Tag Archives: Wall Street

Another casualty of the Wall Street meltdown

What do you mean, my card's been refused?

What do you mean, my card's been refused?

Cocaine deliveries in the canyons are way down. This calls for a stimulus program!

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Don’t blame us brokers if you over paid!

Or so says the head of New York’s Realty Board in a letter to Craine’s Business Report.It’s a fair amount of blather but I liked his statement that New York sales were mostly to smart Wall Street types who are sophisticated enough to figure out for themselves that they’re being fed a line of bull. I like it because that’s the exact defense Wall Street asserts when a customer complains that they took the advice of their “financial adviser” and got hosed. “If you’re intelligent enough to inherit a million bucks we can steal, Widow X, you’re intelligent enough to know that your “adviser” is just a used car salesman, out to take your money – next case”.

And this part could have been written by Mad Monkey. In fact, perhaps it was.

Finally, it is troubling to think that Crain’s believes that the real estate market in New York City is no different from the rest of the country. The type of ownership, the impact of Wall Street, the value of the dollar and the excitement of living in New York are just a few of the factors that make New York different. Our residential brokers understand all of the factors that drive our market, and I am proud of the information and service they provide their clients and their love of our city.

Steven Spinola
President
Real Estate Board of New York

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Advice to 240,000 fired Wall Streeters: Grow up and get a real job

Harsh reality from the head of Heidrick & Struggles.

Q. How bad is it for people working on Wall Street?

A. We haven’t seen anything like this in the financial services industry, particularly in investment banking but also in the capital markets area. The numbers change every day, but at the end of 2008 the number was that 240,000 had been laid off on Wall Street in an 18-month period. If you’re talented — and there are a finite number of individuals across every organization who are A-plus players — you won’t have any trouble getting a job. If you’re newer to the investment banking field, you’re going to have to look at different types of employment.

Q. Is it just people in investment banking losing jobs or is it also happening in other areas, like private equity and hedge funds?

A. It’s across the board. You haven’t seen private equity being hit as hard as investment banking or the hedge funds. I don’t think a day goes by when you don’t pick up a newspaper and see another hedge fund that’s closing. A lot of these individuals will either reinvent themselves in different areas of the hedge fund world or retire or do something completely different. Therein lies the challenge. What type of industries do you want to go into when you’re being compensated fairly heavily now?

Q. Where do those 240,000 people go?

A. There are a couple of things happening. When I say retool or reinvent yourself, some of the local investment banks in Chicago are recruiting people from New York. That just wouldn’t have happened a couple of years ago.

You’re also seeing people moving abroad. —

But it’s a supply and demand issue. The demand simply isn’t there for all 240,000.

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Q. If many of these people were skilled at building complex financial instruments that are no longer in demand, how can they use those skills in other industries?

A. You see a number trying to go back to school. You see a number trying to get into different areas. If you’re intelligent, there will be opportunities. It will just take much longer than it used to. At this time, it could take six to eight to nine months.

But it’s tough because the areas that are looking to recruit and grow right now are energy, things that deal with the environment, pharmaceuticals and some parts of high tech. It’s tough to make a transformation from trading credit-default swaps one day to going to work for a health care company the next. They have to discover what they want to do when they grow up.

Q. Are business schools teaching people to become investment bankers when the world doesn’t need investment bankers any more?

A. There is truth in that. I’m on the board of the Fuqua business school at Duke University, and we were just having this conversation at a board meeting. If you look at all the analytical tools they’re teaching at the University of Chicago or at Wharton, they’re teaching people how to become a great investment banker, but not necessarily how to manage and lead.

Those readers who have argued that Greenwich needs huge salaries to support last year’s prices and who warned that those jobs are disappearing would seem to have a point, eh?

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    Many more mini-Madoffs?

    That’s what we’ve been predicting and here’s someone else who agrees.

