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

CFA Scholarship Opportunities

The CFA Institute, administrator of the Chartered Financial Analyst (CFA) designation, offers a scholarship program to subsidize the enrollment fees for students to sit for all levels of the CFA examination.  As a CFA Program Partner with 3 charterholders on faculty, 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 2014 or June 2015 CFA examinations.  Students selected for these scholarships will be eligible to enroll the December 2014 or June 2015 CFA exam at a reduced rate ($350-$440).  (Normal enrollment fees range from $1,060-$1,610 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 2014 Exam: Wednesday, August 27, 2014, 12:00 p.m.
  • June 2015 Exam: Monday, December 8, 2014, 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 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 2015 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. 18, 2014. (

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, 2015.  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 2014 or June 2015 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 2014 or June 2015 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 6F:221 Applied Securities Management (Henry Fund) course or the undergraduate 6F:112 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 2014 exam will be contacted by Thursday, August 29.  Scholarship recipients for the June 2015 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 2014 exam, and the remaining ten (10) scholarships will be reserved for the June 2015 exam.


A Honduran Adventure on Roatan

My wife and I just returned from a week stay on the island of Roatan, Honduras. It was a very relaxing week of sun and snorkeling as we celebrated our 20th wedding anniversary this month.

Roatan is a relatively undeveloped island, compared to most of the Caribbean. Although the cruise ships started visiting the island within the last decade, SCUBA divers have known of its awesome barrier reef for years. The reef is located between 50′ and 500′ offshore, making it an easy swim across shallow waters inside the reef to great snorkeling amid bright and vibrant coral. Of the six Caribbean islands that I have visited, Roatan probably has the healthiest coral formations.

Blue Bahia Resort, Roatan, Honduras.

Blue Bahia Resort, Roatan, Honduras.

We rented an apartment at the Blue Bahia Resort in Sandy Bay, along a much less developed section of the beach and well away from the cruise ship ports and tourist resorts of West Bay or West End. The awesome staff at Blue Bahia made us feel welcome from the minute we pulled into the drive. The resort featured a dive shop, and we had the opportunity to try a discover SCUBA dive. My wife really loved it and ended up going again. I decided that remaining on the surface of the water was more my calling.

A Typical Sunset from Sandy Bay, Roatan,  Honduras. May 27, 2014.

A Typical Sunset from Sandy Bay, Roatan, Honduras. May 27, 2014.

We rented a car during our stay and explored different parts of the island during the day, then returned to our quiet beach for brilliant sunsets in the evening. Roatan is part of a still emerging Honduran economy, and many areas of the island still have very basic infrastructure. Tourism and the service industries around it are the lifeblood of the island’s economy. It was unnerving at times to see the range of economic circumstances that many of the island’s residents face, but overall, it seemed that island residents are very happy, placing a strong emphasis on family. We had a wonderful visit to Roatan and hope to return again someday.

Why I Do What I Do

One of my favorite things about teaching the Applied Equity Valuation courses at Tippie is watching the transformation that students undergo during the semester. Over the first few weeks of the semester, the students are trying to learn as much as they can about the economy, their assigned sector, individual industries and selected companies. We essentially ask them to become a professional economist and industry expert in a couple of weeks.

Naturally there is a certain amount of stumbling around that must take place in order to develop this knowledge as students navigate the seemingly endless amount of information available. My role is to essentially guide the teams toward the goal of producing a high-quality valuation model and research report, while allowing each group the flexibility to develop their own ideas and opinions. The equity valuation project can initially appear overwhelming. However, we break it down into small steps, and by the end of course, most students emerge as confident analysts with a deep knowledge about their selected companies.

I recently received the following email (reprinted with permission) from a student in my undergraduate Applied Equity Valuation course. It describes the personal transformation and sense of pride that many students who complete the course often feel.


… I just wanted to let you know how much I enjoyed the class this semester. I really wanted to learn more about what it is like to be a financial analyst, and I came out having more of a real experience than I ever thought I could get from a class.  

