Reflections on the World of Investments, Finance, and Wealth Management.

Finance Boot Camp Speaker Series

Todd Nelson, CFA, CPA

Vice President, Investment Banking, Capital Markets

Goldman Sachs (New York)

“How Corporations Enhance Equity Returns – The Anatomy of Corporate Leverage and a Bond Offering”

Wednesday, September 30, 2015

12:30-1:45 p.m., W401 PBB

The Finance Boot Camp speaker series brings finance and investment professionals to campus with the goal of extending traditional classroom education. Speakers focus on specific topics related to his or her role in the investment management or corporate finance process, with a strong emphasis on practical applications and real-world examples. The sessions are open to all students, who are encouraged to engage and actively participate during each sessions’ question and answer period.

Register by Sept. 29:


Henry Fund Economic Outlook – September 2015

The following release was prepared by Christina Erbe and Liana Tamakloe on behalf of the 2015 Henry Fund research team. The team updates its economic outlook several times throughout each semester. This analysis forms the basis for class discussions, company selection, and investment research.

Henry Fund Research

The Henry Fund research team’s September outlook for the US economy shows a decline in our projected 6-month GDP growth to 2.3% down from our April consensus of 2.7%. Though the team remains bullish on the domestic economy, events in the global markets, such as the extreme financial market volatility in China, falling commodity price effects on emerging markets, and geopolitical tensions in the Middle East are expected to hamper global growth potential. In the long run, our forecast for real GDP growth over the next two years remains relatively unchanged at 2.9%. With limited growth in projected GDP, our outlook for unemployment remains unchanged at 5.3% over the next 6 months and a slight uptick to 5.4% over the 2-year forecast period.

Our outlook for inflation remains low at 0.6% in the next 6 months, then increasing to 1.4% in the long run. This reflects our view that oil prices will continue to drag down overall prices in the economy and that the current trough in the oil price cycle will persist in the coming year or longer. Flowing from this, our forecast for the Federal Funds rate remains low at 0.35% in the next 6 months and 0.75% by 2017, as we are of the opinion that a low inflationary environment will not provide enough impetus for the Federal Reserve to increase rates this year. Additionally, as the financial markets self-correct, a rate hike to prevent an equity bubble will no longer be required. Our assessment is that any rate increases will most likely be in the 1st quarter of 2016. We anticipate the 10-year Treasury bond yield to remain steady at 2.4% and 3.1% over the next 6 months and 2 years respectively as we expect a low interest rate environment to persist.

Oil prices are currently trading in the $45 range and have fallen as low as $39.86 recently. We believe that the current price environment will persist as there are no signs of a cut back on oil production, and global demand for oil appears to be falling. Also, finalization of the nuclear deal with Iran is expected to increase global oil output even further. Our outlook over the next 6 months for oil prices remains low at $43, and $61 in the 2-year forecast period, a downgrade from our April estimate of $51 and $71 respectively.

Consumer confidence is expected to remain unchanged, being neutral both in the near term and long run, with low oil prices and reductions in unemployment being offset by uncertainty related to interest rate hikes and recent volatility in the financial markets.

In the currency markets, we project the dollar to strengthen against both the Euro and the Yen, trading at $1.10 in the short against the Euro, and ¥120 per dollar against the Yen. We foresee limited growth in global economies, as stimulus interventions by central governments in Europe, Japan, Australia, etc, have still not yielded the desired results, and depressed commodity prices, partly fueled by slow growth in China, has negatively affected growth in several other commodity dependent emerging economies. We therefore predict a flight to quality as funds move to the US, having better prospects for future growth.

With the recent volatility in the financial markets, we believe equities have become better valued and therefore forecast growth for US stocks in the S&P 500 to be 3.4% in the next 6 months and 12.7% over the next two years. We see opportunities in value stocks, and prefer to go with large and mid-cap stocks as a defensive play. As a fund, we are positive on financials, healthcare, consumer discretionary and technology sectors, and see growth opportunities in integrated energy industries, healthcare (biotech) companies and consumer-focused firms such as manufacturers of household and personal care products.

CFA Scholarship Opportunities for UI Students

The CFA Institute, administrator of the Chartered Financial Analyst (CFA) designation, offers a scholarship program to subsidize the enrollment fees for full-time students sitting for all levels of the CFA examination.  As a CFA Program Partner with 4 charterholders on staff, the Department of Finance at the University of Iowa is eligible to award up to fifteen (15) scholarships to full-time graduate or undergraduate students.

