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kwam
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Wharton - ugly stats for 2007 internships 23 Aug 2008, 21:16
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I am curious how students will take this. The biggest part of going to a top MBA program is to get your dream job or at least a great job with a great company. If people come up completely empty they are going to be a little upset about spending 100k+ and missing two years pay. It will be interesting to see how this affects rankings and what not since employment stats and students opinions are big factors in most rankings. Banking schools could take a hit in the rankings.

That's true. I'd imagine there will be some very upset students at the banking schools. Something interesting that I noticed about the "banking schools" when I was researching Chicago GSB is that everyone thinks these schools are filled with bankers (analysts) that want to become bankers (associates). But I noticed that at Chicago GSB only 31% of students came from a finance background while 55% went into finance after graduation. So, while I'm sure 31% is a little bit high relative to other schools a banking school is really defined by the exit careers of the students, not the entering careers. Using the numbers above for Chicago, roughly a quarter of the school watned to make a career change into finance (from some other career). In today's market that is going to be nearly impossible. I know people that graduated during the last recession and they said it was hard enough to switch functions within your industry - such as corporate finance to IB - let alone transition to a brand new industry. I would imagine up to a quarter of the class at finance schools such as Chicago could be pretty unhappy.
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That may happen, but so far I'm pretty surprised with how things are going with the incoming students. I spoke these last days with many people, and those who said that really want Finance related jobs (Although still there are many opportunities besides IB) are the international ones, and most of them want to go back either to their countries or to be with open possibilities (I talked mostly with the South Americans and South Asians). I was extremely surprised that in 2 dinners I had I was the only one who is 100% sure about finance, most of people said that is thinking about consulting, GM and those who mentioned finance. However, if that's true only God knows.

I believe though, that Wharton, Chicago, Columbia, NYU and LBS will suffer more than others, as they heavily send people to Banks, and the worse part: mostly American Banks...

Wall Street and the London City will definitely be tough places to go afterward, but there are plenty of opportunities for those who want to go elsewhere. As Trader1 mentioned: "The Future is pointing towards east and south".
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Wharton - ugly stats for 2007 internships 23 Aug 2008, 21:22
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kwam
Wall Street and the London City will definitely be tough places to go afterward, but there are plenty of opportunities for those who want to go elsewhere. As Trader1 mentioned: "The Future is pointing towards east and south".

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So you mean Brooklyn? :lol:
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Wharton - ugly stats for 2007 internships 24 Aug 2008, 09:14
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Wall Street and the London City will definitely be tough places to go afterward, but there are plenty of opportunities for those who want to go elsewhere. As Trader1 mentioned: "The Future is pointing towards east and south".


So you mean Brooklyn? :lol:
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Or Canary Wharf :-D
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Wharton - ugly stats for 2007 internships 24 Aug 2008, 16:34
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That isn't what he is saying - it is a partial hedge in that respect. The idea is that you get the IB job come-what-may. It pays less if you go into a bear market rather than bull (promotion, bonus).

I think it is just a desperate scrape around to make an interesting, quoted article. In reality, I expect going in at the tail of a bear is better than having gone in 2006, which was clearly bull... yet now a large volume are unemployed.

I certainly hope so for us Fall 2009 entrants! The economy maybe in recovery, but it could also be a prolonged / more defined recession. It seems like media is all too quick to say an economic slow down is a recession and far too slow to say positive economic signs mean a turn to better days. Those talking heads on MSNBC are a bunch of pessimits!
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If the fall 2009 entrants, graduating 2011 are running into the end of the current bear market, I would think we are in a lot more trouble than anyone has brought into consideration. I expect 2009 Grads may pick it up, and if not them 2010 certainly (and that is as big a downside as I can foresee).
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That isn't what he is saying - it is a partial hedge in that respect. The idea is that you get the IB job come-what-may. It pays less if you go into a bear market rather than bull (promotion, bonus).

I think it is just a desperate scrape around to make an interesting, quoted article. In reality, I expect going in at the tail of a bear is better than having gone in 2006, which was clearly bull... yet now a large volume are unemployed.

