Monday, September 29, 2008

Subprime crisis related litigation

According to Navigant Consulting’s most recent report on this topic, of the 607 subprime-related cases filed in federal courts over the 18 monthe ended June 30, 2008, 310 were filed in just the first six months of 2008 — more than the 297 filed during all of2007.

Jeff Nielsen leads Navigant Consulting’s Financial Services Disputes & Investigations group and is actively advising clients in a number of subprime-related matters. He comments “We are now more than a year into the credit crisis, and the litigation continues to pile up.”

http://www.shopfloor.org/tag/goldman-sachs/

Financial system rescue plan in America (USA)

Every man, woman and child have to commit $2,300 to rescue the financial system.
$700 billion is a lot of money.

http://www.shopfloor.org/tag/goldman-sachs/

Marketing Broking Services throuth Education, Training and Seminars

http://www.stockmarketfunding.com/Free-Online-Seminars.aspx

SMF Fundamental Analysis Training
http://www.stockmarketfunding.com/Stock-Market-Trading/Fundamental-Analysis.aspx

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Sunday, September 28, 2008

The History of the Global Financial Meltdown

The history of the financial meltdown

Simon Evans charts the long chain of events that led to last week's turmoil

Sunday, 21 September 2008

http://www.independent.co.uk/news/business/analysis-and-features/the-history-of-the-financial-meltdown-936671.html

A Day at Goldman Sachs as an Analyst - Bijel Kirti Doshi

Jammin' Like Crazy at Goldman
This Indiana grad works really long days and nights in investment banking, but enjoys "the team-oriented culture" and "focus on mentorship"

10.00 a.m. to 1.30 a.m.

Read the details

http://www.markrosa.com/jammin'_at_goldman_sachs.htm

Saturday, September 27, 2008

Hedge Fund Failures

March 6, 2008

Carlyle Capital, a publicly-traded mortgage bond fund, said it received a notice of default after failing to meet margin calls from banks, stoking fears of a wave of hedge fund liquidations and fire sales of assets.

On Tuesday Focus Capital, a $1bn fund in New York, said it was forced to liquidate its portfolio after missing margin calls. Friday saw the implosion of Peloton Partners, a $2bn London-based fund.

http://ftalphaville.ft.com/blog/2008/03/06/11410/cds-report-hedge-fund-failures-spook-the-market/

August 1, 2008

Expect to see more hedge fails fail this year than are originated, says Philip Duff of Duff Capital Advisors in a CNBC interview. Duff predicts that 2008 will be the first year that will see more hedge funds go out of business than start up.

Duff is the former COO of Tiger Management and former CFO of Morgan Stanley

http://moneynews.newsmax.com/streettalk/hedge_funds/2008/08/01/118150.html


September 21, 2008


The commercial real estate market in New York is feeling the pain of Wall Street's demise.

With the breakdown of Bear Stearns last spring and the shuttering of scores of hedge funds throughout the year, vacancy rates have edged up to 7.3 percent as of Aug. 31 from a record low of 5.8 percent the year before.

http://www.nypost.com/seven/09212008/business/vacancy_rates_rise_on_hedge_fund_closure_130108.htm

Top Four Causes of Hedge Fund Collapses

1. Improbable Market Events
2. Leverage
3. Investor Redemptions
4. Forced Liquidation or Portfolio Sale


http://www.sharpeinvesting.com/2008/08/top-four-causes-of-hedge-fund-collapses.html

March 9, 2006


Kirk S. Wright and his firm, International Management Associates, appear to have lost the hedge fund's all of the $115 million that they invested.

The failure of Wright's fund adds to a long and growing list of hedge fund meltdowns, large and small. Usually only the larger failures make the news, such as Bailey Coates Cromwell Fund ($1.3 billion), Marin Capital ($1.7 billion), Aman Capital (est. $1 billion), Tiger Funds ($6 billion), and Long-Term Capital Management ($1 billion).

A March study by Capco, a financial-services consultancy and technology provider, f investigated 100 hedge fund failures over the last 20 years and found that half of them failed because of operational issues rather than lousy investment decisions. These include misrepresentations and inaccurate valuations, fraud, unauthorized trading, technology failures, bad data and so on.

"Systemic risk is commonly used to describe the possibility of a series of correlated defaults among financial institutions---typically banks---that occur over a short period of time, often caused by a single major event.

http://www.itulip.com/hedgefundsindark.htm

March 28, 2008

Forty-nine hedge funds shutdown in 2007, representing $18.8 billion at their higher valuation, compared with 83 hedge funds that shuttered themselves--worth $35 billion--the year before, as calculated by Absolute Return.

http://www.fiercefinance.com/story/more-hedge-fund-failures-this-year/2008-03-28

----------------------------------

Aug 22, 2008

Earlier this month, former CNBC anchor Ron Insana folded Insana Capital Partners, the hedge fund he launched in 2006, while superstar investor Dan Benton announced that he's shuttering his $2 billion hedge fund Andor Capital Management in October.


http://finance.yahoo.com/tech-ticker/article/49567/Ron-Insana's-Hedge-Fund-Closure-a-Cautionary-Tale?tickers=%5EGSPC
------------------------------------
Bloomberg story, September 2008

"Ospraie Management LLC, the investment firm run by Dwight Anderson, will close its biggest hedge fund after slumping 38.6 percent this year because of bad bets on commodity stocks.

