Why Not Trading?

I think a lot of people want to do IBD for the exit opps - i.e. because they want to get into a good pe shop.

I'm probably the wrong person to ask though, since I want to get into trading.

You learn a lot more in i-banking than you do in trading. I feel as though once you've been a trader for a few years you kind of reach a point where you are just doing the same stuff over and over again. I think the i-banking "path" has a lot more knowledge to gain.

They have different cultures. Not everyone is made for trading, or IBanking.

i'm not sure you learn more in ibanking than in trading. in fact i'm almost positive this is not the case...but you might not be interested in what you're learning.

me, i'll take 55-60 hours a week all day long over banking. but that's just me.

First, IBD does not offer more exit opps, nor greater learning opps, than trading. Second, the "Sales & Trading" world includes sales, origination, trading, and structuring, and comprises a far greater proportion of any bank than IBD--in revenue, profit, headcount, everything. So general stereotypes of what most of you undergrads know about "trading" does not apply to the entire "S&T" career field. Very few people who have not worked in S&T really have any clue what it entails. In addition, IBD and S&T are very, very different. Thus exit opps are not better for either, just different. I am in the S&T world. I am not interested in IBD because I don't enjoy the work. Same reason why I have no interest in PE. Thus, having great PE exit opps is about as appealing to me as having great exit opps into marketing or advertising. It's irrelevant. Finally, anyone who thinks you do the same things day in and day out in S&T is way off base. The bottom line is that the cutting edge of what banks do in the financial markets happens on the trading floor. Creation of new products, the most innovative sturturing, the greatest risk-taking, and the greatest profits, are all on the trading floor. Just something to keep in mind.

so, skins1, what are these exit opp that are different?
another desk/bank, hedge fund....what else?

Most of the people in Banking just aren't smart enough for Trading.

i think both areas are rather broad and there is an increasing trend towards some capital markets desk being placed in IBD at some banks. i agree that exit opps into the finance world for s&t and ibd are on par with each other, but ibd gives you a fundamental corporate finance background that you can take into non finance positions at corporations and consulting firms...

I just realized something. The reason people in IBD are so obsessed with exit opps is because most accept the fact that IBD is a miserable life and do it solely to gain a skill set and leave. That is nothing new. But what I just realized is that these people also don't seem to understand that there are actually career fields out there where people enjoy what they do, and plan to make a career out of it. Thus the sheer numbers of exit opportunities available for any given career field is not the number one factor in choosing what to do with your life. I was in the military prior to getting my MBA, and while the number of exit opps available to military officers is quite high, if you were to ask most young officers about the exit opps available they wouldn't really care, because they love what they do and plan to do it for the rest of their careers. The IBD mentality rerally is quite sad. I really do feel badly for those who feel their only option is to pursue a life they know ahead of time that they won't enjoy.....

way to dodge the issue skins1

Dude, I'm not dodging the issue. There is not a single exit opp that IBD allows that you cannot also achieve via an S&T position. S&T can also give you that fundamental corp fin background. On my desk I spend quite a bit of my time analyzing capital structures, financial statements, etc.--I hate it, but I do it. My point is that most people have no clue what S&T entails, and your comments regarding IBD show that. I can point you to a dozen kids on our credit desk who do the same thing as the bankers do, just with more of a quant focus. I can also tell you that I do a lot of projects on my desk alongside the bankers, so I have to have the same knowledge base. The difference is what you enjoy most--a macro vs a micro focus, quant analysis or fundamental analysis, etc. In the world of S&T there are positions that do one or the other or both--my point is that your stereotypes of what S&T involves are simply not accurate. The S&T world is far bigger than the world of banking, thus S&T has all the same exit opps as IBD, and then some. The question is which desk you are on, which role, etc. You also have to realize that I am looking at this from the MBA point of view. IB is not the holy grail for MBAs that it is for undergrads, in fact, at the top MBA programs it's really not a very desired career choice, other than for people who don't have any previous finance experience. If you land a Goldman M&A position as an MBA at Wharton or HBS, no one is running around patting you on the back, it's just another career field. There are kids leaving these schools with positions that are far harder to attain and with far better pay than an IBD associate (or an S&T associate, for that matter). Just trying to keep some perspective here.....

