U0126:

What's your opinion on where Skip McGee may go next?

he clearly has the contacts to start his own advisory firm, but I don't think he will. Given his experience at the bureaucratic behemoth shitshow that is Barclays, my guess he will go to a boutique that has significantly more flexibility and will have less regulatory scrutiny. Purely a guess though, we don't stay in touch.
 
Island101:

If you were joining a bank (BB/EB) out of undergrad or business school now, which would you choose and why

None of the EBs have any significant trading desks that I am aware of, so that would leave me with The larger banks (remember that I started in capital markets, not banking). I would not wants I work for what is primarily a commercial bank, this eliminates JP Morgan Chase, Wells Fargo, Bank of America Merrill Lynch. Or one that is headquartered outside of the US, this eliminates DB, Credit Suisse, UBS. So, that only leaves me with a couple of choices, Goldman and Morgan Stanley. Obviously, I would never work for Goldman, so I guess that leaves me with Morgan Stanley.
 
DickFuld:
Island101:

If you were joining a bank (BB/EB) out of undergrad or business school now, which would you choose and why

None of the EBs have any significant trading desks that I am aware of, so that would leave me with The larger banks (remember that I started in capital markets, not banking). I would not wants I work for what is primarily a commercial bank, this eliminates JP Morgan Chase, Wells Fargo, Bank of America Merrill Lynch. Or one that is headquartered outside of the US, this eliminates DB, Credit Suisse, UBS. So, that only leaves me with a couple of choices, Goldman and Morgan Stanley. Obviously, I would never work for Goldman, so I guess that leaves me with Morgan Stanley.

Doesn't that go against your religion? Jewish banks were supposed to stick together, no?

 

Thanks, Dick. How long do you think the boutique advisory firms will gain traction? Are the Moelis', Lazards, Evercores going to grow consistently, as they have been, and are they here to stay given the new regulatory environment?

 
BillBelichick:

Thanks, Dick. How long do you think the boutique advisory firms will gain traction? Are the Moelis', Lazards, Evercores going to grow consistently, as they have been, and are they here to stay given the new regulatory environment?

Absolutely, yes. The lower level of government scrutiny and the fact that few are publicly traded will allow these firms to pay winners without populist backlash. Banking talent will continue to flow there.
 
DickFuld:
B4SH:

How did you rebound after losing Lehman?

I feel like this is a trick question. I really haven't and never will. Bombay Sapphire has helped as much as anything.

Sincere question. Just interested in how you deal with it, because I know I'm going to experience catastrophe later on in my life and thought you'd have an interesting perspective on overcoming it. Thanks for the answer though!

[quote=mbavsmfin]I don't wear watches bro. Because it's always MBA BALLER time! [/quote]
 

couple questions: did you ever work with Dimon when he was head of Smith Barney or was that after the split? either way, how is he as a person? I've heard he's incredibly brilliant but prickly to say the least

why do you think investment banks have never gotten the idea to leverage wealth management when doing IPOs/M&A? I know it's done in theory, but often times the bankers just hold onto all of the data and the firm loses out on potential revenue.

what do you think will come of the large banks in 20 years? some of the rhetoric makes it sound like the feds will try to break up the institutions, thoughts?

 
thebrofessor:

couple questions: did you ever work with Dimon when he was head of Smith Barney or was that after the split? either way, how is he as a person? I've heard he's incredibly brilliant but prickly to say the least

why do you think investment banks have never gotten the idea to leverage wealth management when doing IPOs/M&A? I know it's done in theory, but often times the bankers just hold onto all of the data and the firm loses out on potential revenue.

what do you think will come of the large banks in 20 years? some of the rhetoric makes it sound like the feds will try to break up the institutions, thoughts?

I never worked with Dimon. Obviously, we had some dealings, but not working together while he was at Citi or BankOne/JP Morgan Chase.

I'm not sure exactly what you mean in your second question. At Lehman, we employed the One Firm philosophy. Plenty of our investment banking activity was originated in our PCS division and a lot of our syndicate was run through that group.

