Archive for Investment banks

How Will Terrorism Impact Investments in Europe?

If you have not heard about the March 2016 terrorist attacks in Brussels, you are probably not watching any news channels at all. But the chances are that you heard about the ISIS attacks in Belgium and the foiled plots to attack nuclear centrals in France or Europe.
What does this rise in terrorist attacks mean for the investments in Europe?
Well, first and beforehand, uncertainty and risk raises. Be it about real-estate investments in the European major cities (deemed to be one of the safest premium investments in the developed countries) or shares of the FMCG companies, there are obviously risks associated with purchasing shares of these companies: that is supply chains might be disrupted, key employees might be trapped or even harmed, or other countless factors might kick in. It means that overall the cost of doing business in Europe will increase: higher security costs money and slows down by travelling and communication, travel will be disrupted, insurance premiums will increase slowly but certainly. Read more

European Bank’s Shares Shattered or Under-valued?

The last few days saw the European bank’s shares substantially going down. Deutsche’s Bank shares went down from around 25 EUR/share in December 2015 to 13,68 today (Feb 12th, 2016). Other German banks suffered also losses of 10-20% on their share prices, whilst French and Italian ones did not fare very well too. Most of the hit banks were from the invesmtent banking sector – but the traditional commercial ones have not been spared too. Unicredit, the biggest Italian bank, has seen a similar fate too (down from 6 EUR/share to 3).
This downfall share price trend is ggetting super-serious for the bank sector itself, badly hurt by multiple factors. Amid most concerns are the (relatively) capitalization rules, which requires the banks to maintain a higher capital-to-loans ratio – and most of these mammoths have failed on the stress tests. Of course, this is a measure of efficiency – and most of the investment banks are trying hard to keep as low a ratio as possible, since this means for them doing business with other’s (mostly central banks) money/funds. A nice business model indeed for the banks, who have become mostly asset managers, rather than loan-making machines. Read more

Next Financial Crisis

I was reading these days several articles in the financial press. All is so quiet… dangerosuly quiet. Wall Street Journal, Financial Times, LA Times, Forbers etc they are all silent about what the banks are doing or what other financila insitutions are up to. To me, this means only trouble brewing.
Economic data for US looks slightly promissing and the real estate market is slowly growing. Not an accelerated pace (foreclosures in US declined to 650,000 in August, down from 1 million 1 year ago and 3 million 5 years ago), but still… EU is stalling, with Germany and France almost to a halt (industrial production -0.1% to LY, first time in recent history when Germany stumbles a bit). Usually US profits from these moves.
So what next? Read more

Why I Left Goldman Sachs: A Wall Street Story by Greg Smith – A Book Review

A search on Google for Goldman Sachs returns 328 million results. Created in 1869, Goldman Sachs rose quickly to be a favorite banks in the US for IPO’s and later for investment banking. Its history was always tied to acquisitions of trading funds and various financial instruments. And of course, during the sub-prime crisis in 2007, Goldman Sachs became even more famous for short-selling mortgage backed securities right before the market for those instruments collapsed. A close competitor of Lehman Brothers, Goldman Sachs allegedly partly maneuvered its sibling into bankruptcy, thus securing an even better position in the investment banking industry. With $29 billion in assets and a surprising repurchase of the government injection of cash into its share, Goldman Sachs remains one of the most mysterious investment banks on Earth.

No wonder that Greg Smith’s financial book (“Why I Left Goldman Sachs: A Wall Street Story”) was expected with so much interest. As an ex-employee of the bank’s New York HQ, Smith was always critical of Goldman Sachs failing its own standards and the bank’s reference of customers such as “muppets” – after he left the bank in 2006. Thus, it comes as no surprise that this account of an investment banker’s life in Sachs is … well… critical of it. It is also not surprising that the book made the no.1 spot for most book retailers, including Amazon. Read more

Incoming Global Status-quo Meltdown – Investing Alert

My fellow investing folks, we are in for a tough ride again. The markets are dropping all over the world with 3 to5%, led by banks and commodities. And all of these have happened only during one week.
What was behind it? Apparently, all the press hauls about Eurozone emergency bail-outs – the banks are close to a liquidity crisis again since they have less revenues from the Italy and Greece (and other European) bonds. And with the deposits fees charged by NY Mellon, with Japan trying to avoid the yen appreciation and the Turkish Central Bank dropping the reference rate, it seems that nobody wants hot money anymore in their country.
Apparently. The signs are (as one Financial Times columnist – Gillian Tett’s insight article – put it in today’s newspaper) that we are actually facing once more a confidence crisis. It seems that everybody is pulling out of the stock market and of the volatile areas of investments and running for safety. The problem is similar to the global meltdown we experienced in the US crisis – the safety areas are limited and they can only absorb so much of the hot money floating around. The safety refuges of today are the gold (already up to 1,640 USD or so), the swiss franc, the yen and a couple of other places unknown to the wide public. All of these were already crowded because of the prolonged crisis – and now they are massively overcrowded. I think this lead accidentally to over-pricing of those assets – and in turn to a loss of confidence in the financial areas of refuge. Read more

Salaries in Investment Banking – Investment Analysts

frankfurt-river-bank-scenery-with-skyscrappers-may-2011-courtesy-of-wwwrecenziaro-2 Here we have compiled a short list of what an investment banker can expoect to be paid depending on the seniority and the experience.

As a general remark, 2011 is seeing a return to normal levels of pay (before crisis, id est to 2007-2008 level). This doesn’t mean unrealistic expectations from your side, but rather a coming back to normal.

As a general rule, the starting salaries for a junior investment banker range from $90,000 to $150,000. These salaries are paid usually in US by the large investment banks who operate there (salaries in Europe will be at 70-80% usually, translated in Euros at spot rate – if you can read this you can do the maths). Bonuses range from 10% to 80% and are included in the above figures anyhow. Lately the banks are trying to pay less cash and move more to offering share options even to the newcomers. This might not be a bad move – as Harvey McKay said, “it is better to own 1% of something than to control 100% of it). Read more

Freefall by Joseph Stiglitz – A Book Review

I must admit I was a bit impatient when I saw the book being postponed for publishing for February 2010. Not only because “Freefall – America, Free Markets, and the Sinking of the World Economy” by the famous Joseph Stiglitz is a book which promissed to demistify the current prolonged global crisis in a more academic manner (read – with some stone hard economic analysis behind, not the small talk books written usually on the topic). I was expecting it with impatience also because Stiglitz is a non-compromises author – he does not fiddle around the topics, but shoots and moves ahead. And my expetations were actually a bit exceeded.
So, an “Freefall” is an economics book about the recent global crisis and how it spread from US to the rest of the world. I think that besides me, the first one thousand copies were bought by the following characters:
– president Obama and his financial advisors;
– ex- double president Bush, Alan Greenspan and all the economic advisors who accompanied him and
– the bankers who invented lots of arguments to get trillions of dollars in cheap loans from the US government to make even more profits. Read more