Mean Street: Advice for Wall Street’s Soon To Be Fired
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By Evan Newmark / WSJ / Sept 30, 2010
Have you ever been fired on Wall Street?
If not, you may soon have your chance. According to celebrity banking analyst Meredith Whitney, as many as 80,000 of you will soon have some free time on your hands.
Those of you who are lucky will get a short memo announcing your departure to “pursue personal interests” and a token year-end bonus. Those of you less lucky will get a few hours to clean out your desk.
For decades this has been the brutal way of Wall Street. Your boss has to cut headcount and you are, contrary to what your mother told you, just another head.
At least in the past, there was hope. The boss who gave you a pink slip also gave you a pep talk: Wall Street ran in cycles. It was down but not out. Wall Street and your career would come back stronger than ever.
And sure the pep talk was disingenuous touchy-feely nonsense. But it turned out your boss was right.
Just look at the mass layoffs in the last two decades. They came in 1989-1990 (Drexel), 1998-1999 (LTCM), 2001-2002 (Internet bubble) and 2008-2009 (Lehman meltdown.)
Somehow, Wall Street remained the land of opportunity. The workforce at Goldman Sachs grew sixfold since my first job there in 1986.
No more. This time around it may finally, really, truly and unfortunately be different for you and Wall Street.
Of course, no one can ever be sure. But plenty of folks are making a convincing case. The other day I read Andy Kessler’s gloomy but superb piece in the WSJ that predicts five years of a shrinking finance industry.
If you’re on Wall Street, you ought to read it. I did several times. And I’ve spent the last couple of days trying to refute his argument that a post-Lehman, post-Dodd-Frank, post-Volcker Rule Wall Street will mean fewer risks, fewer profits and fewer people.
I’m sorry to report that unless you’re a Wall Street in-house lawyer or compliance officer, I haven’t come up with much cause for optimism.
The best I can do is concoct a little scenario in which a bull run in stocks jump-starts equity underwriting and M&A, Wall Street’s old-line businesses.
But sadly, that’s table stakes. For decades now, Wall Street has counted on something big – something fiery, flashy and full of fees to keep the profits flowing.
It was takeover battles, privatizations and junk bonds back in the 1980s. Then came derivatives, the internet, venture capital, private equity, hedge funds, credit default swaps, prop trading and CDOs and CMOs and on and on…always the next big thing.
But today the only thing we can count on is government oversight. That’s Wall Street’s next big thing. And if you currently work on Wall Street, it’s awfully hard to see all that regulation getting you a bigger bonus.
Presumably, some of you – the quants, programmers, derivative specialists and IT gurus – could see a brightish future in Wall Street’s hyper-complex computer-driven wizardry.
But that’s no sure thing. Wall Street has now spent tens of billions of dollars on proprietary software, supercomputers and trading platforms – for what?
Lower trading margins and lower volumes? A Flash Crash that evaporated America’s faith in the markets in milliseconds?
Increasingly, the rise of high frequency trading doesn’t seem like the birth of a new Wall Street, but rather the final, fleeting death of the old Street.
But just hang on, you might say! How can you forget Wall Street’s last great frontier and its best hope for the future, the world’s ever-rising, ever-miraculous emerging markets?
I haven’t. No doubt, the BRIC nations will generate billions of dollars in investment banking fees in the coming years. No doubt Wall Street will get a good chunk of that. But will it be enough to keep all those folks on Wall Street fed?
Do the math. Do the headcount. Then ask yourself if Chinese Premier Hu Jin Tao has much of a continuing interest in paying Goldman’s Lloyd Blankfein a $50 million bonus.
He doesn’t. China wants its own Wall Street. Already, for the first ninth months of this year, seven of the top 10 investment banking fee-earners in China were domestic firms.
Don’t expect a different story in Brazil or India. Last week’s Petrobras $67 billion capital raise was led by Brazil’s Banco Bradesco for the stunning fee of 0.21% of the offering. A U.S. Nasdaq IPO has fees that at 7% are proportionately 35 times bigger.
Now, as I said earlier, it’s possible I’m too downbeat on Wall Street’s prospects. The future is tough to predict.
But here’s one prediction you can take to the bank: in spite of its struggles, Wall Street will still pay out thousands of multi-million dollar bonuses every year.
You see, on Wall Street the rules of the game may change, but the end-game never does. People work here for the money. That means there will always be a bonus pool on Wall Street come year-end, even if you’re not around to share in it.
Sadly, some of you will soon discover this truth. Pay attention to your boss’s pep talk on your exit. If you hear him say that “Wall Street will rebound because it always has!” - ask him, politely, to prove it.
Then go find yourself another career. |