The regulations in finance have become so onerous, that it pays to be big to spread compliance costs across a larger base. While it is true that there are some regulators that would like to break up the big banks, the management of those companies does not. I don't know how the government could force their hand to break up, because none of the banks are big enough to be considered a monopoly. Frankly, the ones that would most likely be asked to break up would be Citigroup, BAML, and JP Morgan Chase because they have both significant institutional trading capabilities and a retail banking presence.. However, I think a bigger issue for them in twenty years will be the cost of their retail branch network compared to online banking. As more people who are comfortable with doing everything online accumulate significant assets or are in control of significant assets at work, Internet based banks will get a larger and larger share of the market because they will be able to provide better lending rates and better savings rates because of their cost advantage. What do those banks end up doing with 1,000 branches that are only serving little old ladies who need to talk to someone?

 
DickFuld:
Golden Valley:

What are you up to these days?

Drinking Bombay and posting on WSO to attempt to restore my reputation.

There is no doubt that my experience does not hold a candle to yours. That said, one of the few things I have learnt is that "reputation" is subjective. At some point you just have to stop worrying about what others think. Anyway, thanks for hanging out here and sharing your thoughts.

 

Do you think you'll attempt a comeback, probably not at the same scale as Lehman, but in some way? Or is it just not worth it, and not simply for financial reasons, but the scale and fun of the game just wouldn't be there? I used to do business with an executive who was previously a Marine Corp fighter pilot back in Vietnam, was a Top Gun instructor and one of the test pilot for the F-18. When someone asked him if he ever flew small private planes, his response was something along the lines of "I used to fly nearly Mach 2 and pull 9 G's. Getting behind the controls of a twin engine turbo prop wouldn't even register."

 
Dingdong08:

Do you think you'll attempt a comeback, probably not at the same scale as Lehman, but in some way? Or is it just not worth it, and not simply for financial reasons, but the scale and fun of the game just wouldn't be there? I used to do business with an executive who was previously a Marine Corp fighter pilot back in Vietnam, was a Top Gun instructor and one of the test pilot for the F-18. When someone asked him if he ever flew small private planes, his response was something along the lines of "I used to fly nearly Mach 2 and pull 9 G's. Getting behind the controls of a twin engine turbo prop wouldn't even register."

I'm done. I have more money than I can ever spend, so I certainly don't need to work.

Your analogy is absolutely perfect and relevant to me. I would have probably stayed at Lehman until the day I died, because I loved it. I could never feel that way about another place. I don't have the energy to start my own shop either.

 
DickFuld:
Dingdong08:

Do you think you'll attempt a comeback, probably not at the same scale as Lehman, but in some way? Or is it just not worth it, and not simply for financial reasons, but the scale and fun of the game just wouldn't be there? I used to do business with an executive who was previously a Marine Corp fighter pilot back in Vietnam, was a Top Gun instructor and one of the test pilot for the F-18. When someone asked him if he ever flew small private planes, his response was something along the lines of "I used to fly nearly Mach 2 and pull 9 G's. Getting behind the controls of a twin engine turbo prop wouldn't even register."

I'm done. I have more money than I can ever spend, so I certainly don't need to work.

Your analogy is absolutely perfect and relevant to me. I would have probably stayed at Lehman until the day I died, because I loved it. I could never feel that way about another place. I don't have the energy to start my own shop either.

Too much money to ever spend? Can you buy me some new Gucci loafers and a Patagonia vest? I feel real left out at work and since I work at UBS my bonus will probably be zero.

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."
 
Best Response
MBA_Junkie:

Why did you choose capital markets earlier in your career? What would be your advice to "traditional" corporate finance people interested in transitioning to capital markets?

I am very competitive and trading was one of the easiest careers to keep score on how well you are doing. What do you mean by traditional corporate finance people? My suggestion would be to read up on the markets and why things trade the way they do and try to get in front of people in the industry and convince them they should take a shot on you. That would pretty much be my advice for anyone looking to transition into a different career path. Do not underestimate the importance of human interaction and how convincing certain people that you are worth taking a risk on can be to your career and even your life outside of work for that matter. Always be charging ahead and be in front of people, especially those that matter.
 
DickFuld:
MBA_Junkie:

Why did you choose capital markets earlier in your career? What would be your advice to "traditional" corporate finance people interested in transitioning to capital markets?

