Saturday, October 11, 2008

when the shit hits the fan

today was probably the single worst day ever. short sale ban was lifted, govt is pumping money into the arteries of the financial markets nonstop, central governments are cutting rates like crazy in order to simulate the different economies. still nothing is working. everyone is still pulling out, and hoarding t-bills. The LIBOR rate has jumped to all time highs. not just companies, but countries, COUNTRIES, are going bankrupt.
and despite you are in the middle of this, you aren't really really in it. until it hits you or your friends. when bear sterns went bust, then lehman, merril lynch,wamu, wachovia, morgan stanley teetering on the edge. when all this happened, i knew it was happening, but i never knew anyone who was still at these companies, i knew of pple who shifted jobs before the shocking happened but i didnt know of anyone who got the axe, so i was still in my little bubble. but today, i got texted within seconds by a friend about another friend who was let go from barclays. i just cannot imagine what he must be going through. the gang was supposed to meet up today, he didnt show up, or reply to my emails that i sent prior to this happening. its embarassing and considering how the market is flooded with smart brilliant people its even more difficult finding a job. i feel extremely sad for him.
another friend who has been scouting the market for the last month, because she hates her trading desk was initially inundated with calls from boutique quant shops and hedge funds, within 2 weeks the picture has changed so much - no one calls, they dont need to.
of course certain teams are still growing, but whats scary is not that there are these brilliant applicants who can do the job but its these applicants bosses too that are on the lookout for the same job, ready and willing to take the pay cut.
what riles me up is the dumbness of the senior management. how could they have been so stupid, how could you leverage up so much that you are risking your whole capital. have yall not heard of VAR, stress testing, in simple words not eating more than you can show. stupid greed, and it doesnt screw up any big guy it just screws the worker bees. the current rumor going around was the ceo of lehman was working out at a gym, and someone pushed him and roughed him up. just imagine if this happened in india or something. so much value has been lost, its like people are pulling out and just taking the loss, which is really really stupid, im expecting huge write downs this quarter and this recession is touted to be the longest. high frequency trading is controlling hte market, im not saying everyone is losing money, some divisions are making huge money but those whose strategies are long term or even to a medium short term (1-3 months) are getting screwed. its no more the case of what if it doesnt rebound but more of how much can we afford to lose to rebound. what bothers me most is the lack of action, you know whats happening, sure you cant predict tommorow - if anyone could, they woudl probably have their own hedge fund. but you see the signs, and you should not wait too long to react.
to end with a small but true anecdote, the cleaning lady at work gets her 30 seconds quick updates about market conditions from my friend. and hell if she, too is worried about the shop closing, that's a signal right there.


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