I certainly hope so for us Fall 2009 entrants! The economy maybe in recovery, but it could also be a prolonged / more defined recession. It seems like media is all too quick to say an economic slow down is a recession and far too slow to say positive economic signs mean a turn to better days. Those talking heads on MSNBC are a bunch of pessimits!

If the fall 2009 entrants, graduating 2011 are running into the end of the current bear market, I would think we are in a lot more trouble than anyone has brought into consideration. I expect 2009 Grads may pick it up, and if not them 2010 certainly (and that is as big a downside as I can foresee).
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I agree. I think there a bit of an negative over-reaction for recruiting. I expect the 2011 market to be pretty ok - except catastrophe. On the other hand, you could also argue that the US has never ever been in so much trouble - market crisis, national debt sky-high, etc. But that's a debate I'm not competent enough to talk about.
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Wharton - ugly stats for 2007 internships 24 Aug 2008, 19:31
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I agree. I think there a bit of an negative over-reaction for recruiting. I expect the 2011 market to be pretty ok - except catastrophe. On the other hand, you could also argue that the US has never ever been in so much trouble - market crisis, national debt sky-high, etc. But that's a debate I'm not competent enough to talk about.
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I personally thin 2011 recruiting will be similar to 2003 or 2004. Good, but not great. On a personal note, I'm re-reading When Genius Failed because I remember it being such a good book when I read it 4 years ago and it's almost eeire how similar things were back then to how they are now. Everyone back then (1998) worried about leverage, debt, and off-balance sheet exposure; sounds to me like the same record we are hearing now.
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Wharton - ugly stats for 2007 internships 24 Aug 2008, 19:36
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jb32


I personally thin 2011 recruiting will be similar to 2003 or 2004.
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Agreed - if you were one of the lucky ones who landed a finance job in 2003, you had impeccable timing and were likely promoted to a vice president-level role before the bull market hit.
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Wharton - ugly stats for 2007 internships 24 Aug 2008, 20:17
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I'm re-reading When Genius Failed because I remember it being such a good book when I read it 4 years ago and it's almost eeire how similar things were back then to how they are now. Everyone back then (1998) worried about leverage, debt, and off-balance sheet exposure; sounds to me like the same record we are hearing now.
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I thought the same thing when I read the book a few months ago. The similarities are pretty striking. Also... a really good book in my opinion.
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I'm re-reading When Genius Failed because I remember it being such a good book when I read it 4 years ago and it's almost eeire how similar things were back then to how they are now. Everyone back then (1998) worried about leverage, debt, and off-balance sheet exposure; sounds to me like the same record we are hearing now.

I thought the same thing when I read the book a few months ago. The similarities are pretty striking. Also... a really good book in my opinion.
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Thanks for the tip, I was thinking about buying it - although I still have about 5 more books to read! (among others a couple of books about Hold 'em in order to avoid losing money at our Sunday night poker!)
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Wharton - ugly stats for 2007 internships 25 Aug 2008, 18:54
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It certainly isn't definitive, but comparing the number of jobs posted last year to this year's, there doesn't appear to be a significant difference. So, at least, the firms are at least coming to campus, although that says nothing of how many people each firm will hire..... but I'm not that worried about how things look right now.

Honestly, the stuff that keeps me up at night is that things looks OK for the rest of this year and then, in march or june or something like that of next year, another massive shock hits and offers suddenly start getting rescinded or start dates postponed. I saw that happen in 2000/2001, and although I escaped that axe (by the narrowest of margins), the experience made a lasting impression that isn't easily forgotten.
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Wharton - ugly stats for 2007 internships 25 Aug 2008, 23:27
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jb32
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I agree. I think there a bit of an negative over-reaction for recruiting. I expect the 2011 market to be pretty ok - except catastrophe. On the other hand, you could also argue that the US has never ever been in so much trouble - market crisis, national debt sky-high, etc. But that's a debate I'm not competent enough to talk about.

