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My Time at Lehman

  
Analysis, Education
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I started at Lehman Brothers on June 1st, 2007 as a first year analyst. It was my first job out of college. Dick Fuld, the CEO at the time, publicly discussed “the road to two-hundred,” in which he would not retire until the stock reached $200 per share, almost three times the price when I arrived. Everyone at the firm believed this as though it were a fact – that there was something special about Lehman Brothers stock – it always went up.

I joined Lehman for a few reasons. The first was personal. My mother worked on Wall Street and passed away when I was a teenager. I felt, somewhat misguidedly, as though following in her footsteps would bring me closer to her. The other reasons were simpler. I had been interested in the stock market as a kid (though I went to work trading bonds and credit derivatives), I wanted to make good money, and I thought maybe, just maybe, it would be a bit of fun. (more…)

A story of how honesty cost one trader his job.

  
  Education
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With the current climate surrounding the investment banking culture in the wake of the Barclay’s Libor scandal, it is interesting to read about the story of Steve Clark taken from his interview with Jack Schwager in the Hedge Fund Market wizards. 
 
Clark is a highly successful hedge fund manager, running the Omni Global fund which during the period since inception in 2001 has returned almost 20% per annum, with a maximum peak to trough drawdown of just 7% and not a single losing year. However during the 90s he tells a story of how he was forced out of a major investment bank purely for being honest. 
 
The excerpt from the interview goes as follows:
 
‘Nomura ended badly for me because there was a change in management. The new guy in charge wasn’t straight. He had a convertible book, and all he was doing was buying illiquid convertible bonds and every month pushing the price up. He was the market because he owned most of these issues. So all he had to do was buy a few hundred bonds every month to push the price up. (more…)

Links for you

  
Analysis, Education, LINKS
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This is what Crude Oil looks like.

Mexico is paying the price for not being open in its development of crude reserves.

What is the real consumer impact on our economy?

Not only should we not get rid of nuclear weapons, but giving one to an unstable country often makes it safer to deal with them.

Just another step along China’s path to economic and political liberalization, it’s happening right before our eyes people.

My father, who is a real estate attorney in NYC, told me this week that all of the sudden he is slammed with deals after nothing for the past year, interesting.

Good luck finding a job right now.

What happens when California reaches 15% unemployment and crude trades at 100$.

The is ZERO value in cable news, Thomas Barnett is one of my favorite writers by the way.

I will volunteer to colonize the moon, but I don’t ever want to pay taxes up there.

Who gets how much oil from Iran.

There is no such thing as a safe haven for terrorist organizations anymore.

If you have the time and desire, please read this report on China, it’s long, but well worth it.

For all the ruckus in 08′, investing in hedge funds will always be better than leaving it to the market.

Smart kids will always want to go into investment banking, dumb rich kids as well.

Howard Marks On Luck And Skill In Investing

  
  Education
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When Howard Marks graduated from the Booth School of Business of the University of Chicago, he was turned down for the one job he really wanted. That, he said, was the luckiest moment of his career. The firm that turned him down was Lehman Brothers.

Marks is the co-chairman and founder of Oaktree Capital Management. He spoke to an audience of investment professionals and MBA students at the annual MIT Sloan Investment conferencein Cambridge on February 20th.

His talk was moderated by Randy Cohen, a senior lecturer at the Sloan School. Marks and Cohen discussed a range of topics, including his luck and skill in career choices, the lack of efficacy in forecasting, the importance of second-level thinking, investing in the current interest rate environment and the ingredients for investment success.

On luck and skill in career choices

Marks said he was not the kid who started reading prospectuses at nine years old and then invested his bar mitzvah money. Before deciding on a career in finance, he considered being a history professor, an architect, an advertising man and an accountant. Before graduating from the University of Chicago, he interviewed for jobs in corporate treasury, banking, investment management, investment banking, accounting and consulting. (more…)

Life Lessons From A 30-Year Wall Street Veteran

  
Analysis, Education
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Talking to a journalist a few days ago I realized that I can now add “30-year Wall Street veteran” to my list of epithets.  It’s not as catchy as “wily Odysseus” or “wine dark sea”, but then again my life on the Street doesn’t really qualify as Homeric either.  Rather, it’s been more like watching an old school Broadway musical, complete with lots of big personalities whose stories are often best told with small anecdotes.

Along the way those people have taught me everything I know about a career in New York finance.  They all bubble up to what sound like clichés, but only because they are true.  But below the surface… Well, how you learn those clichés is never boring.

Lesson #1: Set expectations and then beat them.  Everything on Wall Street carries with it the weight of expectations, from careers to asset prices.  In both cases, their values only change when outcomes differ from what was expected.

The best example I ever saw: Years ago I worked with a wily investment banker who played the expectations game better than anyone else I ever saw.  He knew that the success of an Initial Public Offering or secondary share issuance often came down to perception.  Did the institutional buyside think he was marketing a hot deal, or a cold one? (more…)

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