The New York-based Ospraie Fund fell 26.7 percent in August after a ``substantial sell-off'' in energy, mining and resource equity investments, Anderson said in a letter to investors yesterday."

http://financetrends.blogspot.com/2008/09/more-on-ospraie-fund-closure.html
-------------------------------
Hedge funds may be next
'We're going to see five fail for every bank'
September 18, 2008

"We're going to see five hedge funds fail for every bank, maybe more," says Christopher Whalen, senior vice-president and managing partner at Torrance, Calif.-based Institutional Risk Analytics.

The CDS market has ballooned to about US$62-trillion, with hedge funds making up much of the trading before the credit crisis began.

A moment of reckoning for many hedge funds may come at the end of this month, when their exposure to credit default swaps must be "marked to market" to reflect the increased obligations at the end of the third quarter.

It may be a very quiet exercise, however, as most hedge funds are private and report only to their investors. Operating largely outside public markets and regulatory scrutiny, the failures, too, may take place largely behind the scenes and may already have begun.

http://www.financialpost.com/story.html?id=798163

Friday, September 26, 2008

Registered Investment Advisors

An investment advisor is one who manages the investments of others for a fee, typically calculated as a percentage (e.g., 1%) of assets under management on an annual basis. Investment advisors must be registered under either federal or state law depending on the amount of money under management. Common examples of investment advisors include pension fund managers, mutual fund managers, trust fund managers and also individuals granted discretionary authority by private clients to manage their personal investments.

Stock brokers (known as "registered representatives" under federal law) are not necessarily (and often are not) registered investment advisors. The vast majority of stockbrokers simply take orders for sales and purchases of stocks, bonds and other financial instruments and provide financial advice (and recommend sales and purchases) only as an incidental service to their primary brokerage service -- they usually do not have discretion to manage client investments.

In general, under U.S. law, investment advisors owe their clients an ongoing fiduciary duty to exercise their discretion in selecting investments with their clients' best interests in mind. Stock brokers on the other hand, typically do not owe a fiduciary duty to clients beyond the proper execution of buy and sell orders.

80-b-2(11) Definition of Investment Adviser in INVESTMENT ADVISERS ACT OF 1940

(11) “Investment adviser” means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include

(A) a bank, or any bank holding company as defined in the Bank Holding Company Act of 1956 [12 U.S.C. 1841 et seq.] which is not an investment company, except that the term “investment adviser” includes any bank or bank holding company to the extent that such bank or bank holding company serves or acts as an investment adviser to a registered investment company, but if, in the case of a bank, such services or actions are performed through a separately identifiable department or division, the department or division, and not the bank itself, shall be deemed to be the investment adviser;

(B) any lawyer, accountant, engineer, or teacher whose performance of such services is solely incidental to the practice of his profession;

(C) any broker or dealer whose performance of such services is solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefor;

(D) the publisher of any bona fide newspaper, news magazine or business or financial publication of general and regular circulation;

(E) any person whose advice, analyses or reports relate to no securities other than securities which are direct obligations of or obligations guaranteed as to principal or interest by the United States, or securities issued or guaranteed by corporations in which the United States has a direct or indirect interest which shall have been designated by the Secretary of the Treasury, pursuant to section 3(a)(12) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(12)], as exempted securities for the purposes of that Act [15 U.S.C. 78a et seq.];

(F) any nationally recognized statistical rating organization, as that term is defined in section 3(a)(62) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(62)], unless such organization engages in issuing recommendations as to purchasing, selling, or holding securities or in managing assets, consisting in whole or in part of securities, on behalf of others; or

(G) such other persons not within the intent of this paragraph, as the Commission may designate by rules and regulations or order.





Registration process
http://www.sec.gov/divisions/investment/iard/register.shtml

INVESTMENT ADVISERS ACT OF 1940
http://www4.law.cornell.edu/uscode/15/ch2D.html

PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940
http://www.access.gpo.gov/nara/cfr/waisidx_00/17cfr275_00.html


FAQs regarding registration
http://www.sec.gov/divisions/investment/iard/iardfaq.shtml

Monday, September 22, 2008

Trading Floor Design and Planning

Trading Floor Services

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Our experts have a proven history of delivering state of the art trading floors and are experienced with the latest trading floor concepts, including:

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Network Design
Cable Management
Desk Design

Trading Floor Related Design and Project Management

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Moves, adds, and changes
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Business Continuity Assessments and Implementations
Market Data Infrastructure, Desktop Implementations and Rollouts

