Thursday, October 26, 2017

Investment Banking

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Investment Banking
1.
An investment bank is typically a private company that provides various financial-related and other services to individuals, corporations, and governments such as raising financial capital by underwriting or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services (fixed income instruments, currencies, and commodities).

Unlike commercial banks and retail banks, investment banks do not take deposits. From the passage of Glass–Steagall Act in 1933 until its repeal in 1999 by the Gramm–Leach–Bliley Act, the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G7 countries, have historically not maintained such a separation. As part of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act of 2010), the Volcker Rule asserts some institutional separations of investment banking services from commercial banking.

The two main lines of business in investment banking are called the sell side and the buy side. The "sell side" involves trading securities for cash or for other securities (e.g. facilitating transactions, market-making), or the promotion of securities (e.g. underwriting, research, etc.). The "buy side" involves the provision of advice to institutions that buy investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, and hedge funds are the most common types of buy-side entities.

An investment bank can also be split into private and public functions with a Chinese wall separating the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas, such as stock analysis, deal with public information.

An advisor who provides investment banking services in the United States must be a licensed broker-dealer and subject to U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority(FINRA) regulation.

2.
What is 'Investment Banking'
Investment banking is a specific division of banking related to the creation of capital for other companies, governments and other entities. Investment banks underwrite new debt and equity securities for all types of corporations, aid in the sale of securities, and help to facilitate mergers and acquisitions, reorganizations and broker trades for both institutions and private investors. Investment banks also provide guidance to issuers regarding the issue and placement of stock.
BREAKING DOWN 'Investment Banking'
Many large investment banks are affiliated with or subsidiaries of larger banking institutions, and many have become household names, the largest being Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America Merrill Lynch and Deutsche Bank. Broadly speaking, investment banks assist in large, complicated financial transactions. This may include advice as to how much a company is worth and how best to structure a deal if the investment banker’s client is considering an acquisition, merger or sale. It may also include the issuing of securities as a means of raising money for the client groups, and creating the documentation for the Securities and Exchange Commission necessary for a company to go public.

Investment banks employ investment bankers who help corporations, governments and other groups plan and manage large projects, saving their client time and money by identifying risks associated with the project before the client moves forward. In theory, investment bankers are experts in their field who have their finger on the pulse of the current investing climate, so businesses and institutions turn to investment banks for advice on how best to plan their development, as investment bankers can tailor their recommendations to the present state of economic affairs.

Essentially, investment banks serve as middlemen between a company and investors when the company wants to issue stock or bonds. The investment bank assists with pricing financial instruments so as to maximize revenue and with navigating regulatory requirements. Often, when a company holds its initial public offering (IPO), an investment bank will buy all or much of that company’s shares directly from the company. Subsequently, as a proxy for the company holding the IPO, the investment bank will sell the shares on the market. This makes things much easier for the company itself, as they effectively contract out the IPO to the investment bank. Moreover, the investment bank stands to make a profit, as it will generally price its shares at a markup from the price it initially paid. Yet, in doing so the investment bank also takes on a substantial amount of risk. Though experienced analysts at the investment bank use their expertise to accurately price the stock as best they can, the investment bank can lose money on the deal if it turns out they have overvalued the stock, as in this case they will often have to sell the stock for less than they initially paid for it.

For example, suppose that Pete’s Paints Co., a chain supplying paints and other hardware, wants to go public. Pete, the owner, gets in touch with Jose, an investment banker working for a larger investment banking firm. Pete and Jose strike a deal wherein Jose (on behalf of his firm) agrees to buy 100,000 shares of Pete’s Paints for the company’s IPO at the price of $24 per share, a price at which the investment bank’s analysts arrived after careful consideration. The investment bank pays $2.4 million for the 100,000 shares and, after filing the appropriate paperwork, begins selling the stock for $26 per share. Yet, the investment bank is unable to sell more than 20% of the shares at this price and is forced to reduce the price to $23 per share in order to sell the remaining shares. For the IPO deal with Pete’s Paints, then, the investment bank has made $2.36 million [(20,000 x $26) + (80,000 x $23) = $520,000 + $1,840,000 = $2,360,000]. In other words, Jose’s firm has lost $40,000 on the deal because it overvalued Pete’s Paints.

Investment banks will often compete with one another for securing IPO projects, which can force them to increase the price they are willing to pay to secure the deal with the company that is going public. If competition is particularly fierce, this lead to a substantial blow to the investment bank’s bottom line. Most often, however, there will be more than one investment bank underwriting securities in this way, rather than just one. While this means that each investment bank has less to gain, it also means that each one will have reduced risk.