I am very competitive and trading was one of the easiest careers to keep score on how well you are doing. What do you mean by traditional corporate finance people? My suggestion would be to read up on the markets and why things trade the way they do and try to get in front of people in the industry and convince them they should take a shot on you. That would pretty much be my advice for anyone looking to transition into a different career path. Do not underestimate the importance of human interaction and how convincing certain people that you are worth taking a risk on can be to your career and even your life outside of work for that matter. Always be charging ahead and be in front of people, especially those that matter.

Thanks for your answer.

By traditional corp fin I meant things like budgeting, reporting, profitability analyses, etc. - still finance, yes, but not anything to do with capital markets. I thought I would try it out because of the supposed 'strategic' aspect. Nearly a year doing this and I am bored out of my mind.

 
Khayembii:

As a young person with a newly-developing professional network, how do I develop a large pipeline of proprietary deal flow quickly without putting too much work in or having to get on a plane?

I have no idea how to build anything 'without putting too much work in'. You have to put the work in if you want any endeavor to have a chance of being successful.
 
JNB150:

What's your advice for building a scrappy but resilient broker-dealer that can rival GS, MS, and the others? Is it still possible with all these financial supermarkets (BAML, JPM, UBS), or is the broker-dealer model officially dead for good at the BB level beyond MS and GS?

Technically MS and GS are commercial banks as well, although, admittedly not in the traditional retail sense.

Starting a full service firm from scratch would be extraordinarily difficult to do now. I think the best way would be to start your own boutique where you bring tons of your old clients from your previous firm and build from there. Sort of like what Frank Quattrone did. If they can continue to build upon that success, you never know what could happen. It sure as hell won't be easy.

 
Winning Since 1776:

"When I find a short seller, I want to tear his heart out and eat it before his eyes while he’s still alive" Do you still feel the same way about short sellers?

Yes, I do. But, with some perspective, I've come to realize there are going be bad actors. So, my anger has increased significantly for those that failed to prevent those bad actors from having a negative impact on my firm and the economy in general. Those are the people that really failed the American public.
 
DickFuld:
simplechimp:

Have you ever considered writing an autobiography?

Have I considered it? Yes. Will I? No.

I am still the most hated man in America by many people. The public isn't ready yet.

Maybe the public isn't ready yet, but you need to eventually. People need to learn the truth about Lehman.

 

If you were a junior guy on a trading desk right out of undergrad, what would you do to try and position yourself to climb the ladder?

Which would you choose: Equity Sales or Derivative Sales?

If you came from no money, had a small network, and recently graduated from a non-target, what would you do to try and get in front of people that matter?

I would greatly appreciate your time and insight, thanks!

twitter: @StoicTrader1 instagram: @StoicTrader1
 
BEAST MODE TRADER:

If you were a junior guy on a trading desk right out of undergrad, what would you do to try and position yourself to climb the ladder?

Which would you choose: Equity Sales or Derivative Sales?

If you came from no money, had a small network, and recently graduated from a non-target, what would you do to try and get in front of people that matter?

I would greatly appreciate your time and insight, thanks!

Derivative sales because it's higher margin and less commoditized.

All I can say is hustle and figure out a way to get in front of people and tell your story. It's really not complicated, just find them and get in front of them. Whatever it takes and take a lot of shots.

 

When you try to network with people as a non target college student, do you think it is better to try to network from the top to the bottom, like from CEOs to MDs to VPs? Or you would start to network first with those analysts.

 

What do you feel are the biggest differences in finance (Wall Street finance overall, not a particular concentration) from when you got into the business to today? I ask this thinking about how people (like my mother to a lesser degree and a guy like Lew Ranieri to a much larger degree) ended up trading or in others areas of IB who didn't have today's typical Ivy League pedigree but were still able to break in and become successful. I'm probably one of the only other people on this site who actually knows and interacts with "old timers" and I get a mixed message where some people say it was tough to break into Wall Street without having a Herbert, Walker, Prescott or Harriman somewhere in your name/lineage and others who say you could start out not just in the proverbial mail room, but the actual mail room, and make it.

I'm also interested in hearing your thoughts on the differences not only related to how people did or did not break in. Smaller partnerships vs. large publicly traded entities? Glass-Steagall and other regulation? The emergence of hedge funds and PE? The general consolidation of every industry and the consolidation of finance (I'm thinking along the lines of how there were many large companies, not planet wreckers like today, in places like Boston or Philly and how there were dozens of banks/brokerages in those cities to service them, and now there's just far fewer of each in both cities and the IB's are primarily rolled up in NYC).

