Financial Meltdown (The World)

[avatarless]

Pretty amazing seeing who was right and who was wrong two years ago.
Who is Peter Schiff and where is he now?

Peter Schiff was right about some things, but terribly wrong about others. He was a proponent of the "decoupling" theory that emerging markets are now sufficiently independent of the US economy that they would be relativly unaffected by the credit crisis. He advised his clients to invest in equities in china, india, etc. The US market is down 40%, but China is down 60+% and facing a crisis very similar to the US in 1932 when the US was still an export focused economy- overcapacity, no reserve currency... In other words, he lost his clients a lot of money!

[azzam]

Thanks.
His schiff is adrift then?

[Burbage]

The big question is whether the Chinese economy can re-organise and use the chaos in the US to take over as the world's pre-eminent economy. Don't know that they have the flexibility.

[avatarless]

Thanks.
His schiff is adrift then?

love your tag line! Do you mind if I borrow it?

[avatarless]

The big question is whether the Chinese economy can re-organise and use the chaos in the US to take over as the world's pre-eminent economy. Don't know that they have the flexibility.

True. I think if they can invest domestically to offset the job losses that will come from all the unused export capacity, they might pull through. I think this crisis could ultimately make deccoupling come about.

[baloo]

The figures below are based on best estimates for job losses since August 2007.

In many cases, the firms themselves won't confirm (for obvious reasons) the number of staff they are letting go. Note that these job losses relate to investment banking, asset management and private banking jobs only.

Bear Stearns - 7,500 job losses, 14,000 financial markets jobs, 53.5% of the total

Lehman Brothers - 14,500, 30,000, 48.3%

Wachovia - 1,400, 3,900, 35.8% (Wachovia's new owners, Wells Fargo, is thought unlikely to want to have to deal with an investment banking business in the current environment. The smart money thinks that the unit will either be sold of pared back)

Bank of America / Merrill Lynch - 29,260, 83,100, 35.2%

Legg Mason Capital Management - 40, 120, 33.3%

Citi - 7,900, 30,000, 26.3% (the firm has recently announced an additional 52,000 job cuts via natural wastage, unit sales and layoffs. The investment bank is again thought likely to be significantly impacted).

Credit Suisse - 5,620, 21,300, 26.3%

UBS - 5,800, 22,300, 26%

Commerzbank / Dresdner Kleinwort - 1,800, 7,200, 25%

WestLB - 1,530, 6,120, 25%

Fortis / ABN AMRO Asset Management - 490, 2000, 24.5%

Royal Bank of Scotland / ABN AMRO Global Markets & Banking - 5,000, 22,000, 22.7%

JPMorgan / Bear Stearns - 5,500 25,000, 22%

Gartmore - 110, 530, 20.7%

Perry Capital - 20, 100, 20%

Ramius LLC - 40, 200, 20%

Thomas Weisel Partners - 160, 800, 20%

UniCredit - 700, 3,500, 20%

Natixis - 900, 4,820, 18.6%

Fidelity International - 370, 2,000, 18.5% (rumours abound that an additional 400 staff are now to be laid-off in Europe and Asia)