3.
What is Investment Banking?
So what does an investment bank actually do? Several things, actually. Below we break down each of the major functions of the investment bank, and provide a brief review of the changes that have shaped the investment banking industry through the aftermath of the 2008 financial crisis. Click on each section to learn more.

Raising Capital & Security Underwriting. Banks are middlemen between a company that wants to issue new securities and the buying public.

Mergers & Acquisitions. Banks advise buyers and sellers on business valuation, negotiation, pricing and structuring of transactions, as well as  procedure and implementation.

Sales & Trading and Equity Research. Banks match up buyers and sellers as well as buy and sell securities out of their own account to facilitate the trading of securities

Retail and Commercial Banking. After the repeal of Glass-Steagall in 1999, investment banks now offer traditionally off-limits services like commercial banking.

Front office vs back office. While the sexier functions like M&A advisory are “front office,” other functions like risk management, financial control, corporate treasury, corporate strategy, compliance, operations and technology are critical back office functions.

History of the industry. The industry has changed dramatically since John Pierpont Morgan had to personally bail out the United States from the Panic of 1907. We survey the important evolution in this section.


After the 2008 financial crisis. The  industry was shaken to the core during and after the financial crisis that gripped the world in 2008. How has the industry changed and where is it going?

Tuesday, May 2, 2017

Satellite Internet

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Satellite Internet
Multiple Responses
1.
Satellite Internet access is Internet access provided through communications satellites. Modern satellite Internet service is typically provided to users through geostationary satellites that can offer high data speeds, with newer satellites using Ka band to achieve downstream data speeds up to 50 Mbps.

2.
How Does Satellite Internet Work?
Satellite Internet is the ability to transmit and receive data from a relatively small satellite dish on Earth and communicate with an orbiting geostationary satellite 22,300 miles above Earth's equator. The orbiting satellite transmits (and receives) its information to a location on Earth called the Network Operations Center or NOC (pronounced "knock"). The NOC itself is connected to the Internet (or private network), so all communication made from a satellite dish to the orbiting satellite will flow through the NOC before it reached the Internet.


Data communication via satellite is not much different than someone using a land based data provider, at least from the standpoint of the Internet user. The key to remember is that once the satellite system is configured by the installer, satellite service acts nearly identically as any other ISPs and may be configured as such. The slight difference of satellite service is described here.

What is a Geostationary Satellite?
There is a location in space where you can place a satellite in orbit so that from the ground, the satellite appears stationary. What is happening is that the satellite is actually orbiting the Earth at the same speed the Earth is rotating. The satellite makes a complete orbit around the Earth in 24 hours, or exactly one day. Geostationary satellites are only located at 22,300 miles directly above the Earth's equator and nowhere else.


A Satellite's Longitude
All Geostationary satellites have a name like "Galaxy 18" or "AMC-4"... and they ALSO have a longitude position.  If you recall from high school, longitude refers to those imaginary long lines that travel down the Earth for global mapping.  There are 360 degrees of longitude readings for Earth (360 degrees is a full circle).  If one knows the longitude of a satellite, one knows where the satellite is located in the sky because all Geostationary satellites are always located above the equator (or zero latitude).

To further confuse things, longitude is divided into two halves of West Hemisphere and East Hemisphere. All orbital "Slots" for satellites would be between 0° to 180° in the Eastern Hemisphere, and 0° to 180° in the Western Hemisphere. A satellite orbiting over the Galapagos Islands that services North and South America may have a Orbital slot of 101° West Longitude. A satellite orbiting over Malaysia that services Asia and Australia may have the orbital slot of 100.5° East Longitude. Satellite longitudes help installers locate where to point a satellite dish. It also helps in finding obstacles from an installation location and the satellite.

Make sense?

Satellite Look Angle
Any obstacle (such as a tree or mountain) will interfere with a satellite signal. It is important that there are no obstacles between the installation location of the satellite dish and the orbiting satellite. In the industry, we call this a clear "line-of-sight" to the satellite. Fortunately, finding if there is clear line of sight is is simplified by using a Look Angle Calculator. All that is needed is a current address (anywhere in the world), and the orbital Longitude of the satellite (see description of orbital longitude above). Plug these two details in, and the calculator will give you a compass heading of the satellite, and the degrees up from the horizon it is located, and a cool overhead picture of the installation location including a line showing the direction of the satellite.

Satellite Latency
The one (sometimes) noticeable difference that differentiates satellite service from other land based ISPs is something called "Latency", a term commonly used in the satellite world. Latency simply refers to how long it takes a single piece of information to make a round trip back and forth over a satellite connection. Latency could also be called "Ping Time".

