The Ax Man Cometh to Wall Street

Edmundo Braverman:

Yeah, I'm hearing Morgan Stanley is going to be letting a bunch of AM people go.

I think it's finally time to delayer the hierarchical bullshit vertical structure so prevalent inside an IB, as constructed by the risk aversion-driven employment bubble in financial services. Do we need these many layers. Fuck no. Namely: MD, Executive Director, Director, Sr. VP, VP, Sr. Associate, Associate, Sr. Analyst, Analyst. I mean honestly - What the FUCK. Converge, compress, purge, cleanse, move the fuck on, and keep only the strong. The appropriate sizing should be, MD, VP, Associate, Analyst, across all product and industry groups, both markets and investment banking. Done

[quote=happypantsmcgee]Thought you were talking about this with that title Eddy:

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What the fuck is wrong with people? Shit like that make me an advocate of vigilante justice. These guys probably never got caught because the tape sucked and the only witnesses are other criminals.

Just imagine some mild manner guy walking down the street, seeing what is going down. He approaches the thugs and offers to buy the bike for $50 if they can get it free. The thug with the ax accepts and begins to chop the tree. This vigilante then removes a concealed firearm and just shots the thug in the head. The thug falls to the ground and the others flee. As they run away the guy yells something epic like, "I will cleanse these streets and use your blood as a detergent"...or something like that, lol.

Regards

[quote=happypantsmcgee]Thought you were talking about this with that title Eddy:

] Three stooges background sounds would have paired brilliant with this

Wall Street is following its own logic, so probably a good thing in the long run, but pretty painful in the short term. The good part is that since the BBs are going to focus more on the heavy hitters and big deals, there is a lot more room in the boutique and MM space [where I prefer to be]. Also, prop trading shops should see a renaissance over the next few years.

Seriously SUCKS to be the guys getting laid off, but it's a safe bet that smaller firms will snap them up

09grad:

start of a long trend, i think. It's not really possible for an industry to sustain a size so disproportionate to the value it adds to a society. Finance will always be here, but not at the level people have grown used to since the late 80s - 2006. In the long run, thats not a bad thing.

There is nothing new in layoffs. Banks are formed by: people + capital. Both are incredibly liquid and can find new uses w/ competitors, new opportunities, etc. The Street is constantly churning people and capital. Laid off workers will find new jobs, some in NYC, some in finance, some in other places.

Save the cliches. Any talk of "value to society" is just sentimentalism. You lose your job when you stop providing revenue generation or cost savings to your firm. Society isn't real. People are real.

IlliniProgrammer:

Also, this is why it is so important to avoid getting caught up in the banker lifestyle and to maintain your college student frame of reference about spending money as long as possible.

It is a lot easier to sleep at night paying ~1/2 the rent in Jersey City that I'd pay in midtown. During layoff season, the PATH ride home is 17 minutes but the time I gain trying to fall asleep is more like 40-50.

I agree with frugality and hate the "banker lifestyle."

But there are plenty of cheap analyst places to live in NYC without trekking to sh*thole NJC. Many of my career opportunities have come during extra moments after-hours in NYC, serendipitous meetings that would never happen on a PATH train.

IlliniProgrammer:

Also, this is why it is so important to avoid getting caught up in the banker lifestyle and to maintain your college student frame of reference about spending money as long as possible.

It is a lot easier to sleep at night paying ~1/2 the rent in Jersey City that I'd pay in midtown. During layoff season, the PATH ride home is 17 minutes but the time I gain trying to fall asleep is more like 40-50.

Agreed. Do what is necessary to save at least 25% of your paycheck (should be ~1k/mo if getting paid 70k). Also pays to keep an eye out for opportunities (making contacts, keeping relationships open) so if s*** hits the fan, you aren't starting from 0.

IlliniProgrammer:

Also, this is why it is so important to avoid getting caught up in the banker lifestyle and to maintain your college student frame of reference about spending money as long as possible. It is a lot easier to sleep at night paying ~1/2 the rent in Jersey City that I'd pay in midtown. During layoff season, the PATH ride home is 17 minutes but the time I gain trying to fall asleep is more like 40-50.

2/3 of your posts pitch metrics about living in Jersey. It is unlikely that you will productively network to keep in front of clients and/or network to keep outside bids strong in case ppl start getting shot @ work in the next 1-2 months. Are you on a franchise/client-facing desk? If so, how do you go out with clients 4 out of 5 weekdays by living in Jersey?

