I recently went through the excellent book ‘Confessions of a Wall Street Analyst’ by Dan Reingold, published in 2006. As I was struggling with my choice of major and my temptation to go into finance, I decided the best way to see if this path would suit me is by reading about the first hand experience of an expert. And the best way to do so is to read an autobiography, right? Anyway, I actually am not 100% sure how this book came to my attention, but while I was randomly plugging search words on the library website, this book came across my attention. I first thought I would simply go through the content page to have a preview, but found myself really curious about it. So I brought it home and read it.
Dan Reingold was a telecom analyst on Wall Street for fourteen years, working for famous companies such as MCI, Morgan Stanley, Merrill anf CSFB. He is a graduate from the Middle East politics program from the University of Chicago and did LBJ School of Public Affairs, Master program, at the University of Texas, hence having quiet a low profile background.
When I started with his chapter ‘First Plungee’, his personality really apealed to me. He, like me, thought sales is a field full of scheming wolves and it is so much better to have a job as analyst, where hard numbers cannot lie and you could use your intelligence to gain your salary. So, when he starts off saying that his perception of Wall Street (the kind of perception I also had) changed drastically after his 14 years of ‘service’, I thought I had to learn more about the issues. I don’t want to find myself between all these bad wolves because I am just not cut this type of lifestyle!
On Wall Street, his first job is as a research equity and earned around $38 000/year. At the end of his career, he earned a big fat seven digits salary and had the chance to explore the whole planet (or going to wherever countries that needed telecom services). Quiet a fabulous life it seems. However, in reality, life on Wall Street is horrible and he had to face the everyday pressure of lying and scheming. Wall Street is a very corrupted environment. Throughtout the book, he talks a lot about how corrupted some of the people he met during his career can be (e.g. Jack Grubman, Bernie Ebbers).
Here are some of his thoughts in quotation from the book and I think that it is wise to learn from:
“I’m a Chartered Financial Analyst (CFA) and I’m embarrassed to be part of a profession that has people like you doing the that it is so misleading and irressponsible” (19).
“We do not make negative or controversial comments about our clients” (34).
“My move set off a wave of musical chairs throughout the entire telecom analyst community, …” (52).
“It sounds exotic. But every trip was made in the shortest time possible – often just overnight, even if it meant traveling 24 hours each way for a two hour pitch” (58).
“I think that Bernie was insulted by the fact that I delegated the lead coverage role to Rick instead of taking it on myself” (65).
“Hospitals are like Wall Street in one major respect: the only way to get good information is to get there at the crack of dawn” (128).
“Yes, my priorities were out of order, but that was what Wall Street was all about, wasn’t it?” (129)
“The other problem was that some brokers paid no attention to the risk level we assigned our stock or to the need to diversify risk” (189).
“I thought, too, about my former colleagues at MCI. Those who had stayed on through the WorldCom acquisitions had probably lost their life savings by now” (269).
To end his book, Dan Reingold shared his thoughts on what a middleman like him could have done to limit the impacts of this 1990s bubble. I will list this thoughts here and you are free to read in-depth what he means by each of these measures. (page 304 to 315)
1. Analyst pay can no longer be tied to specific banking deals.
2. Research cannot report to anyone in investment banking.
3. “Independent” Research Mandated for Five Years
4. Analysts Can No Longer Participate in Road Shows or Beauty Contests
5. Analysts Should Not Attend Board Meetings
6. Each Analyst Must have a Certain Percentage of Sell Recommendations in his Portfolio
7. Analysts Must Certify That Their Own Opinions Are Their Own
WHAT NEEDS TO BE DONE:
1. Stop Making Crime Pay: Vigorously Prosecute Insider Trading
2. Force Insiders to Repay Fraud-Inflated Stock Profits
3. End Analysts’ Wall Crossings
4. Extend the Post-Issurance “Restricted Periods” During Which Analysts Cannot Publish
5. Prohibit Analyst Commentary on M&A Banking Clients: No More SEC No-Action Letters
6. Make the Boss Accountable
7. Tell Individual Investors the Painful Truth
I cannot really share my thoughts on this book for the simple fact that I know nothing about this world of Wall Street. I however believe it was a very important read for me and it is definitely worth sharing and remembering the strong points he delivered. Or at least the ones I felt are important to remember. This book definitely made me rethink what finance and investment banking implie, how exhausting and terrifying this whole world seems. It is definitely not the best suit for me, but maybe it can be a good career choice for others. However, in this type of environment it is very easy it seems to forget the right from the wrong. I think that, as long as people try to have a clear mind of what should and should not be done, it can become such a cleaner business. After all, a lot of Wall Street rules are just bubbles and make no sense. They are often playing with fake money. Yes playing. So these people are investing and investing thinking that it is no big deal, that is is part of the game. My advice; just be careful about what you are doing. People’s lifelong savings are in your hand. Don’t be too greedy because it will cost you a lot.
***I am putting the MLA reference to the book in case some people may want to check the book out too and want to have the same edition as I had (to go to the right pages!)
Reingold, Dan. Confesions of a Wall Street Analyst. New York: HarperCollins, 2006. Print.