The Department of Finance is now accepting applications from graduate or undergraduate students who plan to sit for either the December 2015 or June 2016 CFA examinations.  Students selected for these scholarships will be eligible to enroll for the December 2015 or June 2016 CFA exam at a reduced rate of $350.  (Normal enrollment fees range from $1,100-$1,750 depending upon the sign-up period.)  Scholarship recipients who have already registered for the exam will receive a refund of the fee differential from the CFA Institute once the scholarship forms are processed.

Application Deadlines:

  • December 2015 Exam: Wednesday, August 26, 2015, 12:00 p.m.
  • June 2016 Exam: Monday, December 7, 2015, 4:00 p.m.

Application Requirements:  To apply for the scholarship, students must submit the following information to the Department of Finance, S252 PBB, by the deadlines noted above:

  • One-page cover letter discussing your career goals and the role of the CFA designation.
  • Resume with email address and current contact information.
  • A copy of your University of Iowa grades (does not need to be an official transcript).
  • A completed CFA Scholarship Form:
  • If you are currently registered for the exam, please include proof of CFA exam registration, such as a copy of your confirmation letter or email from the CFA Institute with your candidate registration number.  (Pre-registration for the exam is not a requirement to apply for one of the scholarships.)
  • All students selected to receive one of the 15 University of Iowa sponsored scholarships will be required to sign a waiver authorizing the release of examination scores to the UI CFA program faculty committee, so that we may monitor student performance across areas of the CFA curriculum.
  • Students who plan to sit for the June 2016 exam are strongly encouraged to simultaneously apply for one of the CFA Institute’s Access Scholarships. These need-based scholarships lower the enrollment fee to only $250. The application deadline for 2015 is Sept. 15, 2015. (

Student Eligibility Requirements:

  • Applicants must be current full-time undergraduate or graduate students at the UI.
  • Applicants must have a valid passport (CFA exam registration requirements).
  • All applicants must fulfill CFA candidate requirements.  CFA Institute guidelines require all applicants to hold a bachelor’s degree or equivalent by no later than December 31, 2016.  Thus, undergraduate candidates may only enroll in the Level I exam during their final year of studies.  For more information on the CFA examination or candidate requirements, visit the CFA Institute website (
  • Applicants must choose whether to apply either for the December 2015 or June 2016 exam scholarship, but not both.
  • Students enrolled in the MBA-PM program may apply for the scholarships as long as their current employer does not provide any type of reimbursement or compensation either before or after the exam.

Scholarship Selection Details:  In prior years, the selection process was extremely competitive for the limited number of scholarships.  Scholarships will be assigned in proportion to the total number of undergraduate and graduate student applicants.  Selection criteria may include the following:

  • Academic performance as a student at the University of Iowa
  • Academic performance in courses that are part of the CFA curriculum.
  • Work, internship, and professional experiences.
  • While these scholarships are available for all levels of the CFA exam, the selection committee will give priority to new Level I examination candidates for the December 2015 or June 2016 exams, followed by level II candidates, level III candidates, and finally those repeating levels I, II, or III.
  • Priority may be given to students currently enrolled or applying for the MBA FIN:9250 Applied Securities Management (Henry Fund) course or the undergraduate FIN:4250 Applied Equity Valuation (Krause Fund) course.
  • Priority may also be given to students who have already enrolled to sit the CFA examination.
  • Scholarship recipients for the December 2015 exam will be contacted by Friday, August 28.  Scholarship recipients for the June 2016 will be notified by mid-December.
  • Please note that alternative scholarships, including for exam levels II and III, are also offered through local CFA societies (, such as the CFA Society of Iowa.  Many of society scholarships go unclaimed due to a small number of applicants.
  • Depending on the number of applications, we anticipate that approximately five (5) scholarships will be available for the December 2015 exam, and the remaining ten (10) scholarships will be reserved for the June 2016 exam.


Henry Fund Economic Outlook – April 2015

The following release was prepared by Krishnakumar Bakthisaran and Royce Walton on behalf of the 2015 Henry Fund research team. The team updates its economic outlook several times throughout each semester. This analysis forms the basis for class discussions, company selection, and investment research.

