Spring 2024 Quarterly Update

Hi everyone, Jenson here!

I hope this email finds you well, and that you have enjoyed your spring and have some fun summer plans! 

As a reminder, the purpose of this email is to serve as an update on my life regarding my academic and professional development, and I will continue to send these out every three months or so. Please let me know if you wish to be removed from this email list, and I can easily remove you with no hard feelings. I know we all get too many emails.

Sophomore Year Spring Quarter Highlights at Santa Clara University: 

School:

    •    I just finished my Spring Quarter and just began my summer break! This quarter I took four classes: Statistics and Data Analysis II (aka Stats), Introduction to Programming, Digital Filmmaking, and Financial Management. My GPA is still a 4.0 (phew!) and I continue to be a member of the Leavey Scholars program.

    •    I continued to work in the Department of Modern Languages and Literature, where most of my time is spent making copies, faxing documents (yes, faxing is still a thing), and making fliers for course registration on Canva.

    •    In preparation for my upcoming Fall Semester Study Abroad Program in Paris, I spent many hours dealing with all the required paperwork: booking a Visa appointment (which turned out to be far more miserable than imagined), finding housing, and registering for classes. 🇫🇷

    •    I also became a Campus Ambassador for a new financial lending company called TANDA. It was a great experience helping to grow a new startup and learning about their business model of reaching financial goals with the help of friends and family. 💸

    •    I attended the Women in Investment Annual Dinner at Santa Clara University, where I heard from four panelists about their experiences in the business world as women. This dinner was incredibly valuable, as I learned about some of the struggles women face in an industry dominated by men and what I can do to help bridge this gap.

    •    I am also a member of the SCU Investment Club. We have weekly meetings where we learn about current market and investment terminology (there are acronyms for almost everything in the business world).

Overall, I had a great Spring Quarter, and I look forward to being back at Santa Clara in January after spending the fall studying in Paris. 

Professional: 

    •    This quarter was especially busy for professional development. As in past quarters, I continued to meet with people and reached my goal of meeting with at least one business professional per week—all of whom are on this mailing list as well! This quarter, I was fortunate to meet with professionals from the following companies: Coldstream Wealth Management, Brighton Jones Wealth Management, Wells Fargo, Morgan Stanley, JP Morgan, Meridian Capital, and Invesco. Thank you to everyone!

    •    I completed two online “courses” from Forage, an online course, and a job simulation website. The first was a Private Banking Job Simulation from JP Morgan. This simulation gave me a glimpse into the world of an analyst in Private Banking and Asset Management, and developed my interest in client relations. If you are interested in hearing more about it, I also made a post on LinkedIn. The second course was an “Excel for Business” course from Goldman Sachs. I thought I was well versed in Excel before taking this course as I am Excel Certified, but I soon realized there is a huge difference between what I have learned in school and the nuanced techniques used in the financial world, so this was an incredibly valuable learning experience. 

    •    Finance recruitment starts early . . . really early. So, with this in mind, I decided to start early too. I reached out to campus recruiters at companies like Wells Fargo and JP Morgan and met with them in person and over the phone to get advice on how to set myself apart as I began the application process. I also attended the SCU Spring Career Fair and spoke with an SCU alum who works at JP Morgan. I had my fair share of “Hirevues,” which are online, recorded interviews (not my favorite as I much prefer a face-to-face conversation, but a necessary part of the application process). After a lot of hard work and persistence, I am excited to announce that I have accepted an offer for Summer 2025 at JP Morgan as a Commercial Banking Analyst as part of their Middle Market and Specialized Industries sector (MMBSI). The MMBSI sector works with private and public companies that generate between $20 million and $500 million in annual revenue.

Life:

    •    I am currently on my Summer break! While it was a great year, I am grateful to have a break and to be back home in Seattle with friends and family.

    •    I start my summer internship at Coldstream Wealth Management on June 24th! As a reminder, Coldstream is a wealth management company with offices in several states, nearly $10 billion in AUM, and a 99% client retention rate. I am thrilled to have an internship at a firm as esteemed and experienced as Coldstream. I will learn an immense amount about the financial world, and I can’t wait to be challenged, show my curiosity, and soak up as much information as I can this summer.

    •    In terms of travel, I have a few trips planned this summer. I recently went to Arizona with some good friends and was humbled on the golf course. I am also heading to Las Vegas for a weekend in late July to see Lady Gaga perform with my family. Lastly, I am headed with my family to the San Juan Islands (the San Juan’s are an archipelago off the northwest coast of Washington, accessible by ferry).

