Iris Mack's Blog - Investment Banking

Business Insider: New York Times Doesn't Know Robert Rubin's Record

Sat, 13 Aug 2011 01:46:00 --0100

Hmmm... is the New York Times so financially strapped that it can't afford a research staff and/or fact checkers?

Finance Jobs Vanish, But Not as Fast as Job Seekers

Sun, 16 Jan 2011 03:52:00 --0100

By many measures, 2010 was a dismal year for finance. In the year through November, trading volume on the New York Stock Exchange plunged by 19.6%, according to the Securities Industry and Financial Markets Association. At the same time, almost $255 billion flowed out of U.S. mutual funds on a net basis. Please read more here.

America's Bankrupt Banks: Inside the Meltdown (6 videos)

Mon, 03 Jan 2011 04:13:00 --0100

Very sobering narrative about America's bankrupt banks!

Inconvenient Truth About Bonuses

Tue, 14 Dec 2010 05:31:00 --0100

William Wright writes the following in the Financial News. To paraphrase Marilyn Monroe, you don?t pick a job for the money, but it sure helps. No doubt many investment bankers, traders and asset managers chose their careers for the intellectual stimulation, their love of economic theory, and the punishing hours. But the bonuses sure help ? particularly when you become accustomed to them and they show such little correlation to performance. Bonuses have long been the lightning rod for the social and political outrage over the excesses of the securities industry before, during and after the financial crisis. As such, they have become something of a regulatory obsession, culminating last week in the publication of new European-wide rules that will impose strict conditions on how bonuses should be paid. Please read more here.

The New Yorker: Investment Banking is Socially Worthless, Dysfunctional, Like A Cancer

Tue, 23 Nov 2010 17:59:00 --0100

John Cassidy writes the following in The New Yorker Magazine:

Lord Adair Turner, the chairman of Britain?s top financial watchdog, the Financial Services Authority, has described much of what happens on Wall Street and in other financial centers as ?socially useless activity??a comment that suggests it could be eliminated without doing any damage to the economy. In a recent article titled ?What Do Banks Do?,? which appeared in a collection of essays devoted to the future of finance, Turner pointed out that although certain financial activities were genuinely valuable, others generated revenues and profits without delivering anything of real worth?payments that economists refer to as rents. ?It is possible for financial activity to extract rents from the real economy rather than to deliver economic value,? Turner wrote. ?Financial innovation . . . may in some ways and under some circumstances foster economic value creation, but that needs to be illustrated at the level of specific effects: it cannot be asserted a priori.?

Turner?s viewpoint caused consternation in the City of London, the world?s largest financial market. A clear implication of his argument is that many people in the City and on Wall Street are the financial equivalent of slumlords or toll collectors in pin-striped suits. If they retired to their beach houses en masse, the rest of the economy would be fine, or perhaps even healthier.

Most people on Wall Street, not surprisingly, believe that they earn their keep, but at least one influential financier vehemently disagrees: Paul Woolley, a seventy-one-year-old Englishman who has set up an institute at the London School of Economics called the Woolley Centre for the Study of Capital Market Dysfunctionality. “Why on earth should finance be the biggest and most highly paid industry when it’s just a utility, like sewage or gas?” Woolley said to me when I met with him in London. “It is like a cancer that is growing to infinite size, until it takes over the entire body.

Please read more here.

Distrust of Casino Banks: Investors Flee the Stock Market

Fri, 19 Nov 2010 18:19:00 --0100

Investors are eschewing stocks for the perceived safety of bonds and other fixed income assets, trading the possibility of high returns for stability. Bond funds took in an unprecedented $376 billion in 2009 and another estimated $216 billion in 2010 as of the end of August.

Although 90% of the stock market is owned by 20% of the top income earners, according to Citigroup, the perception of public capital markets as the place where capitalism became a democracy has been a cornerstone of America's promise. Now, as in the wake of the Great Depression, a generation of investors may have become alienated from the stock market.