After to talking to some former Krause Fund Analysts, I knew it would be a tough and long semester and it was, without a doubt, a tough and long semester. But I have to say, the feeling of achievement I got after turning in our final reports and giving our presentations made it all worth it end. I not only learned about equity valuation, but I also learned about hard work and commitment. I know everyone in my group feels the same way. We really worked our butts off this semester and that makes me proud. I know the lessons we learned in this class will continue to pay dividends long after we leave the University of Iowa as we pursue our careers.

I am always looking to explore new areas of Finance to open as many doors as I can for myself after I graduate. Applied Equity was a great stepping stone for me. This summer, I have accepted an internship as a Junior Financial Advisor at (company withheld) in (city withheld)….  

Thanks again and have a great summer!

It is a wonderful feeling to receive a message like this from a student, and it certainly makes all of the long weekends providing feedback on projects or office hours spent with a line of students out the door worth it.

To love what you do and feel that it matters, how could anything be more fun?


The Henry Fund Turns 20

Yesterday marked the 20-year anniversary of the Henry Fund portfolio (established Apr. 30, 1994). Since its inception in the spring semester of 1994, a total of 252 students in the full-time MBA program have served as Henry Fund analysts and portfolio managers. While the portfolio began modestly with an initial investment of $50,000, today the Fund boasts total assets under management of $3.6 million, which supports scholarships for both MBA and undergraduate students as well as other programs across the University.

It was particularly exciting to have Henry Tippie on campus today as part of Phil’s Day at the University. The Henry Fund is named for its two benefactors, Henry Tippie and Henry Royer, who shared a common vision 20 years ago that investment education is more powerful when real money is at stake. Their generosity also demonstrates how giving can provide lasting opportunities for students long into the future.

I have been fortunate to have had a front-row seat for most of the Fund’s last two decades, as an MBA student on the inaugural Henry Fund research team and as faculty adviser for the last 15 years. While it has been amazing to watch the program and its reputation grow over this period, one constant has remained — Henry Fund analysts produce high-quality investment research that has generated outstanding portfolio performance. I am looking forward to seeing what changes the third decade of the Henry Fund will bring.

20-Year Anniversary

Henry Fund Economic Outlook – April 2014

The following release was prepared by Jacob Johnson and Karen Rubel on behalf of the 2014 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

In general the Henry Fund’s outlook for real GDP growth, CPI inflation, and interest rates has stayed constant through March.  After 4Q13 GDP was revised downward to 2.6%, the fund still sees slight growth in the short term trending towards a long-term projection of 3% growth. This expectation is also reflected in unemployment and interest rate expectations. As part of a recovering economy, we see the unemployment rate gradually decreasing from 6.7% in the most recent quarter to a long-term value of 6.18% in two years. Coupled with the GDP growth, we expect interest rates on the 1-year Treasury bill, 10-year Treasury bond, and fed funds rate to increase from historic lows in recent quarters. We expect rates for all three to increase slightly in the short-term with greater growth in the long-term, with compression in the spreads bringing values back to more normalized figures.

Our outlook for future increases in oil prices has not changed; however, we have decreased the amount of increase. The overall increase in prices we believe is due to the continued hydraulic fracturing providing additional production. Driven by higher energy consumption, we believe the WTI oil price will increase to $106.32 in the next two years, after climbing to $103.93 in six months.

Our short-term outlook on the Euro has remained constant at 1.37 USD/EUR since January, even though actual FX has increased from 1.368 to 1.381 USD/EUR over the same period.  However, our long-term outlook has been steadily declining and sits at 1.34 USD/EUR as of April. We expect Japan to continue its current monetary policy, keeping the Yen at a low FX rate, but our two year outlook has decreased slightly to 102.64 JPY/USD.

Overall, we believe the S&P 500 index return will grow significantly slower than 2013. Although the YTDreturn has already grown more than we predicted as of January, we believe it will level out after 1st quarter earnings releases and only return 6.41% (excluding dividends) over a two-year holding period. We do expect consumer confidence to increase, but not to the level to cause large S&P growth over the next two years.