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Armus Partners is a premier professional services and management consulting firm focused exclusively on the financial services industry. Armus brings a pragmatic, cost-effective approach to the challenges facing securities, investment management, and banking firms today. We have offices in New York, Charlotte and Boston.
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E-Mail:


mgt@armuspartners.com

Friday, September 19, 2008

Financial Advertising - A Regulator's View Point

Excerpts from

Keynote speech by Nausicaa Delfas, Head of TCF Strategy, Financial Promotions and Unfair Terms
Infoline Conference "Financial Promotion of Investment Products after MiFID"
12 December 2006

http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2006/1212_nd.shtml

To help achieve a fair deal for consumers, we find it helpful to think in terms of the four pillars essential to delivering a more effective and efficient market in retail financial services:

helping consumers to become more capable and confident in the decisions they are required to make;
ensuring that consumers receive, and use, clear, simple and understandable information;
ensuring that firms are soundly managed, well-capitalised and that they treat their customers fairly; and
delivering a regulatory regime that is proportionate and risk-based.
Our approach to financial advertising is relevant to the delivery of all these pillars. However, the key requirement is one of the eleven principles which underpin our whole regulatory approach: Principle 7 states: ‘a firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading’.

So why do we place so much store on firms getting financial advertising right? Clearly, advertising plays a highly influential role in how consumers make decisions – and I am sure you can appreciate that the consequences of misleading advertising can be painful for all concerned. Poor promotions can lead consumers to buy the wrong product, ultimately with unhappy outcomes for them and for firms.

it is so important for adverts to be straightforward in communicating the nature of the product or service and the risks involved. If advertisements fail to give a clear and straightforward description of the nature of the product, how then can we expect consumers to make the right choices, and looking forward, to progress in taking greater personal responsibility for their financial decisions?


Over the last two years, we have investigated over 930 cases of potentially misleading advertising. Although we did not need to take action in all of these, in 60% of them adverts were swiftly amended or withdrawn altogether. Moreover, where consumers have been misled and suffered loss, firms often offer them compensation. This means that we can deliver very rapid consumer protection without needing to resort to formal enforcement action – the fact is that anything approaching a 'public censure' has to go through the formal disciplinary process which could significantly delay delivering protection. What matters here is acting fast.

In the vast majority of cases, formal enforcement action would be disproportionate. But in the more serious cases we do, of course, take such action. In the last two years, we have done so in respect of twelve firms, levying just over £1.5 million in fines.

Think:

are you clear that you have considered the needs of your target audience?
are you clear that you provide a fair and adequate description of the risks and drawbacks of the product?
are you clear that you have described the product properly? In this case, a whole of life insurance policy was described as a funeral plan in one promotion, when it was no such thing.

World's Best Investment Banks 2008 - Global Finance Ranking

GLOBAL

Best Investment Bank -
Goldman Sachs

Best Equity Bank - Merrill Lynch

Best Debt Bank - Citi

Best M&A Bank - Goldman
Sachs

Best Up-and-Comer - Falcom
Financial Services

Most Creative - Citi

PRIVATE EQUITY

Global - GS Capital Partners

North America - TPG

Western Europe - CVC Capital
Partners

SECTORS

Consumer - JPMorgan

Financial Institutions - Morgan
Stanley

Health Care - Goldman Sachs

Industrial/Chemicals - Citi

Media & Entertainment - Morgan
Stanley

Oil & Gas - Merrill Lynch

Power - Merrill Lynch

Real Estate - Credit Suisse

Technology - Goldman Sachs

Telecom - Merrill Lynch

LEGAL ADVISERS

Global - Sullivan & Cromwell

North America - Skadden, Arps,
Slate, Meagher & Flom

Western Europe - Freshfields
Bruckhaus Deringer

Asia - Morrison & Foerster
Central & Eastern Europe -
White & Case
Latin America - Simpson
Thacher & Bartlett
Middle East/Africa - Baker &
McKenzie
NORTH AMERICA
Best Investment Bank - Goldman
Sachs
Best Equity Bank - Merrill Lynch
Best Debt Bank - Merrill Lynch
Best M&A Bank - Goldman
Sachs
Country Awards:
Canada – BMO Capital Markets
US – Merrill Lynch
WESTERN EUROPE
Best Investment Bank -
Deutsche Bank
Best Equity Bank - JPMorgan
Best Debt Bank - Deutsche
Bank
Best M&A Bank - Deutsche
Bank
Country Awards:
France - BNP Paribas
Germany - Deutsche Bank
Italy - Mediobanca
Netherlands - Rabobank
Nordic Countries -
Handelsbanken Capital
Markets