I personally thin 2011 recruiting will be similar to 2003 or 2004. Good, but not great. On a personal note, I'm re-reading When Genius Failed because I remember it being such a good book when I read it 4 years ago and it's almost eeire how similar things were back then to how they are now. Everyone back then (1998) worried about leverage, debt, and off-balance sheet exposure; sounds to me like the same record we are hearing now.
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That is a great book, and while the events are quite similar to what's happening today, the size of the losses are much, much greater now. No major investment bank failed back then, while in today's episode, Bear Stearns no longer exists. (Some say that this is payback for Bear's unwillingness to help out during LTCM, but who knows! Someone made a lot of money on those put options...)

I think this crisis is a bit more serious. The statement has been made amongst several economists and b-school professors, such as Prof. Stiglitz at CBS and Prof. Roubini at Stern, that this is the worst financial crisis since the Great Depression. Whether or not that is actually true, I think the big takeaway here is to watch how far banks tighten up lending not only to each other but to consumers. It's getting pretty bad out there. If anyone watches the FED statistics, M2 has also been decreasing since March. We have signs of inflation due to high energy and commodity prices, and yet we also have signs of deflation. This is a complicated market environment, and I think the best thing anyone can do would be to remain flexible. Plan for the worst, and hope for the best. Or, as our favorite president GWB says, "All options are on the table...."
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Wharton - ugly stats for 2007 internships 26 Aug 2008, 06:28
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What's funny though is "EVERY" financial crisis is termed the worst since the Great Depression. In 1998, after Russia defaulted on its debt and the East Asian stock markets were down 40-50%, Robert Rubin said at the time the financial crisis of 1998 was the worst since the Great Depression. One of the problems on Wall Street is that people have such short memories and as a result are doomed to repeat the mistakes of the past. For anyone going to work on Wall Street I give you a piece of advice: Study the histroy of Wall Street and past financial crisises. Be educated on the past because it might be beneficial to your career one day.

Also, in 2008 dollars a $4 billion hedge fund was huge. LTCM had assets of $128 billion and $1.4 trillion in derivitives contracts. In today's dollars that would still be very, very large.
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Wharton - ugly stats for 2007 internships 26 Aug 2008, 12:34
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What's funny though is "EVERY" financial crisis is termed the worst since the Great Depression. In 1998, after Russia defaulted on its debt and the East Asian stock markets were down 40-50%, Robert Rubin said at the time the financial crisis of 1998 was the worst since the Great Depression. One of the problems on Wall Street is that people have such short memories and as a result are doomed to repeat the mistakes of the past. For anyone going to work on Wall Street I give you a piece of advice: Study the histroy of Wall Street and past financial crisises. Be educated on the past because it might be beneficial to your career one day.

Also, in 2008 dollars a $4 billion hedge fund was huge. LTCM had assets of $128 billion and $1.4 trillion in derivitives contracts. In today's dollars that would still be very, very large.
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I don't discount your perspective, but let's look at the seriousness of this current financial crisis compared to LTCM.

1) The financial crisis the precipitated the LTCM bailout was due to the market crises of Asia and Russia. Today, the current financial crisis originates from within the US and not from the outside.

2) The overall trend of the dollar was rising during the late 90s and throughout the LTCM crisis, whereas the dollar has been doing the opposite during the current one.

3) Commodity prices were at all-time lows during the LTCM crisis, while commodity prices are now at all time highs during the current one.

4) Unemployment in the US was trending down overall in the late 90s pre- and post-LTCM crisis, whereas it is trending up during the current crisis.
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Yeah, but at the same time, if we are in the trough right now, then things are not that bad. Compare today to the early 80s when commodity prices were at record levels and people had to stand in line for hours for gas. Inflation was at 13.5% and unemployment was over 10%. The federal funds rate, which was about 11% in 1979, rose to 20% by June 1981. Try buying a house when you have to pay 25% interest. While some areas may not be the greatest right now, I'm just trying to put things in a historical perspective.

