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Booth Slide show Continuous loop Revised 3/31 Intro Slide 1 (Who We Are) Chicago Booth is Unparalleled intellectual curiosity, honesty, exchange, and rigor. Ideas that shape business, markets, public policy, and the world. People who create lasting value. Slide 2 Management Conference showcases what Booth does best. Slide 3 Our faculty uncover new facts and frameworks, crack open seemingly intractable challenges, produce solutions that are both surprising and enduring. Slide 3 Chicago Booth—More than a business school, we are a business force. (Keynote Section - Set Expectations about Event) Slide 1 “Future of Finance” Faculty Quote Slide “We cannot pin the stability of the financial system on the idea that nobody should ever lose money. Doing this would strangle the economy and crush financial innovation.” John H. Cochrane, AQR Capital Management Professor of Finance “Lessons from the Financial Crisis”, John H. Cochrane “Future of Finance” CEO Pay Financial System First Speaker Slide John H. Cochrane, AQR Capital Management Professor of Finance President of the American Finance Association Cochrane conducts research on dynamics in stock and bond markets, the volatility of exchange rates, the term structure of interest rates, the returns to venture capital, liquidity premiums in stock prices, the relation between stock prices and business cycles, and monetary economics including the fiscal theory of the price level. Recent awards include the TIAA-CREF Institute Paul A. Samuelson Award for his book Asset Pricing and the Chookaszian Endowed Risk Management Prize. “Future of Finance” Fact Slide U.S. clean energy investments hit $18.6 billion in 2009, a little more than half the Chinese total of $34.6 billion. Five years ago, China's investments in clean energy totaled just $2.5 billion. Pew Charitable Trusts http://www.pewtrusts.org/news_room_detail.aspx?id=57972 “Future of Finance” Clean Energy Investment Faculty Quote Slide “A better solution would impose higher and pro-cyclical equity capital requirements on banks combined with a requirement to raise contingent long-term debt—debt that converts into equity in a crisis.” Steven Neil Kaplan, Neubauer Family Professor of Entrepreneurship and Finance The Economists’ Voice, December 2009 http://www.bepress.com/cgi/viewcontent.cgi?article=1706&context=ev “Future of Finance” Banks Second Speaker Slide Steven Neil Kaplan, Neubauer Family Professor of Entrepreneurship and Finance Board member, Morningstar Steven Neil Kaplan conducts research on issues in private equity and entrepreneurial finance, corporate governance, mergers and acquisitions, and corporate finance. He has testified to the U.S. Senate Finance Committee and the U.S. House Financial Services Committee about his research. Kaplan is the Faculty Advisor at the Polsky Center for Entrepreneurship. He sits on the board of directors of Accretive Health, Columbia Acorn Funds and Morningstar. Kaplan is a director of the Illinois Venture Capital Association and serves as the academic dean of the Kauffman Fellows Program, an educational and mentoring program for new venture capitalists. “Future of Finance” Fact Slide China’s investment in U.S. government securities dropped by $34.2 billion in December 2009 to $755.4 billion, the biggest decline since Treasury data started in 2000. Japan’s holdings rose 1.5 percent to $768.8 billion, making it America’s largest creditor. Wall Street Journal, February 16 http://online.wsj.com/article/SB10001424052748704804204575069172269719754.html “Future of Finance” Foreign Investment Outside Quote Slide “Some of the provisions in the [health care] bill President Barack Obama signed into law could have significant investment implications for clients in both the long and short term.” Investment News, March 28 http://www.investmentnews.com/article/20100328/REG/303289992 “Future of Finance” Effect of Health Care on Investment Faculty Quote Slide “The incentive to sell off all these mortgages was created by the government in its own self-interest. Let’s face it. People were running through the door to borrow money to buy homes they couldn’t afford, because it was a really good deal.” Tobias J. Moskowitz, Fama Family Professor of Finance Booth write-up of January 11 event, http://www.chicagobooth.edu/news/2010-01-11-ethicspanel- IGM.aspx “Future of Finance” Mortgages Third Speaker Slide Tobias J. Moskowitz, Fama Family Professor of Finance Winner of the Fischer Black Prize Moskowitz has explored topics as diverse as momentum in stock returns, local bias in investment portfolio choice, and the social effects of bank mergers. He also looked at the return to private business ownership, the trading and financing of commercial real estate, and the political economy of financial