Pain & Pleasure

[fxtrade]

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[mingsphinx]

http://money.cnn.com/2008/12/04/news/economy/investment.bankers.fortune/?postversion=2008120505

In the wake of this restructuring, investment bankers may need to look beyond big Wall Street firms for job opportunities, consider significant pay cuts, and even think about switching careers and leaving the banking field.

The tone has changed quite a bit. The job market for bankers has become so somber that even the media has stopped making fun of it. But that should not stop us!

Indeed, where will all these investment bankers go? Most of them are completely useless. They cannot read or comprehend financial statements aside from grabbing little pieces of data nor are they conversant enough in financial products to head down the retail path. In the last downturn, it was something of a sport to catch a former Wall Streeter becoming a waiter or bartender. This downturn is so bad that such profiles may not surface. We will just have to wait and see.

 

[mingsphinx]

http://www.nytimes.com/2008/12/04/health/nutrition/04fitness.html?ref=business

I was wrong! But they make it sound so uplifting. Unemployed bankers are now called entrepreneurs with great plans and marketing saavy.

Another hurdle for professionals who go from white-collar to what might be called no-collar jobs can be justifying their career choices to skeptical friends and kin. Ms. Lo said in an e-mail message that her immigrant parents ¡°were not pleased to learn last year that my Harvard education was being put to good use as a yoga teacher.¡± Mr. Fleshner ¡ª who recalls being asked (loudly) at a dinner party two years ago whether he was ¡°still unemployed¡± ¡ª admits to some initial awkwardness in describing his current career. ¡°I felt almost as though I had to apologize,¡± he said.

Now, though, ¡°I say, ¡®I¡¯m self-employed and I have my own little fitness business.¡¯ ¡±

True, true.

 

[dividend]

The credit crisis is partly to blame. But so is the sector's rampant overcapacity. The U.S. financial industry historically has roughly doubled in size during each major technological innovation — railroads in the late 1800s, autos in the 1920s and the tech boom of the 1990s, for example.

As the boom years faded and financing needs fell, the size of the financial industry contracted accordingly. But when the Internet bubble burst in 2000, the sector never stopped growing. Instead, it ballooned over the past eight years to around 10 percent of the U.S. economy, puzzling economists.

"There was no reason for the industry to grow as fast as it did," said Thomas Philippon, a finance professor at New York University who has studied the financial industry's growth cycles. "The fundamentals just weren't there."

His models predict the financial sector will shrink to around 7 percent of gross domestic product, shedding $100 billion in annual wage costs. That would be Wall Street's first contraction in GDP terms since 1933, according to Philippon.

http://www.cnbc.com//id/28099428

 

[mingsphinx]

I could not tell you why the bust up is as bad as it is, but I can tell you that it is very bad. Kids who were thinking that they would sit out the storm after losing their jobs now realize that there is no way for them to hang on to that hope. Rent plus food alone would probably have sucked away all their savings by now. Mommy and Daddy can help out only for so long because their retirement account got hit as well. Pack the bags, load up the car, it is time to get ready for that long drive back to frozen corn fields; back to the world they left behind; back to the person they wanted to forget. No more banking for them. No more Herman Millers to sit on or Bloomberg terminals to fight over. It is time to think about grad school at the local state university and hope that the employment situation improves when they get out because there is nothing that someone like them can do back home. This is a year where the good gets canned and the rich kids hang on. In better times, they would have gotten promoted. Associate, Vice President, Associate Director... each another step up the Wall Street ladder. Never mind the dishonesty; as long as they got the money, they were not going to rock the boat. Alas, oh me oh my! It did not work out that way. The bunions and the minions have to make their way back home through grey skies and falling sleet. Turn your head babe as you cross the bridge to give New York one last look. You came to conquer, but what did you give up in the end?