What's clear is that whatever love affair many Americans may have had with stocks is over, at least for the moment.

Please read more here.

Wall Street Bonuses Skewered In Taiwanese Animation (video)

Thu, 11 Nov 2010 04:12:00 --0100

For news presented as a bizarre video game-like montage, there's nothing quite like Taiwan's Next Media Animation. In a new video released Friday, the studio has turned its unforgiving lens on Wall Street. As the Wall Street Journal reported almost a month ago, financial firms are on track to pay employees $144 billion, to break a record for the second year in a row. NMA offers an understandable, if inaccurate, take on this figure, putting the news in the context of the financial crisis.

Martin Erzinger, Morgan Stanley Wealth Manager, Won't Face Felony Charges For Hit-And-Run

Mon, 08 Nov 2010 20:44:00 --0100

A Morgan Stanley wealth manager will not face felony charges for a hit-and-run because Colorado prosecutors don't want him to lose his job. Martin Joel Erzinger, who manages more than $1 billion in assets for Morgan Stanley in Denver, is being accused only of a misdemeanor for allegedly driving his Mercedes into a cyclist and then fleeing the scene, Colorado's Vail Daily reports. The victim, Dr. Steven Milo, whom Erzinger allegedly hit in July, suffered spinal cord injuries, bleeding from his brain and, according to his lawyer Harold Haddon, "lifetime pain." But District Attorney Mark Hurlbert says it wouldn't be wise to prosecute Erzinger -- doing so might hurt his source of income. Here's Vail Daily: "Felony convictions have some pretty serious job implications for someone in Mr. Erzinger's profession, and that entered into it," Hurlbert said. "When you're talking about restitution, you don't want to take away his ability to pay." "We have talked with Mr. Haddon and we had their objections, but ultimately it's our call," Hurlbert said. Milo, who lives in New York City with his wife and kids, is furious about the dropped charges, Vail Daily says. The doctor's line of work, like Erzinger's, has been threatened by the incident. "His ability to deal with the physical challenges of his profession -- liver transplant surgery -- has been seriously jeopardized," Haddon, Milo's lawyer, said. Here's Milo, from the Vail Daily: "Mr. Erzinger struck me, fled and left me for dead on the highway," Milo wrote. "Neither his financial prominence nor my financial situation should be factors in your prosecution of this case." Please read more on the Huffington Post.

Wall Street Pay Defies Gravity (video)

Thu, 04 Nov 2010 13:26:00 --0100

These are not boom times for financial firms. Trading is down and new regulations threaten to take a bite out of future profits. Some firms have been handing out pink slips. Morgan Stanley even posted a loss in its last quarter. Yet Wall Street pay seems to defy gravity: Bonuses will be up this year, according to a study to be released on Thursday by a Wall Street compensation expert, Alan Johnson. The survey shows that overall compensation in financial services will rise 5% this year, with employees in some businesses like asset management getting increases of 15%. Please read more in the New York Times.

"Trick or Treat" on Wall Street

Mon, 01 Nov 2010 13:13:00 --0100

What might be a scarier sight on Wall Street than Elizabeth Warren in a mortgage modification center? More ghastly than a Goldman Sachs C.D.O.? Packed with more skeletons than Citigroup?s balance sheet? Why, it?s the Halloween costume competition on Friday at the Meredith Whitney Advisory Group. The event, in its second year, has quickly become one of Wall Street?s wackiest rites of fall and is as hotly anticipated as third-quarter earnings. Ms. Whitney, who came as Paris Hilton, and the other members of her staff vie for the best-dressed honors (and a prize to be determined later), while crunching numbers on their computer screens and assessing the latest figures for gross domestic product. The rules are as almost as stringent as Regulation FD. ?There is a lot of self-imposed pressure,? said Ms. Whitney, clad in a purple sequin frock and oversize sunglasses with a stuffed version of Ms. Hilton?s Chihuahua, Tinkerbell, in tow. ?All costumes must be homemade. No Ricky?s.? Ms. Whitney, who once took investors on a ?Blond Ambition? tour of the banking industry, decided to dress as the platinum pop culture celebrity on a lark. ?Clearly I went on the side of a scary costume,? she said. ?That?s hot.? Please read more in the New York Times.

