Investment Banking Discussion Thread

[gdl203]

Maybe - somehow, I doubt that with increased tightening of capital and scrutiny/re-regulation over (prop) trading activities, they will ever get back to making this kind of big bucks, but clearly investment bankers are certainly not going to make big money* any time soon.




* as defined by levels of comp in last couple of decades

 

[leftover_salmon]



true, it's gonna be a grand hustle now. traders can milk it, but M&A and leverage finance are taking hits
but in any case, this is the climate in which the real traders make big bucks. and jp morgan is eating dirt, other banks are out for revenge and these clowns are finding it impossible to unwind their bad trades.

LevFin is actually doing great this year (though the slowdown is starting), and this is a HORRIBLE environment for trading desks at banks. High volatility, spreads steadily widening and low client activity / liquidity is about the worst combination for flow desks. As much as prop trading still exists, this isn't 2007 anymore. Frankly, the days of credit and rates traders running the world are over (though thanks to loopholes, loan traders will be okay for now) and banks will have to retrench to less capital-intensive activities like capital markets underwriting and strategic / M&A advisory.

 

[the shah]

I guess really depends on what they're trading. FX traders and oild traders are still making a killing, a senior director not even partner racked up 3M francs last year. Besides with players who can afford to take big risks fast decreasing, those who can make more because they cake is sliced less. Well anyway...

 

[gdl203]



FX traders and oild traders are still making a killing, a senior director not even partner racked up 3M francs last year.

Is this a typo? 3M francs (swissies?) is not a ton of money for a senior trader. I mean, it is a lot of money in absolute, but look at what the prop traders at Lehman were making before it went bk (see link in my previous post). This is unlikely to come back any time soon, especially given rereg risk, tighter capital ratios and risk management.

 

[the shah]



Is this a typo? 3M francs (swissies?) is not a ton of money for a senior trader. I mean, it is a lot of money in absolute, but look at what the prop traders at Lehman were making before it went bk (see link in my previous post). This is unlikely to come back any time soon, especially given rereg risk, tighter capital ratios and risk management.

no typo chef, but he's in his 50s and works 4 hours a day for 3 days a week, can't hate on that also will be attending the champions league final.

but yeah the lehman days won't be back till next bubble whihc shouldnt be too far in distant future

 

[SkinnyGoomba]

I think you mean 'chief'?

 

[the shah]



I think you mean 'chief'?

non, lui c'est chef.

 

[seeldoger47]

Hey guys I am in desperate need of guidance for I am looking to secure an internship at an investment bank but am a bit ignorant of the of the industry. Now before you tear into me for being some naïve kid who wants to get into IB for the bottles, models, and gross overcompensation that is not the case. My fundamental reason for wanting to become a banker is to have a better understanding of the financial system, which is essential to understand the economy. Now I realize IB is an industry in decline due to: a lack of mergers and acquisitions, a lack of companies looking to go public (think Facebook whose stock face planted after its IPO), companies electing to pay down debt rather than raise new capital, a declining stock market (it is my unpopular contention we entered a secular bear market in the 1st quarter of 2001), and an overall contracting economy due to the extreme global deflationary forces that were unleashed in ‘07 (the housing bubble as a microcosm of an even larger bubble; its just the average American/British/Greek/Irish/Spanish consumer happened to be the weakest link in chain and the market found that link, broke it, and has moved onto European governments, the next weakest link, who is first and foremost experiencing a crisis of their flawed monetary union, a sovereign debt or banking crisis is merely an extension. However the market does not realize Germany is fully capable of turning into Greece in terms of the inability to access liquidity in the capital markets, although you can make the case if it becomes that bad that point the authorities would’ve already intervened or the Euro would’ve already dissolved. Nor has the market anticipated a financial crisis stemming from Asia, in particular our Chinese friends, where the noose is becoming tighter and tighter.) What I want to understand specifically is the credit market. We live in a credit based system and I always felt that individuals from the credit markets had a better understanding of the macro economy, not to mention it does not suffer from the same degree of irrationality as the equity market. I don’t want anything to do with the sell side for I the only thing I have seen from the sell side is people like Tom Lee who is uberbullish on stocks while failing to disclose his firm has a massive long position it is trying to unwind. So where does that leave me? Is there a buy side in the credit market? Ideally I think I want to get into risk management. But can individuals even intern in such a specific position? Is there any individual firm I should look at in particular? On a different note, is there even room for someone like me in an IB? I feel like I would just be laughed for my ideas if I shared them with an interviewer.
Thanks for your help in advance.

 

[gdl203]



What I want to understand specifically is the credit market. We live in a credit based system and I always felt that individuals from the credit markets had a better understanding of the macro economy, not to mention it does not suffer from the same degree of irrationality as the equity market.

