Being a trader for an investment bank has never been a stress free job. Besides the usual demands to generate profit, you are either looking ahead at your next opportunity, or over your shoulder to see if an axe is heading your way. It is not uncommon for some firms to over-hire in the good times, then conduct mass layoffs when things eventually turn sour. This time around, everyone is a little more tense and still waiting for someone to sound a horn signalling all clear.
There have been two rounds of layoffs at the firm where I work, both were very frightening experiences. Investment banks are run a littke bit differently compared to a typical business, so here’s a rundown of what a layoff day is like in my world:
7:15am: Arrive at work as usual, begin preparations for the day.
7:45am: Quick team meeting announced. In the boardroom we learn that “things will go down today” and to keep your head down and focus on your work.
9:20am: The trader to your left gets a phone call asking them to go upstairs. You don’t notice him leave. He is never seen again.
9:35am: You notice the trader to your left is missing. Shit.
10:15am: You take a moment to stand up and look around the trading room. You see empty chairs and wonder if people are on vacation or cut.
10:30am: People start talking about the day’s casualties, everyone wonders if it’s over yet.
11:10am: Your Managing Director walks around announcing who is no longer with the firm.
11:11am: The responsibilities of the departed are spread around the desk, on a temporary basis.
2:40pm: Discussions begin on who will permanently cover now vacant jobs. This is your only opportunity to be proactive and try to increase your value (and hopefully save your job down the line).
4:00pm: Trading day winds down. Training begins on any new roles you’ve added to your job.
6:00pm: Go home and have a stiff drink.
Repeat this time-table for every round of layoffs. Obviously, for those who are left, priorities become very different. Very few people are looking ahead to new opportunities. Very few people are that concerned what their bonus will look like. Everyone is happy to still be employed. They are, however, conscious that as a survivor, their stock has gone up. The time will come, eventually, when traders again will look ahead to the next opportunity and realize they are in a better position than before.
I always get a lot of question asking how someone becomes a trader. The truth is that there is no simple answer, it is a combination of education, ability, personality, drive & luck. I’ll quickly go over them below:
Education
At a minimum a University Bachelor in Commerce/Economics and preferably some industry courses. All the large institutions recruit at the major Universities in September for positions beginning after graduation in June/Aug. There are usually two types of positions, Analyst & Associate. Analyst is for Undergrads and Associates for MBAs. Read more
When I first got interested in markets I thought technical analysis was a great tool. It was easy to learn, made logical sense and most importantly, appeared to work.
I was fooled by this cunning, seductive mistress. Technical analysis is the fools gold of finance. It is an illusion that is as real as Michael Jackson’s face. But to quote Levar Burton’s Reading Rainbow: “You don’t have to take my word for it”. Read more
Not too many people pay attention to contrarians. They often remind me of the kids in school who ate paste. Sitting in a corner by themselves, ostrasized by their peers. Loners. What you forget is that these kids are often the ones who grow up to do great things. Their minds are complex and cavernous, sparkling with nuggets of information that every investor should pay attention to.
Contrarians are not the ones shouting from atop desks, playing silly sounds and acting like crazed lunatics when discussing the stock of the day. In fact, one could argue that a contrarian is the exact opposite of Jim Cramer. Read more
After reading a heated discussion in a personal finance forum earlier this week, I thought it would be a great idea to write my thoughts on one of the most intensely debated and discussed issues in finance. This is a question that I ask MBA grads during 1st round interviews. You’d be surprised how often very smart people can sound very stupid when asked if markets are efficient, and what to do about it.
There are two basic schools of thought in regards to investing in the stock market. In one corner we have the active investor. She believes that markets are inherently inefficient. An inefficient market is one where prices do not accurately reflect the value of an asset at that point in time. Therefore, some stocks will be “cheap” and others “expensive”. The goal of the active investor is to purchase the “cheap” stocks and then sell when they match/exceed their true value.
On the flip side we have the passive investor. He believes that the market is efficient and all prices accurately portray the true value of an asset. There are no “cheap” stocks. Everything is priced to perfection for that point in time. Depending on how far the investor is on the passive scale, they either base purchases purely on future expectations, or opt for the ultimate in passive investing: indexing.
Which is the better approach? Read more
I’m out of the office today, but I’ve written this special feature about choosing a stock broker instead.
For many people, navigating the world of investment products and services is a daunting task. A stock broker can be a great way of saving time and effort by having a professional do the research and look after your finances. The process of selecting this individual can become as stressful and daunting as choosing a house or planning that perfect trip. You’ve worked hard for your money and you want it treated right, so read on and enjoy the tips!
