Archive for October, 2009

I don’t have to offer up many reasons why the bankers on Wall Street have earned the pure hate and vitriol being thrown their way. While most Americans suffer with lower pay (if they were lucky enough to keep their job at all) and houses worth less than their cars, the fat cats in the financial industry are living large. Wall Street is set to pay itself record bonuses this year, even after bringing our economy to the brink of another Great Depression with their reckless bets, insider trades and outright Ponzi schemes.

And they’re laughing all the way (back) to the bank (they nearly bankrupted) because the taxpaying public are the ones who will foot the bill for their party.

Well I say if you can’t beat ‘em, join ‘em. And if you can’t join the ranks of the Masters of the Universe, then read my take on what makes them so financially (if not morally) successful and how you can follow their examples to get ahead in your own career.

1.  Look the Part. – Rule number one is actually the easiest to pull off and yet the most often overlooked. How many times have you heard the saying “dress for the job you want, not the job you have?” Most people dress more for the mail room than the corner office.

Wall Street is notorious for maintaining appearances and you have to dress the part to fit in. Gordon Gekko knew that when he told his young protege Bud Fox to “Buy a decent suit. You can’t come in here looking like this.” This is in spite of the fact that Bud was wearing a $400 suit, paid for in 1980′s dollars. You don’t have to break the bank, but shined shoes and competent use of an iron goes a long way.

Not sure what’s appropriate? Just pick out two or three of the top people in your field and mimic them.  If they wear suits, find suits that look like theirs (but cost less of course.) Do they favor loafers or wingtips? Even if you’re working construction, see which brand of boots the foreman wears and get a pair.

If you want to be with the winning team, put on their uniform.

2.  Make the Sacrifices. – Are you willing to give up everything from your favorite TV shows to time with friends and family and even your health? If the answer is no, then you shouldn’t begrudge high-finance types who do all of that to make the kind of money that they do.

The long hours and stress that junior investment bankers live through are legendary. 100 hour workweeks are expected from 22-year olds whose peers (if they can be called that) are early for happy hour. Most young analysts expect to work seven days a week, especially now in the age of the laptop, iPhone and Blackberry. If you already work full time, how willing are you to get a second job or go back to school?  If you are determined to be a top earner, there’s only one answer to that question.

And speaking of school, there’s no secret why Goldman Sachs and their ilk recruit from the best schools like Harvard and Wharton. They are paying top dollar and want self-motivated, proven achievers. At whatever level you’re competing, education will set you above the lesser souls. Even a University of Phoenix degree is better than no college degree when competing with 500 people for a secretary’s job.

Watching football on Sunday afternoon beats doing homework (except maybe if it’s a Lions or Redskins game) but somewhere out there is a man or woman with an open textbook and an eye on the promotion you thought was yours.

3.  Have no Fear.  - To know how great Wall Street fortunes are made, you need to understand the relationship between risk and reward. The greater the risk, the higher the potential reward.  That’s why a $1,000 FDIC insured CD pays 1% interest and a $1 lottery ticket can pay $300,000,000. The same applies in managing your career.

The reason why banks made so much money during the housing boom is that they took outsize risks, betting against all common sense that the financial house or cards would not come tumbling down before they were able to take their winnings off the table. Small regional banks who stuck to more conservative loans never saw the huge profits that the New York and London banks did.  Some players, like the now bankrupt Lehman Brothers, didn’t survive, but others emerged stronger and with less competition.

Investing in a college education, demanding a raise, going into business for yourself or robbing three casinos in Las Vegas all entail a measure of risk.  And all have the potential for varying degrees of reward commensurate with the risk.  If you want to make more, you have to risk more, and be prepared to deal with the consequences.

Just remember that if you fail, there won’t be the U.S. Government there to bail you out.

4.  Have no Shame. – Speaking of bailouts, now that the economy is on its way to recovery the big banks took TARP money are are reluctant to give it back. They realize that this is free money that can be better spent on bonuses and dividends for investors. These are the actions of people who don’t care what others think about them and look at everyone else as suckers. It’s clear that Wall Street is giving Main Street America the finger.

Big time traders don’t care about what people think. Wall Street is a place run by assholes and proud of it. They are all about the money and everyone knows it.

What are you all about? Having friends at work? Being known as a nice guy? Not making waves? Do any of these describe the traits of Wall Street millionaires? They approach life with a take-no-prisoners, make-money-today attitude and they don’t let sentiment get in the way. Neither should you.

5.  Work your Network. – When former Goldman CEO Hank Paulson was Secretary of the Treasury and needed to beef up his team to handle the banking collapse, he naturally turned to his old cronies at Goldman Sachs. Under current Treasury Secretary Geithner, another Goldman alum, the flood gates have opened for Goldman men to assume high positions in government and make sure that Goldman benefits more than any other institution.

Wall Street is a mafia, with everyone taking care of their family. You need to get a little Cosa Nostra of your own.

You may not have a cabal of politically connected MBA’s in your inner circle but you know a guy who knows a guy. Get a leg up on a new job by reaching out to even your most remote acquaintances and let them know you’re in the market. This has become much easier with LinkedIn, Facebook and other social networking websites.  And when you become aware of a new opportunity, spread the word to your crew.  You’ll become known as a connected guy and that pays big dividends.

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There you have it. Check in later for Part II of Lessons from Wall Street and let us know what you think in the comments.

With fewer rappers buying out the bar with their black cards and even us everyday Americans cutting debt spending for several months straight, American Express just can’t make money like the good old days.

Profits at the credit card issuer are down over 21% from last year. The main culprit was the surge in late payments and defaults due to the overall hard times faced by most credit consumers. Their card defaults are up significantly. Amex wrote off 8.9% of its U.S. credit card balances in the third quarter of this year, up from 5.9% in 2008.

Although net income fell, it was higher than predicted by the company. As a result, share prices for American Express actually rose after the earnings were released.

Some analysts (i.e. those who didn’t get enough coffee that morning) thought that wealthy consumers would pull Amex towards higher year-over-year profits. They clearly failed to recognize just how deep this recession has become and how the habits of even the most affluent members of society have changed. Conspicuous consumption, personified by the swiping of a platinum American Express card, is a thing of the past.

Part of the pain that Amex is feeling may be of their own doing. While the company has historically enjoyed very high customer satisfaction rates, lately they have not been pleasing their historically demanding clientèle. Check out some of the comments made by American Express cardholders (and former cardholders) on Consumer Affairs and the Complaints Board. Much of the dissatisfaction comes from Amex dramatically lowering credit limits and raising rates, even for customers who had been paying on time.  The company is not alone in that regard, but Amex customers pay more in annual fees the the privilege of their plastic and don’t expect to be treated like common ruffians.

It will be interesting to see how many people look to downgrade their Amex cards to lesser levels moving forward, or ditch Amex altogether for more reasonably-priced credit.  Now that the gleam has worn off of the Centurion’s armor it may be the end of this empire.

Regardless of the ornery nature of some of our articles, we’re really only anti-social when it comes to credit card companies reaming their customers and banks hitting people with ten overdraft fees on one day.  Outside of that, Debtbeat wants to give the whole Internet a big social media hug.

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