The World of Investment Banking: Trading, Investing or Managing?

For new and experienced investors alike, the best place to start with managing your money and investing it wisely is by asking investment bankers, who are specifically trained and experienced in the investment world. The insight, experience and technical knowledge they can provide will help turn your investment into a profitable one.

What is Investment Banking?

Experience investment bankers will have expertise in a broad range of areas, including investments, stocks, mutual funds, money bonds, hedge funds. They will also be informed about recent macro-trends, changes in the economy and industry developments. You can also expect many investment bankers to be specialized in one area.

Leading financial experts like John Studzinski Weforum will tell you that one of the biggest determinants in how well your stocks will perform is knowing as much about them as possible. This means researching potential start-up companies and corporations before investing, and keeping a close eye on them to monitor growth patterns and change. By keeping up with what’s happening with investments, you will be able to react sooner if you need to sell a stock, or purchase more of it.

Different types of Investment Banking

Investment banking is usually made up of three components: sales and trading, asset management, and the obvious one, investment banking. The services these three components provide as follows:

Investment Banking: this usually refers to corporate and commercial finance, and offers advice and assistance with investment transactions, including using capital to acquire or merge a business, or to sell or divest part or all of a business.

Sales and Trading: if you want to sell a stock, buy a stock, or trade a stock? This area of expertise at your investment bank is where you’ll go for any type of stock management, or simply to check on the happenings in the stock market.

Asset Management: manage existing assets, such as private or commercial property, here. Seek capital for your assets or acquire additional assets here as well.

Tips & Advice on Dealings

When doing business with investment banks, there are some things to keep in mind.

First, know that there are large and small investment banks, with many smaller investment banks making actual investments themselves. But regardless of their size or whether or not they manage stocks, all types of investment banks can assist you with managing your stocks and shares.

Depending on your investment needs, you’ll either work with an analyst or an associate. An analyst will take care of helping you determine what to invest and where, and for businesses, analysts can assist with putting together pitches and models. An associate is a level higher than an analyst, and will help you out with more complex financial transactions, such as business mergers or acquisitions.

All investment banks have vice presidents, a senior vice president, and a managing director, but unless you are an extremely valuable client, you will rarely have interaction with these "higher ups".

Lastly, make sure that you understand the terms & conditions BEFORE you sign a deal. And if they are too complex, too wrapped up in legalese, you will need help to determine the veracity of the contracts. Don’t be afraid of doing this, after all you should…

Trust But Verify

After the financial crisis of 2007-8, you may have read that investment banks may have engaged in trading against their clients, that investment banks sold inappropriate products, or otherwise acted against their clients’ best interests.

The only suggestion that I can make is that you should keep up to date with your investments and not be afraid of querying, checking, double-checking and otherwise managing the investment managers to make sure they are doing their job. While it might be difficult to avoid second guessing the professionals, and you don’t want to micromanage them (that’s not what you’re paying for), you must still be in charge of your money. After all, whose money is it? It’s not theirs.

Investment banking is something you’ll want to look into if you’re concerned about being able to support yourself after retirement, about managing your estate & wealth, or developing your business investing.

Double Dip Recession: Is this where we’re headed in 2010/11?

Are we at risk of a double dip recession? Certainly many investors, economists, and pundits think so.

You may have noted that the Australian Reserve Bank has raised interest rates, and other countries are following suit. Unfortunately for many borrowers in the weaker economies of the Western world, jobs are being cut, and salaries are stagnating as companies and governments fight their own battles with shrinking revenues.

What is a double dip recession?

In short, a double dip recession occurs when the gross domestic product (GDP) growth starts to shrink after a quarter or two of positive growth. This positive growth period itself occurs after a recession.

In other words, the sequence of events is: a recession that precedes a recovery; after a truncated period in the recovery, perhaps only one or two quarters, a recessionary period returns as growth in GDP shrinks again.

Consumers Bite Back

So what do borrowers do facing such double dip uncertainty? They rein in spending, cut expenses and start saving like mad. And we can all clearly see the effects of this, as retail expenditure falls off a cliff, bank balances rise and expensive services get cut, like premium services on cable, mobile phone, etc..

