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My Time at Lehman

nickchirls.com

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Re: My Time at Lehman

#51

Post by nchirls »

jwb119 wrote: post #8

I worked at Lehman from 2004-2008 in investment banking and on the bond trading floor and I think I have a little more balanced view. Yes, there are people on wall street that hate their jobs. Yes, there are people obsessed with money. That's easy to point out. But there are also some people that are there because they like working with their friends and making big bets, and getting proven wrong or right. It's actual…

Appreciate this perspective. Not hard to imagine why working with friends would be fun. I have many friends who still work on Wall Street or in the financial industry. I don't disrespect them for it, although I do wish more young smart people were focused on making things rather than transacting. I tried to write this post specifically about MY experience and stay away from generalizations as much as possible.

Re: My Time at Lehman

#52

Post by skywalk »

nissimk wrote: post #41
harryh wrote: post #30

Earlier quoted context omitted.

If you're investing over the long term and can afford to ride out the shocks then historically speaking stocks have always out performed bonds. That's not gambling. It's not a zero sum game between you & Goldman. In a growing economy everyone can win by investing.

While cash securities markets (i.e. stocks and bonds) are not a zero sum game, derivatives markets (i.e. futures, options and all kinds of swaps) are zero or negative sum by definition. Also, derivatives markets are far larger in size [1]. There are always 2 parties to each transaction and one makes the money that the other one loses. The additional transaction fees that go to the banks and various other operations p…

Can we stop quoting the underlying notional size when comparing size to equity markets? If you know how a derivative works, it's well understood that quoting the notional to represent size just doesn't make sense.

To put it simpler, a terminated CDS contract does not mean there is a loss of wealth equal to its notional, whereas a stock price going to zero in the equities market literally means you just lost the complete amount you invested.

Not to sound offensive, but I've heard this comparison way to many times and it just doesn't add up in terms of prices - most swaps, for instance, have their fixed leg in the single digits in relation to their notional.

Re: My Time at Lehman

#53

Post by jdross »

orangethirty wrote: post #18
jdross wrote: post #15

Not to be too self-promotional, but this is literally the problem we're solving at Addepar. 15 years ago the power shifted from banks to hedge funds, and then in 2008 it started shifting to investors. But they still don't have the tools to understand what's going on. If you're interested in solving problems like this in an engineering-led company, please email me. I'd love to talk.

What are your plans to deal with this?

There's a whole lot we don't discuss on the website, which is focused towards current target customers of the tool we've built vs. our broader goals to bring transparency to the financial world.

First we've built a (we've been told) very powerful tool to quickly group, filter, sort, and compute standard financial metrics on a portfolio. Importantly, we don't care where you own your securities. It can be holdings from financial accounts, operating companies, homes, art, private options, manually brokered CDSs, whatever. Shockingly, our customers like to pay us a fair amount of money for this tool alone!

On the back end this wasn't easy. We have to normalize the incredibly varied (and often inaccurate) information from banks, third party data providers, excel spreadsheets and other systems. Reconciliation, all day.

Second, if facebook has a friend graph, we're creating the financial graph by aggregating ownership across all sources for our customers to analyze and report on.

At a high level, the financial world (shockingly) lacks a standardized way of communicating information about ownership and transactions. There are complex and specific protocols like SWIFT and FIX, but no standard way of saying "this is what I own, this is what I used to own, this is how it's changed, etc." Banks each make them up with hundreds of unique data formats, often sent with COBOL-style headers. It's 30 year old technology.

Long term, we'd like to open this open both as a data format for representing financial data and as a set of APIs for building tools to interact with financial data.

To use another analogy, if you wanted to make a phone game in 2004, you had to build a phone. Then the iPhone came out. If you want to make a program to analyze portfolio risk in 2013, you need to build out relationships with an entire network of banks, data providers, and customers. We want to be the "app store" for those tools.