Portugal - Millennium bcp
Spain - Santander
Switzerland - UBS
United Kingdom - JPMorgan
Cazenove
ASIA
Best Investment Bank - Citi
Best Equity Bank - UBS
Best Debt Bank - Citi
Best M&A Bank – UBS
Country Awards:
Australia - Macquarie Bank
China/Hong Kong - China
International Capital
India - ICICI Securities
Indonesia - Mandiri Sekuritas
Japan - Nomura
South Korea - Samsung
Securities
Taiwan - Chinatrust
LATIN AMERICA
Best Investment Bank - Citi
Best Equity Bank - Credit Suisse
Best Debt Bank - Citi
Best M&A Bank – Citi
Country Awards:
Argentina - Merrill Lynch
Brazil - Banco Ita├║
Mexico - Banamex
CENTRAL & EASTERN EUROPE
Best Investment Bank -
UniCredit
Best Equity Bank - Deutsche
Bank
Best Debt Bank - UniCredit
Best M&A Bank - Morgan
Stanley
Country Awards:
Russia – Renaissance Capital
Turkey – Garanti Securities
MIDDLE EAST/AFRICA
Best Investment Bank - Samba
Financial Group
Best Equity Bank - Samba
Financial Group
Best Debt Bank - Deutsche
Bank
Best M&A Bank - Citi
DEALS OF THE YEAR
Best Equity Deal – PetroChina
IPO
Lead Underwriters: China
International Capital, China
Citic Securities, UBS
Securities
Best Debt Deal - $9 billion
GlaxoSmithKline bonds
Joint Bookrunners: Citi,
JPMorgan, Lehman Brothers
Best M&A Deal - Sabic-GE
Plastics
Advising acquirer: Citi
Advising target: Goldman
Sachs, Lehman Brothers

http://www.rabobank.com/content/images/Best_Inv_Bank_NL_08_GF_tcm43-68174.pdf

Still there is still plenty of worry in the Global Financial Market

Wharton Professors Franklin Allen thinks there is still plenty of worry -- to go around. The real risk now is overseas, particularly in Europe," according to him. He foresees potentially enormous problems with "big banks in small countries," such as Belgium and the Netherlands. "Fortis [Bank] will come under scrutiny in the next few weeks," he noted, referring to a Belgian-Dutch bank which saw profits for the first half of 2008 fall by 41% compared to the same period of 2007, according to a recent report from the BBC. The performance was blamed on the crashing global credit markets and the bank's own bad loans.

That might turn out to be a blip if things turn sour for Switzerland's two big banks, UBS and Credit Suisse, he suggested, adding that the value of the assets held by those banks is six times the gross domestic product of their home country. "If they have a big problem, the Swiss government cannot bail them out." And If Swiss banks -- traditionally conservative safe havens for international finance -- hemorrhage, a cascade effect across the global markets could have implications that are impossible to assess. Said Allen: "Hopefully it won't happen. But that's the worrying thing."


View expressed by Prof Allen in a panel discussion
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2050

Thursday, September 18, 2008

Investment Banking in China - Presence of Global Companies

In China, foreign institutions covet licences that allow them to form investment banking joint ventures to underwrite domestic stock and bond offerings.

Beijing has been slow to grant such licences, with only a handful of banks managing to win approval for mainland securities joint ventures, including Morgan Stanley, Goldman Sachs, UBS and Credit Suisse.

Global bank HSBC Holdings hopes to strike an investment banking partnership in China as part of its expansion in the region, the bank's Asia chairman, Vincent Cheng, said on 5.8.2008.


http://uk.reuters.com/article/businessNews/idUKHKG28266720080805




Goldman Sachs Gao Hua: In 2004, Goldman Sachs was granted approval by the China Securities Regulatory Commission to create a new investment bank, called Goldman Sachs Gao Hua (GSGH). In creating GSGH, Goldman Sachs partnered with Fang Fenglei, a well-known and politically connected Chinese investment banker, and Lenovo Group, China’s largest computer maker. As part of the deal, GSGH acquired the operating license of the failed Hainan Securities, which Goldman Sachs paid $67 million to bailout. This gave Goldman Sachs the ability to deal in mainland stocks and bonds, as well as access to China’s equity and debt markets, a privilege previously given only to Chinese securities firms. This licensure gives Goldman Sachs (through GSGH) a first-mover advantage in accessing China’s burgeoning trading and securities markets as a
principal.

Strong ties to the government will aid Goldman Sachs in positioning itself to be on the “short list” for lucrative business and assignments. Goldman Sachs has already achieved a milestone in the form of GSGH, which permits them to act as a licensed broker/dealer in China. This was realized against strong opposition from a powerful domestic broker/dealer lobby.

On the personal level, Goldman has forged partnerships with influential Chinese businessmen.
These relationships serve two functions: they generate business for Goldman Sachs
and they enhance Goldman Sachs’ relationship with the government.
Powerful businessmen facilitate economic transactions in the Chinese marketplace. The
government responds favorably to businessmen of political clout. This is called “Guanxi” (friendship) and is essential to the current conduct of business in China. GSGH, an extremely valuable asset to Goldman Sachs operations in China, was facilitated by the inclusion of Fang Fenglei as a partner. Fang is a well-known investment banker of considerable political clout who possesses many valuable ties to senior political leaders.

