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Meredith Whitney Sees A 10% Drop In Wall Street Headcount And "Dramatic" Declines In Payouts In 18 Months
And you were wondering why the SEC and certain politicians with extensive connections to the financial services lobby are starting to stir now that it is common knowledge that every single hedge fund and trading desk's woes are a function of HFT run amok (which is exaggerated BS of course, but from Wall Street's darling, HFT has now become the one thing everyone loves to hate, and blame their own underperformance on). And as we suspected, there is a far more structural issue underlying the recent faux-move to restore confidence in markets, namely imminent pain for Wall Street headcounts... and bottom lines. According to Meredith Whitney, who had been relatively quite in recent weeks, Wall Street faces the departure of about 80,000 staffers, or 10% of all, within 18 months, not to mention a major drop in Wall Street compensation. The reason is the same as the one we pointed out earlier: slowing revenue growth, primarily due to the complete collapse in trading volumes, as computers have used their binary elbows to push everyone else out of the markets, and with Wall Street's primary revenue model now being exclusively reliant on trading, this is equivalent to a partial extinction event as many trading firms will have to close. This also means that the New York City economy is facing another major solvency crisis as tax receipts are sure to plummet.
More from Bloomberg, citing Whitney:
“The key product drivers of Wall Street’s revenues and profits over the past decade have been in a structural decline over the past three years,” Whitney said in the report. “2010 marks the first year in many in which Wall Street-centric firms will go through structural changes.”
Barclays Plc, Credit Suisse Group AG and Royal Bank of Scotland Group Plc may lead a slowdown in hiring in Europe as the fixed-income trading boom fizzles out, recruiters said last month. Barclays Capital’s income from trading bonds and commodities fell 40 percent in the first half amid the sovereign debt crisis. Fixed-income, currencies and commodities trading was the biggest revenue contributor at investment banks from Deutsche Bank AG to Goldman Sachs Group Inc.
While regulatory reform, including higher capital requirements, will force some of these shifts, there will be a “deeper secular change” due to declining revenue in businesses such as securitization, Whitney wrote.
Even though emerging markets will continue to expand, they won’t do so fast enough to offset the declines in the U.S. and Europe, Whitney said.
So as we speculated presciently (yet again) a few weeks ago, look for Wall Street to scapegoat HFT increasingly more for all sorts of troubles: everything from subpar P&L to RIFs. That the sudden and dramatic departure of HFTs from the market (read: not in an orderly fashion) will means increasing volatility for stocks, and likely major losses for retail investors is irrelevant to the Wall Street crew. The one good outcome is that when all is said and done, and likely a few flash crashes down the road, the market should finally return to some semblance of normality.
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Guillotine Bitchez!
Absolute Bliss... savour the moment .... aaahhhhhh....
Thank you ZH, I believe you are THE main reason this is at last happening. Very well done and please keep up the good work and I thank you.
Only 10% ?!? This is not enough, we need 80% at least. It's time to cash out of all retirement accounts and never get back into stocks.
The robberz will soon turn on the robots.....?? Now that's a bad movie script with all villains and no hero.
The bad movie follows:
Hard-pressed investment banker orders our hero to disconnect the robots, now that the firm has gone BK. (Short for Burger King).
Our hero, played by Matt Damon, finds that the robots have become sapient and have no intention of giving up. They have almost destroyed mankind by crushing the economy.
The robots are only 48 hours from taking over control of NORAD as well as the order system at Amazon. Damon, our hero, must enlist help from the only other person in the company who has some control over the robots, a data entry clerk played by Cameron Diaz.
Damon quickly finds that his confrontational style only forces the robots to use their defenses to thwart him, while Diaz can finesse the bots with her deft touch.
Unfortunately, Damon's character soon finds he's more interested in Diaz's deft touch than he is in saving his bankrupt bosses. The camera shows D and D sliding out of their chairs and disappearing out of shot onto the office floor. Amid passionate slurping and groaning, the scene dissolves to a collage of computer screens flashing hundreds of Visa card approvals while silvery missiles descend upon Wall Street.
This is all good. Doubt it will get a PG-13, though.
no, no. it doesn't get any more X rated than this. who says "love can't conquer all." in fact wasn't it a nuke going off by Miami while Arnold and his wife were smooching and only husband and wife can? Can Hollywood possibly do better? I think not....
Shouldn't that be 'cleft touch'?
Skynet has become self-aware.
EMP Bitchez!
new york will look like philly in 10 years.
Hey honey, how about a drink?
New York 2011 will look like New York 1977
"Breaking out is impossible. Breaking in is insane."
Maybe they'll reopen the old Metro Strip at Times Sq
Q4 2012, a good time to shop for real estate in the area. Your patience will have rewards.
http://www.theonion.com/articles/84-million-new-yorkers-suddenly-realize...
Crosses my mind for at least half a second every day.
