Another brick in (the) wall street

September 15, 2008

An artist encouraging passers-by and employees to write a message on his painting.Thats the head honcho of Lehman Brothers-Dick Fuld

 

I chanced upon some interesting(read:distressful) figures about the number of job cuts there have been over the years in the financial sector:

1997— 37,159
1998— 62,366
1999— 60,834
2000— 55,272
2001— 116,647
2002— 89,210
2003— 51,784
2004— 97,945
2005— 50,503
2006— 50,327
2007— 153,105
2008— 102,957 *

* Mind you these figures don’t take into account the very recent Lehman brothers bankruptcy and Merril Lynch take-over crisis. To be added to this large figure is the 25,000 Lehman brother employees across the globe and also the many Merrill Lynch employees who’ll face a sacking with sure job cuts after the acquisition by the Bank of America.

If you’re wondering what the real cause behind the spike in 2007(from 50,000 to 153,000) is,its because of the lay offs initiated and executed by most US mortgage firms.

After a lot of reading it is in my humble opinion that the Lehman Brothers demise was an inevitability. In 1998,the company was first accused of having most of its assets spread over various kind of bonds and in the debt market rather than in the stocks. It has had a history of trading in high risk bonds so much so that one of their gambles with a bond made their market price slump by over 70%  over a period of just three months. They escaped then,but never learnt from their mistakes. A similar kind of a nightmare by the name of sub-prime mortgages got the better of them this time.

The repecursions of such a huge disaster will obviously have its consequences. As we noticed through the day, stock markets in Asia crumbled particularly in India where the BSE crashed by 700 points. The rupee got stronger, which will have its adverse effects on our beloved IT companies which employ the maximum number of Indians. The impact will be hugely felt here in India specially with most of the IT firms working hand in hand with a lot of these bankers. For instance Satyam which used to handle a chunk of Wall street projects faces a tough tough quarter ahead of it. They’ve decided to pack of 9% of their employees and as of today their share plunged by 9.5% to INR 368.50.  Surely the big two Indian IT firms will be hit by this crisi.Though they’re not admitting it right now,their stocks speak for them.Their shares fell by 6 and 4% respectively.

To give you a fair idea of how much money has been lost by the big wigs of Wall Street just because of the subprime credit crunch(the term btw is now officially a part of the English dictionary),see below:

Citigroup: $40.7bn
UBS: $38bn
Merrill Lynch: $31.7bn
HSBC: $15.6bn
Bank of America: $14.9bn
Morgan Stanley $12.6bn
Royal Bank of Scotland: $12bn
JP Morgan Chase: $9.7bn
Washington Mutual: $8.3bn
Deutsche Bank: $7.5bn
Wachovia: $7.3bn
Credit Agricole: $6.6bn
Credit Suisse: $6.3bn
Mizuho Financial $5.5bn
Bear Stearns: $3.2bn
Barclays: $3.2bn
With AIG steering clear of the crisis by being allowed to borrow from its subsidaries,things wouldn’t have gone as worse as feared on this very Monday. Hopefully Goldman Sachs and Morgan Stanley will have some face saving figures to announce when they come out with their earnings and forecasts on Tuesday. Fingers tightly crossed till then.
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9 Responses to “Another brick in (the) wall street”

  1. Ravi Says:

    Man this is scary shit. Interesting to see that the only stock that rose during yesterday’s downturn was Merrill Lynch, and surprisingly BOA fell 6%. Reminds me of the time Microsoft proposed a takeover of Yahoo! Was the only time when Yahoo! stock saw an uptun on its graph, while the proposed ‘buyer’ lost value. Funny how the market reacts.

  2. vicky Says:

    ur title and ravi’s comments are impressive…as for the post, it went over my head

  3. Rohit Says:

    thta some analysis man….!…financial analyst in the making(good u r not one right now or u wud be in a nightmare situation) but its pretty funny how the world reacts to such things…I guess the average Indian will be more calm than his counterpart in Europe( I am just taking an example of myself and a colleague in Dublin)… But to say the least the affect on us is inevitable….
    but things will get better….if they wont also we will just get bac to what we were 10 years back…

  4. neeraj Says:

    thats informative !!!

  5. joshuasingh Says:

    thanks!

  6. Rehana Says:

    Hey Jo!

    This is really informative.. I suppose we’ve all been living under this myth that when the US econ crashes, the world will follow. But I suppose we’ve been given a clean bill of health.. :) What is surprising is that India is affected.. After all the signs, the CG should have done something to cushion the blow, right?? I don’t know.. THat’s what they’re claiming here.. But haven’t read too much on it, so can’t really offer a proper opinion.. All in all, good job.. Uv really analyzed the situation.. :) Financial analyst in the making???:)

  7. Subhash Says:

    Awesome post buddy … [;)]

  8. joshuasingh Says:

    Thanks Rehana! It’s a depressing time to be in the US specially when you’ve gone there with the hope of pinning the most lucrative finance job available on the street. This depression will subside,but how long that will take? That remains a question unanswered as of now.

    - Subhash-thanks man!

  9. mohith Says:

    dude i plan to borrow some of the info garnered by you…


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