Now that the investment banking model is "officially dead", it is time to resolve the murder.
The Treasury's proposal of a massive bail-out for the troubled banks, getting the toxic debt off their books sent equities sky-rocketing on Friday. By now, the shrewd investors would have taken profit with the stock indices lower yesterday and today.
So what are the traps behind the TARP (troubled asset relief programme)? As The Economist points out, it could possibly be another stop-gap measure to stem the avalanche in the financial turmoil. The first liquidity programme extended in March/Apr, then the subsequent bail-out of Freddie Mac and Fannie Mae proved to be short-term stimulus. Taking over the problematic loans and complex structures may save the floundering banks but might not win the credit crisis war.
The underlying loans may prove to be an over-bearing burden on the U.S. government and, for a nation going to the presidential elections in November, the fall-out will lie on the next leader. No wonder Mr Cowboy is all-willing to endorse this plan. He could be digging a big hole for the next fellow (then again, can anyone get worse?).
In my limited but honest opinion (of course governed by bounded rationality), this plan would only serve to prop up the rich and the very rich and the disgusting rich. The banks will survive the crisis, but the normal folks whose very loans underpinned the lending problems do not get a full resolution to their problems.
I should be grateful for this will keep me more secure (like Jade Goody on the gymnastic beam) but I wonder if this is only touching the tip of the iceberg.
Tuesday, September 23, 2008
Monday, September 22, 2008
Doc's out... come back later
In what was the most eventful week on Wall Street in recent months, I had to go on vacation.
Nope, not a deliberate attempt to escape the late nights in office given the recent upheaval. Nor was it an intended "push-out" by the management. It was mere coincidence. I have to publish a commentary report on the intranet everyday, so unsurprisingly is especially tuned-in to the latest events and news in the financial arena. To which Le Boss said, just as I was about to leave the office for Heathrow - "Take your finger off the pulse for the next two weeks. Come back to discover what had happened. You will have a fresh perspective".
Well, I spent an hour on Bloomberg after my arrival in Singapore on Saturday. So much for going on holidays.
Nope, not a deliberate attempt to escape the late nights in office given the recent upheaval. Nor was it an intended "push-out" by the management. It was mere coincidence. I have to publish a commentary report on the intranet everyday, so unsurprisingly is especially tuned-in to the latest events and news in the financial arena. To which Le Boss said, just as I was about to leave the office for Heathrow - "Take your finger off the pulse for the next two weeks. Come back to discover what had happened. You will have a fresh perspective".
Well, I spent an hour on Bloomberg after my arrival in Singapore on Saturday. So much for going on holidays.
Wednesday, September 17, 2008
Last Man Standing
I need to correct my earlier "mistake". While JPMorgan is an investment bank, Chase's merger with the securities house meant that there are only two independent broker-dealer firms now.
Goldman Sachs (in the blue corner) and Morgan Stanley (in the red corner).
Funny thing is they are not punching each other silly but suffering blows from the market. Both blue-eyed boys of the investment banking world but now eyed by the other (slightly more stable) banks.
And if the New York Times is correct, the Spice Girls must be singing the right tunes as two U.S. banking giants seek a merger that may leave Goldman standing alone (and hopefully not silly).
Will Treasury Secretary Henry Paulson let Goldman fall? Is John Thain, after selling Merrill Lynch to BoA, returning back to Goldman to do a third miracle? Or will Robert Rubin, ex-Chairman of Citigroup, fancy a prized coup?
By now, you can guess what these gentlemen have in common.
Goldman Sachs (in the blue corner) and Morgan Stanley (in the red corner).
Funny thing is they are not punching each other silly but suffering blows from the market. Both blue-eyed boys of the investment banking world but now eyed by the other (slightly more stable) banks.
And if the New York Times is correct, the Spice Girls must be singing the right tunes as two U.S. banking giants seek a merger that may leave Goldman standing alone (and hopefully not silly).
Will Treasury Secretary Henry Paulson let Goldman fall? Is John Thain, after selling Merrill Lynch to BoA, returning back to Goldman to do a third miracle? Or will Robert Rubin, ex-Chairman of Citigroup, fancy a prized coup?
By now, you can guess what these gentlemen have in common.
Tuesday, September 16, 2008
Unrelenting mayhem
Glad that I have my usual 7pm football game on Tuesday to distract me from the turmoil in the market today.
I sneaked out of the office quietly at 645pm - usually I will be among the last to leave at that time but given the financial fiasco, the office was packed. And noisy. And tense. By now, rumours are flying all over the city. Is Barclays buying parts of Lehman? Is the much-feared collapse of AIG the start of a tsunami that will herald a new Great Depression?
