Good afternoon, everyone. It's great to see all of you here. Thanks for taking the time out of your very busy schedule at this particular part of the year to join us for the Student Financial Investment Fund report, which is always just a great event. I know it hasn't been a very good few weeks, but I know we're in for a good education this afternoon. I'd especially like to thank the members of our cabinet, Interim President Workman who's here and Acting Provost Cole and Vice President Williams and Vice President Raola who are here. Of course, I'd like to thank Dr. Michael Melton, without whom none of this would be possible. So thank you, Michael, for all the hard work that you do. And Mama Doc, is that what they call you? Michael's lovely wife, Catherine. But most of all, I'd like to welcome back the alumni who are both here with us in the room and those of you who are joining us via video link. We're always glad to have your participation and without further ado, I'd like to turn it over to this very talented group of our finance students. All yours is Geneta. Good afternoon, everyone. My name is Geneta Griffin and I am the Associate Director of the Center for Advanced Financial Education's Portfolio Management Program. On behalf of myself and our director, Dr. Michael Melton, we would like to welcome you to this year's presentation of our CAFE's Student Investment Fund's performance. But before we begin, I would like the student fund managers to introduce themselves. I'm Joseph Beatrice. I'm Stan Pezziora. I'm Matt Carano. I'm Jason Trillo. I'm Sean Tentra. I'm Adam Fumiletti. I'm Amanda Leo Pizzi. I'm Nick Yakima. I'm Liam Cook. Now before we really get to the grit of this presentation, I would like to point out some key differences between this group of student fund managers and those of the past, like many of the alumni sitting in the audience or even watching live today. As Doc has always stressed, change is so critical for a program like this to remain current. We are always trying to incorporate new portfolio methodologies as well as trading techniques. But in addition to that, this group of student fund managers was selected to not only manage the fund for one semester, but two during both the summer and the fall. This has proven to be quite fantastic as you'll learn today. And as this group has had a longer holding period, they have also been able to understand many different aspects of the market with very different time periods. So to give you a brief understanding of what this presentation is going to entail, it's going to be separated into two distinct sections. First, focusing on our cafe growth fund. With that being said, we will be highlighting the experiential learning component of our cafe program through all the different roles of the student fund manager. First, the analyst, then the trader, and the portfolio manager. And the role of analyst, you'll learn that Doc requires us on day one to do a thorough top-down economic analysis. Therefore, we can understand all the international and domestic mechanisms that could potentially affect our market today. Secondly, in the role of trader, you'll totally see how active management is what differentiates our program from its peers and using tools that are yet to be taught at the undergraduate level. And finally, in the role of portfolio manager, you'll see how our portfolio is constructed towards immediate growth, but also with ties to the idea of the preservation of wealth. We will then be shifting gears from our growth fund to our Gabelli value fund. Here, more of our passively managed fund until this semester. Our roles will be focused on our ideas of analyst. The student fund managers will be giving a brief introduction of some of our key holdings and the different techniques that we use to have the most optimal companies in our portfolio. And in addition to this, our economic assessment and sector weights will be showing a portfolio that has been constructed that many of you may want to keep in mind. Now with that being said, I would like to introduce both Josette and Jason to start the discussion of our cafe growth fund. As Juneta previously mentioned, upon entering the cafe on one of the first days we enter, we have to conduct a thorough top-down analysis. We go no further in this program until we have a clear understanding of economic indicators on a domestic and international level. This information lets us see not only where the economies are headed, but the markets as well. Diving deeper, we decide which sectors, industries, and intern companies will benefit from the current economic and market conditions. Also, as we would start in the summer, we see that a lot of the economic indicators are pointed towards a continuation of the bull market that we have been experiencing over the course of the last ten years. However, as the semester started, we noticed a few things begin to change. As the fall progressed, we noticed more concerning changes within these indicators. This is reflected in our change of stance from moderately bullish to moderately bearish. Using our top-down approach and active management style, we were able to get in front of this and see it happen before it happened in the market. On June 5th, when we started, we saw that the S&P 500, a leading indicator, reflected the strength of the economy and the market that quarter. However, as we got to September 15th or so, we began to see a change in the switch of these indicators. As the S&P started to slow in September, we saw a shift in these indices. As the Dow started to overtake the S&P, we started to watch the Dow start to consistently outperform. This reflected to us a shift in investors' value from growth to value. When you look at our summer weightings reflected in light blue, our current weightings reflected in dark blue, and the weightings of the S&P 500, you can see how we have better positioned ourselves for the current economic and market conditions going forward. Our summer weights are reflected in how we felt in the summer on our bullish outlook. As you can see, we overweighted sectors that typically do well in times of economic expansion, such as consumer discretionary and information technology. As in the fall, we saw bear market coming, we reverted back to market weight for these sectors. I would now like to introduce Abby and Amanda to talk about active management within our portfolio. To reinforce what was just discussed, the S&P is the leading of all leading indicators. After we saw the market pullback in February, we saw the S&P go on a long bull run until October, where the market corrected itself again as the bear took over. During this bull run, it was hard to decide for which companies were truly growth and what to revalue as everything was still run up. In the following slide, we'll explain to you the October correction we experienced. Every year, the Student Fund managers prepare for a market correction. However, this was the first semester in a long time where we had to act on our preparations. We are always warned of the October witching hour, which is when the market has a tendency to pull back in the month of October due to options expiring in earning season. In September, we became very weary as we saw the more defensive sectors like consumer staples and utilities beginning to lead the market. We also saw the market to become less liquid. This is something we've been seeing since February as investors are pulling their profits out and pulling their money out. From an economic standpoint, we believe that one of the main drivers behind this market correction was the increase in interest rates. As the Fed increases interest rates, this causes a ripple effect through the market and individual investors. What truly differentiates the CAFE program from any other program in the country is our ability to actively manage our growth fund. As we began to see the market pull back, we decided to use our hedging techniques by using leveraged ETFs. A leveraged ETF is an exchange-traded fund that mimics a market indices. This can be on the S&P 500, the Dow Jones, or NASDAQ. This is a bet for or against the market and can be double or triple leveraged for more gains. We bought into a two-time leveraged bull and bear ETF in order to form Kobayashi Maru. The Kobayashi Maru is referenced to the Captain Kirk sang of the No Wind Scenario. On October 10th, we saw the market open up with high volatility but little movement. So this is when we performed the Kobayashi Maru putting tight-chirling stops on both the bull and the bear. We used tight-chirling stops that way we would be able to get out of the ETF that was not going in the direction of the market. At 2 p.m. on that day, we ended up stopping out of the bull ETF. As the market continued to go downward, we made gains and sold our bear ETF in order to get 3.5% while our bull ETF only lost 1.5%. This represented a total gain of over 3%. Well, we had a total gain of 3.10% on the Kobayashi Maru. It was only 4% of our growth fund. The slide behind me will show you the transactions we made over the two days, October 10th and October 11th. This is the definition of active management. On the morning of the 10th, we saw the market begin to pull back. And then we saw our holding start to stop out as well. These were mostly consumer discretionary and tech holdings.  At around 2 o'clock, we bought into a two-time leverage bear ETF of the NASDAQ and the DAO. The following day, the S&P opened up down and the student fund managers decided to sell off the entire growth fund and buy into the short-position leverage ETFs. Before market closed on the 11th, we sold off these positions. Over these two days, on October 10th, our fund lost 2.8% and on the 11th, we lost 0.81%. However, the S&P during this time lost 5.27%. After performing the Monte Carlo simulation, we learned that if we had kept our growth funds through the October correction, we would have lost 5.4%. However, using these leverage ETFs in the Kobayashi Maru, we saved our fund almost 2%. Now we would like to introduce Sean, Nick, and Josette to talk about the most widely used tool in active management. That would be technical analysis. With all the volatility we saw during our time in the cafe, technical analysis was especially useful. So we were lucky to not have just one, but two opportunities to learn about this tool. The significant benefit of being involved in the cafe program is our access to the vast network of alumni. Former associate director of the cafe, Michael Simione, came into our classroom to expand our knowledge on technical analysis, which we learned over the summer. What a lot of you may not know is that most schools don't offer a class on technical analysis. So we are incredibly blessed to not only have the class over the summer, but to also be able to sit down with a chartered market technician and expand on our knowledge of some of these metrics, such as relative strength index, candlestick charts, adjusted moving averages, consolidations and breakouts, and many more. We use these new skills to help our timing when buying and selling these equities. A perfect example of us using this within our holdings in the case of Dominos. Dominos was bought into our fund last March for approximately $230 a share. Over the summer, as we did with all of our inherited holdings, we re-evaluated the company and found that it had more upside potential, so we chose to continue holding it. By September, we had made a 22% gain on the stock. Seeing such a large gain, we determined that the stock was overvalued and due for a correction. Looking at the technicals, we saw that it was on a clear uptrend, but heading towards its 50-day moving average. Looking deeper into the technicals, we also saw that its 14-day RSI was heading in overbought territory. Another technical indicator that we looked at was the MACD. This helps predict future price movements in the market. As you can see on this graph, the white MACD line crosses below the red signal line, indicating that the stock is in bearish territory. These indicators affirmed our suspicion that Dominos was heading for a correction. We chose to cut our position and immediately we're kicking ourselves when over the next week we saw it jump back up. However, we trusted our analysis and didn't chase, and over the next month we saw the stock force drop 6.9%. And on November 1st, we saw the stock at a strong support level, indicating that we had to take a look back at the technicals. When we revalued the MACD and the RSI, we saw that the stock was in bearish territory. We were also able to purchase this stock at 7% discount when we previously sold it. After buying back in, we have already seen a positive HPY of 1.12%. This just hammers home the point of active management. We would like to now invite up Stan, Jason, and Liam to talk about immediate growth within active management. I'm seeking immediate gains. Our active management strategy allows us the opportunity to play earnings. One example of this is NetApp. Now imagine this. You find a company that has a strong history of beating earnings, and in the third quarter sees an earnings spike between 5% and 16%.  