Another strategic partnership was formed by Goldman Sachs’ dealings with China Netcom (CN). A leading CN advisor is Jiang Mianheng, the son of China’s president. Jiang is a driving force of China’s technological advancement. Goldman Sachs’ investment in CN gives it a formidable political ally and also a possible source of revenue from technological ventures in the future.



Morgan Stanley Outfit: China International Capital Corporation (CICC), the investment bank joint venture between Morgan Stanley and China Construction Bank, had been in service for nearly a decade and was believed by Chinese businessmen to have the best reputation. Upon entering the market with Goldman Sachs Gao Hua, Goldman Sachs mined much of CICC’s talent, including head of operations Fang Fenglei.This resulted in the transfer of 15 of 45 GSGH staff from CICC.



Opportunities

The Chinese market is one of unparalleled economic growth. Every week,
more than $1 billion in foreign direct investment (FDI) comes into the country. China has averaged a 9% increase in its gross domestic product (GDP) over the past 25 years. The growth rate of foreign trade has averaged 15% since 1978. In 2005, China accounted for 30% of Asian business transactions (excluding Japan).

Chinese firms have begun investing heavily abroad. In 2003, Chinese firms invested
$3.32 billion overseas. Lenovo, a Chinese computer giant, recently acquired the personal computer division of IBM in a $1.75 billion deal. CNOOC, a Chinese oil company, was recently engaged in a bidding war for U.S.-based Unocal that topped $18.5 billion. These examples demonstrate the market for investment banking services that arises in China as Chinese companies have capital and are willing to deploy it strategically to enhance their business.


The Union Bank of Switzerland (UBS) recently announced that it would invest $500 million into Bank of China, and take a 20% stake in Beijing Securities.

Last year, the Hong Kong and Shanghai Banking Corporation (HSBC) took a 19.9% stake in the Bank of Communications.

Citigroup recently announced that it is leading a consortium to purchase a majority stake in the Guangdong Development Bank.


References

http://www.mcafee.cc/Classes/BEM106/Papers/2006/GS.pdf

Wednesday, September 17, 2008

Investment Banking - Financing Problem

The problem with the investment banks is that they've generally financed themselves for the good times, not the bad times. This means an excessive dependence on short-term funding and high leverage. This generated high ROEs in good times, supporting large payouts for employees and shareholders alike. But when times turned bad, compounded by poor risk management and mind-bogglingly stupid investment decisions, such a capital structure has come back to haunt many a firm.

Nouriel says solve the problem by joining investment banks and commercial banks, and using core deposits as a vehicle for extending the duration of the investment bank's liability structure.

Roger Ehrenberg says no.

According to him, Goldman Sachs and Morgan Stanley should materially alter their financing strategy, lengthening duration by issuing different tranches of preferred stock, subordinated debt and term debt, de-levering in order to weather the storm and accept lower ROEs in the process.

This means that these firms, their culture and their employees won't be destroyed. To maintain continuity and survival in bad times, firms must forego some of the liquidity-driven option value, and put in a more conservative, less leveraged, more flexible capital structure in place.

http://seekingalpha.com/article/95633-investment-banking-2-0-think-small

Investment Banking 2.0 - Pattern to emerge after the Present Crisis

Investment Banking 2.0 will be the re-emergence of the boutique, the focused, nimble, high-touch firm that was the bedrock of capital formation in the early years of the stock market boom.

The mega-firms, universal banks being created at the urging of the Treasury are not sustainable. They'll live just long enough for investment banking losses to be absorbed by the commercial bank's larger capital base, after which the best talent will flee for greener pastures.


http://seekingalpha.com/article/95633-investment-banking-2-0-think-small

Goldman Sachs Quantitative Group - 2008

Goldman Sachs's flagship Global Alpha fund recorded the biggest loss of almost any hedge fund in 2007. It started the year with $10 billion, made an estimated loss of 39%. The fund lost money after recording a 7.7% drop in the last full week of July 2007. It made a 6% loss in 2006 and a 40% gain in 2005.

Goldman Sachs Asset Management cut 20 members of its quantitative team as a result of a restructuring in March 2008.

http://www.opalesque.com/AMB2008/45022GAIM_Monaco_day_3_Goldman.html

Monday, September 15, 2008

Market Segmentation and Selection of Target Segments

Buyers for a generic product constitute a market. Market can be segmented in a number of ways.

Market Segmentation

Two broad group s of variables are sued to segment consumer markets. One group of variables is consumer characteristics. The other group of variables is behavioral characteristics. Behavior is consumer response to benefits sought or brand and use occasions.

Consumer characteristics used for market segmentation include geographic, demographic and psychographic characteristics.

Geographic segmentation

Geographic segmentation divides the market into different geographic units such as nations, states, regions, cities and neighbor hood etc.

Demographic segmentation

In this segmentation approach, the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, or social class.

Psychographic segmentation

In this approach to segmentation, buyers are divided into different groups on the basis of lifestyle and/or personality.

