I'm a bank regulator, this post resonates so hard. The irony is that these trends are obvious to anybody with a brain who pretends to be even remotely rational, which excludes basically every banker I've met (C-suite or not). When the industry is surviving almost solely bc of non-interest income (service charges, fees, etc), that's an industry that is ripe for tech disruption and deserves to be replaced.
CEOS and CCOs scramble to find yield on loans anywhere they can, but at the end of the day they can't see the forest for the trees. Layoffs are happening in huge numbers as they realize their days of profitability are dwindling.
Never knew this. Easy to see the big picture of technology replacing most of it. Great lesson I learned in college was about tech related to television sets and the related peripherals. Over time, more consumers would want tvs integrated with everything and not want separate devices. Made sense then and it makes sense now.
I’ve spent the last 4 years developing software that automated acquisition and LBO financial modeling. My models are gorgeous, bottoms up, and the most detailed while maintaining elegance.
Just upload excel financials in any format. Scrub for the lines you want to keep and then enter our “turbo tax” process for building a model. Usually takes anywhere from 15min - 1hr depending on how detailed you want your revenue and expense builds to be. And they always look the same and are indistinguishable from a long form LBO that some analyst would make in a few days+. Moreover anyone who somewhat understands business and finance or accounting can do it.
Most people here about it and say …”but no way you can account for…how could deal with…too much variability.” And the answer is for 90% of any scenario in modeling we can handle it. The years were spent understanding how this isn’t chess…it’s bind-able. And the esoteric cases we can’t accommodate we allow the user to set up white space so he can spend another 15-30 min doing his weird extra nuance.
It can either cut serious time out if junior finance peoples lives or change their mandate entirely. It’s a matter of time until we complete merger models and other types. It’s a small niche market unless corporate America begins using it.
Would love to speak with anyone interested in checking it out.
Can attest to the decline on the trading / public equities side.
- Equities trading, absolutely desperate for volumes, need to make P&L with their own book (vastly reduced after '07) else don't really get paid much.
- Equity sales, new faces every 6-12 months. Only senior people making $$ from relationships formed back in the day.
- Research, completely subsidised by investment banking, only there as means to obtain M&A/IPO fees. I may or may not know a few stories that would trigger a regulatory investigation. Team size compressing and becoming more Junior. Competent people long gone to HFs.
Most people on those roles think "you will still need us to sell shares/bond". What they miss is that their business lines are being subsidised (by retail banking/M&A), they are quite expensive to employ, and profitability for the entire sector is compressing... that sounds like an explosive clown-like mix.
Bull - from your infamous "navigating wall street" post, the only tier 1 positions were M&A, HFs, LO PMs.
As of late you are only bullish M&A. Not recommending Hedge Funds roles anymore?
I'm curious to know how this slow bleed down of the banks will affect the consumer side of the banking business-- credit cards, auto loans, etc. Will the banks push harder in to retail loans with higher margins (+20% on credit cards) to try and cover their losses? I'm ignoring mortgages, because current rates are below inflation.
I just wanted to note that on your last part you mention "Why are the fees so high?". Would you not say that the current fees in ETH or other crypto are high, especially in peak times? Unless of course you are implying that the cryptonerds will fix fees in the future (parachain, sharding, lightning network etc). Love your work!
Spot on. Really appreciate the clear and concise value proposition of DeFi and how the financial sector will inevitably get replaced with code. Are there other sectors you are actively looking into/see a lot of opportunity for code to replace the status quo? Insurance, law are obvious ones but still very much in the early days.
Thoughts on private equity job out of college? Been lucky enough to snag a PE summer analyst program as an undergrad. Job is based in SG/HK, covering greater Asia and Southeast Asia where lots of inefficiencies that have yet to be exploited. Though US token flows slight lower by 10/20% compared to traditional M&A banking, hours are good, currently building an online side business as well. Thanks.
I have a close friend that runs a small wealth management shop. In the beginning of the year, he called me to help answer some of the questions his clients were ringing him off the hook asking about Bitcoin and Ethereum.
Legally he is not allowed to buy or sell crypto for his clients, at least that's what he says. He is older, doesn't understand the tech and is probably near retirement soon. I'm young, follow this substack and want to make another revenue stream.
Could I leverage this scenario and provide a bullshit TA course paired with some educational resources related to the origins/fundamentals of Bitcoin, Ethereum and other defi protocols? Same caveat though, he nor I would manage their crypto assets.
