Saturday, 22 August 2015

Investment Banking in Bear Markets

A couple days ago, amidst the rout in the global stock markets that have been plaguing us through the summer, one of the Managing Directors walked around the banking floor, and announced: "This is it boys, the summer of 2008 is repeating itself. Embrace the fun times, for you wouldn't know how long it lasts".

For the uninitiated, 2008 saw the closing down of bulge bracket investment banks Bear Stearns (bought over by JP Morgan) and Lehman Brothers as global markets were brought to their knees. Countless bankers were laid off in several rounds across the industry globally as the contagion spread. I remember the mood on the floor was quiet and sombre, bags were packed, desks were kept tidy. folks hung out hoping for the best, but fearing any phone calls, especially those whose caller ID displayed something along the lines of "meeting room [1]". That probably meant goodbye . I remember the some banker's desk line would ring, that banker would pick up, put down, suit up, take his bag and then send all of us an email via his personal mail to gather for drinks at 1200 at the nearby bar to commiserate and say farewell. That was hardly a fun introduction to a noob-cake in the scene.

Fast forward 7 years. Is this really 2008 all over again?

Fair enough, Southeast Asia capital markets and M&A have had what I would call, a really lean year so far. That would probably be an understatement, but potential IPOs have totally gone off the radar. At least you don't see elephant transactions happening in the near future. Malaysia market is suffering from an overhang of the 1MDB fiasco, Indonesian markets are reeling from wayward commodity prices. The Singapore market has poor volumes and lack-lustre listings. Thailand ain't doing well themselves, and the recent terrorist attacks have enhanced its negative bearing.

From a work perspective, things haven't actually eased up (at least not that much compared to 2008 where most things ground to a halt). Lower prices bode well for buyers flush with cash, aiming to take advantage of over-leveraged targets. That means more buy-side and less sell-side M&A work, which I particularly like (or at least prefer on some days given "like" might be too strong a word here) given you actually have to run certain valuations / returns analysis as compared to packaging sell-side marketing materials (like an info memo and teaser). On a side note, it would probably be worthwhile to give an introductory write up to the M&A process from a process of a practitioner one of these days... Put on the shelf are those countless pre-emptive banking committee memos for block trades, which I feel are a fucking waste of my time. I have seen more pitching as restless senior bankers stalk their prey to edge in on whatever deals they can get their hands on. So it hasn't exactly been a quiet summer. I have had some fucking hard weeks recently as well, but as summer goes, it is definitely quieter for sure, but not quiet per se.

But things can change in a jifty. Back in 2009 where the summer was slow, the last couple of months saw a flurry of activity on the capital markets front. That period was fucking insane - 100 hour weeks for a couple of months aren't a joke. So it can be just a couple of weeks before things turn. Yes, it is that fluid in this industry. One minute you're counting the days left to the unavoidable cull, the next minute you're inundated with more than you can feast on. Ahhh the extremes of life, isn't that what we live for? :)

From a personal perspective, I am fucking overjoyed that the markets are taking a beating. Nobody ever made their fortune betting towards in a bull market. People make their fortunes taking advantage of lower prices. Just from a general valuation perspective, STI and HSI indexes are trading close to their 5 year lows, and I do feel this warrants putting the dry powder to use :) Please do not be a fucking fool and sell your stocks. But if you prefer comfort to growing your money, sure go ahead and follow the herd to perceived safety. This is a opportune time to double down, and make the best of the opportunity. Career wise, sure it this malaise goes on, there is a chance I'll get laid off too. But yeah I don't give two shits actually, given I'm not leveraged on anything, but living life itself. :)

I guess these are some of the advantages of having fuck you money. So you don't have to worry like the rest of your peers on whether there is a layoff coming or not, and you can actually use it to make money in these types of situations.

Ahhh, the life. Time for a solid cuppa coffee :)

1 comment:

  1. thanks for sharing your perspective. hope that this will further enhanced your wealth to push you earlier than 35 years old.