Not sure if any of you are into the finance market, but there are a few big outbreaks in the last week or so. It affects my life because I work for a bank, so the volitility of my job goes with the market. I'm a very risk adverse person, so big ups and downs are not my type of thing. But you gotta play if you are in the game right? In the 1 1/2 year I have been working full time, this is the first time I felt the ripple of the shock happened in the market.
It's probably too complicated to explain the subprime crisis and how it triggered the credit crunch, but basically, the US market is weak because the rate of return on investments (ROI) are too low, so people stopped borrowing and investing. Now, to make people start investing, the Fed is dropping the rate, so that you would borrow on the cheaper side and start the economic circulation. Anyways, it's a long story of what happened and even I can't precisly explain it. The street (Wall Street) is doing bad and that means no body is getting off easy.
Lehman is the 4th largest bank on the street, mainly dealing with fixed income bond trading. The 5th one is called Bear Sterns, often compared to us because we are in the same line of business. Last week Friday, Bear announced that they are going to get emergency help from the Fed and investors started freaking out, withdrew $17Billion fund!!! in one day!!!! that's like sucking the entire firm dry!!! In one day, the 5th largest bond house in the US announced they are on the brink of bankruptcy. JPMorgan and the Fed offered to inject more fund into the firm and help them off of their feet. All was on the upside, until Monday morning, the news broke out that JPMorgan bought Bear for merely $2 per share (Bear was worth $160 per share at one point last year, and was still worth bout $70 before being sold for $2 a share). Can you imagine a billion dollar house being sold for $287million????
Rumors broke out on Monday following the Bear fire sale (means when firms are sold for way under value) that Lehman was going down too and we are going to be the next one up on the chopping block. You could feel it, in the office, it was dead slient, everyone's on Bloomberg following the news. Our Director came to our cubes and talked to us and calmed us down. She reassured that we are not going any where and that we have more than enough liquity to cover for any losses. However, our stock was plummeting, down 30% at one point.
Yesterday, our Q1 earnings were out. Above analyst expectation and Moody kept our triple A credit rating. 10AM was the conference call for the earning reporting, the CFO gave a very optimistic view of how our firm is performing. Although our year to year income dropped 54%, but that's common on the street with all the firms writing off billions in bad loans. Stock price rose back to what it was day ago. The market started to look much better after hearing that Lehman and Goldman's earnings are all above expectation, though net income were down 50% something for both firms. But in this kind of economy, this is considered good.
During the first quarter, Lehman cut 11,000 jobs. Our department is on the cost side (we don't make money for the firm, we get paid to perform a service for the firm), so obviously, they are going to let go some of the positions. 2 people were let go in my department, though they said it's a 5% cut rate across board, but I'm sure the FID and IBD departments are suffering more. One is a AVP and another is SVP, i know the SVP quite well and he's a very nice man. I wonder how he's doing now - he has a daughter still in high school, will he be able to pay for her college tuition? My coworker's dad, who's been with the firm for 20+ years was let go too. 20+ years!!! and he's gone just like that. I wonder how does it feel to come to work and planning on attending a meeting, and never making it...
At this point in my life, though I'm frustrated with my job and don't like what I do, I am grateful that I still have a job and can pay for my mortgage. It's cruel world. You never know what's going to happen tomorrow. Just keep your head on straight and do your best.
I haven't been studying for my GMAT. I seem to have lost a lot of motivation. I guess it's the uncertainty in my life and where I want to go next, that I'm lossing sight of what I really need to do. I'm not quite sure if I can be happy, even if I have an MBA.
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The economy just stinks right now. And the worse part is there is no way but down even further. Everything is getting expensive and going up accept our paychecks. I'm scared that I won't get a job. People are being laid off right and left. I've been looking for a month now and no luck. I'm somewhat in panic mode. You're right. You just don't know what tomorrow will bring.
Is it a good idea to own your own place? I keep hearing that, that's the thing to do - purchase your own place/house. Is renting such a rip off?
I'm afraid I won't get a job either!!!
Anonymous - I wish I could give you a suggestion on to buy a house or not, but it is not an easy decision and I don't have enough info from you regarding your current financial situation to give you a sound advice. However, I will tell you that right now, with the interest rate so low and the housing market slumping, a lot of people are buying since it's such a good deal. I bought my condo a year ago while the market is still on its way down. However, you also need to consider WHERE you are going to buy. My condo is along the NJ side of Hudson River and my window has a view of the Midtown Manhattan (i.e. I can see the Empire State Building from my living room). The transportation to Manhattan is very convinenant and there are a lot of shops around where I live too, so it's a nice living enviornment. In my opinion, buy at a nice location is better than having a nice house, but that's only because I work in Manhattan and I don't have a big family with kids. My area is consider NYC Metro area, so the price of the property goes along side with Manhattan property. a 1-br condo in Manhattan can easily be upward of 700-800G, and the island doesn't get any bigger, so you can imagine the price.
However, I will leave you with this, paying mortgage is always better than paying rent. You get tax benefits on your mortgage interest and as a home owner, you build your credit as well. Paying rent is like paying for someone else's mortgage. but of course, given that you need to be able to pay up the down payment and make the mortgage payment every month, don't forget property tax too, it's expensive and should be considered.
KT - hi girl, how's the weather in Boston? it's raining cats and dogs in nyc. you know, in this kind of market it's hard to predict what will happen. but you should always try to make the best of it. many people I know were sucked into the dot.com bubble and were getting paid 30G, but then again, I knew people who were hired prior to 2000 and entry level pay was 60G and more. so you never know, but strive to just get a job for now. having a job is always better than having no job. or you can consider going to grad school. people usually use grad school to wait out the slow market.
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