regulation. Moskowitz was recognized by the American Finance Association with its Fischer Black Prize, which honors the top finance scholar under the age of 40. The award cited his "ingenious and careful use of newly available data to address fundamental questions in finance." “Future of Finance” Fact Slide Private equity firms are again being threatened with higher taxes. The proposal would tax carried interest as ordinary income, raising the tax rate from 15 percent to typically the highest income bracket of 35 percent and raising $24 billion over a decade, the government says. Reuters, February 7 http://www.reuters.com/article/idUSTRE6161SX20100207 “Future of Finance” Private Equity Faculty Quote Slide “Are you creating banks which know they will never fail?” Raghuram G. Rajan, Eric J. Gleacher Distinguished Service Professor of Finance and former chief economist for the IMF in conversation with Former Treasury Secretary Henry Paulson Booth write-up of February 23 event http://www.chicagobooth.edu/news/2010-02-23-paulson.aspx “Future of Finance” Bank Regulation Fourth Speaker Slide Ragurham Rajan, Eric J. Gleacher Distinguished Service Professor of Finance Former chief economist for the IMF Rajan is also currently an economic advisor to the Prime Minister of India. He is the author, along with fellow Booth faculty member Luigi Zingales, of Saving Capitalism from the Capitalists. He is currently at work on a book entitled Fault Lines: How Hidden Cracks Still Threaten the World Economy. Rajan is president-elect of the American Finance Association. He won the inaugural Fischer Black Prize, given to the financial economist under age 40 who has made the most significant contribution to the theory and practice of finance. “Future of Finance” Fact Slide There is a $1 trillion gap between $3.35 trillion in pension, health care, and other retirement obligations on state balance sheets versus the $2.35 trillion in assets to cover them. This is a massive future budgetary gap, which will have to be funded, at least partially, by debt. Pew Center on the States, February 18 http://www.pewcenteronthestates.org/report_detail.aspx?id=56695 “Future of Finance” Fiscal Imbalance Outside Quote Slide “Michel Barnier, the European financial services commissioner, said he’s studying whether measures are needed to restrict trade in some credit-default swaps in the European Union”. BusinessWeek, March 18 http://www.businessweek.com/news/2010-03-18/barnier-says-still- examining-if-cds-measures-are-necessary-.html “Future of Finance” Credit-default Swaps Asness Quote “Markets are humbling things to try to beat.” Clifford S. Asness, MBA '91, PhD '94, Managing & Founding Principal, AQR Capital Management Chicago Booth Magazine, Interview with Lubos Pastor http://www.chicagobooth.edu/magazine/29/3/fivemins_1.aspx “Future of Finance” Investing Fifth Speaker Slide Clifford S. Asness, MBA '91, PhD '94, Managing & Founding Principal, AQR Capital Management Prior to co-founding AQR Capital Management, Asness was at Goldman, Sachs & Co. where he was a Managing Director and Director of Quantitative Research for the Asset Management Division. He and his team at Goldman were responsible for building quantitative models to add value in global equity, fixed income and currency markets for Goldman clients and partners. The CFA Institute has awarded Asness the James R. Vertin Award given to individuals who have produced a body of research notable for its relevance and enduring value to investment professionals. He is on the editorial board of the Journal of Portfolio Management, the editorial board of the Financial Analysts Journal and the governing board of the Courant Institute of Mathematical Finance at NYU “Future of Finance” Faculty Quote Slide “There's no evidence that pay practices played a significant role in the financial crisis, relative to other factors.” Steven Neil Kaplan, Neubauer Family Professor of Entrepreneurship and Finance Booth write-up of December 2 event http://www.chicagobooth.edu/news/2009-12-02-kaplanigm.aspx “Future of Finance” CEO Pay Outside Quote Slide "I don’t believe this is yet the time to be tightening monetary policy. The current policy of essentially zero-percent interest rates is "accommodative and is currently appropriate...because the economy is operating well below its potential and inflation is subdued." Federal Reserve Bank of San Francisco President Janet Yellen Wall Street Journal, March 23 http://blogs.wsj.com/economics/2010/03/23/feds-yellen-plays-down- inflation-risks-from-deficit-fed-purchases/tab/article/ “Future of Finance” Monetary Policy Sixth Speaker Slide – Moderator Adam Davidson, AB ’92, NPR’s Planet Money Adam Davidson reports on international business and economics for NPR's National Desk where his reports focus on the effects of increased