<p>okay, so i'm a senior at hs and just got accepted to NYU Stern with the plan to major in finance to prepare for IB.......however, especially these past couple of months, IB banks have not been in very good standing....at first i got nervous, especially with the 2nd TARP that got announced today, but i'm thinking that this might actually be a positive in the long run. For instance, since IB are taking a hit right now, people (at least around me) have been suggested to pursue another career path, including myself...but i figure that this will just equal less competition in the long run</p>
<p>BASICALLY: How long do you think it will take for IBs to return to previous levels? Will TARP effect salaries of lower-level employees (analysts, associates, MDs (although thats not very low))? If you think they will not return...what other careers are you looking into, besides starting a buisness or hoping to become a CEO, and what careers have similar salaries or at least a progression of salary (and not something like a surgeon, when you don't even start working till your mid-30s)</p>
<p>Salaries are always going to be performance based. The only problem is that banks just don't have money to continue expanding and aren't making that much money. If the market rallies consistently, banks will make money and pay out a lot of money. Just look at how the market climbed when bush was reelected.</p>
<p>There may be some salary caps and possibly regulatory reforms to reduce executive pay. But the underlying fact remains, if the firm does well.... people should and will be paid well. </p>
<p>If you're a trader, why shouldn't you get 50% of the profit that you earn? There will be shirking if pay diminishes... and that'll be a problem.</p>
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Salaries are always going to be performance based.
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<p>No, salaries are not performance based. Salaries are contract stipulated; bonuses are performance based. Base-level salaries are not being affected in this market; the oh-so coveted bonuses are.</p>
<p>OP - It is impossible to predict when the market will return back to '04-'06 levels. My guess is that for the next several years you're going to see a lot smaller deals being done. No more $10B+ deals. There is still some activity in the middle and lower-middle market. With the credit markets in turmoil, M&A and LBO activity is effectively at a standstill. As hmom5 mentioned in another thread, deal execution is going to require more creativity and more patience than before. Normal cash acquisitions are not going to be done freely in a liquidity constrained market; stock-for-stock exchanges don't make sense in a volatile market. You're going to see a wider range of investments in the capital structure - not necessarily just in common or participatory preferred equity. </p>
<p>As far as your other questions regarding compensation, if you enjoy finance, pay should be of little concern to you. With that said, bonuses will be very low for the next couple of years. Good thing too because, no offense, it'll weed out kids like you who are driven primarily by monetary reasons.</p>
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plan to major in finance to prepare for IB
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<p>We took all types of majors.</p>
<p>Tip: Major in Finance, AND learn how to program computers. For some reason, there are very few people that can bridge the divide between the finance users and the computer programmers. If you can't get an IB job, you can get an IT job programming the risk management systems of all the banks.</p>
<p>Diversify your skill set. Honestly, my biggest regret in college is focusing too much on economics/management/finance. That way, you'll have a backup plan in case finance is still in ****.</p>
<p>Make yourself more marketable by doing something like econ/math, finance/cs, econ/bio, etc.</p>
<p>Do you really want to be an ibanker? If your only concern is salaries, then I really don't think its the job for you. I'd say go enjoy your first year at stern, take broad classes, and don't worry about a career until at least your sophomore year---- then take a look at what classes you liked and what concepts you enjoyed and see where that fits. Salaries will drop in finance and will not return to the highs anytime soon. While it may seem to be less competition, it's also less jobs.</p>
<p>Bulge bracket salaries are not returning to pre-crisis levels anytime soon, if ever. The whole culture of Wall St is changing, and nobody knows how long this change will last. Things will be much better by the time you graduate, as banks will be looking to expand. However, with the public and the government looking into ibanking activities, I would not count on the same exorbitant bonus/salary structure that seems to have attracted you to banking. The future will probably be in boutiques and alternative investments (PE, hedge funds)</p>
<p>^what are you talking about?