I realize we aren't comparing the early 1980s to today, but are instead comparing 1998 to today. However, my point is that if things had gotten worse starting in about September 1998 when credit spreads were at the widest point in history, then we might be singing a different tune about the 1998 slowdown. The same holds true for now. If we are currently in the trough or will be by the end of the year, then this blip would go down in history as being relatively mild overall, even though everyone on CNBC and running for president is claiming the sky is falling. On Main Street the economy is still doing pretty well. 98.5% of people still pay their mortgages on time every month. The services sector is still creating jobs every month, it's just that the manufacturing sector is laying more people off than the services sector is hiring people. While home prices may be falling, 95 %of people are not upside down on their mortgages. They may have lost all their gains from the past few years, but they were just paper gains anyway.

Ok, this is getting long winded, so in summary: If the economy turns over the next 2-4 months, then this would hardly qualify as a recession in comparison to recessions of the past. It would be more of a 1998 than a 1981.
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Wharton - ugly stats for 2007 internships Updated on: 26 Aug 2008, 23:03
Originally posted by trader1 on 26 Aug 2008, 14:09.
Last edited by trader1 on 26 Aug 2008, 23:03, edited 1 time in total.
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Yeah, but at the same time, if we are in the trough right now, then things are not that bad. Compare today to the early 80s when commodity prices were at record levels and people had to stand in line for hours for gas. Inflation was at 13.5% and unemployment was over 10%. The federal funds rate, which was about 11% in 1979, rose to 20% by June 1981. Try buying a house when you have to pay 25% interest. While some areas may not be the greatest right now, I'm just trying to put things in a historical perspective.

I realize we aren't comparing the early 1980s to today, but are instead comparing 1998 to today. However, my point is that if things had gotten worse starting in about September 1998 when credit spreads were at the widest point in history, then we might be singing a different tune about the 1998 slowdown. The same holds true for now. If we are currently in the trough or will be by the end of the year, then this blip would go down in history as being relatively mild overall, even though everyone on CNBC and running for president is claiming the sky is falling. On Main Street the economy is still doing pretty well. 98.5% of people still pay their mortgages on time every month. The services sector is still creating jobs every month, it's just that the manufacturing sector is laying more people off than the services sector is hiring people. While home prices may be falling, 95 %of people are not upside down on their mortgages. They may have lost all their gains from the past few years, but they were just paper gains anyway.

Ok, this is getting long winded, so in summary: If the economy turns over the next 2-4 months, then this would hardly qualify as a recession in comparison to recessions of the past. It would be more of a 1998 than a 1981.
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You like to look on the bright side of things, and we can agree to disagree.

This is not the early 1980s. Actually, I believe the market environment is more similar to the mid 70s than it is to 1998. However, we are exceeding the financial turmoil wrought by LTCM. There is a truly systemic problem at issue in this financial crisis, and it mainly has to do with over-leverage and the proliferation of OTC derivatives.

But, in the end, it is the banks that ultimately win, and the little guy that loses. Life will go on, and there may be a systemic change to the way the markets operate, but it still doesn't erase the fact that the wealth of middle- and lower-class America is being transferred yet again.
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I know this is getting off topic, but I can't resist. As far as the middle class is concerned, it has more to do with blue-collar vs. white collar in this country than it does with wealth transfer.

The rise of the middle class in this country post WWII was due in large part to the rise of the blue collar workforce. They formed the backbone of the middle class in states like PA, OH, IN, MI, and IL. Over the past twenty years a shift has occurred as the US has moved from a predominantly blue collar workforce to a grey to white collar dominated workforce. The number of blue collar jobs and thus the majority of the middle class has stayed relatively constant or declined slightly since the 1980s. On the other hand, white collar jobs have grown exponentially and account for most of the upper class or rich, particularly in the areas of Finance, Law, etc. The reason for the expanding gap between rich and poor can be attributed to two interrelated factors: one, the shift in the US to a service based economy which requires greater levels of education, and two, the inability of many blue collar workers to make the transition due to their lack of higher education and job skills. Therefore, the students coming out of college today into a white collar career have unlimited potential wealth accumulation, while someone performing blue collar work has a finite cap on their long term wealth potential. Thus the rich will keep getting richer and the middle class will stay relatively consatnt until a generation has passed. Blue collar workers will eventually shift to become the lower class as a new generation of mid-level grey and white collar workers takes their place and forms the new middle class.
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Wharton - ugly stats for 2007 internships 26 Aug 2008, 17:47
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this debate is top cerebral after having finished a bottle of wine by myself.
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Wharton - ugly stats for 2007 internships 26 Aug 2008, 18:59
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rhyme,

I'm feeling sorry for you. No one should have to drink a bottle of wine alone, even bad wine. Please tell me you didn't "reenact" the last scene of Sideways with Paul Giamatti!?

