NUR April 2022 Edition

Contents Page

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Quick Take on Iberian Markets

A look into the RussiaUkraine Conflict Stagflation: When all hits at once

Interview with: Miguel Faria e Castro

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24 Page

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Interview with: Rui Dias

Business Deep Dive: Micron Tech NIC-UD Fund: Monthly Performance

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Quick Take on Iberian Markets Daniel Silva Portugal’s €1,6bn payment request approved by EU. As part of the Portuguese recovery and resilience plan (PRR), Portugal’s request for €1,6bn was accepted. This payment is going to be divided in two: €553,44mn are grants and €609mn are loans. This request was accepted since Portugal has demonstrated the fulfilment of the 38 milestones and targets proposed. The main reforms should happen in the fields of health, social housing and services, investment, and innovation.

Big increase in exports and imports for Portugal.

Comparing January 2021 and the same month in 2022, it is noticeable a big increase in exports (22,2%) and in imports (37,5%). This increase is not so impactful compared to the values of 2020, but it is expected that the exports and imports continue to grow in the next two years, but with a slower pace. This data was released on the 28 of March in the Stability Program.

New economic plan from Spain to ease the effect of the war. The plan was announced by the Spanish Prime Minister Pedro Sanchez, and it has the goal to help businesses and households due to the negative effects of the Ukraine war. These €16bn plan includes €10bn coming from the public bank ICO and another €6bn in tax cuts. The government also wants to reduce the price of petrol and diesel by 20 cents per liter. 75% (15) will be contributed by the state and the remaining 25% (5) will be paid by the oil companies.

March was marked by a 34% increase of Iberian electricity markets. The price of electricity has skyrocketed because of the war. The price has surpassed the 300€/MWh for the first time since the beginning of the year, one week after the Russian invasion of Ukraine. To fight this price increase, both Portugal and Spain have proposed a cap of 180€/MWh to the EU. Spanish Environment Minister, Teresa Ribeiro, said in an interview “We are working on a European response to lower energy prices”.

Red numbers for IBEX 35 and good outlook for PSI. The IBEX 35 fell 0,65%. Despite this, it remained above the 8400 points level, mainly due to a rise in bond yields (as a result of inflationary pressures) and a “hawkish” speech of the central bank. Despite these red numbers, IBEX 35 has shown a better behavior than most of international indexes. The PSI has rose by 1,25% and leads the gains in Europe. Galp Energia was the company that advanced the most (2,81%) and EDP group also increased (1,74%). The Portuguese Index has changed his name from PSI-20 to PSI. This also came with the exclusion of Zombie companies like Pharol and it is now dominated by energy.

Cryptocurrencies in real estate has new rules in Portugal. The Order of Notaries (ON) released new regulation which make possible to make real estate transaction with virtual currencies, without converting into euros as before. These transactions are also going to be treated as risky businesses.

The classification has the goal to prevent money laundering and other tax crimes.

Possible mobile consolidation in the future for Spain. Telecom operators in Europe have been, slowly, combining with each other, decreasing the fragmentation of the market. Orange and MasMovil (two of the four main telecom operators in Spain) have decided to start negotiating a merger. The European Commission believes that the current level of competition is needed to keep prices down and give more choice to the consumers.

49% of Primafrio bought by Apollo Global Management. The CEOs of Primafrio will continue to be majority shareholders and responsible for the leadership of the company.

Dylan Foo, Co-Head of Infrastructure at Apollo has stated that they were attracted by Primafrio’s “scale, resilience and operational excellence”.

The transaction is expected to be concluded in mid-2022 and the investment will be used to “accelerate the company’s strategic growth plans.”

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A Look Into the Russia- Ukraine Conflict Analysing the history of how this invasion came to be and its possible outcomes Introduction In the weeks prior to the 24th of February, there was a lot of ongoing speculation and debate over the true danger of an invasion, whether Vladimir Putin was bluffing or being serious, and the extends of his imperialistic views over Ukraine and in general the former Soviet Union countries. However, on that Thursday, when Russian missiles hit military targets inside Ukraine, there were no more doubts, and now, a month and half after the start of the war, with more than 4.5 million refugees having already left their country, the questions now are about how, and when, will this situation end.

With this in mind, it is almost equally as important to look back at how we got here, in order to better understand and be as informed as possible about this complex and decades old conflict, which culminated in the bloody invasion we have before us now.

Early years of the conflict With the collapse of the former Soviet Union back in 1991, as the countries in it began to gradually adapt to their independency, in a lot of cases, the former soviet republics had longstanding political traditions and distinct cultural practices, and most of them had only experienced brief time of independence after the fall of tsarism in 1917, and, to further complicate matters, many of the newfound nations had a significant Russianspeaking populations who were either uninterested in the new national independent projects, or actively hostile and violent against them. In this climate, Ukraine stood out, although it had also only existed as an independent state in modern times for four years, between 1917 and 1921, it had a powerful nationalist movement, with the small exception of pro-Russian minorities, such as the ones in the region of Crimea, and a strong memory and affection for its independent past and place in

Francisco Baptista

European history before getting annexed in the USSR. Besides these cultural factors, it was also well industrialized, a major producer of coal, steel and grain, and with a large population of 52 million people, the economies of Russia and Ukraine were deeply intertwined. Furthermore, the geographic location of Ukraine is also worth mentioning, it was strategically located on the black sea and on the border with a lot of eastern European and more importantly, future NATO members. So, immediately after the collapse of the USSR, we find a landscape of a country with heavy nationalist tendencies and a desire to strengthen its independent status, that was incredibly important to Russia both from and economic standpoint and from a geopolitical one. From the Russian perspective, this was a problem, and so, for the first 20 years of Ukrainian independence, Russia kept a close eye on the country’s development.

From the Ukrainian perspective, it was going through the problems that every former soviet country was facing, poverty, corrupt decisionmakers, and, as the aforementioned Crimea region, opposing minorities to the independence movement. The democratic process in the decades to follow would also prove to be very tumultuous, with successive changes in power going from one side of the opposition to the other, going back and forth between getting closer to Russia, and straying away from the Motherland. However, even with all this uncertain politics, and a stagnant economy, with the passing of time, more and more people being born in a free and independent Ukraine, learning Ukrainian and thinking of Kyiv as their capital instead of Moscow, the stronger Ukraine became, as its own nation.

The NATO problem After the cold war, NATO’s expansion was one of the biggest concerns for Russia, and a constant problem in its relationship with the west. After the goall

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disband of the USSR in 1991, some countries of eastern Europe, particularly Poland, Hungry and ate the time, Czechoslovakia, with the memory of what they struggled under Russian imperialism, sought out NATO in order to protect themselves from a threat they believed would not remain weak forever, and so, in the following years, countries like Czech Republic, Hungary and Poland joined the alliance alongside 11 more new members, bringing the total to 30 countries. During the 90s, Russia heavily opposed and protested this expansion, but were still too weak and dependent on European loans to do anything other than that. The following decades were also not very fortunate for Russia as the second round of NATO expansion saw its largest ever addition of countries in 2004, and, in the former soviet satellite countries, a series of revolutions in the early 2000s saw the ejection of corrupt pro-Russian elites and politicians. A series of events very exciting for the west, seen as a return of democracy to this region of Europe, and for the Kremlin, seen with concern and scepticism for how it could lead to a further loss of control. The tipping point in western-Russian relationship probably came in April 2008 when NATO delivered a promise that Georgia and Ukraine would finally end up joining the Alliance.

It was however, the worst of both worlds, since it was only a promise, it didn’t come with the actual benefits of safety, and it only served to annoy the Russians even more, and months later an invasion ended up happening as Russia defeated Georgia in a five-day war.

focus on one man: Vladimir Putin. At the end of the day, this war is his, it stems from his views and nostalgia of the Soviet regime and is merely the latest of many demonstrations, of what means he is willing to deploy in order to restore Russia to its previous glory, we have other examples such as the war in Chechnya, the involvement in the USA elections and the attempted poisoning of oppositionist Alexei Navalny, all foreshadowing what he could eventually do in pursuit of his vision, which culminated in the current invasion.

For Putin, all of the recent developments in the westernization of Ukraine, the EU-Ukraine Association Agreement gone into effect in 2017 and the imminent NATO affiliation, were concerning, and besides this his attempt to create breakaway independent republics in Donetsk and Luhansk, which not only failed but backfired massively, as they scared the Ukrainians even further into wanting to join NATO. More recently, the election of Joe Biden, beating a Donald Trump, who had entertained and not opposed with a lot of decisiveness Putin’s continued attempts against democracy, there was a sense of renewed American commitment to NATO and the fight against an imperialist Russia, everything pointed towards Putin losing some of his influence. In such a climate, the decision that ended up being taken, and by all accounts pretty much all by himself, was to carry out the “special military operation” of invading Ukraine, which so far has killed over 13000 military men on both sides, and caused over 4500000 to flee Ukraine, causing one of the worst refugee crisis in European history.

How the invasion came to be To analyse this point, it is clear that we need to 5 NIC Undergrad Review

Current Situation Currently, almost a month and a half after the beginning of the invasion, a lot can be said of the current situation, success or failure of Putin’s decision, both objectively analysing on-the-field developments and also looking at the response from everyone outside of Ukraine, but one thing is for sure, this is not going how Putin anticipated it would go, with proof of countless miscalculations.

For starters, it is key to enhance the bravery and commitment of Ukraine’s president, Volodomir Zelenskyy, while most, and definitely Putin, thought he would flee or lack the skills of a strong leader, he as proved everyone wrong, making sure that his country stays united, fighting against the aggressor and, at the same time, following the diplomatic processes to join the EU and pave the way to join NATO in some possible future. This brings up another point that Putin surely misevaluated, which is how much the Ukrainian people don’t want Russia inside their homes. Initially, Russian soldiers were told that they would be received as saviours and allowed freely into towns and villages, this could not be farther away from the truth, the opposition from every Ukrainian has been an incredible show of courage and patriotism against an imperialist attacker against whom they’ve had to fight in order to get independence in the first place. The second relevant aspect where Putin failed to understand the severity of what he had decided to do was in the response from the remaining European countries, and the rest of the world for that matter.