global trade on the U.S. economy, U.S. workers, and U.S. competitiveness. Davidson has visited countries that are undergoing dramatic economic change, such as China, to help listeners make sense of the sometimes overwhelming and confusing phenomenon of globalization. He can also be heard on Morning Edition, All Things Considered, and Day to Day, as well as NPR newscasts. “Future of Finance” Fact Slide Nearly one-quarter of U.S. mortgages, or about 11 million loans, are "underwater”. While home values are regaining ground -- median prices rose 10% in Southern California last month -- they remain far below the July 2007 peak of $505,000. LA Times, March 17 http://articles.latimes.com/2010/mar/17/business/la-fi-walkaway17-2010mar17 “Future of Finance” Housing Asness Quote “I think the true answer to questions like “why does value investing work?” has to be a combination of efficient- market answers and inefficient-market answers.” Chicago Booth Magazine, Interview with Tobias J. Moskowitz http://www.chicagobooth.edu/magazine/29/3/feature4.aspx “Future of Finance” Investing Faculty Quote Slide “If a bank doesn’t have enough capital …it can’t make new loans, even to credit-worthy customers. If all banks are in this position (a much less likely event) we have a 'credit crunch'.” John H. Cochrane, AQR Capital Management Professor of Finance “The Monster Returns”, John H. Cochrane http://faculty.chicagobooth.edu/john.cochrane/research/Papers/mortgages.htm “Future of Finance” Credit Crunch Fact and Faculty Quote Slide Buyout funds sitting on half a trillion dollars committed by investors may need more than a decade to put the money to work if mergers and acquisitions continue at the current pace. “Unless things really change, larger funds will be especially hard pressed to put their money to work.” Steven Neil Kaplan, Neubauer Family Professor of Entrepreneurship and Finance Bloomberg, March 10 http://www.bloomberg.com/apps/news?pid=20601087&sid=aC92MZTOJ3lI “Future of Finance” Venture Capital Faculty Quote Slide “Main Street sees all too clearly how Paulson and the rest went easy on their fellow bankers while preserving a status quo that had made them rich.” Raghuram G. Rajan, Eric J. Gleacher Distinguished Service Professor of Finance and former chief economist for the IMF Chicago Tribune, Feburary 25 “Future of Finance” Banking Faculty Quote Slide “We don’t need to see higher tax rates, we need to see higher revenues or lower spending. A plan for higher rates can choke off growth implying lower revenues.” John H. Cochrane, AQR Capital Management Professor of Finance “Fiscal Stimulus, Fiscal Inflation, or Fiscal Fallacies?”, John H. Cochrane “Future of Finance” Tax Rates Faculty Quote Slide “Banks are in trouble, and more importantly the much larger markets for securitized debt seem really broken.” John H. Cochrane, AQR Capital Management Professor of Finance “Fiscal Stimulus, Fiscal Inflation, or Fiscal Fallacies?”, John H. Cochrane “Future of Finance” Credit Markets Faculty Quote Slide "In its favor it will pick up some taxes. On the other hand, it will hit private equity and particularly venture capital firms, and in this day and age, they're not the bad guys." Steven Neil Kaplan, Neubauer Family Professor of Entrepreneurship and Finance Reuters, February 7 http://www.reuters.com/article/idUSTRE6161SX20100207 “Future of Finance” Private Equity Outside Quote Slide "In the last couple of years, investors have watched the industry lose a great deal of their money and so they are now opting for lower risk fixed income products and more passive, lower-fee forms of money management, like Exchange Traded Funds, which squeeze the managers' revenue yields," Dan Serrao, US Team Leader of Moody's Global Managed Investments Group Financial Mirror March 25 http://www.financialmirror.com/News/Business_and_Finance/19844 “Future of Finance” Asset Management Faculty Quote Slide “Ethics did not necessarily cause the recent financial crisis, but definitely contributed to it. Many investors did not fully appreciate the long-term consequences of some decisions, at least partly because of the incentives created on Wall Street.” Tobias J. Moskowitz, Fama Family Professor of Finance Booth write-up of January 11 event, http://www.chicagobooth.edu/news/2010-01-11-ethicspanel- IGM.aspx “Future of Finance” Wall Street Ethics Faculty Quote Slide “To say that we needed more regulation is not to say that markets don’t work.” Raghuram G. Rajan, Eric J. Gleacher Distinguished Service Professor of Finance and former chief economist for the IMF Wall Street Journal, December 28 http://blogs.wsj.com/economics/2009/12/28/qa-raghuram-rajan- on-the-future-of-the-us-model-of-capitalism/tab/article/ “Future of Finance” Market Regulation Fact Slide The public holds $8.199 trillion in U.S. government