Since data over satellite travels at the speed of light, and light speed is 186,000 miles per second, and the orbiting satellite is 22,300 miles above earth, and must travel that distance 4 times (computer to satellite... satellite to NOC/Internet... NOC/Internet to satellite... satellite to computer), this adds up to a lot of time. This time is called "Latency" and it is roughly ½ of a second or 500 milliseconds. This is not a lot of time to you or me, but some applications like VPN and real-time gaming don’t like this time delay. Who wants to pull a trigger, and wait half a second for the gun to go off? It is important to know if satellite latency will affect the way you will use the Internet. Ground Control iDirect services have a latency time between 500 to 650 milliseconds (0.5 to 0.65 of a second), which half as much as consumer grade service providers.

A MISCONCEPTION ABOUT SATELLITE LATENCY
A common misconception is that latency has an effect on transfer rate, or the speed in which you can transfer a file. This is not true. A one Megabyte file will transfer just as quick over a 5 Mbps (Megabits per second) satellite connection as it does over a 5 Mbps terrestrial connection. The only difference is that the satellite connection takes a half second to begin the file transfer, which is insignificant.

CIR - Committed Information Rate
CIR is a term often used in the satellite industry. It simply means what the satellite ISP is committed in guaranteeing your lowest speed. Normally CIR is 1:1, which means that you are not sharing your data channel with any other subscriber, and that max speeds are available 100% of the time. CIR should not be confused with Contention Ratios described next.

Contention Ratios
Contention Ratios are simply the number of subscribers that can share your connection at any given point in time. Contention ratios of consumer satellite Internet services are up to 400 to 1 (written as 400:1). Ground Control supports premium access and never has a contention ratio above 20 to 1 (or 20:1). Contention Ratios are not CIRs (Committed Information Rates) as speeds are not guaranteed as it is impossible to know if all other subscribers sharing the channel are not simultaneous downloading a data intensive video file, which would slow a connection for all of the users.

Satellite Footprint
The footprint of a satellite shows the location that a satellite dish may be located to communicate with the satellite. Below is the footprint for Galaxy 18 for North America. Also listed is the satellite longitude of each satellite.


EIRP - dWB and Dish Size - Effective Isotropic Radiated Power in the above footprint (Measured in dBW decibel watts), the numbers on the footprint above represent the signal strength from the satellite onto the Earth. The higher the dBW, the greater the signal strength. If you have a region with a low dBW level, you may have to use a larger satellite dish in order to receive the signal.

The Radio (Out Door Equipment - ODU)
Besides the dish (also called the reflector) what makes up a satellite system is the BUC (pronounced "buck") which is simply the transmitter, and the LNB receiver. Both require a high performance coax cable connected to the indoor Satellite router. BUC's come in different wattages. The higher the wattage, the greater the satellite system can perform in both speed and in poor environmental conditions. Consumer systems normally use a 1 watt BUC. Ground Control uses a 6 watt BUC with most systems.


The Ku Band
Satellite communications are radio transmissions in the Ku band of the electromagnetic spectrum. The Ku band is the same band that police officers use for their radar detectors. Ku Band satellite dishes transmit between a frequency of 14000 to 14500 MHz. They receive a frequency range between 11700 to 12750 MHz. Other common satellite bands are L-band (satellite phones and portable terminals), C-band (large satellite dish), and Ka-Band (smaller satellite dish).

The Satellite Router or Satellite Gateway
Most all of Ground Control services use iDirect satellite routers. This is the where the coax cables from the satellite dish connect to inside a building, and where a LAN (Local Area Network) can connect to the Internet. Note the Ethernet port on the back of the modem

3.
A satellite Internet connection is an arrangement in which the upstream (outgoing) and the downstream (incoming) data are sent from, and arrive at, a computer through asatellite. Each subscriber's hardware includes a satellite dish antenna and a transceiver (transmitter/receiver) that operates in the microwave portion of the radio spectrum.

In a two-way satellite Internet connection, the upstream data is usually sent at a slower speed than the downstream data arrives. Thus, the connection is asymmetric. A dish antenna, measuring about two feet high by three feet wide by three feet deep, transmits and receives signals. Uplink speeds are nominally 50 to 150 Kbps for a subscriber using a single computer. The downlink occurs at speeds ranging from about 150 Kbps to more than 1200 Kbps, depending on factors such as Internet traffic, the capacity of the server, and the sizes of downloaded files.

Satellite Internet systems are an excellent, although rather pricey, option for people in rural areas where Digital Subscriber Line (DSL) and cable modem connections are not available. A satellite installation can be used even where the most basic utilities are lacking, if there is a generator or battery power supply that can produce enough electricity to run a desktop computer system. The two-way satellite Internet option offers an always-on connection that bypasses the dial-up process. In this respect, the satellite system resembles a cable modem Internet connection. But this asset can also be a liability, unless a firewall is used to protect the computer against hack attempts.

