Goldman has pretty much blown up as it’s price is now within 10 percent of it’s IPO price. The brain drain facing Goldman will be in full effect next year.
In the Private Equity market, Blackstone (BX), which went public THIS summer is already trading more than 50 percent below it’s IPO price and 75 percent off it’s highs.
The good news is that we won’t turn out as many Investment Bankers in the years to come as the pay scale and job availabilities shrink.
I am super confident that the best of breeds from all the banks will be starting boutique shops and new hedge funds once confidence returns. The sooner, the better.
In the meantime, if Goldman has further balance sheet issues or surprises on any level going forward the stock will trade below $50 and the markets will hit new lows.
I am bothered that Google can’t hold $350 and have been stopped out of all but a fraction of the stock I own this week. This downturn has not been easy for seasoned veterans so Sergei and Larry must be at just a big a loss as anyone. It shows in the stock price. They are just as big a victim of our lack of confidence than any other company. Any negative surprises will not be tolerated and the stock could continue to trickle downward.
Apple worries me the most. I have kept just a fraction of a position, but if the best Company in the world is trading off 50 plus percent, what good are stocks?
Of course, I am watching for leadership daily but all we have are educational stocks and a few Pet and medical stocks. That is not enough to choose from to start a new bull market.
I am off to NYC, Boston and Toronto for meetings this week but put together these great links from the weekend.
And in their current state, there is only one answer for how the derivatives market can safely promote its use and continued growth: exchanges.
Lot’s of talk about deleveraging, but it’s not as simple as it sounds or orderly. Don’t expect it to get any easier according to John Mauldin :
The good news? Oil prices are likely to fall even more, which will free up some money to be used in other ways. The ISM data showed that prices paid are falling, making inflation less likely. The US government deficit, under Democratic control, is likely to be $2 trillion in 2009, a staggering number to be sure. Without the pressure of inflation, and with the threat of outright deflation, it may even be that such a deficit can be managed. In the short term, this massive debt will provide a stimulus, lessening the effects of a deep recession.
The sad thing is that our children will be saddled with the debt for a very long time. Hopefully we spend it on things like infrastructure, which will be of some use to them, rather than on an endless stream of consumer stimulus packages that simply add to current debt.
As investors, businesses, and employers/employees, we will have to deal with the outcome of a major resetting of consumer spending. Unemployment will rise. Whatever stimulus package is enacted will mostly be used to draw down debt, and not actually spent. Businesses all over the world are going to have to rethink their growth plans to the extent that they were based on ever-rising US consumer spending. Earnings are going to be under real challenge in most industries. This is going to become more obvious as time goes by, and is going to challenge whatever bear market rally can be mounted.
All is not gloom and doom. The last major recession and problem period, in the ’70s, saw a number of new businesses start and prosper (Microsoft, Apple, Intel, etc.). Businesses that have access to capital are going to be able to take market share and come out of this recession in much better shape. It is just a recession, after all, and will end. But I would suggest keeping your powder dry and being nimble. There are opportunities which will arise, as they do in every downturn. Just don’t expect this recession to be like any past recession. Make your plans accordingly.
The Brain Drain has always been a threat within technology but maybe it’s the stock options that get the Brains to leave tech in general :
The situation is similar at Google. A third of Google’s 20,000 employees hold underwater options, according to an estimate by Sandeep Aggarwal, an analyst at Collins Stewart. If Google doesn’t deal with the problem, it could lose key staff, he said.
So what will happen this week? I am less clear than I have been at any time in the last three years. Individual stocks are absolutely wrecked and show no life. The few great stocks are crowded and the weakest of the stocks are being leaned on with ‘End of the World ‘ confidence. Thats not a great prescription for investing confidence. It is a prescription for continued whipsaw action and high volatility.
YOU watch the all-time highs list and you get in late. The next boom will be even better than ever because of the deepness of this bear so you will not have to catch even the first year of it.
One of the hot hands of the bear market has been Tim’s blog. He is short (shit he’s always short), but not cocky at the moment .
There is just no rush.