Henry Fund Research

The Henry Fund Research Team’s April outlook for the US economy is reflective of the current economic deceleration with a projected 6 month growth of 2.7% down from our March consensus of 3.1%. We predict long-term real GDP growth of 2.9% by 2017, down from our earlier consensus of 3.1%. A strong dollar has made US exports more expensive for foreign customers, while plunging oil prices have reduced domestic oil investment, thereby slowing the manufacturing sector and to some extent the US economy. Our forecasts also take into account the fact that March saw the smallest additions to the domestic work force in over a year, as hiring slowed down across most sectors.

Our outlook for US employment is also stagnant as we predict unemployment to remain near the current 5.5% level over the next 6 months. Our 2 year outlook on unemployment also reflects a slight uptick in unemployment up at 5.6% partly due to more predicted losses in the energy sector.

Over the prior twelve months, the consumer price index (CPI) was unchanged with a 0.0% change, from its -0.10% reading in March in part due to a small recovery in oil prices. We expect the low inflationary environment to continue, with price changes of 0.8% over the next 6 months and to 1.7% over the next 2 years.

Henry Fund consensus estimates for interest rates remain largely unchanged when compared to our March projections. We expect the Federal Reserve to begin gradually increasing rates in August or September of 2015, but we do not anticipate a large boost to market rates in the near term. We expect the 10-year Treasury bonds will rise to a 2.35% yield by September.

Oil, currently trading just over $52, is expected to remain flat in the $50 range over the next six months. This is also unchanged from our March projections. We do not expect any major changes in supply or demand for the next six months. Concerns about a boost in supply from Iran have quelled as the International Energy Agency released statements saying that they did not expect increases Iranian production for at least three years. We expect a recovery for oil by 2017 to just over $70 based on recovering economies in Europe and Asia.

Weak job numbers and concerns regarding increasing interest rates caused us to downgrade consumer confidence expectations. We expect consumer confidence to be neutral over the next six months and through 2017, which is a downgrade from our more optimistic projections in March.

We also expect currency headwinds to continue for American companies as the dollar continues its surge relative to the euro. Exchange rates are projected at $1.06 per euro in six months due to the continue struggles in Europe. By 2017, however, we expect the a slight European recovery to increase the rate to $1.12 per euro.

Finally, global trends, rising interest rates, and slow GDP growth all filter down to our projections for the S&P 500. We expect US equities to trade relatively flat over the next six months with only a 1.0% growth through September, and we are becoming increasingly concerned about current valuation levels in the market. The team has found it difficult to identify new investment opportunities across most economic sectors given high P/E levels and sluggish near-term prospects for economic growth. However, going forward we like targeted investments in health care, information technology, regional banking, and the consumer discretionary sectors.

Tippie to Host Investment Speaker

“2015 and beyond: Investing after the Global Financial Crisis”
Dan Morris, CFA
Managing Director & Global Investment Strategist
Tuesday, April 7th from 10:30-12:00
W401 PBB

Dan will share his views on the opportunities and potential pitfalls he sees in 2015. The U.S. economy is finally recovering from the Global Financial Crisis, but the rest of the world is trailing behind.

  • Can the U.S. economy continue to expand or will it be dragged down by stagnation in Europe or a slowdown in China?
  • Markets have become more volatile of late. Why is this and will it persist?
  • How should investors protect their portfolios but also find the returns they need as interest rise, but remain low compared to historical norms?

More About Dan:

Dan Morris is a managing director and Global Investment Strategist for TIAA-CREF. Prior to joining TIAA-CREF in 2013, Mr. Morris worked in London as a Global Market Strategist at J.P. Morgan Asset Management, and before that as the Senior Equity Strategist for Lombard Street Research. Previously, he was part of the In Institutional Investor-ranked portfolio strategy team at Banc of America Securities in New York. Mr. Morris began his career covering Latin American equity markets at BT Alex Brown and Dresdner Kleinwort Benson.

Dan holds an MBA from the Wharton School and a Master’s in International Relations from the Johns Hopkins School of Advanced International Studies (SAIS). His undergraduate degree is in Mathematics from Pomona College, and he is a CFA charter holder. Dan is a frequent guest on CNBC, Bloomberg and other financial networks, and is widely quoted in the press.