IlliniProgrammer:

I'm inclined to agree with 09grad to an extent. 2008 was the end of a 30-year trend in finance of more debt, more leverage, and less regulation. Now we are going to see the pendulum shift backwards- regulation is one of those things where the acceleration is the proportionate opposite of the displacement, and the 2008 crash was the signal that the velocity was hitting zero and the pendulum had swung as far as it was going to swing. Now we are seeing regulations and capital requirements increase for the first time in 30 years.

The layoffs and regsaren't going to be a sudden overnight thing- we've slogged it through for three years without any sudden changes, but we can expect a gradual increase in regulations and a gradual decrease in the size of global finance relative to the global economy over the next decade.

But 2008 signalled a sea change in banks' and regulators' approach to risk, and we're going to gradually see more and more regulation and less leverage over the next decade. Long-term, the decrease in leverage is a good thing and not all of the regulations will be bad.

To clarify, my de-regulation advocacy is aimed at the non-financial market (although finance could use a heavy dose of it). Remove the cuffs from the non-finance economy and watch Wall Street soar along with the rest.

MMBinNC:

, it's easy to say that the best times are past us. BUT if you look back at leverage history, when did we over-leverage, 1920s, 1980s and 2000s. 1980s recovered fast, even with the S&L crisis. 1920s was far worse than in the 2000s and the economy took a slow recovery.

My argument is that the 1980s happened in a secular bull market. We still had a lot of room to leverage up and place more bets after that. In the 1920s, we didn't. We're in much better shape today and the swing hasn't/won't be as precipitous, but this is a clear multi-decade shift. Though investors and banks were more leveraged in the 20s, nobody thinks it is a good idea to go back to 2007-style leverage. And that's why we'll see continued contraction at least until the dangers of leverage fade out of memory for investors.

I think we now see the damage over regulation did in the post-Depression era, so the government would be more liable to roll back provisions in Dodd-Frank than we were in the 1950s.

I agree to an extent, but Dodd-Frank is nowhere near as extreme a reaction as Glass-Steagall was in the 1930s. Up until the 1970s, a banker would have gone to jail if he tried to offer his customers a brokerage account let alone a savings account paying more than 4% interest even when the fed funds rate was double-digits. Dodd-Frank simply says that you can't place risky bets with FDIC-insured deposits. Us bankers might see it as crazy, but I suspect the average independent voter thinks it's sensible, even though they do not want 70% tax rates and a divorce between commercial and investment banking (yet).

Deregulation is not bad, but the pseudo-regulation that must be had in the marketplace would be that of the fed funds/discount rate rather than no-prop trading/inhibitory tier1 ratios, etc. Most of the deregulation in the 80s and 90s was beneficial, the sustained period of low interest rates (Keynesian economics if you've read any of his works), and conflicting regulations lead to most of the problems.

I really think the perfect regulation is the FDIC and other bank insurance provisions charging for risk, rather than Dodd-Frank. However, the government isn't smart enough to price risk and stands to get arbed. Thus, risk limitations for banks that can cause systemic issues is maybe the lesser of two evils.

Be a pessimist if you want and you can sit out, but I'm an optimist. And even if it shrinks its not necessarily a bad thing, the people who are good at their job will rise, and the crappy/unmotivated will fail. MAybe not the gravy train it was in 2006, but it will still be a huge and important sector.

Of course. Finance was a huge and important sector back in the '50s, too. I think 2006 was an anomaly, but 2009 was an anomaly too. I think we'll continue to shrink in terms of aggregate total industry comp for another five maybe ten years, but the rate of decrease will slow down and that's what really influences morale. In ten years, there will be fewer bankers, they will work and make less, but they will be much happier and more relaxed about their jobs and their lives. We can't keep shrinking forever and the real unhappy feeling we get about the pay cuts and job cuts has to do more with the velocity than the displacement. We'll actually feel a lot better and be a lot more optimistic than we do today when the industry hits rock bottom. Indeed, I am a lot less pessimistic today than I was in even the summer of 2008.

MMBinNC:

I think that most of the people here are looking very short term for their "end of an era" type mentality... I'm an optimist. And even if it shrinks its not necessarily a bad thing, the people who are good at their job will rise, and the crappy/unmotivated will fail. MAybe not the gravy train it was in 2006, but it will still be a huge and important sector.

Can you do us a favor and weave in just a little snippet of Demographic Reality into your logic?

IlliniProgrammer][quote:

2/3 of your posts pitch metrics about living in Jersey. It is unlikely that you will productively network to keep in front of clients and/or network to keep outside bids strong in case ppl start getting shot @ work in the next 1-2 months. Are you on a franchise/client-facing desk? If so, how do you go out with clients 4 out of 5 weekdays by living in Jersey?

Clients? Who are they? I'm a quant.