Goldman Sachs - 5,700, 32,000, 17.8%

AIC Ltd - 53, 300, 17.6%

Jefferies & Co - 410, 2,568, 15.9%

Morgan Stanley - 7,400, 47,050, 15.74%

New Star Asset Management - 60, 380, 15.7%

Mitsubishi UJF Securities (Europe) - 90, 590, 15.2%

Mizuho Financial Group - 300, 2,000, 15%

Nomura Holdings / Lehman Brothers - 1,500, 10,000, 15%

Nikko Cordial Securities (part of Citigroup) - 1,000, 7,000, 14.2%

Barclays Capital / Lehman Brothers - 3,650, 26,200, 13.9%

HSBC - 3,200, 25,000, 12.8%

Deutsche Bank - 2,400, 20,000, 12.0%

BlackRock - 500, 5,600, 11.2%

Carlyle Group - 100, 1,000, 10%

Fitch Ratings - 130, 1,400, 9.2%

Janus Capital Group - 115, 1275, 9%

Renaissance Group - 1,200, 100, 8.3%

GMP Capital - 37, 475, 7.7%

Macquarie - 1,000, 13,000, 7.6%

Fidelity Investments - 3000, 42,500, 7.1%

Blackstone - 70, 1,000 - 7%

State Street - 2,000, 29,200, 6.8%

Bank of Montreal (BMO Nesbitt Burns) - 150, 2,400, 6.25%

Daiwa SMBC Europe - 50, 800, 6.25%

AIG Investments - 117, 1,950, 6%

Moody's Investor Services - 180, 3,000, 6%

Calyon - 750, 13,000 - 5.7%

Thomson Reuters - 2,500, 50,000, 5%

Legg Mason Inc. - 200, 4,220, 4.7%

Henderson Global Investors - 45, 980, 4.6%

Northern Trust - 500, 11,200 - 4.4%

Bank of New York Mellon - 1,800, 43,000, 4.2%

CIBC World Markets - 100, 2,600, 3.8%

RBC Capital Markets - 133, 3,700, 3.6%

Susquehanna International Group of Companies - 50, 1,500, 3.3%

TD Securities - 90, 3000, 3%

Charles Schwab - 350, 13,500, 2.6%

Schroder Investment Management - 50, 2,300, 2.1%

SG Corporate & Investment Banking - 200, 10,500, 1.9%

Putnam Investments - 47, 2500, 1.9%

BNP Paribas - 220, 13,000, 1.7%


AllianceBernstein - the firm has announced a round of layoffs (October 2008), but job losses numbers are not available.

Collins Stewart is said to be getting ready to restructure its capital markets business.

Rabobank International (The bank is currently reviewing its London operations and jobs will go from the 800-person unit once the restructuring has been firmed up).

[azzam]

Thanks.
His schiff is adrift then?

love your tag line! Do you mind if I borrow it?

Not at all! I stole it anyway.
Another one I liked: When you think it's the end of the world, remember it's already tomorrow in Australia.

[Morrolan]

...but China is down 60+% and facing a crisis very similar to the US in 1932 when the US was still an export focused economy- overcapacity, no reserve currency...

erh... not quite sure what you mean with 'no reserve currency', but China has foreign currency reserves totaling more than USD 1 trillion and no debt... quite the opposite from the US even back in '32.

China is not in recession yet, unlike the US and will still see growth, only not in the double digits. it's gonna be a lot worse for the US than it will be for China.

[edit typo]

[azzam]

Aha, this is what my friend said when I showed him A'less'sss'ss response - what Shriff advises is investing in countries with less debt - he mentioned Switzerland, Singapore, New Zealand,among others.
I was going to say something earlier, but my brain hurts.

[avatarless]

genius!

[avatarless]

erh... not quite sure what you mean with 'no reserve currency', but China has foreign currency reserves totaling more than USD 1 trillion and no debt... quite the opposite from the US even back in '32.

just that in '32 the US was an export focused economy with little debt and did not hold the world's reserve currency (there wasn't one, of course, unless you count gold). I think it had a surplus as well, but I'm not sure. the similarity with China's situation today is pretty interesting. The US decided to devalue it's currency to help with exports. Similarly, China is buying t-bills like crazy right now in an effort to strengthn the dollar to help with their exports. That worked for a while (buying t-bills, that is), then the whole ZIRP thing happened. I assume at some point they will give up and then who knows what will follow...

you say that china is not yet in recession. what do you expect china will do for growth over the next few years now that people aren't buying nearly as much of their crap? it seems to me that any substantial drop in GDP growth will create problems, even if the growth remains above zero. Schiff is certainly right that they are in better shape than we are, but his timing was terrible.

[Burbage]

Dunno about people not buying their crap. 80% of the products in the average Australian shopping centre are made in China, and people are still buying them. Not as much as before, I'll grant, but still buying. The interesting thing is that for a lot of products, even though they come from different manufacturers, all the products of that type come from China, which means that for some things, if you have to have it, you have to buy it from China.

By the way, now that everyone has accepted that the West is in recession, is anyone talking about the "d" word yet?

[Fat Bob]

By "d" word you mean deflation? Let's hope not before my pay review in March.

Saw the governor of the Bank of England used it the other day.

[Burbage]

Depression old bean, depression. As in "The Great d"

[azzam]

http://www.portfolio.com/views/columns/ ... s-for-2009

This guy does - doesn't sound much like it to me:

We are, of course, still a very long way from the Great Depression, which, after all, wasn’t just any old depression: It was a slump of such longevity and enormity that, even now, it is unlikely to repeat itself. Between late 1929 and early 1933, inflation-adjusted G.D.P. fell by some 30 percent, industrial production plunged 47 percent, and the unemployment rate rose to more than 20 percent. And that four-year period wasn’t the end of it. After appearing to recover for a few years, the economy entered another deep downturn at the beginning of 1937 that lasted until the middle of 1938. Unemployment didn’t drop back below 10 percent until the country mobilized for World War II.

