<p>What affect if any will this have on college recruitment? Does it suggest they will need more new hires than usual?</p>
<p>well logically the more profit they have, the more cash they can re-invest in new recruits.</p>
<p>Haha, I was looking at who was issuing their earnings on Tuesday and saw that MS was releasing theirs. So I assumed since the other banks such as GS, ML, and Lehman all had steller results relative to expectations, MS would be a good buying opportunity. My prediction did not fail me and I made quite a profit. :)</p>
<p>To bad Fedex had steller results as well, I shorted almost 500 shares before it announced on Tuesday. :( </p>
<p>In terms of job prospects, yes MS had better than expected earnings, but since these types of data are so volitile, next quarter could produce worse than expected results which can offset what happened yesterday.</p>
<p>volatility, emerging markets and interest rates are all that really matter right now. Hiring? Increasing, it already has, more so in europe and asia than here. Bank of America has really stepped up hiring though, they want the best so they can grow their securities unit since they are still being pummelled by all the bulge brackets, i think almost three fold by the highest earner goldman sachs</p>
<p>i wonder why more pple dont talk or respond to posts like these. It is interesting news especially since everyone is "SO" inrested in finance, its a good thing to keep up with the latest news.</p>
<p>Like for example, they might tear down the valencia six flag magic mountain becuase it is loosing money and instead build homes.</p>
<p>Or the current condo glut in miami/dade county</p>
<p>Or what is happening with the rest of real estate and how the possible impact of the predicted growing recession will impact both market and real estate as bernake thinks about going up a quarter or half point</p>
<p>I'm guessing more trouble for MS since they are involved (or at least the CEO is) with this whole hedge fund problem concerning the SEC. </p>
<p>Also in terms of the interest rates, I heard that the rates will most likely be going up to 6% at most, and that it is all but confirmed that the Fed will be raising the rate to 5.25% next Thursday. Luckly, for now, the market is in a bearish shape with low sentiments and any good news (even the slightest) should yield higher gains for the market until the Fed meets again. The only concern I have is that the Beige book and other indicators are already illustrating slower economic growth and because inflation is a lagging indicator, if the Fed does increase the rates past Thursday's meeting more than likely the economy will see some signs of recession in 2007.</p>
<p>EDIT: In terms of housing, I am a little concerned as well. Due to abnormally high temperatures this years there have been a lot of housing starts. While that may have been good news in previous years, because the economy is etching towards higher inflation, prices for real estate are sky rocketing and thus there is going to be a surplus of unsold housing because of low demand and high supply. Also demand is also going to be hurt as well due to the higher interest rates as consumers are going to be more reluctant to obtain loans fearing that mortage rates will be too high. Overall I think housing is going to be one of the hardest hit sectors if interest rates continue to rise and unfortunately that may send a rippling effect throughout the market and economy.</p>
<p>sounds gooooooooood :]</p>
<p>Recruitment will most likely go up but Ibanks won't make the same mistake they made in the late 90s and 2000. When they over hired and ended up firing everyone after the dot com bust.</p>
<p>Also, while were on this topic I always here "Bankers will have record bonuses this year but it won't be as high as the bonuses in 2000". So if a typical anayst todays makes 65k in salary+ 35k in bonuses, does anyone know what they made back in 2000?</p>
<p>Recruitment has already been up. There isn't much room left to go. I would actually venture to say that all this "irrational exuberance" has to cool off. I mean come on, GS builds a skyscraper and then the traders just say "nah homey, we ain't trading from there" so they are building another one in the city. Way I see it if there is a downturn in the business they are going to be hit as hard as they were during the bubble.</p>
<p>Sammy they are talking about the higher ups who make actual cash. That may be the case in banking. However, I should note that traders at the various banks have never made as much as they are getting now due to pressure to pay up for performance as many competent traders are heading off to HFs and setting up their own shops.</p>
<p>As for housing thats another offgrowth of the easy credit we are experiencing. The spreads nowdays are very low (they had basically blown up early this year) and the way I see it a lot has to be done. </p>
<p>Credit tightening needs to occur which should lead to a cool off in the housing market (that has already started). I believe its going to be less of a supply/demand issue than a credit issue. Due to the bad lending conducted during the recent years you are going to see a lot of people getting hit if they had variable mortgages. Otherwise the companies issuing the fixed one shall be hit. Its obvious here in NYC that people who should not be owning homes (due to their financial situation) are doing so and with down payments of 0-5%. The result of this easy credit environment is not going to end up being pretty because as soon as tightening occurs you are going to get negative results (especially in a population with nearly negative savings rates, and a nation with high debt levels).</p>
<p>I can talk on for hours and hours about these issues (I manage a small FX centric business).</p>
<p>this is much more stimulating than talking endlessly about ibanking and consulting.</p>
<p>Credit tightening needs to occur? I disagree but agree due to it being in my mothers favor (she is waiting to buy a house) But that is what a lot of people are doing today, there is still demand, yet prices are going down and inventory is skyrocketing. Buyers are stagnant due the prospects of the bubble bursting. Luckily i live in So cal, one of the most inflated pieces of poop in the country, an area where rental prices, yet expensive, have had no correlation to housing mortgages for the past three years and an area where the wealth effect is well in place to disable those that use variable rate and balloning mortgages to pay for their homes, cars and other fun toys. Credit tightening will slow the economy, but make it a more condusive environment for housing prices to come down. </p>
