Wall Street new round of layoff

[Andy Nguyen]

It's unclear if this is annual churn or a sign for things to come

Barclays Capital, Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley currently are among those financial institutions either weighing staff cuts or actually paring payroll as they struggle to rein in costs and eke out profits in a choppy market, sources told The Post.
Link: http://www.nypost.com/p/news/business/slasher_street_3N2eDrojp9DGzQcAlzGPhN#ixzz1OosqUk8S

“FYI: layoffs today at Barcap hitting Equities at all levels from MD and down. All areas hit, especially sales and trading. MD who’d been there 25 years got the boot, too.”
Link: http://dealbreaker.com/2011/06/layoffs-watch-11-barcap-2/#more-42913

 

[MSFHQ]

I think this is just cyclical. Wall Street is awash with talent. No need to overpay in slow times when you can simply rehire as needed.

Everyone "dreaming" of working on the street needs to be prepared for this. High pay, high stress and zilch job security. Frankly, I would advise people to go into it with the mindset that it will only last a few years and be able to leverage that experience into something much more mundane. Your pay will take a cut, but your sanity will increase.

 

[Jim]

You know, Andy, I'm seeing a lot of parallels between careers in law and careers in quant finance. Could you please tell me what your opinion on this would be?

For some time, especially the late 90s and early 2000s, law school was pretty much a gigantic gravy train, but now, with more than 200 law schools churning out 45,000+ graduates a year, there's a tremendous bubble. Law schools are pretty much cash cows for schools, since tuition is at $45,000 or above. They publish misleading statistics in order to attract students (i.e. 95% of all graduates employed within 9 months of graduation) - when, in fact, even waiters and Wall Mart cashiers were counted as gainfully "employed".

I don't have any hard evidence that MFE programs and quant careers are following a similar path as law, but I really see the parallel in a sense that (1) a lot of MFE programs are being almost as shady about their employment statistics, (2) more and more MFE/RISK type programs continue to set up shop around the country (especially in the most random parts of the country where the finance market is extremely thin), and (3) demand for "quantitative analysts" in finance doesn't seem to have the potential to keep up with the increasing supply of MFE graduates. It's a bubble, and it seems like a lot of the people that attend programs at UIUC, Washington, Texas, and Stevens Institute of Technology will all just end up as suckers that paid a lot of money for a worthless degree.

Law schools try to sell their programs by saying how "versatile" a law degree is. After all, you could be a plumber, or even a McDonald's manager, or, even better, a paralegal; see how law schools talk about "alternative careers". Since all law schools are pretty much the same, just as many MFE programs are, the only way for companies to differentiate between job applicants is by their pedigree. Only the top law programs are successful in placing their graduates (about 50% get placed in good law firm jobs). Even top programs have students protesting about their dismal job prospects. Pretty much only the most reputable MFE programs and a few others seem to provide any hope for graduates seeking actual finance or risk jobs. What I really don't want to see is MFE websites trying to claim that an MFE degree "also opens others doors, because the skills that an MFE graduate has is sooo versatile".

 

[Yike Lu]

I also think this may be part of a trend of there being a lot of news articles detailing lay-offs.

It's like how the nightly news is always negative - layoffs are just the newest incarnation of that.

Not to say there isn't stress in the BB banks... just something to be mindful of. Nobody really talked about layoffs it seemed in the 90s... but it's been a few years since then and it's normal to hear about now.

 

[Abdel]

A few days ago, someone asked me this question: ''I'm interested in hearing how you know we are headed back into a long recession..?''

And here was my answer:

''Well, all the politicians did, is to delay the inevitable. Just like a heroin addict, instead of going to rehab (recession) to get the toxins out of his system, he rather shoot himself up with another dose (stimulus) to get an artificial boom (phony economic expansion).

And since the stimulus is wearing off (QE2 is ending late june), the hangover is around the corner.

Remember, back in 2000-2001, when Bush got into office, the tech bubble burst. What was his reaction? Injected & printed $700 billion and lowered the interest rates to 1%. As a result, the housing bubble that burst in 2008 with the damages that we seen.

Now Obama got into office. What was his reaction? Injected & printed +$1 trillion and lowered the interest rates to 0%. As a result, the coming desaster.