There are a million other ways to make a platform like this valuable, but I'll save some of the juicier (and more strategic) ones for personal conversations if you're interested :)

Re: My Time at Lehman

#55

Post by nchirls »

jwb119 wrote: post #8

I worked at Lehman from 2004-2008 in investment banking and on the bond trading floor and I think I have a little more balanced view. Yes, there are people on wall street that hate their jobs. Yes, there are people obsessed with money. That's easy to point out. But there are also some people that are there because they like working with their friends and making big bets, and getting proven wrong or right. It's actual…

One more point regarding the bonus question. I don't believe that Wall Street properly accounts for the amount of risk traders take. Should that trader receive 10% of the money he made for the bank that year? No, absolutely not. Because he or she could lose just as much or more the next year. The time horizons are skewed and people on Wall Street are compensated based on short time horizons when the risk in fact is spread over many years. Unfortunately, when things go sour, the general public pays disproportionately.

Re: My Time at Lehman

#56

Post by nchirls »

lifeisstillgood wrote: post #10

The experience reminded me of one as a child when I unfairly sold some worthless items to neighbors at a stoop sale in front of our house in Brooklyn. When my parents found out that night, they made me go from home to home on our block returning the money. I think I like his parents :-)

Indeed, they're quite wonderful and I'm very lucky :-)

Re: My Time at Lehman

#57

Post by jwb119 »

nchirls wrote: post #55
jwb119 wrote: post #8

I worked at Lehman from 2004-2008 in investment banking and on the bond trading floor and I think I have a little more balanced view. Yes, there are people on wall street that hate their jobs. Yes, there are people obsessed with money. That's easy to point out. But there are also some people that are there because they like working with their friends and making big bets, and getting proven wrong or right. It's actual…

One more point regarding the bonus question. I don't believe that Wall Street properly accounts for the amount of risk traders take. Should that trader receive 10% of the money he made for the bank that year? No, absolutely not. Because he or she could lose just as much or more the next year. The time horizons are skewed and people on Wall Street are compensated based on short time horizons when the risk in fact is s…

Yes, exactly. This nails the fundamental problem with the street in my view: unlimited upside, limited downside. You risk everything and have a great year you are rolling in cash. You aim high and fail miserably you probably get fired and maybe even picked up at another bank. This doesn't even get started on the lack of criminal enforcement for fraud, etc. Right on.

Re: My Time at Lehman

#58

Post by orangethirty »

jdross wrote: post #53
orangethirty wrote: post #18

Earlier quoted context omitted.

What are your plans to deal with this?

There's a whole lot we don't discuss on the website, which is focused towards current target customers of the tool we've built vs. our broader goals to bring transparency to the financial world. First we've built a (we've been told) very powerful tool to quickly group, filter, sort, and compute standard financial metrics on a portfolio. Importantly, we don't care where you own your securities. It can be holdings from…

Always interested in meeting smart people like you. Shoot me an email. I'm very into securities analysis.

Re: My Time at Lehman

#59

Post by dsdjung »

I remember a friend who was telling me that only reason this wall street thing works is because there are enough not-well-informed people who will continue to feed money into the market for other well informed people to profit from. It is about people being in a market that they know very little about in a hope of making some riches.

Re: My Time at Lehman

#60

Post by jwb119 »

nchirls wrote: post #51
jwb119 wrote: post #8

I worked at Lehman from 2004-2008 in investment banking and on the bond trading floor and I think I have a little more balanced view. Yes, there are people on wall street that hate their jobs. Yes, there are people obsessed with money. That's easy to point out. But there are also some people that are there because they like working with their friends and making big bets, and getting proven wrong or right. It's actual…

Appreciate this perspective. Not hard to imagine why working with friends would be fun. I have many friends who still work on Wall Street or in the financial industry. I don't disrespect them for it, although I do wish more young smart people were focused on making things rather than transacting. I tried to write this post specifically about MY experience and stay away from generalizations as much as possible.

> I do wish more young smart people were focused on making things

Yep, I'm with you! Thanks for writing the article, I enjoyed reading it. We may have even walked by each other on the third floor at 745 7th ave at some point. Ha.

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