 

[drsteph]

Quote from mingsphinx:

I could not tell you why the bust up is as bad as it is, but I can tell you that it is very bad. Kids who were thinking that they would sit out the storm after losing their jobs now realize that there is no way for them to hang on to that hope. Rent plus food alone would probably have sucked away all their savings by now. Mommy and Daddy can help out only for so long because their retirement account got hit as well. Pack the bags, load up the car, it is time to get ready for that long drive back to frozen corn fields; back to the world they left behind; back to the person they wanted to forget. No more banking for them. No more Herman Millers to sit on or Bloomberg terminals to fight over. It is time to think about grad school at the local state university and hope that the employment situation improves when they get out because there is nothing that someone like them can do back home. This is a year where the good gets canned and the rich kids hang on. In better times, they would have gotten promoted. Associate, Vice President, Associate Director... each another step up the Wall Street ladder. Never mind the dishonesty; as long as they got the money, they were not going to rock the boat. Alas, oh me oh my! It did not work out that way. The bunions and the minions have to make their way back home through grey skies and falling sleet. Turn your head babe as you cross the bridge to give New York one last look. You came to conquer, but what did you give up in the end?

You gave up nothing but your soul... and in retrospect, your anguish is only that you let it go so cheaply...

 

[mingsphinx]

Quote from drsteph:

You gave up nothing but your soul... and in retrospect, your anguish is only that you let it go so cheaply...

If it was just about giving up one¡¯s ¡®soul¡¯, their sense of defeat would not be so total. Who would come to Wall Street and believe that he was going to make the world a better place? You can say that they sold it cheaply, but hey, something is always better than nothing. And now they have nothing. If there was a chance to sell their souls cheaply again, I am sure all of them would do so in an instant and at a discount.

These kids, born after 1975, they were brought up to believe that they deserved all the goodness the world had to offer. For most of them, this is probably the first time anything bad has happened in their charmed lives. It is not that they blame themselves, they are simply stupefied at this unfamiliar feeling of pain. How do you deal with the humiliation of having lost so completely when you have been told that you are a winner all your life?

 

[mingsphinx]

On the Street, Disbelief and Resignation

The Wall Street Journal

By DENNIS K. BERMAN

Inside what's left of Wall Street, investment bankers are doing all they can to cope with a business that is disappearing before their eyes. Yes, there are tens of thousands of people still with jobs. They just don't have much work. Debt and stock markets are virtually shut, merger volume is down by 28%, and whole lines of structured finance are closed for good.

Investment banking has since become a phantom realm, where everyone is busy but no one is doing anything. In this world, status is conferred by a quality meeting, not a completed transaction; a $700,000 salary is deemed generous; and an apocryphal story keeps circulating of a former J.P. Morgan Chase & Co. mortgage-securities banker now driving a forklift.

"An entire generation has worked for 20 years, lifted up their heads, and it's all gone 'poof,' " says one Goldman Sachs banker. Indeed, last Friday J.P. Morgan quietly laid off a passel of Bear Stearns bankers. They thought they had found a safe harbor after Bear imploded early this year.

For now, the coping is taking the form of prolific meeting-taking. Ten of 11 people interviewed described, with unexpected eagerness, how now is a good time to "connect with clients" or "build relationships." One boasted of spending just two days a month in the office, while another ex-J.P. Morgan employee boasted of two breakthrough meetings -- just hours before he was fired.

The bankers say that the most substantive conversations are, surprise, those with companies in urgent need of cash. These companies will listen to anyone who may have a creative idea or two. With markets frozen, there is little work to actually complete. "What's your definition of business?" snapped one Merrill Lynch executive.

Often these conversations devolve into discussions about the fate of Wall Street itself, and whether the bankers' employers will survive or not. "You do that for a little while and you run out of things to talk about," says one Citigroup banker.

These conversations give some macabre cheer to another emerging group of Wall Streeters. These are the ones who have largely given up on their current positions, and feverishly chart layoff rumors and bonus chatter. These types are more likely found among a bank's younger ranks, where employees have less ability to win business or differentiate themselves. They are vainly hunting for new jobs.

"They watch CNBC all day and surf the Web," says the Citigroup banker. "Investment banking had this boisterous vibe. Now they're completely beaten down."

This would appear a moment of natural self-reflection. Perhaps the time to consider a career move out of New York, or pursue an abandoned passion. Oddly, few of the senior bankers seemed to be able to accept the basic reality of their own profession: that an overleveraged world created an excess of bankers, too.