Lifestyle

Active lifestyle, country lifestyle, latenighters etc. are some of the segments under this classification

Personality

Markets are being segmented on the basis of personality. Personality is a group of traits exhibited persistently by a person. For example, Ford buyers were identified as independent, impulsive, masculine, alert to change, and self confident, while Chevrolet owners were conservative, thrifty, prestige conscious, less masculine, and seeking to avoid extremes.

Behavioral segmentation

In this approach buyers are classified into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Some behavioral variables can be usage rate, readiness for buying the product, attitude toward the product, loyalty to the product, and occasions on which the product is used etc.

Multi-attribute segmentation (Geoclustering)

Some marketers are using multiple variables to define target groups. For example using socioeconomic status and lifestyle variables may be combined and market segmentation is done.

Market Targeting

After the doing the market segmentation, the firm has to evaluate the segments for their market potential. Then the company has to decide which and how many segments to serve and how to serve them. The decision alternatives available to the firm are:

Single segment concentration

In the simplest case, the company selects a single segment.

Selective specialization

The firm selects a number of segments, each objectively attractive and appropriate, for the firms objectives and resources. There may be little or no synergy among the segments, but each segment is a money maker on its own.

Full market cover

The firm may attempt to serve all customer groups


References

Philip Kotler, Marketing Management


Marketing Management Article Series

If you take the risk, you get expected return only

If you take the risk, you get expected return

Every security market investor, trader and intermediary should know this statement.

Don't jump in your seats if somebody says I have taken the risk and I made the money.

There were many who took the same risk and were in dumps. This is the man who became successful and exhorts everybody else to take the risk.

Unless you can manage the possible loss (loss will never be expected in a risky venture only profit is expected) don't take the risk.

The mighty investment banks like Merrill Lynch and Bear Stearns have lost their independent status.

Lehman filed for bankruptcy. Many hedge funds are folding up. Let people understand risk taking properly.

Friday, September 12, 2008

Best Practices of Efficient Investment Advisors

Download the full report of Advisor Impact of 2007

Time Management and Personal Productivity, 33 page report

http://www.advisorimpact.com/download/Practice_Update_2007_US.pdf

Thursday, September 11, 2008

Organization buying

Organization buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers. (Webster and Wind)


Some of the characteristics of organizational buyers are:

1. Consumer market is a huge market in millions of consumers where organizational buyers are limited in number for most of the products.

2. The purchases are in large quantities.

3. Close relationships and service are required.

4. Demand is derived from the production and sales of buyers.

5. Demand fluctuations are high as purchases from business buyers magnify fluctuation in demand for their products.

6. The organizational buyers are trained professionals in purchasing.

7. Several persons in organization influence purchase.

8. Lot of buying occurs in direct dealing with manufacturers.


Organizational Buying Situations



Straight rebuy

Modified rebuy

New task buy

Systems buy


Participants in the Business Buying Process

Users
Initiators
Influencers
Buyers
Gatekeepers
Deciders
Approvers


Major Influencers on Business Buyers



Environmental factors

Organizational factors

Interpersonal factors

Individual factors



Organizational Buying/Purchasing/Procurement Process



Problem recognition

General need description

Product specification

Supplier search

Proposal solicitation

Supplier selection

Order routine specification



Supplier performance review



For Further Reading



Philip Kotler, Marketing Management

The issues in organizational buyer behavior are applicable when securities market intermediary are trying to sell their services to institutional clients.

Monday, September 8, 2008

Analyzing Competitors - A Marketing Activity

Marketing Management Article


Companies need to know five things about competition.

Who are our competitors?
What are their strategies?
What are their objectives?
What their strengths and weaknesses?
What are their reaction patterns?

Who are our competitors?

Kotler outlined four levels of competition, based on the degree of product substitutability.

1. Brand competition.
2. Industry competition
3. Form competition
4. Generic competition

Identifying Competitor Strategies

Resourceful competitors revise their strategy through time. A group of firms following the same strategy in a given target market is called a strategic group. A company needs to identify the strategic grouping which it competes. It has to monitor efforts so potential new entrants into this strategic group.

Determining Competitors’ Objectives

The company has to make efforts understand what drives each competitor’s behavior. Normal microeconomic assumption is that every firm attempts to maximize their profits. However, in actual practice, companies differ in the weights they put on short-term versus long-term. Hence, each firm pursues a mix of objectives, current profitability, market share growth, cash flow, technological leadership, service leadership etc. with different weights attached to them.

Assessing Competitors’ Strengths and Weaknesses

Marketing department has to determine the strengths and weaknesses of competitors. When market share is to be increased, the marketing department has to know the weaknesses of competitors, which can be attacked in the market place for grabbing market share.

Reaction Patterns of Competitors

The laid back competitor
The selective competitor
The tiger competitor
The stochastic competitor

Designing the Competitive Intelligence System

A well designed system provides company managers with timely information about competitors and responds better to requirements of more information when needed in response to significant new about the actions of a competitor.

