Some historical context for current students

Moral of the story, I'm assuming, for those of us who haven't been able to get an analyst role because of market conditions and have been coming in "second" to the offer, to hope that the market picks up and try to get in while banks try to accumulate analysts again?

Any predictions on full time recruiting in the fall?

like you said in a previous thread genghis - "this business is all about surviving the downturns"

say that you are a first/second year analyst and manage to get through all the layoffs. I realize promotions to associate usually happen after your 3rd year, but would it be possible to maybe get it after your second (assuming the layoffs dwindled the #s in your group down considerably)?

But in all fairness, the downturn really started in 2001 and people were getting laid off shortly thereafter. Sure, hiring did pick up in 2003 and rose to ridiculous levels afterward (and that is, in fact, how I was able to get in).

But I don't think we're yet at that point where hiring has hit its low and is about to pick up. Given the fall election, equity capital markets will remain slow and IPO windows will be closed for awhile. And credit problems are only getting worse, keeping M&A down.

We've also seen some M&A deals dry up because sellers are not getting the prices they want, even from strategics, given the environment.

I understand what you're trying to do and it's certainly good to point this out to people. On the balance, though, I don't know if things will really pick up until 2009.

Disclaimer: I could be completely wrong. No one really knows.

http://www.mergersandinquisitions.com/
Mergers & Inquisitions

I've been thinking late 2010/early 2011.

Than again, I'm a permabear whose been waiting for a downturn since early 2005 . . .

Personally, I agree with you that the recession is going to be worse than expected rather than better.

If 40% of homeowners have mortgages worth more than their houses, we're in trouble.

Strangely enough, most people I've talked to in finance have said they think things will start picking up the beginning of 2009.

Considering we haven't even had negative GDP growth, I think that's a bit unrealistic. Late 2010/early 2011 almost seems more realistic.

Dosk, I agree with you 100%, I say late 2010 before things start getting better...my PE firm made an investment where I had to do a ton of research on the foreclosure market and in my opinion the shit has just started hitting the fan. The back half of 2008 is going to be horrendous and 2009 not much better. 2010 will be slightly better with slow growth but i don't think we're out of this recession until ealry 2011.

So theoretically, if you guys are correct and the economy starts picking up at the end of 2010 or early 2011, would banks kick-stat hiring in large numbers for 2011 graduates?

I don't want to ignore the severity of the current economic issues but since we are talking about historical context here, wouldn't a recession that lasts "until early 2011" seem to be a bit extreme? Suppose that the economy did contract starting the middle of 2008 this would imply about a recession lasting 30 months or more in which case I think the problems in 2011 would be more serious than how many SAs Citi or UBS are recruiting.

I was not in banking in the last recession so I don't have a reference point other than my friends who were and lived through it.

But things look really, really bad and seem worse every day. Deals drying up... mortgage problems haven't even really surfaced yet, as WSO said.

What scares me about this recession is that it affects all homeowners, vs. the last one which resulted more from the tech bubble bursting and resulting chaos. It seems like the potential for much wider damage is there this time around.

how much does this affect other parts of the world? For instance, will bankers in europe, Hong Kong and India feel the impact as strong as the ones in america do?

In the last 30 years, a US recession has lasted on average 15 months or so. I am quite surprised that people here can actually predict with confidence how long a recession will last this time round, when macro economists and the Fed are not even sure we are heading into one.

The Fed doesn't want to call a recession and have it become a self-fulfilling prophecy and macro economists are never sure about anything. Additionally the practical downfall of a lot of finance theory is to overly rely on historical precedent. Also why 30-year? Why not 50? Or 15?

I agree, I think this recession is going to drag on for a while as everything unwinds.

Kudos to whoever it is that picks the thread topic pictures, by the way.

Actually, 2000 was starting to get pretty challenging, but I agree with the point generally. I don't think we're close to mid-2003 yet.

Before this month, I was hopeful that we were about halfway through. That is, this year would be very hard from a layoff and comp perspective, but that we would see the market turn back up in the first quarter of next year.

