How to Monitor News Streams for Investment Banking Ideas

By Matt Krantz, Robert R. Johnson

Investment bankers don’t waste any time in reacting to corporate developments. The trading desk at many large firms is clearly reacting in real-time to changes in interest rates, exchange rates, and the stock market. But all areas of an investment banking operation need to be nimble and able to adjust the operation’s offerings to reflect the current economic environment.

Investment bankers need to keep their eyes on developments at companies or markets to identify ways to best serve their customers. Doing so means constantly surveying the economic landscape for developments pertaining to key aspects of the financial system.

How to monitor the macro economy

Companies and investors like to think of themselves as free thinkers, but most are largely beholden to the vagaries of the economy. When the economy is rockin’-’n’-rollin,’ many companies look to get aggressive and expand, buy competitors, and file to sell stock to the public. But when the economy cools off and business gets slow, most companies completely retrench, lay off employees, and cut investment in plant and property.

Investment bankers need to keep a close eye on how the economy is performing so they can be in sync with the needs of clients. One aspect of watching the macro economy involves keeping tabs on economic indicators. Economic indicators are statistical measures that sample the health of the economy. Oft-watched economic indicators include the following:

  • Consumer confidence: When consumers are in the spending mood, it can drive demand for companies’ goods and services. The University of Michigan releases monthly survey data on thousands of households to reveal how consumers are feeling about the economy.

  • Unemployment reports: When jobs are hard to come by, companies aren’t hiring and consumers aren’t spending. This critical piece of economic data, from the Bureau of Labor Statistics and U.S. Department of Labor, is closely watched each month.

  • Retail sales: The U.S. economy is consumer driven, so if consumers aren’t spending, that’s not good for growth. Investors closely watch the total receipts of retail outlets, generated by the Census Bureau of the Department of Commerce each month.

  • Inflation: Inflation, or rising prices, can have a profound influence on the economy, companies, and investors. Inflation can be measured in several ways, including the Consumer Price Index (CPI), which is a monthly gauge of the cost of a representative basket of goods.

You can always go to the source of economic indicators. For instance, if you want, you can go directly to the website of the Bureau of Labor Statistics to retrieve information on the unemployment rate or the CPI.

But investment bankers often save time by using services that not only pull all the economic indicators into one place, but show what economists were expecting. The value of the indicator itself isn’t as important as how it measures up to forecasts.

A great source for economic indicator data is Briefing.com, which maintains an economic calendar and not only gives the data and dates of key reports, but tells you what was expected.

How to monitor the news

Don’t forget that investment banking demands ebb and flow with developments in the business world. For that reason, it’s critical to keep a close eye on developments in companies to know where the demands for financial services will likely be. Both Bloomberg and Thomson Reuters maintain dedicated news feeds that give investment bankers a good idea of the developments that matter most.

Bloomberg’s and Thomson Reuters’s websites are comprehensive data sources, so it’s easy to get distracted. But if you’re looking to monitor news key to investment banking, Bloomberg places much of that in the news area, and Thomson Reuters places it in its Global Markets area.

Don’t overlook the major national newspapers and their websites — The Wall Street Journal, The New York Times, and USA TODAY closely watch business developments. All these sources also provide links to their stories using Twitter, which is fast becoming a handy way for investment bankers to measure scuttlebutt on news and the economy.

How to monitor the filings

One of the greatest things about EDGAR is that it contains just about every filing ever made by a company. But that’s also one of its drawbacks. There’s so much data being filed to EDGAR that you can easily overlook important filings that may slip in unnoticed. The investment banker’s duty is to keep a close eye on what companies and investors are filing so nothing gets overlooked.

Most of the professional market information tools — Bloomberg, Thomson Reuters, and S&P Capital IQ — allow users to get notifications when a company of interest makes a filing. But there are free services that do the same thing for people who don’t have access to these services. SECFilings.com allows you to set up alerts and be notified anytime a company, investor, or any other filers submits a document to EDGAR.