Hi everyone,
On the heels of Meredith Whitney's talk on Bloomberg (catch it here: //www.wallstreetoasis.com/blog/whitney-ibd-needs-radical-downsizing), what do you make of the current mid-term future of finance?
For those who haven't or don't want to see the video, she basically says that "investment banking is in a de-leveraging period," and that the catalyst for IBD becoming so big in the first place - MBS - is no longer present. Like her or not, Whitney definitely seems to have a point, at least to the feeble mind of a prospective monkey like myself.
Given all the doomsaying about investment banking these days, what do you think the "next big thing" in finance will be?
As an investor all I can say is that most banks do not generate sufficient ROE to cover their cost of equity. With new capital requirements ROE can't be driven by leverage so margins need to increase. Best way I can see that happening is for banks to cut comp or headcount or a combination of both.
The global financial system is currently unsustainable and is deleveraging. The fiscal imbalances, the trade imbalances, and the incongruent monetary policies will destroy the current system. So finance will likely experience a severe contraction. This is expected after what was an unprecedented 30-year growth to become the largest sector of the economy in the United States. So, short-to-medium-term, I am very bearish. But, if you successfully navigate the troubling waters then there will be incredible opportunities to take advantage of. Broadly speaking, 'finance', as a sector will eventually grow, but financial shocks tend to slow the process substantially, so this could be quite protracted.
When you mention "if you successfully navigate the troubling waters then there will be incredible opportunities to take advantage of," what do you mean? People are saying its probably going take a decade or so (got that number from somewhere I read) for things to turn around. As a finance student, its no longer as attractive to study finance or work in finance. The pay is no longer attractive, and probably, the exit opps (b-school, PE, HF) might become less attractive as well. It seems like ambitious finance students (like me), may have pigeonholed ourselves into something, while all the liberal arts / engineering kids will do fine.
I'd be happy to expand. Successfully navigating the waters can mean several things, but the basal case I use is retaining capital. The 'troubling waters' are, of course, the calamity of the financial system imploding. If equities sell-off again (as I expect) and there is a dramatic re-pricing, you will want to have money to buy extremely cheap equities and bonds- i.e. opportunities. For example, it is my current opinion that holding equities in U.S. and developing markets is dangerous unless the equities in question are outrageously undervalued; given the unprecedented level of monetary and fiscal intervention and the possibility that we are seeing peak earnings. I am holding cash to wait things out. As for recommending alternate avenues/educational choices, I don't know what to tell you. I don't think the 'restructuring' I am speaking of refers to only one segment of the economy- we may experience a top-to-bottom structural employment reset. Finance is probably going to be bad, but it is also likely that areas heavily financed by the U.S. government will do poorly as well (education, medicine, housing, green energy, etc.) because costs have run out of control.
So, finance may do poorly, generally speaking, but those who survive may ultimately do inordinately well.
You can always make money if you know what you're doing.
how do we get models and bottles if we cant get them in IBD anymore?!!?!?!
Dreamgazing, I think you're well off with the liberal arts comment. Comm/Psych/English are too broad to really find a job. Although the industry is downsizing there are still jobs. Unfortunately, the IB and other "prestigious" finance jobs are extremely hard to get. IMO Engineering and CS are the best majors a students can pick for the current and future job market. CS majors are being recruited like crazy. America is not even close to educating enough people to take these jobs. China and India have way more people with the skills to fit these positions. A lot of these positions also pay extremely well.
So, what should people like me who are graduating should think about career in Finance?
Stick with it or find other career so that you have a "safe" job and transition into Finance whenever economy gets better?
What industry are you talking about in finance? If you're talking Wall St, you would be stupid to try and transition to banking or trading or something from a totally different industry. If you are interested in corporate finance, then it shouldn't be too hard for you to get a job anyway unless you're completely retarded/went to a garbage school and didn't kill it.
I was talking about Wall St. And I do agree with you that it would be hard to make transition to banking from complete different industry but how about something closer to finance, for example say Accounting (think Big 4 FAS). Its relativel easier and safer than jobs on Wall St. And while you doing your job, you can analyze the economy and at the mean time keep on recruiting. (If possible, even get a MBA)
Wouldn't this be a safer and better considering all the uncertainties looming over Wall St??
Holy fuck, I clicked too many times, like a UBS trader
So, what should people like me who are graduating should think about career in Finance?
Stick with it or find other career so that you have a "safe" job and transition into Finance whenever economy gets better?