OK they are both very attractive career paths. I was considering both before I landed a job in IBD. There is no point trying to say which is better...

by the way......i am fuckin sick of hearing about how trading/capital markets revenues dwarf corpfin revenues. PE investing brings in tons of money at these big banks, and as we all know LBO funds are run by former corpfin investmetn bankers

propspie - ur rant made little to no sense...for instance, an associate in IB can make 300K after 1.5 years in a good year, but an associate on a sales desk has the potential ability to make twice that. they both have to be good to get paid cuss a crap associate gets fired in both IB and S&T. IB is a career gamble much the same way S&T is - if u suck, u dont get paid in either area.

also, trading revenues do make up a larger percentage of revenue/profit at banks - just read through the latest GS 10-k and see the splits.

On my trading floor, the number of employees ranking VP or above easily outnumbers the number of analysts and associates. Additionally, I am under the impression that 500k is pretty standard for a first year VP in trading. This seems pretty in line with three years out of b-school. Additionally, most traders today do not need to go to b-school.

total number of working hours over the year / year-end salary.

In this perspective, S&T make a ton more on an hourly basis.

I've met analysts that have made more than MD's in S&T. Granted, it's rare, but is that even possible in IB?

On some desk in S&T...including SALES, which some idiot above thinks is a "fucking joke" I know people who have been there for 5 yrs and make over a million, year over year...I think someone is bitter..I love S&T, working on the trading floor is a great experience. Everyday is different and exciting. Exit opps are really good also, granted you are good at what you do. On good desks you are in daily contact with PM's at hedge funds, etc. If you can show them you can generate good ideas, odds are they will offer you a spot. You are in contact with management of various corps etc. If some peopel want to sit at a desk for 90hrs a week, have fun.

I think the poster above nailed it--bitter for sure.

Prospie: I'm not going to waste my time replying to most of your comments, but I will comment on the 300K pay as a first-year associate. That number was the same for S&T and IBD across the Street. Why? Because for the first 12-18 months HR still sets the comp bands for new associates. Thus the range was still rather tight. That was total comp as of your first full-year bonus--so 18-months after graduation from b-school. The comp was 95-100K base, plus bonus of roughly 150-300 for ALL finance positions. Average bonus was right about 210 from the numbers I have seen. The average was the same for S&T on all desks, and for IBD in all groups.

You are slightly correct that it's easier to hide in IBD rather S&T, but only for so long.

I work in banking, but have to tell you that S&T profits >>>> than IBD at most places. This even includes times like these where you're seeing lots of M&A and LBO's taking place. The CEO's of a lot of BB banks grew up the ranks as traders. Just as it's easier to go into PE with IBD (relatively speaking), S&T guys dominate the HF industry. The heads of biggest HFs are former traders, not bankers.

I wish banking would have hours similar to S&T, but it doesn't. I choose that b/c I like what I do and prefer fundamentals over technical analysis of company, etc.

prospie - as i recall ur some punk from podunk u whos not in IB at all...now let me make this clear for u so u can do back to your leisure studies - 1.5 years is the time it takes for u to get a bonus in IB or S&T b/c bonuses are paid out in december/january and u start in july so you get a paid a stub after 0.5 years and get a full bonus 1.5 years but if you were in IB you would know this. also, if you suck as an associate, u wont get paid squat outside ur base and ull be asked to leave much the same way ull be fired from a desk if u suck in S&T..who da hell pays 300K to someone who sucks??

In the end, it boils down the personality type. Both S&T and Ibanking will grant you excellent financial skills, amazing earning potential, and very good exit opportunities or (dare I say it) for those of us who actually might want be career bankers good promotion possibilities. If you are good at either one you will get paid a lot, or get fired if you suck.

So why did I choose banking? Because, I don't have the personality needed to be a trader. I am very hyperactive and tightly wound-up. One bad trade and I would probably die of a heart-attack or grey prematurely. Banking's pace fits me perfectly and I don't need much sleep. Very important as well is that I have a girlfriend, who is very understanding of what I will be doing and the sacrifices it will require from both us. Finally, I love the client interaction aspects of banking. What little I have had hss been amazing and the idea of covering an industry I love is very appealing to me. Yeah, down the road, I might change my mind. I might want to shoot myself after 2 years as an analyst, but for now I loved banking, the atmosphere, the work I had to do, and the client interaction. If someone from S&T from my bank walked up to me and offered me to transfer departments, i would decline.

