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Wow, who saw that coming? I also had this discussion with a few fraternity brothers colleagues about Bear a month and a half ago – I told one to be wary of his Bear Stearns New York City position. Unfortunately, since obtaining said position at Bear NYC is such a prestigious honor for the Rhodes business student who has best played the trite games of the department’s egotistical professors – my advice was brushed off his shoulders. Nonetheless, these professors also hastily dismissed me on a multitude of occasions for suggesting we were going into a recession.
I wonder what this means for my friend. After I find out, I’ll post an update. He’s a smart kid and good person, so I’m sure he will figure something out.
http://www.nytimes.com/2008/03/10/nyregion/10cnd-spitzer.html?hp
This is just great. At a time when the New York governor should be preoccupied with the economic well being of NYC’s financial businesses (and the global spill over effects), he now has to confront scandal.
If you need time with your family, buddy – then resign. We need to start figuring out how to fix this credit mess and how to instate laws to regulate shady leverage.
Didn’t his austere image develop because he was a ball-buster on Wall Street? What has he done to help the current state it has found itself in?
With his powerful populist campaign, I’m assuming Obama will successfully win the national election. Obama is for change and if you don’t want Obama, you’re against change! He hasn’t convinced me, but the general population seems lured by the bait. I am genuinely concerned.
I’m sure he’s going to start throwing the word economy around more often. His campaign advisers seem on point with the voters.
But do the voters REALLY all know what’s up with the economy? Nope – neither did educated professionals working for the major investment banks…
So a certain investment bank – that will remain nameless – has been giving out a lot entry level jobs to Rhodes and University of Memphis students.
They are enticing these entry level analysts to invest their bonus and part of their starting salary in ARS at a 15% rate which has a minimum of $25k. The deal seems too good to be true – the Fed interest rate is 3%.
From what I understand, it seems these kids are just going to lose their money since the banks and their insurers are INSOLVENT (the i-banks were NOT properly hedged like they assumed).
I don’t even necessarily think all of them will still have their jobs in a year – especially since Memphis is the second biggest bond market in our nation.
Anyone have any more insight?
March 11th, 2008 at 9:22 am
@Richard – agreed.
I’m a senior in college and am looking to get involved in startups in the Bay Area after I graduate – so I’ve been watching our economy very closely. I was able to realize getting an investment bank job would not be the smartest opportunity to pursue. I’m fearful for some of my friend’s positions…
Basically, the major investment banks created CDOs (collateralized debt obligations), which were sold in ARS markets with a minimum investment of 25k. These banks kept releveraging themselves on value that never really existed. Now, since the housing bubble has collapsed (as it was guaranteed to – it was a faulty assumption to think housing prices would never slow) these cash flows have completely dried up.
Also, the AAA bond insurers do not have enough cash to back all the defaulted claims since the investment banks are INSOLVENT.
Expect increasing margin calls on these banks – a lot of them will have to sell off faulty divisions and possibly reconsolidate.
Here is a great post from market ticker that explains what caused this issue:
http://market-ticker.denninger…..thers.html
I hope some of you find it useful. There are rough times ahead for the next few years.