Table Of Contents

1 2 3 4 5 6 7 8 9 10 11 12 13 14 INTRODUCTION ................................................................................................................. 1 COMPANY BACKGROUND ............................................................................................... 1 GETTING INTO INTERNSHIP PROGRAM ...................................................................... 2 DUTIES.................................................................................................................................. 2 1ST WEEK .............................................................................................................................. 4 2ND WEEK ............................................................................................................................. 5 3RD WEEK ............................................................................................................................. 5 4TH WEEK ............................................................................................................................. 6 5TH WEEK ............................................................................................................................. 7 6TH WEEK ............................................................................................................................. 9 7TH WEEK ........................................................................................................................... 10 8TH WEEK ........................................................................................................................... 10 9TH WEEK ........................................................................................................................... 12 CONCLUSIONS .................................................................................................................. 13

Internship Report

Merrill Lynch

Nguyen Pham

1 Introduction
The internship is part of my curriculum for my BSBA in Finance at the University of Nevada Las Vegas, that I want fulfill with the academic requirements even if it was not required but I volunteered to do so. This work term has provided me a valuable insight into the professional and industry of the financial field in practice.

2 Company Background
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York Stock Exchange under the ticker symbol MER. Merrill agreed to a purchase by Bank of America on September 14, 2008, at the height of the 2008 Financial Crisis. It ceased to exist as a separate entity in January 2009. Merrill Lynch is one of the worlds premier providers of wealth management, securities trading and sales, corporate finance and investment banking services. Working with our clients as strategic partners, we create and execute winning solutions, which address our clients most pressing strategic, financial and investment needsanywhere in the world. We stand apart by building and maintaining solid partnerships with clients. Merrill Lynch places our client relationships first and is proud to conduct our business based on five unwavering principles: Client Focus, Respect for the Individual, Teamwork, Responsible Citizenship, and Integrity.

Internship Report

Merrill Lynch

Nguyen Pham

3 Getting into Internship Program

I have always sought after to graduate with an internship on my transcript; therefore much research was administered before applying for an internship here in town. I however most of the internships available are for insurance agency or accounting. I have found Merrill Lynch to be a top notch firm to be associated with. Wanting to be involved in the financial management of assets the firm seemed promising. I desired to be in a financial sector where it proved to be relevant to my degree. Joining the FMA (Financial Management Association) has given me the opportunity to brush elbows with scores of professionals that have had professional experience in the field. It was an interesting venture as I was given the opportunity to I have met several analyst and financial advisors from many different financial companies. I tailored my cover letters and resumes to match with each companys criteria and corporate culture. I was given the chance to interview with three different firms and was accepted into Merrill Lynch as an intern.

4 Duties
During the past two months I have carefully monitored and tracked my progress as an intern for Merrill Lynch. It was not an easy task to pursue at first but over time I have learned to be a better part of the firms team. Discipline and patience were key factors to getting a positive experience from the internship. As an intern at Merrill Lynch, my duties included supporting financial advisors when they were reviewing clients reports and analyzing stocks that the advisors wanted to include in the clients portfolios. Clients often suggest stocks to include in their portfolios and it is the financial advisors duty to advise the client of the stocks standings and to give the client their 2

Internship Report

Merrill Lynch

Nguyen Pham

professional opinion about the stock. My duty in return is to conduct research about the proposed stock. After careful analyses has been made, I will then give the financial advisor my findings and if they are proven to be worthy and well studied, the analyses could be used to make decisions for the purchase of the stock. The stock market is not the grand mystery that most people believe it to be. One does not need an intense education or a vast knowledge of financial jargon to be successful in investing but with careful understanding and analysis of the simulation one can do fairly well in the investing with stocks. The most basic tenet behind all dealings with the stock market is to buy low and sell high. The price of stock in every company fluctuates daily and when an investor buys stock at a low price and sells it at a high price, a profit can be made. Predicting trends is the most valued skill when it comes to investment. It takes a substantial amount of time to research and predict the trends of a stock and invest accordingly. Even with careful observation, prediction is not an exact science and is the major cause of the risks involved in investing. A person can individually decide to invest based entirely on their own research and intuition and, often, this can be profitable. Playing the stock market is, as is anything concerning the manipulation of money, a risk. An investment is never guaranteed a successful return and even a profit can easily be lost in the blink-of-an-eye. The stock market can be cruel and it can be quite generous. Almost like someone playing the lottery, an investor needs to accept the fact that they may not come away with millions. Unlike the lottery, however, a careful investor has control over their investment and with patience, perseverance and a little bit of luck, can come away with substantial gains and

Internship Report

Merrill Lynch

Nguyen Pham

a feeling of accomplishment. The stock market is a learning experience, and as such, investors need to know there are always the possibility of failure and the possibility of great success. In addition, I was also given the chance to revise module 1 and module 2 for series 7, and understand the Monte Carlo Simulation. I also have to know the different classes of mutual funds (A, B or C).