You buy in, and after hours the stock falls more than 10%. Now 10% overnight loss might seem like a lot, but trust me, you don't have to feel bad for us about it. Another example of a company we played earnings on was Salesforce. As they reported earnings after hours on November 27th, we saw a price jump of over 10%. Also, as we have continued to hold Salesforce in our growth fund, we have consistently seen an outperforming sector. Now that we showed you how we make money in the short term, Adam, Nick, and Sean will discuss how we preserve our wealth. As he just touched upon, one of the main goals in our growth fund is the preservation of wealth. One of the ways we do this is through making sure our portfolio is well diversified. Behind me is a tool we use to achieve this role called the correlation matrix. On the left you can see our summer correlation and on the right you can see our fall correlation. The red indicates that we pick stocks that moved with each other. This is great on an update in the market, but however, when the market is down, our portfolio got killed. But after reallocating the fall, we chose stocks that moved negatively with each other, meaning they moved in the opposite direction. This helps hedge against systematic risk. Also, our growth fund is now shifting more towards a blend objective in 2019. A perfect example of the importance of diversification was with Next Air Energy. This was the only company we chose to hold in our growth fund through the October correction after we sold the entire rest of the fund. We made this decision based on the assumption that utilities would be running on a down day in the market. As you can see, when we went to cash on October 11th, when we bought in October 31st, the market lost 0.61% during this time. In this time period, you can see the utility sector ETF getting 1.28%. Meanwhile, our holding of NEI outperformed them both, returning over 2%. And this, ladies and gentlemen, is preserving wealth. Now, we would like to show you how this active management has helped our performance. But let's remember, not only have we had this semester to perform our different techniques in managing our growth fund, but two different holding periods, both the summer and the fall. Therefore, we will be reporting that whole performance the same way. In the summer performance, our growth fund helped perform the S&P by 1% on a raw return basis. You can see that we outperformed while taking on the same risk of the market. Like industry, we try to focus on risk-adjusted performance. This is represented here by alpha. As you can see, our alpha is 1.59%, showing that we outperformed on a risk-adjusted basis by that amount during this time period. However, growth in the fall was a bit of a different story, considering that we were moving from a bullish market to a more bearish market. Thank goodness we actually managed our fund as we reallocated our weights into October 31st. On the graph behind me, you can see that our growth fund was able to outperform most of our competitors on a raw basis. But unfortunately, on a risk-adjusted basis, we did have to perform the market with an alpha of 0.28%. Now it is time to show you the optimal portfolio. As you can see here, over the summer, the value fund outperformed a raw-adjusted basis and a risk-adjusted basis represented by the alpha of 1.013%. Now moving into the fall, we actually had a negative return, but we lost less than the market. This is reflected by our increase in alpha to 1.42%. Now, again, let's look at our holding period between June 5th to December 4th. Our value fund continued to outperform all of our competitors on a raw basis. And therefore, the S&P was also beat with our risk-adjusted performance to be 2.72%. Now, obviously, since growth and value are two totally different objectives, our weights in these funds are going to be different as well. And since we changed our outlook from the summer to the fall, we have all those weightings up here for you. The light blue represents our weights in the summer in our value fund, the dark blue our weights now, and the gray are the current S&P weights. You can see that we reduced our weight in the technology sector due to the fact that we saw the rapid rise of the average PE in that sector, and we deemed it overvalued. On the other hand, we increased the weight in the utility sector because we saw it as a hedge against the day in the down market. Another sector we changed our outlook on was consumer discretionary. We were originally overweight in the summer and we brought this down to market weight in the fall based on our bearish outlook on the retail industry, which is such a large part of the sector. We'd now like to talk a little bit about the individual holdings within our sectors in the value fund. Whoa, whoa, whoa. Before we talk about our holdings, let's talk about our strategy. When establishing our fund, we set out to follow the principles of value investing. With this, we set a three- to five-year time horizon. We stress the importance of looking at the fundamentals as we thought it was more important to buy the stock, the company, and not the stock. We had a great example with our holding J.P. Morgan as we do our holding J.P. Morgan as CEO Jamie Diamond's great leadership abilities and well-experienced board directors. Other than being extremely good looking, one thing that we love about Jamie Diamond is his ability to go against the herd. This is important in life as well as it is in value investing. Herding is referred to as short-term movements that are based on things like behavioral news in the market and we don't pay attention to this with a long-term outlook kept in mind. We rather focus on what the company is doing on the inside and where their outlook is going forward will project them. We'd now like to bring up Nick, Joseph, and Sean to talk about consumer discretionary and consumer staples. As Nick mentioned before, a sector that we saw a large shift in from summer to fall was consumer discretionary. While we watched one of our holdings, Lululemon, rally throughout the summer almost 28 percent, while this was fun, we saw a huge shift in the fall. As we started to see them consistently underperform, we knew we had to cut our position and move towards safer holdings. While it was great watching Lululemon rise in the summer, they did fall in the fall. McDonald's during this timeframe gained almost 13 percent during this time. This shows a shift more towards value companies rather than growth companies, even a contraction in the business cycle. Two companies that we felt fit this objective were Garmin and McDonald's. Now, when a lot of people hear Garmin, they think about GPS devices. And while they still make this, they've actually expanded their business model a lot. A large focus is now on fitness watches, and their watches are actually considered the professional product in that market. They also have marine aviation and outdoor segments. These diversified revenue streams lead us to believe that they will be able to avoid cyclical risk. On top of that, they pay a high dividend and push a premium product, as I mentioned, with a customer base that's willing to pay up, even in a down economy. They also have a systematic risk using their cheap products. As consumer sentiment decreases, the amount of disposable income people have to spend decreases with it. This pushes consumer towards cheaper things like McDonald's. Our confidence in these holdings is reflected in our decision to market weight this rather than underweight it in our value fund. What initially drew us to McDonald's was the fact that it was beaten up. This caused the potential for a high upside ratio. During this time, we saw the stock while their operating cash flows were increasing quarter over quarter with a consistent stagnant status. Because of this, we knew the stock was due for a breakout. When we saw them hit their floor in September, we knew it was time to buy in. After watching them rise almost 14%, we knew we were correct in our analysis. As Terzette previously mentioned, the main thing that drew us to McDonald's was our outlook that they would be able to form in a down economy. However, we also have a very positive outlook on the ability to expand and improve on their business model moving into the future. For example, a company is now improving their technology advances by using these self-ordering kiosks. Customers can skip the line and use these digital platforms or the McDonald's application. They've also partnered up with Uber Eats to be able to deliver food to your doorstep. Considering that there's a McDonald's in almost every town in America, it makes sense they would have a much larger market share than their competitors. We're now going to talk about consumer loyalty and brand recognition. We would now like to talk a little bit about the consumer staples sector. Looking at Stovall's sector rotation, we could very well be entering an early contractionary period. This tells us that investors are going to start moving their money to things like utilities and of course consumer staples. Historically, consumer staples has done very well during this time. After all, everyone is going to need the necessities that Proctor & Gamble provides like laundry detergent, toothpaste... I mean mom, I hope you brushed your teeth this morning. Well, we may not see something as drastic as a market crash or a session. We do expect to see some sort of economic slowdown going into 2019. Because of this, we decided to focus on holdings that we thought would perform well under these conditions. He already mentioned Proctor & Gamble, the other company that we felt that this objective was Costco. As many of you already may know, the market took a big hit on Tuesday. With the S&P and Dow, both down 3%, indicated by this red line. Our value holding Proctor & Gamble stayed flat during this time frame, only losing one bit. One of the things we look at, especially with value investing, is institutional holdings. Behind me is Vanguard, a very credible institution, and this chart shows that they have been increasing their position in Costco year over year for some time. We'd like to specify that this does not mean we're following the herd, rather it's one of many metrics we look at that supports our outlook on this company. We also see that Costco's short ratio is decreasing year over year. This just tells us that less investors are shorting the stock and more investors have confidence in this company. We'd now like to invite up Adam and Liam to talk about the industrial sector. So we decided to overweight the industrial sector because we have noticed a shift to more defensive sectors. Currently in our value fund, we hold three count of three companies, Geno Dynamics, Waste Management, and Ingersoll Rain. We chose these companies because we have a bullish outlook on the industrial sector moving into 2019. The first reason would be the defense budget. 