The Blood Moon Lunar Eclipse

I set my alarm for 1:35 a.m. this morning to watch the total lunar eclipse. As a kid, my family used to take our sleeping bags out into the yard on our farm to lie in the grass and watch meteor showers, and the chilly overnight temperatures last night reminded me of those times. As the eclipse reached totality shortly after 2:00, my wife and I decided that we should wake up our boys to see if they were interested in viewing it. Our youngest son groggily rolled out of bed, walked to the window, turned around with a “meh,” and went back to the bed. Our oldest son at least walked outside to get a better look. His reaction was “that’s it?” They may not be budding astronomers yet, but I thought the show was amazing.

Blood Moon Lunar Eclipse

Lunar Eclipse, 15 April 2014, 2:36 a.m. – Iowa City, IA

Henry Fund Economic Outlook – March 2014

The following release was prepared by Michael Fleagle and Nicholas Viner on behalf of the 2014 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

There is no significant change from our initial January economic outlook. Even after taking into consideration some of the weak economic reports in 2014, we feel there are no major data points to change our outlook consensus for expected GDP growth, inflation, or interest rate expectations. There have been surprises above and below consensus on data relating to housing, manufacturing, and employment; however, the surprises have been trending towards the negative. Taking into consideration the weather, these misses cannot be given too much weight nor are there enough data points to forecast a weakening economy. The Fed indicated that it did not perceive the small number of reports as requiring a change to the rate at which they are winding down asset purchases, coming down from $85 billion per month to zero by the end of 2014.

The one significant change to our forecasts is in the employment situation. The labor market shows continued strength, with non-farm payrolls coming in above the consensus (150,000) for February at 175,000. The team’s six month outlook for unemployment fell from 6.8% to 6.6%, with the February data showing an unemployment rate of 6.7% and near term employment trends that appear to be positive. Our two-year unemployment outlook declined from 6.5% to 6.2% and could trend towards 6%. Even with a significantly improved unemployment forecast, we are holding our forecasted treasury rates constant as the Fed has removed the 6.5% unemployment target from rate discussion. The Fed appears to be centering their rate decisions on inflation, and we can expect to see a change in rates as the CPI begins to climb.

March 2014 HF Consensus Outlook

A 20-Year Relationship with the Henry Fund

Last Wednesday, the Henry Fund research team hosted a conference call with Doug Ramsey, CMT, CFA, Chief Investment Officer of the Leuthold Group. Leuthold is an independent, quantitative and contrarian institutional research firm based in Minneapolis. During our conversation, Doug provided a great technical and quantitative overview of the current equity market environment.

Interestingly, Doug was also an original member of the Henry Fund advisory board when the program began 20 years ago in the spring 1994 semester. It is great that even two decades later, Doug has continued to serve as a valuable resource for our students.

Leuthold Group

Henry Fund Economic Outlook – January 2014

The following release was prepared by Jarom Dilworth and Adam Walter on behalf of the 2014 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

We are cautiously optimistic regarding the state of the economy over our six-month and two-year forecasting periods, as equity markets transition from record setting levels in 2013. The U.S. economy experienced steady growth over the first, second, and third quarters of 2013 at 1.1%, 2.5%, and 4.1%, respectively. We predict slower growth in the fourth quarter of 2013 due to unusually cold winter weather nationwide and the high level of inventory buildup in Q3. Our six-month GDP growth target of 2.72% is driven by increases in capital investment and personal consumption expenditures.

We feel that many large-cap stocks reflect full valuation and represent a sector where it will be difficult to obtain alpha. Given the 32.39% return from the S&P 500 index in 2013 coupled with slower than expected revenue and profit growth, we expect difficulty finding good values in the equity market. Overall, our team feels that the S&P 500 will return 8.7% (excluding dividends) over a two-year holding period, significantly slower than 2013 and with more potential near-term downside volatility.