5 1st week
My internship was set in motion with Cason Swinn and Richard Bartone on June 3rd, 2011 and I was quite nervous and anxious at the same time for the first few days. If truth be told I wanted to make a good impression and demonstrate to the two of them that I was serious about the internship so I gave them my full attention to every detail and task they presented me with. A dilemma that I faced during my internship was that I was also taking three other classes during the Summer Term at UNLV so it was hard for me to balance my responsibilities at school and my responsibilities at my internship. I began to get acquainted with other advisors and staff members of the firm. During the first week, I was given certain office work such as the organization of the clients portfolios, the positioning of various files in organized and in a detailed manner as well as the delivery of these files from one advisor to another. In the span of the first week I have learned the inner workings of the organization. My supervisor which was Mr. Bartone arranged my daily schedule for me. I was set up to work on Monday, Wednesday, and Friday from 9:00 am to 3:00 pm which was 18 hours a week, and continue for 9 weeks.

Internship Report

Merrill Lynch

Nguyen Pham

6 2nd week
I was given an office and a computer to work with during my second week at the firm. My duties for the second week included various projects. Mr. Bartone gave me my first project. The project was made up of three reports. The first report was an Accrued Interest Report; the penultimate was a Stress Test Report and lastly a quarterly report. These reports were assigned for the company South West Gas Federal Credit Union. In this project, I was able to update the yield to maturity (YTM), accrued interest and the market value for South West Gas portfolio. I was able to obtain the YTM from the personnel bond desk of Merrill Lynch in New York. The accrued interest was already given in the formula bar in the prepared excel spread sheet. My ultimate duty was to make certain that report matches with the actual statement and more often than so some of the data did not actually match each other. I had to decipher if some of the data were incorrect because a lot of the time information provided online would have errors. I quickly updated the information for the report and then updated the market value of each individual bond according to its interest rate fluctuation.

7 3rd week
One of my supervisors handed me two packages of documents which were Module 1 and 2 for series 7. These modules are to be taken by each and every advisor to be able to work with the firm. Module 1 consists of equity, capitalization, and company capital structure, which are the differences between issued, outstanding, and treasury stock, the differences between preferred and cumulative preferred stock, differences in statutory voting and cumulative voting for common stockholders, preemptive rights and how to value them, and ADR (American Depositary Receipts).

Internship Report

Merrill Lynch

Nguyen Pham

Module 2 was composed of corporate debt securities. The module was a useful tool in the understanding of the following financial management concepts: Types of corporate bonds Par value of a corporate bond Nominal yield and its effect on current yield and yield to maturity Bond prices, bond quotes, and bond yields Accrued interest as part of the bond price Debt service coverage Short-term debt instruments, including commercial paper and bankers acceptances Eurodollar bonds and the Interbank System Taxation of interest and bonds bought at a premium or discount I was still overseeing the South West Gas Report while I was studying for Module 1 and 2 in the third week.

8 4th week
The fourth week proved to be a difficult but rather interesting part of my internship. My supervisors best friend was diagnosed with a rare form of cancer, but was not able to fund for the treatment. My supervisor organized a fund raiser for his friend by setting up an event. It was a bicycle racing event. Armbands were sold and so were the tickets to attend the event. Much of his time was taken over by organizing the fund raiser so much of his workload was given to me.

Internship Report

Merrill Lynch

Nguyen Pham

At first I felt panicked but realized that if I handled the work load well, I could show my supervisor my abilities as an intern. The execution of the work load was the hardest part of it. During this time the office was facing some relocation so I had to organize and rearrange all the files out. The data were all in the form of hard copy so I took the chance to transfer all the data into electronic form. This way it would be easier to transfer the data to the other location. The task seemed simple enough but the amounts of information to be transferred were numerous so it took a good amount of time to pursue the task. The hard copies of course, were shredded. There were the general administration tasks that I was required to take care of along with the projects they assigned me. Some of those tasks include: restocking the printers with paper, picking up the mail, making sure bond and equity orders went through, and printing and scanning documents. Everyone on the team would give me different projects to work on each day and most of them dealt with research and excel data.