<p>What about buying stock in housing development companies. Nope, i wouldnt becuase of the cylical nature of the housing market and the fact that this cycle has been record breaking and so unpredictable in most part becuase it has been hard for anyone to tell when housing will or if it will come down. Orange county foreclosures has trippled since the late part of the first quarter and continues to grow. Housing developments are using so many incentives to sell homes. </p>
<p>And for recruiting, i see recruiting stepping up, but it is all dependent on the company, the top tier companies are doing great minus the colossal merger that brought jp morgan chase together which has in turn given the investment branch a little punch in the gut and which is why bank of america still struggles so hard to become a top notch investment bank. </p>
<p>ETC ETC ETC, please people continue and stop talking about damn ibanking for a while</p>
<p>I actually see a global credit tightening not just US specific one. This has already begun (US and ECB tightening rates with BOJ possibly tightening rates as well once they see if Japanese stocks can rebound again). This has already begun affecting the number of new home sales. However, notice the strength in the prices which shows that there has yet to be a strong supply/demand imbalance.</p>
<p>New home sales:
<a href="http://www.aeroscapital.com/newhomedecline.GIF%5B/url%5D">http://www.aeroscapital.com/newhomedecline.GIF</a></p>
<p>New home prices:
<a href="http://www.aeroscapital.com/newhomeprice.GIF%5B/url%5D">http://www.aeroscapital.com/newhomeprice.GIF</a></p>
<p>My screens did pick up some home builder stocks which didn't do too well for me. I would be out of that market as its too rate dependent at the moment (and I have FX to directly make rate bets).</p>
<p>prices are reflecting the stubborness of home owners trying to sell now for what their houses were worth last summer. But that is the thing, home builders are going to go through a down cycle before their growth. They have already dropped like 10-15%, but their cylical drop should bottom at around 25%, and with this being a usual but abnormal cycle, who know how far it will go down before it starts to rise. Considering true demand it something yet to be determined in many speculative markets, i would wait all the way till next year before i become bullish for this market. But then again i have no real money to buy, so i shall just pretend. </p>
<p>Come on interest rates rise rise rise. They need to since they POORLY reflect the current pace of economic growth. I understand the term soft landing, but either way, rates need to be balanced, yet we cannot term the economy upside down as we are already tilting since people are so irrespsonsible with their money. BOFA has doubled their holding to account for twice the number of defualts that people will make which will exceed 1.5 billion projected for this year.</p>
<p>This is what I mean by spreads blowing up:</p>
<p>Euro: <a href="http://www.pwcglobal.com/images/uk/eng/about/svcs/brs/EIG_credit_spreads.jpg%5B/url%5D">http://www.pwcglobal.com/images/uk/eng/about/svcs/brs/EIG_credit_spreads.jpg</a>
US: <a href="http://www.northerntrust.com/library/econ_research/daily/us/images/030507_06.gif%5B/url%5D">http://www.northerntrust.com/library/econ_research/daily/us/images/030507_06.gif</a></p>
<p>Lets not forget our friend the yield curve either: <a href="http://www.bondheads.com/%5B/url%5D">http://www.bondheads.com/</a></p>
<p>i have seen the spread tighten as treasury bonds were discounted. Yet the 10 year was not? In the last few weeks it has started to rise ever so slowly, good thing for those on fixed income</p>
<p>I'm kind of new on bonds, but if the yield (current) goes up shouldn't the bond be discounted? Wouldn't you divide the interest you receive annually by the market value, and the lower the market value the higher the yield? So in that case more individuals will buy more bonds from corporations, munis, the government, etc. I know that open market operations is a big part of tight monetary policy, but wouldn't it be counteractive if corporations and the government are recieving these large sums of money from the bond buyers to spend on their company. As a result of that (at least for the corporations) there is a higher possibility of employment and other advances which would put more money into the economy resulting in the high earnings we have seen (ie. Morgan Stanley). The same would be true for Tbills, notes, and bonds as the government could use the money to finance other activities. While the Fed can issue the EE and HH bonds and achieve tightened monetary policy through that, wouldn't increasing the interest rate to such high levels be actually negative when trying to achieve tightened monetary policy? </p>
<p>Sorry that probably sounded like crap and if I'm completely wrong please tell me.</p>
<p>Yield Up=Bonds down
Yield Up=Discourage borrowing</p>
<p>By raising rates what the Fed does is that it makes borrowing more expensive thus discouraging borrowing. The institutions have to pay the interest to the lenders and if rates increase the cost increases as well. The price of bonds that were previous released goes down. Institutions (corporations, govts) also borrow less (thus decreasing the number of new bond issues) as its more expensive to do so.</p>
<p>By discouraging borrowing, growth slows down. This is the reason why when you get all those Fed announcements the stock market usually goes down.</p>
<p>Nice little bond primer: <a href="http://www.pimco.com/LeftNav/Bond+Basics/2005/Everything+You+Need+to+Know+About+Bonds.htm%5B/url%5D">http://www.pimco.com/LeftNav/Bond+Basics/2005/Everything+You+Need+to+Know+About+Bonds.htm</a></p>
<p>No I know all about the Fed and their use of bonds to slow growth; I'm talking about the corporations who issue bonds when interest rates are high. Do corporations still issue them in any case (great need of funds, etc) or are they discouraged like the consumer?</p>
<p>Thats what I am talking about. Corporations do not issue them when rates are high because it increases the cost of borrowing. If there is great need they will issue them (and with higher than standard rates to make it attractive). But in general corporations borrow less when rates are high. Interest rates are pretty much governed as a whole. They tend to move cyclically together (based upon the Fed's decisions).</p>
<p>Its honestly not going to be that big of a deal, seriously they have to even themselves out and the yaren't going to make the same mistakes as before. By the way read the article in Businessweek about MS it will give you an idea of what I mean.</p>