Future of Leveraged Finance (Originally Posted: 09/07/2008)
Can anybody in a LevFin group comment on what current analysts are doing day-to-day? What they see as the future of LevFin? and whether Analysts who will start in July 2009 should even consider joining the LevFin or Financial Sponsors Groups at BB banks?
If I were to join a LevFin group, is there a possibility that the group could get dissolved (kind of like JPM firing so much of its M&A staff)?
Please excuse my naivete and thank you for helping.
Good question! I'd be interested as well
Private Equity shops are not going to disappear any time soon and these are huge fee payers so the risk of joining a Financial Sponsor Team is small. Actually most teams are now quite busy, a lot of activity especially on the exit side.
As to LevFin, the teams have been reduced greatly during the downturn and are now looking to build up again given pick up in activity. The HY pipeline is picking up so you should expect to be quite busy
Depends on your group but new issuance is really high and most groups cut so many people that work per person is really high. fees are also higher so potential bonanza. PE will come back. They'll always be HY and lev fin even if not at quite the crazy levels of the boom. If you join now the group is unlikely to get dissolved if you are at anywhere top 5/10.
future of finance (Originally Posted: 11/27/2010)
correct me if i'm wrong but we've seen the rise of the bond trading desk, M&A, PE, hedge fund's, and even the fall of some of these. curious to see what you guys think will be the next big thing. Are the days where a guy could walk a way with 50 mil a thing of the past
Agree with rls, the industry is contacting and changing its structure. The top end finance jobs are there but it's just going to get more and more competitive over the next decade, maybe longer. Those who want to stick it out will see another up cycle, so it may or may not be worth waiting for (I'm debating this with myself A LOT lately) and there are also opportunities amidst the chaos...you just have to find them.
As for Whitney: how long is she going to milk one good call from several years ago? She's either wrong (muni defaults) or stating the obvious, so I really don't get why she thinks this is news to any of us. I knew this coming in, five years ago when I switched, so I'm not sure why her coming on the air and just saying what everyone else is qualifies as 'news'.
Double post
commodities
In no way did I mean it's not possible to get a job in finance or any other profession as a liberal arts major. There are tons of factors that come into play. I agree with your other comment that now finance majors are a dime a dozen as well.
My point was liberal arts majors tend to be less geared towards a specific industry and that can present a challenge. But hey todays job market is all kinds of messed up. I was not an engineering or cs major but I believe those are the safest plays in today economy and both tend to pay well. That’s just my opinion for college kids out there looking at finance as the "money making" industry.
opportunistic investments in China and India
That's why I'm majoring in Finance and CS. And I still have no idea what I'm going to do...
Future of Securitization and Structured Finance (Originally Posted: 03/27/2009)
http://www.nytimes.com/2009/03/27/opinion/27krugman.html
Paul Krugman, highly respected Nobel Prize winner and oft-acclaimed loud-mouth, wrote another op-Ed today. This one stating his dismal opinion on securitization as a whole. To those who are well versed in current changes in industry, Do you continue to be bullish on the future of securitization (perhaps a simpler much more regulated kind)? What's the alternative (and the viability of it) that could supply the public with credit and actually succeed in dispersing risk?
Excuse my simplicity and maybe lack of knowledge, but what's the drawback of just creating a system of government-owned thrifts that (for mortgages and maybe also autos- the biggest consumer loans) loan directly to the public and just keeping the loans on their books.
What's the alternative (and the viability of it) that could supply the public with credit and actually succeed in dispersing risk?
It's called due diligence...
I'm pretty bullish on margarita-based securities these days..
I'm still looking for the Jew cave with all the money stashed in it!
and its gone!
What is the Future of Finance? (Originally Posted: 10/24/2011)
Whats going on my fellow Monkeys... I am currently a new 22 year old graduate trying to find his way in the industry. Had internships and really found what I DIDN'T want to do rather than what I do want to do. Beyond all of that, the real issue that I want to assess is where the future of finance seems to be moving. We are clearly going through major changes and different industries and trends are starting to expand and create precedence. I have had a few professors tell me corporate finance and others tell me get into an IB and be an analyst to start things off. However, what do you all think of the whole social networking move and is corporate finance a logical explanation? I am working with a relatively small network and have virtually no family in the industry either. I am starting off by myself and just want some input on what is a logical move to starting off a journey to becoming successful.
Thanks in advance
save up a lot of money and chase levered beta
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