For Further Reading

Philip Kotler, Marketing Management


I started a new orkut community to develop interaction among practitioners, consultants and researchers.

I request my readers to join the community and support it by participation.

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Merrill Lynch - The FCS Financial Marketer of the Year

March 20, 2008

The FCS Financial Marketer of the Year Award recognizes a
financial services firm that has done outstanding work in the area of
financial services communications. It is open to any firm in the
financial services industry including, but not limited to: banks,
brokerages, investment management firms, mutual funds, credit cards
and insurance companies.

The Financial Communications Society (FCS) presented its
second annual FCS Financial Marketer of the Year award to Merrill
Lynch Global Wealth Management.

Steve Cone, Chief Marketing Officer of Epsilon, who also served as head of advertising and brand management at Citigroup Private Banking and authored the best-seller "Steal These Ideas: Marketing Secrets That Will Make You A Star" delivered the keynote address on the occasion.

The
FCS Financial Marketer of the Year Award 2007-08 judges are:

Jim Sansevero, CMO, Lord Abbett & Co.,
Barbara Glasser, CMO, Citi Wealth Management, Citibank;
Michael Prieve, Creative Director, Doremus;
Danielle Abdelnour, Head of Branding and Corporate Design, Americas,UBS;
Tod Seisser, Creative Consultant, former Chief Creative Officer of Saatchi & Saatchi New York;
Linda Finnerty, Professor, F.I.T., State University of New York and former Director of Corporate Communications for Alliance Capital and DLJdirect.

Rich Aneser, Managing Director of Brand Management & Communications for Merrill Lynch Global Wealth Management accepted the award on behalf of Merrill Lynch

For more information visit

www.fcsinteractive.com

http://www.reuters.com/article/pressRelease/idUS156092+20-Mar-2008+BW20080320

Sunday, September 7, 2008

Consumer Behavior

Buyer’s needs, characteristics and decision making process interact with the stimuli created by the environment and marketers and buying decisions are made by the buyers.

Hence marketers have to understand what happens in the buyer’s consciousness between the arrival of outside stimuli and the buyer’s purchase decision. They must answer two questions:

• How do the buyer’s characteristics – socio-cultural (sociological), personal, and psychological influence buying behavior?
• How does the buyer make purchasing decisions?

Socio-cultural (sociological), Personal, and Psychological Characteristics

Various sociological factors of importance

Culture

Subculture

Social class

Reference groups

Family

Statuses and roles

Personal factors of importance

Age and stage in the life cycle

Occupation

Economic circumstances

Life style

Psychological factors of importance

Personality and self concept

Motivation

Perception

Learning

Beliefs and attitudes

The Buying Process

Roles people play in buying process

Initiator

Influencer

Decider

Buyer

User

Buying behavior

Habitual buying behavior

Complex buying behavior

Variety seeking buying behavior

The stages of buying decision process

Problem recognition

Information search

Evaluation of alternatives

Purchase decision

Post purchase behavior

Post purchase satisfaction

Post purchase actions

Post purchase use and disposal


For Further Reading

Philip Kotler, Marketing Management

I had recently read Kotler and prepared revision articles. Subsequetly I looked at a book on marketing financial services. The contents of the book follow chapters of Kotler's book and concentrate on financial services domain. I plan to take up that book and write concepts, theories and ideas relevant marketing securities in future posts. But first I shall post the general marketing related posts. Then I can link these posts of marketing articles related to securities market domain and that should make understanding of issues easy and better.

I look forward to comments, suggestions and anecdotes of personal experience in marketing securities from my readers.



Orkut Community

I opened an orkut community yesterday to discuss the issues related to management theory and practice in various subjects of management. Such a forum could help us to find out the concerns of practioners that require some ideas from theorists and fellow professionals.

I request readers to consider joining the community and participate in discussions at their convenience.

Management Theory and Practice

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Saturday, September 6, 2008

Marketing and Marketing Concept

I am writing articles on Google Knol platform with an intention to develop a management knowledge revision encyclopedia on the platform. I am calling it a revision encyclopedia as I want it to be useful to people who have studied the related texts and for the purpose of revising and refreshing their knowledge they read these articles. Knowledge workers have to make efforts to make sure that they bring all the appropriate principles into play when they are solving a problem or deciding an issue. Unless they make efforts to frequently revise the principles in various subjects related to management, managers cannot assure themselves or assure others that they are using all the relevant knowledge and taking right decisions.

Performing artists spend hours every day practicing their art and perform for three or four hours on a day. Many knowledge worker in contrast work a minimum of 8 hours per day. So they cannot study their knowledge material for an appreciable amount of time. But expecting them to spend at least half hour to sharpen their knowledge base in the brain is reasonable. Cost of ignorance is quite a large figure in the world. Knowledge workers also incur it and incur it for the organizations they are serving despite having certificates that attest that they have studied knowledge bases in a satisfactory manner. Knowledge base needs to be revised to make it useful when needed. I am writing these article to facilitate the management knowledge base revision. I initiated number of articles in marketing, psychology, sociology, organizational behavior and principles of management. In the area of marketing, I have covered number of chapters. I am giving here the article based on the first chapter of Philip Kotler.


