Post by imSINGLEruRICH on Dec 2, 2007 22:43:23 GMT -5
By: jcline
02 Dec 2007, 01:16 PM EST
Msg. 344751 of 344754
Jump to msg. #
Wall Street's Merry Christmas
Liz Moyer
With talk of thousands more job cuts and mounting concerns about bonds and derivatives held by the biggest U.S. banks, you'd imagine Wall Street to be covered in a shroud of thingyensian holiday gloom. Wrong.
In the coming weeks, financial workers (the ones who have jobs, that is) will hear about their 2007 bonus payouts. The fun begins with Goldman Sachs (nyse: GS - news - people ), which is on track for another spectacular year. So spectacular, in fact, that the firm is encouraging employees to put some of their portion of a $16.9 billion bonus pool into a new charitable fund.
Bonuses are expected to at least match last year's record levels or even surpass them, at Goldman and elsewhere, particularly in investment banking and equities divisions that outperformed while bond desks fell on hard times.
Through September, Wall Street firms had put aside $52 billion for bonuses, which accrue through the year based on quarterly numbers. There is a sense that firms will have to pay decent bonuses, at least in the profit-making businesses, to combat the inevitable poaching that begins after bonus season ends in March.
"In good times, the partners enjoy the benefits, and in bad times, the troops get fed," says Jeffrey Bell, a Wall Street recruiter at Whitney Group.
One of the reasons for the schizophrenic mood on Wall Street is the firms' efforts to manage expectations lower. More than $70 billion worth of mortgage securities and derivatives have been written down since August, and most everyone expects that trend to continue as the credit markets lumber into the new year. Earlier this month, a wave of banks came out and confessed their losses from bond holdings during September and October. In Morgan Stanley's (nyse: MS - news - people ) case, $3.7 billion in losses will probably wipe out fourth-quarter profits.
But analysts said the firm can handle it. Morgan Stanley, Goldman and other brokerage firms are set to report fiscal fourth-quarter and year-end profits next month, and the expectation is that even further write-downs of mortgage-related assets won't drag down the group overall.
For example, Barclays (nyse: BCS - news - people ), the third-largest U.K. bank, said Tuesday it was on track to report a 4% gain in 2007 profits despite having to reduce the value of its mortgage bond holdings by $2.7 billion.
This sets up an interesting dichotomy. The boom times continue in certain parts of the market, at least for now, even as the banks' economists are forecasting a slowdown ahead. Goldman Sachs' own economists said Tuesday they expect the Federal Reserve to continue cutting short-term interest rates until it gets to 3%. That's down from the firm's previous forecast of 4%, and well below the 4.50% target the Fed's Open Market Committee set in October.
Goldman added that unemployment is likely to hit 5.5% by the end of next year, up from 4.7% currently.
The mood extends to the stock markets, which sank Monday into what analysts called "correction" mode, only to roar back Tuesday by more that 229 points at midday, driven by the announcement overnight that Citigroup (nyse: C - news - people ), one of the hardest-hit banks in the current mortgage meltdown, had gotten a $7.5 billion equity infusion from Abu Dhabi's investment fund.
Analysts debated Tuesday whether that was enough to stabilize Citi, which is currently lacking a permanent chief executive and faces another $10 billion to $13 billion in write-downs in the fourth quarter after $6.8 billion in the third. Charles Prince resigned earlier this month as chief executive.
Meredith Whitney, a CIBC World Markets analyst, has said the bank needs to restore its depleted capital levels, to the tune of $30 billion, and should sell assets or cut its dividend to accomplish that. On Tuesday, Whitney said the $7.5 billion infusion, which will go straight to Citi's tier one capital, is not enough.
"We are only in the early stages of Citi's capital pressures," she wrote in a note to clients. Losses from mortgage loans "will mount at an alarming rate over the next several quarters."
Citi acknowledged Monday it was examining costs more closely and could eliminate more jobs than the 17,000 it has already cut this year. That would add to cutbacks at Morgan Stanley, Bear Stearns (nyse: BSC - news - people ), Lehman Brothers (nyse: LEH - news - people ) and Credit Suisse (nyse: CS - news - people ), in areas like residential mortgages, banking and leveraged finance.
But recruiters say the pullback isn't as severe as the one just five years ago, after the Internet bubble burst and Wall Street felt a sharp retreat. Back then, nearly whole classes of fresh-scrubbed, just-out-of-school analysts were eliminated, creating a shortage of vice president-level bankers now.