No one has a clue but one thing for sure - no one is interested in the collapse of another rival.
I sneaked out of the office quietly at 645pm - usually I will be among the last to leave at that time but given the financial fiasco, the office was packed. And noisy. And tense. By now, rumours are flying all over the city. Is Barclays buying parts of Lehman? Is the much-feared collapse of AIG the start of a tsunami that will herald a new Great Depression?
No one has a clue but one thing for sure - no one is interested in the collapse of another rival.
Monday, September 15, 2008
Waking up to a different tune now...
With the sudden chain of events, I will not know if there is a P45 laying on the office desk anytime soon.
Only a week more to the pay check. I can wait though. Some will not be getting theirs.
Only a week more to the pay check. I can wait though. Some will not be getting theirs.
There is always a winner...
... oh yes, did I mention that our very dear and beloved Temasek Holdings made a killing?
Any one-off tax rebate or hardship bonus to ease our pain? After all, they managed the country's reserves. And where did the funding (i.e. reserves) come from?
Any one-off tax rebate or hardship bonus to ease our pain? After all, they managed the country's reserves. And where did the funding (i.e. reserves) come from?
And there were six...
By now, this should be old news. After all, people trade on the seconds but the fate of many lies uncertain.
The news came in midnight U.S. time. I surfed-read Bloomberg last night before I slept and it was pretty much stale news at that point (which was evening in the U.S). Imagine the shock when I clicked onto Bloomberg in the morning and realised that the veritable financial institution is now history.
Frantic. Dramatic. Shock.
An understatement considering this is the biggest corporate bankruptcy ever. Bear Stearns, Enron and Andersen are now a distant memory. For all that have happened over the last 18 months due to the on-going credit and liquidity crisis, the events over the weekend and last week were of no match. First Freddie Mac and Fannie Mae were rescued by the U.S. government which led to the biggest ever default in the credit derivatives market. Oil plunged below $100, a good $30+ from March, then Lehman was reportedly due to be bailed out by some white knights, which only translated to a wipe-out come 48 hours later.
Goldmans Sach. Morgan Stanley. JP Morgan.Lehman Brothers. Merrill Lynch. Bear Stearns.
The last three have disappeared in a space of less than six months. The fallout could be less dramatic if not for the fact that I am in this very threatened industry. I remember I was only two months away from joining Andersen when the beleaguered audit firm collapsed which left me wondering where to go. Enron, Worldcom and the preceding Afghan war a year ago spelled doom for the many new graduates in my batch. Yet God has it for me to join KPMG which subsequently led me to where I am now.
The Lehman New York office has since become a "new tourist attraction". With staff streaming out of the office on Sunday night and curious bystanders standing by, watching the unfolding of a financial soap opera. How sad must it be for these staff, most of whom have nothing to do with the crisis (traders and senior management should be held responsible), many of whom may have kids and wives, many of whom will find difficulties in securing jobs in the next few months or years. It did not stop at New York; Lehman London HQ is just opposite the Barclays Capital building where I work. And by late morning, the reporters were all on-site to capture the first of many to leave the building. Cabs were streaming in and out to ferry tired and wounded bodies. Cameras and videos captured the dejected faces.
"It's kind of chaotic. The only question remaining is whether we will get this month's pay check."
"The Fed didn't bail us out. That's the right decision. As a taxpayer, rather than a Lehman employee, you shouldn't have to foot the bill for someone else's decision. It's a sad story for me and very many others."
"I had trouble getting here because of the Eurostar fire. When I finally made it I found out I was fired. We are all fired."
Quotes from many despondent staff. I know of a commodity trader in Lehman. Xueyan's ex-boss is there now. The talk at the water-cooler today, of course, revolved around Lehman. My colleague, who joined us a year ago from Lehman, told me his old team is no longer there. Everyone basically packed and went. And most of these bright people, he said, are unlikely to get jobs soon; many of whom are in their late thirties and hold senior/middle-management titles.
Will there be a change in the investment banking models? As we looked at the strike-list, there is something common among the fallen - the lack of a retail business. Not many MONTHS ago, retail banking was seen as unsexy and non-glamorous but it is now this unattractive business which is holding up the likes of UBS, Citigroup, Credit Suisse - banks which have posted similar or bigger losses than the collapsed. Right now Goldman and Morgan Stanley have come under fire (Is it a good thing that JP Morgan has the Chase business to fall back on?).