LOL.

Man, I don't want to be mean but you need to revisit a lot of what you wrote in this paragraph if you want any chance at a job in banking. First remember what caused the financial crisis - it was certainly not an equity crash. Second, all your bearish thoughts on secular decline of equity markets and global recession are not exactly what is expected of someone who wants to become a banker - remember, bankers are on the sell-side.

 

[Nereis]



Hey guys I am in desperate need of guidance for I am looking to secure an internship at an investment bank but am a bit ignorant of the of the industry. Now before you tear into me for being some naïve kid who wants to get into IB for the bottles, models, and gross overcompensation that is not the case. My fundamental reason for wanting to become a banker is to have a better understanding of the financial system, which is essential to understand the economy. Now I realize IB is an industry in decline due to: a lack of mergers and acquisitions, a lack of companies looking to go public (think Facebook whose stock face planted after its IPO), companies electing to pay down debt rather than raise new capital, a declining stock market (it is my unpopular contention we entered a secular bear market in the 1[SUP]st[/SUP] quarter of 2001), and an overall contracting economy due to the extreme global deflationary forces that were unleashed in ‘07 (the housing bubble as a microcosm of an even larger bubble; its just the average American/British/Greek/Irish/Spanish consumer happened to be the weakest link in chain and the market found that link, broke it, and has moved onto European governments, the next weakest link, who is first and foremost experiencing a crisis of their flawed monetary union, a sovereign debt or banking crisis is merely an extension. However the market does not realize Germany is fully capable of turning into Greece in terms of the inability to access liquidity in the capital markets, although you can make the case if it becomes that bad that point the authorities would’ve already intervened or the Euro would’ve already dissolved. Nor has the market anticipated a financial crisis stemming from Asia, in particular our Chinese friends, where the noose is becoming tighter and tighter.) What I want to understand specifically is the credit market. We live in a credit based system and I always felt that individuals from the credit markets had a better understanding of the macro economy, not to mention it does not suffer from the same degree of irrationality as the equity market. I don’t want anything to do with the sell side for I the only thing I have seen from the sell side is people like Tom Lee who is uberbullish on stocks while failing to disclose his firm has a massive long position it is trying to unwind. So where does that leave me? Is there a buy side in the credit market? Ideally I think I want to get into risk management. But can individuals even intern in such a specific position? Is there any individual firm I should look at in particular? On a different note, is there even room for someone like me in an IB? I feel like I would just be laughed for my ideas if I shared them with an interviewer.
Thanks for your help in advance.

1. Risk management people that I know are typically quants.

2. The buyers of credit derivatives are typically the same people who sell them.

3. All markets can be irrational.

 

[kasper007]



Hey guys I am in desperate need of guidance for I am looking to secure an internship at an investment bank but am a bit ignorant of the of the industry. Now before you tear into me for being some naïve kid who wants to get into IB for the bottles, models, and gross overcompensation that is not the case. My fundamental reason for wanting to become a banker is to have a better understanding of the financial system, which is essential to understand the economy. Now I realize IB is an industry in decline due to: a lack of mergers and acquisitions, a lack of companies looking to go public (think Facebook whose stock face planted after its IPO), companies electing to pay down debt rather than raise new capital, a declining stock market (it is my unpopular contention we entered a secular bear market in the 1[SUP]st[/SUP] quarter of 2001), and an overall contracting economy due to the extreme global deflationary forces that were unleashed in ‘07 (the housing bubble as a microcosm of an even larger bubble; its just the average American/British/Greek/Irish/Spanish consumer happened to be the weakest link in chain and the market found that link, broke it, and has moved onto European governments, the next weakest link, who is first and foremost experiencing a crisis of their flawed monetary union, a sovereign debt or banking crisis is merely an extension. However the market does not realize Germany is fully capable of turning into Greece in terms of the inability to access liquidity in the capital markets, although you can make the case if it becomes that bad that point the authorities would’ve already intervened or the Euro would’ve already dissolved. Nor has the market anticipated a financial crisis stemming from Asia, in particular our Chinese friends, where the noose is becoming tighter and tighter.) What I want to understand specifically is the credit market. We live in a credit based system and I always felt that individuals from the credit markets had a better understanding of the macro economy, not to mention it does not suffer from the same degree of irrationality as the equity market. I don’t want anything to do with the sell side for I the only thing I have seen from the sell side is people like Tom Lee who is uberbullish on stocks while failing to disclose his firm has a massive long position it is trying to unwind. So where does that leave me? Is there a buy side in the credit market? Ideally I think I want to get into risk management. But can individuals even intern in such a specific position? Is there any individual firm I should look at in particular? On a different note, is there even room for someone like me in an IB? I feel like I would just be laughed for my ideas if I shared them with an interviewer.
Thanks for your help in advance.

i don't even know where to start, how can there not be a buy-side on the credit market, do you think the FED buys ALL credits products.

you clearly have no clue what you are talking about, it's very important to have opinions on current economic events, but it's clear from you post that you have no idea how the economy works and what Investment Banking is all about. and work 100+ hours for a couple years and we'll see if you see yourself as grossly overcompensated....

