Introduction to Wall Street and Investment Banks

Investment banks like Bank of America and Goldman Sachs offer services to investors, but stock recommendations are generally not worth following.

### Wall Street: Understanding the Buy Side, Sell Side, and the Importance of Independent Thinking
* 🏦 Wall Street can be segmented into two main parts: the buy side, consisting of various types of investors like **mutual funds, hedge funds, and individuals**, and the sell side, which comprises investment banks providing **services to investors**.
* 📈 Investment banking is a major revenue source for investment banks, involving **lending to companies**, **underwriting securities**, providing **M&A advice**, and offering services like **trading**, **prime brokerage**, and **securities research**.
* 💸 Stock recommendations from sell-side analysts, despite being regulated to prevent conflicts of interest with investment banking, are generally considered **biased and unreliable**.
* 🧠 It is crucial to focus on developing **lateral skills and conducting independent research** rather than relying on the opinions of others for **stock picks**.
* 🔍 Lateral skills refer to acquiring knowledge in areas relevant to your investments, such as **industry-specific expertise** or **other specialized fields**.
* 📊 When analyzing companies for investment, it can be beneficial to focus on **specific sub-sectors within the technology industry** due to its **vast size and complexity**.
* 🇨🇳 Alibaba, a Chinese e-commerce giant, is an example of a company that does not file 10-Qs and 10-Ks with the SEC because it is **based in Hong Kong**.

okay so now with that being said let's go to a new concept that I want to teach. So I want to give you sort of an introduction to Wall Street, and this is only two slides so it's not going to be too in-depth, but I think a lot of people are not familiar with this. So we're going to sort of define Wall Street in a picture style, and this may not be a complete diagram of Wall Street, but I think it's pretty good. And we're going to segment Wall Street into two parts: the buy side, or we'll just call them investors, and then the other side is a sell side. A better word for is just saying investment banks. I think the whole buy side sell side names are a little silly. I just like to say these are investors and these are investment banks. Investment banks service the investors. They're basically service providers. So in any event, there's a few different kinds of investors, and we went over this a little bit: mutual funds like Fidelity, Wellington, State Street.

Platinum Capital research. And then there's hedge funds like Renaissance, Oxi Citadel, Millennium, oak tree, some. These aren't the only two kinds of investors. There's plenty of other people. In fact, I should add individuals. The most important thing of all. So, Pension funds, insurance companies, Corporate America, Sovereign wealth individuals, all of these folks in aggregate manage just as much, if not more than the mutual funds who manage quite a bit more than the hedge funds. The Investment Bank side is a little bit different. So, you've got Investment Banking, which is where most of the money is made. Most of the money is made. And these are investment banks. These are here's partial list of investment Banks. Bank of America, City Group, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley, RBC, and Wells Fargo. Those are a few investment Banks. And what they do is they'll lend to companies. They'll arrange lending. And that involves often underwriting, which is the process of selling the security to the public or to investors. So, they sell your company security, let's say.

your IBM you want to sell $6 billion of debt. Well, you would have to hire one of these Banks to do that. You couldn't just go out there and say, I'm just gonna sell it myself. It doesn't work that way. You need a bank, a bank that has relationships with all of these investors. You might want to buy another company, so do you need m&a advice, um, and that is useful. So, Investment Banking is a pretty big part of these companies. These investment Banks profits. The other thing that they do that is profitable is they, um, do different services for these investors. So, they'll actually conduct trades or they'll Prime brokerage or broker their money or deposit their money for them and clear their trades and things like that. Then finally, these Banks issue Securities research. They give buy and sell recommendations on Securities, and these are generally not considered or thought through too heavily. Every now and then, one out of a 100 maybe of these sell-side Securities analysts will be useful, but in general, they're pretty

biased due to the conflict of interest that exists with Investment Banking. Despite the rules that exist to separate those two, despite that in any event, one of the things I wanted to say, say one of the things that took a long time for me to learn and was very painful for me to learn, is that when it comes to stock recommendations, they're never worth listening to. They're always worth ignoring, no matter who, no matter who they come from, including Warren Buffett or Carl ion. I think stock recommendations are worthless, uh, in many ways. Now, they're not completely worthless, obviously there can be good stock picks from people, but I think that you should spend your time more efficiently researching yourself. I would not look. The first thing I would definitely would not look at his investment Bank opinions. Then I certainly wouldn't look at other investors' opinions or their Holdings. You can look up an investment fund's fund's Holdings. I would worry about learning Securities by yourself and learning lateral skills. I would definitely not spend my time looking at.

other people's opinions. It's not that they're completely worthless, it's that you want to win at the game of your own time. You want to bet on yourself and short everyone else. And the long short game of your time is the most valuable thing you have. Listening to other people and thinking about other people's stock picks is not going to get you very far, in my humble opinion. I used to think carefully about the markets and other people's investments, and I certainly didn't do very well when I did that. I started to do much better when I thought for myself. So, in any event, that's sort of what I'm thinking about there. Lateral skills are things like, well, if you're looking at, for example, what I did. I was a pharmaceutical investor. Instead of spending my time worried about what other pharmaceutical investors were doing, I learned a lateral skill of pharmacology. I studied deeply in fields like pharmacology, medicinal chemistry, and other areas.