Unemployment in the US is hovering around 10% so job security is a primary concern for many working people. Those with jobs would rather save more money now than spend, spend, borrow and spend, so the employed are increasingly boosting their savings rate to multi-year highs. With unemployment likely to remain high for the foreseeable future, this bodes well for savings rates and workers’ bank accounts and it coincides with a period of lower interest rates.

Banks: Protecting their interests

The banks have acted in their own best guardians in many situations by raising rates on unsecured loan items such as credit cards, personal loans, etc. as they are facing an onslaught of credit defaults and increasingly interventionist laws from governments worldwide that seek to curtail their excessive profiteering.

The latest round of BASEL III talks has threatened to increase capital requirements further, thereby making banks less vulnerable but in short-medium term dampening lending prospects even further.

However, many consumers are experiencing surging credit card rates to as high as 30% pa for their debts, increased levels of minimum payments, and restricted credit lines, or even credit card terminations.

The consequence of this for the economy in the short term is only bad: higher default rates on loans, less leveraged spending on consumer items, less reinvestment by companies, and tightened budgets in both governments and corporations. And banks on the one hand are stashing the extra cash to bolster their banking reserves rather than lend, and on the other cite reduced demand for loan products and services. But governments keep calling for more lending, yet banks only lend to those who don’t need it. Ironic, but true. After all none of this really lessens the risks of a double dip recession by any means.

It’s The Economics That Matter

Why? The inflationary subsidies, tax breaks and bailouts have all served to add stimulus to the economy, preventing the situation getting far worse. Recently, for example, in Taiwan, the economic indicators started flashing green again, after extensive periods of both overheating (until 2007) and recession (2007-2009). So in many markets, there are initial signs of recovery as some exporting economies move out of recession and bond rates are indicating upward pressure, too. But…

Where now, consumers?

Many economists are predicting a double-dip recession in 2010. This may happen, and things may worsen again in the short term as the stimulus measures are withdrawn, run out of funds (new car credits) or expire their terms. Even if that doesn’t happen, I don’t think consumers are going to start spending any time soon. They are scared of the future, and the prospect of a double-dip may only force consumers to redouble their efforts at controlling their spending.

In short, going into the latter part of 2010, there is still a lack of confidence in the recovery; and recent upturns in the stock market are likely to be short-lived. I do not think we will retest bargain basement pricing as in early 2009, but for those with patience, guts, and cash, there will be good opportunities to purchase both stocks and real estate in the coming 12 months.

What’s an investor to do?

With the risk of a double dip recession, typical in a bear market scenario like this, investors are unlikely to be buying for the long haul. They would prefer to ‘trade the markets’ in either direction, buying or shorting stocks when there’s opportunity otherwise staying in cash.

How would you plan to trade these recessionary times? Let me know, via the contact form! Look forward to hearing from you.

How to Find the Best Foreclosure Deals

Because of the struggling economy, many homeownersarefacingforeclosure. If you are looking for a home to buy, you might consider purchasing a foreclosure. This will enable you to buy a home below the market value. Before looking for a foreclosed home, you need to research your options to get a great deal.

You can look online at the foreclosure sale notices to see what homes are for sale. Your local newspaper will also list foreclosure notices. You can even subscribe to foreclosure listings, so you can see the best deals on homes. A lender will conduct a foreclosure auction; therefore, you need to arrange to attend the proceedings.

Before attending an auction, make sure that you have enough money available to purchase the property. If you will need to finance the home, you need to get pre-approved for a loan, so the money will be accessible.

Before attending an auction, drive by the home to make sure it is in good condition. You can also look at the neighborhood to see if it is safe and welcoming. When you find a home that you would like to purchase, you need to register with the person conducting the auction. They will want to know information about yourself, and they will need proof that you can afford the home.

You can then attend an auction and bid on the property. Make sure you do not go over your price range. If homes are not sold at auctions, you need to keep checking with the bank. In some cases, banks will be desperate to get rid of a home, so the price will continue to decline.

It also might be a good idea to hire a real estate agent. They will be familiar with properties that are close to foreclosure proceedings. You can then purchase a great home at an excellent price.