Interview prep can be an especially draining process, not to mention the stress of waiting to hear back from companies. In preparing for finance interviews I have also been working on trades ideas, should I be asked for one in an interview. It's also just generally a good idea to have a view on aspects of the market. I decided to have a little fun with it and composed my trade ideas as a rap, minus the music (I can work on that later). I now present my answer to the interview question of "Where would you invest in the market?"
To cash in big you'll want to be equipped,
With some agency MBS P/O strips,
QE's ending, mortgage rates heading higher,
Means low-refis and an absence of buyers,
Despite the MBS negative convexity,
Being agency backed is the necessity,
Chalk up defaults as prepayments on these,
That's the beauty of GSEs charging those fees,
With unemployment high and moral duty eroding,
The streets will be filled with lots of foreclosin'
Principle is coming in quick, returns are rising,
With more to be made, on to the next trade I'm advisin'
China's monetary policy is looking a little lax,
Time to scoop up some Yuan NDF contracts,
Based on the 6.62 level I see,
Market's pricing an appreciation of 2-3,
With exports and imports rising so quick,
I'm thinking more in the range of 5-6,
Tightening lending and raising bank reserves,
Still won’t let the 6.83 peg be preserved,
With inflation and GDP growth soaring away,
“Why not let the Yuan rise PBOC?” is all I can say,
The third trade idea I'll leave you with today,
Has the growth of Kaplan U but as a pure-play,
With tuition high and industry employment trends turnin,
Nothing's better than some ITT Tech online learnin'
With a price to earnings ratio right around 13,
Compared to the 24 of the industry, it looks like a dream,
With projected EPS growth of 17 and ROE of 40 percent,
A few student loan defaults won't make a dent,
ESI’s fundamentals all look solid to me,
I'd put the one year target price at 133.
To wrap this all up, I’ll end with my short pitch,
For a company that’s clearly filling the wrong niche,
With both existing and new homes sales continuing to fall,
Shorting luxury builder Toll Brother’s a pretty easy call,
With “Move-up Buyers” core purchasers of new TB homes,
There’s few to be found since they can’t sell their own,
TOL’s trading at a price to sales ratio of 1.74,
With an industry average of .65, need I say more?
In addition, TOL has 27,000 lots in their vice,
Which unfortunately are quickly depreciating in price,
If QE’s end causes an increase in Jumbo mortgage rates,
Combining with its high SG&A expenses will seal TOL’s fate,
While owning a home may be the American dream,
With this economic climate, one-year target is a drop to 13.
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