As an FYI, I had final round interviews with GS for S&T for an internship, which I didn't get. However, 2 interviewers emailed me back and said to keep in touch during the summer, so we could talk again in the fall. After doing an internship in ibanking for another BB, I never regretted not getting GS S&T because I know I would have accepted.

you wish you were a trader man, stop being a bitter banking monkey

Who the fuck wants to hide, or is even thinking about it?

You better show up fighting to be the best, and believing you have the potential to be the best, no matter where you are. IB, sales and trading, it doesn't matter. If you think you are going to be making a million by being anything other than the shit, you are sadly mistaken.

...but the above post by "prospie" is so stupid start to finish that i have come out of hybernation.

First of all, as noted by a previous poster, anyone who thinks sales "is a joke" has no idea about how the business works. Good salesman make as much or more money then bankers, period.

Secondly, "trading some arcane product that nobody has heard of" is currently making a fairly sizable group of people in the business ungodly sums of money (many at a ridiculously young age). In fact I would say that "trading some arcane product that nobody has heard of" is consistently one of the best jobs on wall st. year in and year out.

Thirdly, let me dispel another popular myth that prospie highlights: Banking has more job security. In point of fact unless you are an experienced banker with hard-earned client relationships as an Investment banker you are no more then cannon-fodder. Completely expandable. At the end of the last reccession way back in the early 90's GS once fired 80% of their associate class in one swoop, on one day...as Casey Stengel used to say, "u can look it up". So bankers and traders and salesman have the exact same job security...0 until u are a producer and then 100% complete immunity. If you don't believe that ask anyone who has worked on the street for more then one business cycle.

Lastly, let me highlight that prospie's post implied that banking is a career that has more long-term stability then trading which he characterizes as some sort of fad that will be eliminated by technology. i would just like to point out that if u polled actual working wall st. professionals and asked them where the biggest bubble in financial employment lies I believe the top answers would be 1) CDO origination/subprime lending 2) Private Equity 3) Hedge Funds 4) M&A. Saying you are striving for a PE job b/c you are looking for something long-term as opposed to chasing what's popular today would be a good joke if said with the right intonation. I know on my trading desk it would likely get a laugh...

'....im saying your first year in a good yr u can make $300k....that is NOT going to happen ur first year in S&T, bc in S&T u have to have some experience and bring in money to start mkaing big bonuses'

this is completely false.

and skins is a US military officer, how about showing a little respect?

God, bankers are dummies. I think it's wonderful that I can have a degree in leisure studies, work from 8am-2am everyday and go bald by 27 so I can make 200k a year. I mean, fuck that. There is much better upside and you have a life!

Like, isn't a life important? If you want exit opportunties in IBK, then aren't you exiting into jobs that work you the same? You think PE guys are doing 9-7 like hedgies? Fuck no. PE guys are busting balls all the way up, because they had no math skills out of college and can't take the 'pressure' of the trading floor. I mean, fucking please, be men. If you can handle the swings on partypoker.com, then you can handle the trading floor.

Are missing the point. Yes, the lifestyle in trading is better, and yes, the upside in trading is probably higher than banking from ages 22-35 or so (i.e. it's more meritocratic than banking early on and thus traders can be making multiple millions by early 30's. BUT, long-term, there is really no comparison. People starting out in banking and learning fundamental analysis have way way more upside. Just take a look at the U.S. billionaire list. While there are a few traders (Steve Cohen, Lew Ranier - not even sure he's on there anymore), all the truly rich finance people focus on fundamental analysis or private equity. Steve Schwarzman is a great example - the Blackstone IPO will likely make him worth $10 billion and he's definitely not from a trading background. And have you heard of a guy named Warren Buffett? His investment approach is much better learned through banking rather than staring at some candle chart ro whatever else random shit you guys use. You can argue that traders can go to hedge funds and that hedge fund managers make billions, but honestly the roles that traders enter into at hedge funds are generally pure execution roles with very little upside. The future PM's do not come from execution backgrounds, but rather from research analyst backgrounds, which is the exact role that banking sets you up for.