2019 is expected to have the largest US defense budget at over $950 billion. Geno Dynamics is a government contractor so they will serve well within this. A lot of corporations are working to reduce their carbon footprint. All three of our holdings are actively working to make their products and services more efficient. This not only improves public perception of the company but creates a far superior products and companies that don't do this will be left behind. Finally, trading tariffs remain a headwind for this industry. However, with the majority of revenue for these three companies coming from the United States, we're able to limit the downside to tariff uncertainty. We have a 3% holding of General Dynamics in our fund and we absolutely love this company. Here's a few reasons why. First, they have a strong board of directors that's comprised of retired generals and army commanders. They also have a former senior vice president of the Boeing company, one of their competitors. Geno Dynamics also succeeds through mergers and acquisition. Their acquisition of CSRA allows them to enhance their technological capabilities and their acquisition of FWW allows them to enhance their services worldwide. Finally, their diverse revenue streams allows them not to be overexposed in one segment of their business. They also continue to innovate and generate continuous revenues from these streams by updating to market trends. But some of you may think that because Geno Dynamics has outperformed the industry in the past month that this is the end. Well, you're wrong. Geno Dynamics is an average price target of over $220. This is an upside of over 26% to this aerospace and defense pioneer. Now I'd like to bring up Stan, Sherlock and Matt to discuss financials. We are bullish on the financial sector as we decide to overweight it in our valley fund. Our four holdings included Chubb, Raymond James, JPMorgan Discover Financial Services. One of the biggest striers for the financial sector is and will be interest rates. Despite the Fed expecting to slow down future right-hags, any additional right-hags would help boost margin in already profitable sector. Another driver is regulations. Under the current administration, we've seen a rollback in regulations such as Dodd-Frank. Even if this rollback does not continue moving forward we're currently in a more regulatory friendly environment than we were before. Also, when we look back at the theory of sector rotation that was previously mentioned, we said that we were currently experiencing a contraction. Financials generally benefits towards the end of a contraction, so we are comfortable with our long-term outlook of being bullish on the sector. The first of two holdings we'd like to present to you is Chubb Ltd. The thing that stood out to us about this company is that they're the world leader in providing insurance. Chubb is a great fundamental compared to its competition. It had a lower price to book, lower peg ratio and better margins than its competitors. This may as well lead to stock was undervalued and at its current price. In addition to its undervaluation, we also love the fact that Chubb has been able to consistently increase their dividend over the time frame of 25 years. Chubb was also well diversified to their geographic and product segments around the world. We really emphasize the diversification and our value fund as it helps companies hedge against risk. It's very important for Chubb who deals with property and casualty insurance as natural disasters happen all the time in very concentrated areas. Chubb operates in four main geographic segments, North America, Latin America, Asia and Europe. My operating of these four segments allows them to diversify away from the risk that any one market poses. In addition to Chubb's global diversification, their product segments were well diversified as most of their revenue came from North America and its commercial personal PNC. The next holding we'd like to present is Discover Financial Services. Despite the beating it took Tuesday, we're very confident in this holding moving forward. Discover has crazy swings as it has a higher standardization and higher beta. To re-emphasize our value outlook, we would like to look towards things not like Discover's price drop on Tuesday, but rather things like the fact that year over year revenues have been steadily increasing at an increasing rate since 2011. Also, reflecting our projected time holding period of around two to five or three to five years, we can see that since this company bottomed in 2016, they've moved within a steady trend channel upward. They're currently lying on the bottom of this trend channel again at around their 52-week low, and we anticipate this company to recover strong as it has done in the past. Looking at some key fundamentals, we can see that Discover trades at a low price relative to its earnings. It has a current PE of under eight and both the best even emergence in its industry. Discover credit card sales have increased each of the last few years, as well as their volume increase sank 12% year over year. Another one of the benefits of being in the CAFE program is our access to the research that we do have. When looking at things like ValueLine.com and SAX Investment Research, we can see that other analysts can reaffirm our confidence in Discover as a value holding. But wait, we hold both Discover and Visa in our value fund. Don't they do the same thing? They're actually very different and I'll tell you why. Discover holds the consumer debt while and offers additional loan services while Visa is the third party that processes payments. This is why we classify Discover as a life plan, financial company and Visa as a technology company. So why do we hold Visa? After running a correlation of Discover and Visa we found that neither of these credit card companies move together at all. Considering that they're both very strong holdings and good at what they do, we see them both as optimal fits for our value fund. Well does every Visa card come with a picture of Doc on it? I don't know. I'd now like to welcome our man to help me discuss the technology sector. We'd like to talk to you about tech which has taken us on a very wild ride this semester. Within this volatile sector we wanted to find value-like companies that we would feel comfortable holding over the next three to five years in our portfolio in case of an uncertain market. We feel we have four holdings well equipped to navigate current market conditions. These include Microsoft, Cognizant, Visa and Cisco. Moving forward in the tech sector we decide to underweight it in value due to its volatility. However we see continued strong growth and we think prices have come down since the October correction. Microsoft is one of our top tech holdings. This is due to their diversified products mix as well as their leadership in their cloud computing platform. Recently they switched over to more subscription based sales. This has allowed their revenue to become more stable and more recurring. As you can see over the last few years Microsoft has a steady increase in their revenue. In 2014 Microsoft decided to change its business model from a more hardware focused to a more software focused including their cloud computing and their more personal computing. If you look at their operating cash flows you can see that in 2014 it changed from a more cyclical cycle to a more constant growth year over year. Our three to five year outlook on Microsoft is very strong due to our expectations for them to continue leading in their cloud platform as well as continue stable with their growth segments such as continue growth on their stable segments such as Office 5 and their game computing. Another thing we love about Microsoft moving forward is their leadership. Just as we discussed before with Jamie Dimon at JPMorgan Satya Nadella has totally transformed the company moving them from hardware to software and transferring over to subscription based sales we see the company entering a long term uptrend. Another holding we'd like to briefly touch upon is Cognizant. Cognizant is basically the IT people for corporate clients. Behind me you can see a graph of Cognizant's last eight earnings reports of where they beat us. In fact they haven't missed a single earnings since 2008 which is pretty impressive. An emphasis on earnings is something we place with our value holdings as this allows them to navigate a volatile time. Next I would like to introduce Abby to come and talk to me about healthcare. On the other hand healthcare is a much safer sector that we've decided to overweight. We have four holdings which include Medtronic, Johnson and Johnson, United Health Group and Quest Diagnostics. Although three of them fall under the same main industry they all do very different things. Medtronic is a medical device and equipment company where Johnson and Johnson who also has a medical device segment has two other segments in pharma and personal products. Then we also hold UNH which is basically the largest provider of health insurance in the sector as well as Quest whose lab diagnostic lab testing company outside of the hospital realm. We are bullish on the sector for three reasons. The first one being that the healthcare sector has historically outperformed other sector in times of higher interest rates. Also, previously mentioned we believe that we are heading into a more of a contractionary period and this is where we see investors flee to the sector for safety. We are also seeing that the baby boomer generation is aging. Therefore we might see an increased demand in healthcare as these patients will need care. Medtronic is one of our largest holdings and best holdings in the healthcare sector due to their diversified revenue segments and strong fundamentals. Two of their largest segments are cardiology and surgical solutions. Medtronic is also working on the advancement of their technologies and global outreach to eight countries such as China and India with underdeveloped healthcare systems. Behind me you can see how Medtronic outperforms its two competitors Boston Scientific and Abbott on every fundamental basis. When looking at their price to earnings ratio you can see that Medtronic significantly outperforms their two competitors. You can see that for every $25 you invest you'll get $1 back in earnings. However for the other two companies you'd have to invest $36 or $39 to get that same dollar in return. This is expected to decrease in the future. Besides being a great value Medtronic is also more liquid, less leverage and more profitable than Boston Scientific and Abbott. As well you can see that their beta and standard deviation are significantly lower than their two competitors. This means that they're taking less total risk and also less company specific risk which is beneficial in an uncertain market. Our three to five year outlook for Medtronic remains strong due to their acquisition of major technologies in their global excellence