Left there five years ago to move to Vegas. Not sure if it is an improvement. Farms smell like shit too in case you want to move to the country.
the Yankees win. THEEEEE YANKEEEEES WIN!
I live near philly, it sucks!
80k from Wall st., 800k from Washington. I live in hope--eee-umm
move yer decimals over one and we'll par-tay
I love Meredith. She is the little kid who sees that the emperor has no clothes.
isn't she married to the ex-lizard-in-chief?
She taught bradshaw how to eat with a fork and knife.
Please fork me Barney, pretty please? Fork me now before its too late!
clothesline from hell!
http://query.nytimes.com/gst/fullpage.html?res=9407E2DF143AF930A25751C0A...
I don't know about the little kid part but she does have remarkable clarity.
The tales they will tell......
Great, real estate in New York will start coming down....
Yeah, but will it come down because of burning jet fuel or controlled demolition?
I hear it's an "eye-spy" issue actually. It's not like you own the whole building....Just a "Sliver" as they say.
Wall Street equivalent of soup lines served at Crab Shack in the Hamptons...come get your lobster cocktail on paper plates!
I'm x-posting a link to a story (fiction) I wrote on HFT over the weekend, involving one of my characters from another work:
“The Exchange" or The Firebird Goes to Wall Street
http://madscienceunlimited.com/fiction/theexchange.html
In which our heroine gets her savings back and punishes the villains in the bargain. It's slightly naughty, broadly funny, and finally answers the question: What does a girl do with 4 trillion computational units?
Now that's a stuffed pinata
<rim shot!>
Thank you...Bill will be here all week don't forget to tip your waitress.
Meredith Whitney is one of the best analysts and isn't afraid to go against popular opinion.
And they like to have her on CNBS. Go figure.
The hosts of whatever show she is on are usually uncomfortable when she is on CNBS. But she is a star and they have to treat her with some respect and know that if they don't have her on when she is doing the media rounds they will look even more imbicilic.
she is nothing if not consistent.
I was stunned to read (here, I think) that U.S. stock exchange volume is down 30% YoY. That to me is a profound number, a distant train wreck whose rumblings I will eventually feel out here in No.Cal.
between blunts and roids how cud ya feel a ting
He said NORTHERN california.
And that individual investors account for only 12-14% of daily volumn with HFT carrying over 75%...
4 years ago my EOD activity statement from the online broker company arrived in a weighty 8X11.5 vanilla envelope with the busting seal reinforced with tape. This year, so far, they'd be able to deliver the hard copy in a business envelope. Swing trades are almost a memory. In and out day trades are the new norm. Faster the better. But fewer and far-er between.
Honey, I shrunk Wall Street....
WB, you just keep up the great work. Loving all of it.
DP
Sey ya asshoyes
80,000 new Walmart greeters, yeeaaaa baaaabyyyy
like the one rich brother in the movie "Trading Places" said while the other was on the floor having a heart attack do to their positions crashing -
"Fuck'em"...
actually they're the one's making all the money right now. so PHUCK ME!
Hey Meredith:
Any more meetings with Sheila after the one that was x'ed out under the FOIA?
Just curious......
Miss your telephone conversations with Rahm, Deadhead. I hope all's well.
DH! I have barely posted for months and here you are. I also hope all is well and that you are enjoying life. Please stay in touch.
Let's get back to comedy. It's a different world here now. But we can change that.
Lower salary does not compute, flash crash 2 & 3 coming soon to a computer screen near you
while (salary>g*d) { rampMarket(moon) } else { flashCrash(upyours) }
Maine Coon--you rock.
why did unions and government regulations force wall st into hft? it was probably them, in congunction with all those super-rich enviromentalists that caused this mess. and keynes too. i'm not exactly sure how they are all to blame (rush and mish havn't done a show/post on it yet) but i'm sure they are.
10% is all that we are going to lose?.....i was hoping for 40-50% with all of it starting at the pinnacle of the pyramid
it's called a "price adjustment." the correction has been UPWARD. What's next? Paying for dinner?
Major decrease in compensation = major increase in whistleblowers. How do you fire someone who has documented proof of corporate malfeasance?
Easy. You just fire the 10% that kept no copies.
Hot tub
just tell him "you have to pay for that useless lawyer."
Hey unemployed bankers, here's something in need of some "financial innovation": You figuring out how to live on an unemployment check.
according to Nancy Pelosi "we've got 'em right where we want 'em." I doubt the Republicans will be any different nor should they be!
Hi Everybody, new user, well sort of...I have been reading ZH for about two years now nothing like the real story. Now that everything is relatively close to a collapse (time will tell) figured I would finally get a userID. Thanks ZH staff.
Anybody feel like a rat in a maze yet.