You pretty much have to ask yourself whether it is worth it to sacrifice most of your 20's working in banking/PE in order to eventually have a shot at entering into the top of society and really having an impact in business (there is really no way you can argue that traders make anywhere close to the impact that PE guys or activist investors make). I actually don't blame traders for saying that the sacrifice is not worth it. It's a personal decision. But to argue that trading sets you up for the long-run as well as banking is just plain wrong and most of you traders will realize it during the next down-turn when you lost your job (bankers might lose their jobs too but at least they have a transferable skill-set and won't be forced to beg for jobs at random prop shops).

if you wind up with 5mm by your early to mid 30s, you think that's not enough to qualify as 'set up for the long run'?

I hope to be out of this game in 5 years.

why nobody on this board ever talks about being a career banker?

I think it totally has to do with personality, if your a gambler or not, if you like "downtime" during your day, or to be screaming and running nonstop all day. The hours may be better in SandT but the stress sure ain't.

That $5MM is enough to live on. But the point is some people are ambitious, like finance, and dont "hope to be out of the game in 5 years." I worked on a trading floor and I generally found that people were not really all that ambitious but were rather more interested in making money and retiring by age 35. I also saw no passion for finance, and would argue that if you actually enjoy financial theory and want to add value to society, you should go into banking. If you want to make a few million and retire by 35, go to trading. Also the stress factor mentioned above makes it questionable whether the lifestyle is any better in trading.

'that if you actually enjoy financial theory and want to add value to society, you should go into banking.'

adding value to society, that made me laugh...don't be deluded aboutt he value of any of this

Another thing is the fact that you have the POTENTIAL to make enough money to retire by 35. Obviously, not every trader is going to succeed. In fact, some newly hired traders never even get a chance to trade. If that happens, was trading really better than ibanking? In ibanking, you at least make a solid salary doing what I would say easier work than trading. There is so much risk invovled with being a trader that you definitely earn your salary as a trader.

Sure, if you are a good trader, you will really make it. Every trader I know did it for one reason: to retire early. Every ibanker I knew did it for the money and the exit opportunities. I think at the end of the day, both are good careers. However, some people are not trader material, just like some people arent' ibanking material. I say whatever peronality you have, go into one of the two fields, suceed in them, and watch your money pile up.

PE has been proven to increase efficiency and create wealth for society. Not sure that traders or salespeople really do much of anything worthwhile. In fact, you guys should read the article on the front page of the WSJ today about Alan Blinder, the Princeton economist. Especially focus on the offshoring part where he pretty much argues that anything that can be easily replicated overseas eventually will be. I can't really think of a more easily replicated thing than trading. All you need is to set up a trading floor in Mumbai and there's really no reason for a hedge fund to use a U.S. investment bank than the one overseas. I would agree that the analyst work of ibankers is largely offshoreable as well, but at the upper levels, both in banking and PE, the business is much more relationship-based. Putting together deals requires connections and face to face interaction, and that clearly is not offshoreable. Have fun losing your job to some overseas dude in five years....

'Have fun losing your job to some overseas dude in five years....'

i will be done by then, my friend.

pe creates wealth for its investors, not for society.

where do you work anyway blahblah?

You guys just needs to cool down a little bit and subscribe to a little reality check. Here are some key points: 1. Somebody mentioned Steve Schwarzman. I highly doubt he is getting 10bb from the IPO. I could be wrong because I just don't know, but that seems highly unlikley. 2. Somebody said that the finance people on the Forbes list are mostly bankers. The people on the Forbes list who are bankers are old as shit and there are not that many. Look at the traders: Lampert, Cohen; those guys are in their 40s. 3. With increased regulation, hedgies, and foreign competition, the chances of a banker/pe/vc guy making it on the Forbes 40 years down the line are slim. 4. Let's examine the average banker and the average trader, both of whom made MD. In their 20s: Banker - works all the time; no social life; you can distinguish yourself as a gunner, but because of the nature of the biz you cant be a hitter. Trader - works hard and is stressed, but has a good amount of free time, especially considering the money he/she is pulling down. if youre good you can make it past gunner status and move on to hitter status. that is, your bonus potential isnt capped. you can be pulling in 7 figs. 40s: Banker- MD. still traveling away from the family. 2mm/ year all-in. wife hardly knows you, kids know you less. fat, ugly, pale. Trader- MD. 2mm/year. Still stressed. You know your wife, you know your kids. you love both. because over the years youve had a lot of time, you are still in pretty good shape. you go home and have a lot of sex while those bankers are in a hotel somewhere.

