From the monthly archives:

January 2009

Pundits have blamed the financial crisis on many things: excessive Wall Street greed, failure to manage risk, consumers with lousy credit who couldn’t afford subprime mortgages and more. But they all miss the real reason behind the crisis, according to Jeremy Siegel, professor of finance at Wharton Business School.

Siegel was speaking in Philadelphia to launch a 15-session lecture series that Wharton is offering for MBAs and undergrads. Siegel says the real reason is that large financial firms bought, held onto and insured large quantities of risky mortgage-related assets using borrowed money — instead of “flipping” them as they had in the past, and done with other financial products such as the IPOs during the dot-com era.

Many of these companies were making enormous profits from creating, bundling and selling these products. There was little need to hang onto them. But instead they decided they were good assets to hold. That was their “fatal flaw” according to Siegel, in an article published by Knowledge at Wharton.

Siegel looks at American International Group (AIG) for example. Roughly 95% of its business units were still profitable when the company collapsed. But it was the New Products Division based in London, England, that came up with the idea of insuring piles upon piles of mortgage-backed assets, and nobody at the head office raised a red flag. Basically, 90 employees sank a firm with 125,000 employees.

Siegel discusses other mishaps along the way in a lengthy article that’s worth reading. Yet he remains optimistic about things finally turning around, toward the end of 2009. He even offers some advice for investment bankers with an entrepreneurial bent: it’s a good time to start your own bank. “You won’t have the problems of existing banks, and the federal loans interest rate is near zero,” Siegel said. “Demand for loans is high, and you will face no competition from the private market. You could become very profitable.”

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Despite the carnage on Wall Street in 2008, several financial firms, including an investment bank, made Fortune Magazine’s list of the 100 best companies to work for in 2009. Some of these firms are even looking to add staff in year ahead.

Brokerage giant Edward Jones was #2 on the list. The company apparently had no exposure to high-risk mortgages or financial derivatives and has no plans for layoffs in 2009. It’s even building an addition to its headquarters in St. Louis to make room for 500 new employees. 

Goldman Sachs came in at #9 on the list. Okay, so the firm morphed into a bank holding company and laid off 3,000 workers worldwide last year. Fortune still ranks it in the top 10 because its top officers skipped their bonuses yet allowed the rest of the staff to collect theirs. Goldman also lists more than 50 investment banking jobs right now, and an average annual salary level of $144,994.

Others making the top 100 included Robert W. Baird, the midwest-based employee-owned investment advisor, at #14; Principal Financial Group at #17; and Wisconsin-based Johnson Financial Group at #25.

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Traders are the heart and soul of the Investment Banking firm. That’s why trading jobs come with the pressure, responsibility and compensation that makes other financial positions seem like second fiddle.

Traders work closely with quantitative analysts at investment banking firms to develop trading models based on statistics and computational mathematics. The traders are the ones who execute the strategy and the magic happens in the execution.

Investment Banking trading jobs usually require experience working with various trading models, such as multi variant regression analysis and risk models. Many Investment Banking trading jobs call for a background in statistics or mathematics, and often the most successful firms hire only from the top colleges and universities. In the end, a great trading record will trump educational background.

You can read more about trading jobs and get an idea of sample job descriptions at JobSearchDigest.com

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Getting Creative in Hunting for Investment Banking Jobs

January 19, 2009

Desperate times call for desperate measures, with job applicants resorting to many creative ways to land at least an interview with a prospective employer. From an article in Forbes comes the tale of investment banker Joshua Persky. After losing his IB job at Houlihan Lokey, Persky spent 11 months pounding the pavement, taking all the […]

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New Opportunities for Investment Bankers

January 15, 2009

Even veterans with a quarter-century of experience on Wall Street have been shocked at the speed at which the industry changed last year. Many of the world’s oldest, most respected institutions vanished, along with tens of thousands of banking jobs. And while many insiders feel that Wall Street will never be the same, there are […]

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British Investment Banks Hiring Younger Candidates

January 12, 2009

While laying off thousands of more senior (and more expensive) employees, British banks plan to continue hiring graduates and interns, to make sure they have the junior talent ready when the economy finally picks up. A report by MSNBC quotes experts as saying that closing the pipeline for graduates in the past has left companies […]

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Sell-side Versus Buy-Side Compensation in Investment Banking Jobs

January 8, 2009

The Australian had an amusing take on the ongoing feud between sell-side (brokerage) professionals and buy-side (fund managers). For years, the sell-side enjoyed better salaries and bonuses and overall compensation. While the buy-side fund managers enjoyed long lunches, golf days and other leisurely junkets to lure their business. The joke from brokers was, “What’s the […]

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