Every hour Wall Street is open, the school of hard knocks delivers body blows to the nation’s future financial leaders.
With a professor speaking quietly and reassuringly in one ear, and Mad Money Man James Cramer shouting from cable TV into the other, students at the University of Denver’s Daniels College of Business are both short and long in the market, as they say.
Long-term, they know they will be the ones handling the next worldwide financial crisis as they take jobs in finance, industry and government.
Short-term, they’re losing a pile of money like everybody else. And it’s not fun.
“It’s our duty to learn from our mistakes,” said undergraduate Aaron Moore. “The average consumer may have a very low understanding of what’s going on. People who do understand have a duty.”
At business schools like Daniels, and at the University of Colorado at Boulder’s Leeds School, students find themselves immersed in a rare academic opportunity. Their textbook classroom experience suddenly segues — with both alarm and fascination — into the real-time economic crisis.
Professors have adjusted their curriculum or offered outside seminars to address it. Students feel unusually engaged by the intersection of theory and practice. Serendipity gave some traveling CU undergrads a front-row seat — literally — to the calamity on Wall Street.
$600,000 at stake
At DU, students looked a little queasy as current events triggered real-life consequences. Moore belongs to a team of Daniels College students that manages $600,000 in very real endowment money by investing it in the stock market.
Undergrads control a $100,000 pool, while DU graduate students control another $500,000. Each pool was contributed by financial titans specifically to give students a market education.
Consider them educated, and stunned.
“My biggest thing is, why didn’t they catch this before it tumbled this far?” asked Taylor Gillman, a graduate student.
Gillman meant the nation’s entire finance system, but the DU students keep one eye on their own plummeting portfolio. The $500,000 graduate fund opened in 2000, and was down as low as $290,000 in 2003. It reached a high over $600,000 during the market peaks of 2007, but during Monday’s wild ride downhill amid the failed bailout vote, the portfolio fell to $503,207. By Tuesday it came back to $517,337
“I think what we’re seeing in the market is a lot of surprise,” said Professor Maclyn “Mac” Clouse, with the kind of understatement that has helped keep his classes calm.
While watching over their portfolios, the DU students say they are absorbing important lessons in volatility and bad assumptions that they will take with them to future jobs.
“Next time this happens, we’ll be in the driver’s seat,” said grad student Mary Neilson Hawkins. “And hopefully we’ll fix problems sooner.”
Clouse and other professors at DU inject daily events into their set curriculum whenever possible. The extraordinary confluence of financial turmoil and government policy in recent weeks is far too good a teaching opportunity to pass up, they say.
“It’s always nice when we see something going on in the real world out there that we can say, see, the stuff we’re talking about is important.”
At CU’s Leeds School, current events prompted finance professor Sanjai Bhagat to introduce study of the subprime mortgage market earlier than he’d planned. The result: a free-form discussion that covered the material and uncovered passionate opinions.
“They’re more interested in understanding the political and conceptual — more interested in learning from me and less in debating with me,” Bhagat said. “But as you might expect, there’s a fair amount of animated discussion on this topic. ”
A visit to Wall Street
By happenstance, a group from the Leeds School witnessed the market’s manic gyrations at close range on a recent networking “trek” by students and faculty to Wall Street.
They met movers, shakers and alumni from the finance industry — even as some grads watched their careers shift suddenly from Lehman Brothers’ bankruptcy to new ownership under Barclays.
Corporate headhunters patrolled the sidewalk outside the Lehman offices, handing business cards to employees who might consider a move.
“Several people pointed out that the smaller consulting banks, boutiques that help with mergers and acquisitions, see this as an opportunity to pick up human capital that’s being severed or consolidated,” said CU finance professor Chris Leach. “It’s not all bad news for everybody.”
Monday afternoon, when the market took its biggest nose dive in history, unsuspecting MBA candidate Judd Rogers walked into a class at CU to find that the professor had written “777” on the board.
“I said, ‘Jackpot!’ ” recalled Rogers, referring to the winning combination on a slot machine. “But it was how far the Dow Jones was down.”
Despite the pall hanging over the markets, students on the Boulder campus talked of an overriding optimism.
“This huge shake-up of the system could create a lot of great opportunities for entrepreneurs who work between the cracks in the system,” Rogers said. “With new problems come new solutions.”
Not that they — or their professors — have all the answers. But there’s something exhilarating about hashing out cataclysmic economic events in the classroom as they happen.
“You tend to lose sight of the reality at the end of the year is I have to find a job,” said Greg Norris, 34. “But school wouldn’t be nearly as exciting if we were seeing the usual pattern of inflation and growth.”
“We talk about it every day — before and after class,” said classmate Matt Grassman. “This is the ultimate time to be in school.”
Michael Booth: mbooth@ ; Kevin Simpson: ksimpson@denverpost.com.
