Mar 9, 2009

A Week on Wall Street: Day 1

I had the privilege of joining a group of fellow finance MBAs last week for a trip to Wall Street. I don't know that there's ever been a better (worst?) time to visit Manhattan. Over the next five days I'll post my observations for each of our company visits. It was a great trip, and I really appreciated all of our speakers taking the time to meet with us. Disclaimer: These notes are my completely subjective recollection of the day's events and should not be interpreted as official statements by any of the organizations mentioned.

Wachtell, Lipton, Rosen & Katz

A partner from this law firm met with us and discussed the government's involvement in the financial markets beginning with the failure of Bear Stearns. His firm does a lot of work with M&A for financial services firms. A common theme throughout his remarks was that the government (i.e. the Fed and the Treasury Department) had forced many firms to accept a deals at the eleventh hour with verbal promises that they later reneged on. At the risk of sounding like a tinfoil hat enthusiast, it would not be an exaggeration to say "don't trust the government." As far as his investment outlook was concerned, he mentioned that he had moved his entire portfolio to cash and treasuries. On the plus side, this firm seems to have more work than it can handle (or at least, this practice area).

Deutsche Bank, Structured Products Group

This group creates options strategies to limit downside or lever upside. They'll either sell you the strategy and/or implement it for you, although I don't envy anyone trying to sell these products to retail investors (anything that sounds like "derivatives" is going to be anathema). If they put a package together for you, it will probably be with OTC options contracts, so be aware of the limited liquidity that accompanies such a program. I haven't heard of any bailouts for Deutsche Bank lately, but counterparty risk is also a concern for these one-off strategies.

Overall mood for day 1: moderately bearish.

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