The decline in economic activity during the Depression was quite remarkable. In terms of lost G.D.P., it amounted to more than 10 times the decline seen in all the other recessions of the 20th century combined. In many urban areas—in New York’s Central Park, in the Anacostia section of Washington, along the banks of the Mississippi in St. Louis—tent villages of homeless people, known as Hoovervilles, sprang up, while in the drought-stricken interior, countless families lost their homes and followed the “dirty plate trail” to California.

While the financial system was contracting dramatically, a big fall in wholesale and retail prices, as well as the values of real estate and most financial assets, subjected the rest of the economy to ruinous “debt deflation.” If wages and prices gradually rise, as they do in normal times, the inflation-adjusted value of debts diminishes. But if wages and prices fall sharply—between 1929 and 1933 the wholesale price index fell by a third—debt burdens increase.

Borrowers who can’t meet their interest payments are forced into distress sales of assets, putting more downward pressure on prices.

Between 1929 and 1933, that is what happened. Even today, with an economy much less dependent on bank loans than it was in 1930, a wholesale failure of the banking system, together with an extended fall in prices, could have a devastating impact. The reason most economists discount this possibility is that they don’t believe policymakers will make the same disastrous mistakes their predecessors made in the 1920s and 1930s, when the authorities stood by as the financial system imploded and withering deflation developed.

[baloo]

Depression ? Don't know, it'll get close. As for China, I think they're ok of now and if they concentrate on building up their infrastructure during the slow period when the west aren't buying, they'll be setting themselves up nicely for the recovery.

I think Consumer spending will grind to a halt after Christmas. It's been such good times until now that people are refusing to believe they need to cut back on anything especially with Christmas here. I think it's a case of having one last good Christmas before starting the new year hunkered down.

Also expect another wave of layoffs after Christmas. Not many companies want to do it now. Asia I expect the layoffs will happen en masse after CNY.

It's still very dangerous out there. The scariest of all is that for the most part, people really can't see the bottom of this crisis yet.

[Burbage]

Anopther thing o watch out for is the vast number of "buy Now and Don't Pay For Two Years" deals that sprang up a few years ago... Those two years will be up soon.

[Kooky]

Anopther thing o watch out for is the vast number of "buy Now and Don't Pay For Two Years" deals that sprang up a few years ago... Those two years will be up soon.

Some places are still advertising those - are they mad???

[Joseph27]

Just did a 12 months interest free deferred payments for someone... people still line up for it - cant afford the 24 months deferred anymore though... that cost too much. Hate to see what next quarter brings but I do predict it being worst months in decades.....

[Kooky]

So are the retailers insured and don't give a monkey's whether or not the punters can pay up at the end of the term?

Being working class, I was brought up to be afraid of credit - if you can't pay, you don't get. Catalogues were not allowed in the house.

Of course I worked out how to use credit to my advantage but I still hate to get into debt and only use cards if I can pay them off. The only car loan I've ever had, I took out because it was 0% finance and it would have been rude not to.

[azzam]

So are the retailers insured and don't give a monkey's whether or not the punters can pay up at the end of the term?

Being working class, I was brought up to be afraid of credit - if you can't pay, you don't get. Catalogues were not allowed in the house.

Of course I worked out how to use credit to my advantage but I still hate to get into debt and only use cards if I can pay them off. The only car loan I've ever had, I took out because it was 0% finance and it would have been rude not to.

Aha! Would you like to see my video wot explains it? ( Him over there keeps sending me rivetting material to spice up my day - But I'm learning...)

[Kooky]

Aha! Would you like to see my video wot explains it? ( Him over there keeps sending me rivetting material to spice up my day - But I'm learning...)

Well normally I'd jump at the chance but I've got some plaster to watch dry, so I'll have to pass.

[azzam]

I knew you would! Just sharing the joy at Christmas.

Here you go..

http://www.youtube.com/watch?v=8aWv-41C-4Q

( If I have to bloody watch it, so do you... )

[baloo]

So are the retailers insured and don't give a monkey's whether or not the punters can pay up at the end of the term?

I assume the people obtaining the credit are all adults and with Australia's schooling system not that bad, they are capable of making their own decisions regarding finances.

But if they're just trying to keep up with the kellyville Joneses who also just bought a nice shiney LCD TV for their media room and brought it home in their new V8 Commodore which is now parked in their 5 bedroom, 3 storey house, then I have no sympathy for them.

Blaming banks and stores for offering attractive credit terms is all well and good, but it's about time these "battlers" stop running to ACA and TT trying to blame everyone but themselves when they find themselves unable to meet the mortgage payments.

[Kooky]

It's 8 minutes long