debt. Bureau of Public Debt , March 30 http://www.treasurydirect.gov/NP/NPGateway “Future of Finance” Government Debt Fact Slide Senator Kerry hopes to pass a bill that would commit the United States to a 17 percent reduction in carbon pollution by 2020, from 2005 levels. Reuters, March 23 http://www.reuters.com/article/idUSN2374080?feedType=RSS&feedName=everything&virtualBrandCh annel=11563 “Future of Finance” Global Warming Faculty Quote Slide “The insider economy is gaining ground, with its national champions and various forms of protectionism.” Raghuram G. Rajan, Eric J. Gleacher Distinguished Service Professor of Finance and former chief economist for the IMF Wall Street Journal, December 28 http://blogs.wsj.com/economics/2009/12/28/qa-raghuram-rajan-on- the-future-of-the-us-model-of-capitalism/tab/article/ “Future of Finance” Government Debt Fact Slide Adapting to climate change will cost $75 to $100 billion annually between 2010 and 2050. World Bank http://beta.worldbank.org/climatechange/content/economics-adaptation-climate-change- study-homepage “Future of Finance” Global Warming Breakout Slides Slide 1 – Breakout Sessions The dialogue continues. Slide 2 – Breakout Sessions With disappointing returns for VC over the last decade, is the model broken? What are the new trends that will shape asset management in the future? What does a fiscal imbalance mean for macroeconomic growth prospects, the conduct of monetary policy, and inflation? What policies will governments enact to mitigate global warming? What will be the effect on business and economic growth? With fingers pointing at the markets, what is the legacy of the global financial crisis? What kind of a first impression do you create? With media, politicians, and many economists having singled out credit derivatives and the securitization process as contributing to the financial crisis, what lies ahead? What effect will the changing tax environment have on real estate finance? Slide 3 – Breakout Sessions (look like website) Asset Management Venture Capital and Entrepreneurship Real Estate Fiscal Imbalance Global Warming Policies Financial Regulation Leadership Special Forum Slides Slide 1 – Special Forum The dialogue continues. Slide 2 – Special Forum Just how efficient are the markets? Where are the returns? Slide 3 – Special Forum Eugene Fama and Kenneth French found that outside the top 3% of funds, active management lags behind results that would be delivered due simply to chance. Wall Street Journal, December 3 http://online.wsj.com/article/SB10001424052748703735004574572293978523358.html Slide 4 – Special Forum – Fama Bio Slide Eugene Fama, Robert R. McCormick Distinguished Service Professor of Finance Fama is widely recognized as the "father of modern finance." He is strongly identified with research on markets, particularly with regard to the efficient market hypothesis. Through his research he has brought an empirical and scientific rigor to the field of investment management, transforming the way finance is viewed and conducted. Fama was the first recipient of three major prizes for research in Finance; the Deutsche Bank Prize in Financial Economics, the Morgan Stanley American Finance Association Award for Excellence in Finance, and the Onassis Prize in Finance. Slide 5 – Special Forum “We have this belief in how markets work that we learned at Chicago Booth that’s difficult for most people to accept. It’s a strong belief system that gives us a degree of freedom to be innovative.” David Booth, ‘71, Chairman and Co-Chief Executive Officer, Dimensional Fund Advisors Booth Magazine Special Issue http://www.chicagobooth.edu/booth/articles/true_believer/3.aspx Slide 6 – Special Forum – Booth Bio David Booth, ‘71, Chairman and Co-Chief Executive Officer, Dimensional Fund Advisors Booth founded Dimensional Fund Advisors in 1981 and continues to focus on the firm's key corporate initiatives and strategic long-range planning as chairman and Co-CEO. His groundbreaking work in indexing and small capitalization investing is an example of his ability to connect the academic side of economic science to the practical world of investment management – two worlds that previously existed in separate realities. In so doing, he has furthered both the state of investment management and the state of portfolio theory. Slide 7 – Special Forum Edward A. Snyder, Dean and George Pratt Shultz Professor of Economics As dean, Snyder oversees the overall academic, financial, and administrative leadership of the school. As a scholar, Snyder is interested mainly in industrial organization, antitrust economics, law and economics, and financial institutions. He received his PhD in economics and an MA in public policy from the University of Chicago. (Continuous loop – Back to Start)
"Man Con Slide show revised"