It feels like the intermission during a movie whose ending would most probably affect your life and everyone you know. It is not very easy at this point to identify the real villains (many have gotten away with murder) and heroes (too few left in the game who could potentially become one by the end of the movie). Most are just like the extras in a Godzilla movie who get killed in collateral damage.
For many of my friends, especially those who are not working in capital markets , what is happening now might just look like a case of stock markets going down - something that happens every few years. One could just hope that is the case.
When (not if) the movie ends, it would be great if one could come out of the hall and say, "There were too many unwarranted twists, only leading to a familiar climax".
But lets do a quick recap of the story so far. The movie begins in late 2006.
Dec 2006
The environment for investment banking and trading has been excellent across the board, and 2006 will be remembered in financial circles as an historic year. The year isn't even over, and it has already set records for mergers-and-acquisitions volume and for biggest leveraged buyouts.
The results reflect a strong environment. Stocks have moved higher since the summer, and the global economy remains solid, despite slowing growth, Viniar said. He said the combination of a decent economy and strong CEO confidence boosted investment banking and created a good environment for trading. Revenue from equity trading soared 105% to $1.23 billion.
Goldman's culture also contributes to its success. The company uses its profits to hire and retain what it believes to be the best minds in finance. It has spent $16.5 billion, or about 42% of its revenue for 2006, on salaries, benefits, and bonuses, which run into the tens of millions of dollars for top bankers and traders.
Jan 2007
Please remember the name Stan O'Neal. This guy is sure to make another spectacular entry later in the movie)
Merrill Lynch & Co.'s chief executive officer, Stanley O'Neal, received $46 million (€35.4 million) in salary and bonuses in 2006, ranking him the second-highest paid CEO on Wall Street.
The largest U.S. brokerage said O'Neal received $18.5 million (€14.2 million) in cash as a performance bonus on top of his $700,000 (€538,255) salary, according to a filing with the Securities and Exchange Commission. He also was awarded $26.8 million (€20.6 million), the filing revealed. This puts him among the highest paid CEOs at the big five U.S. Wall Street investment banks, which include Merrill Lynch along with Morgan Stanley Inc., Lehman Brothers Holdings Inc., Bear Stearns Cos. and Goldman Sachs Group Inc.
Feb 2007
All is well in paradise, really
Speaking to the House of Representatives' Budget Committee, Bernanke buoyed investors, saying that markets "seem to be working well" and that there had been "no material change in our expectations for the U.S. economy since I last reported to Congress" two weeks prior.
He added that if housing and business inventories can stabilize over the next few months, the economy should come out of its slump by the year's end.Whether that will happen remains to be seen. For the time being, however, the U.S. Commerce Department offered new evidence that U.S. economy is weaker than previously thought. Nonetheless, the news was mainly greeted as a sign that inflation would not be a problem in the months ahead.
March 2007
People actually needed some guidance on how to splurge their money.
Expecting a $200,000 bonus? We suggest spending $70,000 of it on a 23-day world tour via private jet. If something closer to home is more your style, check out BMW’s 500 horsepower M6 convertible. It will set you back $104,000. But you’d better act fast. If the kind of money being doled out this month and next is any indication, these and other big-ticket items won’t be around for long.
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