The Best Job in the World?


Written on 9/26/2008 02:45:00 pm by sikapitan

I was told by someone that when he was in University, when people talk about Finance, the immediate association would be banker. And banker here does not mean your sexy Investment Banker, but actual bread-and-butter deposit, loan etc. banking.

Nowadays, there’s a myriad of opportunities for those who did Finance or its ilk in university. Everyone wants to be an Investment Banker, and for good reasons too.

The world economy has moved beyond the simple import export of goods and services. Some very clever folks have decided that simply dealing with real, tangible products are no longer enough to satisfy their lust for money.

So they created the futures market, short-selling and other kinds of financial razzmatazz that deals not with the present, real and tangible. Instead, the vast amount of liquidity going around the world these days are based on perception, on anticipation, on hedging for the future and sometimes, just plain old speculation.

What this means is that the market is never rational and never perfect (Adam Smith would be disappointed, no?). And that means it works based on the herd mentality. Once a sign is picked up by everyone that the market is heading for a bull run, they will immediately act upon it. In other words, it’s a self-fulfilling prophecy.

IB folks are smart, no doubt about it. But they are also not immune to follow the herd, simply because if they don’t, and based their assessment on the plain old “boring” fundamentals, they might lose out to their peers. And losing out here means losing a huge paycheck at the end of the year.

This is what pisses me off a bit about all these Finance and Investment Bankers and Analysts. They get paid for the performance of their portfolio in any given year, and in a bull market, the payout could be astronomical. Unfortunately, the reverse is not true. If next year that very same portfolio loses value (most of the time back to square one, or even worse, a negative figure), the payout given in the earlier years would not be returned.

Gordon Gecko: Not an Investment Banker, but runs Wall Street...damn cool!

Some might argue that this is the same for every profession and you can only get compensated for your current performance. But actually, it’s not. If I get a bonus for sales, I have already done the sale, and I have already completed by KPI. If I manage to settle a case, I would get a portion of a done deal. There’s no more follow-up per se. But with investment, it takes years and years, so why should IB folks get compensated for an increase in value for one year when that value is not sustainable in the long run?

The yachts, the houses, the trophy wives, the fancy cars…will still remain with these guys. True, they run the risk of getting fired. But the effect of their actions affects a whole lot more people who have entrusted their hard earned savings on to this people who then proceeded to speculate and manipulate the market until one find day, and unfortunately it’s today, the fundamentals would catch up with them.

Anyway, this note is just an expression of my frustration with what’s going on with the world economy nowadays….so it’s a bit disjointed and ….well, I’m tired too with this heavy but exciting new job scope.

Hope that this does not discourage anyone from taking Finance. I might need a CFO one day for my company.

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