Despite the easy money policies of the Federal Reserve (“the Fed”), CPI inflation increased 1.5% over the prior year. However, with the Fed’s December and January announcements to reduce its monthly bond buying program $10 billion per month from $85 billion to $65 billion, we feel this reduction will inevitably create headwinds as U.S. and world markets adjust to a reduction in the unprecedented levels of liquidity. Our six-month CPI inflation target is 1.92% annualized.

Labor markets showed relatively positive trends as non-farm payrolls averaged 182,000 per month in 2013. December reported disappointing job growth of 74,000, which was below economist estimates of 197,000, but this looks like an outlier when taken considered with the positive ADP report. The unemployment rate maintained a downward trend throughout the year with a steady decline from a high last January of 7.9% to a low in December of 6.7%. As moderate growth continues into 2014, we believe this rate will remain relatively unchanged in the near-term with our consensus six-month unemployment rate forecast of 6.79%. Our two-year outlook estimates an unemployment rate of least 6.5% due to companies slowing investment in capital expenditures as interest rates rise.

As the Fed pulls back on its monthly asset purchases, they have committed to maintain historically low interest rates by setting the Federal Funds rate target at 0.0-0.25%. Although the Fed has expressed that this rate may increase with noticeable improvements in other areas of the economy, we believe this rate will remain unchanged for the next six months. As the Fed continues to pull various “levers” to manage monetary policy, we believe short-term treasury yields will modestly rise to 0.16% over the next six months, while long-term yields, as represented by the 10-year treasury bond, will rise to a target of 2.95%, up approximately 20 basis points from its current level. Additionally, without significant investment by the Fed, we believe that the 1-year T-bill rate will rise 25 basis points to 0.36% and the 10-year rate to rise 60 basis points to 3.44% over the next two years. Moreover, as inflation remains steadily low we expect the fed funds rate to remain at its historic lows in our two year projection.

With continued operational efficiencies in extracting and transporting oil from America’s abundant shale formations, U.S. crude oil production in 2013 surged more than 1.0 million barrels/day to its highest level in 24 years. This increase helped stabilize the price of West Texas Intermediate (WTI) crude oil which recorded a low of $92.02/barrel in April and a high of $106.57 in August. Revised IMF forecasts raised 2014 global GDP to 3.6%, driving our six month target for WTI crude oil to $102.60 per barrel. Driven by the geopolitical volatility in the Middle East, we expect oil prices to continue to rise and as global consumption increases we expect this demand to drive the price of oil to $109/barrel over the next two years.

We expect Japan to continue their current monetary policy, keeping the Yen at a low FX rate going to 102.92 JPY/USD over the next two years. With intra-year fluctuation, we expect the Euro to remain close to 1.36 USD/EUR over the same period.

A Guaranteed 6.5% Return?

I have been told that finance people tend to see the world a little differently.

This morning I read a news article stating that the price of first-class postage stamps was to increase from 46 cents to 49 cents this weekend. Although I use only about 10-15 stamps per year, my initial thought was that it is not often you come across a guaranteed one-day return of 6.5% in today’s market. (OK, technically first-class postage is increasing more than 6.52173%.)

My second reaction was to wonder whether it was possible to purchase 100,000 “Forever” stamps before Sunday. A little research showed that one could theoretically order large quantities of stamps online through the website. However, the US Postal Service charges shipping and handling fees for online orders, not to mention the not-so-small problem of how to sell a large quantity of stamps without incurring substantial auction or shipping fees, which would of course both lower the expected profit margin.

Forever Stamp

Interestingly, the very first “Forever” stamp debuted on April 12, 2007 at a rate of 41 cents. If you had invested in these stamps at the time, their value would have increased 19.51% after this weekend. This works out to an average compound annual return of nearly 2.66% per year, which would have provided a better return in your portfolio than money market accounts or short-term U.S. Treasury Bills.

While I am not planning to pursue this investment strategy any further, I may still stop by the local post office this afternoon to pick up at least one book of stamps. That would save me 60 cents and probably last until mid-2015.

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.