The Great Debate UK
Wall Street is once again aflutter with talk of impending job cuts. But jittery traders may have a few months more grace before the knives come out. With trading revenue falling, the pressure is growing for investment banks to lay off staff. But executives are still debating whether the current slump is a blip. Nobody wants to slash ranks right before a turnaround. The summer could be safer than many think.
It has happened before. Morgan Stanley scaled back its fixed-income operations after the 2008 crisis, leaving an already-damaged franchise unprepared for the bailout-fueled market recovery the following year. The firm has since hired 400 or so people in interest rates and other more liquid markets, but has not yet made much progress toward its goal of increasing revenue by around a third to 8 percent of the top 10 players' share.
Merrill Lynch also hit the panic button in 2008, perhaps more understandably given the tens of billions of dollars of losses its structured credit desks generated. But Tom Montag, who had just been hired from Goldman Sachs to run trading, extended the cull to the equities desks, too. The firm ended up trying to rehire scads of them months later, with varying success.
That was not the first time Merrill pulled the trigger too early on a cull. A decade ago then chief-executive-in-waiting Stan O'Neal cut thousands of staff soon after the Sept. 11 attacks. At the time the Thundering Herd was still trying to recover from its previous mass firing after the Russia and LTCM crisis in 1998.
from The Great Debate:
Morgan Stanley has paid a steep price for trying to trade its way through tough markets and has failed to reap much of a reward.
In contrast to rivals Goldman Sachs and JP Morgan , which have both been reducing the amount of risk they hold in their trading book, including for commodities, Morgan Stanley has kept trading risk at a high level in a bid to catch up after falling behind in 2008-2009.
Three months is a long time in the markets, and particularly for banks. Alongside the rally in bank shares, investors have also bid up bank bonds, especially so-called tier 1 bonds which rank just above the equity in the list of creditors.
from The Great Debate:
China investors should care about three major numbers this year: 8 percent economic growth, its 4 trillion yuan ($586 billion) stimulus package, and the 10 industries revitalization plan.
The first is the government's economic growth target and the second is a spending plan to shield the economy from the global financial crisis.