Since the beginning of the invasion, the EU and the US have imposed some of the harshest and steepest economic sanctions in recent memory, and not only that, both have pledged to lower drastically their dependence on trade with Russia, essentially isolating them from the western economy, leaving China as the only significant trade partner and ally. On the battlefield, a lot of reports point towards a demotivated, undertrained and underprepared Russian army, which has close to triple the casualties of the Ukrainian side, however they have been able to take territory mainly in the southeast and in the north, coming from allies Belarus, but still haven’t been successful in taking

Kyiv, which has been the number one target since the beginning of the invasion. NATO and other organizations and countries keep providing weapons to the Ukrainian forces, the resistance is set to continue, and so Putin and his army have resorted to bomb civilians and brutal massacres like the most recent one in Bucha.

Geopolitically, what Putin has accomplished so far has been the unification of the western block around support for the Ukrainian resistance, the resurgence of relevance of NATO, leading countries from the former “iron curtain” to restrengthen their desires to join the alliance, and the further dip in the Russian economy, all of this while revealing, without leaving room for any possible doubt that might still exist, the dictator and war criminal he has always been. Such a failure in the geopolitical arena leaves Putin with only one possible scenario of victory, on the battlefield, and so it remains unclear how much longer the invasion will last and how it will eventually end.

Possible Outcomes After early speculation and threats from the Kremlin, it looks as though, on one hand, NATO will not intervene with troops in this conflict, and on the other hand, it looks like Russia will not use its nuclear weapons, which means that, as of now, there are two possible continuations for the invasion: either a peace treaty is signed, or the war will continue and turn into a long lasting conflict until a clear winner is found.

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According to reports, there has been a softening of positions on both sides, with Turkish mediators claiming that the Ukrainian government appears open to negotiating disarmament of the country and recognition of Russian language as an official idiom in Ukraine, which is part of the Kremlin’s demands.

Despite these advances, other perhaps more important points are still grounds for disagreement, such as the status of Crimea and Donbass regions.

This point specifically seems like the biggest source of tensions as both presidents don’t want to concede on this issue. Furthermore, Putin is dodging invites from Zelenskyy to discuss peace conditions in person, president to president, which raises questions over the seriousness of the Russian’s efforts towards peace, and so, according to most analysts, a quick peace treaty signing remains unlikely.

On the other side stands the possibility of a long, deadly war. The underperformance of the Russian army could lead towards peace and compromise, however it looks like Putin is pushing towards escalation, as attacks on Ukrainian civilians become more and more common. It is a possibility that his plan B is to establish a long war, driving millions of refugees to other European countries, create an unsustainable crisis and intense social and economic burdens on these countries and then reap the benefits of whatever comes out of those struggles. Either way, it seems like the end is not yet near for this conflict.

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Stagflation: When all hits at once Central Bankers’ most dreaded storm Miguel Amaral

Stagfla…what?

Stagflation happens to be an even mixture between two words that might make many investors weary: stagnation, and inflation. When stagnation is mentioned, of course it’s meant economic stagnation: a prolonged period of slow economic growth, as measured in terms of GDP growth, usually accompanied by high unemployment.

Inflation, on the other hand, refers to a general and progressive increase in prices of both goods and services in the economy. Naturally, stagflation occurs when we witness both inflation at high levels and little GDP growth, or even a recession, allied with steadily high unemployment rates. To better understand how this concept evolved and why it is relevant today, let’s discuss some brief history.

Keynesian attack

Macroeconomics

under

The term stagflation dates back to the late-1960s and 1970s, in the United Kingdom. At a time of deep economic distress when an oil supply shock hit the British economy, prices were soaring amidst high unemployment in the region, especially due to the increase in the price of gasoline that drove all other prices higher. As all policymakers would, Englishmen tried to recur to monetary policy to control the rising inflation. However, their situation was quite worrisome, mainly due to the prevailing economic models at the time. You see, ever since the end of WWII theories advanced by the great John Maynard Keynes were the rulebook for monetary policy, especially the Sticky Nominal Wages model. I apologise in advance for the model mumbo-jumbo that follows. Keynes’ observation was that the extremely high and persistent unemployment during the Great Depression had to be caused by some failure in the wage adjustment of the labour market.

Keynes therefore predicted that sticky nominal wages were the problem: given that wages were determined by contracts and they take time to be drafted, contracts are not able to keep up with the

volatile levels of inflation observed in the economy.

An important notion for this market clearing model is that markets clear at the expense of real variables: real wage, real rental price of capital…As a result, when there was a price increase, real wages, as measured by the ratio between the “fixed” nominal wage and the price level, would decline. This implies that labour is now cheaper, and given that productivity of labour had not been impacted, this would drive labour demand by firms upwards, and lead to an increase in the optimum labour in equilibrium. As more workers are employed in the economy, output, as measured by real GDP, would grow.

However, this goes against what was observed during the stagflationary period of the 1970s.

Prices were soaring, firms were not demanding more workers and the employed labour wasn’t rising; in fact, unemployment was growing. What’s more, the Phillips Curve, a key economic indicator at the time created by William Phillips, developed an inverse relationship between the change in the unemployment rate and inflation. This is because, as GDP grows above the potential GDP, which occurs when the unemployment rate is below the natural unemployment rate, inflation is likely to ensue. Therefore, with higher labour in equilibrium and reduced unemployment, GDP would increase and so inflation would soar. Both these macroeconomic theories were put to the test when stagflation came around.

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Theories predicted that high inflation and high unemployment rates were mutually exclusive and could never be observed at the same time in the economy. The truth is it happened. Struck by surprise, policymakers all throughout the world were led to exert desperate measures to try and revert the situation. However, the conducted Monetary Policy only worsened the problem. Using Milton Friedman’s theory that “Inflation is always and everywhere a monetary phenomenon”, the Federal Reserve followed a contractionary monetary policy in 1979 and interest rates were led to double-digit levels. The problem is that, in the preceding 15 years, FED’s monetary policy had anchored inflation expectations so high that this rise in interest rates was felt primarily on output and employment rather than on prices, which continued to rise. In fact, the economy was driven into a recession, and monetary policy was believed to have little to no credibility.

This situation clearly highlights one of the main problems with stagflation: how it acts like a neverending loop.

Circular Economy (kind of) Stagflation is perceived by many as a hard-toleave loop. Therefore, there are a few different theories on how both high inflation and a stagnating economy can exist. One such theory is that stagflation happens when there is a negative supply shock, that is, when something that is crucial to an entire economy, such as energy or labour, is suddenly in short supply or becomes more expensive. One key example, and the one that economists believe was the root of the crisis in the 1970s, was the increase in the price of crude oil.

Oil is a key input in the production of both goods and services, and when in short supply the price of it increases due to the basic laws of market dynamics. As a result, a great number of producers decrease their production, which declines the output in the economy as well as reducing the number of job offers available. However, all of this was driven by an increase in oil prices, so in the back-end of this decrease in output is an increase in prices.

For policymakers, there’s almost nothing worse than the thought of stagflation. The problem is that the way to fight one of the problems, either rising prices or declining output, tends to make the other

even worse. For rising prices, the general consensus is to rise interest rates and in that way deter borrowing and encourage saving, which tends to decrease inflation as it slows down the economy . Therefore, raising interest rates reduces inflation, but affects output as consumption is deterred. On the other hand, when we see the spectrum of declining output one approach, as seen recently, is to purchase large quantities of financial instruments from the market, thereby injecting new cash in the economy and promoting growth whilst raising prices. As you can see, both policies do not reduce the problem and may even aggravate stagflation.

The main worry that many investors share is that Central Banks would be out of the picture during this stagflation loop, as an end to the crisis might be out of their control.

Why stagflation is especially important now(and how we can learn from our mistakes) As hopefully you might have perceived, stagflation is indeed a hard-to-leave loop and last time out it lasted from 1965 to 1982 in the US. When discussed, economists found three main causes for the Great Inflation( as it is also known) period, which share some similarities with the economic developments we have seen as of late.

First and foremost, in the early 1960s the FED was promoting an expansionary monetary policy that was later deemed “too easy”. The FED was looking to foster permanently lower unemployment by allowing inflation to rise, but it later backfired.

For the past 2 years, we have also seen a period of stimulative monetary policy. The FED and the ECB applied Quantitative Easing(QE), in which a central bank purchases longer-term securities from the open market in order to significantly increase the money supply in the economy and therefore encourage lending and investment.

However, a key difference between today and the 1970s is that the QE program is quickly reversing as the emergency measures from COVID subside, and it has not lasted the long period it did in the 1960s. Even though history strikes its similarities, differences might give us an upper hand.

Secondly, and especially relevant in the past month, the economy in the 1970s suffered two ggggggg

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supply side shocks caused by oil. Oil shortages drove its price increasingly high, up to $68 a barrel for the WTI Crude Oil in 1973 from around $25 a barrel a mere two years before. It is hard to neglect the similarities between then and today, as the War in Ukraine with Russia has driven a severe oil supply shock given that most of Europe’s oil is imported from Russia. Crude oil has hit 13-year highs, reaching $130 a barrel overnight in the 6th of March. Easier to see is how hard gasoline prices have hit: I have lost track of how much I’ve cried when filling up the tank of my car. Even though we do not know how long the oil price crisis will last, the Oil Shocks during the stagflationary period of the 1970s far exceed anything we have experienced to date. Crude oil prices quadrupled during the 1973 crisis and then doubled again in 1979, something we hope does not happen again today. What’s more, we do have one supply side issue that was not present during the 1970 crisis: a decline in the labour force participation rate in the US due to COVID. You may regard it as indifferent, but it did decline from 63% to 60% in 2020 alone.

Wages have been driven up, and the possibility of increasing wages, deterring demand for labour, amidst growth in prices is undoubtedly a major concern for the FED. WTI Crude Oil

inflation target, which previously was of 2%, to allow for inflation to rise somewhat above 2% for an undetermined period. For sure the move was taken after deep discussion, but some analysts see it as a reduction of the FED’s commitment to the 2% target. Currently, the FED is maintaining some ample credibility, but it must reinforce it by fighting the inflationary pressures we see as of late. Inflation has hit 7.9% in February in the US, a level not seen for the last 40 years.