9 5th week
The fifth week consisted of the duties I have mentioned in the previous weeks but a certain term that occupied my mind was the term or rather the process of Program Trading. It was mentioned by one of the financial advisors and as I was not familiar with the term I conducted some research about it. I started to research about Program Trading. Looking for articles about the matter was not easy with search engines often generating mere definitions of program trading and no explanations about its impacts and the nature of program trading. Digging deeper into more research I have found that program trading is a common form of computerized trading, which the NYSE defines at the simultaneous buying and selling of at least fifteen different stocks that are

Internship Report

Merrill Lynch

Nguyen Pham

in the S&P 500 index.(Madura pg. 314) Program trading is used primarily by institutional investors typically for large-volume trades. Orders from the trader's computer are entered directly into the market's computer system and executed automatically. (www.egothemag.com) The concept of man versus machine definitely comes into mind when learning about program trading. With the use of computers to target and identify specific stocks with great speed and accuracy that would generate the most profit in the market, it seems to be a situation where man could not possibly be capable of doing so by himself. One would question on how much of an impact program trading may become and as predicted it has gained immense popularity among firms. Program trading has changed how one views the exchange of securities in the market today. One should understand that program trading is not a computer program itself but rather the act of forgoing simultaneous buying and selling of large amounts of stocks at approximately the same time. Through research I have found that program trading is impacted by various strategies of trading namely; portfolio insurance, index arbitrage, dynamic hedging or duration averaging. As much of an impact they have on program trading, it is program trading itself that allows these strategies to be put in place and therefore executed in the stock market. These strategies would not exist without the use of program trading. I have learned that these strategies expressed a goal of minimizing loss and maximizing loss in the stock market through the help of program trading. Portfolio insurance was used as a risk management method to minimize the loss of securities in the stock market. It was first introduced in 1978 by Hayne Leland and Mark Rubinstein, both finance professors at Berkeley. Their idea was a simple idea. One was to pay them something akin to an insurance premium and they were assured that losing investments

Internship Report

Merrill Lynch

Nguyen Pham

could be limited. (www.fool.com) They were able to gain a great number of clients willing to partake in this offer. This of course is too good to be true, the market crash of 1987 proved that stock market volatility cannot be fought or limited indefinitely. This proved that portfolio insurance was a less than perfect risk management strategy when it comes to fighting the stock markets volatility. So how does portfolio insurance impact program trading and stock market volatility? The existence of such a strategy placed downward pressure of the stock prices. When it was predicted that stock prices would only decline in a modest manner, it would otherwise go further down because declining prices would trigger the selling of large amounts of shares thus placing downward pressure on stock prices. Due to the stock market crash of 1987 most portfolio insurances has disappeared from view. (Kupiec pg. 49)

10 6th week
The sixth week I was given an assignment. Mr. Cason wanted me to increase our clientele and was asked to provide him with a list of all CPAs and lawyers in town including their names, addresses, and phone numbers. I organized this information using an excel spread sheet and printed them out after. I labeled them and wrote invitation letters to attend a conference that Mr. Cason was conducting. The presentation was being conducted to inform potential clients about the firm and why it would be good to invest their capital and money with Merrill Lynch with the hopes of having them as actual clients in the future. After a lengthy research I have conducted with the use of online tools, yellow pages, newspapers and magazines, I was able to come up with two hundred CPAs and seventy lawyers across the valley.

Internship Report

Merrill Lynch

Nguyen Pham

11 7th week
Mr. Cason left me a note on Monday asking and wanting me to find corporate bonds that have maturities within ten years or more. These bonds have to have a grade of AA or better. An execution of these orders has to be made. Namely the companies I have chosen were JOHNSON & JOHNSON, MICROSOFT CORP, BERKSHIRE HATHAWAY FIN CORP, and GENERAL ELEC CAP CORP MTN BE. One of Mr. Casons clients wanted to buy Chipotle Mexican Grill, Inc (CMG). I recommended the client to buy because CMG has a very lucrative earning potential. Their assets were increasing and the net income for the company has increased every year for the past few years and has proved to be a growing company. The quarterly revenue for Chipotle grew by 22.4% versus the industry average of 8.4%. Their gross margin is 37.19% and industry average being only 28.26%. ROA is 17.43%, and ROE is 22.70%, plus CMG products and services are exceptional, I have read a lot of positive reviews from customers, and the price range per meal is affordable to the average consumer.