Henry Fund Economic Outlook – March 2015

The following release was prepared by Alec Davis and Bernardo Daza on behalf of the 2015 Henry Fund research team. The team updates its economic outlook several times throughout each semester. This analysis forms the basis for class discussions, company selection, and investment research.

Henry Fund Research

The Henry Fund Research Team’s March outlook for the US economy remains positive, with a projected 6 month growth of 3.1% compared to a 2.2% growth for Q4 2014. We expect GDP expansion to remain stable over the 2 year forecast period at an average of 3.0% by Q2 2016. Recent growth has been slowed by a sluggish global economy and currency devaluations in Europe and Asia which has put strains on US multinational corporations.

The CPI inflation currently stands at -0.1% over the trailing 12-month period as the recent plunge in the price of oil works its way through the economy. We expect this number to move positive to 1.1% for the 6 month outlook and 1.8% for the 2 year windows, still below the Fed’s target rate of 2.0%.

Our outlook for US unemployment is stable, as we expect the current 5.5% rate to remain over the next 6 months while continuing to move downward to 5.35% over the 2 year forecast period. Despite loses in the energy sector, we expect the strong US economy and GDP growth to make up for this in the other sectors such as technology and consumer discretionary.

The recent strong gains in unemployment have accelerated sentiments that the Fed will begin its shift in monetary policy towards raising rates in the latter half of 2015. We project the yield on the 1-yr T-Bill will move to 0.32% by Q3 2015 and the 10-yr yield at 2.42%. Any increase in the Fed Funds rate will be gradual, signaling a move towards a higher rate environment but with consideration that US inflation remains low. Our outlook for 2017 interest rates are 0.90% and 3.36% yields for the 1-yr and 10-yr notes respectively.

The price of oil remains suppressed following its fall in Q4 2014, and continues to have a major impact on the global economy. Our 6 month outlook at $51/barrel is in line with current trading levels as OPEC and other major oil producing nations have yet to signal any significant cutback in production. At these prices we believe ultimately production will be unsustainable for higher cost producers such as the American shale oil industry and that prices will eventually rebound slightly to $71/barrel by 2017. Global energy stability could be threatened by the fact that several major oil producing nations such as Russia and Venezuela have federal budgets based on oil priced at $100/barrel, and continued trading below these levels would continue to destabilize their economies.

In the US falling oil prices have helped pushed consumer confidence up as consumers are able to put savings on energy and gas towards other household purchases. Lower energy prices should continue to provide tailwinds for the US economy as these pricing effects work their way through the various sectors. Due to low oil prices, low unemployment, and forecasted strong GDP growth, our outlook for consumer confidence is positive for both the 6 month and 2 year time frame.

US consumers will also benefit from the strongest US dollar in over 5 years as major economies such as the EU and Japan have implemented economic stimulus measures that have devalued their currencies. Our outlook for the 6 month Euro exchange rate at $1.07 is close to current trading levels, and we expect this to rebound slightly to $1.14 by 2017. We expect the dollar to the yen exchange rate to behave similarly.

The US equities market continues its strong bull run, and we expect this trend to continue although at a reduced rate for 2015. Despite high valuations, the strength of the US economy and dollar relative to the rest of the world has continued to drive capital to US markets, which combined with low interest rate environments means record valuations should continue. We expect a 2.8% growth for the S&P 500 over the next 6 months and a 6.7% growth rate for the 2 year outlook.

CFA Exam: Ethics Study Sessions

Cathy Zaharis, CFA, Director of the Finance Career Academy in the full-time MBA program, will host weekly study sessions for the CFA exam ethics module. All students are welcome to attend any or all of the sessions. Feel free to bring your lunch.

  • Location: 435 Pomerantz Center
  • Time: 12:30-1:20 p.m.
  • Dates:
    • Tuesday, March 24
    • Tuesday, March 31
    • Wednesday, April 8
    • Wednesday, April 15
    • Tuesday, April 28
    • Tuesday, May 5

Celebration of Women’s History Month

Tippie is celebrating Women’s History Month throughout March, highlighting alumni, faculty, students and leaders of the TCOB. The profile for one of the highlighted alumni, Shalini Campbell (BBA ’04) caught my eye, as she shared one of her favorite memories of Tippie.