See, people thought the U.S had a real economy, but they didn't. For the last 30-40 years, all they had was a phony bubble economy. And as you see, with bush stimulus, the bubble lasted +7 years...with obama stimulus, the bubble lasted 2 years or so (when he injected alot more money!). So, this phony bubble economy will come crashing down back to earth pretty soon. Just like the heroin addict, he'll go from dose to dose untill the overdose kills him.

And do not look at their GDP numbers as a sign of economic growth. Their GDP is 70% consumption based on borrowed money. So, when their GDP goes up, it is more a bad sign than a positive thing! Don't be surprised if their GDP shrinks dramaticly.

I think that their GDP is in the negative area if you measure the inflation the correct way. Currently, the way they measure inflation is non sense. They exclude food & energy. They use substitution (if chicken meat price goes up, they'll take it away and replace with sheep meat for example)...they use hedonics (if ipad 2 costs the same price that the ipad 1 but is more sophiticated, then they consider this deflation).... they also you ponderations (if chicken meat represent 10% of the consumer price index and his price goes up, they'll bring it's weight down to let's say 5%) etc etc...everything is made to hide the inflation.''

Now the question is when the financial sector will shrink in the U.S, will it mean that it will expand in Asia?
That's the million dollar question

 

[Andy Nguyen]

Now the question is when the financial sector will shrink in the U.S, will it mean that it will expand in Asia?

Let me ask you this
If the US (the world financial capital) shrinks, is it possible that other financial centers will shrink more or worse, collapse?
If one's career is so dependent on the financial sector, how would people shield themselves for future collapse?

Being one of the increasing pool of cookie-cutter MFE grads doesn't sound like a great prospect to me, don't you agree?
How would one diversify his career aspect?

 

[Yike Lu]

You becoming disillusioned Andy?

 

[Andy Nguyen]

You becoming disillusioned Andy?

Nope. I just want to let people think a bit before jumping on the train-to-Wall-Street-rich wagon.
And my experience here is that many people haven't done much research (if any) about what they want to do and what this line of work entails so it's a responsible thing to do, like any caring person would.

 

[Abdel]

Let me ask you this
If the US (the world financial capital) shrinks, is it possible that other financial centers will shrink more or worse, collapse?
If one's career is so dependent on the financial sector, how would people shield themselves for future collapse?

Being one of the increasing pool of cookie-cutter MFE grads doesn't sound like a great prospect to me, don't you agree?
How would one diversify his career aspect?

I think that other financial centers will pick up the slack and the financial jobs will shift away from the U.S.

So, there is hope, maybe the transition can be tuff but eventually it should be ok, as long as the individual is willing to work overseas.

 

[Alexander Krosky]

There is definitely a crash coming, it's just a matter of how and when. Whoever can figure that out will make a lot of money. New report out today: China says the US is already defaulting.

http://ca.news.yahoo.com/china-ratings-house-says-us-defaulting-report-054309883.html

It will definitely spread to Asia when it happens, it's just a qusetion of by how much. You can lump the ties into two cursory areas: financial and economic. Financial will always drag them down with us if we go into a recession/depression due to the covariance of our markets. If we're talking about a default, that's going to be economic on top of it. I can't see China sustaining >10% GDP growth when their biggest customer is in economic ruin. Then their little bubble collapses as well because they've already picked up the unsustainable capitalist habits of the US. There will be no refuge under this scenario.

 

[Andy Nguyen]

In before bbw comments

 

[bigbadwolf]

Let me ask you this
If the US (the world financial capital) shrinks, is it possible that other financial centers will shrink more or worse, collapse?
If one's career is so dependent on the financial sector, how would people shield themselves for future collapse?

Being one of the increasing pool of cookie-cutter MFE grads doesn't sound like a great prospect to me, don't you agree?
How would one diversify his career aspect?

As you suggested yesterday, a very good programmer can always find a job. People need back-up plans, need not to put all their eggs in one basket. need to ask, "What if ...?"

I am of the opinion that finance as a whole, at least in terms of employment the world over, will shrink. And a particular form of finance -- derivatives, hedge funds -- is US- and UK-led, and will not be transplanted to other economies.

I also think that advanced economies are going to regress -- because of paucity of energy and out-of-control climate change -- to being more subsistence-based. In such a scenario, finance will have a very limited role (if any).

 

[Abdel]

@Alex Krause

Well, China's economy is not a bubble (their real state market is).

China doesn't need the U.S.