Perhaps this is what we call the cycle - you always have a trough and peak. And it is our time to witness this tough period. The day will come when the panic will strike me worse. Instead of seeking security in the securities that have now gone worthless, I thank God for His provisions. And if I were to worry about tomorrow, He has assured me - for He holds my future.
"Consider how the lilies grow. They do not labor or spin. Yet I tell you, not even Solomon in all his splendor was dressed like one of these. If that is how God clothes the grass of the field, which is here today, and tomorrow is thrown into the fire, how much more will he clothe you, O you of little faith! And do not set your heart on what you will eat or drink; do not worry about it.
The news came in midnight U.S. time. I surfed-read Bloomberg last night before I slept and it was pretty much stale news at that point (which was evening in the U.S). Imagine the shock when I clicked onto Bloomberg in the morning and realised that the veritable financial institution is now history.
Frantic. Dramatic. Shock.
An understatement considering this is the biggest corporate bankruptcy ever. Bear Stearns, Enron and Andersen are now a distant memory. For all that have happened over the last 18 months due to the on-going credit and liquidity crisis, the events over the weekend and last week were of no match. First Freddie Mac and Fannie Mae were rescued by the U.S. government which led to the biggest ever default in the credit derivatives market. Oil plunged below $100, a good $30+ from March, then Lehman was reportedly due to be bailed out by some white knights, which only translated to a wipe-out come 48 hours later.
Goldmans Sach. Morgan Stanley. JP Morgan.
The last three have disappeared in a space of less than six months. The fallout could be less dramatic if not for the fact that I am in this very threatened industry. I remember I was only two months away from joining Andersen when the beleaguered audit firm collapsed which left me wondering where to go. Enron, Worldcom and the preceding Afghan war a year ago spelled doom for the many new graduates in my batch. Yet God has it for me to join KPMG which subsequently led me to where I am now.
The Lehman New York office has since become a "new tourist attraction". With staff streaming out of the office on Sunday night and curious bystanders standing by, watching the unfolding of a financial soap opera. How sad must it be for these staff, most of whom have nothing to do with the crisis (traders and senior management should be held responsible), many of whom may have kids and wives, many of whom will find difficulties in securing jobs in the next few months or years. It did not stop at New York; Lehman London HQ is just opposite the Barclays Capital building where I work. And by late morning, the reporters were all on-site to capture the first of many to leave the building. Cabs were streaming in and out to ferry tired and wounded bodies. Cameras and videos captured the dejected faces.
"It's kind of chaotic. The only question remaining is whether we will get this month's pay check."
"The Fed didn't bail us out. That's the right decision. As a taxpayer, rather than a Lehman employee, you shouldn't have to foot the bill for someone else's decision. It's a sad story for me and very many others."
"I had trouble getting here because of the Eurostar fire. When I finally made it I found out I was fired. We are all fired."
Quotes from many despondent staff. I know of a commodity trader in Lehman. Xueyan's ex-boss is there now. The talk at the water-cooler today, of course, revolved around Lehman. My colleague, who joined us a year ago from Lehman, told me his old team is no longer there. Everyone basically packed and went. And most of these bright people, he said, are unlikely to get jobs soon; many of whom are in their late thirties and hold senior/middle-management titles.
Will there be a change in the investment banking models? As we looked at the strike-list, there is something common among the fallen - the lack of a retail business. Not many MONTHS ago, retail banking was seen as unsexy and non-glamorous but it is now this unattractive business which is holding up the likes of UBS, Citigroup, Credit Suisse - banks which have posted similar or bigger losses than the collapsed. Right now Goldman and Morgan Stanley have come under fire (Is it a good thing that JP Morgan has the Chase business to fall back on?).
Perhaps this is what we call the cycle - you always have a trough and peak. And it is our time to witness this tough period. The day will come when the panic will strike me worse. Instead of seeking security in the securities that have now gone worthless, I thank God for His provisions. And if I were to worry about tomorrow, He has assured me - for He holds my future.
"Consider how the lilies grow. They do not labor or spin. Yet I tell you, not even Solomon in all his splendor was dressed like one of these. If that is how God clothes the grass of the field, which is here today, and tomorrow is thrown into the fire, how much more will he clothe you, O you of little faith! And do not set your heart on what you will eat or drink; do not worry about it.
Tuesday, September 02, 2008
Year of Return
Before this year, I have only returned to Singapore twice in over two years. And in this year up to now, I have already gone back twice. And it doesn't stop there - I will be going back again! Managed to squeeze an upcoming trip from 20 Sep to 1 Oct.
This time with a greater sense of purpose. And coming back with my love.
This time with a greater sense of purpose. And coming back with my love.
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