Even though some similarities are hard to neglect, it must be mentioned that, as of yet, we haven’t seen the degree of shocks observed before and during the stagflationary period of the 1970s. We learn from our mistakes, and hopefully we are better prepared today to fight a crisis, if it were to happen. ECB’s president Christine Lagarde recently mentioned that the bank did not expect the war in Ukraine to push the euro zone into stagflation, even as prices increase further and growth is stalled.

Lagarde mentioned the growth in the euro area could be as low as 2.3% in a severe scenario in 2022, downplaying the threat of a recession. But should we consider it further?

And may the odds be ever in your favour

Source: Yahoo Finance

Last, but by no means least, the FED’s stance in the 1960s and early 1970s is regarded by many as one of the causes for the Great Inflation. During that period, there was no clear stance on which level of inflation was deemed “adequate”. As a result, inflation ran hot, resulting in a draining of America’s gold reserves. We might not see such an illustrative context today, but similarities abound.

Recently, the FED slightly altered its message on its

One of the main predictors of an impending recession is the inverted yield curve. The yield curve represents how the yields, the “return” on debt instruments, varies as the time to maturity changes.

An upwards sloping yield curve is regular because long-term debt is more expensive to borrowers, given that they are subject to the corrosive effects of inflation as well as risk of the lender going bust, ggggggg

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which implies that long-term interest rates are higher.

Movements in the left-hand end of the yield curve are determined by the FED’s short term interest rate, whilst the right side depends on economic prospects such as GDP growth estimates and inflation expectations. An inverted yield curve, therefore, occurs when short term rates exceed long-term rates and often anticipates recession because it implies that a short-term US treasury is paying a higher interest rate than a long-term US treasury. This highlights that the long-term outlook is poor, and as concerns of an impending recession increase investors tend to buy long Treasury bonds thinking that they offer a safe harbour from falling equities. As a result of the rotation to long maturities, the price of long term bonds increases, and therefore the yield declines.

What is key to note is that the Inverted Yield Curve has preceded every recession since 1956.

However, this does not imply that every time there is an inverted yield curve, a recession is to be expected. Rather, every time there was a recession, an inverted yield curve occurred previously.

Observing an inverted yield curve does not imply we should all panic and sell all our portfolio to avoid the impending disaster. However, it is regarded by many as the key economic indicator of a preceding recession, because it is just that accurate.

By construction, to measure whether there has been an inversion of the yield curve investors recur to the spread between the 2Yr and 10Yr rates, that is, the difference in yield between both. When it turns negative, that is, when the 2Yr rate exceeds the 10Yr rate, then we have an inverted yield curve.

As of the time I began writing this article, the spread between the 2Yr and the 10Yr rate was sitting at 0.12%, disturbingly close to inversion.

Funny enough, a mere day later and the yield curve inverted for the first time since September 2019. At

the same time as the FED is raising short term interest rates to fight inflation, the market expects the long term rates to decline amid declining future expectations, and so the inversion occurred.

To show how accurate this indicator is, notice that in 2006 the yield curve inverted and from 2007 to 2009 the world economy suffered what is known as the Great Recession, throwing many into poverty.

The yield curve anticipated an impending recession by 16 months. Again, in 2019 the yield curve inverted and the COVID-19 pandemic did, in fact, trigger a global recession( even though many regard it as luck, given that the yield curve would never predict a pandemic). For the last example, the yield curve inverted in 1989, and in 1990 there was a deep economic downturn affecting much of the Western countries. The yield curve has preceded every recession since 1955, with only one false signal during that time. Given that it has inverted, many predict that a recession is ahead.

When you pray for rain, you got to deal with the mud too Stagflation worries have been rising recently throughout the investor community. With inflation hitting absurd levels and worries that an impeding recession is to come, we may find ourselves in the never-ending loop of stagflation. If we do find ourselves in it, will the FED keep raising interest rates as planned to tamper with inflation? Or will it let the economy grow at the expense of more inflation? In the Great Inflation of the 1970s, the only way that the economy left the loop was through a deep recession, one that took 3 years to conclude.

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Luckily, we hope we have learnt from our mistakes in the past. Both Christine Lagarde and Jerome Powell, president of the ECB and FED, respectively, have signalled no anticipation for an impending recession. Even though there are some similarities between today and then, differences abound, such as the fact that the shocks witnessed in the economy during the 1970s have not been felt as of yet. However, the war in Ukraine might aggravate the current economic scenario, leaving us to bite our nails hoping for a future with no stagflation.

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Interview with…

Background Miguel Faria e Castro is a Senior Economist in the Research Division of the Federal Reserve Bank of St. Louis and a Lecturer at Washington University in St. Louis.

Miguel Faria e Castro Nova SBE Alumni (Class of 2011) /in/mfariacastro/

Miguel joined Nova SBE in 2006, pursuing a degree in Economics, followed by the Master of Research in Economics. During his journey at Nova, he was also a Teaching Assistant. After his Masters, he enrolled in the PhD programme in Economics of NYU, in which he graduated in 2017.

His research focuses on macroeconomics and financial institutions, and numerous of his publications are available in academic journals such as the Review of Economics and Statistics and the Journal of Monetary Economics.

mfariacastro@gmail.com

Education in Nova SBE

Q: Having begun your university education at Nova SBE, how did you find you wanted to study Economics?

A: That’s a good question because I think it was in high school that I realized I liked social sciences (anthropology, politics, etc.) and at the same time I liked mathematics and statistics. One thing plus the other eventually led me to economics, something very accidental.

Q: Ending your bachelor’s in Economics, you decided to pursue a master’s in Economics at NOVA SBE once again.

What were your goals, at that time, after graduation?

A: Maybe not as romantic as the story of some other people, but I entered the bachelor, and I was getting good grades, so in the second year, I started to observe what people with good grades at Nova SBE do after graduation. I think that nowadays it won't be much different, but the best students usually would go to investment banking or consulting and since they seemed to be interesting areas, I decided to try it out. I did some internships after graduation, both in investment banking and in consulting

and none of the areas made me fall in love.

Despite this, I think I have a relatively good idea of what the roles are in these companies and, when I mentor someone, I always say that internships are super useful, especially for a person to understand what they want to do.

I excluded these two areas, and, in fact, what mattered for me the most during the degree was economic policy issues. In particular, at the end of the course, I went to do an internship at the Ministry of Economy's studies office, and I really liked it, but I quickly realized that the interesting jobs in this area always require a PhD and that's why I decided to take the more academic path.

Q: Is, or are, there any specific courses or teachers that brought you some good memories?

A: I think I was very lucky because I had great relationships with several Nova professors, especially when I was in my master's degree. I think they helped and advised me a lot when it came to thinking about the next steps after the master's degree. At that time, I had a lot of support from professors such as José Tavares, Susana Peralta, Francesco Franco, André Castro Silva, all of whom were very important in advising, helping, and

introducing research.

me

to

the

world

Q: Through your journey at Nova, you were a T.A, did this inspired you to being a professor?

A: It was a bit of an accident. There were several master’s students who were assistant professors and I thought it was something interesting to earn some money and help to pay the rent.

Q: Also, instead of pursuing a normal Master’s, you did a Master of Research. Why did you choose that option?

A: It is a very rare Master’s, maybe 2 or 3 people were doing in my year.

The Master of Research is a master's degree that is a little heavier than the normal master's and it was for people who wanted to go on to a doctorate.

The normal master's in economics, in my time, was a year of courses and a semester of thesis. The research master's was a year of courses, together with the normal master's, and we had some compulsory courses that the normal master's did not have (extra subjects in mathematics) and then the second year of the research master was the first year of the PhD at Nova and we had to write the thesis at the same time.

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of

PhD at NYU

Q: In 2011, you joined the PhD program at NYU. What led you to study in NYU? Did you specifically wanted to study in the United States?

A: At first, I didn't have the definite idea of doing a PhD in the US, as there were several good programs in Europe. But I knew I definitely wanted to leave Portugal. Eventually, during my master's degree, I talked to several Nova professors who gave me a lot of advice on what I should and shouldn't do. What the professors told me was that the best economics departments at the time were in the United States. There are good departments in Europe, however, most are in the US. This led me to apply to many American universities, some in Europe, but I was more focused on the United States.

Q: How was the decision of specialization made during your PhD? A: It's a very complicated question. As you learn more, you take more and more advanced courses, and eventually you start to realize that there are certain topics, areas and methods that you are more interested, and you end up specializing in that. For me, I think I specialized relatively late, because there are people who start their PhD with a very well-formed idea in the area that they want to do research and write their thesis and, obviously, this is an advantage as the person starts to specialize right from the start. That was not the case for me, I spent the two years of my PhD beating my head against the wall to try to find the area I really wanted (I liked Micro, I like Macro, I like political economy, I like finance, …), I had to jump between areas.

The way in which the doctoral programs of American universities are organized, and this is increasingly true for European universities, is that in the first year we do the “core” of the

curriculum (we do a macro course, a micro course, a course in econometrics and maybe mathematics) and then, in the second, we have to choose two areas of specialization and take courses in these areas. Eventually, there is a matching process between students and teachers (there must be someone who does the type of research that you like, that you have some affinity for, …) and it ends up being on the basis of choosing the supervisor and then specializing in the same area as him.

But you always end up finding something you like.

Federal Reserve Bank of St. Louis Q: How was the decision of specialization made during your PhD? Did you already know what you wanted to do after the PhD and to the Fed specifically? How did you obtain the working opportunity? Was this your career goal?