Bear's failure was a 9-11 type shock for Wall Street, I think. Now, I think that most people feel it might last at least a year beyond that. I admit that I do.

Of course, the economy and the job climate are not completely correlated, nor are they synchronized in terms of cycle timing. That's a good thing.

But while we all have opinions and guesses, like Dosk I am reflective enough to realize that I could be (and undoubtedly am) completely wrong on my view of the timing of the cycle.

If that's the case then, I guess I better switch my major to English or Philosophy or something, because I'll probably have the same chance getting a job in these majors than as a Finance major when I graduate (2010).

Actually, it's since the last 60 years, not just 30. The downturns since World War II have ranged between 6 and 16 months, with an average of 10. You are right that Fed oftentimes pronounces a recession only when it's over or when we are deep into one, and many economists (e.g. Feldstein from Harvard) actually think we are already in one. To predict a late 2010/2011 recovery is to say that this recession will last >36 months.

It's possible of course that historical precedents are completely wrong but I wonder what the logic is, to support such an extreme event. The longest recession since WWII lasted 16 months in 1981 when the Fed raised interest rates to 20% to battle soaring inflation - grinding the economy to a halt. Any macro data released since the sub-prime till now is nowhere as negative as the '81 recession, and to say a downturn will last >2x as long? I do not think so. Everyone's entitled to their own opinion of course, and my bet is for a short one (2009 is reasonable, 2011 is stretching it), and like some others above, I am self-reflective enough to know that my bet may turn out completely wrong.

http://www.valueinvestingcongress.com/pdf/T2Partners_mortgages_bond.pdf

dosk, not sure if you've seen this. if not, i highly suggest checking it out and sending it to some friends.

i can't remember if this is actually in the report, but this is how i received it:

To paraphrase Victor Sperandeo one of my favorite traders of all time.
"Trying to know when the recession will end when we are just entering it is a lot like the insurance guy telling you when and how you are going to die on the date you bought your policy. You dont need that much information to make money in the market"

Furthermore, trying to know its eventual impacts on the job market in finance, and how long this is going to last is very difficult to forcast. While history can serve as a guide the market will never behave exactly the same twice however there is a certain framework you can draw around it to build some conclusions.

My question is, when were the previous housing triggered crisis? What about issues with cheap credit? If you want to compare this market to past markets you are going to need interest rates and fed policy that were comparable. Im not even sure if we have been in a situation like this before. Falling housing prices, Tight credit market, and falling interest rates. If no one answers this question i will begin some research to see what I can come up with and post my findings.

"Oh - the ladies ever tell you that you look like a fucking optical illusion?"

Yeah that report reinforces a lot of what I've seen/read elsewhere. And since it's actually a formal study, I tend to believe the results more.

I don't know if people really think it's almost over or if it's the whole ignorance-is-bliss thing, but I think they're a bit unrealistic.

That said, I've been known to be overly pessimistic before so who knows...

!!

Someone asked about if other parts of the world will be affected. Well accoding to a Financial Times article, it will.
"Mr Strauss-Kahn, a former French finance minister, rubbished the notion that the credit crisis was largely a US problem. “The crisis is global,” he said. “The so-called decoupling theory is totally misleading.” Developing countries such as China and India would be affected."

"Dominique Strauss-Kahn, IMF managing director, told the FT Government intervention at a global level is required to tackle the credit crisis, who has warned that market turmoil will take a serious toll on world growth."

Here is the link:
http://www.ft.com/cms/s/0/5196933c-0410-11dd-b28b-000077b07658.html?ncli...

Who knows what's really going to happen. Only time will tell.

No one knows what's going to happen. Especially not thefoxwhorocks. Take some econ courses and then get back to me with your hilariously ridiculous pseudo-logic.

I'm just giving you a hard time but come on man; your analysis makes the comments on google finance look respectable.

Interesting article, MMmonkey. We need more threads like this one.