So things have been looking good for 1-2months now. Here in the UK house prices appear to have bottomed out and there’s been increase in sales. Shares in the west are up with the FTSE nearly 500 points above its lowest mark and the Dow Jones has gained nearly steadily for the past month and is up just under 2000 points from its lowest point. Goldman Sachs analysts are encouraging investment in Bank of America and many of the major banks like JP Morgan and Goldman Sachs have posted significant profits for the first quarter this year. Oil has now also risen above 60$.
Disregarding big lame ducks like GM, it seems like things are getting good. But I’m an engineer. The professional engineering sector wasn’t really hurt too bad in terms of jobs. So I’m curious, was anyone really affected? It seems to me to have been more of a media frenzy about it being the “worst time since the great depression”. I’ve seen no public soup queues. It seems that wealth has instead simply switched hands. And many of the losses from the foremost millionaires/billionaires are in terms of asset values, not actual losses. So they just hold on to them, and make a “profit” next year? There’s various statistics, but who exactly were these people that were affected?
Were you? How?
In the US, much of the job losses have been in construction, which is, in the most affected areas, dominated by noncitizens - Mexicans, who have in many cases just packed up and left. And finance. But finance was bloated with many newbie mortgage brokers and order-takers. Yeah, GM took a big hit, but as you allude to, they made every mistake in the book and were already headed south.
The business that I help run has been affected, not so much by unemployment itself, but by the fact that people aren’t as much in the mood to blow money on a night out as they used to be. Because we are a consumer-dominated economy, it’s largely a confidence game.
There is a ton of money sitting on the sidelines, which is why the Fed is worried about eventual inflation. Americans get in the spending mood again, and we could start the cycle again. Soon.
I have hired several people recently. I don’t think I have passed up too many desirable employees - I have a stack of apps two feet tall, but most of them I would not hire even if i could hire more. Maybe not any of them. These jobs aren’t for everyone, but they produce a middle class wage.
Things aren’t great, but the recent baseline has been, in many sectors, a situation where jobs, electronics and housing have been seen as disposable. In the most affected areas, growth was so out of control as to be a bigger menace than no growth. Things are bad, but in many ways, the recent boom was worse. As they tend to be.
Well the markets have slid a bit since that post. But hey, there’s always fluctuations and I think the majority view is that the recession’s onslaught is over. But as you say Faust, it hasn’t really affected your hiring. I’m told that 39pubs closed every day in the UK in 2008. I’m curious though, if these places were running only on credit hoping for better times, or if the recession actually dissuaded the customers who contributed most to their revenues from going there. I personally know of a City investment banker who was fired from Morgan Stanley following its first major losses but apart from some particular individuals in particular markets, (and given the stability of consumer price indices in europe) it just seems like noone has “really” been hit. People are just becoming more cost conscious.
I’m told by this person that the American branch of Goldman Sachs bears the brunt of the responsibility for creating and trading the financial instruments that led to this situation. But perhaps it’s just an environmentalist conspiracy.
Who knows what to think, when you have an economist from Harvard with a PhD saying our economy is inevitably doomed, and an economist from Columbia with a PhD saying our economy is going to be peachy.
This is just an example, but there are experts everywhere with differing opinions. But I guess that’s because nobody really knows what’s going to happen. They say this was a once in a lifetime event, but everything is a once in a lifetime event, because each situation is so unique and has so many factors.
I work at a brokerage firm, as does my girlfriend, so yes, I’ve seen the layoffs.
39 pubs? That’s 14,235 pubs! How many usually close in a given year?
There’s plenty of blame to go around. But these instruments are still being used. It wasn’t those instruments that caused the problem, it was the lack of worth of the assets backing them.
But these instruments were the cause of the crisis in that their complexity concealed the high risk involved. Apparently Standard & Poor’s was rating these subprime mortgages AAA. That should be proof enough.
I don’t know about S & P, but subprime is subprime. Everyone on the ground knew that most of them were written against future value, and not the appraised value of the properties and that no concern was had for the mortgagee’s ability to pay. That was, in fact, the sales pitch. Those securities (the name of which escapes me) made an additional market for the mortgages (most are sold off by the banks that write them) but everyone knew that this market was ultimately dependent on the boom continuing. This is not hindsight - it was known at the time. Investors just stopped caring about the fundamentals of that market. It’s not the first time that has happened. The stock market right now is managing to ignore the fundamentals of many sectors and individual stocks.
When even the top rating agency was saying these are safe bets, I can only assume that they had limited understanding of what it was they were investing in. If I had 10k to put aside for a year or two, I’d invest in a safe bank like HSBC. The returns and dividends are just amazing. In contrast with a high interest deposit bond that will only yield 3.5% max here. Well, at least it’s obvious why people were taking greater and greater risk.
The good thing about stock markets is that confidence is a self fulfilling prophecy. So hopefully the current trend will maintain.
I have a friend who is a day trader. All he does is invest on sentiment - not his own.
Yeah - risk. Nothing changes the fact that the gains in these investments were high risk. But if you trade a few billion of these, for a salary of millions plus more millions in bonuses, why should you care if the bottom falls out? You’ve made millions. The banks lost billions, but the traders didn’t.