A: Again, it was an accident. Things happened and I adapted to the circumstances. When I finished my PhD, I went to an annual meeting called the Job Market, that takes place in January, which is a meeting of the American Economic Association and the American Finance Association where all people with PhD's in economics and finance (and a few

other related areas) who are going to finish their PhD this year, go to that conference and all the employers are there to do a preliminary interview with candidates. In the year that I knew I was going to finish my PhD, the end of 2016, I sent applications to everything, I must have sent 150 applications, mainly to universities to be an assistant professor (1st level of the teaching career) and since I was specializing in macro and finance, I also sent applications for research positions in international public institutions (IMF, OECD, Fed, …). I had 30 to 40 interviews at that conference and some of these passed to the “flight outs” (I had about 15) where they invite you to go there (university or institution) for the day, you present your thesis, you have 1on-1 interviews with the professors or economists who work there and, of these, I received 5 or 6 offers.

Q: As a Senior Economist, what are your main tasks?

A: My normal day is a bit boring; it's basically working on my research. At 8:30 am I go to my office, debug my code and essentially, write papers. My life today is very similar to the life I had as a PhD student. The difference Is that instead of teaching, I do policy analysis.

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Q: Would you like to work in other Central Banks?

A: I don't rule out that possibility, but not yet. The Federal Reserve treats me very well and I have a lot of freedom, resources time to do my research. More than I would have in other European banks.

Q: You mentioned that you have more resources and freedom in the Federal Reserve than you would in other central banks. Do you feel that the United States values Economic Research more than Europe, or Portugal in particular?

A: Fortunately, I think that this is changing a lot in Europe, and in fact, Portugal is an outlier in Europe because in terms of research, the bank of Portugal is one of the best central banks in Europe, and it is a Central Bank that has a very good study department, and they have a lot of freedom and a lot of resources. This is not true in other European countries.

Without mentioning specific cases, let's say that the average Central Bank in Europe is a place where there is not much freedom and recognition of investigation.

The ECB has improved a lot. Before, it wouldn't be on the radar for anyone who wanted to do research and it wasn't a good place to work until a few years ago, but I think they understood that they were losing a lot of Europeans who were going to work for the federal reserve, and they started to give more importance to research, which has greatly improved the ECB. Advisory for the PT Government

Q: You were a member of a panel of 20 economists advising the PM of Portugal on the COVID-19 recovery.

Did you feel that your opinions were heard?

A: Yes. One thing that I found interesting and that I was positively

surprised was that I expressed my opinions and had answers not only from the Prime Minister, but also from the Minister of Economy. In example, to justify if they would try to make the proposals, and if not, why. However, there is obviously a big gap between giving policy recommendations to politicians, and then seeing those policies implemented, as there is a whole political process between these 2 things. But overall, yes, I felt that they paid attention to what I proposed.

Q: What were recommendations you gave?

the

A: I addressed the issue of moratoriums. At the time, the moratoriums were about to be lifted, and I addressed this issue because it was a big macroeconomic risk for the country. If 15 to 20% of the moratoriums were to default, this would be more than the Portuguese banking system’s equity, so there was a thought that if these moratoriums were lifted too early (as the agents, companies and families that were taking advantage of the moratoriums did not in fact have the possibility to repay the moratoriums), this could lead to an implosion of the banking sector.

Additionally, there was also a lot of conversations about the issue of tourism in the Portuguese economy, because as we know, it is an economy that is quite exposed to this sector. At that time, still in June 2021, it was not clear that the global tourism industry would recover, so it was necessary to take into account this scenario in which a very significant part of the national economy would never recover demand, and therefore would never return to the levels it had before the pandemic. Hence, it was necessary to question whether it would be possible to invest in other sectors.

Macroeconomic Outlook

Q: Contrasting now the case of the United States and Portugal, the United States government let

people go into unemployment while in Portugal mechanisms were created and we had the case of the simplified lay off. In fact, we were not sure if these people who were on lay-off for several months would actually return to work because the companies they worked for could go bankrupt due to the possibility of there not being a recovery in demand that there was before for certain sectors or for certain products. Do you think that for Portugal, the Portuguese solution was the best for our context, or do you think it would have been better to do like the United States? Simply letting the flexibility of the labor market increase, which in the United States has quickly returned to very low levels of unemployment?

A: This question ultimately has to do with the nature of the welfare state, and the way it differs between Europe and the United States. In Europe, we have much fewer dynamic economies, where when you lose your job, it takes a long time to get back into the labor market, so both job creation and job destruction in Europe are much slower than in the United States. At the same time, Europe has a much stronger and more complete welfare state. This means that from the point of view of Europe, the potential cost of letting a lot of people go into unemployment was much higher than in the United States. We'd have unemployment exploding, and it's not clear that it would recover quickly. The United States has a more dynamic economy in terms of the labor market, so people lose their jobs and in the same month, on average, they manage to return to the labor market, and therefore the people who were in charge of economic policy in the United States were much more willing to tolerate high levels of unemployment because they knew that once the economy started to reopen, unemployment would fall at a very high rate.

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Additionally, the United States has much weaker social protection than the Europe, and I think that also justified and shaped much of the American fiscal response. As they do not have a very strong unemployment benefit system, they simply threw money at the unemployed, which in Europe is not necessary because there are already much more generous unemployment protection systems. So, given these differences, the different answers made a lot of sense. So, it makes sense that the main objective of the Portuguese government at that time was to prevent people from losing their jobs because once they would lose jobs, they would take a long time to find another one. So, they tried to support companies and keep people employed, and that was the purpose of the lay-off: to ensure that as soon as the economy started to reopen, they would continue to be employed in the place where they were before.

Q: Regarding the monetary policy that was used after the 2008 crisis, the United States was more aggressive while the ECB was more conservative. Do you think that the most aggressive policy is the ideal, or that, in the case of Europe, applying austerity measures was better so that they could stabilize them in the long term?

A: Before giving my opinion, it should be mentioned that there is a big difference, which is the fact that the ECB has a single mandate: price stability, and the federal reserve has a dual mandate, not only price stability but also keeping unemployment low.

This difference between single mandate and dual mandate is quite important to explain the differences in responses to the 2008 crisis. What happened in 2008 was that the American economy started to go into recession, but at the time it was thought that it would be a normal recession, and at the same time, the price of oil and inflation were quite high.

Additionally, that was also what was happening in Europe. The economy was slowing down and inflation rising.

The ECB's response was to raise interest rates, in fact, even before the sovereign crisis (2011), interest rates were rising. Precisely because of the price of oil and others that were causing inflation to rise.

The ECB was very focused on its single mandate (price control) and what happened was that while the European economy was already going into recession largely due to the crisis that was happening in the United States, the ECB continued raising interest rates, which was bad for what happened afterwards. In the United States, starting in September 2008, when Lehman Brothers went bankrupt, and it was realized that we were entering a crisis that we have not seen since the 1920s (the Great Depression), the Federal Reserve quickly began to be quite aggressive.

Precisely because unemployment was starting to rise, and one of its mandates is to keep unemployment below a certain level.

What happened at the ECB was that its mandate was completely unique.

The aim was to control prices regardless of unemployment or output gap, but in fact there was a big change in the way of thinking of the ECB as soon as Draghi becomes President at the end of 2011, because he starts to adopt a much more “American” posture and despite the ECB not having an explicit dual mandate, it effectively started to adopt an implicit dual mandate from that point on.

In fact, this created a lot of problems for the ECB because we started to have many “hawks”, mainly in Germany and the Netherlands, complaining that the ECB is not respecting the unique mandate as it was trying to close output gaps and unemployment and that is not part of its mandate.

Q: Do you think that there should not only be a double mandate, but also a third mandate in the future related to controlling bubbles in the financial markets?

A: To answer the first question, I think it makes sense to have a dual mandate. In the history of the ECB, the increase in interest rates in 2011 made absolutely no sense, but it resulted from the institutional design of the ECB, so I consider that the fact that the ECB raised interest rates in 2011 is the best argument that we can present in favor of the inclusion of the dual mandate.

As for the second question, regarding the third term, I am generally in favor of that, and I think that, implicitly, the Federal Reserve already has this third mandate.

We have several instruments, for example The Countercyclical Capital Buffer. We are the primary regulator of the US banking system and therefore we implicitly also have a financial stability mandate to make sure that banks are behaving well, so we have some of those instruments and this third mandate.

Regarding the ECB, there is an important problem for the institution, which could threaten the very existence of the ECB: It makes sense to include central banks with certain responsibilities as long as we also manage to give central banks the tools to be able to fulfil these responsibilities and I think this is a problem that has arisen a lot at the ECB especially in the post-crisis.

“[…]the fact that the ECB raised interest rates in 2011 is the best argument that we can present in favor of the inclusion of the dual mandate.”

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In the post-crisis period, there were many politicians in Europe who said that the ECB should do more to support the recovery in the European economy and Draghi was complaining that in fact he would like to be able to foster more growth in Europe, but not only it is not in his mandate, the ECB also doesn’t have the tools for that.

There is the issue that central bank officials are technocrats, while European Parliament staff are elected, so Parliament staff and other elected officials have much more democratic legitimacy to add or remove powers from the Central Bank. So, it must be them, the elected politicians, who give these powers if they want the ECB to solve these problems.

An issue that is talked about a lot these days is the issue of increasing inequality and how some of the unconventional monetary policies that have been carried out like asset purchase programs etc. could potentially be increasing inequality, and that is completely true because if the Central Bank is buying assets, and the objective is to increase the value for those who have the assets, which tend to be richer people, then these are the people who will gain mainly from the programs. But these programs are designed because eventually this will have good spill overs for the economy so naturally these programs increase inequality, but the issue is that the Central Bank does not have the tools to correct inequality. The ECB has tried to stimulate the economy through certain channels of monetary policy transmission, and this has a side effect which is the increase in inequality. You see many elected politicians complaining about the side effects, but these elected politicians have in their hands the tools to fight inequalities.

They can raise taxes on the rich, they can redistribute. The Central Bank cannot do this directly, but governments, parliaments and elected representatives can do this through fiscal policy.

Q: In the fight against the COVID-19

economic fall down, in the US, the amount of consumption stimulus and infrastructure projects were very high in percentage of GDP, and Europe, where the total amount of monetary and fiscal counter-cyclical policies was much lower, but still a change in policy compared to the 2011-2013 eurozone crisis. Inflation has been in the rise and some people have complained that it was mainly due to the excess “helicopter money” in the economy, but, as we have seen, other factors have been affecting inflation (like “exploding” demand creating container shortages and chip shortages due to crypto mining). What is your view on what is driving inflation? Was it mainly loose monetary policy (thus, a mistake by the central banks) or something exogenous?