Wall Street May Break Pay Record -- $144 BILLION

Tue, 12 Oct 2010 16:37:00 --0100

Wall Street is on track to pay its employees $144 billion this year, breaking a record for the second year in a row, the Wall Street Journal reports. Despite financial reform intended to curb compensation, and a steep decline in trading volume, pay in the financial services industry has shown few signs of fading. Pay is expected to rise at 26 out of the 35 firms according to the Wall Street Journal. According to it's analysis, the $144 billion overall figure is a 4% increase over last year's $139 billion. Revenue on Wall Street grew only 3% this year, the Wall Street Journal reports, but, unlike at some businesses outside the financial sector, employee compensation remains a high priority. Please read more in the Wall Street Journal and Huffington Post.

Wall Street Journal: Obama Pal's Mutual Fund "Bleeding Money" for Years

Sun, 15 Aug 2010 22:21:00 --0100

For a low-key money manager, John W. Rogers Jr. got awfully close to the national political spotlight during the 2008 presidential campaign. Not only was the founder and chief executive of Ariel Investments LLC a key fund-raiser for Barack Obama, he also was part of the candidate's inner circle, playing basketball with the soon-to-be-president on Election Day and donating his Chicago offices to President Obama's transition team. Now Mr. Rogers must apply some of the political lessons he learned from Team Obama as he ventures out on a campaign to win back skeptical investors. His mutual-fund firm had been bleeding money for years, with assets under management plunging to just $4.75 billion on July 31 from $21.4 billion in 2004. The mutual-fund industry has been buffeted in recent years as passive, low-cost index funds grabbed market share from higher-cost, actively managed funds. The stock market's plunges only reinforced the notion that active managers weren't worth their higher fees. Ariel has suffered more than most: In 2008 its flagship Ariel Fund lost 48% while the Standard & Poor's 500-stock index declined 37%. Ariel has roared back since then. From the market bottom of March 9, 2009, to July 31, 2010, Ariel Fund gained 160%, for example, while Ariel Appreciation Fund gained 127%. Still, some investors remain skeptical. Matthew Tuttle, chief executive of Tuttle Wealth Management in White Plains, N.Y., says of buy-and-hold investing: "It works in an up market like everything works, but wipes you out in a down market." Mr. Rogers is trying to rebuild his firm. For nearly 20 years Ariel gathered assets at an impressive clip, but his stock picking didn't always yield consistent results. Value investing outperformed growth investing for much of the 2000s, yet Mr. Rogers's funds sometimes lagged behind. In 2005, the flagship Ariel Fund, a small-cap and midcap blend fund, returned less than 1%, when the typical fund in its class was returning 9%. Outflows increased as investors fled to better-performing value funds or cheaper index and exchange-traded funds. Investors pulled a total of $4.1 billion from Ariel in 2006. The funds continued to struggle, culminating with a 66% decline in assets under management in 2008. Read more....

U.K. Launches Probe Of Investment Banks

Thu, 10 Jun 2010 16:12:00 --0100

The U.K.'s Office of Fair Trading (OFT) will launch an inquiry into the fees they charge for equity underwriting and other services. The Wall Street Journal reports that this is the OFT's first big inquiry into City practices in over a decade. The OFT said ~£70 billion (~$101.73 billion USD) in equity capital was raised by companies in the U.K. last year and that investment banks charged ~£2 billion in underwriting and other associated fees. The competition watchdog said initial talks showed some corporate clients were dissatisfied with the investment banking services they received. The OFT plans to start a market study this summer looking at rights issues and other types of equity raising by the 350 largest U.K. public companies, to consider whether corporate client concerns are justified. The OFT inquiry will look at all foreign and local investment banks operating in the U.K.