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Are we paying too
much for gasoline?
Here is a comparison of Erie gas
prices to other cities all over the
United States and European coup-
tries
Erie, PA: $ 1.55 / gallon
Chicago, IL: $ 1.87 / gallon
Los Angeles, CA: $ 1.57 / gallon
Miami, FL: $ 1.61 / gallon
Belgium: $ 3.56 / gallon •
Denmark: $ 3.75 / gallon
Germany: $ 3.49 / gallon
Greece: $ 2.72 / gallon
Spain: $ 2.85 / gallon
France: $ 3.78 / gallon
Italy: $ 3.76 / gallon
Netherlands: $ 4.01 / gallon
Austria: $ 3.26 / gallon
Finland: $ 3.95 / gallon
Sweden: $ 3.85 I gallon
United Kingdom: $ 4.53 I gallon
I-Banking: Is it for you?
Investment banking is about
gambling in a suit. Most people
think it's about money (and given
that the bulge bracket firms
regularly post multibillion-dollar
revenues, one could be forgiven for
making this assumption), but the
thrill for many players in this
domain stems from the risk as much
as from the reward. Sadly enough
there have been several people who
have joined I - banking firms for the
money only to find that they have
come into the wrong profession or
are simply unwilling to put up to the
100 hours plus a week.
Investment banks are experts at
calculating what a business is worth,
usually for one of two purposes: to
price a securities offering or to set
the value of a merger and acquisition
(also known as a M & A). Securities
include siocks and bonds, and a
stock offering may be an initial
public offering IPO) or any
subsequent offering. In both cases, I
banks charge hefty fees for provid
ing this valuation service, along with
other kinds of financial and business
advice. When banks underwrite
stock or bond issues, they ensure
that institutional investors, such as
mutual funds or pension funds,
commit to purchasing the issue of
stocks or bonds before it actually
hits the market. In this sense, (-
banks arc intermediaries between
the issuers of securities and the
investing public. I-banks make
markets to facilitate securities
trading by buying and selling
Hey, college students:
plastic or paper?
SANTA ANA, Calif. -- Sandra Escala wanted an educa
tion when she went to college. She got one a 10-year les
son in personal debt.
After only one year at Saddleback College, the Mission
Viejo, Calif., woman had run up a total of $lO,OOO on
nine credit cards she'd gotten as a freshman. She over
spent on clothes, dinners and furniture. The card that
started the problem a Visa was her very first credit card.
And she got it on campus.
Escala had to quit school at age 19 and get a full-time
job to chip away at her bills.
"School was out of the question. It became a luxury I
could not afford," says Escala, now 29. Debt, she notes
sadly, has cost her time. "It took me 10 years to get out.
By now I could have had a master's degree."
Escala's experience is a cautionary tale for the thou
sands of students who are arriving on campuses. It's not
tough to get plastic. There are few, if any, income require
ments because issuers know most parents will bail out
kids who rack up big bills. No credit history is needed.
Just fill out an application received in the mail or at the
credit card tables that are set up at on some campuses.
You might even get a free T-shirt as an enticement, pos
sibly distracting you from the high interest rates the cards
carry on average, 17.5 percent.
"It's very easy to get a number of cards," says Genri
Detweiler, an education adviser with Myvesta.org, a group
formerly called Debt Counselors of America. "The issu
ers want to grab the students early so they can establish a
relationship."
Used correctly, a credit card can help a student estab
lish a good credit history before entering the work force,
says Detweiler. If students make payments on time, it
shows future lenders responsibility. Once they're out of
school, it will be easier to get a car or home loan.
But misuse can lead to deep debt and to blotches on a
credit report that will haunt a student long after he or she
graduates.
It took Escala almost a decade to conquer her debt. Af
ter she quit school, she bought a car, which sank her fur
ther into a cycle of missed payments. Debt interrupted
her education for eight years.
It ruined an opportunity to become a law-enforcement
officer after a background check revealed 74 late payments
on her credit report. And in her most humiliating moment,
a creditor served her with a judgment at work.
"I blame myself," says Escala, who is now free of credit
card debt. "I didn't think about the minimum payment,
interest rate or late fees. I knew nothing."
Students can avoid the credit card trap by understand
ing how their plastic works and more importantly when
to use it.
School supplies, gasoline and car repairs are consid
ered OK purchases to make with credit cards, experts say.
Also emergency spending, such as an unexpected trip to
the doctor or dentist. But "an emergency does not mean a
sale," says Sally Antwiler, an education adviser at Con
sumer Credit Counseling Service in Santa Ana.
