The Truth - S&T is dead
After the wolf of wallstreet some of you might think S&T is the place to be. My thoughts:
Past way of making money:
- scamming clients through non best price execution (liars poker) (sole market making in some product JP Morgan Itraxx CDS)
- inefficient markets --> prop desk making a lot of money. Before information advantage was if you had some data a week before it was available in the papers through own research. (Gray zone 'insider info')
- creating inflated trading books --> leveraging
Now:
- tons of regulations which make commercial momentum non existent (MiFid, Dodd Frank etc)
- client passiveness
- bonus caps
- over broked mature equity market
- quant hedge fund strategies trying to get an information advantage, yet fail to sustain their performance in the longterm
- Basel III eliminating exotic capital intensive products
Future:
- S&T will become more of a "normal job" forget 500k+ figures
- Become an absolute narrow product specialist in order to survive
- Equities will become more of a Tech execution job, when there are no more "old school" PMs no one will ever need a pure Equity Sales person again.
Places to be: Exotic Fixed Income trading in HF// Special Situation funds // M&A // PE // Physical Commodity Trading
Thoughts?
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I am glad you referenced one of the worst financial movies ever made and then regurgitated the same BS that all rookies continue to say. Very original.
Why go in to trading? - Instert buzzwords - Basel III, Dodd Frank, Algo's, HFT are all killing S&T...
Good one. Real revolutionary thread here.
congrats
this is what's known as the bottom. get long the industry.
I don't know why everybody is shtin on this guy. Yes, he's repeating what others are saying, but they're true. S&T is not a fun job anymore. You're an execution boy who is being watched by 10 other people to make sure you're not doing something too "risky". Go to a HF if you want to trade and take risks. Advisory/research businesses will continue to do fine, but banks will keep cutting back on S&T as it becomes more commoditized and less profitable.
Let's be real here S&T is still the absolute best way to learn how big money moves in and out of the market, and is practically the only way to break in to a global macro fund 5-10 years down the line. It's true that spending your entire career on the sell side won't be as profitable going forward, but S&T is still one of the best places to start a career. Also, I like to think that bulge bracket banks will outsmart these dumbfuck regulators like they always have in the past, There's too much money to be made in FICC to just let the regulations eat away at their profits.
Correct me if I'm mistaken but I'm pretty sure banking remains as the best way to go to HF. Like HFwannabe said, you're probably just going to be executing orders on the behalf of institutional clients, especially as an analyst.
Equities desks are being marginalized but there are plenty of desks that are making money. In regards to regulation we have had multiple scandals since 08 in regards to LIBOR scandal, the JP Morgan whale scandal, etc that regulation is not going to make a difference.
Also the trading desks have been huge profit centers for the investment banks do you really think Goldman is going to say shucks we should probably follow the rules. No the banks are going to find ways around them and make it so complicated that regulators will have no idea what they are doing.
Also starting in sales and trading is great for your career because you make so many contacts at the buyside firms and if you can impress the firms you are covering you have a good shot of getting a job from them.
what's the problem necessarily? you can't prop trade if you can't even execute an order properly.
I don't understand why every week someone feels the need to proclaim "S&T is dead". Are you guys all just wannabe I-Bankers who are jealous the S&T guys don't have to work 100 hours a week?
STUPID ASS POST
As many people said banks will always find a way to optimize the profit from their S&T desks. It is true that there is a bunch of upcoming regulation or that computers begin to stand it for humans especially for quant/trading equity things, but they'll always need sales guys, derivatives trader/research/algo/quant guys and such.
the business simply doesn't work that way. large institutions will always need to trade X amount of Y securities. you can slap on regulations, put comp restrictions, clawbacks etc but there will always be money to be made. when bid/offer starts widening out and dealers stop giving infinite liquidity to every client under the sun, the landscape will change once again. not to mention you drastically underestimate the lobbying power of wall street.
now is it as good as the 80s? the 90s? 04-07? no. clearly not. it will likely never get back to those levels. is it better than any other job out there for a fresh undergrad with zero experience. if you're interested in markets and want to make money, absolutely.
step back and realize making a fraction of what comp used to be is STILL better than almost any other job out there.
and before college kids start bleating about ibd/pe/hf or tech startups, just take a moment and try to think about the ecosystem of a trading floor.
"large institutions will always need to trade X amount of Y securities". But thats not my point if you look at the revenues of 05-07 there were not generated by the 'hygienic income' but through leveraging of municipalities, HF, and IBs, which is just not happening right now, and won't happen in the near future.
"is it better than any other job out there for a fresh undergrad with zero experience. if you're interested in markets and want to make money, absolutely." Agreed compared to F500 and marketing jobs, but not vs. PE and Physical Commodity Trading. If your looking for longterm upside, and wish to by property etc, forget S&T. Take FX (extreme example), an MD (10y+) will make max. 500k-600k right now, how much is he actually going to save from that? A few Heads of desks and star sales/trader will make more, buts thats the exception. If you are an MD at a P/E fund, senior trader at a large commodity trading firm you will make 2-3M or more.
What I am saying is that S&T as a cash cow is dead, its becoming more of a "normal" job for high performers, I would say its not much different from consulting anymore, you just "do your job" hence you will earn good money. I don't think that the years were a 3rd year Sales guy would make 500k will ever come back...
You definitely pulled those numbers out of thin air, you're not even in S&T. Have a close family friend who trades FX options at a BB and pulls 7 figures. It's funny on WSO all you hear is that S&T is dead yet pretty much everyone I've spoken to expects things to pick up and are relatively optimistic about the industry. CLO and CDO markets are starting to make a comeback and FICC revenues have been decent this year.
dude you have no idea what you're talking about. what the fk is "hygienic income"?
physical commodity trading is such a different animal than s&t it's not even funny.
what's your background, what do you do?
LOL hygienic income, dude he's a fkn college kid. Probably a target too. Bigt, I've seen some dumbass college kids here over the years, but you're a champion.
HFer - Hey man, you seem pretty salty from resetting ATM pins all day in commercial banking.
This site has gone downhill so much over the years it's sad...poor patrick
Is physical commodity trading really that good of an opportunity?
If you start at a supermajor, you have to spend 2 - 3 years rotating through various BO and MO functions and may not even get a shot at being a trader.
You also start at a lower base (I believe about 30% lower in the UK) and a lower bonus.
I know if you hit the big time, all this will seem insignificant but still... Are the exit opportunities even that good?
I think that depends on the type of physical trading you go with. Ag markets tend to have well-designed tracks for junior trader roles right out of college. That was the track I ended up taking. My base pay when I started was 30% lower than non-trading offers I had, but six months later when the "junior" was dropped from my title my salary was almost doubled and ahead of where I would have been had I not gone into trading. Add bonus eligibility into that, and my first couple of years weren't too bad. Exit ops within the field are good, especially out of the majors to smaller specialty shops where you can get paid on a larger percentage of your P&L if you're good. Otherwise, you can make a very good career working your way up the ladder at a major, or if you like a quieter life, moving into country operations and running elevators.
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