A: It's a very complicated issue, and a big part of my effort in terms of policy analysis in recent months has been trying to understand where this inflation is coming from. My opinion, based on the analysis I've done and the data I've looked at, is that it is indeed a combination of several factors. The pandemic shock was an unprecedented shock because it was not a traditional shock, it was not simply just a supply or supply shock. It was rather a combination of several aspects of demand and supply shocks and all this together, adding the fiscal and monetary policies of response created a cocktail of factors that led to the inflation that we have today, so we have a great expansion of demand mainly in the United States, what we call pent-up demand. People were locked up at home for a year and a half, so the government injected a lot of money to the population through government checks and extra unemployment benefits, but they could not spend that money because they were closed at home, and as soon as the economy started to reopen, it was like we opened this “dam” of demand.

Added to this, is the fact that we had negative supply shocks, supply chain disruptions, for example the chip shortage, but also many other problems in example in the supply of

various raw materials, where some of this comes from the trade war between the United States and China, part of this is also the result of geopolitical tensions, such as the energy issue between Russia and Europe. Therefore, all this combined, contributes to less supply and higher production and import costs, in addition to the fact that there was a large negative labor supply shock.

Many people have decided that they are not paid enough to do their jobs.

Mainly people who have jobs more related to the hospitality, catering and retail sectors that are effectively not very well paid and that have received a lot of money from the government and additionally are jobs that involve a high level of physical contact, so they are jobs that became quite dangerous during the pandemic because the probability of catching Covid-19 is much higher than in other sectors. We had this big shock and on top of that a huge wave of people retiring in the United States, a topic that I also have a lot of analysis on. This phenomenon has several reasons, such as the fact that older people are more vulnerable to the virus, so they have more incentives to stop working so they don't have to be around other people.

Added to this is the fact that the financial markets had an extraordinary performance during 2020 and 2021 in the United States, which greatly increased the value of these people's pensions, leading to the decision to retire earlier. All this has conspired to reduce the labor force participation rate in the United States, which means that we have fewer people to cover this huge expansion of demand. So, we have a negative supply shock and a positive demand shock, and all this obviously leads to inflation. The reasons why there was the positive demand shock has a lot to do with fiscal policy because the government here in the United States has given people a lot of money. However, I don't know if it will have as much to do with monetary policy.

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Monetary policy was very important in March 2020 to prevent this situation from turning into a new financial crisis, mainly through policy interventions in the financial sector, liquidity facilities, among others. But I think in general monetary policy has not played a very important role here.

Now, we know that this is a traditional monetary transmission mechanism: we raise interest rates and that leads to a slowdown in demand, so in principle it can help to solve inflation. I don't think it will be completely resolved because there is a negative contraction in supply, and there is not much that the Central Bank can do, but the Central Bank can effectively respond to an expansion in demand.

Q: We are now, undoubtedly, at a turning point in monetary policy stances with inflation being the highest in 40-years in the US. This means that extraordinary measures must be put in place to stop the economy from either overheating or even becoming a stagflation scenario. Another important point is that consumption has increased due to Wealth effect (high asset prices) and high savings rate during the pandemic, leading to roaring demand and constrained supply. Do you think the Fed will need to cause a recession, like in the Paul Volcker era, to stop inflation from going out of control?

A: I think it's tempting to draw some parallels, but I believe we're in a different situation. To begin with, Volker inherits the economy in recession and so what he did (which was extraordinary in the sense that they let him do it), and that actually resulted was: with the economy already in recession, we are going to raise interest rates to cut inflation.

Inflation was high and so they had to raise interest rates a lot and therefore throw the economy into an even bigger recession. In fact, it did.

I think we're in a different situation at least in the United States, we're not starting from a recession, but from a

point where the economy is clearly above pre-pandemic trend GDP, so we're better off than we would be if we were in the trend and we didn't have the pandemic, so we are clearly expanding, the job market is super tight, which means that there is much more demand for work than there is supply at the moment and therefore I consider that we are starting from a very different recession from the one in which the Volker left. By this, I mean that analogies to the Volker period possibly make more sense in Europe. What we are having in Europe is that inflation is also rising, not as much as in the United States, but clearly above the ECB's target, and although we have had a recovery from the pandemic, the recovery has been much weaker for several reasons, and therefore the ECB is in a more complicated position than the Fed, because the Fed, as I see it, will simply be moderating an expansion whereas in the case of the ECB they might even be dealing with stagflation, especially now with the war in Ukraine.

The Divine Coincidence says that the Central Bank can perfectly handle aggregate demand movements because by raising interest rates it is closing the output gap and reducing inflation. In Stagflation, we lost Divine Coincidence because in a situation of recession and high inflation, if we raise interest rates, we lower inflation, but throw the economy into an even greater recession. Lowering interest rates reduces the output gap but increases inflation.

yields will rise. How much is the real question. Do you think we may see a 2012 moment in the eurozone all over again?

A: I don’t think so. It will be a complicated situation to deal with and I think this is one of the major macroeconomic risks that the Portuguese economy is facing at the moment, and in fact I have already written some articles on what can happen with the increase in interest rates in terms of public debt, because Portugal is receiving a huge implicit subsidy from the ECB in terms of funding costs. I think that fortunately the attitude of most European institutions has changed a lot compared to 2012. The ECB is completely different. Once again, we had the pre-Draghi ECB and today we have a post-Draghi ECB that is much more willing to help when it's needed and deviate from its single mandate in a way, and I think there's also a different attitude on the part of the European Commission. Actions such as the suspension of the Maastricht criteria during the pandemic, the European fiscal stimulus package, and the issuance of Eurobonds are measures that were completely unthinkable for the Commission to do in 2011. So, in this aspect I believe that the European institutions are much softer and that I think is very important to prevent something like the sovereign debt crisis from happening again. But I think the impact of interest rates will still be a problem, especially if we have stagflation.

Q: Although inflation is good for indebted countries, as it devalues the amount the real amount of debt the country has, the level of inflation seen in the last few months has been much higher than the 2% target set by most CBs. Incidentally, the amount of public debt to GDP increased dramatically, either in “financially-sound” countries or not. Some of the countries in the latter group is the southern European economies (i.e.: Portugal, Spain, Italy, Greece). As the rate hikes become increasingly necessary, sovereign

[…] the suspension of the Maastricht criteria during the pandemic, the European fiscal stimulus package, and the issuance of Eurobonds are measures that were completely unthinkable for the Commission to do in 2011.”

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Q: The EU, the UK and the US are starting to apply economic sanctions to Russia, but there has been talks of the delicate balance that we have to consider between achieving sanctions that penalize Russia the most, but that do not penalize our economies. Would it really be possible to apply effective economic sanctions to Russia that do not affect us more than Russia?

A: It is indeed a very big problem that we are having, and the attitude of most European leaders reflects that. Europe imports a lot of natural gas and oil from Russia, and these are Russia's main exports so the sanctions that would hurt Russia the most would be sanctions on imports of natural gas and oil but they are also the ones that will hurt us the most so there is no easy answer. It depends on how strong we want the sanctions to be. Additionally, there are several actions that lead me to believe that the Russian government is not a completely rational actor. Basically, the invasion of Ukraine immediately caused the Moscow stock market to drop 50%, and I believe we are dealing with an agent who has no problems with his economy imploding and, in that aspect, I don't know if it's clear that sanctions are going to be very effective. It is not clear to me that these sanctions will lead to major changes in behavior on the part of Russia, so if this is the case, why should we be hurting ourselves? On the other hand, there is also the issue that as long as we do not block Russian oil and natural gas imports, Europe is implicitly financing the war. Additionally, if I think the ECB was already in a complicated situation, the invasion of Ukraine has increased its order of magnitude. If we in fact end imports of natural gas and oil for example, this will almost certainly lead to a major recession and rising inflation in the eurozone.

Final Tips

Q: What is your top 3 favorite economics-related book and why?

A: Perhaps the book that was the most

Economic-Related Book Picks

The Worldly Philosophers

The General Theory

Dune

(Robert L. Heilbroner)

(John Maynard Keynes)

(Frank Herbert)

formative for me growing up as an economist was “The Worldly Philosophers” which is simply the collection of biographies of famous economists. It starts with Adam Smith, goes through Karl Marx, Keynes...

Despite being a collection of biographies, it's basically a small manual on the history of economic thought and I think it's very interesting, and it addresses the most varied economists of the different schools of thought and helps to understand why economic theory it is what it is today.

Another book that I think is a classic is “The General Theory of Employment, Interest, and Money”. I always say that like classical economics goes to Adam Smith, Marxist economics goes to Marx's Capital.

In modern macroeconomics I think everything goes to Keynes. And it is indeed incredible. It is a book with very little mathematics, but it has such a powerful compendium of ideas that many of them were abandoned and died and then eventually recovered.

Moving now to fiction, I think a pretty good book is Dune, which is a book about scarcity of resources. I usually joke and say that it is a very Marxist book because the basic principle of Karl Marx's thinking was that the scarcity of resources and the unequal allocation of resources lead to class struggle, and ultimately it is a great NIC Undergrad Review

engine of the book’s story. Everything that happens in the book happens due to the class struggle which in turn happens due to the scarcity of resources. Although the author is not an economist, it is a book that has a lot of economics.

Q: Any final message or tip for the people reading this interview that want to work in Central Banking?

A: Interesting positions in central banks, that is, actually doing analysis and research, require a PhD, so this is somewhat inevitable for anyone who wants to pursue a career in interesting positions in Central Banks. That said, I really enjoy what I do, and I think it's super stimulating, as we're always dealing with different situations. We spend hours analyzing what is going on, but after all, we economists, even though there has been a lot of progress in the last 200 years, we still have a very imperfect idea of the way the economy works and therefore we are always exposed to new challenges, and intellectually, I really enjoy working at a Central Bank. Also, as I work in a government institution, I end up being able to contribute to what I think is the common good of society, which is very important to me.

