Beat the Dow Jones

Who Wants To Be A Millionaire?

With Wall Street still reeling from credit crisis, many industry experts and politicians continue to point their fingers at financial engineering as a catalyst for the current mess. They blame many of the Wall Street firms for creating financially engineered products as a way to bundle together credit products, obtain artificially high credit rating, and sell of pieces of the instrument to parties who did not fully understand what they were buying. In the end, the investment banks were left holding only very small pieces of the securities after collecting large fees on the transaction. Regardless of where the fault lies the market for these structured products has completely seized up in the wake of the crisis.

That's why it came as such a surprise when Erick Rendon and Nick Casaril launched RC Capital this last month in Seattle and brought to market a new structured product which was received with great fanfare. The product is called a BBS, or Baby-Backed Security. The way it works is the following. RC Capital will purchase unwanted babies from their mothers and from the state and bundle these babies into a security. The security is then partitioned into different tranches which are sold to investors. The tranches represent ownership interest in the tax-exemptions able to be claimed on the babies. The tranches have different characteristics in terms of average baby age, size, and seniority versus other tranches.

"What we have found is a great way to solve two problems with one solution. Society needs someone to care for these children, and people need tax exemptions. The BBS market is providing both of these services," stated Mr. Casaril. When asked for more information regarding where the babies and children are kept, Mr. Casaril referred us to Baldwin Bank, which manages the trust under which the babies are kept. Rhett Baldwin, Chariman of Baldwin Bank, refused to comment for this story.

So far the BBS market has reached $1 billion and is expected to expand as RC Capital looks to expand overseas.

Cap & Gown & Trade

No Wonder Demand Exceeds Supply

The Cap and Gown 500 Index (C & P 500) skyrocketed earlier this month amid heavy volume spurred by speculation that the class of 2009 will graduate. Eager traders are running rampant, snatching up as many caps and gowns as they can.

With other investments failing in this recessionary period, ranging from housing to stocks, caps and gowns are seen as a sure-fire investment with little downside. "Based on the trends and forecasts from late-June of last year through May of this year, the cap and gown market should continue to see explosive growth," speculated Economics Professor Alan Hess. "This is absolutely not a bubble."

Full time MBA 2009 Erick Rendon, fresh off of a humanitarian mission to cure swine flu in Mexico disagrees. "NO MORE CAP AND GOWN E-MAILS!" comments Rendon, hoping the use of all caps will stem the irrational behavior of his fellow traders.

The cap and gown trade bonanza is also encouraging traders to experiment with new, innovative and complex trading strategies. Recent evening MBA 2008 graduate Teresa Addison is employing a unique premium strategy for her vintage cap and gown. Full time MBA 2010 Ian Courtnage is attempting to proactively corner the market on caps and gowns to foil the plans of Randolph and Mortimer Duke. Full time MBA 2009 Craig Wiley, speculating that he will in fact graduate, is looking to create the elusive arbitrage opportunity.

Index fund trading has also been strong. The BEN09 and KEV09 funds have both quadrupled since their IPOs two years ago. Similarly, the ZAK10 fund is showing strong early returns.

Despite the solid sustained growth in the cap and gown sector, the industry still has its detractors. "I just don't see how cap and gowns are sustainable in the long term without doing serious harm to the environment," remarked incoming Net Impact President and full time MBA 2010 Ben Sadler. "To offset the emissions from the production of caps and gowns, we will have to seriously consider implementing a cap and gown and trade program immediately."

Sigrid Down With Pirating

Somali Pirates Hold Well Attended Meet the Firm on Alki Beach

After fielding many questions from first year MBAs about the possibility of working with Pirates in the Gulf of Aden this summer, Sigrid Olsen from the program office officially announced last week that all Pirating internships will count towards international experience graduation requirement. "After talking with the BCC and getting a better understanding of what being a Pirate intern was all about, I decided that this should definitely count," noted Sigrid. "We are excited about incorporating piracy into a full range of international options like the Global Negotiations class and Study Tours. You can sit in class with Vandra Huber every Monday night in the spring, you can get drunk and wear flip flops to business meetings with execs in Japan on Spring Break, and now you can shoot shoulder fired rockets at container ships in the high seas. We have something for everyone," she added.

Paula Klempay in the BCC added her excitement, "Pirates have been looking to get a hold of Foster MBAs for a few years now. They really want to leverage our proximity to the ocean and the fact that we have many former military members in the program who have experience confiscating AK-47's and Rocket Propelled Grenades from rogue nations," said Klempay.

Trevor Cobb quickly offered his expertise to prospective first year pirate interns by holding an abbreviated weekend Ranger school. "We'll concentrate on small arms and rockets, as that is the weapon of choice for the pirates in the Horn of Africa." Likewise, first year ex-sailor, Nik Vondrak, agreed to hold a knot tying class after some prodding from his classmates.

Unfortunately, the global economic crisis has had a tremendous impact on the pirates, and as such, they are not offering any full time positions for second years. "That kind of sucks," said Klempay, "we thought the pirates would come through with some great F-1 visa type positions." First year MBA, Chris Trudeau, is seen as a shoe in for a pirate internship thanks to the enthusiasm he showed earlier this year by spamming the bull with emails about "Talk Like a Pirate Day."