The Marketing Concept – Kotler



Marketing - Definition

Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others.


A human need is a state of deprivation of some basic satisfaction. People require food, clothing, shelter, safety, belonging, and esteem. These needs are not created by society or by marketers. They exist in the very texture of human biology and the human condition.

Wants are desires for specific satisfiers of needs. Although people’s needs are few, their wants are many. They are continually shaped and reshaped by social forces and institutions, including churches, schools, families and business corporations.

Demands are wants for specific products that are backed by an ability and willingness to buy them. Companies must measure not only how many people want their product but, more importantly, how many would actually be willing and able to buy it.

Market

A market consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want.

Marketers

When one party is more actively seeking an exchange than the other party, we call the first party a marketer and the second party a prospect. A marketer is some one seeking one or more prospects who might engage in an exchange of values. A prospect is someone whom the marketer identifies as potentially wiling and able to engage in an exchange of values.


Marketers do not create needs. Marketers, along with other societal influences, influence wants. Marketers influence demand by making the product appropriate, attractive, affordable, and easily available to target consumers.


A product is anything that can be offered to satisfy a need or want. Offering and solution are synonyms to the product in marketing context.


A product of offering can consist of as many as three components: physical good(s), service(s), and idea(s).


Value is the consumer’s estimate of the product’s overall capacity to satisfy his or her needs.

Value is “the satisfaction of customer requirements at the lowest possible cost of acquisition, ownership, and use.


Marketing management

Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other parties.

Definition of American Marketing Association

Marketing (Management) is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals.

Marketing management has the task of influencing the level, timing, and composition of demand in a way that help the organization achieve its objectives. Marketing management is essentially demand management.

Marketing managers manage demand by carrying out marketing research, planning, implementation and control.

Within marketing planning, marketers must make decisions on target markets, market positioning, product development, pricing, distribution channels, physical distribution, communication, and promotion.

Marketing work in the customer market is formally carried out by sales managers, salespeople, advertising and promotion manages, marketing researchers, customer service managers, product and brand managers, market and industry managers, and the marketing vice-president.

Concepts of marketing that business units hold

Business units even now hold one of the following concepts of marketing and manage their marketing activities accordingly.


The production concept

The production concept holds that consumers will favor those products that are widely available and low in cost. Managers of production-oriented organizations concentrate on achieving high production efficiency and wide distribution

The product concept

The product concept holds that consumers will favor those products that offer the most quality, performance, or innovative features. Managers in product oriented organizations focus their energy on making superior products and improving them over time.

The selling/sales concept

The selling concept holds that consumers, if left alone, will ordinarily not buy enough of the organization’s products. The organization must therefore undertake an aggressive selling and promotion effort.

The marketing concept

The marketing concept holds that the key to achieving organizational goals consists of being more effective than competitors in integrating marketing activities toward determining and satisfying the needs and wants of target markets.

The societal marketing concept

The societal marketing concept holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well-being.




The Marketing Concept

The marketing concept holds that the key to achieving organizational goals consists of being more effective than competitors in integrating marketing activities toward determining and satisfying the needs and wants of target markets.


The marketing concept rests on four pillars: target market, customer needs, integrated marketing, and profitability.

Target market

No company can operate in every market and satisfy every need. Nor can it always do a good job within one broad market.

Customer needs

Marketing is about meeting needs of target markets profitably.
The key to professional marketing is to understand their customers’ real needs and meet them better than any competitor can.

Some marketers draw a distinction between responsive marketing and creative marketing. A responsive marketer finds a stated need and fills it. A creative marketer discovers and produces solutions that customer did not ask for but to which they enthusiastically respond


Integrated Marketing

When all the company’s departments work together to serve the customer’s interests, the result is integrated marketing.

Integrated marketing takes on two levels. First, the various marketing functions-sales force, advertising, product management, marketing research, and so on – must work together.

Second must be well coordinated with other company departments.

The company is doing proper marketing only when all employees appreciate their impact on customer satisfaction. To foster teamwork among all departments, the company carries out internal marketing as well as external marketing. External marketing is marketing directed at people outside the company. Internal marketing is the task of successfully hiring, training, and motivating employees who want to serve the customers well. In fact internal marketing must precede external marketing. It makes no sense to promise excellent service before the company’s staff is ready to provide excellent service.

Profitability

The ultimate purpose of the marketing concept is to help organizations achieve their goals. In the case of private firms, the major goal is profit. (Marketing managers have to evaluate the profitability of all alternative marketing strategies and decisions and choose most profitable decisions for long-term survival and growth of the firm.)

References

Kotler, Philip (1997), Marketing Management, 9th Ed., Prentice Hall, New Jersey.



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