program which is looking to expand their sites worldwide. Along with this they are also trying to cut costs by improving their supply chain infrastructure to increase margins. Another holding we like to briefly touch upon is Johnson and Johnson due to their tendencies to outperform in a down market. What keeps this company flow on down days are its personal care staple products that we all use like Benadryl, Band-Aid and Neutrogena. As you can see on Tuesday when the market was down over 3% Johnson and Johnson was barely negative losing only 12 bips. This means that it proves that it's stable in this kind of market. Next we would like to introduce Adam and Liam to talk about materials. Air products and chemicals is our only materials holding and so far it has made us more than 7%. Due to positive guidance on this sector we've decided to overweight it for a few reasons. The first reason being global trade and tariffs. Global trade and tariffs can swing this sector in either direction. However APD is positioned with 55% of its business coming from North America. The other large segment stems from Europe thus limiting global exposure. We've also seen an increase in demand in Latin America. Air products and chemicals has began to capitalize on this by taking a 67% acquisition stake in a Chilean industrial gas company. Finally in recent news we've all seen large fluctuations in commodities such as liquid natural gas and crude oil. APD has minimal exposure to liquid natural gas so they will not be as effective to the price changes as their competitors who have larger stakes in this commodity. As you can see air products and chemicals has began to increase their gross profit margin year over year. They do this in a couple of ways. First they've removed their material technology segment from their business so they have more money to focus on. They're already more profitable industrial gases segment. Also they're in the middle of a $600 million cost savings effort. They work with this in order to become the most diverse and the most efficient materials company in the whole sector. When you look at their competitor DaoJupan they have decreasing gross profit margins year over year. Now Abby and Josette will discuss the new communication services sector. On September 28th the S&B created a new sector, communication services. This took the old telecom sector and brought in companies from consumer discretionary and technology. Although we expected some volatility in news about this new sector we actually didn't hear much. The next slide will introduce you to our communication services holdings. Our two holdings are AT&T in Disney. AT&T falls into the telecom industry while Disney's in media entertainment. We remain bearish on the sector for three reasons. We are bearish on this sector because of the high expenses, high competition and the already highly saturated market. Because of this we see less gross for this sector in the future. We fell in love with Disney as they're expanding their film and entertainment segments with new movies such as Incredibles 2 and the Star Wars series. Disney's also able to build their media empire using Fox 21st Century assets with their new streaming service Disney Plus. With the expansion of their parks and resorts through higher ticket prices and global expansion and their ESPN Plus over one million subscribers since April and the newly acquired UFC writes we believe that this will drive Disney in the future. Although we are bearish on this sector as a whole we have faith in our holding Disney. Their large cash outflows for investing activities will support their parks and new streaming service Disney Plus. Because of this we have faith in Disney's future earnings. We would now like to introduce you to the energy sector analysts. Looking at the energy sector you can see it's slightly overweight. However, this isn't due to a bullish outlook on the sector rather because we have extreme confidence in our two holdings of Simerix Energy Co and Conoco Phillips. We were impressed by their cash flows as well as their fundamentals such as their current and quick ratio turnover ratio and cash flow margins. The main driver in the energy sector is crude oil prices. While this was our best friend over the first half of the semester it ended up being our worst enemy. However we're determined not to let day to day or even month to month price movements affect our decisions. The energy sector is finally influenced by international relations as oil is a globally trade commodity with suppliers in unstable parts of the world. Another factor is the shift towards clean energy but we believe there will be a long time before the world shifts away from oil. Looking into Simerix Energy Co they're a company that deals with oil and gas exploration and production within the United States. We all share an interesting bond around this company as over the summer it was the first thing that we decided to sell as a group together. However, when reallocating our value fund we stumbled across this company again while it was more educated. First thing we looked at this time was the increasing operating cash flows year over year in each of the four quarters. Etsy City saw a severe price drop of no justification. This is when we decided to buy in on them. We caught this company right at its bottom and after smashing earnings we saw the price jump over 12%. While this was a fun ride we did not buy Simerix for this. We bought this with a three to five year outlook and we can justify this through their strong earnings guidance and price targets. Seeing that their earnings increase strongly year over year and looking at some of their recent price targets of $144 and $137 per share with a 12 month price target average for around $123 we can see that we're positioned for around a 50% return if we continue to hold Simerix. At CC's commitment increase their dividend was attractive to shareholders as they were already above the industry's average. With forecasting production output expected to increase we expected their revenue increase as well. Additionally they have a break-even point at $30 and we feel this gives us a comfortable margin against the volatility in oil prices. This combined with the fundamentals is the reason why we are bullish on the company moving forward. Now Shot and Nick will talk to you about utilities. As we touched upon before we see the utility sector as a good flight to safety during times of uncertainty. Because of this we have chosen to overweight by approximately 2% in our value fund. If you direct your attention to this chart behind me you can see that over the past three months the tech and consumer discretionary spider ETFs have lost money while the utilities ETF has returned over 4%. Although this is a small proportion in our value fund during the month of October these were the holding holdings that we held. This worked out well for us as ETR the electrical utilities company gained 3.4% during this time. Going back to Tuesday when the S&P in the Dow entered back into a correctionary period both losing over 3% you can see that ETR returned a whopping 1.33% outperforming the market and successfully preserving our investors wealth. This hammers home that utilities is a good sector to hold during times of high volatility. Now traditionally this would be the time that the student fund managers would reflect back on the lessons that they have learned through their time in the cafe program. But we hope that we have emphasized how awesome it's been to be able to be in this program for the longer time period experiencing both a bullish and semi bearish market. Now the purpose of the cafe program is truly to experience a real world industry that mimics industry in every single way possible. For examples the responsibility and pressure of managing running real time. Long hours making a successful student fund managers. Our professionalism not just suiting up the answer to a boss or bosses. In-depth financial reporting. And of course being able to conduct business across the globe. What you were able to do in Tokyo thanks to the support of Hans Christian in an MJX asset management. And lastly learning how to work in an environment with the absolute highest expectations. And with that we are concluding our presentation for this fall and opening up the floor to any questions. I've seen certainly the most entertaining you mentioned that you started using ETFs to match your positions can you elaborate on that? Yeah, so during the market correction we used leverage ETFs we were we took some time to decide what we wanted to do during if we were to experience a market correction whether we wanted to go to cash or we wanted to hold onto our growth fund and just take the beating. So as a group we decided to use leverage ETFs everyone was doing it during the market correction. The market was going down and we decided to play the market and really regain our alpha that we lost in the spring. Yeah, like Abby was saying we want to gain alpha back as most people were in cash and we want to do an active management approach by buying these bear ETFs. It's both the the short short leverage ETF and the long leverage ETF. Yeah, so we did that. I mean that's called the Kobiashima so we weren't sure where the market was going to go so instead of just using money we used both the bear and bull that way whatever direction the market went in we would make money on that side and stop out of the ETF that wasn't in the direction of the market. So I have a question from Mr. Jason Moren who is part of the advisory board texted me to watch Deadline and this question is how and why you determine your benchmark as the S&P 500 for the growth portfolio instead of an index that has a growth objective. So during the semester we actually had like different discussions with this entire idea of always using the S&P as our benchmark and we did discuss the idea of having this blended benchmark using ETFs in relation to the weights that we were putting on the sectors we did use those as comparisons for a lot of the times that we saw the market being pulled down or maybe when we were underperforming both the S&P or the Dow and we were a bit uncertain about our portfolios and it just led us to confirm that even though we might have these weights and they might be different from the S&P we were still performing the way that we should be. You mentioned Tuesday a number of times. So you talked about what caused the market to fall on Tuesday and how it slated the portfolio and why it has slated it down for the potential of the future. So October is generally a volatile time of the year we've seen a lot of market corrections and crashes start in the month of October. Moving forward our value fund has a very low beta we've over weighted sectors like consumer staples moving forward if the market were to continue to fall down we're very well equipped to produce positive alpha in that time. Yeah, I was just going to go based on what he said we reallocate our weights around the end of October so we were prepared for this economy to slow down so Tuesday wasn't a shock to us. We do think that Tuesday was a bit of a rebound from the behavioral news where we saw the S&P rally earlier in like last week or so. I have another question from Ms. Mollie from who is also part of the cafe program. She asks how do you think that utilities will fare in this increasing interest rate market? Well I don't know about the entire sector but we think that our holdings will do pretty well and just I mean going back to the entire sector as we saw throughout October we were looking at a lot and a lot of times when everything is down people are throwing money into utilities. We went for