That's probably enough to fill part of your autobiography of course....

And, while I'm by no means asking for a job, and I by far wouldn't be the only person, and you don't know me from Adam, if you ever wanted to start your own shop I would be more than honored to work with Dick Fuld. You and Lehman got so screwed that revenge would be a dish best served cold. Thanks for giving back.

 

No offense, you already know I'm two liters deep on Bombay and you write a Moby Dick sized novel for me to read through.... You found my kryptonite. Are you Lex Luthor or just another average middle aged bald guy?

I'll have to get to this tomorrow. I'm sure it's great stuff as you usually write, of course. I am just seeing six of it and can't decipher it now.

 

Lol. I'm Lex Luthor with better hair genetics. Middle age and stress is making me grey but my hairy fucking Irish brethren still makes my grow hair, everywhere, unfortunately. But I do have kryptonite in my pocket. Unfortunately it's my own as well.

I'm still on the imperial measures so until a liter equates to a half gallon, I'm still thinking Mama Cass could live and therefore I can too. Two more fingers and then two more...

 
Dingdong08:

What do you feel are the biggest differences in finance (Wall Street finance overall, not a particular concentration) from when you got into the business to today? I ask this thinking about how people (like my mother to a lesser degree and a guy like Lew Ranieri to a much larger degree) ended up trading or in others areas of IB who didn't have today's typical Ivy League pedigree but were still able to break in and become successful. I'm probably one of the only other people on this site who actually knows and interacts with "old timers" and I get a mixed message where some people say it was tough to break into Wall Street without having a Herbert, Walker, Prescott or Harriman somewhere in your name/lineage and others who say you could start out not just in the proverbial mail room, but the actual mail room, and make it.

I'm also interested in hearing your thoughts on the differences not only related to how people did or did not break in. Smaller partnerships vs. large publicly traded entities? Glass-Steagall and other regulation? The emergence of hedge funds and PE? The general consolidation of every industry and the consolidation of finance (I'm thinking along the lines of how there were many large companies, not planet wreckers like today, in places like Boston or Philly and how there were dozens of banks/brokerages in those cities to service them, and now there's just far fewer of each in both cities and the IB's are primarily rolled up in NYC).

That's probably enough to fill part of your autobiography of course....

And, while I'm by no means asking for a job, and I by far wouldn't be the only person, and you don't know me from Adam, if you ever wanted to start your own shop I would be more than honored to work with Dick Fuld. You and Lehman got so screwed that revenge would be a dish best served cold. Thanks for giving back.

Alright late me take a crack at some of these questions (too many to get all of them).

The biggest differences:

The trust level from clients is unimaginably lower than when I started, that would be my number one difference. Clients used to be believers about the advice we gave. People are much more cynical and sophisticated now. The complexity of the offerings is probably the second biggest difference. I'm sure that these two issues are somewhat related.

As far as breaking in goes:

It's much more difficult today than before. If you could prove yourself as someone who was smart and would work hard, places like Salomon Brothers, Bear Stearns, and yes, Lehman Brothers would be much more likely to take you on than most places today. This was especially true of trading desks compared to investment banking, where the snootiness factor has always been present to a fairly high degree. Of course, it helped a lot if you were already from New York, because networking would be much harder than today if you were out of town.

Hedge funds and PE:

Hedge funds are places where you are worried about making a bid or offer to, because it was such a different dynamic from the real money investors that were pretty straightforward trading partners. Obviously, I loved the trading volume they brought and the lending we could do for them, but it was anything but the more traditional research driven relationship we had with real money guys.

PE was nothing but upside on the advisory side from my perspective. Huge fee business and minimal risk.

Glass Steagall: I don't know how old you think I am, but I was not around when that went into effect. Of course, I was around for the repeal. If it couldn't be reinstated after the '08 financial crisis, it's never coming back in its original form.

That's all I have for now.

 

People would have walked into your office with all sorts of ideas all day and you'd have to make a go/no go decision on the basis of maybe 15 minutes briefing.

I figure, at that point, you're not evaluating a deal entirely on its merits, but also on the signaling you're getting from the people in the room (and those not in the room).