What’s next:

    •    My summer internship at Coldstream!

    •    I am studying abroad this fall in Paris! I will be in Paris from late August to mid-December, and I could not be more excited. I have wanted to study abroad my whole life, and to be able to do so in a country where I can speak the language fairly well will make the experience even more rewarding.

Recommendation:

My recommendation for this mailing list is to read publications from Philipp Schnabl, who is a renowned Finance Professor at the NYU Stern School of Business who has a Ph.D. from the Economics Department at Harvard University, his M.P.A. from the Harvard Kennedy School and his B.A. and M.A. from the Vienna University of Economics and Business Administration.

This recommendation is based on the article “Why Do Banks Invest in MBS.” Schnabl about Mortgage-Backed Securities (MBS) and the role they played in the meltdown of Silicon Valley Bank. While the SVB collapse is not necessarily in the news anymore, what happened last year down the street from where I go to college provides an important financial lesson. I understand that many of you may already have a baseline understanding of why SVB went under, but I am going to offer my interpretation based on what Schnabl said and mention why he believes this crash will help deter future financial meltdowns. 

First of all, it is important to understand why banks take deposits (yes, I understand most people know this :)). Banks love deposits because they make immense profits on the difference

between the U.S. savings deposit rate (roughly .45%) and the Fed funds rate (roughly 5.25%). This difference between the Fed funds rate and the deposit rate is where banks make their money. Right now, there are over $11 trillion in savings deposits in the U.S., which means that banks are getting roughly $528 billion each year in profit just from these savings accounts. However, the Fed funds rate changes each year; for example, in 2022, the Fed funds rate was 0%, which means that banks were making nothing on deposits. 

Ok, so now that we all understand the basics of deposits, we can dive into why SVB went belly up. Because so much profit relies on the Fed funds rate, and this rate changes too frequently, banks hedge the deposit franchise (hedging = limiting risk). SVB decided to hedge this risk by borrowing for the short term and lending for the long term. After SVB collapsed, many people, including renowned economists, were quick to call out SVB for this tactic and called it stupid, but in reality, it is quite smart, according to Schnabl, because it stabilizes the value of a bank and reduces risk. While it successfully hedges the bank, it is all about balance, and SVB did not correctly balance. SVB had mostly checking accounts from venture capital-backed firms, and checking accounts typically pay low rates. SVB assumed that this would be the case, but in reality, their corporate checking accounts were different. The rates ended up being much higher for the corporations’ checking accounts that SVB was holding as VC-backed firms began to slow in growth. SVB assumed that their depositors had low rates and were, therefore, properly hedged, but they were not. 

SVB had a second problem, though. According to Schnabl, 97% of the deposits in SVB were not insured by the FDIC, which guarantees depositors’ funds up to $250,000 per bank in case of failure. This is quite frankly insane, considering most banks typically have much less than 50% of their depositors uninsured. Uninsured bonds are risky. They always leave fast at the first sign of trouble because they don’t want to lose all of their money. This then has a snowballing effect because when one depositor leaves, the bank value drops, which makes more people want to pull their money out. This is called a bank run and is why SVB collapsed. Too many people were trying to pull their money out of the bank, and SVB did not have enough liquid assets to get the money back to these people. 

The article from Schnabl and other pieces that I read about the SVB collapse made me realize how close we were to another financial crisis, like in 2008 or even 1928. Schnabl estimated that banks lost an estimated $1.75 trillion in assets, and this figure could have been higher if other financial institutions had not maintained their confidence in the U.S. economy (for example, JP Morgan acquired First Republic Bank to save it from going under like SVB). 

The SVB collapse is also important, like any financial crisis, because it can help us deter future ones. The SVB collapse highlights critical vulnerabilities in banking practices, especially the importance of proper risk management and hedging strategies. It also underscores the dangers of relying heavily on uninsured deposits, which can lead to rapid bank runs and can destabilize financial institutions. The event also emphasizes the need for diversified financial systems to prevent widespread economic crises. Finally, it shows the interconnectedness of global finance, where confidence and swift action by major institutions can prevent broader financial disasters.

If you appreciate this “recommendation” section of my mailing list, I would recommend that you read more from Schnabl as he is well-versed in the business world and very well-respected. He has a multitude of publications and is featured in many different articles from outlets such as the Wall Street Journal.

If you have any other book recommendations, podcasts, etc., please send them to me! 

I hope you all have a great summer.