electric over like water or oil because it's supposed to be not that cold or winter and we don't think people are going to need heating as much so we tried to pick the industry that we think is the safest. We don't really think it's going to be affected by interest rates nearly as much as something like financials or the other sectors so we think it's a lot it's a really good hedge in times of uncertainty. And as many of you probably know utilities is a heavily subsidized sector so the government is not going to let a lot of these companies fall too far. News once requires that you come online a lot of these cases of tariffs, trade I'm just curious because of the comments I just put out too much on it how did all the you know movements work trade wars and uncertainty how did that impact reflections on how that impacted your discussions about portfolio? Well so one thing to keep in mind about tariffs and trade is we've had that for years and years it's not something that's new we have a president now that just likes to talk about it a lot more and get everyone wild up about it when he's talking about China and other different nations but especially with our value portfolio we need to keep in mind that you know these are only short term news snippets that are coming out that cause people to really move and a lot of our positions are a lot of our holdings are positioned well to you know negate any of the terror risks that we might see in the future. In the next couple years we don't really know what's going to happen to tariffs so we don't feel if there's any sense in speculating on it. Our value fund is a three to five year outlook so it's anyone's guess where tariffs go but we're properly diversified away so that we're not overly exposed to it. I have a question from Ms. Carlos Pachini on the advisory board. She asks given the market condition over the past two months what part of the daily active management did you find most challenging? I think it would be technical analysis because we are one of the groups that use technical analysis the most out of any cafe group probably besides like around 2008 because when that correction was going on we had to find support lines and resistance lines in order to know when to buy back in the green opportunity. I would say like also ignoring behavioral news like for our value fund we have a three to five year outlook so seeing things change and react to the news every day it's sometimes hard to stick to our objective and remember that we're not we're not listening to other people's opinions when we have a three to five year outlook. What's the time during the discussions within the cafe where we're about 50-50 split years? Yeah absolutely actually happened a lot but I have a lot of people coming in or kind of bearish in the beginning a lot of people who are bullish so usually when that would happen it wasn't easy to get over we end up staying a lot later than we wanted to because people wouldn't give up their opinion but we would just go back to the economic indicators and pretty much just argue your point go do more research bring up as much like do diligence obviously like leave no stone unturned I know we use like chaos theory at one point everything so it's pretty much just swaying the other side until we so someone gave it so we didn't figure it out it was never capable everyone has a price guys great presentation you know you certainly I'm sure you learned a lot this semester with recent volatility as as we're now in year 10 of the global market taking through why both of these funds are still 100% investing in the market and you haven't flee the cash the cash alternatives so we did like originally flee the cash which is why we did do the leverage ETF and perform the Kobayashi Maru but after we saw the market start to cool off we kind of thought we wanted to position our portfolios in a way that we could hold our funds in equities as the market continued or if there was a potential decrease in the market so that's why we have positioned our value value fund the way it is and we have been comfortable on these down days over the past few weeks that it has been performing well and outperforming the market and then with our growth fund because that's more actively managed we are that's just something we have to continuously look at and choose every day every week every month like we want to continue holding what we have if we want to change it up a bit so that's basically how we went through this semester and how we hope the portfolios will continue to be just speaking to our value fund too is we over-weighted utilities, staples and financials as we follow the sector rotation and we feel the value fund is well-positioned in the next 3-5 year time frame so you obviously have a state-of-the-art facility at the cafe I'm wondering if there's one tool there will be different opinions is there one tool that we feel stood out the most being most helpful to you especially during the volatility period definitely the technical analysis which we talked about when Michael Simione came in as they also mentioned we took the class beforehand in order to better learn about it and when he came in we just saw how cool it was so we thought that it was something that we wanted to implement more and then when the market was going down this was a perfect time for us to use the technical analysis to see when we wanted to exactly time our buyings when we wanted to buy into the leveraged ETFs when we wanted to trade out and same with our growth fund that's how we're going to be able to continue forward with that fund too as far as the best technological tool we love using technical analysis on Bloomberg it has all the annotations you can pretty much mark up the chart however you want and that's definitely one of the ways that we navigated through the correction Chair of this favorite company heading into 2019 and any of your current bullies that you have none of them we have confidence in all of our holdings I can't speak on everyone else's favorite company I really like Entergy but I think it's really because we're all different sector analysts it's kind of what would be your one company for this probably McDonald's every single company is my favorite company definitely I think McDonald's McDonald's has not only already performed so well for us but it's outlook into 2019 is just great as well I have to mention those this question is from myself so I notice that both funds are completely 100% domestic and with Ryan mentioning this is our 10th year of bull market is there any discussion about potentially going into a global or even including some international funds I think next semester after being all domestic this semester looking more towards global markets after we did our top-down analysis we didn't think it was profitable to go into the foreign markets but I think that's going to change in January we've also seen a lot of the foreign markets kind of suffering from the same things that we are right now in terms of behavioral news and what's dragging it down with slowing down companies so we didn't really see an advantage when looking into foreign markets in the first place it was also hard to find some of the information on companies within foreign markets but I mean that's another story that's what you know right well before we all joined together in giving these very talented and hardworking students a big hand for all of their work in the summer and now I'd like to extend one more special or a set of special thank yous to people who are not here with us today Hans Christensen has already been mentioned of MJX securities he has been a great supporter of the cafe program for a number of years and has made possible the international travel that is such a unique characteristic of this program I'd like to thank Mario Gabelli who has been a longtime supporter of course of our school and certainly of the cafe program and helping out along the way with lots of different things that have been seen and unseen so I'd like to thank both of them even though they're not here they may be watching if they are hello and thanks to both of you and please join me in giving a big hand to these great students investing the stock market betas or any of those kinds of things or even if you just want to stay and visit for a while we do have a lovely reception set up in the Bayview room of the law school which is just across the quarter here the little open space and especially for all of you parents who are here who are also very very welcome and we're so glad so many of you could be with us we'd love for you to stay and join in a conversation and everybody is welcome so please join us it will be open for the next hour or so we'd love to see all of you there and at least happy holidays to everyone and good luck on exams


Until now, we have discussed about the philosophy of triaxial tests and I have tried to overemphasize that why a certain type of tests should be recommended for a given circumstances to simulate the response of the sample or the soil mass in general. So, having covered all these philosophical discussion, I thought will be quite good to take few example problems and then maybe share my ideas about how the interpretation of the test should be done, particularly the test results. So, what I am trying to emphasize in the subsequent part of the discussion today is that try to understand the material, try to understand why a certain type of test is being done on this and once these two things are in line, you can interpret the test results quite easily. So, the first category of the problem in this series would be straight away test results which you can obtain by conducting the laboratory experiments. So, suppose if I say specimen of saturated sand, now the moment you see the word saturated sands, there should be something clicking you because normally we do not talk about the saturated sands as such, fine. So, each word in the problem is just like diagnosing a patient's report and doctor has to be extremely careful to understand why the patient is saying something. It might be related directly or indirectly with the implications on the patient's health. So, the moment you see that there is something defined as saturated sands, the first question is that are we doing triaxial tests on sands? This is also under question mark because as I said sometime back normally it will be difficult for you to make a sample of sands unless you go for advanced techniques, all right. Under normal circumstances, sand samples are never tested in triaxial setups or they should be extremely fine sands. So, the specimen is 75 mm length and 37.5 mm in diameter is a typical triaxial sample and this was fully consolidated. Now, particle size analysis becomes very handy over here because when we are seeing saturated sands, these sands basically lie on the border of the sills and fine sands or the person is not very clear that why he or she is trying to conduct this test on this material. So, fully consolidated in a triaxial cell by applying a cell pressure of 75 kN per meter square. Now from this is the first stage of the testing, I hope you can understand, this is the C part of the testing, consolidation part of the testing. Now from here, the second part starts with the shearing, so this is the either let us see whether this is a drain test or it is an undrained test. So, the cell pressure was raised to 550 kN per meter square and an undrained test was done and the results are given below. So, the results are you have delta L decrease in the length of the sample which you get from the dial gauge which you have attached to the sample if you remember, there will be a proving ring. So, this is the proving ring reading and