What heuristics/shortcuts did you use to use to filter deals?

eg did you peg people as sales guy vs details guy in the first 30 seconds? Did you look to particular functions in the bank, disregard others (eg Risk)? Did you look for stuff like "where is this guy vs his budget ie what desperate gambles for revenue may he be making to keep his job?".

And, in retrospect, how would you have adjusted those shortcuts?

Those who can, do. Those who can't, post threads about how to do it on WSO.
 
SSits:

People would have walked into your office with all sorts of ideas all day and you'd have to make a go/no go decision on the basis of maybe 15 minutes briefing.

I figure, at that point, you're not evaluating a deal entirely on its merits, but also on the signaling you're getting from the people in the room (and those not in the room).

What heuristics/shortcuts did you use to use to filter deals?

eg did you peg people as sales guy vs details guy in the first 30 seconds? Did you look to particular functions in the bank, disregard others (eg Risk)? Did you look for stuff like "where is this guy vs his budget ie what desperate gambles for revenue may he be making to keep his job?".

And, in retrospect, how would you have adjusted those shortcuts?

You had to have a lot of trust with the people you work with. For me, it was a process of drilling down with questions and I tried to look at everything like a trade....what's my upside? What's my downside?

If I could do it all over again, I would have liked to have listened more and encouraged a 'devil's advocate' on major decisions. Ultimately, I kept pushing people to do more and more and eventually it caught up with us. I also realize now, that some people may have been afraid of me and that's why I should have encouraged more dialogue.

 

Interesting, I was talking to a friend of mine at a credit fund, he's thinking rates are going to have one last big push lower by early 2015 before the trend turns to rising rates. Probably a more 'speculative' rationale than he usually comes up with, but the guy is pretty sharp.

 
thebrofessor:

where are interest rates headed?

Up at a slower pace than most think. The interest rates in the US are higher than most developed nations already. Generally, this will cause the dollar to strengthen and has a somewhat deflationary effect because US citizens can buy foreign produced goods cheaper. Deflation is the last thing the Fed wants to occur. While the economy is doing ok here, I don't think the Fed wants to fuck that up by raising rates too quickly. I'm still expecting the Fed to raise rates in mid next year. I think they will not do much until they see what impact the rate increase has on the real economy. I think the 10 year yield hits 4% for the first time in late 2016.
 
DickFuld:
thebrofessor:

where are interest rates headed?

Up at a slower pace than most think. The interest rates in the US are higher than most developed nations already. Generally, this will cause the dollar to strengthen and has a somewhat deflationary effect because US citizens can buy foreign produced goods cheaper. Deflation is the last thing the Fed wants to occur. While the economy is doing ok here, I don't think the Fed wants to fuck that up by raising rates too quickly. I'm still expecting the Fed to raise rates in mid next year. I think they will not do much until they see what impact the rate increase has on the real economy. I think the 10 year yield hits 4% for the first time in late 2016.

If the Fed leaves its foot on the gas too long, what will be the next bank to go the way of Lehman?

 
BillBelichick:

One more question, thanks again for doing this. I'm moving into ER at a large firm, how do you see the future of research? I believe its role as a liaison between businesses and the investment bank is pretty crucial and profitable. Do you think hedge funds tend to look at ER talent with higher regard than IB talent due to the applicability of the skill set? Thanks.

Not really. Research took a huge hit during the Spitzer settlement. That being said, talent is talent and the best will find their way no matter which of those areas they start in.
 
Cruncharoo:

I see you are a Bombay guy but what about Beefeater? How do you take it? Rocks with lime?

I favor Bombay Sapphire.

How do I take it? Well that depends...

I like to start off the day with a pull directly from the bottle. Later, you'd be surprised how well it goes in coffee....highly underrated. If you're at brunch, try it with orange juice. For lunch, a classic G&T is always at your disposal. By the time you hit dinner, a tall glass neat is the way to go.

 

how did your experience as a comm paper trader prepare you to run Lehman and how did it impact the way you ran the bank?

thoughts on the bankers vs. traders dynamic? difference in culture, the types of people who work in each role and are successful and how they get along (at Lehman and other banks you know of)?

thoughts on the FICC space and where you see it going over the next 5 years at BB banks? what desks will be major profit centers, which desks are headed for secular decline? the business took a lot of heat for what happened in '08 and has been crimped by regulation. will it ever be back in a big way? is that a good thing for the world of finance and the economy?

why/ how did you end up on the comm paper desk starting at Lehman? if you were starting at a BB bank today in a S&T role which desk/ seat would you push to get?

