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Just when we thought all had turned around and we sensed the corner had been turned, we hear banter about financial institutions pondering lay-offs and staff reductions. Haven't we heard these rumblings before? As big banks and other financial institutions stumble toward the end of the second quarter, 2011, published reports say lay-offs are looming. Senior managers have begun to panic over whether they will be able to generate returns that will match those of 2010, especially with deal flow, trading activity, and the economy sputtering.  Historically, the first response of financial institutions (from trading desks and deal teams to operations groups and compliance functions) is to reduce personnel numbers to brace for rougher waters.  And always, the method that comes to mind to reduce is "LIFO" outplacement--the last in are the first out. Critics say the first reaction is to protect compensation among the elders when the industry must weather a brief storm. This time a...

One of the most documented of all psychological errors is the tendency to be over optimistic. In general, most people do not see the need to improve the way they make decisions, as they believe that they are already making excellent decisions. The unwarranted belief that we are usually correct is a major real-life barrier to critical thinking. People exaggerate their own abilities and this is particularly common in managing their assets. Overconfidence often results in investors being fooled by small gains in a few trades, feeling much more in control of a situation than they are. Money managers, advisors and investors are consistently overconfident in their ability to outperform the market, but fail to do so. For example, mutual fund managers, analysts, and business executives at a conference were asked to write down (1) how much money they would have at retirement and (2) what is their net worth now. The average figures were $5 million and $2.6 million respectively. The professo...

What are the top black-owned banks, brokers, and asset managers in the U.S.? Has there been progress in financial services for African-Americans who want to start, run, own and manage their own firms?  Is the outlook better today than it was in the 1980s--or even a few years ago? For the young black banker, broker, or trader, are there fair, reasonable opportunities to dream and aspire to starting a new firm? Black Enterprise magazine just published its annual BE100s lists. The list shows what's possible and what's been done. The magazine every year publishes several lists of the top black-owned businesses in the U.S. for several industry groups.  In financial services, its lists includes the top banks, top asset managers, top investment banks and top private-equity firms.  Those lists suggest how much black firms have penetrated within the industry. Review and analyze the lists in financial services, and applaud the courage, progress and showing among top black firms. ...

Still looking for a sustained uptown? We are all suffering fatigue waiting for a surging recovery in job markets and the general economy.  Every month or so, the news sours after a few months of hopeful, surging signs. That--in a nutshell--describes midyear 2011.  A series of upturns and optimism followed by the stench of a momentum-killing downturn.  MBAs in finance, especially those who embarked on careers the last decade, know these trends, teasing market movements and promising signs well. Many have adjusted to these ups and downs and press on. As of midyear, 2011, the mood is not dismal. Uncertainty, however, always seems to be hovering overhead.  Many MBAs are finding jobs and meaningful positions in finance.  Job openings and opportunities are more prevalent now than they were in the depressed years of 2008-09.  Yet they may not be first-choice jobs or dream roles. While a select few are winning prize positions at investment banks or p...

There was a famous economist, who was also a Yale professor who was once a very successful man, driven by chauffeured limousine, owned $10million worth of stocks but because he made a blunder in his macroeconomics view he lost all his fortune and died in poverty! He was known as the Milton Friedman of his time, the premier monetarist – Irving Fischer, the man who contributed to the Quantity theory of Money. Where did he go wrong? During the 1920’s the U.S. was enjoying the fruits of the industrial revolution with new technology and new consumer products, one of them was the mass production of the Ford T model. Fischer believed in this new era and he was too optimistic about the macroeconomic data at that time. He was famous for having made a statement one week before the crash, on October 16th, 1929: "Stocks appear to have reached what appears to be a permanent plateau." He argued that stocks could not go down, and economists have had to live with that. As a great economist ...