It is a testament to Wall Street's inherent optimism -- and exactly why the boom-and-bust cycles will continue -- that bankers remain so committed. As the Goldman banker summed it up: "People are busy. They're just not getting paid."

Write to Dennis Berman at dennis.berman@wsj.com

 

[mingsphinx]

Layoffs expected to decimate Wall Street ranks

By STEVENSON JACOBS

NEW YORK (AP) ¡ª The U.S. financial services industry is witnessing the bursting of yet another bubble. This time, it's the industry itself.

Bloated by years of frenzied growth, Wall Street banks and other firms are shedding tens of thousands of jobs and slashing entire divisions in their most drastic downsizing since the Great Depression. The moves promise to upend financial services and investment options for Americans from Wall Street to Main Street.

Those layoffs will drain New York and other cities of vital tax dollars while swelling the fast-growing ranks of the nation's unemployed. U.S. employers cut 533,000 jobs in November ¡ª the most in 34 years ¡ª including 32,000 in the financial-services sector, the government said Friday.

Saddled with heavy losses and a shriveled stock price, Citigroup Inc. last month said it would eliminate 53,000 jobs, the second-largest job cut by a U.S. company on record. Other firms plan to drop the ax on tens of thousands more, especially in areas that specialize in the risky investment products that helped ignite the financial meltdown.

"I think it's pretty clear that the whole financial sector is going to be smaller than it was," said Kevin Logan, chief U.S. economist at investment bank Dresdner Kleinwort. "It's not going to just consolidate; it's going to shrink."

Whether the bloodletting brings permanent changes to the economy is a matter of debate. But consumers will be deeply affected regardless. A leaner financial sector should lead to simpler, safer investment options as Wall Street reduces risk. But a smaller, more conservative financial sector also means smaller, more conservative lending. And that would lead to less available credit.

"We're going back to the basics," said Robert Howell, a finance professor at Tuck School of Business at Dartmouth. "The financial system was behaving like a bunch of drunks, and now it's back to sobriety. Things got totally carried away."

Through October, 130,000 financial jobs had been eliminated throughout the industry this year, according to employment firm Challenger, Gray & Christmas.

The elimination of 53,000 jobs at Citigroup ¡ª part of a 20 percent downsizing at the firm ¡ª will raise the number to around 180,000. That would be the industry's biggest yearly contraction ever.

JPMorgan Chase & Co. is shedding 10 percent of workers at its investment bank, matching planned cuts at rivals Goldman Sachs Group Inc. and Morgan Stanley. State Street Corp. said it will cut 1,600 to 1,800 jobs, or 6 percent of the investment services company's global work force.

The credit crisis is partly to blame. But so is the sector's rampant overcapacity. The U.S. financial industry historically has roughly doubled in size during each major technological innovation ¡ª railroads in the late 1800s, autos in the 1920s and the tech boom of the 1990s, for example.

As the boom years faded and financing needs fell, the size of the financial industry contracted accordingly. But when the Internet bubble burst in 2000, the sector never stopped growing. Instead, it ballooned over the past eight years to around 10 percent of the U.S. economy, puzzling economists.

"There was no reason for the industry to grow as fast as it did," said Thomas Philippon, a finance professor at New York University who has studied the financial industry's growth cycles. "The fundamentals just weren't there."

His models predict the financial sector will shrink to around 7 percent of gross domestic product, shedding $100 billion in annual wage costs. That would be Wall Street's first contraction in GDP terms since 1933, according to Philippon.

The pullback comes at a heavy cost. New York state Comptroller Thomas DiNapoli has said that over the next two years, the financial crisis could cost the state and New York City 225,000 private-sector jobs and the state and city $6.5 billion in tax revenue from the securities industry.

For financial workers caught in the whirlwind, anxiety runs high.

"Everybody's talking about it, of course," said Oliver Bouchard, a New York-based technology specialist for Citigroup, whose stock dipped below $4 last month, before federal regulators unveiled a plan to guarantee hundreds of billions of dollars in possible losses by Citi and inject more money into the struggling bank. "People are fearful for their jobs."

Bouchard, speaking for himself and not his employer, doesn't think he'll be among those laid off but said "nobody at this moment knows what's going on."