Look, I want to set one thing straight. being pale and fat has nothing to do with the industry, but with the person. During my Summer Inernship, i looked around and only about 10% of us looked like they hit the gym on a regular basis. Among traders, on the other hand, the guys seemed in a lot better shape and the girls were also a lot hotter. I guarantee you that after 19 years, when some become MD's, the ones who have a culture of working out now, will still have it. But because fewer ibanking analysts hit the gym to begin with, it is only natural that fewer MD's will be in good shape.

In addition, military personell is equally attracted to S&T and banking, or the difference is negligible. I met a lot of ex-military in my bank and they told me that a lot of their buddies work at other banks. So it is not true that traders are alpha ballers, and bankers are complete nerds.

And finally, one key difference in your two descriptions. Stress level. Do you think that being under constant stress does not affect family life? Do you think the wife and children of a constantly stressed out trader receive only love? Do you think that 25 years of constant stress will not put a toil on you, your body, adn those you love?

traders hate bankers, bankers hate traders

nobody is going to "win" this argument

Its all about personality and what you want to do. If you are driven, talented, and passionate about what you do, you can be succesful in either banking or trading. Its honestly all about YOU, who cares what other people think. In my mind, both are extremely prestigous and we should be thankful we have a chance to work in this business. It beats the hell out of anything else you can get out of undergrad. If you want to be banker, good. If you want to work in S&T great. Personally, my choice was S&T and i couldnt be happier. But someone else may have made the opposite choice and feel the same way I do.

NO BANKING IS THE BEST! FUCK TRADERS! FUCK YOU BITCHES! YOU CANT GO TO PE! I JERK OFF TO EXIT OPPS! BANKING GIVES ME SO MANY EXIT OPPS.

OH, AND FUCK PLAIN OLD BANKING...IF YOU DONT DO GS, MS M&A OR UBS LA, YOU ARE FUCKED. OH WAIT, NOT UBS LA ANYMORE BECAUSE Moelis IS PUNKING OUT! FUCK THAT SHIT! TRADERS ARE JUST JEALOUS OF OUR EXIT OPPS!

AND WE ADD SO MUCH VALUE TO SOCIETY! IF YOU KNEW THE THEORY YOU WOULD UNDERSTAND, MY PITCH BOOKS CHANGE THE WORLD! WTF DO FUTURES DO? FUCK THAT SHIT!

WHEN I AM GORDON GEKKO YOU IDIOT TRADERS WILL BE SWEEPING THE STREETS! JUST LOOK AT THE THEORY!

STILL nobody has rebutted this point....i.e. people in S&T are product specialists and they ahve a very narrow skillset, so if their product becomes less profitable or favorable or whatnot they are SCREWED

The narrowness of a skillset doesn't imply lack of transferrability or profitability-- it implies the ability to understand something "arcane" or "deep" and profit from it, which in finance is most important. Transferrability is a much more personal trait, whether someone can apply the techniques of learning product X to situation Y, or whether someone learns by mimicking someone else or develops their own strategy. If you know a product well, you can find ways that commoditization has "missed" something, and therefore increase YOUR profitability in the face of what you call a PRODUCT profitability reduction. Or you can take your skills at learning say equity option trading to trading currency options, or structured equity if you understand the nature of the industry. I just don't think a huge portion of the market, and primary revenue driver for many of our employers, will somehow disappear in a computer-induced poof within 5 years. Also,One of the highest growing and most paid jobs was Equity Sales this year -- this is literally what 85% of ppl here bash as the playground of idiots. Yet they generate fees, and they still thrive. Very few products are really ever "less profitable" -- profits just require more of a microscope and a larger array of tools. Potential abounds, have faith.

Products get more commoditized, yes, but a fuckin IBM can't build strategies or make fundamental directional bets without human interaction/decision-making. You can't program for everything, and those that do get run out in the face of others who have looked at a situation with a human eye.

And if you're worried about helping society, no one's curing AIDs here unfortunately. Trying to analyze the benefit to society of anything any of us does, banking or trading, is only going to launch us to a level of bullshit that rivals Bruce Wasserstein.