    Get ready for investigators to uncover dozens of more possible Bernard Madoff style frauds. Politco and Morningstar Inc surveyed 1,684 hedge funds that have disclosed their quarterly results for the past 5 years. That’s twenty quarters of results. It seems that 34 of those funds have never reported a down quarter. 

    That kind of unwavering stability of results was a key red flag that the Madoff investment scheme was crooked. So the odds are that at least some of these funds reporting unbelmished quarterly records have been cooking the books. According to Politico, seven of the firms with unblemished results are connected to Madoff. That means there are 27 firms with results suggestive of completely independent scams.

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    Will Citigroup fall this weekend?

    Maybe. This Bloomberg article doesn’t seem very positive about the company’s prospects.

    Jan. 17 (Bloomberg) — Citigroup Inc. shareholders aren’t buying Vikram Pandit’s attempt to salvage the bank by splitting it in two. Nor are they buying the stock.

    Citigroup shares tumbled to a 16-year low on Jan. 16 after Pandit, the U.S. bank’s 52-year-old chief executive officer, said he would undo a decade of acquisitions by separating the bank into two units, Citicorp and Citi Holdings.

    The problem: Nothing — not $45 billion of U.S. government funds, not federal guarantees on $301 billion of debt, not a pledge to dump non-core assets — can stave off the worst financial crisis since the Great Depression. Already crippled by trading losses on mortgage bonds, the bank faces credit-card losses that surged to a record in the fourth quarter.

    “The losses from the investment banking businesses wiped out any margin for error that Citi might have had to be able to weather the storm of the U.S. consumer defaulting on his debts,” said James Ellman, president of San Francisco-based money manager Seacliff Capital LLC.

    After initially rallying 17 percent yesterday on news of Pandit’s planned reorganization, Citigroup shares fell, closing down almost 9 percent at $3.50. At that level, it’s below the $3.77 it dropped to on Nov. 21, when the bank entered talks with officials from the U.S. Treasury Department and Federal Reserve over a second round of rescue funds.

    They say Citi’s too big to let fail, but hasn’t it already done that? 

    Citigroup Chief Financial Officer Gary Crittenden said In an interview yesterday that the bank has had “no conversations at all about additional capital from the government.”

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    Why are we bailing out these buffoons?

    Citicorp Special Opportunity hedge fund will return 3 cents on the dollar to investors . I suppose they wanted to give real meaning to the term, “special opportunity”.

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    Michael Lewis – The End of the Financial World as We Know It.

    Good article in yesterday’s Times by Michael Lewis on the state of Wall Street, its players and its regulators. It’s long but well worth reading in its entirety. Here are just a few of his observations:

    The Madoff scandal echoes a deeper absence inside our financial system, which has been undermined not merely by bad behavior but by the lack of checks and balances to discourage it. “Greed” doesn’t cut it as a satisfying explanation for the current financial crisis. Greed was necessary but insufficient; in any case, we are as likely to eliminate greed from our national character as we are lust and envy. The fixable problem isn’t the greed of the few but the misaligned interests of the many. ….

    OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.

    The credit-rating agencies, for instance.

    Everyone now knows that Moody’s and Standard & Poor’s botched their analyses of bonds backed by home mortgages. But their most costly mistake — one that deserves a lot more attention than it has received — lies in their area of putative expertise: measuring corporate risk.

    Over the last 20 years American financial institutions have taken on more and more risk, with the blessing of regulators, with hardly a word from the rating agencies, which, incidentally, are paid by the issuers of the bonds they rate. Seldom if ever did Moody’s or Standard & Poor’s say, “If you put one more risky asset on your balance sheet, you will face a serious downgrade.”

    The American International Group, Fannie Mae, Freddie Mac, General Electric and the municipal bond guarantors Ambac Financial and MBIA all had triple-A ratings. (G.E. still does!) Large investment banks like Lehman and Merrill Lynch all had solid investment grade ratings. It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.

    These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.

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