proving ring normally are calibrated, so 1 division is equal to 1.5 Newton is the calibration from the proving ring. The cell pressure remains constant, so this is 550, the pore water pressure which you are measuring is a typical straightaway type of a problem, everything is clearly defined, you have got the test results, try to diagnose the material, correct, so this is the first category of the problem, there is a mismatch, somebody design a system and the system fails. And now I as a forensic expert go to the site, take the sample, bring it to my lab, analyze the samples and I will like to match, this is the sample and this is what it was reported when the design was done. Excellent example of category 1, straightaway problem where you are trying to find out some mismatch in reporting or testing, so this is 18.75, 25.0, proving ring readings are 0, 435, 813, 1020, 1140, the pore water pressures are 480, 348, these are corresponding to these values, so please ignore my improper tabulation, this is 202. Now my question is, if you really want to learn the geotechnical engineering, what is your speculation by seeing the number which I have written on the board and this is what the diagnosis of the material is, so the entire story is here itself, forget about the mathematics part, in shear strength theory we do not talk about the mathematics at all, what is the implication of this whole thing, that is what I said that this is sort of a forensic examination which is going on alright, what is your speculation, do you find something interesting, very speculating, yesterday I was talking about the sample being in ICU and you are a expert, clear, so what information you get from here, this is what you have to catch, I may give you a hint but then it is not going to help you always, I can reverse the whole situation and then you will be in a trap. So in this case as the shearing process goes on, I think some of you are discussing this the other day, what essentially is happening is the proving ring reading is nothing but the tau value which is nothing but sigma d value, is this alright, in the shear stress when you are shearing the sample from the bottom and there is a frame and there is a PR attached to this, so when you are pushing it up the reaction comes in the proving ring and the readings are this, the load is increasing and this is your axial strain, so if I know the initial length of the sample and if I know the delta L I can always find out delta L by L, clear, now this delta L by L is nothing but epsilon a, so as you shear starting from 0.00 what is happening, you are straining the sample, the proving is increasing or in terms of the sigma d value, sigma 3 remains constant after the consolidation process is over, so consolidation was done at 75 kilo Newton per meter square, what is so peculiar here, are you observing something, this is what you have to catch, the consolidation is done, it is an undrained test, what undrained test tells me is that initial volume is going to be final volume of the sample, so what is changing, if it had been a drain test, alright, so this is for a typical undrained test, had it been a drain test what difference it would have made, it would have become Vf plus minus volume of water, I have used very trickily plus minus Vw, why, that is what we discussed yesterday in the lecture, clear, the positive power pressures and negative power pressures, so the moment you are seeing that the final volume is getting changed and the volume of the moisture or the water which is coming to the sample or within the sample is controlled, now this becomes a typical condition which I am imposing on this, fine, it is my wish, now the hint is if you look at these numbers what do you realize, so the more and more you shear the sample what is happening, the power of pressures are decreasing, that is the crux of the problem, that is the material, you have to capture this, alright, so there is a decrease in the power of pressure, under what circumstances this is going to happen, it is a drain test, the more you shear, the more water goes out, but this is an undrained test, that is the problem, so anyway what we will do is, let us decode this further, so initial Vi is length of the sample multiplied by area of cross section, this we maintain constant in the triaxial test, we do not allow normally area of cross section to change, but it is going to change and then what is going to happen, Li the final L will be Li minus delta L into A final, let us write it as A1 because F will be used for failure, so from here I am getting the area correction factor, so A1 will be equal to if I can write this as Li into A upon Li minus delta L, so this in other words becomes A1 will be equal to A upon 1 minus epsilon A, so we have obtained the corrected area of cross section, this correction has to be applied, otherwise your test will be wrong. Now I know the value of the proving ring, so the proving ring stresses are nothing but sigma d value, so that will be equal to proving ring divided by A1, so I can compute the value of sigma 1 minus sigma 3, which is essentially equal to sigma 1 prime minus sigma 3 prime, rest is all mechanical exercise, so this is the first class of the problem, where what you have done is by getting this hint of undrained test on a material which is supposedly to be known alright saturated sands, we are trying to interpret the pore pressures and then we are trying to understand the material. Now in this question what you are supposed to do is you plot sigma 1 prime minus sigma 3 prime and sigma 1 prime over sigma 3 prime as a function of axial strain that you can do now alright, why we are doing this, we are trying to do this because if I know the tau versus epsilon A response or if it is like this, I can classify the soil clear, so this becomes a NC material NC response and this becomes a OC response. So what I have done, I have established the material by doing the triaxial test, very simple example okay and the hint is here, most of the time geotechnical engineering analysis and experimentation and experimental investigations are directed towards cross questioning, cross examining something. The second part of the problem would be plot the Mohr circle at failure, having done all these things, you plot the Mohr circle at failure, so what is the check, whether testing has been done properly or not, because the guy says that you find it out at failure, I do not know whether I have achieved the failure or not. Now what you should be doing is, you should plot these results over here and see whether the peak has been achieved or not, otherwise this test is incomplete. So in the practice of geotechnical engineering, most of the time these type of investigations are done, which are subjudice, I do not know, you have to plot and you have to see. So that is what I am saying, the whole idea is with all this story, depict it over here, look at the trend, if there is a hump OC, if there is no hump NC, check whether the failure has been achieved or not, write a line, test was incomplete, if you are still on this part of the curve, you cannot say anything, are you getting this point, above? See the question is that there is nothing like having a unique solution to a problem, it is all your interpretation, I hope you are getting this point, clear? So I am just trying to create several situations, which would help you in maybe interpreting and becoming a top class legal advisor to a company, tau is coming from here, proving ring, this was the frame, what we did is we connected proving ring over here, alright, and this was connected to the sample in the form of a plunger, correct, good that you have asked this question, and this is resting on that load plate, and below that you have the porous stone and this is resting on the pedestal, clear? So when you shear it from the base, the reaction comes in the proving ring because the frame is rigid, axial strain is causing the shear stress to develop. Look at this graph, the more and more you shear, what happens? The more and more shear stress gets developed, correct? So the first reading corresponds to 0, 0, next is this, next is this, next is this, next is this, so on, so on, so on, and failure occurs over here, post failure, residual.  That is it, why? Because the moment you shear it, when you are applying a strain from bottom is getting sheared and that is what you are measuring over here. The dial gauge reading is this, I hope you are getting confused, okay? So dial gauge gives me delta L, and this delta L divided by L gives me epsilon A, fine? And this epsilon A has given me A1, clear? So proving rings are a steel ring, alright? This is connected to the rigid frame, somewhere here because of the rigidity of the ring, you know, we have, we utilize the hoop stress and when I deform it by applying the axial stress, this also gets deflected and this is the proving ring constant. That means one division which is observed in the proving ring corresponds to the load which is getting transmitted on the system equal to whatever, 1.5 Newton or whatever, clear? So this is the system on which works. So the best way is you apply the load and see how much the deformation the system is undergoing, clear? So when you go to the lab, please get this thing done because the rings are the ones which have standard materials which are used, ellipse cannot be used. The idea is you are taking the help of the hoop stresses, clear? That is it. How this area will be changing? Very good question. So when you are compressing a soil sample, what happens? Initially the sample would be like this, no issues, discussed, clear? Now what is going to happen? Because of the shortening of the sample, this is how the bell shape failure would be. Did it happen or not? And at failure, this is the failure plane and what you are finding out is sigma and tau, that is it, under application of sigma D and sigma 3, that is it. A cylinder cannot be rigid because this depends upon the type of soil. So if I am working on a rock sample, clear? What is going to happen? Rock will not tolerate so much of deformation and if you keep on compressing them which is known as UCS on rocks, there will be a brittle failure. So what will happen is there will be a vertical split and this is how like the concrete cube, rock sample or the rock core we call it, will break. This test is normally done to obtain elastic modelers and poisons ratio of the rock under undrained conditions mostly, okay. Sometimes you will find very distinct failures. So depending upon again the condition of the soil sample, it is good that you have asked this question. The shear plane develops and what is going to happen now? Remember the first lecture of the course with respect to the parent rock mass, soil mass, the tendency of this block would be to slide. That is what the shearing process is. So shearing plane is AA which gets developed because of the triaxial testing and on this plane you are trying to find out the state of stress. So this point what he was also asking about is the failure point, agreed? So that means if I know this point, I can complete Mohr's circle provided what that becomes the second type of problem. Material is not known, only state of stress is known that we will go into. The state of stress I think I can give you. The Mohr's circle would look like be very careful about the effective state of stress or normal or total state of stress, alright? Because your answers will be wrong if you plot the results on opposite scales and that is why yesterday's lecture was dedicated on the type of parameters which you get from this test. So you should remember that all these results are you know filtered out by applying membrane correction, correct? That is it and area correction. So what I will do is I will make a wax sample, I will test it in UCS, I will be getting some result.  So I will be getting now response like this, okay? And then I know at failure how much actual strain is coming because of the membrane and how much shear stress is getting imposed on the sample because of the rubber membrane, fine? Good. All round pressure, sigma 3 clear consolidation stage is if you remember this is sigma 3, this is sigma 3 all round pressure, clear? So you cannot shear the sample because no shearing is being done. So average stress is this point and what was the deviation of the stress? 0, that is it? From this point onwards you are shearing the sample keeping sigma 3 constant, okay? So all this is happening under application of sigma 3 and what is delta sigma 3? This minus 75 and what 75 corresponds to consolidation test, all the pore order pressure has been removed.


