bankers

  • 11 Jan 2008 at 3:46 PM
  • bankers

The Fresh “Prince of Wall Street”

So there’s this blogger who’s been toiling in obscurity until this very moment. We know you’ve never heard of him so lets take a look-see at the fruits of his digital labor. He came to our attention from his advertisements on facebook.
Frankly this kid is us in a previous life. Three internships in Banking. He incessantly quotes Wall Street (the movie, not the actual street, or people who work in finance), his blog has a random Wall Street quote generator. He’s working in Financial Sponsors at a bulge bracket bank, and he’s proud of it. With 95.76% certainty we predict he’s an incoming analyst (read pre-frosh) at Credit Suisse.
We submit for your consideration “The Prince of Wall Street.
1) He’s has a deep appreciation for the business of finance. “Whenever The Prince hears bloggers or financial “professionals” reading charts and talking about breakouts, support, momentum, resistance, chart patterns, or any number of goofy names for the shapes that charts make he immediately begins to smile.”
2) He’s smarter than Steve Feinberg. “Cerberus sure has been busy recently putting out fires on the deals they did when the LBO game was at its peak. Cerberus’ troubles are illustrative of the tendency of private equity firms to throw caution to the wind when money was cheap before this summer. Cerberus is getting is now getting its just deserts for the Hubris it and other private equity firms exhibited.”
3) He has a keen grasp of the industry. “With 1,400 seats, 2,000 computers and 5,000 monitors, the UBS trading floor is noted by the Guinness Book of World Records as the largest single trading floor in the world.” (That would be UBS trading floor in Stamford. We all got this spiel during campus recruiting. Everyone knows UBS has the world’s largest trading floor. Bonus points for not being afraid to be obvious!)
Keep your head down young sprout or you could find yourself blogging full time, ahem.
–Everett Stuckey, DealBreaker adviser to i-bank analysts.

  • 10 Jan 2008 at 1:53 PM
  • bankers

Bonus, claw back? More like Raghuram Rajan is on crack

Raghuram Rajan from the Financial Times says YOU are compensated unduly. He says bogus “alpha” is created by hiding long-tail risks, as with structured products linked to subprime mortgages. He thinks the solution would be to hold in escrow a big chunk of bonuses “until the full risks play out”, meaning only true alpha gets jumbo rewards and reducing the hidden risks in the financial system.
We at Dealbreaker, think Rajan is woefully misguided. Here’s why:
First of all, what exactly does “until the full risks play out” really mean? If you underwrite a 30 year bond for GM does that mean you have to wait until you’re retired before you get compensated for that bond? Does this any sense at all? What if you create a new trading strategy? When would you know that “the full risks” of that strategy have “played out”. We don’t know too much about risk management here, but we’re pretty sure if you think your strategy no longer has any risks, then you’re about to blow up.
Anyway, there is already an incentive structure that exists which is designed to align the interests of the company, and employees. Its called EQUITY, friends. Bankers, traders, private equitiers and hedgies already get compensated in equity. Their goals are already shifted, to some degree, toward thinking about the long term prosperity of their firms. Sure some of them are mercenaries, but to quote Ben Affleck (in Boiler Room) “We’re not saving the fucking manatees here”. And by “we’re not saving manatees”, we mean you’re not. The Dealbreaker team saved three manatees and a goat on the way to work this morning.
The net result is that when positions pan out over the long run, the traders’ equity in the company becomes more valuable and goes up. When positions are shit and generate “fake alpha” employee equity drops as those position deteriorate. Get it? Got it? Good? There’s no need for escrow accounts to tie up compensation and add all sorts of other annoying hassles. You’d just be reinventing the wheel.
Further, i-banks are (or should be) inherently long volatility. Their derivatives desks and market making operation pick up more cash when the market is more volatile. So if some traders are generating “bogus” alpha being short vol, or “hiding long-tail risks” that is not necessarily bad for the bank. The banks want incentivize this type of risk taking, this is what generates all that ROE they’re so famous for.
Since banks are some of the most profitable enterprises on the planet, one has got to wonder if there isn’t some other area that would be better served by Rajan’s keen insight. Like maybe, figure out a better compensation system for the production department, so they’re not always fucking up the binding on the pitch books. Maybe they could use a little more equity.
–Everett Stuckey, DealBreaker correspondent.

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  • 06 Sep 2007 at 4:18 PM
  • bankers

Knee Slappers

What does Jonathan Knee, author of “The Accidental Investment Banker” and senior MD at Evercore (and ex-Morgan Stanley, Goldman grunt) have to say about banking jobs and bonuses this year, in a Reuters (via BankersBall) interview?
1. New analyst classes (the record number of people brought onto the Street in June) this year are playing one big game of musical chairs. There are way more people than spots, and its only a matter of time before chairs run out, or people are offered a lump sum to take a hike and come back next year (a deal often revoked if a downturn ensues) or switch cities.
2. BSDs may have been herding elephants most of the year, brining in tens of millions of dollars in revenue, but it only takes one TXU tank job to put their net fees generated deep in the red. What kind of bonus are you supposed to give these guys?
3. People are scared because they might have to demonstrate firm loyalty (lateral hiring is going to dry up), at firms that probably want to fire them anyway.
4. Advisory business is becoming less relevant, and is increasingly at odds with the intents and purposes of the other, much higher revenue generating banking businesses.
5. Tell your bankers that daddy hit you – “There’s a garbage in, garbage out problem with your advisers. It’s like going to a shrink and you don’t tell him your father beat you for the first five years of your life; it’s hard for him to help you.”
6. London, SarbOx – overblown, so out this season.
Banker Jonathan Knee–unplugged [Reuters via BankersBall]