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A Letter from the Dean

Public Offerings
Economists and other experts discuss how to shore up confidence in credit markets; The Haskins Award goes to former Treasury chief John Snow; Amazon CEO Jeffrey Bezos talks strategy; advice for board members during volatile times; Nathan Myhrvold's deep think on competitive industries for the long term; the economic health of Asian nations; IBM's Joe Dzaluk and leading academics dissect global outsourcing; Moody's Chairman Raymond McDaniel holds forth on the credit crisis

Stern in the City
CEO Theresa Bischoff's American Red Cross serves nine million New Yorkers, By Rika Nazem
Former Knicks forward Cal Ramsey now plays for the larger New York community, By Jenny Owen

Keep Your Seat Belts Fastened, the Ride's Not Over
8 questions for Richard Bernstein

Cover Story — It's Time for a Broader View of Risk Two NYU Stern professors say that the strategic consideration of risk — and the risk management function — demand re-evaluation in the wake of the past 18 months, By Marilyn Harris

Special Feature — "A Look to the Future" Some 300 alumni gathered in New York for the 2008 Alumni Business Conference, with provocative panels led by NYU Stern faculty and alumni and a first-class collection of thought leaders, By Marilyn Harris

Leading Indicators
Stern's CEO Series: John Hofmeister, recently retired president of Shell Oil, debunks some myths about oil supplies and the energy business

Prospectus
New faculty appointments, noteworthy papers, awards, and honors

Office Hours –
Faculty Research

After Hurricane Katrina
The response to the disaster may have been shaped by the amount of power of the various players, and what that could mean to you, By Frances J. Milliken, Joe C. Magee, Nancy Lam, and Daniel Menezes

The Home Court Advantage
Why investors still weight their portfolios to local equities in a boundary-less market,
By Stijn Van Nieuwerburgh and Laura Veldkamp

Think Again
Going with your first instinct? You may be proceeding under a faulty assumption, By Derrick Wirtz, Justin Kruger, Dale T. Miller, and Pragya Mathur

Peer to Peer
Student Life in Washington Square and Beyond: Studying in Shanghai, the "mentee" experience, talking new media to executives of the Tribeca Film Festival, the global study tour goes Latino

Alumni Affairs
Alumni News and Events: Linking in with LinkedIn, hotel discounts, reunion celebrations, the 2009 Global Alumni Conference in Barcelona

Class Notes

Past Performance
Dr. Robert Kavesh, beloved teacher of generations of Stern students, is honored with an endowed professorship in his name, By Marilyn Harris

 

 

 

Merrill Lynch is one of the world's leading wealth management, capital markets, and advisory companies, with offices in 40 countries and territories and total client assets of approximately $1.6 trillion. Merrill's star investment strategist (and multiyear member of Institutional Investor's All-America research team), Richard Bernstein has a carefully considered opinion that's heard and respected around the world. This fall he adds a stint as an adjunct professor at NYU Stern, teaching a class on investment strategies.

1. You address many constituencies. To name a few: You are the public voice of the firm on the stock market; you counsel institutional investors; you guide individuals and institutions on what sectors to buy; you call turns in the market. What do you feel is your most important job?

My most important job is stewardship. Merrill is the biggest brokerage firm in the world, so a lot of people follow my advice. Because this position is so visible, people's livelihoods depend on what I say, both within the firm and externally. I take the notion of being a steward of people's futures very seriously — being able to benefit their lives is what is most fulfilling about my job. You can't ask for anything more.

2. You're known for being a contrarian, and an exceptionally accurate one. How did you get that way?

I tend to be a contrarian because that's the way to make money over the long term — as opposed to being a momentum investor. Even prior to going to business school, which I did part-time while working, I believed valuation was very important. People think you just want to buy cheap stocks, but that's not the reason. There's an economic reason why that works, and this is one of the things I took away from NYU Stern — that the links between the economic world and the financial world are tighter and more numerous than people realize. I often preface remarks with "As they taught us in business school...". I don't think people realize how tied in academe is to the real world.

3. You use various quantitative models to guide you. Which ones are most useful?

Funny enough, the model I find most useful is something I learned in my operations research class in business school: control theory. In manufacturing you use control theory for quality control purposes. I was playing around one day with the theory, when I was attending Stern and working at EF Hutton, and it turned out to be a great stock market timing model for the S&P 500, in terms of asset allocation, not for any short-term purposes.

4. We're talking in July, and stocks have been disappointing recently. What's the outlook for the end of this year?

Our big theme for 2008 is that the underlying trend for market volatility won't change. The credit bubble is not just a US event, it has impact globally on growth, and people will see how broad it is into 2009. Over the next 12 months, we believe we'll be looking at mid-single-digit returns.

5. What is a reasonable time frame for an investment to pay off? Does it vary based on the economic cycle?

There are three very easy ways to build wealth: Extend your time horizon; compound dividends; and diversify. Research shows the longer your horizon, the better. Day trading is basically luck. I don't believe this varies based on the economic cycle. You should review your portfolio based on time (quarterly, semi-annually, annually), not on events.

6. You were an early fan of the energy sector when others were captivated by technology. What do you think of energy and oil now? What do you think of technology now?

We're bigger fans at this point of older tech stocks — the large-cap technology companies. They remain undervalued versus the S&P 500. Regarding the energy sector, we're still long-term bullish, but the group has gotten a little ahead of itself, and since it's traditionally a lagging sector, we think oil will probably come down in the next six to 12 months and energy stocks will underperform.

7. How has your job evolved over the years?

In November, I'll have been at Merrill 20 years. I started as a senior quantitative analyst in the equity strategy group. There were three of us at the time. Roughly three years ago, I was appointed chief investment strategist, with about 40 people in my department. As my interests have expanded over the years, the issues I get to deal with are proportionately broader, which is great. In my current position, the number of constituencies has increased. At first, equities accounted for 90 percent of the demands. Now I get demands from fixed income, trading, private client, and investment banking as well, and equities account for maybe 50 percent.

8. How has your education at NYU Stern influenced your career?

Attending business school part-time while working was difficult, but I found what I was learning could be completely integrated into my job. In fact, I wrote a journal article that incorporated what I was learning in my bond math class into a way of valuing equities.