What's not OK to charge? Dinners. Drinks. Clothing.
Groceries. Movies. "If you're living off your credit cards,
you're in trouble," Antwiler says.
securities out of their own account
and profiting from the spread
between the bid and the ask price. In
addition, many I-banks offer retail
brokerage (retail meaning the
customers are individual investors
rather than institutional investors)
and asset management services
Not surprisingly, the center of this
industry is in Wall Street in the U.S.
Other hot spots include London,
Frankfurt, Tokyo, Hong Kong,
Singapore and several other foreign
metropolises'.
Trends: -
Deregulation
The late-1999 repeal of the
Depression-era Glass-Steagall Act
marked the deregulation of the
financial services industry. Commer
cial banks, investment banks,
insurers, and securities brokerages
are now free to offer one another's
services. A rush of cross-industry
mergers and acquisitions are
occuring as I-banks add retail
brokerage and lending to their
offerings, and commercial banks try
to build up their investment banking
services. This consolidation has the
potential to result in the financial
services equivalent of Wal-Mart—a
superstore where clients can invest,
save, and protect their money all
under one roof.
Joining the VCs
Banks started the venture capital
industry in the '6os but lost it when
their VC experts left to form
by Diana McCabe
September 12, 2000
Knight-Ridder Newspapers
Once students start carrying a balance, the card becomes
independent companies. In the '7os
and 'Bos, the industry stalwarts were
private firms like Kleiner, Perkins,
Caufield & Buyers, Patricof & Co.,
E.M. Warburg Pincus and Co., and
Menlo Ventures. During the '9os,
however, established, traditional
investment banks have started
venture capital departments, and
they've been very successful. One of
the first investment banks to enter
the venture capital business, in the
mid-80s, was Chase Manhattan, and
more recently Wells Fargo, Fleet
Boston Financial, and others have
followed suit. One of the advantages
a bank like Chase has in the venture
capital market is that it can use its
own money to make investments
and only later sell shares in the
investment fund to outside inves
tors—if it chooses to do so. Increas
ingly banks are so choosing, to
spread around the risk should the
stock market cease to be so favor
able to IPOs.
"Internetization"
The sheer ease and volume of
trading over the Internet is changing
the face of the brokerage business.
Anyone with a browser and a
modem can get the kind of informa
tion that once only wealthy clients
with multimillion-dollar accounts
could obtain. Net centered invest
ment banks—E*Offering, W.R.
Hambrecht and Wit Capital—have
introduced new formats for initial
public offerings. These innovative
firms' goals are to capitalize on the
multitude of startups seeking public
costly, especially if they're only making the minimum
monthly payment. Sure, these cards usually only carry
credit limits of $250 to $l,OOO. But by sticking to the mini
mum payment, a student would take seven years and $BO4
in interest to pay off a $l,OOO balance on a card with a
17.5 percent annual rate
That's only if they
t h
men
$25
your
cardholder
who is late once
or twice in a four- to six-month period will see his or her
interest rate skyrocket
Besides the financial pain of late payments, falling be
hind hurts a student's credit. A bad credit report makes it
tough to get a car loan, rent an apartment and as Escala
found out a job.
lips for students with credit cards
by Diana McCabe
September 12, WOO
Knight-Ridder Tribune
SANTA ANA, Calif. -- Once you have your credit
card:
Remember that this is real money that•you'll have
to my back. It is not free, so choose your purchases
wisely. A few other tips: Pay on time You're an adult
now, so no excuses about the dog eating your bill. If
you're even one day late, you'll get socked with a
late fee, usually $25, and your interest rate may
climb. The late payment will show up on your`credit
record, too.
Pay more than the minimum
If yon can't pay your balance in full, pay more
than the minimum monthly payment the credit card
suggests. The bank wants to make money off you.
'and they do that by extending the payments and, ' •
racking up interest. Pay as much as you can, as often
as you can. •
Know your credit limit
Generally, student credit limits run from $250 to
$l,OOO. If you go over that limit, you'll be charged a
fee of about $25 for each month you're over. It's
important to keep track of what you've charged , too,
because a store won't always decline your card if
you're over your limit.
Don't get cash advances
Rates ori,cash advances are always high around 20
percent and should be avoided at.all costs. Grace
periods don't apply to cash advances, so interest is
status and also to get a head start in
online investment banking. But the
bulge bracket is gearing up for
online trading too. Firms including
Merrill Lynch, Goldman Sachs
Group, and Morgan Stanley Dean
Witter are trading not only stocks on
the Internet, but bonds as well,
offering individual investors
participation in big corporate bond
issues for the first time.
