If the ever-expanding world of investment banking is a mystery to you, this quick rundown should aid your understanding of the basic concepts. Specifically, this article about investment banks will cover who typically owns them, their differences from retail banks, and the services they render. Once you read this, you should understand enough about these financial institutions to know what purpose they serve in the financial world.
Most investment banks in Europe and the United States are publicly traded on stock exchanges, meaning that anyone who purchased shares owns a part. But, there are also some institutions that are controlled by a small number of investors that are the majority shareholders. These major investors are usually family groupings, wealthy individuals, government entities, or directors of the institution itself. There are even some smaller variations that are set up as partnerships or are privately owned.
Difference From Retail Banks
Investment banks are completely different from the institutions that most of us use on a day-to-day basis. They operate in two completely distinct manners. Retail banks accumulate deposits from customers that are saving, and then lend that money to borrowers as loans, credit cards, and mortgages. They make a profit by charging interest on the money they lend out, which is higher than the interest earned on deposits.
Investment banks work differently. Their customers include governments, corporations, fund managers, and hedge funds. They do not make their money from interest payments. Instead, they get to charge commissions and fees for the services that they perform.
There are many services that fall under the umbrella of investment banking. However, there are four main functions financial institutions concentrate on primarily. These are giving advice, financing, trading, and research.
The advice that a financial institution gives can vary. These tips include, but are not limited to: useful information about potential merger and acquisition targets, stock exchange tips, and ways to avoid excessive tax payments. The institutions also arrange financing for corporations by issuing shares of stock or corporate bonds. Sometimes they even offer loans to companies directly.
They are able to easily trade because they are staffed with hundreds of traders that trade currencies, shares, and derivatives on the behalf of clients, or for their own interests. The research they conduct is about different industries and specific companies and the information they mine is invaluable. They then make a profit by selling this knowledge to hedge funds and fund managers.
Nothing floats my trading boat more than the subject of market timing. For nearly three decades now, I have dedicated my whole trading life to the discovery and application of amazing market timing techniques.
During this incredible journey into the world of esoteric discovery, I have been blessed numerous times for having an open mind when it comes to market forecasting. So often we are bombarded by the naysayers that market prediction with any valuable level of accuracy is impossible. Time and time again I have proven to those who have crossed my path that accurate market forecasting is not only possible, but being done week after week.
Of the many things I have come to discover during my research and studies in the field of market forecasting is that the markets do in fact tend to repeat certain patterns. What often boggles my mind is that much of technical analysis is based on a certain amount of pattern recognition that most accept as important, yet how these patterns repeat (cycles) is often shrugged off as unimportant.
Patterns repeat because of market cycles. The word ‘cycle’ itself is “a series of events that are regularly repeated.”
Each day is a 24-hour cycle based on the earth’s rotation. Each year is a cycle that can be divided into four 3-month periods referred to as the seasons, which is due to the earth’s relationship to the sun.
The daily cycle is marked by the sun coming up each day, going down each night, then repeating this cycle over and over again.
The yearly cycle is marked by the earth revolving around the sun, returning back to its starting point about every 365 daily cycles.
This basic explanation is easy to understand, where we have a very short-term cycle (days) that oscillates within a much larger cycle (years).
With seasonal analysis, we are looking for some regularity in market behavior based on the time of year that we can take advantage of for purposes of market timing. My many years researching market price action has proven to me that markets do tend to exhibit certain price tendencies during certain times of the year.
Here are some recent examples.
In the British Pound currency market, a bottom occurred on May 29, 2014. This year, a bottom occurred on June 1, 2015.
Now you might be thinking, “those are different days!” Yes, but if you look at your daily chart, you’ll find that June 1, 2015 is only one trading day after May 29, 2015!
Following this bottom, the British Pound made a higher daily swing bottom on June 4, 2014 and made a following top on June 19. This year a following higher bottom formed on June 5, 2015 and made a top on June 18!
Spend any time studying your charts and you will see for yourself that this is not some coincidence, but often occurs. So why do so many dismiss this method?
The biggest reason is that it is not 100% reliable, as if anything in trading is 100% reliable. There are going to be turns that occurred one year but not the next. Also, a bottom then does not mean a bottom now. The seasonal market timer is well aware that we are looking at ‘when’ price action changes direction, not necessarily whether it was a bottom or top in expectation that it will do the same ‘type’ of turn this time around. In the world of cycle analysis, there is a thing called ‘price inversion’, where the cycle pattern flips 180-degrees in phase.
The purpose of this article is not to make you a seasonal market timing expert, but to open your mind to the validity of market forecasting for market timing purposes. While seasonal timing is valid and powerful, it is only one method among many others that used together increases your potential for precision market timing and low risk trading.
The justices of the U.S. Supreme Court are exceptional individuals, but there are still many ways in which they are just like the rest of us.
One example: investing. Like most people, the justices by and large won’t benefit from picking individual stocks. The keys to successful long-term investing are proper diversification, an asset allocation that matches your goals and risk tolerance, and patience. A concentrated stock position rarely serves any of these three goals well.
Holding too much stock in one company, or even one industry, poses obvious risks. Most people’s portfolios are simply too small to support a mix of stocks that is properly diversified among companies, sectors and geographic regions. On top of that, the choice of what stocks to buy and which ones to sell leave investors at risk of being victimized by their own biases and emotions. Those biases also affect professional money managers, so hiring someone to pick stocks for you is not really a good solution.