Is this an opportunity or something that's more trouble than its worth?
Thoughts on Strategy Consulting as a career vs M&A Banking from a skillset perspective? Feel like banking gives you more hardcore modeling skills vs Strategy Consulting providing a broader exposure to business situations and skills (business case modeling, DCFs, market sizing, analyzing large purchase data sets, etc.)
For those of you who will ask, there is definitely tangible value in private equity. For those not in finance private equity (PE) is buying a company, fixing it up and reselling the company in a few years - similar concept to fixing and flipping houses.
Some of these values include making the company operate more efficiency by cutting all bloat and opex and the value is seen with the return when the company is sold.
Recommend everyone read "The Big Short" to get an idea of how banks really work (packaging derivative junk debt into attractive high-rated products) and how stupid/negligent some of the ratings agencies/underwriters/regulators are...it would be comical if it weren't so grave with trillions in debt and people's lives intertwined.
Now Bull, I agree with your thesis. But due to the MAGNITUDE of money tied up in banks (and debt purchased by the Fed in order to print money), wouldn't we be talking mass societal calamity after systemic bank failures? And at that point wouldn't governments/central banks do "whatever it takes" to preserve the existing system? And how do average people who don't understand how to set up a cold wallet suddenly mass adopt crypto?
At that point you get hyperinflation - while that's good for crypto, do you agree the societal impacts of such a scenario are absolutely horrifying?
Big questions - not trying to be a doomer, but systemic bank failure would be catastrophic (unless we transitioned to a decentralized system before that happened).
Heard Saylor give an interesting interview where he believes in 10 years $USD will still be the world reserve currency, but it would be backed by Bitcoin as a stable store of value with limited supply.
Should be self-evident but does in fact need to be stated. Over the last nine months I've learned the hard way that in some cultures (Asia) this is incredibly difficult to get across.
How do you see this playing out for other market participants such as traditional stock exchanges, rating agencies, transaction law and auditors? How do these guys adapt to the incoming change? Until what year do you see the Bulge Brackets having an ECM/DCM division?
I'm a bank regulator, this post resonates so hard. The irony is that these trends are obvious to anybody with a brain who pretends to be even remotely rational, which excludes basically every banker I've met (C-suite or not). When the industry is surviving almost solely bc of non-interest income (service charges, fees, etc), that's an industry that is ripe for tech disruption and deserves to be replaced.
CEOS and CCOs scramble to find yield on loans anywhere they can, but at the end of the day they can't see the forest for the trees. Layoffs are happening in huge numbers as they realize their days of profitability are dwindling.
Never knew this. Easy to see the big picture of technology replacing most of it. Great lesson I learned in college was about tech related to television sets and the related peripherals. Over time, more consumers would want tvs integrated with everything and not want separate devices. Made sense then and it makes sense now.
I’ve spent the last 4 years developing software that automated acquisition and LBO financial modeling. My models are gorgeous, bottoms up, and the most detailed while maintaining elegance.
Just upload excel financials in any format. Scrub for the lines you want to keep and then enter our “turbo tax” process for building a model. Usually takes anywhere from 15min - 1hr depending on how detailed you want your revenue and expense builds to be. And they always look the same and are indistinguishable from a long form LBO that some analyst would make in a few days+. Moreover anyone who somewhat understands business and finance or accounting can do it.
Most people here about it and say …”but no way you can account for…how could deal with…too much variability.” And the answer is for 90% of any scenario in modeling we can handle it. The years were spent understanding how this isn’t chess…it’s bind-able. And the esoteric cases we can’t accommodate we allow the user to set up white space so he can spend another 15-30 min doing his weird extra nuance.
It can either cut serious time out if junior finance peoples lives or change their mandate entirely. It’s a matter of time until we complete merger models and other types. It’s a small niche market unless corporate America begins using it.
Would love to speak with anyone interested in checking it out.
Can attest to the decline on the trading / public equities side.
- Equities trading, absolutely desperate for volumes, need to make P&L with their own book (vastly reduced after '07) else don't really get paid much.
- Equity sales, new faces every 6-12 months. Only senior people making $$ from relationships formed back in the day.