Quote from Shalini Campbell

Current members of the Applied Equity Valuation (Krause Fund) course can take some comfort in knowing that they are not alone and that the more things change the more they stay the same. :)

Henry Fund Economic Outlook – February 2015

The following release was prepared by Kapil Dhingra and Michael Kelleher on behalf of the 2015 Henry Fund research team. The team updates its economic outlook several times throughout each semester. This analysis forms the basis for class discussions, company selection, and investment research.

Henry Fund Research

The Henry Fund research team expects the U.S. economy to stabilize following the 5% growth in 3Q2014 and project a six-month growth rate of 3.4%. Over the next two years, we anticipate the U.S. economy will benefit from lower oil prices and a strong dollar. While we forecast prolonged growth and an overall increase in corporate earnings, gains will be muted by a lagging global economy. We project real GDP growth of 3.2% by 2017.

The CPI inflation in December decreased 0.4% from November driven mainly by a swift decrease in oil prices and flat wage inflation. We expect inflation to stagnant with a positive bias over the next two quarters, but return to a targeted 2.0% over a two-year period.

With an overall stable economy and favorable economic outlook, we see improvements in the unemployment rate to continue, reaching 5.4% over the next six months before stabilizing at 5.3% over the next two years. Job losses and layoffs related to the energy sector should be offset by expanding opportunities and growth in the information technology, consumer discretionary, materials, and telecommunications sectors.

In line with the Federal Reserve’s announcement of maintaining accommodative monetary policy and the recent drop in their inflation target, we expect a delay in any potential increase in the Fed funds rate until at least the second half of 2015. We believe the Fed Funds rate will approach 0.75 by the end of 2016. Global market forces, low inflation, and continued flight-to-quality will hold interest rates down. The 1-year Treasury-Bill yield is expected to stay unchanged in the near term but increase up to 0.80% over the next two years. The 10-year Treasury yield will reach 2.6% by 2017.

Falling oil prices have dominated the headlines over the last year, with oil recently trading in the mid to upper $40s per barrel. Oil has fallen by over 50% in the last six months.  OPEC members have not reduced production as US shale output increased. Predicting future oil prices has proven extremely difficult; however, we believe oil prices have neared bottom.  We estimate prices to remain near current levels for the next six months, then rebound to the around $75 per barrel by 2017. Demand in mature markets will remain constant with increased demand in emerging markets. We believe current low revenue per barrel is unsustainable and anticipate small operators with high extraction costs may either cease production or be forced out of business. The decline in energy prices has led to annual savings of nearly $1,000 per U.S. household. While these gains should eventually spur consumers to boost spending, recent data suggests that so far households are using the energy windfall to pay down debt and strengthen personal balance sheets rather than increasing discretionary expenditures.

As the dollar also strengthens, we see consumer confidence remaining strong over the next six months and remaining positive into the near-term future as well.  Further, as the US economy continues to outperform global benchmarks, we see a continued strong dollar against the Euro.  We do expect the global economy to mirror US growth within the next two years giving the Euro a bit of a rebound against the US dollar at $1.19 by 2017.

Following three years of strong equity market gains, the S&P 500 index is trading near record highs. Given positive trends described in this report we foresee continued growth to equities, but at a more conservative pace. We are taking a conservative approach and predict low-single digit growth in the market over each of the next two years, while corporate earnings catch up with valuation levels.

Finance MBA Program Ranked #2 in World

The Financial Times has ranked the Tippie MBA Program #2 in the world for finance in its 2015 Global MBA Rankings. One of the interesting aspects to this ranking is that a portion of the formula is based on surveys of graduates from 2011. This cohort of students was the first to graduate from Tippie following the overhaul of our MBA curriculum and the creation of the Finance Career Academy.

Financial Times 2015 Global MBA Ranking for Finance

Financial Times 2015 Global MBA Ranking for Finance

Death Valley

Todd Houge

Todd Houge is the Curt and Carol Lane Faculty Fellow in the Tippie College of Business. He teaches applied equity valuation, applied portfolio management, and wealth management courses to undergraduate and MBA students. Todd also supervises the department’s award-winning Henry Fund and Krause Fund programs, which provide a real-world, money-management opportunity for UI students.

Todd received a Ph.D. in Finance and an MBA from the University of Iowa. He also earned his Bachelor of Arts degree from Wartburg College and holds the Chartered Financial Analyst (CFA) designation from the CFA Institute.