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Brendan R. - Intern Winter 2010

A Great Experience

Today was the last day of my internship at the fund. I view the last two weeks as a great learning experience.  There is clearly a huge difference between what can be learned in a classroom and what can be learned at a trading desk. I am very grateful that I have had this opportunity and would like to thank Jeremy and everyone at the desk for allowing me to join them for the last two weeks.

Reflecting on Progress

I finished two projects today and afterwards focused more on the market. When I look at stocks I now find myself more attentive to chart patterns, resistance and support levels, and volume. I was also able to watch Marc make a lot of money shorting RIMM today. It has been exciting to work and learn here and I plan on continuing to learn about trading while back at school next semester. Tomorrow will be my last day here at the fund.

College Football

After watching the BCS national championship game last night I feel compelled to write about football today. Unfortunately the college football season ended last night but the game ended up being very good. Auburn beat Oregon in the final seconds by a field goal. I read today that the game attracted the top overnight metered cable television rating ever. This is a testament to the popularity of college football.

The quality of the game last night and the record breaking rating reminded me of an interesting article I read recently about the amazing amounts of money that the top college football programs make for their schools. Although many of us do not realize, college football is a billion dollar enterprise. The five most profitable teams in 2010 generated combined revenue of $361 million. The most profitable team was The University of Texas, which generated $93 million in revenue and had a profit of $68 million this year.

Although we will have to wait until the fall to see more college football, there will be some great NFL games this weekend. A notable matchup is the Jets vs. Patriots on Sunday at 4:30.

Is Facebook a $50 Billion Company?

The more I think about Facebook’s $50 billion valuation, the more I question it. The numbers simply don’t make sense.

If one assumes that Facebook has $2 billion in revenue (a generous estimate) then Facebook’s new valuation gives the company a price-to-sales ratio of 25. In comparison, Apple has a price-to-sales ratio of 4.5 while Google has a price-to-sales ratio of less than 7. Keep in mind that Apple and Google are remarkably innovative. Both companies have proven that they can develop very profitable products. Their innovative capabilities and profitability justify their valuation. However, Facebook has not proven that it can generate substantial profits. In order to justify its $50 billion valuation, Facebook must find a way to generate more revenue without irritating or alienating its members. That task could prove to be quite difficult and time will tell if the company can succeed. However, if Facebook continues to generate relatively unimpressive revenue, investor demand will wane substantially and the company’s valuation will probably drop drastically as well.

A Learning Experience

This internship is proving to be a great opportunity to learn about the stock market and trading. I felt comfortable balancing a number of things today, which mostly contributed to my knowledge of the market in different ways. In the process of compiling glossary terms and elearn notes I have been able to learn a significant amount about trading. In the midst of working with these terms and notes, I was have also been able to learn about the markets from a more practical perspective by observing the activities of the traders. Working in the office is thus providing me with a synergized learning experience.

More Positive Economic Data

While watching the market today I was interested by the fact that the market initially hesitated to rally behind the extremely positive jobs data. It took time for investors to shake off the bearish feelings that existed over the night and early this morning.  It will be interesting to see the BLS numbers on Friday. More positive numbers on Friday may extend this rally even further and leave investors wondering when or even if there will be a significant market adjustment in the near future. However, we will first have to see how the market behaves tommorow.

Bad Herds and Good Herds

I read a great article last night about the disastrous story of Merrill Lynch in the time leading up to and during the financial crises. The article was called “The Blundering Herd” and was in the November issue of Vanity Fair. I certainly recommend reading it. Merrill under the leadership of Stanley O’Neal serves as a perfect example of a firm with a destructive culture. The article describes how O’Neal created an atmosphere that rewarded shortsighted greed and that rejected the exchange of ideas. In thinking about the article I’ve realized that one of the great strengths of this fund is that it is structured in a way that facilitates dialogue and the exchange of ideas. I think that in order for an organization to succeed over a long course of time such an environment is not only desirable, it is necessary.

First Day

My name is Brendan and I am finishing my first day as an intern at the fund. I am a junior at Cornell University majoring in Industrial and Labor Relations.

This was definitely a good day of work. I have been eager to experience the atmosphere of a hedge fund and it has proven to be very exciting. There is an extremely noticeable difference between following the markets independently and through the lens of a hedge fund.  I appreciate this opportunity and look forward to another day at the fund tomorrow.