Like most investors, Supreme Court justices would generally be best served by a portfolio composed mainly of mutual funds. But the justices have an extra incentive to favor mutual funds over individual stocks: Mutual funds almost never present conflicts of interest in cases that come before the court. Stocks, on the other hand, raise such questions all too often.
Bloomberg recently reported that Justice Samuel Alito recused himself from a case the court heard this term because he or his wife owns stock in Johnson Controls Inc., whose subsidiary is a party to the litigation. Justice Stephen Breyer, who did hear arguments in the same case, was unaware that his wife owned stock in the same company. Bloomberg reported that she sold her shares the following day, after a journalist inquired about the holding; Breyer, however, indicated that he plans to take part in the decision. (1) (Justices have personal discretion over when or whether it is appropriate to recuse themselves.)
No one wants conflicts of interest in the nation’s highest court. However, holding direct stock in large companies means it is generally a matter of when, not if, a justice will have to step away. Alito, Breyer and Chief Justice John Roberts, or their close family member, each owned shares in at least a dozen companies as of the end of 2014.
The recusals leave the court open to the possibility of a 4-4 split, and can potentially lead the court to reject appeals it might otherwise consider.
While judicial ethics experts debate the merits of permitting the justices to invest in stocks, the law continues to allow it. But the justices would avoid a lot of problems if they mainly stuck to mutual funds, which avoid nearly all conflict of interest issues by their nature. The STOCK Act, which became law in 2012 and regulates securities transactions by legislative and executive branch officials, explicitly exempts mutual funds from its immediate reporting requirements for just that reason.
The reasons mutual funds shield officials from conflict of interest charges are, by and large, the same reasons they are well-suited for most investors’ needs. A good mutual fund builds in diversification, and the investor does not exercise control over the fund’s overall financial interests. Both the public interest and the official’s ethical standing are insulated from the potential mess – or legal consequences – a conflict of interest can create.
Justices and officials can also consider the alternative of a blind trust. The trust is “blind” because the nominee grants total control of the assets in the trust to an independent trustee, who is not allowed to tell the nominee which assets the trust holds going forward. To avoid conflicts of interest legally, however, the public official must go one step further to ensure the blind trust is “qualified” by government standards. This means that the trustee must be truly independent, which usually means an institutional trustee such as a bank or financial service company. If the justice neither knew nor controlled the trust’s contents, at least in theory, he or she could still avoid conflicts of interest even if the trust held individual stocks.
But blind trusts are a far from perfect answer, especially if the justice already holds a large stock position that the trustee may not be willing or able to dispose promptly. At least the justice could not be accused of using information about the direction of a court case to inform a future trade, since trading would be out of the justice’s hands. Blind trusts are certainly better than nothing, and can work in circumstances where they are used carefully, but even then holding individual stocks is a lot of potential trouble for a relatively small potential reward.
When I was a journalist for The Associated Press, I felt similarly constrained about owning stock in entities I might cover, even though journalists are not legally subject to public disclosure laws. The idea of avoiding conflicts of interest, after all, extends past satisfying legal requirements into the realm of satisfying ethical concerns. So although I was young and had only a very modest investment portfolio at the time, I confined myself exclusively to mutual funds. I never had any cause to regret it. I doubt many people would.
Are you willing to invest in a more long-term and reliable organic traffic source for your website? Then let’s look at a search engine that can assist you in increasing your traffic.
Interview an Influencer or Get Interviewed by a High-traffic Website
Have you heard of Tim Ferriss, the author of the Four-Hour Work Week?
His podcast is nowadays a staple content type that he provides to his viewers. Tim’s show has world-class performers who share their insights on a variety of topics, and he is well-liked on social media. Do Tim’s fans enjoy the show? So far, the show has received over 50 million downloads. On most days, it’s the most popular business podcast on iTunes.
Interviews, whether on video or audio, are inherently conversational, lively, and engaging. The great aspect is that it’s a win-win situation for both sides. The interviewer is exposed to a new audience, while the interviewee is able to provide his website visitors with new fascinating and authoritative information. You can ask an industry influencer to share your interview with their followers on social media if you interview them. Consider the organic traffic you’ll get from their social media followers, which number in the hundreds of thousands. Consider the level of interest generated by a prior Derek Sivers interview on the Tim Ferriss Show. Derek shared the show’s URL with his 283K followers on Twitter. It won’t hurt if you establish a relationship with the influencer as a result of the interview.
Similarly, being interviewed by a high-ranking website can result in a significant increase in search engine traffic. Harsh Agrawal’s blog, Shoutmeloud, received 35,000+ views in a single day after he was profiled by YourStory. That was the blog’s most popular search engine traffic source (with 600,000+ monthly visitors). Because interviews provide consolidated value, they can be used as a long-term lead generating source for your company. Consider how many bloggers you’ve learned about through interviews on YouTube and other high-authority websites.
You may also conduct a Reddit AMA if you have a very compelling storey to tell. Mateen’s AMA got about generating $85,000 in profit by selling TeeSpring shirts/hoodies received 2000 page views. He also boosted the number of visitors to his website on a daily basis.
By registering as a source with HARO, you can also answer queries from journalists. On HARO, Christopher from Snappa came across this question from Inc Magazine about the future of content marketing. He swiftly responded with a thorough response. He was mentioned in Inc a few weeks later as a result of this. HARO is an excellent strategy to have your brand mentioned on authoritative news sites such as Entrepreneur and Inc. Those backlinks will enhance your search engine traffic and increase your marketing strategy by improving your reputation in Google’s eyes. Contact an SEO agency to find out how you can do this and how they can manage it for you while you work on the bottom line of your business.