Hey everyone, this is Carlos, founder and CEO at Product School. Today I'm here with the CEO and CPO at AirFocus, Malte Schultz. Excuse my non-German accent, Malte. Hope that I didn't butcher your name too much. How are we doing? Pretty good, pretty good. Thanks for having me. It's really good to be here. I'm glad to have you. I remember I was just talking off the camera.  I love those stories and I want to get that back story from you. Let's start from the very beginning. What's your background and what's inspired you to start AirFocus? I started as a product manager right out of university around seven years ago. I was dropped into this super strategic role. I don't know what happened, but they expected me to turn around the business. I very quickly learned that, at least in this company, product strategy and product management is very broken. It has to do with the nature of product management being such a multifaceted, complicated thing. I also saw a lot of things that could have been improved. Very early on, I thought, well, there need to be better ways than, I don't know, using complicated Excel spreadsheets and always looking for a single point of truth when it comes to product data and mission statements and so on and so on. I was interested in the problem and I started AirFocus really as a side project with my co-founder Christian. The prototype launched on BetaList and we got feedback, we iterated. In the beginning, it was really just a little tiny prioritization tool that has evolved quite a bit since then. That's really cool because it means that you are solving your own problem. That's something that I've seen happening in not only CEOs, but also product managers. When you really care about the problem that you are solving because you have that problem, you will always have product market feedback. Yeah, exactly. I had to solve it. We can't stand these spreadsheets anymore. And we do. There are so many companies that are trying to replace Excel because, obviously, Excel is great for many different use cases, but at the same time, it's not the best for anything. So when it comes to building products, we're just talking about it. So many people out there still use spreadsheets, PowerPoints, whatever, to represent a roadmap for their company and now we're seeing different technology that is specific for those cases. What would you say our focus does different than not yet as a spreadsheet, but all the road mapping tools out there? Yeah, yeah. So essentially, we're building a home for products and the people who built them. So that's actually our new slogan, but we are providing PMs with everything they need to do their job and we're trying to make sure that there's a single point of truth for the product team and the company even. So you always have the right data at hand when you need to make all these product decisions all the time. So we always say you're always prioritizing, so not just which features to put into which release and so on, but on multiple levels, you're prioritizing your outcomes, your problems, your opportunities, your features and so on. Yeah, and we help product teams with all these topics from kind of breaking down the bigger mission into objectives and then prioritizing what problems to solve and then to, as you said, like creating and sharing roadmaps that actually align people around the things that you should work on as a team and as a company. So let's talk about road map because it's true when you go deep, you realize that a road map is not just a list of to-dos, it can get very messy very quickly and now we're seeing how as a product manager, we're thinking more about the user and identifying certain insights that come not just from the company, but sometimes it's from our actual users and other data points and then transforming those into action and making them more strategic for the entire organization. It's really a challenge. So just give me some best practices on how a product team can leverage road mapping to really make it a strategic tool. Yeah, that's a great question. As you said, the big challenge is to be strategic, right? And it's very difficult and all the teams struggle with it and probably everyone will always struggle with it because it's so complicated, but there are tricks that you can and should do in order to get better at it. And what you should not do is start with features and requests that have been thrown over the fence by sales and marketing and competitors and future lists and so on. So what you should really do is like do the right level of discovery and trying to understand the problems that you're using that you're solving and the problems that different customer segments have. And in order to kind of put this into the road map, there are obviously multiple ways how you could do this. There are outcome-based road maps where you really focus on the outcomes and the initiatives that you should tackle on the highest level in order to achieve your mission. But we are not big fans of telling people that they're doing it wrong or that there's just one approach of solving these problems. We've just learned that yes, everyone shares these problems because it's so difficult, but at the end of the day there are often good reasons why companies do what they do. So sometimes it makes sense to have a feature road map or even the timeline road map and some people hate it, but sometimes it makes sense. But very often the thing that we try to communicate to product teams is to really look at the outcomes that you want to achieve and try to cluster opportunities that you have in your product backlog or idea backlog and kind of put them all together in a now-next-later fashion. That is a process that works for everyone, at least as a starting point. Yeah, because you're building a product for product managers. That's very meta. Obviously, product team may have their own playbook and that's okay. There's no silver bullet that works for everybody. However, now, is there anything that you can do with regards to onboarding by creating templates or by somehow helping those first-time users to make sure that they can understand your value proposition and get off the ground quickly? Yeah, I mean, you already mentioned templates. We had templates from really from day one and templates are great because it brings you a very fast aha moment. So we have been a product-led growth company from day one. We only hired our first-time person like a month ago. So we had to kind of provide our users with these very first aha moments within the software. So they sign up for our vocals. They tell us very quickly what problem they have. For example, I need to build a roadmap because my team needs it or my boss tells me to do so. And then we try to get you a result super fast, right? And that could be a template for an out-time-based, non-executive roadmap. You mentioned the company's product-led, which I think is awesome and we're seeing more and more companies. So giving an example of how, let's say a user kind of finds out about you and then eventually bubbles this up to a decision-maker for them to integrate their tool with the rest of their stock. Yeah. So there's one thing that doesn't work and it's showing people Facebook ads and then expecting them to sign up and immediately become paying customers. This has proven to not work. What a surprise because for sure not how I would have bought a software. So our time group is super interesting because they're super clever people, right? They're working in product because it's probably one of the most intellectually interesting things to work on because it's so complicated. And these people are clever and they are trying all the players in the market or at least the top players for sure anyways when they're looking for a solution. So that's kind of really good for us because we're not as overfunded or funded as some of the other players in the market and we're still a scrappy 30-person startup. So that's for sure the good part. So people always try us out and then they go with the product that they like the best. And yeah, like this is a big decision for a product team, right? Like usually these teams use JIRA to manage developers and tasks and then they maybe use, I don't know, Slack and Intercom for customer feedback. And what they today do is they manage all the product strategy and product management in excellent spreadsheets, right? And PowerPoint as we mentioned. And the decision to now move to a more professional solution is, in my opinion, more and more a no-brainer. But then they quickly discover that this is a very important decision. So that's why they are looking on places like Capterra or they're reading about what's the right way to do product strategy and to prioritize my backlog. And we're just trying to be helpful and not pushing our product and trying to hard-tail to sell to you because it's never working. I agree. You cannot trick the user. Especially you're talking about product managers, people who are in the trenches, seeing every single product out there, right? So, obviously, social validation is good, but at the end of the day, you want to get your hands dirty. You want to play around with cool and then make your own decision. Yes. So one of the indicators of a product-led organization is when the CEO comes from a product background. That's not the only way to do it, but obviously in this case, it is true. In your title, you said that you are the CEO and the CPO. So how do you wear those two hats? Well, there are only two ways how effortless is going to stay a success story. It's when we get our product right and then when we also get all the surrounding stuff like communication and customer support, right? But the product is the most important part of our puzzle and of our value proposition. And it's just that I was the first product manager on the team when we were just three people and I kind of remained in that position where we didn't have a few product managers on the team. But on the one hand, to be super honest, it's very difficult for me to let go because I'm still so deeply involved on the product side which I sometimes should not be and you can ask my colleagues. Yeah, but it's just like super crucial that me as the leading person in the company is still involved in all the sprint plannings and road map sessions and so on. There's just no other way that we build this platform. Even if you don't have the official CPO title as a CEO, I'm sure you're still going to be involved and I've seen that across the world. I'm still involved in that. I think one of the challenges is probably to kind of create a space for other product leaders to shape that vision and really feel empowered to grow. Otherwise, we're going to become bottleneck. Yes, that's already happening. You're very right. Yeah, you have to make room for others to develop their own thinking and problem solving. I'm sorry. I love this question because it's CEO is different but I want to learn more about your calendar. What does your day-to-day look like? Yeah, so I for sure don't want to bore you with like no days like the other, but in my case, it's very true. So I start in the morning. Actually, I'm not a super early morning person not because I am not getting up early but because I drive my daughter to kindergarten every morning. So that makes me only start at around 9 o'clock. And then I prepare a little list of things that I must get done by the end of the day because I'm still very involved in getting stuff done and I try to pick the most important projects and usually I get only 50% of those done. So I'm prioritizing my day essentially. And then we have a product daily. I'm involved in that. And then I mean, it's really difficult to look at my calendar because it's so all over the place all the time with hiring, fundraising lately. Like we went through major product upgrades and migrations in the last two months. We worked on stuff for 10 months in the basement without releasing anything new and then shifted all at once. So that was like insane. And we at the same time rebranded AirFocus and launched a new website. So this kind of stuff you cannot plan.  