hey guys, was wondering if any if you had any good ideas regarding some indicators (financial and non, but mostly financial) that a broker-dealer is in trouble; i know the obvious like if their risk officer leaves or profits are negative for a certain number of periods, but what about like large reclassification of assets from say level one or two to level two to three or something like that.
any ideas would be appreciated. thanks
I'm looking for something a little more tangible that can be recorded (i.e. numbers/ratios/etc. )
A really early indicator is when management comes out with stock price goals...that means that they are focused on their personal bottom line instead of the company's. Check the trash bin of major investment banks for how many did that.
"There is absolutely no truth to the rumors of liquidity problems that circulated today in the market."
"The worst of the impact of the financial markets is behind us."
etc
To be honest, if a firm is going to go down, it's going to happen relatively quickly. You could look at leverage, cash, debt maturities, and even CDS spreads, but with the possible exception of CDS, nothing will be up to date enough for your purposes, and by the time something shows up on CDS, the firm could already be screwed. Volatility could be another metric, but this prices in the market view. You want to get ahead of the market. At the end of the day, it's hard to get a clear picture of a firm's trading or banking books, and this is what really matters.
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