"My bet is, they don't want to repeat that," said Bell, the executive recruiter.
www.forbes.com/home/wallstreet/2007/11/27/compensation-wall-street-biz-wall-cx_lm_1128wallstreet.html
02 Dec 2007, 01:16 PM EST
Msg. 344751 of 344754
Jump to msg. #
Wall Street's Merry Christmas
Liz Moyer
With talk of thousands more job cuts and mounting concerns about bonds and derivatives held by the biggest U.S. banks, you'd imagine Wall Street to be covered in a shroud of thingyensian holiday gloom. Wrong.
In the coming weeks, financial workers (the ones who have jobs, that is) will hear about their 2007 bonus payouts. The fun begins with Goldman Sachs (nyse: GS - news - people ), which is on track for another spectacular year. So spectacular, in fact, that the firm is encouraging employees to put some of their portion of a $16.9 billion bonus pool into a new charitable fund.
Bonuses are expected to at least match last year's record levels or even surpass them, at Goldman and elsewhere, particularly in investment banking and equities divisions that outperformed while bond desks fell on hard times.
Through September, Wall Street firms had put aside $52 billion for bonuses, which accrue through the year based on quarterly numbers. There is a sense that firms will have to pay decent bonuses, at least in the profit-making businesses, to combat the inevitable poaching that begins after bonus season ends in March.
"In good times, the partners enjoy the benefits, and in bad times, the troops get fed," says Jeffrey Bell, a Wall Street recruiter at Whitney Group.
One of the reasons for the schizophrenic mood on Wall Street is the firms' efforts to manage expectations lower. More than $70 billion worth of mortgage securities and derivatives have been written down since August, and most everyone expects that trend to continue as the credit markets lumber into the new year. Earlier this month, a wave of banks came out and confessed their losses from bond holdings during September and October. In Morgan Stanley's (nyse: MS - news - people ) case, $3.7 billion in losses will probably wipe out fourth-quarter profits.
But analysts said the firm can handle it. Morgan Stanley, Goldman and other brokerage firms are set to report fiscal fourth-quarter and year-end profits next month, and the expectation is that even further write-downs of mortgage-related assets won't drag down the group overall.
For example, Barclays (nyse: BCS - news - people ), the third-largest U.K. bank, said Tuesday it was on track to report a 4% gain in 2007 profits despite having to reduce the value of its mortgage bond holdings by $2.7 billion.
This sets up an interesting dichotomy. The boom times continue in certain parts of the market, at least for now, even as the banks' economists are forecasting a slowdown ahead. Goldman Sachs' own economists said Tuesday they expect the Federal Reserve to continue cutting short-term interest rates until it gets to 3%. That's down from the firm's previous forecast of 4%, and well below the 4.50% target the Fed's Open Market Committee set in October.
Goldman added that unemployment is likely to hit 5.5% by the end of next year, up from 4.7% currently.
The mood extends to the stock markets, which sank Monday into what analysts called "correction" mode, only to roar back Tuesday by more that 229 points at midday, driven by the announcement overnight that Citigroup (nyse: C - news - people ), one of the hardest-hit banks in the current mortgage meltdown, had gotten a $7.5 billion equity infusion from Abu Dhabi's investment fund.
Analysts debated Tuesday whether that was enough to stabilize Citi, which is currently lacking a permanent chief executive and faces another $10 billion to $13 billion in write-downs in the fourth quarter after $6.8 billion in the third. Charles Prince resigned earlier this month as chief executive.
Meredith Whitney, a CIBC World Markets analyst, has said the bank needs to restore its depleted capital levels, to the tune of $30 billion, and should sell assets or cut its dividend to accomplish that. On Tuesday, Whitney said the $7.5 billion infusion, which will go straight to Citi's tier one capital, is not enough.
"We are only in the early stages of Citi's capital pressures," she wrote in a note to clients. Losses from mortgage loans "will mount at an alarming rate over the next several quarters."
Citi acknowledged Monday it was examining costs more closely and could eliminate more jobs than the 17,000 it has already cut this year. That would add to cutbacks at Morgan Stanley, Bear Stearns (nyse: BSC - news - people ), Lehman Brothers (nyse: LEH - news - people ) and Credit Suisse (nyse: CS - news - people ), in areas like residential mortgages, banking and leveraged finance.
But recruiters say the pullback isn't as severe as the one just five years ago, after the Internet bubble burst and Wall Street felt a sharp retreat. Back then, nearly whole classes of fresh-scrubbed, just-out-of-school analysts were eliminated, creating a shortage of vice president-level bankers now.
"My bet is, they don't want to repeat that," said Bell, the executive recruiter.
www.forbes.com/home/wallstreet/2007/11/27/compensation-wall-street-biz-wall-cx_lm_1128wallstreet.html
who lost their homes, and financial stability??? gosh... must not be them!