IlliniProgrammer][quote:

2/3 of your posts pitch metrics about living in Jersey. It is unlikely that you will productively network to keep in front of clients and/or network to keep outside bids strong in case ppl start getting shot @ work in the next 1-2 months. Are you on a franchise/client-facing desk? If so, how do you go out with clients 4 out of 5 weekdays by living in Jersey?

Clients? Who are they? I'm a quant. delta-neutral, gamma-long, short-index, long-correlation, flat-Rho arbitrage strategies. And that you're so quanty that you eat Theta for breakfast.

mxc:

I disagree with the gloom and doom. Finance provides necessary services. If those can't be delivered by banks, they will be delivered by private companies. HFT shops already provide most of the liquidity on exchanges.

Bingo. The main problem though is that they don't provide any depth. But a market model of prop shops handling the day-to-day adjustments for news and having general investors stick their money into index funds seems like a good way to go. There's really no need for mutual funds and hedge funds anymore. Eventually,

Eventually, I'd like to see an electronic investment banking model where anyone with a recognized accounting firm for their business can sign onto the system, file a prospectus, set up a dutch auction, and even request guaranteed minimum bids (firm commitments) from prop shops, and pay a flat 0.5% of issuance fee- without having a single human being lift a finger.

Let's cut the BS out of the financial markets and focus just on pricing and efficiently getting capital where it needs to go. It really shouldn't be that complicated.

mxc:

I disagree with the gloom and doom. Finance provides necessary services. If those can't be delivered by banks, they will be delivered by private companies. HFT shops already provide most of the liquidity on exchanges.

Being a private company has nothing to do with plugging liquidity gaps. Further, fiduciary asset managers who pledge 2 and 20 are unlikely to ALWAYS post liquidity, like a franchise driven market maker, who must always post liquidity despite of market direction. Cmon dude.

jgrisham:

Nothing too surprising here....The Ax Man already visited every other industrial sector in the country....maybe some financial firms are starting to believe that QE3 chances are looking slimmer....

Maturation is surely one side of the coin, but these are mostly regulatory-driven restructurings.

MMBinNC:

I don't think it's imperative for traders to network in the way that you are implying. Since they really don't have clients, "networking" could be going to dinners and such, rather than going with your "clients". A good trader will be hired, and its easily quantifiable with P&L.

Well, the broker dealerage business can be very relationship based. During a market crash, the most loyal clients sometimes get the best liquidity. And our salespeople do take them along to meet clients every once in a while. But you're absolutely right- for strict exchange-based market making, even a hippopatamus who's fast enough at responding to the facts on the ground can be a perfectly good trader. Strict market making and proprietary trading does not require people skills. Broker dealerage does- at least a little.

Lebowski, love the name, but could you please not post a bunch of one-line responses to quotes? I mean you can only be so much of a banana whore. I may even give you a SB if you stop.

It is a bit ironic that someone advocating people skills would keep responding with one-liners and come off as so combative.

MMBinNC:

I don't think it's imperative for traders to network in the way that you are implying. Since they really don't have clients, "networking" could be going to dinners and such, rather than going with your "clients". A good trader will be hired, and its easily quantifiable with P&L.

Networking is still important. Face to face meetings with clients can generate increased flow, give you information edges, and keep you in the loop. Its all a client facing business. As for your personal career development, its important when you are starting out and don't have that long industry contact list or track record. Keeping in touch with people and actively meeting more people can only help in case something happens. Its a volatile industry. Your book could be showing green but you get canned because greece implodes for example.

Ya you can be a successful trader with no social skills but there are more options for the guy who can trade and can carry healthy relationships.

lebowski:

Did not read. Please refrain from outing pictures you have stashed in that old shoe box under your bed for those extra lonely nights. thanks

You realize you can reply to more than one person in a single post, right? That way I don't have to see that faggity picture of yours 45 times on each page.

lebowski:

Traders (market makers) have clients you wingnut

You seem to be confusing broker-dealers with market-makers. I guess broker-dealers are a kind of market-maker, but most of the equities and commodities volume these days is electronic market-making via a democratic exchange where anyone can offer bids/asks and anyone can take the market without knowing who their counterparty is.

For someone seemingly dismissing experienced folks out of hand with one-line insults, it is just very interesting that you're getting confused about some basic industry terminology here. Either that or you work in corporate or muni bonds.

Lord Blankfein:

This quant guy defending his existence has provided the needed lulz for the day.

Never claimed that my job needs to exist in the long run, either. I think the vast majority of folks working in finance could do a lot more for world if they worked somewhere else; Warren Buffett and a lot of other smart folks who work in finance agree with me, too.