Difference between fixed income desks

-MBS/ABS (longer hours) -Rates trading (absolutely awesome, can be mathy) -Credit trading (fun, but some sectors can be quiet) -High Yield trading (don't know much about, probably would need to spend time in research first)

Banks hire out of generalist pools. so the requirements are similar. each desk at a bank will have it's own personality. and regarding opportunities, i've said it a thousand times. go where you like the people. the rest will come.

i have an interest in HY trading and was told specifically by traders at my bank that i would have to do FI research for a yr or two before going onto the trading desk

they all seemed to think research was a great place to start but i am not all that convinced. also i would be doing research for the desk, not public research.

anyone care to comment on this?

yes it's a good place to start. i know of at least one bank's desk that specifically requires research.

how are you gonna trade the product if you don't understand the fundamentals? that's what they're getting at.

what desk are you on now?

as a first year analyst this summer

what kind of hours do you do in FI research and does the desk keep you involved in their operations or are you get separate from what goes on?

also, is your bonus is line with the rest of 1 year analysts in s&T

high yield will be different from corporates. hours could be long till 8 or 9 pm. and yes 1st yr analysts are all in a band.

you working at a broker dealer or one of the commercial banks (jpm, citi, bofa)?

well research in general at lehman is very strong. so if i was there that'd be a good move.

they said it in liar's poker, i'll say it again. choose your guide before your product. what other products are you interested in why? what is your background?

Jimbo: Thanks for your reply. You write that credit trading can be quiet in some sectors. What other diffrences are there between credit and rates trading in terms of life at desks, trade flow, hours (early mornings, late nights) etc). Thanks for your time.

any advice or input? others feel free to chime in as well

you will place on rotations based on aptitude and fit. how good is your valuation skill currently? can you analyze a 10k? what stocks do you like and why?

skills are pretty solid. spent the summer in product group at top 5 BB (think M&A or FSLF) and have taken many classes in undergrad with a strong valuation component. i am comfortable reading through 10Ks and running proformas, DCF, IRRs, etc.

I currently like aapl as i believe the iphone will produce better than expected numbers and believe it is time to get in before its release. i also think they will split soon as they generally do around 100 and this usually brings the stock higher

i am also continually bullish on google bc even though they have had quite a run, based on their growth rate of 62%, a forward p/e of 24 makes me beleive the stock is still undervalued and has room to grow

we have different investing styles i guess. i'd sell goog calls myself.

the point is be prepared to answer these questions. why is a stock split important?

be inclined to sell goog calls as well as i dont see much movement in the short term and would think you could make the premium..however in long term 12 mo+ i see more growth

one reason splits are important is that to the average investor the stock appears cheaper. for a company like apple that many are familiar with, they might see a $100 stock as too "expensive" but may be willing to purchase a $50 stock, this increased demand can drive the stock higher. stocks split can also be seem as a sign that the management in confident in the future prospects of the company. a split also occurs after a nice run up of the stock usually and a split can signify this positive momentum to investors in the market

but economically, do you think they have any value?

they have no real economic value as no value is created or destroyed, just moved around

is that right?

yeah, it's like making change. economically irrelevant. so much for the idea that investors are rational...and there are some stocks that have never split and it hasn't hurt them much.

thats what i thought

google, berkshire hathaway

is is true they never want to split to keep away irrational investors?

was thinking more BRK. that might be part of it, but also it's the 'there's no economic value' in a split.

I always thought that Berkshire Hathaway never split because Buffett wanted the stock to feel "exclusive;" something to be held on to and kept for a long time.

As i recall he said in his cnbc interview that he never split the stock because his salary was connected to the price.

he was kidding mh

re: going into credit trading, would you advise against going into this sort of role given the current environment? Or do you think there'll be a pickup in activity (and bonuses?) once all this mess gets cleaned up (12-18mths?)

agreed. there is the liquidity premium.

"don't you think that by splitting it, it will create more liquidity--which sort of enhances the value? i would compare it to gold, its property of malleability/divisibility is what made it a good unit of exchange. ie. if there were only 100 dollar bills circulating, how would you buy/sell things not valued exactly at multiples of $100?"

sure it makes it more liquid, but Buffett has no interest in making the stock more liquid. the opposite actually.

" i'm suggesting that stock splits DO add value, not much... but some value. would you agree?"

no, they add no value to the business.

Buffett's concern is for the volatility of Berkshire. Higher price / share (at the Berkshire magnitude) discourage casual investors who have little capital and decreases volatility. At least that's the theory.

yes my guess is that discouraging casual speculators is probably closer to the truth.

Jimbo: I know things are very volatile and liquidity is all but non-existent, would it be wise to go onto an MBS/ABS desk now? Thoughts?

Thanks.

"Jimbo: I know things are very volatile and liquidity is all but non-existent, would it be wise to go onto an MBS/ABS desk now? Thoughts? "

nah...know lots of mbs/abs guys who got zeroed out this year.