 

Guys,

Let's try to limit this to a question or two at a time. I can't do multi-part questions a la Rodney Dangerfield in 'Back to School'. I just don't have the attention span or sobriety level to answer Russian doll type questions within questions.

@"glen Ross". I'll try to get to some of these tomorrow. PS, never say FICC to me. That's a GfS term, not a Lehman term. We had Fixed Income and Equities within Capital Markets. Use one of those terms only please.

 
glen ross:

@DickFuld duly noted, fixed income from now on and brevity out of respect for your time. i chopped it down to 2 questions:

1.) if you were starting in a BB Capital Markets role today which seat would you push to get?
2.) thoughts on the differences between successful traders vs. successful bankers and how the 2 groups get along?

1. Something in derivatives. It's a much higher margin business than cash trading.
  1. When I started in the industry, the difference between traders and bankers is much bigger than it is today. What I mean by that is bankers were stereotypically white shoe Ivy League guys and traders generally were more street smart and your background mattered less as long as you could make money. Now, you're finding Ivy League types everywhere. In terms of what makes them successful, there's a lot of overlap....being smart and hungry being key components in either field. I think the distinction is that to be successful in banking you need to know how to cultivate relationships over very long periods of time. In trading, you need to give the best price, so the relationships matter less. You need to be laser focused in trading. You have shorter days that are much more intense than banking. Some people burnout, so it just needs to be a part of your DNA that you love winning and thrive on the competitiveness that is inherent in a trading environment. In banking, how people perceive you is much more important. It's probably why the kids on WSO focus so much on perceived prestige. It actually matters in banking.
 
moneytrail:

from what I understand you need a company email to get certified on this website, if so, which firm's email are you using to get the gold star? have you created a 1 man consultancy through which you funnel your speakers fees etc or something else?

Remember when I wrote about doing whatever it takes to get in front of the right people and telling your story? That's what I did.

The other thing I didn't mention yet is discretion. You don't need to tell everything to everyone, so exactly how I did it will not be mentioned.

 

Thanks for all the great posts on WSO; they have all been phenomenal to read. You mentioned that you felt you lost everything in a short period amount of time back in 2008. How did you let go of the past after this? I mean, you had been so wildly successful before so how long did it take you to get more comfortable with your life post-Lehman?

You have probably gone through self-realization. How did you make use of what's left in the past to make a better future?

 
Ding_Dong:

Thanks for all the great posts on WSO; they have all been phenomenal to read. You mentioned that you felt you lost everything in a short period amount of time back in 2008. How did you let go of the past after this? I mean, you had been so wildly successful before so how long did it take you to get more comfortable with your life post-Lehman?

You have probably gone through self-realization. How did you make use of what's left in the past to make a better future?

I really haven't gotten over it and probably never will. Lehman was my baby that I nurtured for decades. It hit me like the loss of a child.

At this point, I'm using my posts on WSO as a small way to pass some of what was great about Lehman on to the next generation. Ten years from now, most people entering the industry won't have even heard of Lehman.....unless I can do something about it here. Keeping the Lehman name alive is important to me.

 

Thanks for all the great posts on WSO; they have all been phenomenal to read. You mentioned that you felt you lost everything in a short period amount of time back in 2008. How did you let go of the past after this? I mean, you had been so wildly successful before so how long did it take you to get more comfortable with your life post-Lehman?

You have probably gone through self-realization. How did you make use of what's left in the past to make a better future?

 
Clutchmeister:

Dick, I'm a undergrad junior in a non-target college. If I want to become someone in upper management (maybe even a CEO) in a BB Investment Bank, where should I start out? CP like you? HF? IB? portfolio management?

I think you need to think about what your ultimate goal is, power, money, whatever.

If you want to manage a large and complex financial organization, in some ways, whether you start in trading or banking matters very little. You just need to ensure that you can sell, you know how to mentor those lower on the totem pole, you know how to enforce controls, and know how to manage an organization. You can only do that by working your way up and earning the respect of those around you.

