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*gasp* Mr. Become a Plumber Fukkin Loser; Finance is Dead says the ER space is not shrinking?
It’s dying slowly
There’s less of a need for research when a lot of the data is being synthesized for you. Big data will solve a lot of this but won’t replacefirst hand knowledge of a sector.
How does ER make money for the firm?
No answer huh? Back in the day SS ER would generate pennies by selling their garbage to the muppets who would buy it. But it was essentially a cost center at parity with marketing bimbos where SS ER guys would give strong screaming buy recos on companies they wanted to generate investment banking relationships with.
It still is? Talked to this head ER guy and 95% of his coverage is strong buy.
SS ER is a straight up cost center. Its so funny how these newbies taking the CFA exam think its the ticket to a lucrative sell-side research gig with Itera.
Sell Side ER is a commodity at best. Most of it is just investor relations propaganda put forward by the lowly BB associates so the big MDs can secure corporate finance deals. Every report I see has some disclaimer indicating, “Research is paid based on x, y, and z which includes investment banking revenues.” Furthermore, would anyone dare trust SS ER? I can see Iteracom coming out and bashing me saying, “Really, we have hedge funds as clients buying our sht!” True, I bet you do. But I doubt Asness and Griffin are chomping at the bit placing their leverged bets on your bespoke research. They buy it as a scapegoat. When sht goes astray, they can say, “Hey Mr. Client, we did our best, if anything GS, MS, etc screwed us by giving us shoddy research.”
Let’s look at it this way. As my man Klarman would say, buyside eats their own cooking. Why trust a bunch of sell-siders who have everything to gain and nothing to lose by investing other people’s money.
I’d rather browse Yahoo! Finance message boards for insight than pay for SS ER report, lets be honest.
OP didn’t specify buyside or sellside, why are you girls all getting your panties up in a bunch?
So whats your point - since the responses might not address OP’s specific question, that somehow invalidates the arguments that were made?
Sell Side Research is a component of sales for market making banks. The only reason I place trades with JPM is because they send me a useful newsletter from their strategist. So, if profits and volumes in market making are high, Research will have a higher value. If profits and volumes decline, Research will have lower value.
As long as we have stock markets, Sell Side Research will exist. However the size of Research divisions, as well as the market value of analysts, will depend on future profitability of market making activity.
in general, no. in response to your particularly useless comment, yes.
I get the impression there is differences in the different market caps. The successful groups I’m around get paid through volume of course. They also bring investors into new companies if they are respected, which helps the investment banking arm. Our analysts also help management teams prepare for their road shows and such. We also broker a lot of meetings with management we have good relationship with, which the buyside likes. And the prestige of the firm from both investment banking and analysts helps win future ibd business. That’s just my observations, but those above activities drive volume and ibd activity for my firm. When we hire more MD investment Bankers, we almost always expand research capacity in the given space
whats the pay structure for SS ER these days?