"Everybody hopes that it will just resolve itself," Bouchard said.

So where will the next round of layoffs hit the hardest?

The sectors of the industry that deal with mortgage mortgage-related asset-backed securities and other risky investments are expected to be among the most battered. The subprime fiasco has left investors wary of holding such investments. As a result, many financial firms have closed mortgage-related divisions. Experts expect that trend to accelerate next year.

"Any sector related to mortgages will contract significantly, probably by as much as half," said Sung Won Sohn, an economics professor at California State University, Channel Islands. "Many of those people simply aren't going to be needed."

Another group whose ranks are being thinned are financial engineers. Those are the math whizzes, lured from top schools to build complex computer trading models at hedge funds and big Wall Street firms. The so-called "quants" have been blamed for underestimating the risks of mortgage-related securities, derivatives and other exotic assets that helped trigger the financial crisis.

Many already have been let go. And firms say few will be replaced any time soon. That somber reality cast a pall over a financial engineering career fair at New York University this month. The annual event used to attract all the big names on Wall Street; this year, there were numerous cancellations.

"They said, 'Look, we're not hiring right now,'" said Steven Allen, board member of the International Association of Financial Engineers, which co-sponsored the event. "This was the first year you felt that people think it's worse than it was. There are jobs, but it's going to be much harder."

One prospective quant faced with dwindling job prospects is Zaw Myo Thant, who is pursuing a master's in financial engineering at NYU's Polytechnic Institute. He described the mood among his classmates as "pretty grim."

"Most students are already having difficulties finding an intern position, let alone full-time positions," said Thant, 32.

Amid the gloom, there could be a silver lining, at least for consumers. Fewer high-risk assets being traded should provide a more orderly marketplace. Ideally, that would safeguard against further market spasms like those that have wiped out billions in investors' retirement savings and other holdings.

"We can't have Wall Street producing defective products again," said Edward Yardeni, an independent market analyst. "They don't necessarily kill, but they do a lot of damage."

He said the industry will likely go back to the basics of the capital markets ¡ª "stocks, bonds ... things normal people can understand."

Yet if banks remain stingy with their money, the credit pinch that has squeezed consumers and small businesses in need of loans could worsen.

"Banks won't be lending as much, and that's going to cause some pain," said Howell of Dartmouth's Tuck School of Business.

Opinion is mixed, though, on whether a slimmed-down financial industry will really become more prudent or whether the pursuit of profits will inevitably restore the kind of freewheeling days the led to the meltdown.

Much will depend on what new regulations stem from the crisis, NYU's Philippon said.

Some lawmakers have called for tighter limits on how much leverage financial firms can assume, among other restrictions. Free-market advocates, though, warn that burdensome rules could stifle innovation and undercut the industry.

"My best guess is that the U.S. economy remains vibrant and efficient," Philippon said. But the shape and scope of any new regulation "will be the biggest factor" for the financial sector's future success.

"That's going to determine whether it's a dynamic sector or a dead one," he said.

Ya gotta feel a lil' for the quants. Nah!

 

[mingsphinx]

There is a thread about former Wall Street hotshots becoming farmers. That is cruel because such a dream is really beyond the reach of most laid off Wall Street grunts. It takes significant mojo to start a farm these days if you want to make any money and then back breaking sweat equity to build it up. On top of that, you would probably need to go to college just to learn the basics.

What do people who are forcibly evicted from Wall Street do? Dog walking seem to be a popular choice. It is freelance and the up market customers are comfortable with a fallen star of one of their own. Tutoring is another especially if you are a girl with blue stocking credentials. Then there is tending bar or opening up your own small business. The problem that most former Wall Street employees face is a form of subtle discrimination. Other people think that you are probably too smart and too aggressive to undertake a $60,000 a year no bonus possible assignment. Plus, you are supposed to be a mega millionaire, why would you need a job? Cramer was right about law school, it is probably the best option available for most former bankers. But I hear that lawyers are getting canned too.

Dark days ahead for lots of people. Even if they did save their money, they would need to quickly downsize their lifestyle expectations or that cash will just dribble away before you know it.