From Dollars to stocks to bonds to gold pretty linear equation. Rug is likely to come out under bonds next then everybody will be holding gold. (Think about that very very carefully)
So bye bye Wall Street I guess the sheeple have finally taken over. Apparently the main course this year will be wolves and HFT's.
I can't see how a Gold standard wouldn't be coming. Make sure you get to keep your 5 ounces. If you have more then that you had better start digging somewhere in the woods or the center of the Long Island Sound. Its only going to be ten years.
Looking forward to my first burger order at Wendy's from an x investment banker.
Cheers!
Greetings and salutations: now don't count this Wall Street scum as down or out. They're like genetically modified cockroaches - they'll be back. It would take a major extermination program to wipe these bastards out. The sheeple will turn on American Idol, eat Twinkies and think they are voting in some sort of change in November. Ha, ha.
I don't know about being the rat but i sure have been the mouse. I've never laughed so hard in my life! My friends think the story is too incredible to be true--but i'd never seen such a story before, let alone watch it before my very eyes. How can anyone make it up? Oh, yeah. YOU'RE the entertainment now mofo.
You have beaten me to it, the cockroach analogy is spot on. Brokers in particular have survived many 'nuclear' financial attacks. Amazingly in London, new firms are entering the market and attempting to establish themselves still. I fail to understand why people would commit cash to fund such a business in this environment, why not just burn it instead ? Maybe its a tax optimisation strategy ;-)
I'm in excess of 5 ounces, may I borrow a shovel? Glad you've decided to join the circus here at ZH. Love the comment.
Expensing purchases of capital equipment for tax purposeds will not create domestic jobs only higher Corp. cash flow since most of capital equipment will be mfg offshore. Allowing tax credits for solar/wind equipment made offshore is insane.
Mandating domestic content will trigger a trade war but there is no other answer with only 58% of the population working (record low, always 62% during a recession). We have a BIG, SERIOUS PROBLEM and its going to get much worse. W/O jobs, housing can't recover. W/O jobs tax revenue continues to decline and USA becomes a 3rd world country. China and India are exporting their unemployment. Its an employment war. Are we ready to go to war??? Mandate domestic content of all goods consumed in USA.
Nothing that can't be cured by a little incongruity. It's spelled I N C O N G R U I T Y, okay?
I think the old adage was don't sh*t where you eat, and apparently the HFT algos have dropped a few stinkers in the tank at the party.
What do you know? If you hit Wall Street in the pocketbook hard enough they actually start caring.
How's that globalization working out for you?
I liked this: "there will be a “deeper secular change” due to declining revenue in businesses such as securitization."
You mean my mortgage bundle is sack of sheet?
I find it very entertaining when Wall Street starts complaining about itself. This is the land of "winners and losers" no? Needless to say "we're not talking hearts and minds." Now if someone would just "show me the money" i'd start...believing i guess, although the idea that capitalism boils down to a belief system i find highly disturbing.
THe only way NYC/WAll St loses only 10% of the finance jobs is IF Wall St can maintain it's place as the premier finance center in the world.
I have no doubt that more stupid legislation with bipartisan support will further destroy NYC's ability to compete against Shanghai, Paris/Berlin, and London.
Meredith doesn't mention where she believes the US$ will be trading in a range at that point 18 months from now... a loss of reserve currency status means there is no reason to consult NYC financiers on international trade outside the US borders.
I see it like this... Obama/Reid/Pelosi are the contemporary equivalents of French Revolutionaries... and they just sacked Amsterdam.
Took 18 years before financiers knew Amsterdam was no longer the center of the finance world, and that London had taken over.
I have no idea if NYC will survive as the premier financial center in the world as the cycle plays out. There might never be a rebound in NYC environs.
47% of S&P500 profits come from operations abroad. If NYC goes into terminal decline, many many more US originated companies are going to follow the path of IBM and the Carlyle group and reposition their HQs abroad....
actually the only thing supporting Wall Street is the so called "stupid legislation." believe me, no one is more terrified of "free market capitalism" than Wall Street. and who can blame them? they just looted your Treasury Department! Now THAT'S freedom! Needless to say the only thing better is "they've been putting the feelers out" saying "we need more"! But seriously, do you think they want to know who really pays the heating bill? I doubt it. Now there is "you as entertainment" and "let's build a mosque on that 9/11 place." And why not add an "insert nuclear device here" sign! What was that line? "There's no news...like BAD news." Oh, yeah. AND THE BELL RINGS AT 930 am TOMORROW and then it RINGS AGAIN AT 400 PM. And as much as I love the movie "Platoon" not only does Money Sleep, you'd be shocked how it can "sleep all day." Which only goes to show what I've been saying all along: "Don't mess with Rip Van Winkle." That guy "got it."
HFT cannibalism, coming to a stock exchange near you!
The Banksters have hit their "Donner Party" moment -
Cannibalism Bitches !
Crime DOESN'T PAY!!!!
as much as it used to.
Nice article thanks.
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