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this debate is top cerebral after having finished a bottle of wine by myself.
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Wharton - ugly stats for 2007 internships 26 Aug 2008, 23:02
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jb32
I know this is getting off topic, but I can't resist. As far as the middle class is concerned, it has more to do with blue-collar vs. white collar in this country than it does with wealth transfer.

The rise of the middle class in this country post WWII was due in large part to the rise of the blue collar workforce. They formed the backbone of the middle class in states like PA, OH, IN, MI, and IL. Over the past twenty years a shift has occurred as the US has moved from a predominantly blue collar workforce to a grey to white collar dominated workforce. The number of blue collar jobs and thus the majority of the middle class has stayed relatively constant or declined slightly since the 1980s. On the other hand, white collar jobs have grown exponentially and account for most of the upper class or rich, particularly in the areas of Finance, Law, etc. The reason for the expanding gap between rich and poor can be attributed to two interrelated factors: one, the shift in the US to a service based economy which requires greater levels of education, and two, the inability of many blue collar workers to make the transition due to their lack of higher education and job skills. Therefore, the students coming out of college today into a white collar career have unlimited potential wealth accumulation, while someone performing blue collar work has a finite cap on their long term wealth potential. Thus the rich will keep getting richer and the middle class will stay relatively consatnt until a generation has passed. Blue collar workers will eventually shift to become the lower class as a new generation of mid-level grey and white collar workers takes their place and forms the new middle class.
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Excellent post! I meant to include "middle class and below" in my former post. Editing....
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Wharton - ugly stats for 2007 internships 27 Aug 2008, 07:24
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jb32
Thus the rich will keep getting richer and the middle class will stay relatively consatant until a generation has passed. Blue collar workers will eventually shift to become the lower class as a new generation of mid-level grey and white collar workers takes their place and forms the new middle class.
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I have to disagree with this point. The problem is that as we move from an industrial/manufacturing economy to service based economy we are constantly finding ways to create exponential amounts of wealth with smaller amounts of people. And as these people continue to take power they find new ways to structure our laws and tax codes to support them, often at the expense of less wealth people. In the days of old you if you created a company that created massive amounts of wealth then you probably had an army of middle class workers that you were paying. But now you can create an internet company that generates the same amount of wealth with just a few employees.

As we continue to increase the percentage of people we educate this will only increase the barrier of entry to entry level jobs. I believe about 25% of the population obtains at least a bachelors degree. If we increase that percentage to 50% then the average income will not increase. It will just mean that there will be more people with bachelors degrees working as the shift supervisor at McDonalds.

At some point we have to realize that corporations have a social and economic responsibility to the country. Sure you can buyout a company, layoff thousands of workers a few people can get rich off of RJ Nabisco. But that is largely due to the creation of one of the strongest middle classes ever. Once that middle class erodes then it all falls apart. For example, due to the strength of a large middle class a musician, athlete, movie star can make millions of dollars because there is huge amount of people that can dispose a decent amount of income on entertainment. But as the disposable income of the middle and lower class decreases they won't be able to spend money on entertainment and then creation of wealth through entertainment evaporates.

If the spending power of the middle and lower class continues to decrease, soon we will not have anyone to sell the services to. If you look through out history in the years leading up to the great depression the highest tax bracket decreased from up in the 70% range down to 24%. Then after the depression the rates increased up to 91%. During which time we created the strongest middle class. Now were back down to 35%. A small group of wealth people are making the huge amounts of money with less people and doing nothing to distribute the benefits of that wealth to anyone else. Workers moving from factory workers to fast food shift supervisors with college degrees is not going to change this.
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