12 8th week
The eighth week consisted of municipal bond traders. With the use of Bloomberg Terminals my supervisor was able to visually show me the various rates and figures that they analyze in order to put a bid order for a certain bond. What piqued my interest was the fact that whenever he was interested in buying a municipal bond he would personally call the issuing town or service to gain an even more in-depth perspective. After the seventh week my familiarity with the particular way the team handles clients issues and concerns, I was able to learn about various trading strategies that the financial 10

Internship Report

Merrill Lynch

Nguyen Pham

advisors used to maximize the value of their clients portfolios. They typically invested their time in call and put options for large-cap value of growth companies. In some occasions they were using swap options. As it is common with all forms of market analysis, by the time a decision in made, circumstances in the market can change, sometimes radically. It would be remarkable to learn and be in a time where instantaneous analysis and reaction to market stimuli, but this, of course is nearly an impossible task. By the time we identified trends of by the time I had a chance to check up on my investments, strong chances to make financial climbs had passed and I were left with less than maximum possible gains. This, as I have learned, is the nature of the market. Timing is most vital skill any investor can acquire. Like any other prized skill, stock market analysis requires a great deal of practice in order to perfect. With the internship reaching its final stages, this would be a good starting point for further diving into daily workings of the modern stock market. Given the time period of the internship, I was quite satisfied with my understanding of what the stock market is, by far, greater than it ever was before and we are confident that with any future endeavors in the stock market, we will be able to proceed as if in familiar territory. Through practice with trades, analysis of important investment decisions, and use of available online resources, we began with a goal to learn about the stock market and its daily operations and we are looking forward to what might come after. This internship and research has provided me with encouragement and confidence to partake in the next few years, with growing knowledge in our grasps. The internship has changed many of my perceptions, mainly that the stock market is not as intimidating as what I once thought it was and is actually quite accessible to anyone with the 11

Internship Report

Merrill Lynch

Nguyen Pham

capital, ambition and determination to make it work for them. I feel that an important lesson I have learned so far is that knowledge itself garnered from this project is the answer to unraveling the stock market.

13 9th week
During the last week of my internship, the two financial advisors that I intern under let me conduct my own work with actual clients without them being in the office. Prior to this they have let me observe closely how they work with their clients in family situations. How they selected the right financial product and how they matched these products with the clients own circumstances and needs. The clients that I sat with were a married couple names Jane and Anthony, Jane is 37 years old, and was making $80,000 a year as an accountant for Bellagio. Anthony is 41 years old, a business owner, his income on average was about $200,000, they have four children, the youngest child being 7 and the oldest being 15. The couple has a combined checking account with $50,000 and $100,000 in savings. Jane also has $150,000 in 401K. They also own a house in Las Vegas, with a mortgage of $400,000: their goal is to set some money to retire within 15 years. They also want to be able to send their children to college. Based on their circumstances the clients have 15 years time horizon to work with. Mr. Cason recommends them to purchase life insurance, and put their money 40% in long-term bonds with 6% coupon, and 60% in stocks. Of that 60% stock, 50% will go high dividend and low volatile stocks mutual fund, and the other 50% will go to growth stock mutual fund. Mr. Cason was also recommended them to buy long-term care, and life insurance.

12

Internship Report

Merrill Lynch

Nguyen Pham

14 Conclusions
This experience has proved to be invaluable. I have learned so much about my strengths and weaknesses. It has taught me substantial information and experience about the financial management industry. I was placed in an unpredictable situation where I had to prove myself to the firm time and time again. I believe this internship has made me into a stronger and more knowledgeable person. At first I only thought that this internship would be an excellent addition to my resume and boy did I think wrong because it is if anything a life changing experience. I have gained momentum towards my future and realize that this opportunity was much more than I expected it to be. I am grateful to have had this opportunity to work with the firm. I am promising myself to continue to invest my time, efforts, and strengths into improving myself in the field of Finance.

13

Internship Report

Merrill Lynch

Nguyen Pham

Works Cited Khanna, Ayesha. "Program Trading." EGO Magazine. Web. 23 July. 2011. <http://www.egothemag.com/archives/2006/01/program_trading.htm>. Kupiec, Paul. "STOCK MARKET VOLATILITY IN OECD COUNTRIES: RECENT TRENDS. CONSEQUENCES FOR THE REAL ECONOMY. AND PROPOSALS FOR REFORM." 1991: 49. Print. Madura, Jeff. Financial Markets and Institutions. Australia: South-Western Cengage Learning, 2010. 314. Print. Schay, Alex. "Foolish Feature, 10/17/97: 1987 Revisited -- Flawed Insurance." Fool.com: Stock Investing Advice | Stock Research. Web. 24 July. 2011. <http://www.fool.com/Features/1997/sp971017CrashAnniversaryFlawedInsurance.htm>. Wikipedia. "Merrill Lynch." Wikipedia, Web. <"Merrill Lynch." Web. . >.

14