Going the hedge fund route is probably preferable these days. The upside is nowhere near that of what it was for the founders and you absolutely should not expect to become a billionaire if you join someone else's hedge fund. But the money is relatively good and you aren't kissing ass almost all of the time.

 

How much advisory is there in IB? I thought there would be more offering of strategic advice in M&A, it seems its mostly in capital restructurings. From the impression I am getting bankers offer some advice but their kinda just nodding their heads and making sure everything goes as planned. Was expecting to be able to advise clients using the knowledge I amassed from the beginning when I was a summer analyst?

Also why IB? I read your stories/ but none have answered it. Power? Money? Or, maybe you liked analyzing financial data for companies because it is very interesting the way the companies financials are like the cardiovascular system to the human body? Or was it all of the above? Did you have something to prove? (What/why)

Thanks.

 
BillieJean:

How much advisory is there in IB?

A lot.
BillieJean:
I thought there would be more offering of strategic advice in M&A, it seems its mostly in capital restructurings. From the impression I am getting bankers offer some advice but their kinda just nodding their heads and making sure everything goes as planned. Was expecting to be able to advise clients using the knowledge I amassed from the beginning when I was a summer analyst?

Also why IB? I read your stories/ but none have answered it. Power? Money? Or, maybe you liked analyzing financial data for companies because it is very interesting the way the companies financials are like the cardiovascular system to the human body?
Or was it all of the above?
Did you have something to prove? (What/why)

Thanks.

There are a bunch of statements, instead of questions in here, which I acknowledge, but will ultimately ignore. I went into trading because of the competitiveness that it offered. You knew whether you were winning or losing at all times.
 

Since you have both time and money in abundance, do you travel from time to time? Europe? SE asia? If so where did you have the best time? And would you advice young monkeys to get some international experience through studies or internships?

 
AI9:

Since you have both time and money in abundance, do you travel from time to time? Europe? SE asia? If so where did you have the best time?
And would you advice young monkeys to get some international experience through studies or internships?

I like to get away to Florida and Idaho fairly often. I do make some international trips as well. I recently took a trip to China which was very interesting.

International experience is usually a good thing and I think it will become more important over time. The U.S. is a tiny fraction of the world population and a shrinking proportion of the global economic output. I wish I spoke Mandarin or Spanish fluently.....outside of English, those seem to be the most important languages to know going forward.

 
Trader-123:

Thanks for doing this, 2 quick questions:

1. Where would you start off in the industry right now? IBD or trading? (given more roles in trading are getting automated)

2. Buy-side vs. sell-side?

trading, but something in derivatives.....mostly because of my nature, rather than it being inherently 'better'. If you could start out on the buyside and get the proper kind of training, that would be better. My guess is that the best training ground is still on the sell-side.
 

@DickFuld - What's your angle with the 'green channel' for listing more Chinese SMEs in the US?

We've already seen multiple waves of Chinese SMEs list in the US via RTO and then turn out to be frauds. Even Big 4 audits are meaningless in China and the US PCAOB has no reach into China to punish them when the Chinese offices of the Big 4 are negligent at best, complicit at worst.

Those who can, do. Those who can't, post threads about how to do it on WSO.
 
SSits:

@DickFuld - What's your angle with the 'green channel' for listing more Chinese SMEs in the US?

We've already seen multiple waves of Chinese SMEs list in the US via RTO and then turn out to be frauds. Even Big 4 audits are meaningless in China and the US PCAOB has no reach into China to punish them when the Chinese offices of the Big 4 are negligent at best, complicit at worst.

Clearly, it's a good thing. When Chinese companies get rewarded for good behavior in the form of higher stock prices, that will change behavior more than any regulation.

Like I mentioned a little bit ago, I recently took a trip to China and this topic is the main reason why (as well as to vacation with my wife). The U.S. is in the business of capital markets and we should be doing everything we can to open up the capital markets for these small and medium sized companies based in China. This is something we should do as patriotic Americans.

As far as corruption in China, certainly China is not as advanced as we are today. Like almost all third world countries, like India, Somalia, and Italy, the greasing of the palms and political favoritism have a higher place in society than it should. That being said, China is making huge strides in these areas. And, anyway, we don't blanket prosecute entire countries, we prosecute individuals. So, not allowing some Chinese companies to list here because you disagree with national policies is downright unfair and wrong. The companies we should be supporting are those that are the fastest growing companies in the fastest growing parts of the world. This will be a boon for both investors here and companies there.

