Rough Times
Posted by tapishkushwaha on November 25, 2007
The past few months have made me acutely aware of the fact that the financial industry (especially the banks) is in bad shape. Be it the scarce numbers (of banks) that turned up on campus for recruiting or the small numbers that were called in for interviewing, everything points towards a gloomy picture. It was only last year when there seemed to be opportunities aplenty, but things have changed pretty quickly.
In the course of my interviews over the past few months, ive had almost every interviewer asking me what i think of the current state of the economy (almost as much as ive been asked volatility smiles!). And ive had a multitude of reactions to my answer to this question. The responses have ranged from “Its not that bad, look at the strong fundamentals” to “The fed needs to cut another 100 bps and the crisis is much deeper than people are thinking” to “This is the worst since the great depression!”. The thing that strikes me about this is the amount of uncertainty that prevails. Nobody seems to have a definite answer. I think THAT is most worrying.
The tragedy for students graduating now has been the fact that most of the investment banking jobs after a Financial engineering degree have typically been on the Fixed Income side. And it is Fixed Income divisions that are the hardest hit, thus making it impossible for them to hire right now. I have seen a number of extremely smart people not getting offers simply because the firms do not have a clear idea of what kind of a headcount they will need in the coming year.
The bright side is that there have also been efforts rectify the situation. A lot has been said and written about the M-LEC (Master – liquidity enhancing conduit) being funded by Citigroup, Bank of America and JPMorgan Chase, along with several other financial institutions, who have been meeting to come up with a plan to create a fund that could prevent a sharp sell-off in securities owned by bank-affiliated investment vehicles. Another course of action seems to be a freeze on interest rates on ARM’s (Adjustable Rate Mortgages) in a bid to keep delinquencies under control.
Given the volatile markets, It is expected that this coming January might see a lot of turnover. For the sake of many many students who are here on big loans and have worked hard in getting their degrees over the past two years, i hope and wish that the New Year brings better opportunities for everyone.
sandyhandy said
uh, your posting makes me feel ill as i’m supposed to be starting a MFE at Standford’s local rival in a few months time. Wonder if investors will lose interest in structured products for the long term, since it moves the risk away from the lender and encourages lenders to give bad loans.
Also wonder if you’re forced to take a job that you otherwise wouldn’t what are the chances of moving onto better positions when times improve given that you’ve stagnated in your not-so hot back/middle office position for a few years, and there will be a new crop of grads ready to take the better jobs when times are better.
dhina said
Do you have any idea about the campus recruiting in Berkeley, Columbia etc? It could be due to bad reputation for Stanford’s MFE. The tech companies in Bay area are doing good right now and joining them is a better option than praying for opportunities in January. The situation is going to get worse in the next quarter. Sandyhandy, I don’t think working in middle office for few years is an option you can consider. Most of these jobs are taken by Indian consulting companies.
tapishkushwaha said
@Sandyhandy, i think the recruiting effort at Berkeley is pretty good and from all accounts their internship recruiting was quite ok. What happens in terms of final offers remains to be seen though. If the economy continues to be bad, then the recruiting at all the programs will be hit. I know that Columbia and NYU also have not had it good this year, so id expect the same for all the programs.
Also, in a scenario like this, i cant imagine people being very choosy and so one might have to make a sub-optimal choice as far as an offer goes right now. Im sure there will be more opportunities when times get better. Sure there will be fresh grads then, but then you will have the advantage of having worked in the industry.
@Dhina – The situation is not stanford specific and i do have job offers, if that serves as proof! Im just commenting on the general state of affairs, given my interactions with a lot of FE students.
Aditya Singh said
No updates? Whats the scene like now? Where are you headed to?
Abhinav said
The situation does sound scary. All of us are children of the bull market who have seen just one direction!
I had planned on studying lot earlier, but somehow postponed my plan to sometime in the future, maybe 2010 or 2011! I am still not sure if I would still have the drive to study at 30, but I will try, and I do hope that economies would be in a better shape then!
all the best
Bob J said
Hello Tapish,
Thank you for your insight and for sharing important aspects of your experience in the MSFM program . As you near graduation, I hope the path lying ahead will be up to your ambitions and goals after your hard work, especially in these rough times..
Indeed, I recently gained admission into the MSFM program at Stanford for 08-09 but feel a little concerned and undecided given the current state of the economy. Would you mind, whenever you get the chance, sharing your email address so I could address to you a couple of specific questions about the program and have your insight?
Much appreciated!
Many thanks,
Bob
bobjreige@gmail.com
xeno said
i think that theory is not at all important – practice is. in fact intelligence is optional, as long as you know the right people, and how to use them. this is what i have done all my life and am a successfull quasi-quant !