The nature of the satellite connection is good for Web browsing and for downloading of files. Because of long latency compared with purely land-based systems, interactive applications such as online gaming are not compatible with satellite networks. In a two-way geostationary-satellite Internet connection, a transaction requires two round trips between the earth's surface and transponders orbiting 22,300 miles above the equator. This occurs in addition to land-based data transfer between the earthbound satellite system hub and the accessed Internet sites. The speed in such a connection is theoretically at least 0.48 second (the time it takes an electromagnetic signal to make two round trips at 186,000 miles per second to and from a geostationary satellite), and in practice is somewhat longer. Satellite systems are also prone to rain fade (degradation during heavy precipitation) and occasional brief periods of solar interference in mid-March and late September, when the sun lines up with the satellite for a few minutes each day. Rain fade and solar interference affect all satellite links from time to time, not just Internet systems.

This author recently had StarBand, a two-way satellite Internet service, installed at his rural home office. Bandwidth tests were conducted with the new system compared with a conventional telephone modem. The telephone connection provided actual bandwidth ranging from 10 to 15 Kbps. StarBand worked at 200 to 1350 Kbps; throughput seemed to depend mainly on the download file size. The fastest speeds were obtained with files of 50 KB (kilobytes) or less, typical of images and text contained in Web sites. Surprisingly, fast downloads were obtained even during times of maximum Internet traffic.

4.
What is Satellite Internet?
If you live or work out in the middle of nowhere then you’ll have few internet connection options. One of those options is dialup, and the second is usually satellite.

Satellite internet is a wireless connection that involves 3 satellite dishes; one at the internet service providers hub, one in space and one attached to your property. In addition to the satellite dish you also need a modem and cables running to and from the dish to your modem.

Once you have everything connected, the ISP will send the internet signal to the dish in space which then relays it to you. Every time you make a request (new page, download, send an email, etc) it goes to the dish in space and then to the (ISP’s) hub. The completed request is then sent back through space, to your dish and then to your computer.

Why Use Satellite Internet?
The only reason why you might use satellite internet is if you live in an area where other internet options such as cable or DSL isn’t available. If you’re on dialup then satellite internet will be an “upgrade” in the sense that satellite internet is considerably faster.

Other than that, though, there isn’t much of a reason to use satellite internet. Look at these pros/cons and you’ll see what I mean.

Satellite Internet Cons
  • The weather affects the signal path. During bad wind or rain storms you should expect poor quality internet, assuming you have internet at all.
  • Poor latency or high ping rate. Latency and ping rate is essentially the same thing; they both test how long it takes to communicate between another computer, device, service or server in a network.

In the case of satellite internet, it’s how fast you send and receive files (the delay or how much lag there is). Since you have to send data to space, to your ISP and back again, satellite internet has poor latency, or a high ping rate. So satellite internet is not good for you if you’re a gamer or if you intend to use VoIP services.
  • Minor obstructions can affect your signal. Your dish need to point south (where all the orbiting dishes are), and anything in the way of your dish’s signal such as branches or buildings can affect the quality. This can be a major pain if you live out in the woods.
  • Bandwidth limitations. Each month you’ll have so much bandwidth you can use up before your ISP throttles your connections (slows it down). This is in accordance to their (http://en.wikipedia.org/wiki/Acceptable_use_policy) Fair Use Policy. Some ISPs do daily bandwidths instead, which is slightly better, as you don’t have to wait as long as an entire month if you use up your bandwidth right away.
  • VPNs aren’t compatible with satellite internet. They require a low latency, high bandwidth setup which is the complete opposite of what you’ll get with satellite internet.
  • Satellite internet is relatively expensive. You’ll pay around $100 per month for speeds of 2 Mbps. To put this into perspective, this is twice what I pay per month for 25x faster cable internet.

Satellite Internet Pros
  • Satellite internet is faster than dialup. It’ll depend on what package you buy, but you can expect satellite speeds to be 10x to 35x times faster than dialup.
  • Satellite internet connections can handle high bandwidth usage, so your internet speed/quality shouldn’t be affected by lots of users or “peak use times.”
  • You don’t need a phone line for satellite internet.

As you can see, the cons of satellite internet (far) outweigh any pros. It’s not the greatest or most reliable option, and it’s incredibly expensive. Some of the cost may be due to the technology, but it’s also a supply and demand thing. There isn’t much (internet) supply in the middle of nowhere, so the demand (and costs) are going to be high to reflect this.

That being said, it’s hard to complain about or knock satellite internet when it’s really the only option you have (if you have other options such as DSL or cable, you should choose one of those instead). It is faster than dialup, and it’ll provide internet access to areas that the other connections won’t. The bottom line — it’s better than not having internet access at all.