By: Bermardo Patrício, Bruna Travassos and Diogo Zuzarte

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Interview with…

Background Rui Dias is a Hedge Fund analyst at Millennium Management, one of the prominent Hedge Funds in the world, where he executes market neutral strategies to maximize the fund’s alfa with his team.

Rui Dias NIC Alumni (Class of 2010) in/rui-dias-2b875b43/

Prior to this, he worked for nearly 10 years in the sell-side as an Equity Research analyst in BESI, Berenberg and in UBS (London office), conducting research in the Utilities and Industrials sectors.

Regarding the academic background, Rui started out with civil engineering in IST, but quickly shifted to the finance world when he joined the Master’s in Finance at Nova SBE. He was also one of the founder members of the Nova Investment Club in 2010.

ruifsdias@gmail.com

Education at Nova SBE

Q: During your time in the MiF in Nova, what were your goals and objectives at that time?

A: So, I didn't know what I wanted. I discovered what I wanted actually when I came to London with my colleagues from NIC. When I met people here in London that were working in finance, that's when I related to that and I thought “OK, this is this is more for me”, you know? Because really what I was looking for, to be very blunt with you, was to make money, I mean you work to make money. There are some people that do work because they have some special interests in what they are doing, I would like to have obviously an interest and like what I do, because at the end of the day you spend a lot of time on it, but I also wanted to make some money for myself and that was the problem of engineering, and when I realized the potential in finance, for me, I would say a no brainer to bet my bucks on that horse.

Q: But did you know that it was Equity Research that you wanted to pursue, or you didn't know at that time?

A: No, at the time I didn't know, I think we didn't have proper guidance, or we didn't have enough knowledge to understand the difference between

what equity research or corporate finance or M&A would be, or, you know, capital markets in the bank or consulting. You knew that these things existed but in practice, what does it mean? What would you do? And what does that mean for your career? You know, what are the possibilities, if you take these different paths? So, luckily, I got my first job in equity research, and I just took it from there. You know, I think I stuck to it because this is an addicting job at the end of the day, if you do it well, you have opportunities to grow as an analyst in equity research.

Q: How did NIC helped you attain your objectives or develop yourself?

A: Basically, NIC was a way for us to gain that contact. We needed to network a little bit more outside of NOVA, so that was also a way to go.

And then I got to finance and changed to equity research thanks to NIC. If it was not because of NIC, I don't know if I would be where I am right now. I’ll give you an example, the person that hired me to Espírito Santo, I met him through NIC, in London, when we did our first trip over there, we had a meeting with this person, and he turned out to be hiring people for equity research in Portugal, an ex-Morgan Stanley sales, and he was just hired by Espírito Santo to build a new research team in Iberia, in Lisbon, and in Madrid,

and he needed analysts, so we sent our CVs and two of us got the job. If it weren’t for NIC, I wouldn’t know that this guy was hiring.

Working in Equity Research

Q: What are the daily tasks one might expect from an Equity Research analyst in Portugal?

A: Look, I think that it doesn't matter if you are in Iberia or if you are in London. Any part of the world the job of equity analysts is going to be very similar. You start really early, I'm just going to give you kind of the daily schedule, and then maybe we can talk more about the different tasks, but you start very early, before the market opens, because you have to, obviously, as an analyst, you have to be very well aware of the news of that day, or during the evening, the overnight news, so you come in early, let's say between 6:45 and 7:00, and you start looking at all the news and you try to understand if any piece of news is going to impact some of the stocks that you are looking at, if there are no news, lucky you, you're going to have a relaxed morning.

If there are, then you need quantify, you need to think about how that piece of news is going to impact the stock, your valuation, your thesis about the company. And you need to do that 20

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before the market opens because a client may call, ask you and you want to be prepared. So, you need to have that.

Market opens at 8AM Lisbon and London time, so we start at 7AM to have at least one hour to do that, and that hour is quite stressful, especially when something happens. If, for example, a company announces that they are launching a takeover offer over another one, that's extremely stressful because, in that short time frame, you need to come up with a view, if the evaluation is fair, if it's not fair, what could be the potential impact for the acquirer, etc... Of course, you will not, in one hour, write a huge and long thesis about that deal, but you need to have at least a first view, so that's it.

So, you start the morning early to be ready for the for the day, at 8AM the market opens and then your day is going to be split between looking at your companies, updating models, updating views, talking with the companies, making all the fundamental work that you need to do to make sure that your view on a specific company is still valid, or sometimes you are just doing research about something in a specific company or about a specific sector.

Imagine you are concerned with steel demands. OK, you are concerned with steel demands and also with the trends of steel prices. So, you need to do some research, you will spend your day doing that sort of research. Then you will spend some time writing those ideas, the result of that research, not every day, but when the research is done, then you have to write that, to publish it and so that clients can have access to it. So, you do research, lots of modelling, you speak a lot with the companies, write your views, and you call clients, and you speak with clients, right?

And when you speak with clients sometimes the client is calling you because they want to understand some sort of supply demand dynamic for a specific company, and you are the expert of that company, and they want

to speak with you, or you call them because you have a view.

Let’s say you think a particular stock is a buy and then and the client is going to ask you, “OK, but should I buy the

stock now or should I buy the stock later? What are the catalysts? What is the event that will make the market realize that it’s wrong?” So, you have a discussion about that with the clients and this is the sort of conversation that you have. At the end of the day, an equity research analyst is almost as a consultant for an investment professional.

Q: And who are these clients?

A: So, clients are institutional clients, as we call it long-only’s which are, for example pension funds. They just buy and hold stocks, they don't have a mandate to short stocks. What they try to do is just to outperform the market, so they try to, let’s say, think about the Footsie 100. So, if the Footsie 100 is the benchmark that they need to beat it, they will choose the best companies of those hundreds. So those are what we call the long-only’s, they buy and hold, and they try to beat the market or to beat a specific benchmark.

Furthermore, hedge funds, family offices, I mean, every sort of investor, but in general, you know, we're talking about long-only pension funds, institutional funds, asset managers, hedge funds, everyone that that runs big institutions and big funds are the clients of an equity research house.

Q: And you said that you enter your office at 7AM? At what time do you leave the office?

Well, effectively, you could leave the office when the market closes at 4:35, but you never do it, because you always have a lot of work to do in equity research, you have to work 24/7 because you have research to do.

There's always something about the company, about the industry that you would like to explore a little bit more.

There's always something that you need to write. There's always an email

that you need to reply to clients. You know, you can stay there forever. In general, at 6:30, 7:00 or 5:30, depending on the days, you would leave, you can rest assured that it’s at least a 10-hour day, if not 12-hour day it will depend a lot, but the interesting thing is that you have flexibility. It's not like consulting that you are going to spend evenings and weekends.

I worked a lot of weekends, but because I wanted to, just to write research quicker, or because I was engaged in some sort of research that I wanted to do as soon as possible, or because I thought that I really had to publish a report on a specific time frame because I will get more client attention. If I do well or bad, it will all depend on me. That's it. So, if I want to excel, if I want to have more votes at the end of the year from the clients. If I want to make more money for the firm, I will want to have as much output as possible to clients, and sometimes that requires some extra effort in the weekend or spending a little bit more time at the end of the day. But, at the end of the day, you manage it.

Working in London

Q: After the difficult time BESI was passing through, you decided to move to another firm. How was the transition?

It was a hard time for the company and for me. But that’s when I move to Berenberg, I spent a short time with this firm because I was also in different processes with UBS and Morgan Stanley. But if you ever find yourself in a situation like that, you should never stay. It messes you up because you need to find a way out immediately and you have a few days thinking “What should I do?”, “Who should I call?”, …

But once you are in London and you want to change jobs, and that’s the beauty of the London market, there are lots of opportunities, you just need to know the right people to speak with.

21 NIC Undergrad Review

Q: And who are these right people?

Well, anyone really. If you have a friend that works in a different bank you ask them “Can you pass the contact of the headhunter of that specific bank?”.

Well, banks like UBS, Morgan Stanley, J.P. Morgan, … they do have in-house headhunters and these individuals speak with “external” headhunters. So, if you have a friend in one of these institutions, you simply ask them to make a contact. If you are lucky and they make that introduction, you skip a few steps and get direct contact with the bank.

If not, you ask your friends if they know any headhunters and you “cold call” those headhunters and say “Look, I am Rui, I work at Equity Research, I cover these specific sectors and I am looking for a way out. Do you want to go for a coffee?” and you for a coffee and you have a chat. If there are opportunities and if they think that you could be a good fit, they’ll put you in front of a client, meaning a company that could potentially hire you.

Or maybe you happen to know someone with power in a specific institution and you speak with them, and you put yourself out there. This is crucial, guys. This is not an industry where you should be shy, this is not for shy people. If you want to move jobs, there are lots of jobs. You just go out there and you speak with people and hustle a little bit, eventually, things will happen.

In Portugal, a bit more difficult. In Madrid, much easier than in Lisbon.

But not as easy as in London. London has this amazing ecosystem that the job market is extremely liquid.

Q: How did the opportunity to work for UBS appear? Did a headhunter contact you or were actively applying for positions at bigger banks?

A: Since I got to London, I think almost all the jobs I got was through someone I knew. Someone that knew someone.

It was never me sending a CV to a random email of HR, that never happens or is very difficult. You are 1 in 100 and your CV can be very good, but is as good as half of those 100’s.

You need a step on the door and if you know someone, it just helps a lot.

You still go through an interview process, you still have to compete with a bunch of guys. But you are not competing in a stack of CVs, you are competing face to face with 10, 20 people. It is completely different.

So, the transition was very easy, doing Equity Research at BESI, Berenberg and UBS is the same, only the intensity and client contact was different.

Espírito Santo and Berenberg will have a lower client base or client reach than UBS because UBS is a global bank, so, you have much more interaction with clients and tough clients, so you need to push your game a little bit, you have to be a bit sharper, more disciplined, add more research, be more intense. But, in terms of skills, no difference.

but you can invest through a shadow or paper-trading portfolio, understand why did you lose, why did you win, before making an investment, put some notes on why you are buying this stock, why am I shorting this stock. Go through that process, read research if you can find it, read online forums like Seeking Alpha, they have lots of interesting (and bad) articles there, specially for people starting out. It’s good to start wiring your brain on the vocabulary, on what people look at, what are the key topics.

