View From a Height

In addition to getting up at 5:00, working at a brokerage requires a Series 7 license. So, after the regular workday, I'm back in school, taking the equivalent of 4 credit hours stuffed into two weeks of evenings. Makes for a very long day. I actually wrote this during the options class. Options, I know. Options, I already trade.

The course is taught by one Reed Nakazono, who seems to be something of a legend in Denver financial circles. Reed teaches the best Series 7 cram course in the area, and he does it by teaching to the test. No, I mean to the test. High school teachers with CSAP evaluations coming up should be so lucky. Reed's been doing this for a living for almost a quarter of a century. He used to actually sit for the exam until NASD, recognizing industrial espionage when they saw it, revoked his license. [The NASD is a jealous god, carefully monitoring the proper use of their licenses.] Now, he debriefs as many students as he can, often as they walk out of the test.

Reed's been doing this long enough that it's clear he's slightly bored by the whole thing, but he's still got a good sense of humor. He can stand in front of an options grid he created, oh, 20 years ago, and point to the chart over his shoulder without even looking at it. If the NASD ever finally gets fed up and raids the place, he'll have another career as a TV weatherman.

Every city probably has a Reed Nakazono. New York, Chicago, LA probably have a dozen, teaching to and defeating the test. Seen one way, if undermines an exam intended to protect the public. Seen another way, it undermines the Guild Hall.

As for the test itself, it seems to be oddly weighted in both space and time. Stocks get all the press, but the test favors the process of underwriting and trading municipal bonds. They also have questions about "bearer bonds," which haven't been issued for years, but apparently used to operate like letters of transit signed by General Weygand, only without the piano. I'm sure there must be films noir where the husband and the femme fatale can only raise the money to get to Brazil by getting the bearer bonds out of the unsuspecting wife's safe deposit box, or war pictures where the feds have to foil a German plot to hijack a train carrying bearer bonds. They get the bonds, only to see that all the coupons have already been clipped.

The exam also resembles nothing so much as a vocabulary test. Even without street slang, or Street Slang, there are still four different ways to describe a zero-coupon bond. And of course, the inevitable trick questions about options that expire on a day they can't be traded.

Evidently, the test has also drastically reduced the amount of calculation over the years. Now, why do you suppose that is?

UPDATE: The Great One himself has commented on the post, with two corrections to it. In the first case, I simply misunderstood; apparently they won't let him sit for the exam any more, but have not revoked his license. In the other case, I was unclear. When I wrote that Reed debriefed students...as they walk out of the exam, I had in mind that they called him with whatever questions they could recall, not that he stood outside like an exit pollster. Clearly what I wrote lends itself more to his interpretation than to mine.