just general preclinical science, and these were important to me. It helped me be a better Pharm investor. When it came time to be an entrepreneur, these skills came in handy. These skills came in handy, so it was much better for me to spend my time doing this than it was to worry about 13F filings or being on the phone all day talking to other investors, watching CNBC. All of this was not completely useless, but relative to what I could spend my time on, remember I only have 24 hours in a day, so all of this was comparatively useless. This was useful stuff, this was stuff that people didn't know, that people couldn't match with the skill of investing, this is just garbage comparatively. Now I know there's plenty of people that do this who are quite successful, but this is just my tips for success. So in any event, um, those that's a it only took 10 minutes, but I think there's a lot of

information crammed in there, and so one of the things that we're going to do. Um, you know, we've been looking at the technology industry for a little bit, and one of the things we're going to do is try to fixate on one sub-sector. And by the end of today, by the end of today, we're going to pick one, and we're going to pick one by vote. We're not going to pick one based on my own opinion. We're going to pick one, but by your guys' opinion. But before we do that, we're going to go run through a couple more tech companies. And one of the big, big sub-sectors we have to look at, of course, is telecom. It's up to us. We're going to pick one sub-sector. Tech is so large. It's kind of hard to look at all of it. In fact, I know companies that have 20 or 30 investment analysts that, uh, want to cover the technology industry. And that, that takes a lot of a lot of firepower. So for us, we're going to

actually, just stick to one of these sub-sectors. I don't know if it's going to be software, semiconductors, hardware, or internet, or what, but we're going to pick one at some point. So in any event, let's continue along our path because I think we learn a lot as we successively look at more and more companies. So, Alibaba is one such company, and Alibaba does not file 10-Qs and 10-Ks. And this is interesting. The reason they don't do that is because this is a company that is based, as you can see, they're not based in the US, they are based somewhere else. I think they may be based in China, for instance. Let's take a look. I don't know, I can't tell by reading this. Hong Kong, there it is, Hong Kong. I actually like to keep track of headquarters, believe it or not, headquarters Hong Kong. Alright, so Alibaba, I don't know anything about this company. I don't know.

anything about this company. Let's take a look. Here it is. December quarter 2015 results. Alibaba today announced results. Alibaba had an outstanding quarter reaching a milestone of over 400 million annual active buyers and continue our unrivaled leadership in Mobile. Our proven ability to deliver an unparalleled consumer experience help Merchants attract buyers will drive future growth in our Core Business. Sounds like an e-commerce company, doesn't it, said Daniel Jang, Chief Executive Officer of Alibaba. We remain focused on our top strategic priorities including Global Imports, rural expansion, increasing our footprint in first-tier Chinese cities, and building world-class Cloud Computing business. Okay, really sounds like Amazon, huh? We had excellent results. We achieved impressive Revenue growth and increasing the monetizing the user activity in our marketplaces, particularly mobile devices. In this quarter, Revenue grew 32% year-over-year and China retail Marketplace Revenue grew 35% year-over-year, said the CFO, Maggie Woo. Meanwhile, we generated strong free cash flow of $4 billion this quarter. Okay, well if you generate 4

billion a quarter. That means you're going to generate 16 billion a year, right? And I know this, this is 180 billion market cap.

Martin Shkreli Explains How Wall Street Works (Secrets Revealed)

Shkreli Planet

Wall Street can be segmented into the buy side (investors) and the sell side (investment banks), with the investment banks serving as the service providers.

The buy side includes various types of investors such as mutual funds, hedge funds, and individuals, along with other institutions like pension funds and insurance companies.

On the sell side, investment banks like Bank of America, Goldman Sachs, and JP Morgan, make the majority of their money through lending to companies and arranging lending, often through the process of underwriting securities.

The Role of Investment Banks in Debt Selling and Other Financial Services

Investment banks are crucial for selling large amounts of debt, providing M&A advice, and offering various services for investors.

These banks also issue securities research, although the reliability of their stock recommendations is questionable due to potential biases.

Ultimately, the advice of investment banks and other investors should be approached with caution, with an emphasis on conducting personal research and learning independent skills in the world of securities.

Listening to other people's opinions and stock picks is not as valuable as investing in your own thoughts and skills.

Developing lateral skills, such as pharmacology in the case of a pharmaceutical investor, proved to be more beneficial than obsessing over other investors' activities.

Time is limited, so focusing on personal growth and unique skills is more worthwhile than following the crowd.

Narrowing Down a Sub-Sector in the Tech Industry

The decision on which sub-sector of the tech industry to focus on will be made by vote.

The large size of the tech industry makes it challenging to cover all sub-sectors, so the focus will be on one, such as software, semiconductors, hardware, or internet.

Alibaba, a company based in Hong Kong, is one of the companies being considered in this decision-making process.

Alibaba's Strong Performance in the December 2015 Quarter

Alibaba reached a milestone of over 400 million annual active buyers, solidifying its leadership in mobile and e-commerce.

The company's strategic priorities include global expansion, rural outreach, and building a cloud computing business.

With a 32% year-over-year revenue growth and a strong free cash flow of $4 billion in the quarter, Alibaba demonstrated impressive financial performance.