My viewpoint is that you can rage against the machine from the outside or you can try to provide real financial incentives to drive for change from within. Listing in the US will provide that incentive better than any hippie, do-gooder intentioned regulations.

Clearly, you have a viewpoint you would like to share, so, please go ahead.

 
DickFuld:
And, anyway, we don't blanket prosecute entire countries, we prosecute individuals. So, not allowing some Chinese companies to list here because you disagree with national policies is downright unfair and wrong.

Wholeheartedly agree with this.

DickFuld:
When Chinese companies get rewarded for good behavior in the form of higher stock prices, that will change behavior more than any regulation. ... My viewpoint is that you can rage against the machine from the outside or you can try to provide real financial incentives to drive for change from within. Listing in the US will provide that incentive better than any hippie, do-gooder intentioned regulations.

My issue is more with this perspective. For where China is today, I think it's overoptimistic to think that the incentive works that way outside the large Chinese corporations, whether SOEs or private sector.

The current business culture in SME China when it comes to raising money offshore has heavy flavours of "get money off dumb foreigners", with the Chinese legal system providing a lot of cover through offshore investor-unfriendly laws around corporate control, company seals, legal reps etc.

Fleecing money from eager offshore investors is a perfectly rational and sensible approach in China where the legal system is largely offshore investor unfriendly, where the Party can decide overnight to shut down or cramp your business, or some Party rent seeker decides you must pay him your cut or else he'll make trouble.

That is, the incentives work to incentivise fleecing of offshore investors, rather than incentivising good, clean capital raising behaviour.

Even in a IPO regime like Hong Kong's, where the Exchange due diligences and vets the candidates (unlike the Western "just disclose everything" philosophy), you gets frauds slipping through eg China Metal Recylcing (HKG:0773). In the case of CMR, a recent HK judgment indicates that CMR execs are thumbing their noses at the offshore liquidator using the unfriendliness of the Chinese legal system as cover:

Some <abbr title=Hong Kong>HK</abbr> judge:
During Mr. Shieh’s submissions concerning the complaint made by the Company in respect of an instruction given by the Provisional Liquidators in a letter of 2 September 2013, which I deal with in detail in paragraphs 39 to 40, I asked what prohibition there was in the Mainland on the subsidiaries voluntarily assisting the Provisional Liquidators exercising the rights of the sole shareholder of the Company to become legal representative of the subsidiaries and take control of them. Mr. Shieh accepted that there was none. The reality is that the management of the subsidiaries have simply refused to cooperate. The Court is asked to believe that this failure has nothing to do with Mr. Chun, Mr. Yan or Mr. Jiang. Mr. Chun owns, through Wellrun, 53% of the Company that he established and controlled prior to the appointment of the Provisional Liquidators. Mr. Chun’s suggestion that he has done what he can to assist the Provisional Liquidators but the subsidiaries management have simply ignored him is unbelievable. The only sensible inference that can be drawn is that a conscious decision has been made by the management in conjunction with Mr. Chun to do what they can to prevent the Provisional Liquidators obtaining control of the Company’s assets in the Mainland.

Source: http://legalref.judiciary.gov.hk/lrs/common/ju/ju_frame.jsp?DIS=95704&c… eg from para 37

There's a wide range of other Chinese companies that turned out to have dubious stories, like Sino-Forest (ie John Paulson's big long). I could be wrong, but my understanding is that none of Sino-Forest's PRC directors or auditors have gone down as a result of that deal.

In the short term, bringing SME Chinese companies to list in the US regime will discredit Chinese stocks in the longer run because the incentive effect of defrauding offshore investors overpowers any incentive effect for good corporate gvernance. We saw this in the the wave of Chinese RTO frauds a few years ago and nothing has changed the alignment of incentives.

In any case, this thread is not the place to argue the topic. Hopefully your public support for Chinese listings via the US is coupled with behind the scenes lobbying on the Chinese to make their domestic company law more offshore investor friendly.

Those who can, do. Those who can't, post threads about how to do it on WSO.
 

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Those who can, do. Those who can't, post threads about how to do it on WSO.
 

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