Other things you could look at is a magazine called Value Investor. It is paid, 350$ a year, but it is a very good magazine because what they do is they interview asset managers, portfolio managers…

Q: For undergraduates, graduates and experienced professionals willing to break into a Bulge Bracket IB in London, what is your advice given your experience?

Q: Afterwards, you were able to land a position in Millennium Management, one of the biggest Hedge Funds. How did the opportunity appear?

A: You should definitely reach out to people like me and all my peers here.

Imagine that I receive 50 CVs, and in one of them I see someone I know. If you have the same CVs as other people, I would prefer to call you since we already had a connection. At the end of the day, this is a people’s business, finance is a people’s business. I need not only a person that comes from X university, did Y things and is very smart, but also a person that I like to work with, that is dependable, that I can trust him. And that’s why, if you know people, that is an advantage and so I think you should focus on networking.

And if you want to work in Equity Research, in an Hedge Fund, or in an Asset Manager, if investing is your thing, I think you need to be obsessed by that. If you want to do something and be good at it, you need to be obsessed. What can you do? Well, first of all, you can start by reading everything you can about investments.

Second of all, if you really like investments, what do you do? You invest. You may not have the money, NIC Undergrad Review

Millennium Management

A: Well, you know that in the industry, there is something we call sell-side and buy-side. Sell-side are the banks, they sell their research, they sell the time of the analysts. Buy-side are the investors that consume it.

So, both sell-side and buys-side, they have Equity Research analyst, so the natural move, if you really like investments, at the end of the day, you want your career to go towards that, to be an investor. And the way to do it is to pass from the sell-side to the buyside.

Let’s say you were unable to get a position at a Hedge Fund, because it is extremely competitive to do that and there’s less positions as well. So don’t be sad for starting in the sell-side, you are going to learn as much as in the buy-side.

I made the transition because I put myself out there. People started to know I was looking to move. I had many conversations, some funds were not what I was looking for, which was in the right place, with the right people.

22

And that takes time to find. I was lucky enough to come across this opportunity through a former client of mine, which today is colleague. He knew I was looking for an opportunity and he was running an interview process and he asked me if I’d like to join the process as well. Again, networking was key.

In terms of the perfect candidate, I think you need 3 things. You obviously need to know how to do this job, you need to know the basic skills, how to value a company, how to look at a business, you need to be very good in accounting, in valuation …

The second point is that you need to want to do this, and it is very important.

We are going to hire people who want to do it, that show passion.

Finally, we need someone that is a likable person, someone that is humble, someone I could trust.

Q: What exactly does a Hedge Fund do?

A: There is often a misconception regarding hedge funds, many articles write that “Hedge Funds had a performance that is below that of the market” and this is not accurate, the goal of the hedge fund is to deliver quality risk-adjusted returns.

Hypothetically, if say a hedge fund had an annual average return of 10% since the 80s and only lost 3% in the financial crisis, that is an amazing performance, especially if it is done with a lower risk than the risk if you had gone to the market. A long-only Asset Manager will have a lot of volatility, they will have all the volatility of the market, it may go up 5% in one day and down 10% the next week, and for someone who has invested their savings, this may be too much risk for them to undertake. Hedge funds do not aim at beating the benchmark, they aim at providing quality and superior riskadjusted returns in comparison to say a standard Eurostoxx ETF, comprising a bit of performance for much lower risk and security.

Q: What kind of strategies do you

Finance-Related Book Picks

One Up on Wall Street (Peter Lynch)

Valuation (Koller, Goedhart & Wessels)

implement at Millennium Management Global Investments?

A: We tend to be market neutral, we try to generate alpha, mitigating or reducing exposure to the risk of the market and that is what drives the uncorrelated returns relative to the market. To do that you employ longshort strategies, try any strategy that tried to reduce that market risk, in my case we focus on long-short equities in specific sectors.

Final Tips

Q: What are the 3 finance books that you recommend?

The first book I would recommend is One Up on Wall Street, it simplifies things quite a lot, but it helps understand what it takes to do research, in practical terms what does it mean to research a company, answering many doubts you may have round this. I would also mention The Essays of Warren Buffet, in the annual reports he goes through his investment ideas, going into detail why he is investing in company X and Y, allowing you to see how an investor think which is very useful if you want to pursue a career in equity research or financial markets. A more technical book is

Investing against the tide (Anthony Bolton)

Valuation, it is the best valuation book you have out there in my opinion.

Finally, I would add a book by a former portfolio manager at Fidelity, Anthony Bolt, called Investing Against the Tide, discussing his investment process during the years with concrete examples and again gives you a clear perspective of the view of a portfolio manager and how they seek value.

Q: Final words of advice for someone who wants to succeed in the world of finance?

A: In short, work hard, set yourself career goals, be obsessed about it and self-motivated. be Finding that motivation to persevere is very important especially when you move from university to a having professional career and never underestimate the importance of being a humble and nice person, after all this is a people business as well.

By: Bermardo Patrício, Tomás Forte Vaz, Francisco Baptista and Ricardo Freitas

23 NIC Undergrad Review

Business Deep Dive: Micron Tech

Diogo Luís Micron Technology was founded in October 1978 and is headquartered in Idaho, United States. The company is a world leader in innovating memory and storage solutions that accelerate digital transformation, with operations in 18 countries and over 26,000 patents. Micron operates several sales channels, including direct to consumer, sales representatives, and retail distribution. The company seeks to change how companies and individuals use data, transforming how the world uses information.

Markets MicronMicron Technologies is listed on the NASDAQ under the ticker (MU).

After being founded as a start-up, Micron went on to produce the world´s smallest 256K DRAM product in 1984, just 8 years after its foundation.

In the same year, Micron went public through an IPO. In 1994, Micron earned a spot on the Fortune 500 and steadily grew into an industry leader. Since then, the company has been responsible for several technological innovations, including the industry’s first double data rate (DDR) chipset in 1999, and many others.

Micron’s growth over its more than 40-year history comes from the firm’s internal innovations as well as from strategic acquisitions, including Toshiba’s commodity DRAM operations, Lexar Media Inc., Tidal Systems Inc., and more. Also, as the data and computing industries have shifted toward AI, Micron has made acquisitions in line with

that trend. As a high-tech company, Micron´s share price has been strongly volatile relative to the S&P500, with a beta of 1.21. In the last 5 years, the company has gone from $27.64 a share to $72.14 with over $80.5B market capitalization. The stock ownership is highly concentrated in the United States (79%), followed by the United Kingdom and Germany. Insider-owned stock corresponds to 22%, a slight increase from 16% in 2019, reflecting optimism from insider investors.

Price Performance

24

Source: Bloomberg

NIC Undergrad Review

balance for both DRAM and NAND.

Industry Overview Micron Technology is part of the semiconductor industry. However, it belongs to a specific subset of companies that provide memory chips.

To a certain degree, the products sold in this market are interchangeable, meaning that chips from different companies are very similar performance-wise. This reduces the company’s ability to differentiate its products and gives brands less pricing power. However, the nature of the memory industry as an oligopoly avoids unwanted pricing competition. The DRAM market only has three major players, while NAND flash has about six. The big takeaway is that the small number of players in the space helps keep price pressure minimized. It also explains why the comparatively more concentrated DRAM space has better margins than the more fragmented NAND flash space.

The industry is highly oriented into innovation and first entrants to new technology markets.

Growth The global semiconductor memory market size was valued at USD $25.56B in 2019 and is expected to expand at a CAGR of 5.9% from 2020 to 2027.

The market is expected to witness an increase in demand at the global level owing to the growing use of semiconductor components in various industries, such as automotive, consumer electronics, IT, and telecom.

Demand growth is expected to be in the mid to high teens for DRAM and approximately 30% for NAND. Non-memory component shortages are improving, and further improvements should support memory and storage demand growth for the rest of 2022. Ultimately, there is a healthy supply-demand

Company Overview Micron Technology’s two main businesses are manufacturing DRAM and NAND Flash. DRAM is the computer memory used to temporarily store data (what electronic devices use to multitask).

NAND Flash is a type of high-speed storage used in modern computers and related devices.

Micron's sales channels allow it to sell its DRAM and NAND Flash products directly to consumers.

However, computer manufacturers and data centres are the largest consumers of NAND Flash, while DRAM products are mainly popular in the gaming industry. Moreover, the company also sells SSDs (Solid State Drives), using its corporate name or other lesser-known names for the purpose of segmentation.

After Samsung and SK Hynix, Micron Technology Inc. is the largest supplier of DRAM in the world, with a 23% market share. On the NAND Flash market, it represents a significant, 11% market share. Between the two, DRAM brings to the company 73% of total revenue while NAND Flash brings approximately a third, at 24%. This difference is due to the more consolidated nature of the DRAM market.

Business Model Micron Technology business does not distinguish between different groups of customers. Most of its sales are business-to-business, meaning it sells to other tech companies. These include computer manufacturers, phone manufacturers, and chip makers. It locks in volume-based annual contracts where customers get bulk pricing depending on how much they order.

25

NIC Undergrad Review

Micron business model is composed by four distinct segments: Compute and networking (data centers, servers, enterprise clients, etc.), Mobile (memory and storage for smartphones and tablets), Storage (SSDs for manufacturers and consumers) and lastly, Embedded (memory products used in smart cars, IoT devices, etc.).

Compute and networking is the largest of Micron’s business units, growing at 34% YoY, it did $3.4 billion in revenue in Q1, corresponding to 44% of total revenues, also growing at 34% YoY. Mobile is the second largest business unit. It did $1.9B in revenue in the most recent quarter, or 24% of the total.

bounce back to $31,169M in 2021, a 29.3% YoY increase.

Profitability didn’t follow the same trend as the company managed to become much more efficient with an EBITDA margin growing from 25.39% in 2016 to 45.50% in 2021. This is explained by the development of more cost-effective segments and the added value of acquisitions.