 

[seeldoger47]

LOL.
Man, I don't want to be mean but you need to revisit a lot of what you wrote in this paragraph if you want any chance at a job in banking. First remember what caused the financial crisis - it was certainly not an equity crash. Second, all your bearish thoughts on secular decline of equity markets and global recession are not exactly what is expected of someone who wants to become a banker - remember, bankers are on the sell-side.

Sorry I didn't mean to imply the past financial crisis was caused by to much equity leverage, that was the crisis of '01. The problem then and still is private sector debt. This is where my bearish view comes from, the enormous horizontal creation of money, ~ $44.5 trillion, by the private sector since 1980. The housing bubble merely marked the end of a near 3 decade long spending spree financed by private sector debt, which now must be paid or written down. This deleveraging process is why the recovery has been the weakest economic recovery in over 50 years. On top of that there are serious macro problems in the near and medium term that the US will be powerless to escape from. That being said I am actually very bullish on America's long-term future, I am just not ready to be bullish at the current price.

2. The buyers of credit derivatives are typically the same people who sell them.

Why is that? A seller of CDS protection created the product into existence. Why would they want to buy back the same protection unless the position started moving against them in a way they didn't predict.

3. All markets can be irrational.

Yes all markets are irrational for they are made up of irrational participants. However at any point in time the market price is always right.

i don't even know where to start, how can there not be a buy-side on the credit market, do you think the FED buys ALL credits products.
you clearly have no clue what you are talking about, it's very important to have opinions on current economic events, but it's clear from you post that you have no idea how the economy works and what Investment Banking is all about. and work 100+ hours for a couple years and we'll see if you see yourself as grossly overcompensated....

Forgive me for you are absolutely right, I have no idea what I am talking about when it comes to investment banking. I've never really studied it intensely for it never really interested me until recently. Also I didn't mean to imply everyone who works at an investment bank is overcompensated merely the likes of: Stanley O'Neill, Charles Prince, Angelo Mozilo who received $161.5 million, $99 million, and $184 million respectively in '07 for running their firms into the ground. As for your accusation that I don't understand the economy...well I don't know if I really buy it given my investment thesis that the market will undergo a drastic change in liquidity preference is up over 50.85% and 51.32 against the DOW and S&P respectively on a YOY basis. Although I have taken a beating over the past 2 days albeit on light volume.

 

[gdl203]

Sounds like you should just manage money for a living. With a track record like this, you'll turn a few bucks into millions in no time

Are you a freshman in college (srs question) ?

 

[seeldoger47]

Sounds like you should just manage money for a living.

I can't tell if you're being facetious but anyways it matters not for here is my own and very unqualified opinion: the asset management industry, hedge and mutual funds, had a very good 30 years as managers could hardly go wrong picking a stock and letting the bull do the work, however the economic environment change drastically in '07 but their thinking has not, this will cause their performance to suffer as retail finds out they invested with very poor risk managers, which is why I believe the asset management industry will bleed the most relative to the entire financial industry.

Are you a freshman in college (srs question) ?

No I am going into my junior year.


On a different note has anyone heard anything about an internship/working with Bloomberg. I was told you go through a training program where you learn the basics about most asset classes and markets, then you go off and help one of their clients, some type of money manager I believe, with many making the jump from Bloomberg to their client. Can anyone confirm or refute this?

*Edit the bleeding as already started with mutual funds seeing 13 consecutive weeks of net outflows while hedge funds have seen outflows for 7 consecutive months (info from the Investment Community Institute and Morningstar Direct Fund Flows.)

 

[Nereis]

Time for a little nuance.

If you want to work as a credit trader you should know that credit derivatives are mostly used by institutional investors to hedge their debt portfolios these days.

These are the same institutions that also sell that same sort of protection to other institutions to earn income or tailor their net position as the underlying changes.

If you want to talk directional betting, that is the realm of hedge funds (unless you're in the JP Morgan CIO).

I'm not sure if you believe in the efficient markets hypothesis, but from your general remark on that point I'm inclined to believe so. If so, you will have to explain the returns of value portfolios and successfully argue against Fama and French.