and so the size of the open-ended QE3 program will likely grow and grow as the labor market continues to struggle.

Do you think QE3 will be successful in stimulating economic growth? Do you agree with its ‘open-ended’ provision, or do you think its size should be predetermined?

– Kara

You Now Have the Leader’s Edge

Welcome to The Leader’s Edge, the Johns Hopkins Center for Leadership Education’s blog! This blog is a resource for students, faculty, alumni, industry experts and business owners who are looking to engage in a discussion about business.

Whitehead Hall, Home of the Center for Leadership Education

The Leader’s Edge is meant to serve as an educational tool and an open forum for new ideas. Take a look at the following questions:

– Are you interested in marketing, communications or advertising?
– Are you planning on starting a business? Have you already done so?
– Are you interested in finance, investment banking or accounting?
– Are you a current student who might have an interest in learning about business?

If you answered “yes,” “maybe,” or even “no” to any of these questions, then you are a right fit to participate in The Leader’s Edge. Our student bloggers will be contributing posts about business leadership, marketing, and other relevant topics in the business world. But while we are confident in our team, we’re not the only ones who have a voice. We greatly appreciate any thoughtful comments, feedback, or your own stories that you feel would add to our project. Blogging is a two-way street, so make sure your voice is heard!

Our student bloggers are Clint Hall, Kara Deppe, Jenna Link, Danielle Stern, Sinan Ozdemir, Devin Alessio, and me, Dave! We look forward to showing you our best work, and if you would like to learn more about us, click here

– David

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