Going Forward At present, Micron is confident in its efforts to revolutionize the industry again with its innovative 3D NAND and 3D XPoint technology. This nextgeneration tech promises non-volatile memory storage 1,000 times faster than conventional NAND with 1,000 times greater endurance.

More recently the “1-alpha node” DRAM products are built using the world’s most advanced DRAM process technology and offer major improvements in bit density, power, and performance. The applications for this new technology are extensive and far-reaching, from mobile devices to smart vehicles Holding the industry’s broadest memory solutions portfolio, Micron continues to expand the application of its products further by offering memory solutions for the latest innovative technologies, “bringing new life to data, and bringing new data to life.”

Performance Overview Income Statement In 2018 Micron celebrated its 40th anniversary with $30,391M in its income statement. The company also received the “Great Place to Work” certification and established its Center of Excellence for Longlifecycle products.

Unfortunately, the years 2019 and 2020 weren't so kind for the company, as supply chain constraints, cost increases, and demand shrinkage lead to a 23% YoY loss in Revenues in 2019 and a further 8.4% in 2020. The company was able to

Balance Sheet Micron´s Balance Sheet has changed radically over the years. In the last 10 years, Total Assets almost quadrupled to $58,849M. Remarkably, the evolution didn’t compromise liquidity, as the current ratio stayed solid at approximately 3.0 over the entire decade. The cash ratio showcases once again robustness to cover short-term liabilities, as it smoothly increased from 0.75 in 2013 to 1.34 in 2021. Debt to Assets also decreased from 76.66 in 2017 to just 16.70 in 2021.

These numbers are explained by the numerous acquisitions the company has made over the last decade, especially in 2013 (Elpida Memory Inc. for $2.5B) and in 2016 (Inotera Memories Inc. for $4B). Micron said that it expected the acquisitions to enhance its operational efficiency and immediately bring even better DRAM gross margins.

26 NIC Undergrad Review

compared to 2021. In addition, the industry-leading 1-alpha DRAM and 176-layer NAND technology promise to deliver strong cost reductions.

All in all, the company is on track to deliver record revenue and robust profitability in 2022.

Cash Flows Micron Technology´s operating activities generated $4,883M less than in 2019. This translated into a fall in free cash flow from $3,409M in 2019 to only $83.0M in 2020. However, as component shortages started to resolve and demand for consumer products picked back up, the company recovered quickly and reached $2,438M in free cash flow by 2021.

Valuation & Outlook Despite its performance, investors seem to be reluctant about Micron Technology due to the cyclicality of the DRAM and NAND sectors.

However, Micron has been evolving its product portfolio, customer base, and sector exposure.

To continue to put out impressive quarterly results, Micron will need to keep pushing for a competitive advantage and be prepared to fight probable industry volatility. Moreover, recent inflation may slow down the expected growth of key markets.

However, Micron has proven to be able to adapt quickly to market settings and has a lot of promising developments in the pipeline that may help sustain its high margins.

Micron Technology Inc. is now trading at almost 9x P/E with 32.6% revenue growth and an EBITDA margin of 55.2%. Revenue is expected to increase 17.5% YoY, and adjusted EPS is expected to increase 31% YoY. Management sees memory chip pricing rising by a double-digit percentage for the remainder of the 2022 fiscal year when 27 NIC Undergrad Review

NIC-UD Fund: Monthly Performance Inflation, inflation and guess what? More inflation…

Afonso Costa

Global Markets After an exceptional year in 2021, the first quarter of 2022 has been difficult for markets amid concerns about the economic implications of Russia’s invasion of Ukraine and a possible need for a faster pace of interest rate hikes to tackle higher inflation.

Russia is a major oil, natural gas and other commodities producer and the escalation of the conflict pushed energy and commodity prices to extreme levels aggravating the surge in inflation, disruption in supply chains and risk to global growth.

The prices of Brent oil and gas prices surged in early March before falling back with Brent oil closing at 103$ a barrel and Natural Gas at 121€ per megawatthour, up 33% and 55% respectively since the beginning of the year according to J.P Morgan Asset ggggggg

Management.

Looking at inflation, Eurozone inflation is expected to hit 7.5% and, in the US, even before Russia invaded Ukraine last month, conditions were already difficult for the Fed (Federal Reserve) with CPI (Consumer Price Index) running at 7,9%. Jerome Powell has restated that "if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so”.

In March, the S&P 500 rose 3,6% after it rebounded sharply from its lowest point of the year amid accelerated inflation, Russia’s Invasion of Ukraine and the cooldown of the economy by the Federal Reserve.

Current Positions Regarding Capital Allocation we had some changes in our portfolio adding Sibanye Gold and Volkswagen Group AG to our fund. The top performer out of this month was Agnico Eagle Mines (AEM), with a 21,29% share price increase. In addition, WisdomTree Broad Commodities ETC (AIGC) was among the top performers this month with a 9,87% increase followed by Berkshire Hathaway (BRK.B) with a 9,79% increase.

Positions Weight on Total Equity

8,6%

2,70%

5,83%

1,07%

3,17%

5,80%

3,70%

2,40%

4,69%

3,81% 5,97%

3,54% 5,07%

8,58% 6,27% 3,59% 7,47%

6,52% 3,13% 3,31% 4,77%

Accounting Sof tware Aero & Defense Biotechnolog y Consumer Products EV Battery Food & Beverages Gaming/eSports Gold Miner Holding Company Oil & Gas Pharma Retailer Renewables Social Media/Internet Sovereign China Bonds Streaming/Entertainment Tobacco Commodities Precious Metal Mining Automative Industry Carbon Credit Cash

Nº

Industry

Type

1

Accounting Software

US Equity

$

73,22 $

2

Aero & Defense

UK Equity

£

7,17 £

7,20

3

Biotechnology

ETF

$

42,97 $

41,01

4

Consumer Products

EU Equity

€

50,03 €

54,31

5

EV Battery

ETF

€

15,86 €

15,47

6

Food & Beverages

ETF

€

80,88 €

80,59

7

Gaming/eSports

ETF

$

58,09 $

60,60

8

Gold Miner

CND Equity

$

61,24 $

50,49

9

Holding Company

US Equity

$

352,91 $

321,45

10

Oil & Gas

US Equity

$

25,81 $

24,42

11

Pharma Retailer

US Equity

$

44,77 $

46,09

12

Renewables

US Equity

$

84,71 $

78,07

13

Social Media/Internet

US Equity

$

202,36 $

186,00

14

Sovereign China Bonds

Bond ETF

$

5,66 $

5,69

15

Streaming/Entertainment

US Equity

$

137,16 $

147,86

16

Tobacco

UK Equity

£

31,95 £

32,62

17

Commodities

ETF

$

12,91 $

11,75

18

Precious Metal Mining

US Equity

£

16,23 $

18,30

19

Automotive Industry

EU Equity

$

157,00 €

152,16

20

Carbon Credit

ETF

£

28,95 $

31,37

Cash

Current Price

Open Price

233,34

28 NIC Undergrad Review

75,31

NIC-UD Share Price (Inception Cumulative Returns)

5,0% 4,0% 3,0% 2,0% 1,0% 0,0% -1,0% -2,0% -3,0%

13/03

16/03

19/03

22/03

Benchmark Analysis

25/03

28/03

31/03

Monthly Performance 30 % 20 % 10 % 0% -10 %

St oc St k # oc 1 St k # oc 2 St k # oc 3 k ET #4 St F # oc 1 St k # oc 5 St k # oc 6 St k # oc 7 St k # o 8 St ck oc #9 k # E 10 St T F oc #2 St k # oc 11 k # ET 12 St F oc #3 k # ET 13 F ET #4 St F oc #5 St k # oc 14 k #1 5

-20 %

Performance vs Benchmark 10,00%

8,52%

8,00%

7,13%

6,00%

4,88% 3,60%

4,00% 1,96%

2,00%

0,77%

0,24%

0,61%

0,00%

0 PS I2

xx Sh ke an i2 gh 25 aiC om po sit e

sto

Ni k

10 0

e

50 0 S& P

Pr ic e

Corporate News

Fa ng +

-0,06%

-2,00%

Sh ar

March was favourable for almost all benchmarks with only the Shanghai Composite showing negative returns and PSI20 coming out a big winner this month.

The S&P500 rebounded in March even as worries grew over Ukraine and inflation with investors believing that the economy continues to show signs of strength. Although lower, the MSCI World Index, FTSE 100, Eurostoxx, had positive returns.

The Nikkei 225 index increased by 4,88%, accompanied by a weakening of the Yen, making Japanese exports more competitive in the global markets. The PSI 20 index was the best performer rising 8,52% with the value traded in March rising 34% compared to February and with emphasis on Jerónimo Martins (12,44%), Galp (12,27%) and EDP Renováveis (11,92%).

Finally, our fund ended March with an increase in the share price of 1,96%, underperforming the S&P 500 but being able to outperform the MSCI World Index, FTSE 100 and Eurostoxx.

Eu ro

10/03

SC I

07/03

M

04/03

FT SE

01/03

Berkshire Hathaway announced in March that it owns 136.4 million shares of Occidental Petroleum (OXY) after purchasing over 100 million shares since March 2. This amounts to an over 14% stake in the company worth approximately 7.7 billion dollars and ranks it as one of Berkshire’s top 10 publicly-traded companies. This month too, Berkshire also announced it agreed to buy the Insurance Company Alleghany for $11.6 billion with the deal being expected to be close in the fourth quarter of this year. This transaction would mark Berkshire’s biggest acquisition in six years.

BAE Systems has received a 34.9 million dollars contract, by the U.S Marine Corps, for the design and development of an Amphibious Combat Vehicle Recovery (ACV-R) variant, and more recently, it successfully completed prototype tests of its Multiple Object Tracking Radar (iMOTR), a mobile instrumentation radar that provides precise radar data on multiple objects.

Lastly, British American Tobacco (BAT), the maker of Lucky Strike and Dunhill, has opted to pull out of Ukraine.

29 NIC Undergrad Review