The Breakdown
Boutiques and Regional Firms
Obviously, the investment
banking world extends beyond New
York, but the list of small firms is
getting smaller as the market
consolidates. The four strongest
boutique firms Hambrecht &
Quist, Robertson Stephens, Mont
gomery Securities, and Alex.
Brown—have all been acquired by
commercial banks. But that's not to
say independent firms are nearing
extinction the equity markets are
strong, and that means big business
for niche firms focusing on technol
ogy, biotechnology, and other high
growth industries. In New York,
Allen & Co. and Lazard Freres still
do big business in specialized fields
Volpe Brown Whelan and Thomas
Weisel are Silicon Valley firms
capitalizing on the Internet boom
Job Prospects
Two things you need to know
about jobs in 1-banking. One, these
jobs pay a lot, with year-end
bonuses that can match your salary.
don't spend more on
Add
u r -
;lases,
p late
id a
you'll
pay-
Tease
pay
about
onto
pas.
ma(
cul
tural
totem. No one is exempt, and no
one, particularly anyone who's
already paid his or her dues, is much
interested in a crusade for change.
That said, investment banking is
one of the best ways a young person
can learn about finance and make a
lot of money right out of school.
Even if you later opt out to reclaim
your personal life, the skills you
learn on Wall Street will be valuable
in most business careers.
The recruiters at the top banks—
who, each fall, receive more than
8,000 MBA and undergrad résumés
for only half as many openings—
will tell you they're looking for
excellence and leadership in
"They told me to come back in a year," says Escala,
after her poor credit torpedoed her chance at becoming an
Orange County sheriffs deputy. This after three years of
struggling to finally pass rigorous physical and written
exams.
If you're a student who decides to sign up for credit
cards, you should limit yourself to one or two pieces of
plastic. If you start to get in over your head, get help be
fore you mess up your credit. Missing a payment or jug
gling balances between two cards are big warning signs
that things aren't right. If that happens, talk to a credit
counselor, parents or a financial adviser.
Through Consumer Credit Counseling in Santa Ana,
Escala learned how to budget and manage her money. It's
helped her move on with her life. She received a two-year
associates degree from Saddleback and is now studying
criminal law at California State University, Fullerton. Last
year, she bought a condo in Mission Viejo and has accu
mulated $30,000 in equity. She's got another chance at
becoming a law enforcement officer.
But no one bailed her out. Escala did it herself by work
ing 14 hours a day at two waitress jobs. She put off her
education. Today, she only works one waitress job be
cause she needs to study.
"I learned a very hard lesson at a very young age." Her
advice to students tempted by credit cards? "If you can't
pay for it, don't buy it."
charged the day you get the money. And there's
usually a fee of 2 percent or 3 percent of the amount
you're advancing for the transaction.
A warning to parents: Don't co-sign for plastic.
Certainly, if a student gets into credit trouble, Mom
and Dad can bail 'em out. That's what the credit-card
issuers expect.
But. it-card companies no longer insist that
parents'iniist co-sign a student's credit application. In
fact, personal-fmance experts say parents shouldn't: , '
co-sign. 74
'The assumption is that if the student can't pay, the
parent will," says Gerd Detvveiler of Myvesta.ors, a.
debt-counseling group.
Most parents don't want their children to start:out
with a bad credit history or a pile of bills, so they'll.
pay the debt whether they've co-signed for the card • -
or not, she says. But it shouldn't come to that. If
ova haven't talked to their son or daughter ahoy*, •J , ",,
Pi responsibilities that come with the card, the kids
shouldn't have a card in the first place, experts say.
While co-signing is no longer required to get most •
student credit cards, some parents continue to sign
on the dotted line. It's a bad idea, experts say. A?co
signer doesn't get the tills, and doesn't get the late
notices. "If the student doesn't pay, it looks just as
bad on the parent's credit record," Detweiler says: )
That's the big risk parents take when they co-sign::
ruining their own credit record. In many cases,
parents aren't even aware there is a problem until
they see a warning on their own credit record. By
that time, it's too late.
academics, athletics, the armed
services, and even the arts.
Due to the broadening definition
of financial services, job seekers'
options are expanding quickly.
Commercial banks buying up I
banks to expand their services are
hungry for talent and hiring like
crazy. Several years of experience in
these ranks will position you nicely
for a move downtown later on. Or
you may well decide—as many
others have—that investment
banking experience from Wall Street
has significant advantages and that
you're better off as a big fish in a
small pond.
ditor