But now it's getting better. I mean, in reality, it's always a roller coaster, right? Like, and one of the funny things I think in general as a CEO is you kind of reinvent yourself. And I'm sure at the very beginning when you were in the basement just building it was all about just shipping the product. Now you mentioned fundraising, hiding and many other things around. And it's exciting and stressful at the same time. Yes, 100% very stressful, but super exciting. I love my job. I don't want to do anything else. It's awesome. So what is the status of the company today? How many people are working there? Yeah, we are a bit more than 30 people right now operating out of Europe. Mainly we have our first hires in the U.S. also. And yeah, we're a remote first company. Although we have an office here in Hamburg, Germany, but we make sure that this is a remote company. So when someone remote is styling in on a meeting and everyone goes to remote to really make sure that we have this culture where everyone feels to be on the same level. We are noticing this trend, obviously, especially because of the pandemic when a lot of organizations are building their virtual HQ, but you've been working remotely and I haven't worked before it was cool. So I want to hear from your perspective also being based in Europe. Have you noticed any differences trying to build a global product with a strong customer base in the U.S.? I think the answer would have probably been different two years ago and probably biased by, let's say, stuff that you read on the internet where it says you have to be in San Francisco and stuff like this. But I have more and more of the feeling that it doesn't really matter where you're located, especially when you're product-led growth and you can hire people in two minutes via Upwork or other platforms and they can join you remotely to provide customer success or customer support in the U.S. The stuff has gotten a lot easier and it just allows you to hire the best talent because if I would just hire based out of this little limited pool here in Hamburg, I would not be able to onboard the people that we have today. That question is becoming less and less relevant. I think it's going to get to a point that it's not even going to exist because you're going to be read by the quality of your product and what your customers say about you, not by where someone is living. Yeah. It now already feels like a no-brainer, right? Like two years ago we would have said maybe, but now it's super obvious where this is going. Yeah. I remember when I started my previous company, like I was planning that, oh, we had a team I'm from Spain, so I was always based in San Francisco, but we always hired remotely and it was like almost like an excuse like, well, but you know, but you have a good network. I had to justify why someone wasn't working in the same office. Now it's a company. It went from that to a competitive advantage. Oh, you're so smart.  You were like, okay, I get it. Everyone is doing it. Yeah. So let's talk about the future. The future of Air Focus.  You are home for products and I think that also requires strong integrations with other products because if you tried to be the best for everyone at the end of the day, it would be the best for nobody. So how do you go about integrating with different tools to make sure that you are the hub, but at the same time you give flexibility to the product teams to create their own stack? Yeah. So I left what you said earlier where you said that you essentially solved your own problem. So I built Air Focus to solve my own problem and I knew we had JIRA as the tool that was irreplaceable in the company. So from day one, we built on top of JIRA and then very quickly we learned, okay, other tools, other companies are using Trello or Sana, Azure Default, all these tools. And so really from day one, we had integrations into these systems and we then also quickly learned that these integrations need to be super advanced with two-way sync and mapping and all these things because tools like JIRA, Trello, ClickUp, Lately, Asana, they're great tools, right? Like they're just not made for product strategy or product management as a kind of product hub, but for collaboration and project management, they're awesome, right? They're not going to go away and that's why we have to and we're happy to sit on top of this landscape and help you make better product decisions on a daily, but mostly on a strategic level. So that's a trend we've seen tools that products that really want to be category leaders and you want to define and go very deep into something by definition, they need to put all their energy into that. And I think that having the ability for products to integrate with others in an easy way, it's really powerful. I remember those days where like you had to build everything.  Now it's really amazing to see product leaders and other creators in general to be able to plug and play certain blocks that work so they can focus on really adding value to the customer instead of reinventing the wheel. Yes. Yeah, the beauty is that we are really able to focus on the things that we are good at and that we want to solve, which is product strategy and certain parts of product management. And the definition of these two terms is very difficult, but like we're not here to replace how you prioritize your JIRA, the bug backlog. Like this is not what AirFocus is here for. Yeah, that's true. And how do you guys dream your own champagne?  Yeah, so obviously we use AirFocus as a strategic product tool to do all the things that I mentioned earlier. And then on top of this, we are of course using Slack also since day one. And then a tool that we introduced around two years ago it was Notion and we love Notion, Notion, Notion is awesome. And we actually learned a lot from Notion also in terms of our own approach to building AirFocus because Notion is all about modularity, right? Like you essentially start with nothing and you can then build on top and really build fancy applications even and websites and whatever you want to do and we're kind of going into a similar direction. So we're not believers of there's one way to fit all product teams into a certain way of doing product strategy. We're instead adapt to your stack and your situation by being super modular. And we're just trying to be helpful and listening to the problems that you have and then giving you solutions that fit to these problems and that is kind of similar to how Notion approaches their problem. We use Notion in-house as well. And it's really amazing to see really so many pools that are very visual. Now that these are part of this, what some people would say no code, which means basically you don't need to throw a single line of code in order to build.  I remember a lot of our students would say, hey, do I need to be a software engineer in order to become a product manager? Do I need to code? Do I need to annihilate? Like no to any of that. I mean, obviously there are many things that you need to learn, but it's more about just really understanding the customer and leveraging technology to fit those needs rather than going so deep into technology to build something very complicated and then see the customer likes it. Yeah, it's really interesting. And I'm also following IndieHackers still a lot also since the very beginnings and the kind of applications and companies that these IndieHackers build based on low code or no code is just a stomach. So what do you think is like the future of product? Where are we going? That's a complicated question, but I think with kind of connecting to what we just had like a minute ago with no code tools and the ability for everyone to create applications and solve problems. Obviously this is a positive thing, but this also means that there's a much more competition, right? And so kind of building tools and building stuff has sort of become a commodity. And if you're not building the stuff yourself with low code, you can, I don't know, get 20K and set up a DevShop in Ukraine and build stuff yourself. So I think in the long run, the things that will win and retain other things that have like outstanding quality. And in my opinion, you only get that when you're really strategic and you're kind of going beyond just understanding product. You also have to understand business and you have to kind of bring these two things together. Of course, like the customer is also a big part of this kind of trial. But yeah, like you have to be strategic and you have to understand business in order to build products that really create outcomes that help you win. So I agree with you. I think now product is becoming more strategic in general. Like I see a lot of CEOs that call themselves product people and a lot of companies that are product-led. And this is not just for the companies that sell products to product managers. This is just across the board and it's a big responsibility for people who work in this industry to really build something that people care about. It's just for the sake of it. Yes. Yeah, and it's about so many small things like gamification and understanding network effects and bringing all of that together. And this all goes beyond just, I don't know, writing user stories and user mapping and all that stuff. It's bringing it to kind of a higher level and solving business problems at the end of the day. And I think sometimes we tend to forget this as product people, myself and people. It's normal. You mentioned product strategy multiple times. I think it's the right word here. We come from a world where a product was very misunderstood. And still in a lot of organizations, they say project management. They treat it almost as like, okay, here's a list of tasks, a laundry list and you have to go through them instead of like, really, let's elevate the function to decide strategically where are we going as a company? Yeah, yeah. Yeah, it's very different than product management for sure. Well, it's been awesome to chat with you. Is there anything else you would like to add? No, I just wanted to congratulate on what you've got with product school. It's an amazing platform and you're doing outstanding work. And we're very happy to reach your staff and then partner up on projects. Very good. Well, thank you for giving back to the community. Bye. Thanks, bye.