PE and hedge funds were hit the worst...the only class of hedge funds that have done well through this crisis are Global Macro...</p>
<p>I'm with Roubini and Taleb on this...I'm very, very bearish for the future.</p>
<p>Wutang is right, where is all the leverage going to come from for PE firms to turn a quick profit by managing CFs? LBO's are difficult to come by these days. For example, when was the last time you heard of KKR closing a big deal. Its a different world right now, and actually I'd say HFs might be one of the hardest hit along with the IB's.</p>
<p>I'm not bearish long term though. I think in advisory, MM and boutiques will grow in importance. I think Wall Street's time will come again. It always seems to happen cyclically, its the nature.</p>
<p>^I agree...the Lazard model will always be around. But Wall Street will have to seriously reinvent itself. </p>
<p>Hedge funds have seen such precipitous growth over the past decade, and many funds offered zero value...now that the liquidity has dried up, all the fakers are being exposed...Madoff is just an extreme example. Plenty of shops charged 2 and 20 on what were really leveraged mutual funds with no edge...pretty much legal theft. </p>
<p>I was seriously planning on starting a small hedge fund for a while, and I even had some investors lined up; that's how ridiculous it got.</p>
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Hedge funds have seen such precipitous growth over the past decade, and many funds offered zero value
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<p>Huh? Do you even know what a hedge fund is? HFs, by definition, are not supposed to offer value. When in the history of finance have fund managers added value to companies or the capital markets? HF managers opportunistically manipulate the market to make profits by taking various positions vis a vis risk-based investment strategies. They "offer zero value" because they're not PE shops looking to capitalize on portfolio growth and improvement.</p>
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I was seriously planning on starting a small hedge fund for a while, and I even had some investors lined up; that's how ridiculous it got.
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<p>HAH, wutangfinancial is officially the comedian of the year. By "seriously planning" do you mean you drew up your investment thesis on a paper napkin with a crayon at the dinner table? By having "investors lined up" do you mean searching beneath sofa cushions for loose change and rummaging through your father's wallet for singles? Ridiculous, indeed.</p>
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Huh? Do you even know what a hedge fund is? HFs, by definition, are not supposed to offer value.
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<p>Then why would institutions give them any money to invest? I think you misinterpret what he means by 'offer value' as in 'value-added'.</p>
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HF managers opportunistically manipulate the market to make profits by taking various positions vis a vis risk-based investment strategies.
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<p>Do you know what a hedge fund is? They're not supposed to be "manipulating" the market.</p>
<p>"Huh? Do you even know what a hedge fund is? HFs, by definition, are not supposed to offer value. When in the history of finance have fund managers added value to companies or the capital markets? HF managers opportunistically manipulate the market to make profits by taking various positions vis a vis risk-based investment strategies. They "offer zero value" because they're not PE shops looking to capitalize on portfolio growth and improvement."</p>
<p>LOL....you should never flame someone when you have no idea what your talking about. You actually DON'T know what a hedge fund is. You can fool other people, but this sentence: "managers opportunistically manipulate the market to make profits by taking various positions vis a vis risk-based investment strategies" is complete, utter nonsense. And you know it.
Where do I start...
1. Manipulating the market is illegal. Although there are loop holes, such as naked short selling, this is not the purpose of a hedge fund. Hedge funds began as relatively riskless investment strategies that practiced arbitrage, profiting off the convergence of dual listed securities. Of course, hedge funds employ all kinds of strategies today.
2. Many hedge funds DO capitalize on portfolio growth and improvement. Do you know what an activist hedge fund is, little kid? </p>
<p>Everything you said is wrong. I would change your screen name.</p>
<p>It looks like Wall Street can use some history majors. Not that I am a history major, but I know a lot about history. My conclusion is, this has all happened before:</p>
<p>Panic of 1819
Panic of 1825
Panic of 1837
Panic of 1857
Panic of 1873
Panic of 1893
Panic of 1901
Panic of 1907
THE GREAT DEPRESSION (Much worse than our current situation)
Recession of 1974</p>
<p>The fact of the matter is if you told someone waiting on line for bread during the Great Depression that the 20th century would be a time of financial prosperity and technological breakthrough they would probably laugh in your face. All of these previous economic slowdowns came with bank failures, and every time America has recovered. </p>
<p>This economic recovery is going to be even more significant than any previous recovery. Economic prosperity follows technological breakthrough, and the 21st century is going to make the industrial revolution a relatively insignificant blip on the radar of the development of mankind. The developments being made in the fields of nanotechnology, robotics, artificial intelligence, and medical science are truly going to revolutionize the world, and the way it does business. Talk to any scientist you know, and they will tell you the 21st century is the golden age of discovery, and more breakthroughs are going to occur this century than the previous 20 centuries combined. Economic prosperity almost always follows technological breakthrough, and I do not see why it is any different at this point in history.</p>
<p>To make a long answer short I do not know if investment banks will recover within the next 4 years. What I do know is the economy as a whole is going to flourish throughout the majority of the 21st century, and history shows when the economy flourishes, people with jobs in the field of finance get very rich.</p>