Remember, China is lending the US money in order for them to buy chinese products. What the chinese governement has to realise is that if it stop the peg, it will benefit china not the US.

In order to maintain the peg, China has to print it's currency to buy up the US dollar. By doing so they create alot of inflation for their people. And when they raise their rates to ''fight'' the inflation, it only get worse because the high yield attracts foreign investors that comes in and pur more money wich causes even more inflation.

So by letting the yuan raise, they bring the inflation down = new purchasing power for the +300 million middle class consumers.
China has the factories, the US don't. So if china don't export it's product and let the it's own citizen to consume it, what will the US consume? lol...

See it this way,

There's an island with 5 people on it. 4 asians and 1 american.
The 1st asian's job is to gather wood....the 2nd one job is to go fishing...3rd one is to build a wood house and the 4th one job is prepare the meals.

The american's job is to consume what the 4 asians produced.

Now you got this 'modern economist' that comes in and tell you : ''See, without the american, these poor asians wouldn't know what to do and wouldn't have jobs'' (this is what we constantly hear in the mainstream media).

And of course, this is non sense. To the contrary, if they asians kicked the american off the island, they could consume their own products and maybe even take some time off to relax on the beach!

 

[bigbadwolf]

New report out today: China says the US is already defaulting.

Not technically. The US authorities can keep arbitrarily raising the debt ceiling (which is what? -- $14.5 trillion?). In fact they have no alternative to raising the debt ceiling and engaging in repeated bouts of quantitative easing. That's the sum total of economic policy. What happens as a consequence, I have no idea. The Chinese are right in that the poor suckers holding dollar-denominated paper are getting shafted. Hence the diversification into commodities, precious metals, tangible assets (including by China).

 

[Andy Nguyen]

As you suggested yesterday, a very good programmer can always find a job. People need back-up plans, need not to put all their eggs in one basket. need to ask, "What if ...?"

I'm of the school of thought that one should be equipped with skills that can translate into at least 2 industries. Programming skills are the perfect candidate for it.
You can work for banks, tech companies (Google, MS), start your own company, etc.

 

[logixwriter]

Nope. I just want to let people think a bit before jumping on the train-to-Wall-Street-rich wagon.
And my experience here is that many people haven't done much research (if any) about what they want to do and what this line of work entails so it's a responsible thing to do, like any caring person would.

I am a programmer but lately feel this skill is not enough. One needs to have deep knowledge in finance/economics to succeed more than the regulat vp/avp/dir level jobs..

 

[logixwriter]

Nope. I just want to let people think a bit before jumping on the train-to-Wall-Street-rich wagon.
And my experience here is that many people haven't done much research (if any) about what they want to do and what this line of work entails so it's a responsible thing to do, like any caring person would.

The problem is to find out what you really want..

 

[marina]

The former Special Inspector General for TARP also noted that S&P says the next round of bailouts will cost $5 trillion just in up-front costs, and that enormous pressure is being put on Wall Street executives to take giant, company-bankrupting risks.
http://www.washingtonsblog.com/2011/06/former-bailout-inspector-general-neil.html

 

[MSFHQ]

Whoa, wait. China doesn't need the US? We are both connected at the hip. Please tell me how an authoritarian state is going to maintain control with massive unemployment and stagnation? Last time I checked, the USA was the largest market for Chinese goods and US companies employ, in one way or another, a TON of Chinese people.

There is an old sayin... (which I will paraphrase).

When a person owes you $100 dollars, it is his problem.
When a person owes you $100,000 dollars, it is your problem.

China has us over a barrel as much as we have them over the barrel.

 

[bigbadwolf]

Whoa, wait. China doesn't need the US? We are both connected at the hip. Please tell me how an authoritarian state is going to maintain control with massive unemployment and stagnation? Last time I checked, the USA was the largest market for Chinese goods and US companies employ, in one way or another, a TON of Chinese people.

Yes. But the Chinese and other foreigners are not allowed to buy American companies with their dollar holdings. That's why there's a divide between US corporate profitability (which is excellent) and the poor returns on US Treasuries. If I were holding dollars and was told I could only park them in US Treasuries, I would be very upset. US companies, on the other hand, have used dollars to buy up foreign companies and foreign tangible assets. At the heart of this is politics and military power, which directly and indirectly ensure the acceptance of the dollar.