- Research, completely subsidised by investment banking, only there as means to obtain M&A/IPO fees. I may or may not know a few stories that would trigger a regulatory investigation. Team size compressing and becoming more Junior. Competent people long gone to HFs.
Most people on those roles think "you will still need us to sell shares/bond". What they miss is that their business lines are being subsidised (by retail banking/M&A), they are quite expensive to employ, and profitability for the entire sector is compressing... that sounds like an explosive clown-like mix.
Bull - from your infamous "navigating wall street" post, the only tier 1 positions were M&A, HFs, LO PMs.
As of late you are only bullish M&A. Not recommending Hedge Funds roles anymore?
I'm curious to know how this slow bleed down of the banks will affect the consumer side of the banking business-- credit cards, auto loans, etc. Will the banks push harder in to retail loans with higher margins (+20% on credit cards) to try and cover their losses? I'm ignoring mortgages, because current rates are below inflation.
I just wanted to note that on your last part you mention "Why are the fees so high?". Would you not say that the current fees in ETH or other crypto are high, especially in peak times? Unless of course you are implying that the cryptonerds will fix fees in the future (parachain, sharding, lightning network etc). Love your work!
Spot on. Really appreciate the clear and concise value proposition of DeFi and how the financial sector will inevitably get replaced with code. Are there other sectors you are actively looking into/see a lot of opportunity for code to replace the status quo? Insurance, law are obvious ones but still very much in the early days.
Where can we get your books from?
Thoughts on private equity job out of college? Been lucky enough to snag a PE summer analyst program as an undergrad. Job is based in SG/HK, covering greater Asia and Southeast Asia where lots of inefficiencies that have yet to be exploited. Though US token flows slight lower by 10/20% compared to traditional M&A banking, hours are good, currently building an online side business as well. Thanks.
I have a close friend that runs a small wealth management shop. In the beginning of the year, he called me to help answer some of the questions his clients were ringing him off the hook asking about Bitcoin and Ethereum.
Legally he is not allowed to buy or sell crypto for his clients, at least that's what he says. He is older, doesn't understand the tech and is probably near retirement soon. I'm young, follow this substack and want to make another revenue stream.
Could I leverage this scenario and provide a bullshit TA course paired with some educational resources related to the origins/fundamentals of Bitcoin, Ethereum and other defi protocols? Same caveat though, he nor I would manage their crypto assets.
Is this an opportunity or something that's more trouble than its worth?
Thoughts on Strategy Consulting as a career vs M&A Banking from a skillset perspective? Feel like banking gives you more hardcore modeling skills vs Strategy Consulting providing a broader exposure to business situations and skills (business case modeling, DCFs, market sizing, analyzing large purchase data sets, etc.)
For those of you who will ask, there is definitely tangible value in private equity. For those not in finance private equity (PE) is buying a company, fixing it up and reselling the company in a few years - similar concept to fixing and flipping houses.
Some of these values include making the company operate more efficiency by cutting all bloat and opex and the value is seen with the return when the company is sold.
Recommend everyone read "The Big Short" to get an idea of how banks really work (packaging derivative junk debt into attractive high-rated products) and how stupid/negligent some of the ratings agencies/underwriters/regulators are...it would be comical if it weren't so grave with trillions in debt and people's lives intertwined.
Now Bull, I agree with your thesis. But due to the MAGNITUDE of money tied up in banks (and debt purchased by the Fed in order to print money), wouldn't we be talking mass societal calamity after systemic bank failures? And at that point wouldn't governments/central banks do "whatever it takes" to preserve the existing system? And how do average people who don't understand how to set up a cold wallet suddenly mass adopt crypto?
At that point you get hyperinflation - while that's good for crypto, do you agree the societal impacts of such a scenario are absolutely horrifying?
Big questions - not trying to be a doomer, but systemic bank failure would be catastrophic (unless we transitioned to a decentralized system before that happened).
Heard Saylor give an interesting interview where he believes in 10 years $USD will still be the world reserve currency, but it would be backed by Bitcoin as a stable store of value with limited supply.
M&A: "There is *actual* value here."
Should be self-evident but does in fact need to be stated. Over the last nine months I've learned the hard way that in some cultures (Asia) this is incredibly difficult to get across.
How do you see this playing out for other market participants such as traditional stock exchanges, rating agencies, transaction law and auditors? How do these guys adapt to the incoming change? Until what year do you see the Bulge Brackets having an ECM/DCM division?